Ray Dhirani, Head of Sustainable Finance at WWF-UK, gives a personal view on forging a greener recovery
The financial crisis of 2008 blindsided the global economy, just as COVID-19 has done in 2020. But this time the stakes are even higher.
I was working in markets for Merrill Lynch in New York when Lehman Brothers collapsed, and it had become clear that a culture of short-termism, narrow focus on profit, and general excess ruled the roost in the financial sector. This was not a stable system. In the aftermath of that crisis, decisions were taken by governments and businesses that saw global greenhouse gas emissions continue to accelerate. To quickly stimulate economic activity, investments and incentives mostly supported business as usual. Overall risk, it seemed, was not properly addressed.
The world stands on the precipice of a catastrophe many orders of magnitude greater than COVID-19. CO2 in the atmosphere is at its highest in 800,000 years and rising, the population of vertebrate species has dwindled an average of 68% since 1970, and record temperatures are melting polar ice and fuelling devastating forest fires. Our economy, society, and our planet cannot afford these trends to continue, and scientists warn we may have only around a decade to turn things around.
The aftermath of COVID-19 offers the chance for a sustainable reset that could, according to the World Economic Forum, create 395m jobs in the next decade as well as support planetary and public health. Politicians, businesses, economists, environmental groups, scientists, and social justice campaigners have called for the recovery to focus on low carbon industries, nature restoration, and greener lifestyles.
Whether it’s electric cars, plant-based diets, or digitisation, consumer trends are rapidly turning greener – and first mover companies and investors stand to make the biggest gains. The pandemic has served to amplify the fragility of some of our existing business models, and shown public and economic health are two sides of the same coin.
But social and environmental considerations must be systemically embedded into all investment and business decision making, which is where the accountants have a critical role to play. A robust standard for measuring and reporting on key environmental issues, for example, can ensure auditors treat environmental factors with the same scrutiny as financial information. Environmental risk is material risk.
At Davos this year, Greta Thunberg delivered a lucid message: ‘We are telling you to act as if you loved your children above all else.’ The choice facing us is simple – to try and protect our short-term fragile gains at the expense of our planet, or to invest fully in safeguarding our future.
WWF’s new film, Our Planet: Too Big To Fail, exploring the critical role of the finance sector in powering a sustainable future, is here.