Building a resilient economy

Analysing options for systemic change

to transform the world’s economic and

nancial systems after the pandemic.

Building

a resilient

economy

institute fo

future-ﬁt

economies

Page intentionally left blank.

Project Consortium

ZOE-Institute for future-t economies, Germany

New Economics Foundation, United Kingdom

Wellbeing Economy Alliance, United Kingdom

The project was led by ZOE-Institute for future-t economies (ZOE) in close

cooperation with the New Economics Foundation (NEF) and the Wellbeing Economy

Alliance (WEAll).

Please cite as:

Barth J. and Coscieme L., Dimmelmeier, A., Kumar C., Mewes S., Nuesse I., Pendleton

A., Trebeck K. (2020): Analysing options for systemic change to transform the world’s

economic and nancial systems. ZOE-Institute for future-t economies: Bonn.

Transparency

This paper is based on a review commissioned by the WWF.

The nancial support of Partners for a New Economy (P4NE) is greatly appreciated.

ISSN: 2627-9436

Acknowledgements

We would like to thank all people who supported us in the development of this report.

First and foremost, the WWF team, who developed the initial study concept and

provided advice and expertise throughout (Toby Roxburgh, Karen Ellis, Ray Dhirani,

Angela Francis, Dominic White, Stefano Esposito). We would also like to thank the

participants of the survey and the webinar where we presented a preliminary version

of the report. Thanks also to all those who assisted us in the background during the

development. These include Lisa Boll, Olivia Davis, Anais Gradinger, Christoph Gran,

Elias Huland, Benedikt Hummel and Lukas Salecker.

Layout and design concept

Drees + Riggers

Photos

Cover: Juliane Liebermann, p. 19: Myles Tan, p. 20 / 21: Adrian Infernus, p. 46 / 47:

Cagatay Orhan, p. 53: Julia Stepper (all photos taken from unsplash.com)

The views expressed in this document are those of the authors. This publication and

its contents may be reproduced as long as the reference source is cited.

Contact details

Jonathan Barth,

Institute for future-t economies gUG (haftungsbeschränkt),

jonathan.barth@zoe-institut.de

Content

Executive Summary 8

Introduction 11

Background: The economics of biodiversity

and the need for systemic change 13

Addressing biodiversity loss 13

Understanding and dening systemic change 15

Methodology 17

Part 1: Overview of barriers and

policy proposals for changing the

economic and nancial system

Policy and governance 24

Barriers to policy change 24

Options for systemic change 25

Finance 28

Barriers to a sustainable transformation

of the nancial system 29

The role of policy in setting nance on

course for tackling today's challenges 30

Business 33

Barriers to implementing sustainable

and fair business models 33

Policy options to drive sustainable business behaviour 34

Citizens 36

Barriers for change towards sustainable

living and drivers for unsustainable behaviour 36

Policy actions to enable sustainable living 37

Interim conclusion: thinking about and

engaging in systemic change 40

Part 2: Policy options for the UK

to move towards a resilient economy

Rationale behind this prioritisation 50

1. A Wellbeing Budget for the UK 54

2. Modernising UK’s Fiscal Rules 58

3. A New National Investment Authority 61

4. Mandatory Financial Risk Assessments and Disclosure 64

5. Green Credit Guidance 68

6. Land Value Tax 71

7. Resource Caps and Biodiversity 74

8. Environmental Border Tax 78

Interim conclusion: The interplay of policy proposals 82

In place of a conclusion: A story of hope 86

Endnotes 88

Appendix 112

Executive SummaryBuilding a resilient economy

Content ↑

Executive Summary

In 2020, the world’s governments acted at an

impressive scale and speed to mobilise resources

in response to COVID-19. By April, they had col-

lectively assigned US $ 9 trillion to buffer against

the economic impacts of the pandemic. In the UK

alone, € 176.7 billion were made available as an

immediate scal response.

As these eye-watering sums illustrate (and

those associated with the banking crash in 2008

reinforce), dealing with a crisis is very cost-

ly, in economic terms as well as regarding social

impacts. Therefore, where a crisis is foreseeable –

as in the case of climate change and increasing bio-

diversity loss, societies should invest in preventa-

tive measures.

Science shows us that humanity’s impacts

on the planet are intensifying and environmen-

tal trends are heading in the wrong direction. In

response, there have been calls for systemic

interventions from prominent international agen-

cies including the United Nations Environment Pro-

gramme, the Intergovernmental Panel on Climate

Change (IPCC) and the Intergovernmental Sci-

ence-Policy Platform on Biodiversity and Ecosys-

tem Services (IPBES).

These agencies recommend a rapid transition

towards an economy that’s low-carbon, resource-

light and that restores nature. They are promot-

ing the need for a fundamental reform of our eco-

nomic systems, so that equality, environment, and

wellbeing become core to the way our economies

function. It’s an agenda that has been endorsed

by mainstream actors such as the World Econom-

ic Forum, the Financial Times and the Economist.

Many reports, ideas and proposals make the

case for the required changes. What has been

missing is a better understanding of how system-

ic change can be put into operation and, given the

urgency and interdependency of the issue, how the

UK can effectively support a fundamental trans-

formation of its economic system towards a resil-

ient economy.

This report it is an attempt to ll this gap. The follow-

ing chapters (and the research underpinning them)

focus on the role of government and policy in deliver

ing systemic change. We outline where public policy-

makers should place the emphasis in order to trans-

form the world’s economic and nancial systems most

effectively to mitigate future environmental crises.

The report proposes a set of policies the UK

government could implement to amplify impact

and ensure long-term systemic change – both for

its domestic economy and at an international level.

There is no “silver bullet” solution to the multiple

crises we face, and many changes will be required,

involving governments, investors, businesses and

the public alike – so the policy package we out-

line is a blueprint to deliver systemic change in

the current policy context. It should be regarded

as a basis for discussion to demonstrate the scale,

nature and interlinkages of the changes required.

We start by categorising the key areas for sys-

temic intervention that can shift behaviour in the

longer term into four sections (policy, nance,

business, and citizens), as illustrated in Table 1.

The → rst part of our report provides a summa-

ry of almost 300 transformative proposals split

into these four categories. Each proposal has the

potential to address the socioeconomic root caus-

es of today’s crises through policy changes that

have cross-cutting and transformative impact.

Building on this comprehensive list of propos-

als we set three key criteria to identify the most

promising policies:

1. Relevance: their relevance and topicality in

the UK context.

2. COVID-19 suitability: the extent to which

they could support a sustainable economic

recovery from COVID-19.

3. Transformative potential: the impact they

have on driving long-term systemic change.

Policy Finance Business Citizens

Multidimensional

indicators, moni-

toring capacity, and legal

frameworks: ensure

political decision making

addresses the environ-

ment and wellbeing with

equal weight on the

economic aspects.

Fiscal policy and

growth independ-

ence: increase the space

for scal interventions to

support a green and just

transition and decouple

economic stability from

economic growth.

Limiting power

and empowerment

for change: reduce

economic and democratic

power imbalances.

Mandates and legal

interpretations:

include environmental

and social objectives in

the targets of public insti-

tutions such as central

banks and development

banks.

Metrics for the

long-term: integrate

environmental categories

and extend the time hori-

zon in risk assessments.

Shifting

Protability:

internalise the costs of

environmental damage.

Sustainable invest-

ment and innova-

tion: shift investment and

techno logy from resource-

intensive activities to

those that are less resource-

intensive but more

labour-intensive.

Non-nancial

disclosure, report-

ing and accountability:

include environmental

objectives in business

reporting standards.

Sustainable

business models:

Support business models

that focus on sustainabil-

ity and well being and

create a level playing

eld.

Sustainable

consumption

alternatives: shift from

unsustainable to sustain-

able consumption.

Sufciency: limit

the total level of

consumption.

Affordability

and fairness: reduce

inequality and ensure

that all are capable of

meeting their basic needs

and of participating

socially.

Executive SummaryBuilding a resilient economy

Content ↑

Using this analysis and input from experts in poli-

cy, academia and business, we propose a package

of eight mutually supportive areas of reform in the

→ second part of the report. These policies would

help to signicantly accelerate the transition towards

a resilient economy for the UK and internationally:

1. A → wellbeing budget for the UK that redenes

what we value in our economy and conse-

quently allocates a greater share of public and

private resources towards environmentally

sustainable and socially benecial outcomes.

2. A → modernised set of government scal

rules in the UK that ensure the availability

of sufcient resources to complement the

wellbeing budget. This will enable the UK

government to borrow more at the current low

interest rates and invest in the low-carbon and

resource-efcient sectors that will sustain the

economic development of the country over the

coming decades.

3. Further backing for redirecting money to help

fund the green transition, via a new → UK

national investment authority. This will play

an active role in the market by investing public

resources towards specic missions or

outcomes (such as meeting the UK’s net zero

target).

Table 1: Fields of action and intervention clusters of recommendations from the literature review

Executive SummaryBuilding a resilient economy

Content ↑

4. On a nancial level, this shift in investments

is accelerated through → mandatory nancial

risk assessments and their disclosure for

private banks that integrate non-traditional

environmental risks into their accounting and

risk assessment frameworks.

5. The disclosure of these risks is also a

precondition for → green credit guidance. By

factoring climate and ecological risks into their

asset purchases and collateral frameworks,

central banks will help shift investments from

harmful activities to green sectors.

6. A → land value tax to generate a new source

for nancing investments and generating

resources to support low-income households.

This policy will have negligible effects on eco-

nomic activity, but will help correct wealth and

power inequalities. Its taxes windfall increases

in land value while increasing the efciency

of land use in rural areas, and will reduce soil

sealing and the fragmentation of landscape.

7. Additional scal revenues from → resource

caps. These ensure that increases in resource

efciency translate into an absolute rather

than a relative reduction in resource use. In

doing so they help control biodiversity loss

and ensure ecosystems can recover naturally

to a more sustainable state.

8. → Environmental border taxes that put a

higher price on imports of environmentally

harmful goods. These will ensure that the

domestic economy is competitive, at the same

time they will reduce carbon emissions while

protecting biodiversity.

For each of these policies we identify several exist-

ing stakeholder coalitions and upcoming political

opportunities where they could be rened, promot-

ed and secured. Some require much greater inter-

national cooperation and are therefore more chal-

lenging, while others could be enacted immediately.

The policies presented here are mutually sup-

portive. Most address several of the intervention

areas listed in Table 1. A wellbeing budget for the

UK, the national investment authority, mandatory

nancial risk assessments and a green credit guid-

ance all aim to increase and strengthen investment

in the green economy. A modernised set of govern-

ment scal rules, a land value tax, and resource

caps create the necessary scal leeway. Resource

caps ensure that these policies are effective in

reducing resource use through absolute limits

and a dynamic steering effect via prices. Lastly, a

land value tax is one option among many to ensure

social acceptance, while environmental border

taxes aim to support domestic economic actors.

