The EEA is right – Europe’s Green Deal is unsustainable

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

Green growth is unlikely to become areality, says the EEA, leading to Lily Tomson calling for a "need to rethink and reframe societal notions of progress". c Shutterstock/metamoreworks

A truly sustainable economy will need to re-align the financial system around planetary boundaries, not ‘green growth’, writes Lily Tomson, head of networks at ShareAction.

The European Environment Agency recently joined the growing list of organisations to acknowledge that there are environmental limits to economic growth.

Rejecting the idea of ‘green growth’ touted by many, they argue that “It is unlikely that a long-lasting, absolute decoupling of economic growth from environmental pressures and impacts can be achieved at the global scale; therefore, societies need to rethink what is meant by growth and progress and their meaning for global sustainability.

The EEA aren’t the first to talk about limits to growth, but as an agency of the EU their report presents a specific challenge to Europe’s flagship environmental policy, the European Green Deal (EGD). The Green Deal has many positive features, but one of its three core aims is “economic growth decoupled from resource use”.

As the EEA has acknowledged, this seems unlikely. From 1970 to 2017, the annual global extraction of materials tripled and it continues to grow. This year Earth Overshoot Day, which marks the date when humanity has exhausted nature’s budget for the year, was as early as 29 July. 

Green growth advocates argue that green technology can help improve resource efficiency and reduce impacts such as greenhouse gas emissions. But technology cannot eliminate material impact entirely – for example the IEA has warned that clean energy technology is driving unsustainable demand for rare minerals.

Support for the EEA’s view comes from an unlikely source – investors 

Investment is a claim on the future. The claim investors are generally making is that financial value will continue rising, without the social and environmental costs catching up. 

Investor support for the EEA’s position therefore seems unlikely. However mission-driven investors, such as charitable or religious foundations, are uniquely placed to question this logic and explore paths beyond it. To this end, members of the Charities Responsible Investment Network released the provocation and enquiry, Growth Narratives, this spring.  

It argued that ‘sustainable’ or ‘ESG’ investment, as currently envisaged, does little to address the unsustainability of infinite growth. For example, many leading ESG funds have moved away from oil and gas and are heavily invested in big tech. These perform well on ESG metrics, despite their value being built on advertising that spurs consumption and planned obsolescence.  

Genuinely responsible investors must be alert not just to companies’ performance on peer-benchmarked ESG ratings, but also to whether those companies’ operations are compatible with planetary boundaries and social foundations.

These are best exemplified by Kate Raworth’s Doughnut Economics, which shows us the space of human and environmental flourishing, between minimum social standards outlined by the UN Sustainable Development Goals, and environmental limits, such as those relating to pollution, climate change, biodiversity loss and ocean acidification. 

What should be done? 

As per the EEA report, we “need to rethink and reframe societal notions of progress in broader terms than consumption.” Investors, too, need to rethink their choices about asset allocation and expected returns. But investors can also use their influence to support regulatory systems that would foster financial alignment with planetary boundaries. 

For example, investors could call on the EU to include reporting on business activities in relation to its material footprint, in the forthcoming corporate sustainability standards. The Corporate Sustainability Reporting Directive (CSRD) would then oblige companies to report on their resource use against externally defined measures of social and ecological carrying capacity, and investors could use this data to align their holdings with their sustainability ambitions.

Fiduciary requirements – the legal duty to act in the best interests of fund beneficiaries – could also be updated so that contributing to a ‘safe and just operating space for humanity’ becomes a legal investor duty. 

Nobel Laureate Ilya Prigogine observed that “When a complex system is far from equilibrium, small islands of coherence in a sea of chaos have the capacity to shift the entire system to a higher order.”

The investors behind Growth Narratives and the EEA are among a number of groups beginning to create such islands of coherence. What we need now is to join them up to take shared action. 

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