Towards green recovery from the pandemic

The ongoing Covid-19 pandemic has already caused more than half a million deaths worldwide and apparently there is no end to this deluge. Except a handful of the countries that could respond to this surge in virus relatively better, most others are still at a loss in facing this unprecedented challenge.

Besides the health disaster, the global economy has also been forced to a standstill with huge implications for a majority of the population who have been badly hit by income loss.

In particular, the service and informal sectors have been hit the most and the livelihoods of those involved in these sectors have been seriously affected.

Most governments have been mobilizing massive resources despite a sudden fall in domestic revenue collection. The central banks, as well as international finance partners, have come forward to tackle the Covid-19 related challenges with emergency financing support.

Most countries have been able to suppress the virus significantly and passed the peak of infections. However, the uncertainty still remains, and both governments and businesses are opening up cautiously to create some income-earning opportunities for the affected population.

And this uncertainty breeds loss of business confidence, which does not help much in creating an environment for higher consumption and demand supported by enough purchasing power of the consumers.

No doubt the governments have been very aggressive in providing unusual stimulus packages to support both business enterprises with low cost running capital and individuals with various kinds of social protection programs, in addition to lavish health expenditures to help people survive.

Bangladesh has not been an exception in following the same response trajectory. It is too early to evaluate how effective these public responses in the form of various stimulus packages have been.

The urgency for suppressing the invisible enemy called Covid-19 virus has been at the top of the agenda of the policymakers throughout the world. Countries like China, Vietnam, Singapore, South Korea, Germany, Italy, New Zealand and Sri Lanka have done pretty well in containing the spread of the virus by following effective public health strategies of behavioural changes (e.g. use of masks, frequent hand-washing and cleanliness etc.) and massive testing, isolation and treatment.

Bangladesh, unfortunately, could not join this group of countries.

In this wider context, let me focus on an aspect of the response to this pandemic which has been relatively less discussed. This is about the other side of the coin. This pandemic has also revealed the need for caring for nature which has been badly treated by humans.

The partial and full lockdown has already shown that given a chance, nature can revive if we care to let it live in harmony with us.

Hence, the policy focus for greater protection of the environment has come to the forefront during this pandemic. Some would argue that this pandemic has created a life-time opportunity to 'go green' and support climate actions so that we can rebuild the economy and society that can be more aligned with the aspirations of the sustainable development goals, as well as the core spirit of Paris Climate agreement to achieve carbon-neutral future for humankind.

Most experts feel that the carbon emission may have already dropped by about 10 percent, which is the largest level of reduction since the second world war.

Yet, this is still not enough to take the world to the 1.5-degree Celsius trajectory by 2050. Moreover, there is a significant danger of rebound in carbon emissions, as well as a delay in a major transformation of the economy towards green goals.

It cannot be denied that the asset base of the global economy is still overwhelmingly dependent on fossil fuels and its production and business models are intricately intertwined with this dependence.

With 'business as usual' policy framework, there is every likelihood that most countries will revert to a high level of combusting coal, oil and gas once the economy starts recovering.

Moreover, the cost of fossil fuel has also dropped so much that it will be difficult to make a case for a lower-carbon economy unless the policymakers look at it with long-term lens.

The global funding capacity to go for green growth has also declined significantly in general, which has only gotten worse due to the pandemic.

The Paris Climate Agreement requires huge funding support of 75 trillion USD. Thanks to the UN stewardship, many of the corporates started pledging funds to invest in sustainability linked investments. The process is still on. However, the momentum may have been lost due to this sudden turn of the global economy.

For example, both the Stan Chart Group and HSBC have committed to go for sustainability link investments in trillions of USD. Other corporates have also pledged similar commitments for green investments. Many green bonds were in the pipeline.

We only hope that this pandemic is well managed so that the private sector can continue to invest in green infrastructures and products as planned earlier. But it is too early to say how these global investors will behave in the changed context. The focus may shift as well.

The governments and the public may become more focused on addressing the urgent challenges of the hour like retaining the jobs, maintaining health and economic well-being instead of addressing long-term climate challenges. In the process, the much-aspired to economic transformation, which was supposed to be rolling out, may be put on hold in the post-Corona scenario.

The world is indeed at a crossroads. We can go back to our 'business as usual' mode as things were before the pandemic, or we can resolve to create a greener and more resilient pro-nature new world.

The governments, businesses and investors can be more socially responsible now to go for a green recovery that addresses the ongoing crisis and simultaneously start building a stronger foundation for a climate-friendly world.

Governments can certainly look far 'beyond their noses' and prioritise sustainability in their massive stimulus packages that amount to no less than four percent of global GDP. They can surely focus on green jobs and manage the transition of the workforce to adapt to the carbon-neutral economy.

