BEIJING – The G20’s finance ministers and central-bank governors have begun to undertake a stunning shift in mindset. They have become increasingly convinced that “green finance” – financing environmentally sustainable growth – should be at the center of economic-development strategies. Such an idea, until recently confined to a fringe of academics and policymakers, is potentially one of the most important new “truths” of the twenty-first century.
The conventional economic-development model viewed environmental protection as a “luxury good” that societies could afford only after they became rich. Such thinking explains why the dramatic growth in global income, 80-fold in real terms during the last century, has been accompanied by a decline, according to the United Nations Environment Programme, in natural capital in 127 of 140 countries.
But natural capital is not just an abstract concept; it supports lives, livelihoods, and societal wellbeing. The environmental destruction that our activities are wreaking – greenhouse-gas emissions add energy to the Earth system at a rate equivalent to the detonation of four nuclear bombs every second – has concrete consequences, which are already being borne by millions of people.
Since 2008, an average of 26.4 million people have been displaced from their homes by natural disasters each year – equivalent to almost one person every second. One-third of the world’s arable land is now jeopardized by land degradation, which causes economic losses of $6.3-10.6 trillion per year. And 21 of the world’s 37 largest aquifers have passed their sustainability tipping point.