Policy Analysis

Environmental, Social, and Governance Targets of the March 2020 Economic Stimulus

Can these economic stimulus packages be accompanied by targets on environmental performance, social cohesion, and economic governance?

April 3, 2020

Examples of economic stimulus packages announced in March 2020

  • The United States announced USD 2 trillion on March 30.
  • The European Union announced EUR 759 billion on March 13.
  • Canada announced CAD 150 billion and a supplementary CAD 52 billion on March 25.
  • France announced EUR 45 billion positioned to provide relief for small business and unemployment benefits on March 17. A second wave targeting industries, including the automobile industry, is being prepared.
  • Spain announced USD 220 billion on March 17.
  • Italy announced USD 28 million on March 10.
  • The United Kingdom announced GBP 30 million in direct support to businesses, GBP 4 million in direct contributions to households, and a raft of other measures on March 20.
  • India outlined USD 23 billion in support for a range of urgent needs, including food security, agriculture, and state-sponsored retirement contributions on March 26.
  • South Africa announced the preparation of a stimulus plan on March 19.
  • Germany is preparing EUR 350 billion in stimulus spending, most of which will be positioned to increase large liquidity loans from commercial banks. The announcement was made on March 23.
  • Switzerland announced CHF 40 billion on April 3 to be targeted as lending for small businesses.
  • The International Monetary Fund Rapid Credit Facility (RCF) has approved disbursements to over 30 countries and further debt relief grants to many others through the Catastrophe Containment and Relief Trust.

As governments around the world announce unprecedented stimulus packages and opinion leaders ask if this will be enough to avoid a long and difficult recession, we pose an even more important question: Can these economic stimulus packages be accompanied by targets on environmental performance, social cohesion, and economic governance?

The humanitarian crisis caused by the COVID-19 pandemic continues to be devastating, and targeting stimulus spending on emergency responses, healthcare, food security, and keeping jobs and small businesses alive is extremely important. But when the pandemic ebbs, we will see that not using this large public spending to trigger better sustainability performance across global supply chains was a missed opportunity.

When there is a lot of money being spent quickly, there is little time for rigorous analysis of wise spending. Policy-makers and central banks working on open market operations have little space for systemic thinking on how to prioritize or where more spending can optimize value for money for society as a whole. Performance targets can be useful in such instances, as they invite profit-maximizing firms, the hallmarks of capitalism, to be innovative in how to achieve the required performance. There are no limits to human ingenuity. Passing a share of the performance challenge to those receiving public support may increase the likelihood that the post-COVID-19 recovery will benefit people and the planet alike.

Environmental, social, and governance targets are also appropriate as scientific evidence strengthens on the “species jump” that gave rise to the COVID-19 pandemic. (Similar species jumps were behind the Middle East respiratory syndrome [MERS] and the severe acute respiratory syndrome [SARS]). With increasing climate change, deforestation, and biodiversity loss (not to mention unsustainable practices in the trade of species, agriculture, and a host of other sectors), the likelihood of recurring human health catastrophes is increasing. Hence, we need to remember the precautionary principle and accompany future preparedness measures with prevention strategies. And what better way to do this than through positive incentives on stimulus spending?

Stimulus involves a multitude of measures: public spending on infrastructure, capital injection (cash equity or debt) into strategic firms, deposits in banks, loans, credit, government bonds of different traceability, and more. Performance targets on this spending can hence be deployed in a number of ways. Let us consider a few examples:

  • Countries are setting up national health funds. Can medium-term spending target secondary healthcare services for lower-income communities and maybe even improve the handling of medical waste within national boundaries?
  • Can cash injections into the airlines, shipping, and cruise lines be tied to carbon targets?
  • Can the automobile sector be required to step up innovation on sustainable mobility?
  • Can banks be asked to increase lending to sustainable enterprises by deploying more green loans and sustainability-linked loans?
  • Can public agencies be mandated to ensure that spending on infrastructure is tied to sustainable design, energy efficiency, waste reduction, and green technological innovation in its broadest sense?
  • Can direct payments to farmers be designed as payments for clean water and increased biodiversity?
  • Can our zest for remote working and “Zooming” increase the impetus for the greening of electricity? [1]
  • Can all market participants be prohibited from using stimulus money to buy bonds issued by fossil fuel firms?
  • Can we heed the warnings of Yuval Noah Harari[2] on the slow, creeping risks related to artificial intelligence and cybersecurity, especially as hospitals, governments, businesses, non-governmental organizations, and schools are all now working online?
  • Automobile manufacturers are making respiratory equipment, industrial designers are 3D-printing long-wearing medical masks, engineering and construction firms are setting up mobile hospitals, textile manufacturers are working on protective medical gowns, luxury perfume makers are supplying sanitizing gels—and we applaud their generosity and ingenuity. Can this momentum be extended to innovation in clean and green technologies?

I am confident that, this time around, a difference can be made. Our track record on green public investment shows that spending on sustainable infrastructure increases labour income, productivity, and GDP. Using the Sustainable Asset Valuation (SAVi) tool, we can simulate the full societal costs of economic policies and infrastructure investment decisions and show exactly why sustainable infrastructure can bring more attractive financial returns. We can also run “what if” scenarios to help policy-makers understand the whole-life-value implications of their spending.

At the time of writing, the COVID-19 pandemic is drastically reducing economic activity, and supply chains around the world are coming to a standstill. We are witnessing the loss of tens of millions of jobs and, as the pandemic spreads in lower-income countries, the full human and social catastrophe is just unfolding. It is therefore paramount that stimulus is targeted at boosting universal healthcare, food security, unemployment benefits, and credit to keep businesses alive. But this unprecedented stimulus will only make a difference if countries continue to prioritize sustainable development. In other words, when the pandemic ebbs and the focus fully moves to propping up consumption, providing low-cost credit, and bailing out our strategic industries, there must be no compromise on sustainability. We all agree that economic shocks can be weathered better than long recessions. Hence, letting this emergency funding be used to trade off on climate, biodiversity, jobs, education, healthcare, and cybersecurity would be a grave mistake. Instead, it should be an opportunity to reward front-runners on sustainable development. Global societies deserve no less.


[1] Emissions from date centres are reported to be on level with air traffic.

[2] Yuval Noah Harari has long outlined the risks to personal freedom, personal choice, and democracy. His views are elaborated in his book, 21 Lessons for the 21st Century, his discussion at the 2020 World Economic Forum, and his March 20, 2020 article in the Financial Times, “Yuval Noah Harari: The World After Coronavirus.”

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