The recovery from COVID-19 presents a fork

in the road for governments. Bouncing back to

the pre-COVID days isn’t good enough. We can-

not afford to continue to tinker at the edges with

policies that achieve incremental change or are no

longer t for purpose. As the environmentalist Bill

McKibben solemnly noted, “winning slowly is the

same as losing” in the context of climate change.

The research, analysis and synthesis presented

here offers a sample of the bold and transform-

ative policies we need to bounce forward and to

address the multiple crises we face collectively.

To do so, government, investors, businesses and

citizens need to make choices. Together, they need

to put in place regulation that breaks our depend-

ence on fossil fuels and extractive economic activi-

ties and propels the UK along a carbon-neutral, low

resource and high wellbeing pathway. This report

is an invitation. We are aware the proposals are

far-reaching. But we are convinced they are nec-

essary. To mitigate the costs of future crises, we

need the courage to do something new. With this

report, we invite you to dare, so that the prosperi-

ty of today will benet our children tomorrow and

we can give them a greater chance to thrive on a

bountiful planet.

IntroductionBuilding a resilient economy

Content ↑

» COVID-19 has shown that avoid-

ing crises is not just a moral issue

– it is also an economic question. «

Crises tend to encourage short-term thinking.

When facing a crisis, people tend to react impul-

sively to end it – be it in relationships, business,

nance or policy. This has been no different during

the COVID-19 crisis. Many governments respond-

ed quickly and with extensive effect. By April 2020,

leaders around the world had collectively mobi-

lised $ 9 trillion to buffer against the economic

impacts of lockdown measures.

In the UK alone,

€ 176.7 billion were made available as an immedi-

ate scal response to the crisis.

The scale of these investments is impressive.

But at the same time, the COVID-19 crisis has

made clear how much crises can cost. Only through

such unprecedented public investment and by rad-

ically restricting public life – closing kindergartens,

schools and businesses – could the worst be pre-

vented. The countries that did not react swiftly and

underestimated the crisis, such as Sweden, have

paid for this with many lives.

4, 5

The actions focused on the short-term saved

lives. However, while politicians respond to the

immediate dangers, there is a direct lesson to be

learnt: Crises are expensive, and they can cause

economic disaster. Societies would, therefore, do

well to invest in preventative measures.

Some crises, like COVID-19, are difcult to

anticipate. Others, however, are foreseeable – cli-

mate change and increasing biodiversity loss, for

example. In the interest of long-term economic

stability, policymakers must face this fact today

and work to limit climate change and the break-

down of ecosystems. Not only because doing so

can decrease the risk of future pandemics

: as

COVID-19 has demonstrated, avoiding crisis is not

just a moral issue, but also an economic question.

Many international scientic organisations, includ-

ing the IPCC

, the IBES

and the recent WEF report

on “The Future of Nature and Business”

, have high-

lighted that a fundamental transformation of today’s

socio-economic systems is needed to mitigate cli

mate change and biodiversity loss. They provide a

broad consensus on the main areas needing reform

– ranging from policy and nance to private sector

business and lifestyles. What has been missing is a

better understanding of how systemic change can

be operationalised and, given the urgency and inter

dependency of the issue, how the UK can effective-

ly support a fundamental transformation.

We have conducted a qualitative expert-led assess-

ment of 60 sources within the global literature on

systemic change. From this literature review, we

derived 270 policy proposals from across 12 topic

clusters, pertaining to four stakeholder groups:

policy, nance, private sector business and peo-

ple. Of these, we have selected eight key policies

for a more detailed elaboration, based on three

criteria: feasible and topical in the UK (relevance),

contribute to recovery from the COVID-19 crisis

(COVID-19 suitability) and have high transforma-

tive potential (transformativity).

Introduction

With this report, we seek to close this gap.

Our work aims to provide:

1. A denition of systemic change

2. An overview of the main policy areas

needing reform, of barriers to change

and transformative policy options

3. A set of eight policy priorities for

the UK that could also inspire

international action

Aim of the report

IntroductionBuilding a resilient economy

Content ↑

This report contributes to multiple policy discus-

sions. The options outlined here add to the list of

options for change in the Dasgupta Review, com-

missioned by the UK Treasury, to address the bio-

diversity crisis. This analysis also provides guid-

ance for the effective implementation of the UK’s

net-zero legislation, circular economy strategies

and COVID-19 recovery programs.

We focus on policy actions aimed at adjusting

the structure of the economic system through legal

frameworks or legislation, to influence behaviour

i. e. actors’ collective decision making and in doing

so achieve far-reaching change. This recognises

that institutions are performative: the economic

and institutional framework is a key determinant

of how funds are invested, how and what business-

es produce and how people live and consume.

The report is structured as follows:

1. Chapter one presents our interpretation of the

main challenges that are rooted in the eco-

nomics of biodiversity, which we will present

here drawing on the insights of The Dasgupta

Review

. We then provide our denitions of a

resilient economy and systemic change.

2. Chapter two provides a short synopsis of the

methodology used in the literature review and

the stakeholder consultation.

These introductory chapters are followed by two

parts that summarise the results:

• Part 1 provides an overview of the barriers

that hinder systemic change, categorised into

four areas of action: policy, nance, business,

and people. In this chapter, we also sum-

marise the boldest and most transformative

policy solutions to overcome these barriers,

that we found in literature.

• Part 2 further elaborates on the eight key

policy proposals in detail and explains the

rationale behind their prioritisation. Every

policy proposal includes a section on

implementation and the associated barriers

and enablers, inspirational practices, windows

of opportunity and potential stakeholder

coalitions.

• Chapter Five explores how systemic change

is as much about narratives of change and

collaboration, as it is about policymaking.

Many policymakers know that current

measures will not be enough to tackle

today’s environmental crisis, but, in the

face of groupthink, only a few dare to

call for more ambition. With this report

we hope to encourage those involved in

public administration to speak up.

The report is an invitation to question and

consider new solutions. We do not claim

to have found all the solutions. Rather, we

aim to start a necessary discussion to think

outside the box. We are aware that some

of the solutions we present may seem

unusual or too ambitious. However, we

believe that the time has come to discuss

more transformative measures in the polit-

ical arena, and doubt that anything less

would sufce to address the magnitude of

today’s challenges. The costs of inaction

are too high.

An invitation to think about

systemic change

Background Building a resilient economy

Content ↑

» The extinction rate has

accelerated enormously, being

up to 100 times higher than in

the past. «

A recent study by the Potsdam Institute for Cli-

mate Change showed that limiting global warm-

ing to below two-degrees Celsius, as agreed in the

Paris Agreement, would be economically efcient

while an abundance of literature has conrmed

that costs of climate change will be astronomical.

While such studies are subject to uncertainty, mod-

elling, data and valuation choices, they point in the

same direction: the costs of climate change will

be high. Some of these costs are already evident

today. One consequence of climate change is the

devastating loss of natural habitats and the asso-

ciated ecosystem services. Together with resource

consumption, land-use change, pollution and inva-

sive species, these drivers have brought the global

ecosystem to the brink of collapse.

Ecosystems are responsible for purifying water

and air; providing food, wood, and biomass; regu-

lating climate and delicate water cycles; and pro-

viding natural amenities that humans use for recre-

ation and education. Take bees, for example: They

contribute between $ 233 billion to $ 577 billion

to global food production and support basic eco-

system functioning through their pollination activ-

ities

, this economic and ecological value goes

largely unnoticed and unprotected. All these valu-

able ecosystem services are at risk. While current

extinction rates for species are hard to assess, they

may lay somewhere between 1–2 every week

There is wide agreement that the extinction rate

has accelerated enormously, being up to 100 times

higher than in the past.

For example, in 2003, New York has

designated a huge nature reserve and

$ 150 million annually for its preservation

– but not for moral reasons. The nature

reserve puries water and the construction

of a comparable water purication plant

to replace this natural service would cost

$ 8 to 10 billion. Preserving biodiversity

is similarly economically efcient.

Addressing biodiversity loss

» Economic growth is not the goal

in and of itself, but a means of

reaching a number of other goals,

which collectively create economic

stability. «

To understand the economics of biodiversity and

the value of nature, HM Treasury (the UK Depart-

ment of Finance) recently commissioned a report

on the “economics of biodiversity”. Dasgupta dis-

cusses two scenarios for ending the degradation of

the biosphere by 2030, which depend on the “ef-

ciency with which we convert the biosphere’s goods

and services into GDP”.

In a “Green Growth” sce-

nario, this efciency would need to almost quad-

ruple, from 2.5 % to 9.1 % by 2030 – an unprece-

dented and unlikely rate of innovation. He there-

fore outlines a second scenario, an economy with

constant economic output (GDP) from now until

2030, where efciency would “only” need to dou-

Background

The economics of biodiversity and

the need for systemic change

Background Building a resilient economy

Content ↑

ble – a still unlikely, but more likely scenario. The

second scenario, essentially a “stagnating econo-

my” by current standards, is a headache for econ-

omists, especially in a crisis period.

Pillars of economic and political stability, includ-

ing servicing debts, investment, providing jobs and

ghting inequality, all seem to demand economic

growth. Economic growth is not the goal in itself,

but a means of reaching a number of other goals,

which collectively create economic stability.

The social, economic, and political aspects of

the current economic system demand growth to

ensure stability in the short term. However, in pur-

suing short-term economic growth, policymakers

put long-term stability at risk – by trading in envi-

ronmental health and function, transgressing plan-

etary boundaries and risking costs for public budg-

ets from the environmental crisis.

Economic Stability and Resilience

Stability is a rather static concept. First and fore-

most, it means that important system variables

such as unemployment, inequality or temperatures

have a predictable level of variation around a mean.

To talk about how policy can escape the dilemma of

choosing whether to preserve short-term or long-

term stability, we must introduce another concept:

“resilience”. Resilience adds a dynamic component

to the concept of stability. While stability is about

the magnitude and strength of change, resilience

denes the ability to cope with change, especially

massive change such as shocks and crises. Stabili-

ty in the long-term can therefore be achieved both

by limiting the size of change or by developing an

ability to adapt to and recover from change.

Inspired by Andrew Mitchell

, we dene resil-

ience as “the ability to absorb and recover from

shocks”. Long-term stability requires a resilient

economy. An economy that is able to react to mas-

sive change and at the same time reduce the risk

of such change. For the post-COVID recovery to

create a resilient economy, it must transform both

structures and means of living to enable the sys-

tem to react to large shocks, while also reducing

the risk of such shocks.

