COP21 could redefine green growth — if business steps up

COP21 could redefine green growth — if business steps up

stairs, businesses step up for climate change action
ShutterstockGualtiero Boffi
With a lack of investment still holding clean technologies back, businesses need to work together with policymakers to shift the status quo.

Economic growth and sustainable development are complementary in that we cannot have one without the other. A key element that can help to achieve both objectives is green investment.

A growing number of companies around the world are changing their business models to recognize the importance of sustainability and the need to address climate change. The private sector is increasingly working to shape a society that is sustainable and is developing business models and investment options that recognize global trends on climate, energy, food, water and scarcity.

Many big banks are shifting their priorities to financing renewables, including wind power, solar energy and new technologies. They acknowledge that achieving environmental and sustainability goals is a path to a stable future for "business-as-usual" investment.

Citigroup pledged to invest $100 billion in environmentally sustainable projects and Deutsche Bank, recently accredited by the Green Climate Fund, is financing projects related to renewable energy, energy efficiency and technologies and providing an opportunity for investors to allocate capital to sustainable products.

Companies are developing successful examples of growth through innovation.

For example, Unilever recognizes that a "new, bigger" approach to innovation and greater use of technologies are driving growth amid sluggish sales. Accelerating its innovation capabilities has helped Unilever to achieve an increase in turnover while expanding the number of projects using new technologies.

General Electric is taking advantage of new technologies by putting emphasis on approaches to collaborating, reviewing performance and manufacturing.

Creating a climate for policy change

Despite positive signs of increasing private finance into green investments — clean technology and renewables — there remains a considerable shortfall in investment.

Trillions of investments are made in infrastructure around the world, but today's market and policy conditions drive them to brown rather than to green.

This is because the primary goal of businesses is to generate the highest possible return with the least possible risk, and policy makers fail to internalize externalities of subsidized fossil fuels, such as health costs.

Progressing towards green requires creating a policy-friendly environment in a country conducive to green investments. Policy makers need to remove barriers to green investment and establish enabling conditions in areas, including regulations, policies, subsidies and incentives to scale up investment and facilitate a transition to green economies.

If green was easy, we would not need Sustainable Development Goals, climate negotiations, most of the U.N. organizations or — for that matter — environmental agencies.

Substantial progress has been made in transitioning to green growth; however, we still rely on fossil fuels and require them for our daily lives. What's more important is to understand how long it will take and how challenging it would be to shift away from these sources of energy.

Many still have a false perception that renewables are expensive and fossil fuels are cheap because the health costs of burning fossil fuels and the cost of maintaining aging infrastructure have not been taken into account.

In principle, the current economic model has stimulated significant economic growth around the world and has lifted millions out of poverty.

At the same time, it is evident that the current economic growth is no longer sustainable, does not adequately consider the well-being of humankind and the needs of the growing population.

Clearly, we need a migration away from fossil fuels and towards innovative upgrades in technology, skills, policies and business models. Also, an aligned public consciousness is required for the transition to a green growth pathway.

In spite of global wealth increase, the gap between the rich and the poor is widening, so greater emphasis must be placed on finding a different model of economic growth that is more financially, economically, environmentally and socially responsible.

Bridging economics and environment

We have to find a better synergy between environmental and economic goals.

The Global Green Growth Institute, the organization I work for, is a good example. We are a member-based international organization founded to support developing and emerging countries in exploring how green growth can help achieve economic growth and development objectives. We are conducting 37 programs in 22 countries.

We begin by doing an assessment of what green growth would mean for them and assess the risks and opportunities related to green growth. We then work with countries to implement strategies in four main areas: energy, cities, water and land use.

We work with governments to help them achieve their growth goals of real inclusive and sustainable change for their people and the environment and help countries to develop green growth plans that are "bankable" — projects that meet investor criteria and that will be implemented.

In fact, investors and businesses have a crucial role to play in driving low-carbon growth at COP 21.

A Paris outcome could help to find solutions for national and international businesses. It could formulate strong ambitions for international companies by giving carbon the price it deserves and bringing coherence or a level playing field to international climate action.

As for national companies, they could reduce risk, enhance rewards and create new finance solutions that draw smaller projects into the market based on the commitments countries make in Paris. If we see progress on both fronts, businesses will be empowered to contribute to profitable green solutions, without being asked to do the impossible.

Part of the issue is that government representatives, often from the diplomatic and environmental domains negotiating the Paris outcome, are shaping a business landscape they do not fully understand.

In the interest of all of us, businesses need to offer Paris negotiators practical business solutions that will give innovation both the help it needs and the chance it deserves.

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