LONDON – It will take time for the COVID-19 pandemic’s economic consequences to come into full view. But some of the costs are already becoming apparent, beginning with the devastation the crisis will wreak on the global workforce. With climate change also threatening to hurt the world’s most vulnerable workers, the need for a holistic crisis response that emphasizes both justice and sustainability could not be greater.
The numbers paint a grim picture. The International Labor Organization warns that 1.6 billion workers in the informal economy – almost half the global workforce – are in “immediate danger of having their livelihoods destroyed.” The African Union reports that, in Africa alone, nearly 20 million jobs, in both the formal and informal sectors, are at risk. In the United States, the New York Timesestimates that, despite a headline unemployment rate of 13.3% – already higher than in any previous postwar recession – actual unemployment is closer to 27%.
Clearly, governments must act to protect workers from the COVID-19 shock. But if such efforts are to put economies – and their workers – on a stronger footing beyond the current crisis, they must also advance the goals encompassed in the 2015 Paris climate agreement – including the vision of a “just transition” that it articulates. This means not only shifting to sustainable patterns of development, but also safeguarding workers’ rights and livelihoods in the process.
Too often, it is assumed that progress on sustainability must come at the expense of economic growth and employment. Employees in polluting sectors fear that the climate transition will result not only in “stranded assets,” but also in “stranded workers” – and perhaps for good reason. Former mining towns and villages in the United Kingdom still have not recovered from the coal industry’s demise in the late twentieth century.
Yet this outcome is far from inevitable. The International Renewable Energy Agency predicts that, with more investment in renewables, jobs in the sector could reach 42 million globally by 2050 (four times their current level). Energy efficiency measures would create 21 million additional jobs, and system flexibility 15 million more. Simply put, with sufficient investment in the green economy, there will be enough jobs.
Yet ensuring that this leaves workers better off will also require a concerted effort to guarantee that the new jobs are good jobs, and facilitate a smooth transition for workers displaced from other industries (such as fossil fuels). The only way to achieve this is by adopting a truly integrated approach, in which governments, companies, trade unions, and investors all work to guarantee that climate initiatives take into account workers’ needs.
In recent years, environmental, social, and governance considerations have been gaining traction in business, investment, and policy circles. Yet too often a siloed approach has predominated, with actors tackling these critical dimensions of long-term performance separately.
This will not suffice. Just as unbridled climate change will do serious damage to the economy and its workers – not least by exacerbating natural disasters and contributing to pandemics – so, too, will failure to improve human-capital management and safeguard workers’ wellbeing. More broadly, building a sustainable economy – and the long-term investment returns that flow from it – will be impossible, amid high levels of unemployment, inequality, and disruption.
To avoid that outcome, shareholder engagement must be used to push companies not only to implement a just-transition strategy, but also to bolster transparency through public disclosures. More than two-thirds of the engagement initiatives currently being pursued by Candriam (of which one of us, Abou-Jaoudé, is chief executive) directly address the energy transition, fair work conditions, and business ethics – pillars of a just transition.
Moreover, investors should encourage companies to deploy capital – such as through a new generation of investments and bond issuance – to support renewal and diversification in communities affected by the transition. Investors and companies should work with governments to ensure that a just transition is placed at the heart of policymaking, not least in terms of COVID-19 recovery planning, so that stimulus funds can help build the clean, inclusive economy of the future.
Never before have our societies – including governments, public bodies, investors, and companies – been as committed to sustainability as they are today. Not only have the world’s governments committed to advance the United Nations Sustainable Development Goals; over 11,000 companies across 157 countries have also committed their support.
But this is only the first step; these actors must now follow through on their climate commitments – and make sure that their efforts advance, rather than undermine, social imperatives. This is not only the ethical choice; it is the best way to ensure future economic dynamism. Only by integrating environmental and social imperatives into our business models and economic policies can we secure long-term growth and prosperity – and build the resilience we need to weather future shocks.
NaïmAbou-Jaoudé is CEO of Candriam and Chairman of New York Life Investments International. Nick Robins is Professor in Practice for Sustainable Finance at the London School of Economics’ Grantham Research Institute
By NaïmAbou-Jaoudé and Nick Robins.
Copyright: Project Syndicate, 2020.