In this sense, out of all the dimensions of resil-

ience

, two aspects of a resilient economy are cen-

tral to this report:

1. Safeguarding environmental resilience:

A resilient economy reduces the risk of future

environmental shocks and enhances

environmental resilience through a reduction

of drivers of biodiversity loss. Green inno -

vation and a structural transformation of the

economy towards sustainable business

models and lifestyles can reduce pressure

on the environment. Investment in ecological

function and recovery can boost both

ecological as well as economic resilience,

if employment and income are coupled with

a healthy environment.

2. Strengthening socio-economic resilience:

By safeguarding environmental resilience,

a resilient economy reduces the long-term

economic risks of environmental crisis. At the

same time, a resilient economy increases its

capacity to recover from shocks by liberating

its stability from the need to grow. A resilient

economy can ensure employment generation,

equality and debt reduction even in a stagnat-

ing economic environment. Such resilience

would require rethinking how we generate

wellbeing and rearranging how we pursue it,

as well as how debt is managed, how jobs are

created, and how inequality is reduced.

Background Building a resilient economy

Content ↑

Strategies for addressing

the biodiversity loss

To pave the way for a resilient economy, two

central strategies are required:

1. Green innovation: We need huge leaps

in green innovation to increase material

productivity and efciency, as specied

by Dasgupta, to allow businesses to

produce and society in general to

enjoy as much material prosperity as

is available for distribution. Within the

ecological limits of the planet, policies

that encourage green innovation can

reduce the negative ecological effects

of economic activity and could enable

a transition to a less resource-intense

and climate-friendly economy, as

sought by the UKs Net-Zero Regulation

and the Circular Economy Package.

2. Growth independence: However, while

green innovation has to increase,

policymakers today must prepare for

the fact that these innovations are likely

to still not be sufcient, as recognised

by Dasgupta. It is possible that

ecological collapse can only be avoided

by a courageous restructuring of

today’s economic systems: decoupling

economic and political stability from

economic growth.

The matter of which of these strategies is

the right one is highly disputed.

20, 21, 22, 23, 24, 25,

26, 27

Given the uncertainty of the future, we

must apply both rather than debate which

one is right.

Understanding and dening

systemic change

Many researchers, including the IPCC

, the IPBES

and the WEF

have highlighted that transformative

change is necessary to mitigate the acceleration of

the climate crisis and biodiversity loss. They agree

on the main areas of reform, ranging from policy

and nance to business and lifestyles. However,

what is missing thus far, is a better understanding

of how to operationalise systemic change.

We dene systemic change as institutional change

that drastically decelerate or mitigate the break-

down of ecosystems, either directly through pol-

icies that protect and restore natural habitats or

indirectly, e. g. through policies that address the

drivers of biodiversity loss like climate change.

Douglass North denes institutions as “con-

straints that structure political, economic and

social interaction. They are made up of formal con-

straints (constitutions, laws, property rights), infor-

mal constraints (sanctions, taboos, customs, tra-

ditions, codes of conduct), and their enforcement

characteristics.”

In this report, we go beyond the cultural and

informal dimensions of institutional change. Often,

responsibility is redirected to the people’s cul-

ture. In those cases, the assumption is that people

have to change their values rst, which would then

translate into different policies afterwards.

In our

assessment, we recognise the reciprocal nature of

the interaction between formal and explicit institu-

tions like policy, regulations, laws, agreements and

informal value systems and culture.

We assume

that policy can drive cultural change, rather than

only being an outcome of it. This, however, does

not take anything away from the necessity of infor-

mal cultural change independent of policy.

Background Building a resilient economy

Content ↑

Criteria for systemic change

Systemic change can be understood as changing the formal and explicit

(policies, practices, resource flows) as well as informal and semi-implicit

(power dynamics, relationships and connections) and implicit (mental

models) institutions of today’s economies.

In order to be considered systemic

changes, proposed institutional changes must full the following criteria:

1. Structural: Increase the relevance of sustainability and wellbeing aspects in

formal institutions like governance processes, legislation and international

agreements (explicit level).

2. Root-cause related: Address the root causes of today’s environmental and

social challenges (semi-implicit and implicit level): power imbalances, lack

of valuation of nature, growth dependence, narrow value systems in society,

business, nance and policy, and mindset.

Cross-cutting: Influence the behaviour of the majority of actors within

different economic areas (policy, business, nance, citizens) across different

economic sectors (manufacturing, agriculture, energy …) on a long-term

basis, rather than changing the behaviour of only one single actor.

4. Transformative: Can be incremental in the short-run (e. g. biodiversity

labels for nancial products), if they contribute to systemic change in

the long-run (e. g. directing investments across sectors into nature conser-

vation) and help overcome path dependencies that create lock-ins

in existing structures.

MethodologyBuilding a resilient economy

Content ↑

To identify a set of key policies for systemic change

toward a resilient economy, we conducted a qual-

itative expert-led assessment of literature on sys-

temic change, building on our experience in the

eld of transformation sciences and new econom-

ics. In doing so, we conducted the following steps:

1. Identication of sources

Firstly, we identied 60 sources on systemic

change from the global literature based on expert

input. Criteria for the selection of sources can be

found in the appendix.

2. Identication of barriers

and transformative policy

proposals / options

Secondly, we identied 270 policy proposals from

these sources. Our literature review concentrated

on proposals for systemic changes, as dened in

the previous chapter.

From this set of proposals, we identied 12 topic

clusters on systemic change along the four clusters

of actors. These are:

• Policy: multidimensional indicators,

monitoring capacity, and legal frameworks;

scal policy and growth independence;

limiting power and empowerment for change.

• Finance: metrics for the long-term; mandates

and legal interpretations.

• Business: protability, investment and

innovation; disclosure, reporting and

assessment; business models.

• Citizens: sustainable consumption

alternatives; sufciency; affordability and

fairness.

Part One of the report will describe the clusters

and associated policies in more detail.

In terms of

content, we have enriched the chapters with addi-

tional sources, when an important aspect was still

missing.

3. Denition of eight key

policies for the UK

Out of these 12 clusters and associated proposals,

this report elaborates on eight key policies that:

• are feasible & topical in the UK (relevance),

• contribute to recovery from the COVID-19

crisis (COVID-19 suitability),

• have a high-transformative impact

(transformative potential).

At the same time, additional conditions apply to the

whole set of policies, rather than single policies:

• Balance: To nd the balance between feasi-

bility and transformative impact the overall

set of policies includes at least one less

feasible, but highly transformative proposal.

• International dimension: To account for the

UK’s international role, at least one proposal

should have an international dimension

attached.

• Side effects: The set of policy should be com-

plemented with proposals to reduce negative

side effects of other proposals, to ensure

consistency (e. g. environmental border taxes,

land taxation)

Methodology

Building a resilient economy

Content ↑

4. Expert consultation

In order to “sense-check” the policy proposals that

emerged from the literature review and from expert

input, we conducted a stakeholder poll amongst

leading policy experts, academics and commenta-

tors who work on relevant questions in the UK and

beyond. We invited almost 100 participants and

received a response rate of approximately 30 %.

Participants in the survey were asked to:

• Reflect on whether the shortlist of proposed

policy changes met our criteria for being

both transformative, and possible, in the UK

context.

• Nominate the three policy changes they would

be most likely to advocate for and why, and

to point to any policies we should consider

adding to our list.

• Advice as to what strategy and approach

would help to secure adoption of the

respective policies in the UK.

While not a large-scale representative poll, this

deliberate, strategic sampling of professionals

with relevant expertise has provided condence

in the suite of policies we set out below. To aug-

ment the poll input, we also posed similar ques-

tions to a different set of policy experts, including

UK government ofcials, at a webinar hosted by the

WWF in June 2020.

Part 1

Overview of barriers

and policy proposals for

changing the economic

and nancial system

This part provides an overview of the main areas of reform, as well

as barriers and transformative policy options, categorised into four

areas of action: policy, nance, business and citizens.

IntroductionBuilding a resilient economy

Content ↑

Drawing on our assessment of the global liter-

ature on systemic change, this part provides an

overview of the main areas of reform, as well as

barriers and transformative policy options.

To this end, we consider four elds of action in the

following four sub-chapters: Policy, Finance, Busi-

ness and citizens. The literature offers a wide range

of insight on what prevents these actors from

changing their behaviour and what policy can do

about it.

We faced two challenges when synthesising

the literature. The rst challenge were the highly

differing levels of abstraction of proposals found

in the literature, ranging from abstract propos-

als such as “internalise environmental costs” to

very concrete proposals such as “increase equity

requirements for unsustainable credits”. The chal-

lenge was therefore to align proposals to a similar

level of abstraction. The second challenge was to

identify the target group for policy proposals. For

example, in the case of the proposal to “ban adver-

tising of environmentally harmful products”, the

question of whether the proposal is attributed to

the target group that implements the policy (busi-

ness) or target group that should change its behav-

iour (citizens).

To align levels of abstraction and consistently

assign target groups, we identied 12 interven-

tion clusters for policy makers (see Table 1). The

clusters are to be understood as objectives, the

achievement of which influences the behaviour of

each actor. Some proposals in the literature are

directly reflected in the objective, others in the

associated policy proposals.

A detailed summary of all literature sources can

be found in the → Appendix.

It is important to stress that these clusters are all

interwoven. There are many synergies but also

many conflicts between them. Many of the goals

can only be achieved in tandem with others. For

example, consumption change is only possible

through the availability of product alternatives, as

well as the purchasing power required to access

them. Power cannot only be directly restricted

through prohibition, but it can be influenced indi-

rectly through tax structures and new corporate

models. By cross-referencing, we point out possi-

ble links between the objectives in the chapter.

Introduction

Policy Finance Business Citizens

Multidimensional

indicators, moni-

toring capacity, and legal

frameworks: ensure

political decision making

addresses the environ-

ment and wellbeing with

equal weight on the

economic aspects.

Fiscal policy and

growth independ-

ence: increase the space

for scal interventions to

support a green and just

transition and decouple

economic stability from

economic growth.

Limiting power

and empowerment

for change: reduce

economic and democratic

power imbalances.

Mandates and legal

interpretations:

include environmental

and social objectives in

the targets of public insti-

tutions such as central

banks and development

banks.

Metrics for the

long-term: integrate

environmental categories

and extend the time hori-

zon in risk assessments.

Shifting

Protability:

internalise the costs of

environmental damage.

Sustainable invest-

ment and innova-

tion: shift investment and

techno logy from resource-

intensive activities to

those that are less resource-

intensive but more

labour-intensive.

Non-nancial

disclosure, report-

ing and accountability:

include environmental

objectives in business

reporting standards.

