BEIJING – For the first time in years, a healthy dose of optimism seems to be in order. The global economy – a few trouble spots aside – is finally moving beyond the financial crisis. Technological breakthroughs have put renewable energy on a competitive footing with fossil fuels. And the international community seems poised to forge critical agreements on sustainable development and the fight against climate change.
And yet the risk remains that these gains will be frittered away, as policymakers, business leaders, and investors focus on short-term concerns at the expense of looming threats to the global economy. If we are to lock in our progress, we will need to address the failures of our financial system at their roots, putting in place standards, regulations, and practices that make it compatible with the long-term needs of a more inclusive, sustainable economy.
This year, the world has the potential to do just that. The transition to a green economy now seems to be a certainty, rather than a hopeful aspiration, as growing public acceptance and technological advances make investments in clean energy increasingly practical. In 2014, global investment in renewable energy increased by 17%, even as oil prices plummeted, according to a recent report by the United Nations Environment Programme (UNEP). The trend was driven by a boom in solar energy in China and Japan and increasing European investment in off-shore wind power.
Stock exchanges from Shanghai to São Paulo have established reporting requirements to inform investors about how companies are weaving sustainability into their strategies. Green bonds have taken off, with upwards of $40 billion issued in 2014, and they are likely to become only more popular as clearer standards and regulations are established. Even central banks have turned their attention to the environment. The People’s Bank of China has joined with UNEP to identify practical steps to ensure “green” financial-market reform, and the Bank of England (BoE) has initiated a prudential review of the systemic risks posed by climate change to the United Kingdom’s insurance sector.