Why should Financial interests be aligned with Green economic recovery strategies?
"For every dollar spend in green investment, what is the return on investment within 5-10 years of reducing climate risks....?'' (Mr. Edward B. Barbier, University Distinguished Professor, Department of
Economics, Colorado State University).
Covid 19 pandemic has without reduced the rate of economic growth and development globally. However, the greatest impacts are expected to be felt in developing countries in Sub Saharan Africa, Asia and the Caribbean. This has a great potential of negating all the gains made on Environmental management and climate change mitigation, as most countries will be trying to rapidly bounce back from tough economic times, through increased industrial productivity, increased agricultural activities, high energy consumption and water usage.
To be able to ensure green recovery, developing countries in particular, should consider three emerging developments, that's;
1. Adopting and acting on Net zero carbon targets - the current financial sector wants to see businesses focusing on net zero carbon emissions to attract future investments and guarantee return on investments.
2. Increasing use of internal carbon pricing to screen Financial investments - focusing on the likelihood of reducing carbon emission and net Financial gains from such reductions and
3. Use of Financial instruments like Green bonds and targeted guarantees - this focuses on potential gains of investing in green bonds and targeted guarantees, as was witnessed during the 2008 recession where about 250,000 dollars’ worth green bonds were issued. Developing countries on the other hand should target benefiting from Green Financing mainly in their energy and transportation sectors.
Considering the above three emerging developments, countries should align their Financial interests with green economic recovery through implementation of the below strategies;
1. push for reforms in green recovery strategies through adoption of green projects in their being implemented across different sectors. For example, construction of coastal resilient structures, low carbon Agriculture, and low fossil intensive transport sectors through use of hybrid, and pure electric vehicles, trains and machineries.
2. Public support for private Re-engineering and redesigning of pre-existing projects and investments. Further, developing countries should focus on ending dependence on fossil fuel subsidies at the expense of sustainable Green Financing opportunities, Green bonds and Targeted financial institutions guarantees, mainly in transport and energy sector initiatives which are primarily known to be fossil fuel intensive and,
3. development of business policies and incentives to encourage countries to adopt and implement Green Recovery strategies.
It is thus worth noting that there is indeed an urgent need for developing countries to align their Financial and development interest with long term Green recovery economic strategies post Covid-19 pandemic. Whereas it is a painful path, the net long-term gains are worth the current investments.