Sustainable busi-

ness models:

Support business models

that focus on sustainabil-

ity and well being and

create a level playing

eld.

Sustainable

consumption

alternatives: shift from

unsustainable to sustain-

able consumption.

Sufciency: limit

the total level of

consumption.

Affordability

and fairness: reduce

inequality and ensure

that all are capable of

meeting their basic needs

and of participating

socially.

IntroductionBuilding a resilient economy

Content ↑

Table 1: Fields of action and intervention clusters of recommendations from the literature review

Policy and governanceBuilding a resilient economy

Content ↑

» Governments have often

fallen short of implementing

policies that translate agreed

environmental and social

objectives into action. «

Policy and governance are one central lever in

bringing about a resilient economy. By setting

legal and institutional frameworks, governance

shapes people’s attitudes and behaviour, and the

interactions between actors (including govern-

ments, nancial institutions, business and civil

society).

Policy could either reproduce existing

inequalities or support low-income groups in the

transition to a more sustainable society. Policy can

also incentivise or disincentivise certain invest-

ment, innovation, production, and consumption;

making it a key measure in the effort to overcome

path-dependencies that lock in current modes of

unsustainable production, consumption, and gen-

eration of wellbeing.

Governments have often fallen short of imple-

menting policies that translate agreed environ-

mental and social objectives into action. While

objectives such as the Sustainable Development

Goals (SDGs) and the Paris Agreement are impor-

tant steps towards a resilient economy, , the world

is not well placed to achieve most of the SDGs.

Similarly, global policy commitments to reduce

greenhouse gas emissions are insufcient to halve

GHG-emissions by 2030, which is required to limit

global warming to 1.5 °C.

Even the existing weak

climate pledges are unlikely to be achieved. The

policy efforts of the UK, the second largest con-

tributor to CO

emissions in the European Union

(10.7 %), have fallen short. The Paris Agreement

binds the UK to reducing emissions by at least

40 % of 1990 levels by 2030, and in June 2019

the UK adopted a net zero emissions reduction

target for 2050. Achieving any of these targets

remains unlikely, especially given that the UK’s

expenditures into climate mitigation ($ 100 billion)

decreased by 35 % between 2014 and 2017.

42, 43

Challenges

Barriers to policy change

It remains difcult for most governments to pro-

mote policymaking that is suitable for tackling

the complex challenges of the 21

century, for a

myriad of reasons. An assessment of the literature

can be summarised in two clusters: Governance &

political value systems, and power imbalances.

Compartmentalised governance

and short-term focused political

value systems

Firstly, managing the global commons in the face

of international economic competition requires

collective action and enforcement. The non-bind-

ing nature of international climate agreements,

with unclear or inadequate compliance rules, has

not succeeded in raising political ambition at a

national level to take meaningful climate action.

Secondly, one of the reasons for this lack of

interest in stronger international agreements are

political value systems and the associated gov-

ernance processes that prioritise short-term eco-

nomic impacts of policies, rather than long-term

environmental and other social impacts. Many

policies lack an evaluation of long-term environ-

mental and social impacts and are shaped accord-

ing to a short-term agenda of economic growth –

even though long-term ecological and social harm

also translates into immense scal expenses down

the line. Economic growth is associated with high

levels of wellbeing, debt reduction, lower inequal-

Policy and governance

Policy and governanceBuilding a resilient economy

Content ↑

ity and employment generation. Therefore, it is

seen as the preeminent means to achieve the most

fundamental socio-economic policy objectives.

This and a range of further lock-ins, such as media

attention, geopolitical power competition, pri-

vate interests and lobbying, make it very difcult

for policymakers to break away from economic

growth as a policy objective and argue in favour of

a wider set of indicators and policy measures.

45, 46

Thirdly, political value systems that prioritise

short-term economic policy impacts are tied to

economic attitudes and theories in public institu-

tions, which stem from a narrow reading of eco-

nomics. Economists shape how policymakers per-

ceive and measure the world, affecting the deci-

sions they make.

47, 48, 49, 50

The uncompromising

focus on economic growth is one example.

Anoth-

er is the focus of public policy on market-based,

supply-side solutions to economic problems For

example, prior to the COVID-19 crisis, policymak-

ers – both globally and in the UK – were convinced

that solutions would surface through the free mar-

ket, which policy should not excessively regulate.

52,

This reading made it difcult to implement regu-

latory measures such as bans or obligations. These

may be economically less cost-effective, but they

are effective in terms of their impact.

Fourthly, certain features of existing demo-

cratic systems pose additional barriers to long-

term oriented policymaking. To ensure re-elec-

tion, political agendas tend to focus on actions with

measurable impacts during their term.

Power imbalances

These structural lock-ins of policy and governance

systems are reinforced by actors pursuing short-

term prots and translate into power imbalanc-

es. In the UK, 0.1 % of business receives 47.8 %

of total revenues and provides 39.5 % of the coun-

try’s jobs.

In the US, the “Big Three” index funds,

Vanguards, BlackRock and State Street make up

96 % of the shareholdings of Fortune 250 compa-

nies and exercise signicant influence over share-

holder proposals, especially on proposals relat-

ed to the environment, social matters and govern-

ance.

This concentration of power, reinforced by

their capacity to organise lobbying and their strong

political networks, gives them tremendous lever-

age when it comes to public decision making.

The

resulting power imbalance between policymakers,

business and civil society hampers any progress

towards sustainable solutions.

Solutions

Options for systemic change

Drawing on the reviewed literature, we propose

several actions to overcome these barriers. Policy

actions can be grouped into three clusters: govern-

ance related issues, scal policy and growth inde-

pendence and power. We summarise key argu-

ments and invite readers to consult the sources

provided in the footnotes.

Multidimensional Indicators,

monitoring capacity, and legal

frameworks

Political decision-making should give equal

weight to the environment, wellbeing and eco-

nomic aspects in order to build ecological resil-

ience and social wellbeing. This requires develop-

ing and implementing policies that consider short-

as well as long-term environmental and social

impacts. To achieve this, governments should

replace purely economic measures as indicators

of progress that guide political decision-making,

such as Gross Domestic Product

– which does not

account for the negative environmental impacts

of economic growth, or the negative impacts on

Policy and governanceBuilding a resilient economy

Content ↑

human health and social relationships. A group

of countries, including New Zealand and Scotland,

are exploring alternatives using Wellbeing Budg-

ets which rely on a multidimensional set of indi-

cators.

60, 61

The alternatives are there.

What is

missing is their implementation and their actual

use in political decision-making processes.

Indicators are not only measurements but

can also determine accountability and effective-

ly change policy decisions, if they are incorporat-

ed into policy design and decision-making pro-

cesses. This would require methods, models and a

community of users able to understand and evalu-

ate the quantitative as well as qualitative impacts

of policies on wellbeing and the environment, as

exists for economic indicators.

Some argue that

such skills should be accompanied by training in

systems thinking, to build capacity in public insti-

tutions in understanding feedback mechanisms

between the economy, society, environment and

associated tipping points.

64, 65

Such indicators for

policies should also be used to assess existing sub-

sidies and tax systems, subjecting them to a critical

analysis of their domestic and international envi-

ronmental and social impacts.

66, 67, 68

Governance systems would need to be legal-

ly obligated to adopt long-term criteria to ensure

that an enhanced understanding of environmen-

tal, social and economic impacts and interlinkag-

es inform policies. The upcoming Environment Act

in the UK or the Climate Law in the EU are impor-

tant steps in securing obligations among poli-

cymakers to incorporate future factors and the

needs of nature into decision-making. Proposals

in the literature include the legal recognition of

the rights of nature, as in New Zealand, Bolivia or

Ecuador.

A new democratically elected chamber

with the responsibility of representing the inter-

ests of future generations could have veto power

on decisions with long-term impacts.

This would

increase pressure to nd solutions that mediate

conflicts between the present and future inter-

est groups. One important initiative in this vein is

the Wellbeing of Future Generations Act in Wales,

which requires public bodies to think about the

long-term impact of their decisions, in terms of

their effects on persistent problems such as pov-

erty, health inequalities and climate change, offer-

ing opportunities to bring about long-lasting, posi-

tive change for current and future generations.

Fiscal policy and growth

independence

However, for long-termism to be embedded in pol-

icy, another structural barrier must be overcome.

The puzzle of economic growth dependency needs

to be solved.

71, 72

The COVID-19 crisis has demon-

strated how steadfast public perception is that sta-

bility depends on economic growth. Placing social,

environmental and economic stability at the cen-

tre of concern is not merely a matter of political will.

Economies today seem to be structurally depend-

ent on the continuous expansion of the economy.

Becoming growth independent means nd-

ing other ways of generating employment, pro-

moting equality and reducing debt. It is not about

de-growing the economy. It is about recognising

the fundamental uncertainty regarding the future.

Due to the complexity and amount of assump-

tions involved, neither science nor policy can fore-

see how stronger environmental commitments and

regulation will affect aggregate economic growth

in the long-term. It would be great, if green growth

and technology solved the problem and ensured

that today's economies stayed within planetary

boundaries while growing. However, as outlined

recently in the Dasgupta Interim Report

, innova-

tion is likely to be too slow for addressing urgent

environmental challenges. Becoming growth inde-

pendent is about preparing for the possibility

that ecological resilience can only be maintained

through a steady-state economy or a decrease in

consumption and production. In addition, policy-

Policy and governanceBuilding a resilient economy

Content ↑

makers must rethink scal policy. A green trans-

formation requires substantial public invest-

ment. At the same time, it will be crucial to invest

where the economy creates real public use-val-

ue: health care, education, nursing care, public

parks and clean energy, transport and infrastruc-

ture.

74, 75

To do so, sufcient amounts of resources

must be available. Thereby, regulations such as the

Stability and Growth Pact in the EU, or the Char-

ter for Budget Responsibility in the UK dene how

much money can be spent and what it is spent for.

Changing the legislations that assess scal space

can create space for new investments.

These new investments can, for instance, be

directed by a Green Investment Bank

to where

they minimise ecological risks and maximise social

value. However, such investments often face high-

er debts. Charles Goodhart and Michael Hudson

therefore propose a modern form of debt jubi-

lees to deal with this challenge, where those forms

of debt most largely contributing to income and

wealth inequalities could be cancelled by funding

from a land or property tax.

