We must invest in our environmental future, not only to heal our planet but heal our society. Our social and cultural wellbeing is intrinsically tied to the environment and climate we live in.
Finance is the cornerstone for implementing climate actions and scaling up ambition, yet the gap between what we spend through public money and what is needed to reach our climate targets is massive. In the EU context, we have a 177 billion euros per year gap that we would need to raise if we are to have a chance of meeting our climate and energy targets. That’s more than the individual annual GDPs of 11 of the EU-27 Member States. But it is achievable and the benefits of rising to this challenge are greater still.
The difference between keeping temperatures around 1.5°C or letting them get to 2°C is startling. More heat-related deaths, higher risk of food scarcity, more frequent and extreme weather events, as well as an increase in people facing water stress. In short, our basic human needs of shelter, water, and food are under threat and these impacts are happening now (the 2003 summer heat wave in Europe caused over 70,000 excess deaths that year). This is the impact of 0.5 degrees change – yet society is currently on a trajectory to reach 3.2 degrees by the end of the century, a three times greater change.
The benefits of acting now are therefore profound. The savings resulting from mitigating the impacts of a changing climate are arguably far greater than the cost to act. For example, flooding impacts alone are estimated to increase from 5 billion euros to 20 billion euros per year but could be avoided; or the savings associated with addressing air quality are between 48 and 99 billion euros by 2050. So maybe 177 billion euros a year is a good deal after all? But where and in what do we invest?
Investments are generally best done early and over the long term, whether that’s investing in health, knowledge, or wealth. But what to invest in, and how to be confident it is the right choice, requires guidance. The EU’s environment and climate goals give us the direction of travel, based on our international commitments. For public finance, the various strategies under the European Green Deal guide us on how and where to invest, and thus holding true to the intent of the Green Deal and raising its ambition is a necessary part of our economic decision-making for the long term.
For private finance, the EU’s sustainable finance agenda – and specifically the EU sustainable finance taxonomy – provides the signpost and performance standards to guide economic decisions. There are already more than 80 economic activities for which mitigation and adaptation criteria are set out in EU law, and a further 80 are expected next year looking at the wider environmental objectives of biodiversity, pollution, water, and circular economy. Together, these standards have the potential to influence trillions of investments not only in the EU, but globally. As such, a high level of ambition and a strengthened science-policy interface in political decision-making is essential as we decide how to invest in our environmental future and safeguard future generations.
Photo by Piron Guillaume on Unsplash