Making money greener: building a sustainable economy

Artwork by Lesley Wang

Jamie Singleton considers how different aspects of the economy might be pieced together to ensure the sector is sustainable.

Since the UN’s Intergovernmental Panel on Climate Change (IPCC) reported that the only way of ensuring that global temperatures don’t exceed the (now evidently nominal) 1.5 degree threshold is through a “rapid and far-reaching” transformation of human civilisation to be instituted by a 2030 deadline, the fate of the planet has embedded itself in the popular consciousness. But such an unprecedented problem demands unprecedented action, and action that surpasses mere recognition. The core principles of the economic model on which we depend must be subjected to a systemic reevaluation and infrastructural reconstitution, and one that will take the remodelling of each instrument which makes up an economy.

Because the mechanisms for change will be inoperable without cash backing, the financial sector will be pivotal in opening the door for the green economy. Fortunately, this decade has swung open on promising news: the world’s largest asset management firm, BlackRock, announced a new strategy geared more heavily toward stronger environmental, social, and governance (ESG) profiles (these help investors recognise a company’s sustainability), a move they hope will amount to “fundamental reshaping” of finance. It’s a momentous declaration, but one building on a growing trend in the financial sector that the European Investment Bank helped spur last November, devising their own plans to phase out multibillion-euro fossil fuel funding by 2021, intending to release €1 trillion for “climate action and sustainable investment” in companies with cleaner ESG profiles. 

Such moves are rather more talk than walk at the moment, however: ESG ratings are currently beleaguered by a high susceptibility to greenwashing – especially by companies of the more carbon-reliant variety. In order for dark-green investments (long-term projects and initiatives that curb carbon emissions in the long term) to fulfil their potential, thorough and reliable yardsticks must be innovated; these are, however, still largely under development. If provided, then between now and 2030, major change can be introduced to turbocharge a phenomenon which is already beginning to take place. Merrill Lynch recently estimated that ESG equity funds (high-risk, high-reward market investments) in Europe will burgeon to $1 trillion between 2020 and 2030, redirecting capital towards real difference in the future of the economy. 

Real assets and sustainable alternative investments are crucial, but more direct action will be found in funding the tech innovation fuelling the energy sources renovation. While fossil fuels will spike with the increased demands for energy, oil is due to run out somewhere around 2050, some sources estimate. Modern civilisation being utterly at the mercy of energy provision, finding renewable energy solutions will satisfy more immediate as well as long-term needs. According to the International Energy Agency, integration is already moving more fluidly in this area, renewables accounting for one third of global energy last year. And forecasting for the years ahead is no less promising, the International Energy Agency recently reported that renewable energy is set to grow by 50% over the next five years, with an increased emphasis on solar energy. This is bolstered by major innovations like Dubai’s solar field, which is set to become operative by 2030, and thereafter capable of supplying enough energy to power over 1 million homes, according to CNN. The dream of green energy may very well begin to look like a reality by the end of the decade.

But well-intentioned technological innovation has leash only as long as policy is behind it. In Britain, policy is stifling a transition to renewables, the government spends just under £200 million annually curtailing wind-generated electricity in order not to overload grid capacity. This a problem that has less to do with a lack of available technological solutions than with political resistance to decentralising the national grid, a move that will permit the introduction of technologies that can store renewably-generated power. Despite the efforts of advocacy groups, this is currently one of the main roadblocks to an energy overhaul.

Perhaps confronting policy deficiencies with decentralization seems counterintuitive, and indeed Aymeric Amand, a UCL postgraduate working with the sustainability department at FTI Consulting, warns that “moving toward a decentralised economy makes policy harder to impose”. But he also maintains that “decentralisation should actually help cut carbon emissions and generate revenue opportunities for consumers who can sell power back to the grid”. And given that decentralisation may also help innovate policy more directly, allowing the creation of more agile multi-stakeholder sectoral forums that will make organisations more accountable to consumers, policy likely needs to undergo enormous changes in the coming years.

One of the more likely purveyors of the comprehensive renovation required is the Green New Deal, a proposed overhaul that promises to institute many of the major changes required by 2030. Regrettably, currently extant models remain definitively more idealistic than realistic. But again, their existence seems to promise that change is due: Labour’s Green New Deal for example, is the result of a grassroots campaign launched by members of the party, and this crystallisation of democratic pressure into policy surely means that governments can hardly resist change any longer. Tie this in with Austria’s recent elections where the Green Party was elected into a coalition government, and a trend has been set. The future will enfranchise the generation most staunchly advocating for governmental action, suggesting that political bodies will soon recognise instituting impactful measures as paramount to their identity. Since major financial entities have cited last September’s global protests as instrumental to their move toward strategies reserving capital for a green economy, the people are looking like major movers in the future of the economy.

Popular engagement undeniably makes a difference: protest, campaigning, and ‘flygskam’ (flight-shaming) have bent businesses into more sustainable shape by forcing producers to adapt to demand for sustainable alternatives. But this kind of consumer engagement is, as Aymeric says, a scenic route: “the best way people can reduce their carbon footprint isn’t by cutting meat consumption or wearing big jumpers instead of putting the heating on, but by better managing their savings and making sure that they are invested in funds or pension schemes that prioritise companies with excellent ESG score”. Through an active engagement with the financial and political beasts that pull the strings for changing the landscape of the economy, change can be set in motion.

The green economy may very well be an answer to the monumental questions before us, but it is no miracle cure, and won’t be instituted without drastic conceptual revolution. The proposal is more than a reworking of civilisation’s constitutive materials, but a new method of construction, emphasising the ecology and interplay of components for the realisation of a responsible economy. And vitally, what the next decade must provide is a new model, one which will foster the building of a circular economy where a “loops not lines” flow of material prevails, where economic growth is organic rather than meteoric. Its seeds are beginning to shoot, but need more intensive care and deliberate action.

This article was originally published in Issue 725 of Pi Magazine.