77, 78

Additional resources can come from taxa-

tion on activities that produce damage instead

of value, and by ghting tax evasion and offshor-

ing. Legislation denes how much money is taxed

and who pays that money, thus guiding economic

development in a certain direction. More taxes can

be collected by reducing tax advantages for fossil

fuel industries

79, 80

or implementing taxes on activ-

ities that are harmful to the environment and the

public good (e. g. carbon taxes

81, 82

). Policy would

thereby internalise external effects from econom-

ic activities and incentivise the right kind of behav-

iour. Taxes can also come from skimming off eco-

nomic rents: increases in value that occur not by

the personal investment of people, but through the

investment of the State

83, 84

or are not associated

with real economic activities (e. g. a nancial trans-

action tax

Limiting power and

empowerment for change

Policymakers will face considerable resistance to

change, if policies are accompanied by concen-

trated impacts that run counter to the interests

of powerful actors. To prevent this, policies that

combat power inequalities are important. Often,

money results in political power (in the sense of an

individual’s or group’s ability to influence political

decision making), over the use of public resourc-

es and the implementation of policies

. Propos-

als to break these power imbalances by distribut-

ing money more equally range from redistributing

economic rents through land tax reforms

, pro-

gressive wealth and inheritance taxes

to struc-

tural approaches like business unbundling, strong-

er regulation for mergers to a change in owner-

ship structures as a whole

89, 90

, to maximum sizes

of companies

, income limits

92, 93

or basic income

schemes

Tackling power imbalances is not only about

limiting the power of influential actors, but also

about increasing power of less powerful groups.

One way to achieve this is to extend policy coher-

ence boundaries to non-state actors that operate

outside or across the borders of national legal regu-

lation.

This includes corporate norms and compli-

ance systems, new business models, new ways of

forming civil society groups, the use of social media,

etc. Policy coherence needs new means of govern-

ance. New forms of collaboration between poli-

cy and the private as well as the civil society sec-

tor can promote policies that cut across functional

boundaries to create solutions that anticipate soci-

etal and global dependencies. Citizen assemblies

can become a new form of policy design and inno-

vation.

FinanceBuilding a resilient economy

Content ↑

The vast majority of nancial institutions fail to

integrate environmental and long-term factors

into their decision making. This leads to a large

misallocation of funds. On the one hand, funding the

transition to a sustainable economy is estimated to

cost between US $ 5–7 trillion per year until 2030.

However, public and private nance only mobilis-

es US $ 2.5 trillion, leaving a signicant shortfall of

funds

97, 98

. On the other hand, nancial institutions

continue to fund unsustainable economic activities.

Bond and equity markets are, for instance, overex-

posed to fossil fuel intensive and polluting sectors.

This means that a large amount of capital is being

invested in environmentally harmful business, rath-

er than sustainable alternatives. Notably, this also

applies to the seemingly “market neutral” asset

purchasing programs of central banks

. A similar

dynamic exists in bank-based nance. It has been

estimated that banks across the world have invest-

ed a total of US $ 2.7 trillion in fossil fuel projects

and companies between 2016 and 2019; after the

signing of the Paris Agreement

100

. Of this amount,

UK banks alone accounted for US $ 100 billion

between 2016 and 2018

101

. In addition, the high

exposure of the UK’s nancial sector to mortgages

on real estate with low energy efciency illustrates

how urgently the nancial system needs reform, if

it is to become an enabler rather than a barrier to

environmental sustainability

102

This collective misallocation of funding has

enormous implications in the way of destabilis-

ing the planet’s environmental systems. Since

economic and nancial systems are embedded

in earth systems, nancial stability itself is at risk.

Now realising the systemic risks for nancial sta-

bility that arise from climate change, which are

estimated at US $ 43 trillion in nancial losses by

2100

103

, regulators and central banks have start-

ed to explore and integrate climate-related risks

into their work.

Climate-related risks are, however, not the only

concern for nance. A WWF sponsored study has

recently estimated potential losses from ongoing

biodiversity-related loss at a minimum of US $ 10

trillion by 2050

104

. Another study sponsored by

UNEP suggests these risks are heavily concentrat-

ed in a few sectors, including agriculture, apparel

and resource extraction and use

105

Notably, such high-level scenarios are likely to

underestimate the real risks that materialise. They

are based on assumptions about highly interde-

pendent and uncertain environmental, technolog-

ical and political trajectories. In light of this, recent

working papers from the Bank for International Set-

tlements

106

and the UCL’s Institute for Innovation

and Public Purpose

107

have pointed out the limita-

tions of relying on modelling. Citing the precaution-

ary principle and the fundamental uncertainty that

comes with changes to the planet’s natural sys-

tems, the authors advocate rapid and transform-

ative action to avoid potentially catastrophic out-

comes for nature, the economy and nance.

Financial institutions and their supervisors

need to better incorporate environmental criteria

into their allocative decision making and their risk

assessments. Ethical investors, ESG rating agen-

cies and NGOs have pioneered the work on dis-

closing and understanding the data on how nance

contributes to and is exposed to environmental

risks. Most recently, initiatives like the FSB TCFD

have added much-needed rigorousness and scope

to these assessments. Nonetheless, disclosure

alone remains insufcient if nancial institutions

are unable or unwilling to process it.

108

This needs

to go further by making sure that this data is used

Finance

» The collective misallocation

of private funding has enormous

implications in the way of

destabilising the planet’s

environmental systems.«

FinanceBuilding a resilient economy

Content ↑

effectively. The priorities and mandates of regu-

lators need to change. Additionally, actors across

the nancial system including nancial institutions,

regulators and service providers (e. g. rating agen-

cies, index providers) need to develop common

metrics and methodologies that make the relevant

environmental issues clear. Together, these shifts

could give rise to policies and investment practic-

es that better allocate funding.

Challenges

Barriers to a sustainable trans-

formation of the nancial system

There are, however, institutional and legal reasons

for the misallocation of funds and the failure to

take environmental issues into account.

Short-termism

The rst issue is that nancial institutions and their

regulators often only operate using a time horizon

of one business cycle, and thus, only look at what

happens in the next one to ve years

109, 110

. In addi-

tion, the practice of quarterly reporting has been

linked to short-termism by some observers

111

. The

associated longer-term environmental impacts and

risks of nancial transactions are often not consid-

ered and therefore not appropriately priced.

A second issue is that large nancial institu-

tions and investors are generally risk averse when

it comes to economic risks. This is because regu-

lation and mandates require that they do not gam-

ble with the contributions of pension savers or

insurance holders. While this is a sensible policy,

it also means that such nancial institutions dis-

play a status quo bias, which means that they are

greatly exposed to the current unsustainable econ-

omy, whereas alternative (possibly more sustain-

able, but less protable) businesses face a short-

age or increased cost of funding. This status quo

bias is further exacerbated by the use of indices

like the S & P 500 or the MSCI World as proxies for

“the market” against which risks and returns are

benchmarked. Such indices have been found to be

biased in favour of the fossil fuel industry and to

grant undue infrastructural power to index provid-

ers like MSCI, which make far-reaching decisions

about capital allocations.

112, 113

The inability of institutional investors to fund

sustainable projects is further exacerbated by

narrow legal interpretations of their responsibil-

ities (i. e. duciary duties). These postulate that

they need only take short-term prot maximisa-

tion into account

114

. A nal institutional issue is

the mismatch of scale across capital markets in

particular. Impactful environmental preservation

projects often have a volume of less than one mil-

lion euro or dollars, while the average green bond

requires a volume of 100 million EUR.

115

Lack of metrics

A second cluster of barriers concerns the lack of

common metrics for environmental and broader

sustainability indicators. While data and ratings

on Environmental, Social and Governance (ESG)

criteria abound, different methodologies make

standardisation and comparison difcult. The lack

of correlation between different providers has led

critics to adopt the term “alphabet soup” when

referring to ESG

116, 117, 118

. Some of the confusion of

ESG methodologies comes from the fact that data

providers often assess companies’ targets and pol-

icies instead of the actual environmental and social

outcomes. Initiatives like the EU’s upcoming green

taxonomy and the Task Force on Climate-relat-

ed Financial Disclosures (TCFD), as well as more

established frameworks such as the Global Report-

ing Initiative or the CDP (formerly Carbon Disclo-

sure Project), aim to enhance the clarity of envi-

FinanceBuilding a resilient economy

Content ↑

ronment-related information. Most recently, sev-

eral organisations including the WWF and UNEP

launched the Taskforce for Nature-related Finan-

cial Disclosures

119

. Given increased deteriora-

tion of ecosystems and increased awareness of

nance and the economy’s dependence on natu-

ral systems

120

, this task force aims to improve the

reporting, metrics and data that nancial institu-

tions need in order to better understand their risks,

dependencies and impacts on nature by 2022.

These developments notwithstanding, the lack

of agreed upon and widely used metrics allows

nancial institutions to engage in “greenwashing”,

i. e. selecting the ESG measures that make their

portfolio look sustainable. This kind of ESG data

shopping, however, defeats the purpose of sustain-

able investment, since instead of reallocating cap-

ital towards sustainable businesses and projects,

existing assets are merely relabelled. In addition,

the “noise” that such competing methods gener-

ates, makes it harder to clearly identify the long-

term risks.

Culture and Policy Frameworks

Thirdly, there are barriers to sustainability in

nance that are related to but not completely cov-

ered in the institutional and legal barriers, which

we term culture and policy frameworks.

Financial practitioners tend to reflect little on

long-term and environmental impacts in nance

education and in the work environment. Instead,

short-termism and a narrow conception of mone-

tary prot are prioritised. This is reinforced by the

dominant metrics and tools that nancial prac-

titioners use. The ubiquity of narrow Cost Bene-

t Analysis and short-term nancial pricing mod-

els like the Capital Asset Pricing Model (CAPM) as

well as Modern Portfolio Theory more generally, are

prime examples of this dynamic.

A second broader issue is the overall policy

framework beyond the regulation of the nancial

sector (see Chapter 1). The materialisation of the

risks for unsustainable investments depends ulti-

mately on real economy policies. If, for instance, a

high carbon tax is implemented or internal com-

bustion engines are prohibited, this represents

a risk for those who currently invest in nancial

assets linked to these economic activities – in the

literature, this issue is denoted by the concepts

of stranded assets and transition risks. If, howev-

er, nancial institutions do not believe that gov-

ernments will act forcefully, they have little incen-

tive to already factor in such transition risks today.

121

For this reason, focusing on risk disclosures in

nance only is unlikely to shift allocation patterns.

On the other hand, the point about the signi-

cance of real economy policies should not be over-

stated. Finance is not merely a reflection of the real

economy and reforms to the nancial system are

not only second-best strategies. Instead, there is

a two-way dynamic between nance and the real

economy. The nancial system processes informa-

tion from the real economy according to its own

institutional dynamics. Allocation decisions that

are made in this process not only reflect the cur-

rent real economy, but also contribute to the con-

struction of the future real economy.

