Mind the tragedy of the horizon in the crisis of the moment: climate change in the light of COVID-19
Not only does climate action remain critical over the next decade, but investments in climate-resilient infrastructure and a lower-carbon future can drive significant near-term job creation, as well. And with near-zero interest rates for the foreseeable future, there is no better time than the present for such investments. The time is now.
Given the scope and magnitude of this sudden crisis, and the long shadow it will cast, one can raise the question: can the world afford to pay attention to climate change and the broader sustainability agenda at this time? The answer is simple: we cannot afford to do otherwise.
In our post we provide a brief overview of recent international publications in this topic.
In its insight, McKinsey made an attempt to understand the similarities, the differences, and the broader relationships between pandemics and climate risk, considering this as a critical first step to derive practical implications for the climate actions to take.
The current pandemic is the first of its kind in our lifetime and it may provide us with a foretaste of what a full-fledged climate crisis could entail in terms of simultaneous exogenous shocks to supply and demand, disruption of supply chains, and global transmission and amplification mechanisms.
The key difference between a pandemic and the climate risk probably lies in that while a global public-health crisis presents imminent danger, which we have been conditioned to respond to for our survival, the risks from climate change are gradual dangers that manifest themselves in degrees and over time. However, the latter also requires a present action. This is what former Bank of England Governor Mark Carney has called the “tragedy of the horizon.”
It is indeed important to consider that climate change—a potent risk multiplier—can actually contribute to pandemics in many ways, as highlighted also in a recent OECD publication about the need for a green post-pandemic recovery. Rapid urbanisation and illegal wildlife trade bring people into closer contact with wild animal species, which in turn exposes humans to virus-carrying animals via zoonotic transfer. Exposure to air pollution increases the risk of cardiovascular, respiratory and development diseases, etc.
Conversely, the same factors that mitigate environmental risks are likely to help mitigate the risk of pandemics (e.g. some of the measures currently taken, like teleworking and a greater reliance on digital channels instead of commuting to work or business travels and shortening and localizing supply chains, but we could also consider clear water supply and waste management).
There are some factors in the current socio-economic situation, which may contribute to climate actions, e.g. lower interest rates may accelerate the deployment of new sustainable infrastructure, which would also support near-term job creation. It is also promising that environmental, social and governance (ESG) investments in general constitute an increasingly popular investment segment, as highlighted in a recent article of the Financial Times.
A main crosscurrent may be however that governments and citizens may struggle to integrate climate priorities with pressing economic needs in a recovery.
In this context, all actors—individuals, companies, governments, and civil society—will have an important role.
For companies, the main priorities should be to seize the moment to decarbonize and take a systematic and through-the-cycle approach to building resilience. When it comes to resilience, a major priority is building the capability to truly understand, qualitatively and quantitatively, corporate vulnerabilities against a much broader set of scenarios, and particularly physical events.