Recent crises have exposed the weaknesses of our international institutions, and growth-obsessed economies models.
Russia’s war in Ukraine is a humanitarian catastrophe which violates the United Nations Charter and international humanitarian law and has exacerbated socio-economic and environmental crises around the world. This is also the latest example a global system that does nothing to improve the human condition. Our imperfect responses Climate change, Biodiversity loss, The Covid-19 pandemic and rising energy Food costsInternational systems are in desperate need of redesign due to war and conflict.
We are faced with an economic model that is based on indefinite production and consumption. Climate and ecosystem breakdown. The Recent reportsThe Intergovernmental Panel on Climate Change highlights the severity of climate change and the shrinking opportunities for more climate-resilient development.
Governments must deliver PromisionsTo align public support towards clean-energy investments, deployment, and phase out subsidiesfor fossil fuels. The war in Ukraine is increasing the pressure on fiscal authorities to maintain or even increase their spending. Support for fossil fuelsIntense protectionist agriculture. Policy-makers therefore must recognise that the current crisis is an opportunity to invest in a faster transition to clean energy and resilient agriculture—all of which will create green jobs in the process.
Climate finance should be focused on the most affected and least able to address climate change. Before the war, rising food and energy costs were already causing hardship in poorer countries. The World Food Programme may have to deal with a food-security crisis that has erupted because of higher food and energy prices. More than halfUkrainian wheat.
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Peace is necessary for the survival of all societies and nature. Peace and long-term prosperity depend on our ability create an equitable, net zero society. Global economy that is nature-friendly. Governments and multilateral organisations like the International Monetary Fund (World Bank) will have an advantage this week and over the months ahead. opportunityTo lay the foundations for achieving this vision.
The IMF’s proposed Resilience and Sustainability Trustcan help ensure that the recently allocated $650 million in funding is used. Special drawing rights (the fund’s reserve asset) will channel more cost-effective, flexible finance to the most vulnerable countries. Increasing development finance can also help to increase green industrialisation and employment while supporting countries that are making the most of it. Shift awayFrom carbon-intensive industries
The World Bank, on the other hand, must Use its financial leverageTo finance a quicker and more equitable clean-energy transformation. It should support countries suffering from the pandemic, the physical effects of climate change and the economic shocks of war by making a greater commitment to financing adaptation, facilitating concessional lending and deploying its risk-mitigation tools to help ‘crowd in’ more private finance.
Modification of the rules
Beyond supporting a Just transition, transforming the global economic and financial system means changing the ‘rules of the game’. Natural resources and nature’s services must be properly valued and externalities properly disclosed, priced and built into financial markets.
We must also change the way we measure progress because gross domestic product is not enough. No longer fit for purpose. Instead of helping us to solve our most pressing problems, it encourages us to do better. over-consumption. Replacing GDP with a new yardstick that tracks wellbeing and prosperity across generations would encourage investment in natural and social capital, as well as a transition to a nature-positive global economy that respects and operates within the biosphere’s limits. The UN Sustainable Development Goalswere made to do this, but we have yet not fulfilled our commitments.
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A consensus will be needed to agree on new rules. Global commission on the economy and nature—a new Bretton Woodsto bring together finance, academia, government and civil society. Recognize that our economies are complex. dependent onEmbedded in nature. We must also update the Governance structuresThe IMF and World Bank recognize the economic power of emerging market economies, giving more voice (and votes) to countries that are less represented.
Governments must consider natural and social systems when making decisions to convince investors and businesses to shift capital toward low-carbon, nature-positive, socially-inclusive activities. This is the only way to align fiscal, other economic policies with international. Climate, Nature Development goals. This includes publishing information on natural capital stocks and the associated risks, liabilities, and investment requirements in annual budget reporting. Corporate reporting on climate-related issues should also be done. Nature-related risksBased on the recommendations of Task Force on Climate-related Financial DisclosuresEventually, it will be the Taskforce on Nature-related Financial Disclosures) needs to be standardised and made mandatory for businesses and financial institutions.
Investing in nature-positive, net-zero action should increase. Subventions that are environmentally harmfulShould be eliminated. It will be costly to reverse the damage done to nature. $700 billionIt is only a fraction, however, of what you can expect to earn in a year. $5.9 TrillionCost of fossil fuel subsidies. It is imperative that the same bold economic intervention used in managing the pandemic be applied to climate change and biodiversity loss. As many countries increase their borrowing in order to recover from the pandemic. Now is the time for the global financial safety net to be expanded, green sovereign-debt market to be nurtured, and new financial instruments to be promoted such as Nature-performance bonds.
We can reduce the capital cost for those who invest in resilience and drive economic reforms that will accelerate progress towards greener, more inclusive prosperity. With more than $44 trillion in economic worthat risk from natural loss and with a netzero transition that requires investment Nature-based solutionsIt must be a top priority to initiate reforms for a fairer, more sustainable world.
Finance ministers at IMF and World Bank address immediate food- and energy crises. spring meetingsIt is also necessary to open the door for long-term reforms. World leaders will be able to do so by gathering in Stockholm+50This June, and for COP15Kunming will host a biodiversity conference later this year. This conference will give us a solid foundation to build the sustainable, fair, and net-zero global economy we need.
Republication forbidden—copyright Project Syndicate 2022, ‘What is needed for long-term peace & prosperity’