Nature and Biodiversity

What’s needed to secure a sustainable future?

Simon Zadek
Principal, Project Catalyst, United Nations Development Programme (UNDP)
Our Impact
What's the World Economic Forum doing to accelerate action on Nature and Biodiversity?
The Big Picture
Explore and monitor how Future of the Environment is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Future of the Environment

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.

September will mark the launch of the UN’s Sustainable Development Goals, the world’s first universally adopted, measurable targets for ending poverty and hunger while protecting the environment and the planet’s natural-resource base. And, later this year, the international community is expected to agree on binding commitments to cut emissions and finance the fight against climate change.

But, although the signs are all pointing in the right direction, success is far from guaranteed. The gains could slip away if the moment is not seized. The real question is one of timing, and the irreversible damage that delays could inflict. More than 80% of the 140 countries surveyed in UNEP’s “Inclusive Wealth” report registered a deterioration in their stock of natural capital. The economic damage resulting from environmental degradation is estimated to be roughly $7 trillion a year, much of it irreversible. The longer we wait, the worse our problems will become.

What is needed is a major international effort to realign financial and capital markets in ways that support sustainable development. Our financial system’s current design all but guarantees what BoE Governor Mark Carney has called the “tragedy of horizons” – a market failure resulting from the inability of investors, companies, and governments to act on problems, such as climate change, with consequences that will be felt only far in the future.

Policymakers and business leaders cite many reasons for focusing on immediate concerns. Indeed, the very policy actions needed to reduce the risks of another financial crisis force banks and asset managers to lend and invest for the short term, passing up often more profitable, but less liquid, longer-term opportunities.

Short-term pressures will always be present, but they can be overcome with the proper tools: improved pricing of environmental risks, climate-sensitive credit ratings, environmental lender liability, and efforts to mitigate the environmental risks to financial stability. A sustainable future is within reach, but only if we put in place the policies that make it possible.

This article is published in collaboration with Project Syndicate. Publication does not imply endorsement of views by the World Economic Forum.

To keep up with the Agenda subscribe to our weekly newsletter.

Author: Simon Zadek is Co-Director of the UNEP Inquiry into the Design of a Sustainable Financial System.

Image: A boy touches a 45-metre long wall lighted by colour rays. REUTERS/China Daily.

Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Nature and BiodiversityFourth Industrial RevolutionEconomic Growth
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

The planet’s outlook is in our hands. Which future will we incentivize?

Carlos Correa

April 22, 2024

About Us



Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum