A period of global economic meltdown is one without a jolly moment for economic units across nations. However, even with this knowledge, the global economy has continued to suffer regular and significant damages, since the early 19th century. This is primarily due to the inadequacy in risk and crisis management policies. The great depression of 1929–1939, the 1970s energy crisis, the savings and loans crisis of the 1980s and the subprime mortgage crisis of 2007–08 all had one thing in common. The key players in the respective industries disregarded all the warning signs that could have been mined to prevent all the unfortunate consequences.

In 2020, one of the biggest threats to the global economy is climate change. The issue of climate change is one that cannot be ignored as it exists with us. It concerns the major building blocks of the global economy ranging agriculture, infrastructure, human health, financial markets and tourism.

In the Unites states, a recent report (National Climate Assessment, 2018) examined how climate change could disrupt activities in twenty-two (22) distinct sectors of the economy. It tries to understand how a 2.8 degree-centigrade increase in annual temperature would affect national income. It was projected that there will be a direct cost of $520 billion in these sectors by 2100. We thus cannot understate the level of attention required to these issues.

The year 2020 brought mixed feelings on the climate change outlook. Heat, fires and hurricanes became worse in the year and it does not feel like slowing down any time soon. The election of Joe Biden into power was however, like a light at the end of the tunnel, as he made climate change a priority in his campaigns. He proposed greening the country’s grids by 2035 which in turn boosted values of green and sustainable finance instruments.

China also made commitments to hit net zero by 2060. Although, this appears as a moonshot, the Chinese ruling Communist Party has proven to be able to move mountains when required. If China commits to this target, it is a good step in the right direction for the global economy, as China emits about 20% of global greenhouse gas emissions as per 2016 figures.

The outbreak of the COVID-19 pandemic is also a huge silver-lining. People have now been made more aware of the connection between the health of the global economy and its environment. This is also shown in the increase in sustainable investing all around the globe. 2020 started with Blackrock adding its $7trillion heft to climate 100+, a coalition that pushes corporations to have great concern for ESG ratings.

With the a-fore mentioned information, institutions still need to be much more deliberate in their handling and participation in the climate change management process. The idea of having a sound risk and crisis management system alone does not act as a deterrent to the careless implementation procedures that companies all around the globe adopt. Some Companies and government are still clearly ignoring several warning signs from extreme climate projections and estimations. Some even go as far as acting as catalysts to the climate and environmental degradation process.

An instance as was reported by Bloomberg was that banks raised funds worth about $1.7trillion, for firms causing plastic pollution, between January 2015 and December 2019. By financing these companies in the plastic industry value chain, banks are playing active roles in enabling plastic pollution. Therefore, the gains of any sustainable investment that is taken up by the banking industry is offset by the financing issued to companies that have strong negative externalities.

All governments, institutions and humans need to heed to the wake-up call on climate change as though we were in a state of emergency. New “greener” industries need to be developed and more attention needs to be focused on ESG ratings and Sustainable investments.

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