In the same vein, regulators can create more incentives for the companies so they can be more efficient in reducing carbon output, revisit their supply chains so that they procure green products and services and make their portfolios more resilient to climate risks.

The investors can help finance a green recovery, improve the investment process by integrating in it climate considerations and enhance transparency and accountability with broader disclosures of climate risks and opportunities. In other words, the global economy should commit towards a fundamental shift towards greener recovery.

Nature has already been demonstrating a perceptible revival as greenhouse gas emissions have been substantially reduced. This has been made possible due to significant changes in our work and living styles during the pandemic.

We now are getting accustomed to remote work, foregoing frequent and long-distance business and personal travels, and at the same time, businesses are looking for shorter supply chains to de-risk their operations.

If we can stick to these behavioural changes even after the suppression of the virus, this will have a long-term impact on our society and economy in motivating all the stakeholders to become more socially responsible and climate-friendly.

We probably will prefer to walk or ride bicycles or take public transport to reach our workplaces rather than burning fossil fuels to spoil the environment with our overused private vehicles and creating unnecessary traffic jams.

This can indeed be a lifetime opportunity for all of us to invest in a green recovery that will lead to optimal social, environmental and economic outcomes. In order to drive green recovery, the governments should put sustainability at its heart (which was missing while responding to the last global financial crisis) by promoting projects that create more opportunities for jobs and at the same time reduce carbon emission.

Large scale renewables, building renovations, improving energy and water efficiencies for the industrial units can be some of these green options. Prime Minister of Canada Trudeau has already created a $750 billion carbon emission fund to help companies reduce pollution and waste while maintaining and creating jobs as part of the stimulus packages he created to address the Covid-19 challenges.

The governments can motivate the stakeholders to give more support to those who are ready to go for more green and digital investments including 'smart investments' like start-ups promoting e-marketing for agricultural products, encouraging more women SMEs, skilling and reskilling of human resources for the post-pandemic world.

The catalytic use of public funding to mobilise additional private fund to accelerate the transition to cleaner energy-based economy could be one of the positive spin-offs of the ongoing pandemic. In addition, there has to be a more coordinated global response to address climate change.

There should be greater international emergency financing support for focused green transformation of the developing countries from IMF, WB, ADB, AIIB, and IDB etc.

The developing countries that are already struggling to cope with the current pandemic deserve special support to build resilience to tomorrow's climate change. Use the climate-lens to address the risks and opportunities when financing efforts to restart the economy.

Bangladesh stands a better chance in making this recovery greener as it has already made early gains in green transformation of its finance and economy while responding to the Global Financial Crisis. We focused on a more inclusive and productive investment in agriculture, MSMEs, green products, women entrepreneurship over the years.

Our central bank played a pioneering role in green transformation of the economy. Besides a handsome refinance line for the small and medium green enterprises including providing support to small and medium entrepreneurs involved in bio-gas, organic fertiliser, solar energy plants, green RMG factories, green brick production, ETPs, green housing etc.

Bangladesh Bank went out of the box to provide fund in foreign exchange for green transformation of the textile and leather industries. The central bank has a large solar panel on its roof and encourages banks to follow Environment, Social and Governance (ESG) guidelines to attain sustainability.

The government has also been supportive of promoting climate-friendly agriculture and desalinisation in the coastal belt by supporting green research and development. The dedicated financial institution called IDCOL has been promoting millions of solar home systems, mini-grid solar system, solar irrigation program, rooftop solar solution program under the guidance of SREDA and regulatory support from the central bank.

The government has recently gone for a large solar energy plant with G2G support from China. All this has created a strong base for green transformation of the economy. The focused attention of the HPM on inclusive and sustainable growth process promoting rural and blue economies has been instrumental in strengthening this base.

"Never let a good crisis to go waste", said Winston Churchill. Indeed, disasters are our great educators. HPM Sheikh Hasina, a 'champion of the earth', also transformed Rana Plaza tragedy into an opportunity for the RMG sector by introducing social and environmental compliances with the support of the stakeholders.

I am sure we will be able to achieve greater good in the post-pandemic environment through the cooperation of the government, organisations and citizens. We hope to further strengthen prudent strategies of addressing climate change, pollution and bio-diversity already initiated by the government led by Sheikh Hasina while making smart recovery from the pandemic focusing both on reducing emission and adapting to the present and future impacts of climate change.

We plan to make agriculture bio-diversity positive and back sustainable production and consumption to conserve the resources provided by the nature.

In the process, with right investments for green recovery, we will not only be able to avoid future damage but also make everyone's life and livelihood better.

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The author is Bangabandhu Chair Professor, Dhaka University and former Governor of Bangladesh Bank. He can be reached at [email protected]