The Corona Virus Is Like A Natural Catastrophe - Sir Christopher Pissarides
1. In which areas do you see opportunities for Europe to emerge stronger from the Corona crisis?
First, at the political level, Europe will emerge more united and more appreciative of each other in the European Union. The pandemic has taught us important lessons about dealing with the health problems together and helping each other as we come out of it. working together in times of crisis makes everyone stronger. The programme voted by the European Union is excellent and it will make a difference to many countries as they try to rebuild their economies. I never supported Brexit, but I can see that even many supporters are now seeing the problems from the separation. Having to deal with the pandemic recession alone, superimposed on the adjustment problems that Brexit introduced, is something that the UK economy is fining difficult to do well.
At the economic policy level one good development is that there is now a lot more awareness of the need for sustainable policies that reduce climate risks, and address responses to natural disasters. European governments are taking this opportunity to start on a new platform, not go back to the old ways, even if that were possible. I hope, and actually expect given what has been said, that the European Union supports more strongly proposals from its members that address sustainability and climate change.
2. Germany has been pushing ahead with the energy transition, especially since 2011. The EU is getting serious about sustainability. That's absolutely essential for the future, but it's also a major effort for the corporate world and indirectly for consumers. How much Corona crisis management and ESG can Europe tolerate at the same time?
Admittedly the coronavirus crisis has made economic management more difficult and debt levels have risen in most nations. But perhaps surprisingly there is also a complementarity between the corona crisis and ESG, in the sense that if we need to restart from something new, it will be possible to give ESG more weight. Put differently, if a corporation in normal times were to change from its traditional ways of operating to a more sustainable way, it would need to destroy part of its activities and replace them with new ones. Corona has destroyed many of these activities within a short period of time, so the difficult job has been done for them. I expect to see an upsurge in ESG investments in the years to come.
3. What parallels do you see between the social consequences of the Corona pandemic and later possible consequences of climate change?
We can think of the corona pandemic as a natural disaster that hit large parts of the planet. Think of a massive volcanic eruption that creates clouds that deprive parts of the planet of sunlight and it grounds flights, causes breathing problems to humans and animals, and destroys agricultural production. The corona has done something similar. It shut down business activity across the planet and caused large numbers of deaths. Climate risks also produce natural disasters, such as flooding of coastal areas and droughts. The impact of the pandemic is very similar. Dealing with the pandemic requires coordinated action from governments, businesses, and the public, within countries and across them. This was manifested in taking action to mitigate its effects but also in medical research to discover quickly effective vaccines and supply it across the globe. The parallels are evident, and they showed us how we can reach better outcomes of we work together in confronting them.
4. Is Europe creating a competitive advantage for the future with its sustainability push?
One of the problems that sustainability policies and corporate investments in sustainability have been facing is that the payoffs were more removed into the future than those of other investments. Short-termism dominates many decisions, especially in government. But the pandemic has taught us that the future could suddenly become the present, with action needed now. Europe will gain a competitive advantage as more sustainability investments are taking place and it will be better placed to face future risks, both from pandemics like the one that we are experiencing now and from climate risks. But this future, although on paper it looks like being a long way away, could suddenly become the present.
5. What are the key building blocks for Europe to truly achieve the sustainability turnaround? Which instruments available to policymakers are likely to have the greatest impact?
The drive has to come from governments that will provide the incentives, and from the public, which should show preference for production processes that are more sustainable, energy sources that are renewable and contribute directly themselves to the development and growth of the circular economy. The public needs to be educated about the benefits of shifting their consumption, and their investments, to sustainable ends, and this is firmly in the domain of government and the education system. Education needs to start from a very young age, so people grow up knowing the advantages of sustainability. As for the corporate sector, it carries a lot of responsibility – to show preference over renewable sources of energy over fossil fuels, and sustainable investments over short-term profit maximizing ones. The government’s role in this respect is the provision of tax incentives in this direction and the administration of a system of penalties for those that do not comply.
6. Can sustainability only be achieved through laws and rules, because people are guided primarily by their individual interests, not by the idea of community?
The idea here is to show people that their individual interests lie with sustainability, and ultimate coincide with those of the community. The current generation is likely to face the consequences of climate change if they are not guided by sustainability but even if they avoid it, their children’s generation will not. Government incentives in the form of tax policies and regulation can help in the short run, but unless people are persuaded that sustainability is the right policy no government action will succeed in the longer term. Some politician will appear that will repeal everything to win votes, or people will find ways of avoiding compliance.
The interview appeared originally in German in the Private Banking Magazin
A Fireside chat with Sir Christopher Pissarides and Dr. Ranjit Nayak
On Wednesday, March 24, Corinth Capital and Grammig Advisory invite you to seize a unique opportunity to join a fireside chat with Sir Christopher Pissarides and Dr. Ranjit Nayak. During a one-hour session, you will explore how the Covid-19 pandemic led governments to focus on sustainable development and the ways private investors could benefit from this. Make sure to register via this link to discover the recent outlook on sustainable investments and get all your related questions answered during an interactive Q&A.
We look forward to welcoming you!