Green finance is critical to a sustainable recovery from the coronavirus pandemic. That was the main message of a recent Cyprus event co-organised by ICAEW, WWF, Cyprus UK Business Association and the British High Commission Nicosia, Charting Economic Recovery to Integrate Green Finance: The Role of Government, Financial Services and Funding Institutions.

British High Commissioner HE Stephen Lillie opened the event by setting the scene for the discussion to come. Governments are designing and implementing economic recovery packages at the moment, and there’s an opportunity to fully address the climate change challenge. 

The G7 Summit will take place in the UK in June, followed by COP26 in November. It’s an opportunity to rally international support and gain momentum to halve global emissions over the next decade. Five areas will need particular attention to achieve those goals, and one of those pillars is finance. 

“The potential for finance to affect the speed and scale of how the world reduces emissions is huge,” Lillie explained. “The UK Government has committed to doubling its international Private Client contribution to £11.6bn over the period of 2021-2025, to establish the green Recovery Challenge fund to directly support countries to design their recovery packages in a way that supports green and resilient recovery.”

Demetres Karavellas, the CEO of WWF Greece, addressed delegates on the extent of the challenge that we face, with the loss of biodiversity, extreme weather, loss of natural resources and an increase in the potential for pandemics like COVID-19. “We’re all becoming painfully aware of a very real planetary crisis.” 

The Dasgupta review, commissioned by the UK Treasury, states that our economy and wellbeing is linked with nature and the valuable services it provides. Karavellas cited a vital line in the review: “Nature is a blind spot in economics that we ignore at our own peril.” 

“The outbreak and the spreading of the COVID-19 pandemic throughout the world is the most painful proof that we have lost the balance, and that something has gone very wrong in our relationship with nature.”

For governments, the private sector, and the finance sector all need to play their parts in bringing about much-needed transformational change, said Karavellas. Recovery from the pandemic will require a bold vision and political will. But ultimately, it will require funding. “Sir David Attenborough hits the nail on the head when he poses a question in the film we will see shortly. Do we invest money into the practices that take us deeper into the crisis, or in the solutions that could get us out of it?”

Recovery funding cannot be about returning the business as usual and throwing away money into a fundamentally flawed and unsustainable development model, Karavellas explained. “This is a time to be brave and bold, the goals that we set. We must learn from the mistakes of the past, build on the momentum of the European dream view and aim for a recovery that is green, just and socially inclusive.”

The event then brought together a panel including Cyprus Minister for Energy Natasha Pilides, ICAEW chief executive Michael Izza, George Panteli, Permanent Secretary in the Cyprus Ministry of finance, Marios Andreou, president of CYPRUS-UK Business Association and a partner at PwC Cyprus, and James McLaughlin, head of international engagement for COP26 for the UK Cabinet Office.

The Cyprus government is in discussions with the European Investment Bank to finance improvements in energy infrastructure, including renewables and natural gas. 

“We are one of the few countries in the EU that still do not have natural gas in the energy mix, and this is an important bridge fuel which we believe will enable us to reduce our carbon footprint, while our other plans for completely green energy are implemented,” said Pilides.

It's in the interest of every business to embrace green finance, said Izza. Organisations don’t operate separately from climate change or the natural world. The pandemic, despite its human and economic costs, is a unique opportunity for us all to think about the kind of world we want to live in. 

“I would suggest to you that the world could be one that is greener and fairer for everyone. Let's remember, it's nearly 30 years since the Rio summit of 1992 and we've failed to take the measures that were identified by all the world governments at that time…This may be our last chance. The evidence of massive change is all around us.” 

The forces that gave the world decades of unprecedented stability, growth and success for the last 70 years is also what has put our future success at risk, explained Andreou. “The system failed to notice the ways in which technology and other forces were changing their efficacy and outcomes. We also failed to understand the disparities that they were creating.”

We need to rethink our business models and the economy as a whole, he said, to be fit for the future. “The key to achieving this is a clear vision and an action plan embraced by all stakeholders including multilateral organisations, governments, businesses, financial, services, and funding institutions.”

We’re in a precarious position, said Panteli, requiring a delicate balance between economic growth and the preservation of natural capital. “Finance Ministers will have to reflect on comprehensive recovery and stimulus packages that can help resuscitate economies and also build a better future.”

Green recovery packages have already been proven to deliver better economic results, he said. Stimulus plans across Europe should include a minimum of 55% expenditure related to climate. Cyprus’s recovery plan includes reforms under five ‘policy axes’, including the acceleration into a green economy. 

Measures within this aim to meet the country’s 2030 climate goals and includes the introduction of a carbon tax over five years for sectors that don’t fall under the Greenhouse Emissions Trading Scheme. Other measures include a levy on water usage and a countrywide charge on household waste. “Through this reform, the right incentives will be introduced for consumers and businesses in order to drive change, change behaviours and contribute to achieving our environmental goals.”

Net zero is becoming the norm, says James McLaughlin. Over half of the G20 have announced net zero targets, covering around 70% of global emissions. COP26 has four major campaigns on energy, transport, nature adaptation and resilience and a fifth – finance. 

“These are not part of the formal COP process, but they will help generate that real-world change, which will help contribute towards success at COP26 later this year. 

“We're really putting great focus this year on engaging widely with all countries, making sure that we're bringing everyone under the tent and listening to the country's concerns but also engaging closely with those in the private sector with society, and other groups.” 

Watch the webinar: Charting economic recovery to integrate green financing: the role of government, financial services and funding institutions