122, 123

As such,

reforms of both the real economy and the nan-

cial system are needed to transition to a sustain-

able economy.

Solutions

The role of policy in setting

nance on course for tackling

today’s challenges

Institutional legacies, mandates and legal inter-

pretations are the outcomes of past political

choices and policies. Likewise, what is considered

today as standardised and “hard” nancial data is,

FinanceBuilding a resilient economy

Content ↑

in fact, the outcome of legal and political process-

124

. The barriers to nance adopting and playing

its part in funding a sustainable transition is there-

fore not set in stone, and policymakers can rewrite

the rules of the game according to the altered pri-

orities that planetary emergencies demand. We

have identied two main clusters where policy can

intervene.

Mandates and legal

interpretations

In its simplest form, a mandate describes the

objectives of a public institution. Accordingly, a

body with political legitimacy like the UK Parliament

delegates the task of achieving certain goals to an

independent public body like the Bank of England

(BoE). In the context of nance, central banks and

regulators are the public institutions whose man-

dates are especially relevant. Mandates serve on the

one hand to ensure the consistency of policies pre-

scribed by regulators and central banks, since they

prevent politicians from creating confusion by con-

stantly adjusting policies. On the other hand, man-

dates prevent “mission creep” on the part of these

institutions by clearly circumscribing their tasks.

Nonetheless, it is important to remember that

mandates remain based on political decisions and

that they reflect the context of those decisions. A

recent review of 135 central banks nds that only

13 % out of the reviewed institutions have a sus-

tainability-related mandate

125

. Some, like the BoE,

have a broader mandate that tasks them with con-

tributing to the government’s priorities. However,

due to different political priorities in the past, many

central banks, including the BoE, are still primari-

ly tasked with ensuring price stability (and more

recently nancial stability). This could make them

a target for criticisms of mission creep, should they

try to address environmental issues like climate

change

126

Legal interpretations, on the other hand, deter-

mine the meaning and implications of a concept in

regulation or any other piece of legislation. Such

clarication determines, for example, whether and

to what degree the task of maintaining nancial

stability forces central banks to address climate

change. Yet legal interpretations also impact private

nancial actors. For instance, the question of which

risks can be considered “nancially material” influ-

ences the reporting and risk assessments of nan-

cial institutions. Another example is the above-men-

tioned concept of duciary duty, which has implica-

tions for the allocation strategies of institutions like

pension funds. The list below outlines certain poli-

cies that could modify the cluster of mandates and

legal interpretations towards sustainability:

• Democratic consultation on the purpose of the

nancial sector led by the Parliament, whose

outputs would be used to update the mandates

of the Bank of England and the Financial

Conduct Authority.

127

• Clarify the meaning of materiality, so that it

accounts both for risks of dependencies of

nancial institutions on nature and for impacts

of nancing operations on nature (double

materiality)

128

• Clarication of the non-nancial dimension of

duciary duties.

129

» Only 13 % of central banks

have a sustainability-related

mandate.«

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Metrics for the long-term

Illumination of the links between the environment

and nance requires standardised measuring

techniques. While popularisation and increasing

sophistication of environmental metrics helped the

nancial sector to learn about environmental issues

in the past, these efforts have been insufcient in

anchoring sustainability concerns to nance. To

assess the risks to and impacts on nature, nan-

cial institutions and regulators need consistent, sci-

ence-based data that can be integrated into nan-

cial decision making and supervisory practices

respectively. There is a need for common standards,

mandatory disclosure and publicly backed method-

ologies. Some of the proposals that are related to

the question of metrics are listed below:

• Support the development of a taxonomy of

economic activities.

130

• Develop public labels that certify the

compatibility of nancial products with

biodiversity goals and ensure that biodiversity

is integrated into ESG [Environmental, social

and Governance] ratings. In the longer-term,

methodologies should be harmonised.

131

• Make long-term and environmental risk

assessments obligatory for all nancial

institutions through prudential regulation

tools such as climate stress tests.

132, 133

• Develop transition scenarios and stress tests

to assess how well nancial institutions are

aligned with the pathways towards a 1.5 °C

transition and a halt of biodiversity loss.

134, 135

• Make environmental, long-term risk assess-

ments obligatory for all nancial institutions.

• Make disclosure and reporting of “non-nan-

cial” information to regulators and the general

public obligatory for listed companies.

136, 137, 138

• Make nancial institutions’ disclosure to

supervisors of climate-related risks and their

management obligatory.

139

• Make reporting on climate change risk

mandatory.

140

Success story

The Task Force on Climate-Related Finan-

cial Disclosures (TCFD), hosted by the

Financial Stability Board (FSB), was put in

place to develop consistent, climate-relat-

ed nancial risk disclosures to help compa-

nies, banks and investors provide informa-

tion to stakeholders. Increasing the amount

of reliable information on nancial institu-

tions’ exposure to climate-related risks and

opportunities will strengthen the stability

of the nancial system, contribute to great-

er understanding of climate risks, and facil-

itate nancing the transition to a more sta-

ble and sustainable economy. This frame-

work requires businesses to report the cli-

mate-related impacts of their operations,

thus providing an accounting mechanism

that claries progress toward wellbeing

goals. To date, the TCFD has gathered over

1020 supporters representing a market cap-

italisation of over US $ 12 trillion

141

. In addi-

tion, regulators like the UK’s Department for

Work and Pensions have started to explore

the option of making the TCFD framework

mandatory

142

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» Efciency gains might be

realised in one sector, but they

are often offset by an increase

in production in another. «

Business

143

has a major influence on the prospects

for a sustainable economy and socially just socie-

ty. The private sector is a key economic actor via

its immediate role as employer, purchaser, pro-

ducer, and taxpayer and by shaping the behaviour

of employees, citizens, communities, other busi-

nesses, and societal institutions.

144

In the UK, the private sector accounts for 60 %

of GDP145 and per capita income and employs

77 % of the workforce

146

. It is responsible for 18 %

of UK territorial Greenhouse Gas (GHG) emissions

on average.

147

It extracts over 100 million tonnes

of natural resources in the mineral and agricultur-

al sectors alone.

148

It uses these resources to sat-

isfy consumption, which has increased nearly 50 %

from 2005 to 2019.

149

At the same time, business practices can exac-

erbate vertical and horizontal inequalities. For

example, a focus on returns to nancial capital can

come at the cost of the returns to labour.

150

Without

regulation, the majority of businesses will contin-

ue to pursue activities that risk undermining envi-

ronmental quality and resilience and undervaluing

workers and the wider community.

In the past, efforts in the UK to compel sustain-

able production focused on closing material cycles,

increasing energy and resource efciency and

decarbonising the energy system. In 2008, the UK

adopted the Climate Change Act, and it is imple-

menting higher standards on efciency and the cir-

cular economy, while growing the renewables sec-

tor. It has improved benchmarks for ESG disclo-

sures

151

, has taxed plastic bags in grocery stores

152

and implemented the UK Trading Systems (UK ETS)

and carbon pricing.

While these measures are moving in the right

direction, they fall short in terms of scope and

speed of change. While the UK has seen a decrease

in carbon emissions in the private sector by 41 %

since 1990

153

, the speed of decarbonisation has to

further accelerate to stay within the 1.5° goal of

the Paris Agreement.

154

The UK’s private sector has

made progress in reducing dependency on fossil

fuels, reducing the use of coal by 80 %, gas by 20 %

and oil by 6 % in the last decade

155

, but the pri-

vate sector is still hugely dependent on these fuel

sources. Efciency gains might be realised in one

sector, but they are often offset by an increase in

production on the other.

156

The expectation for businesses to be more

inclusive of social and environmental considera-

tions is growing. Businesses are already feeling

pressure to become more sustainable, primarily

from their competitors, following customers and

governments.

157

However, only 17 % of the current

market is demanding more sustainable products.

158

Despite this, the prominence of the “ESG” agen-

da is growing.

Challenges

Barriers to implementing sustai-

nable and fair business models

From the literature, we identied a series of barri-

ers that limit the development of sustainable and

fair business models:

Short-termism: Institutional investors

are typically unable to sacrice

short-term nance returns in support of

ESG guidelines

159

as they have the duciary

duty to preserve capital and maximise risk

adjusted returns.

Business

BusinessBuilding a resilient economy

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2. Fiercely competitive market contexts

which create narrow prot incentives

and pressures to compete on cost and

price, driving outsourcing, automation, and

externalisation. These prots are important to

pay for the opportunity costs of the owner, to

service liabilities and attract investors to keep

up with technological progress. Coupled with

the need to scale, the sustainable investment

market is often not large enough to attract big

institutional investors to support the transition

toward sustainability.

160

In markets for goods

and services, for those who cannot differenti

ate their product, going against these trends

means their customers would purchase else

where and the rm would become unviable.

3. Without standardisation of meas-

urements and labels, investors (and

consumers) cannot compare products against

each other, and sustainability is left as a “nice

to have” instead of a requirement. There is

a lack of common language and inadequate

measurement tools to aid businesses in their

transition towards sustainability.

161

Without

standardisation mechanisms, companies,

investors and consumers have no way to

compare the efforts of respective businesses

which translates to weak incentives for

businesses to change.

Lobbying that pushes for unambitious

regulation and loopholes for busi-

nesses to exploit, potentially exacerbated by

reliance of certain regions on the presence

(and hence employment footprint) of a single

rm or industry (see → Policy).

Corporate governance structures and

business models that elevate nancial

over social and environmental interests and

incentivise managers to make decisions

accordingly.

Solutions

Policy options to drive

sustainable business behaviour

As outlined in the chapter on the role of → Policy,

governments incentivise or dis-incentivise cer-

tain business behaviour. In order to achieve sus-

tainable business behaviour, there is a need for

changing legal frameworks and for providing

the right incentives and mandating tools, meth-

ods and models that support longer-term visions.

For example, public procurement and tax poli-

cies are key levers to inculcate better distribu-

tion of value shared. Furthermore, regulations,

trade-agreements and standard setting can deter-

mine how environmental impacts are approached

and accounted for. Drawing on our literature review,

we have identied four clusters of policy action:

Shifting Protability

Protability is one of the major drivers that deter-

mine where investments flow and business mod-

els emerge. To change what is protable, govern-

ments can undertake tax (and subsidy) reforms to

encourage companies to better align their activi-

ties with socially and environmentally benecial

outcomes. For example

162

• Move towards a new taxation paradigm.

Rather than taxing what people value (employ-

ment), policy should tax harmful activities

(environmental damages), increase taxes on

resource use such as Carbon or Resource

taxes

163

, phase out direct and indirect fossil

fuel subsidies

164

and lower taxes on labour.

165

• Advance tax collection tactics and promote

international collaboration. The corporate tax

base has steadily been eroded as globalisation

of corporate activities allowed companies to

BusinessBuilding a resilient economy

Content ↑

shift home-bases and transfer liabilities to tax

havens.

166

This has exacerbated inequality and

undermined public revenue.

167

One example of

a new tactic to end tax avoidance and evasion

is the OECD / G20 Inclusive Framework on

Base Erosion and Prot-Shifting.

Non-nancial Disclosure,

Reporting and Accountability

Many authors have advocated for an inclusion

of external environmental costs into economic

accounting.

168

As flagged elsewhere in this report,

requiring corporate disclosure, reporting against

clear benchmarks and increased accountability

can move businesses away from a narrow focus on

short-term prot maximisation towards the incor-

poration of wider societal concerns in business

decision making. For example:

• Require businesses to include both social

and environmental objectives in their stated

purpose and accounting;

• Develop biodiversity labels for nancial prod-

ucts for retail investors to be better informed

on the real impacts of their investments;

• Full cost accounting for environmental exter-

nalities to change patterns of use, purchase

and production via more accurate prices;

• Establish a common international standard

for calculating carbon content and biodiversity

impacts of goods.

Sustainable Investment

and Innovation

Challenges such as climate change, health and well-

being are complex and interconnected: solving them

requires the inclusion of several different stakehold

ers. Businesses need to have access to resourc-

es and partners in order to invest and innovate in

addressing these challenges.

169

For example, prop-

erly targeted and monitored government invest-

ment can provide businesses with access to nance

that underwrites experimentation and innovation for

sustainability.

170

Regulations also matter: to increase the circu-

larity of economies, governments might regulate

for extended producer responsibility (such as via

longer warranties), that encourages better dura-

bility of products, alongside the right to repair and

modularity standards. Creating design require-

ments for products such as the Cradle to Cra-

dle framework

171

and punishing planned obsoles-

cence

172

can increase repair and reuse potential

173

while banning waste disposal can compel practic-

es such as food-sharing.

Sustainable Business Models

In the current system, a substantial number of

businesses are congured so that their utmost

goal is to maximise prots for shareholders. This

heightened focus on economic prot and growth is

often counter to the interests of other stakehold-

ers and fails to adopt longer-term time horizons.

Policy can ensure businesses incorporate environ-

mental and social considerations into internal gov-

ernance structures to be accountable for and deliv-

er on a suite of impacts

174, 175

via:

• Regulating for legal forms beyond the Public

Limited Company (PLC). The UK, for example,

has a suite of pro-social business models such

as Community Interest Companies, social

enterprise, and cooperatives.

• Using incentives (tax breaks, accounting advice,

preferential procurement and so on) that

encourage the uptake of such business models.

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» The focus on consumer

sovereignty fails to acknowledge

the influence on individual

consumption behaviour of

contextual factors. «

Consumption is also a major factor in rising global

emissions and environmental degradation beyond

planetary boundaries. Considering the entire glob-

al value chain, nutrition, housing and mobility

account for approximately 75 % of lifestyle carbon

footprints.

176

Hotspots include meat and dairy con-

sumption, fossil-fuel-based energy, car use and air

travel. To get on track towards the Paris Agreement

will require immense reductions of carbon foot-

prints by up to 96 % in industrialised countries, in

the next 30 years.

177

Not all people equally contribute to this prob-

lem. Forms of consumption are enormously une-

qual distributed, both between and within coun-

tries. 20 % of the world’s population in the wealth-

iest industrialised countries account for 86 % of

the world’s consumption, while the world’s poorest

20 % account for only 1.3 %.

178

With disposable per

capita income being a major driver of consumption,

the environmental impact of households increases

with income.

179

Policy efforts for sustainability so far have

primarily focused on accelerating technologi-

cal change to make production more sustainable,

by decarbonising energy provision and improving

material and energy efciency (for discussion of

this approach, see → Business).

Policy based on the demand side of consump-

tion have thus far had limited success in changing

unsustainable behaviours.

180, 181

This is due to their

basis in the concept of consumer sovereignty i. e.

policies such as information labels about sustain-

able products and price signals.

182

However, this

focus fails to acknowledge the influence on indi-

vidual consumption behaviour of contextual fac-

tors like infrastructures

183

, provisioning systems

184,

185, 186

, inequality

187

, psychological drivers and hab-

its and norms

188

Sustainable consumption policy is about influenc-

ing how and what people consume. It is about

• providing new sustainable consumption

options and the necessary infrastructures.

• decreasing overall consumption levels and

addressing the underlying drivers of increased

consumption.

• ensuring that needs satisfaction does not

necessarily rely on material consumption and

income, but also on immaterial goods.

Challenges

Barriers for change towards

sustainable living and drivers

for unsustainable behaviour

Literature outlines two levels of barriers to sustain-

able consumption: social and physical infrastruc-

tures at the structural level and deeply enrooted

habits at the cultural level.

Social and physical

infrastructures

The rst barrier are lock-ins to unsustainable con-

sumption patterns beyond individual control.

These result from

a. existing infrastructures

189, 190,191

b. availability of consumption options,

Citizens

CitizensBuilding a resilient economy

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c. misleading incentives

192, 193, 194

and

d. economic threats.

195

Existing infrastructure in industrialised econo-

mies make it difcult to consume in a sustaina-

ble way. There is limited access to sustainable

alternatives for high environmental impact hous-

ing, energy, mobility and nutrition, everyday con-

sumer products, working environments and social

integration. In many sectors, sustainable alter-

natives are simply not available (e. g. the IT sec-

tor) or are not affordable for everyone (e. g. organ-

ic food, clothing and material for housing). Further,

misleading incentive structures promote unsus-

tainable consumption patterns. Subsidies for fos-

sil fuels, large-scale industrial agriculture, or tax-

free kerosene distort prices for consumers, thus

encouraging unsustainable consumption.

Another barrier is efciency consumption, when

consumption is presented as an “offer you can’t

refuse”

196

. Owning certain products is required to

actively participate in society, increase time ef-

ciency and become employed. Examples include

washing machines, cars and mobile phones. One’s

ability to drive to work, communicate efcient-

ly and have sufcient time for a full working week

depends on access to goods and services and on

whether employers and colleagues expect one to

have this access. In this case, consumption is not

a choice, but becomes a necessity.

Habits

In today’s society, consumption serves impor-

tant social and psychological functions that pose

a cultural barrier to sustainable consumption. The

cultural relevance of consumption in high-income

societies associates higher levels of consumption

with improvements in wellbeing, beyond the meet-

ing of basic needs. For example, the term “status

consumption” describes how people manifest their

role in society by owning goods that offer recogni-

tion. In addition, alternative means for needs sat-

isfaction are limited, e. g. recognition via stronger

and meaningful relationships.

Solutions

Policy actions to enable

sustainable living

Policymaking has the tools to effectively change

social infrastructures and set incentives for cultur-

al change, the two mutually reinforcing drivers of

unsustainable consumption. Addressing both lev-

els of barriers is crucial to initiate change. To effec-

tively tackle unsustainable consumption, litera-

ture describes three levels that policy can address:

What people (can) consume (incentives, consump-

tion options and infrastructures), how they con-

sume (behaviour and culture) and the creation of

more equal consumption opportunities (affordabil-

ity and income inequality).

Sustainable consumption

alternatives

In a society with diverse values, sustainable prod-

ucts must be cheaper than unsustainable alterna-

tives, for sustainable consumption to become the

norm. This requires effective incentives or regula-

tions, as discussed in the → Business chapter. Mar-

ket prices must integrate true environmental and

social costs, e. g. via the introduction of taxes on

carbon emissions

197, 198, 199

or stricter waste incin-

eration laws

200

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Of particular importance is decreasing direct and

indirect prices for basic needs and services like

mobility, nutrition, housing and increasing prices

for luxury goods, to influence what is consumed.

Likewise, regulation can promote more sustain-

able consumptions. For transport options, this

means lowering costs of public transport, abolish-

ing VAT for rail travel, introducing a tax on kerosene,

setting incentives for car-free travel and commut-

ing, setting speed limits for cars or including the

transport sector in the emissions trading scheme

to reflect the right prices for transport.

201

For the

working environment, this can mean introducing

one Veggie Day a week for canteen food or nan-

cially supporting alternatives to commuting to work

by car.

202

With regards to nutrition, recommended

policy actions include price incentives to substi-

tute dairy products and red meat with plant-based

options and raising taxes on meat.

203

Concerning

housing, recommended policy actions include pro-

gressive estate taxes on e. g. living space, to avoid

efciency improvements being negated by increas-

es in living space. Status consumption beyond what

people really need can be discouraged through

taxes on luxury goods

204

, or higher taxes on prod-

ucts beyond basic needs.

205

Prices alone are not sufcient for transitioning

towards more sustainable production and con-

sumption systems. For incentives to reach their

full potential, policy must promote better availabil-

ity of sustainable alternatives, reduce transaction

costs and make unsustainable options unavailable.

Exemplary policy options include the introduction

of low-emission transport infrastructure such as

bike lanes or public transport, target values for bike

sharing

206, 207

and good pedestrian infrastructure in

all trafc areas. Further, policy can direct innova-

tion where it reduces transaction costs of sustaina-

ble services, making sustainable consumption eas-

ier and more comfortable. An example is the sim-

plication of cross-border train bookings. Lastly,

policy regulation is needed to limit non-sustaina-

ble products and services such as domestic flights,

plastic bags or meat products in canteens.

208

Policy can strengthen local and sustainable

consumption and thereby lower transport emis-

sions, while establishing and diversifying local

working opportunities. A wide variety of policy

options include nancial incentives for local pro-

duction, regional business development focused

on ecological, non-intensive small-scale agricul-

ture, community-supported agriculture, strength-

ening of local eco-tourism

209

, price incentives to

consume regional, seasonal food, as well as reg-

ulations that make the implementation of comple-

mentary local currencies possible.

210, 211

Infrastructures for sufciency

Along with “what” people consume, great poten-

tial lies in changing “how” people consume.

Rather than replacing a product with a sustaina-

ble alternative, the “how” it is about reflecting on

the necessity of using and owning certain servic-

es and goods and move towards sufciency. Suf-

ciency means to identify new ways of needs sat-

isfaction beyond material consumption, reducing

overall consumption levels and creating structures

for social integration that do not rely on material

consumption.

To ensure this, infrastructures that allow a dif-

ferent form of consumption and working life are

required e. g. reducing working hours

212

, enabling

sabbaticals

213

or working from home. Such chang-

es have the potential to offer opportunities to con-

sume differently, as they provide more time for

more sustainable, time-intensive activities.

» Prices alone are not sufcient

for transitioning towards more

sustainable production and

consumption systems.«

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For example, this additional time can be used to

repair products. Demand-side policies can make

this easier, e. g. by supporting the implementa-

tion of repair cafés that increase awareness of and

care for product durability and support a shift away

from a “throw-away” mentality.

214, 215

A sharing economy would make people recon-

sider which goods really needed to be owned and

which can be substituted by services. Well-known

examples of a sharing economy include car shar-

ing, bike sharing and the introduction of neighbour-

hood sharing systems for goods people rarely use,

like special toolkits.

216, 217

The development of new ways of housing has

the potential to reduce the living space and the

associated energy demands for heating i.e. model

projects for alternative forms of housing such as

multi-generation houses and the construction of

overall smaller living spaces.

218

A different form of nutrition can be incentivised

through the creation of community-supported agri-

culture and community gardening, creating new

communal spaces and raising awareness of and

demand for the consumption of seasonal food.

219, 220

Affordability and fairness

Literature stresses that addressing inequality is

a necessary precondition to effectively changing

the “what” and “how” of people’s consumption.

Therefore, policies that ensure people are able,

nancially and socially, to satisfy their basic needs

and participate in society are necessary to enable

sustainable consumption. Such policies include

establishing minimum and maximum income lev-

els

221, 222

, a universal basic income (monetary

and non-monetary)

223, 224

, and / or wage tax cuts

for low-income households (→ Power).

225

Further

measures include providing equal access to sus-

tainable goods and services through providing

vouchers for rail travel, regional food and sustain-

able housing for low-income households. Universal

access to health care and education

226

, increases

in energy efciency of buildings and housing

227, 228

and free public transport can play a crucial role in

creating more sustainable consumption.

Interim conclusion Building a resilient economy

Content ↑

This section has shown the amount of possible

changes mentioned in the literature and made

clear that economic behaviour is not set in stone.

Be it politics, nance, business or citizens, behav-

iour is always the result of existing political deci-

sions, legislation and systems. Therefore, to nd

the way to a resilient economy, it is necessary to

change the underlying systemic factors.

As illustrated in the previous chapters, there

are a number of constraining forces that hinder

change. They prevent people from changing their

consumption, investment, or political decisions.

→ Figure 1 summarises these factors.

However, these constraining forces can be

countered by the enabling forces of change sum-

marised in the previous sections, as depicted in

→ Figure 1. The enabling forces are a summary of

the political intervention options. They show start-

ing points for alternative policies that – if cast into

political legislation – can free the actors from their

cages and enable them to move towards a resilient

economy in their respective elds (politics, nance,

business, or consumption).

While some required changes may be hard to

swallow, policies in each of the elds of action are

strongly interconnected. They only develop their

full effectiveness when they are applied at different

points (see Box “A systemic change mindset” →).

Their interplay can generate many co-benets.

Investments into green sectors include job oppor-

tunities in the renewable energy sector, the cir-

cular economy or care, cultural and crafting sec-

tors. Improvements in environmental quality and

equality could have positive effects on health and

wellbeing. Providing public expenditures to x the

harm created by the current economic system may

increase economic resilience and provide resourc-

es to reduce poverty. Rethinking how we consume

can leave people with more time for their relation-

ships, families, and friends.

In the next chapter we will discuss eight of these

proposals in detail and show how they reinforce

each other.

Interim conclusion

Thinking about and engaging

in systemic change

Interim conclusion Building a resilient economy

Content ↑

A systemic change mindset

It is not easy to nd and prioritise systemic change among the options

presented here. Prioritisation requires changes in how policymakers think.

Science and policymakers often use mechanical images to guide thinking on

solutions: leverage points, gear wheels or levers, which encourages a focus

on the most important lever, the “one size ts all” solution. However, reality is

too complex to be captured in mechanical terms and linear pictures. Solutions

capable of creating systems change require thinking in terms of a network.

In fact, the network metaphor is ideal for systems: if one pulls on one point,

the tension to connected points will increase. If environmental taxes are

implemented, their impact will be limited by distributive implications. If policy

wants to use other indicators and goals, the realisation will be limited by the

power of those actors who prot most from economic growth as a policy goal.

Policymaking for systemic change is not about nding the right lever, for there

is never a “most important point” to address. It is about nding the most

connected node points that lock-in the current behaviour patterns of policy,

business, nance, and citizens. Only a package of policies that targets several

points of the network simultaneously can direct the system towards a more

sustainable state. The → second part of this report presents one option for

such a package.

Figure 1: Enablers and barriers towards a resilient economy.

Policy and

governments

Finance

Short

termism

Power

Imbalances

Culture and

policy

frameworks

Mandates

and legal

interpretations

Extractive

Economy

Multidimensional

indicators,

monitoring

capacity, and

legal frameworks

Sustainable

consumption

alternatives

Shifting

protability

Non-nancial

disclosure,

reporting and

accountability

Sustainable

investment and

innovation

Sustainable

business models

Infrastructures

for sufciency

Affordability

and fairness

Corporate

governance

Lobbying

Social and

physical

infrastructures

Incentive

structures

Short-term

horizons

Standardisation

of measurements

Habits

Market

competition

Compartmentalized

governance and

short-term focused

political value

systems

Resilient Economy

Business

Citizens

Limiting

power and

empowerment

for change

Power

imbalances

Fiscal policy

and growth

independence

Metrics for the

long-term

Lack of

metrics

Content ↑

Policy and governments

Constraining forces

Compartmentalized governance

and short-term focused political

value systems

• Non-binding international agreements

• Short-term oriented political value systems

and governance processes

• Economic mindsets in public institutions

• Short-termism due to election cycles

Power imbalances

• High influence of few businesses on policy

• High concentration of turnover and jobs

Enabling forces

Multidimensional indicators,

monitoring capacity, and

legal frameworks

• Integrate multi-dimensional indicators into

the whole policy cycle

• Increase capacities for systems thinking

• Promote long-term thinking trough legal frameworks

Fiscal policy and

growth independence

• Decouple economic stability from

economic growth

• Change scal assessment frameworks

• Create scal space for investments in

green infrastructure, health and education

• Introduce taxes on environmentally and

socially harmful activities

• Combat tax avoidance and evasion

Limiting power and empowerment

for change

• Redistribute wealth and incomes

• Break the power of monopolies and trusts

• Change ownership structures of businesses

• Involve citizen assemblies into policy design

• Extend policy coherence across national

borders

Finance

Constraining forces

Short termism

• Time horizons rarely extend beyond the

business cycle

• Risk aversion of institutional investors

• Narrow legal interpretation of duciary duties

by institutional investors

Lack of metrics

• Lack of standardisation and comparability of ESG data

Culture and policy frameworks

• Value systems focused on short termism

and monetary prot

• Lack of clear incentives and direction by

overall policy frameworks and regulators

Enabling forces

Mandates and legal interpretations

• Green mandates of central banks and

regulators

• Account for nature-related risks

• Clarify non-nancial dimensions of duciary duties

Metrics for the long-term

• Introduce common standards for

environmental metrics

• Mandatory disclosure and publicly backed

assessment methodologies

Content ↑

Business

Constraining forces

Short-term horizons

• Narrow focus on short-term

Market competition

• Pressures to compete and innovate

Standardisation of measurements

• Lack of standardised sustainability

measurements

Lobbying

• Influential lobbying for weak regulation

and loopholes

Incentive structures

• Lack of enforcement of policies

Corporate governance

• Prioritisation of nancial over social and

environmental interests

Enabling forces

Shifting protability

• Shift protability from environmentally

harmful activities to activities that increase

planetary health and wellbeing

• Impose limits on resource use and carbon emissions

Non-nancial disclosure, reporting

and accountability

• Introduce full cost accounting

• Establish standards for calculating climate

and biodiversity impacts

Sustainable investment and innovation

• Promote business experimentation and

innovation for sustainability

• Introduce stronger design and durability requirements

Sustainable business models

• Promote social business types beyond Public

Limited Companies

Citizens

Constraining forces

Social and physical infrastructures

• Existing resource-intensive infrastructures

• Lack of sustainable and affordable

consumption alternatives

• Misleading incentive structures

• Need for time-efciency increasing

consumption

Habits

• Cultural signicance of consumption

• Lack of alternative ways for immaterial needs satisfac-

tion

Enabling forces

Sustainabe consumption alternatives

• Price environmental and social costs

• Subsidise basic necessities and sustainable mobility,

nutrition, and housing

• Increase investments in green infrastructure

• Create disincentives for unsustainable

products and services and luxury goods

• Strengthen local and fair economies

Infrastructures for sufciency

• Create infrastructure for non-material

consumption

• Reduce working time

• Promote repairing, reusing and recycling

of goods

• Promote the sharing economy

• Reduce unsustainable consumption

Affordability and fairness

• Support low-income households with

payments or vouchers

• Ensure universal access to basic goods services

Part 2

Policy options for the

UK to move towards a

resilient economy

This chapter presents a consistent set of eight policies for the

UK that are feasible and topical, suitable to support COVID-19

recovery and can deliver systemic change.

IntroductionBuilding a resilient economy

Content ↑

Building on the literature review and a compre-

hensive understanding of what systemic change

requires, the aim of this chapter is to present a set

of policies that the UK can use to pave the way to

a resilient economy. Setting priorities was the big-

gest challenge. To do this, the following questions

were raised:

• Focus: How can the number of policies be

kept to a minimum?

• Synergies: Which policies are suited for

achieving several goals simultaneously?

• Consistency: How can a set of policies appear

consistent, so negative effects of certain

policies are compensated by others?

• Sequencing: In what order should policies

be implemented, so that steps taken today

facilitate desired changes thereafter?

Prioritisation is always accompanied by a high

degree of normative evaluation. In our case, four

experts evaluated the systemic change poli-

cies proposed in the literature against the crite-

ria of feasibility in the UK, COVID-19 compatibil-

ity and transformative potential (see → Method-

ology). The list provided here is therefore not to

be understood as the only solution. Rather, it is to

be understood as an invitation to discuss what is

needed and single proposals can be supplemented,

adapted or rejected. The selection of policies and

the intervention clusters addressed by these poli-

cies are shown in Table 2.

Policies are listed in order of increasing trans-

formative impact, whereas proposals at the top

make the implementation of proposals at the bot-

tom more likely. As an example, if investments

are channelled into sustainable business models

through a Wellbeing Budget or green credit guid-

ance, the adjustment cost of introducing resource

caps will be much smaller. Alternatives will already

be in place that provide jobs and infrastructure,

ensuring higher levels of wellbeing.

While this list sets out what the UK can do, the rec-

ommendations for transformative policies are like-

ly to be applicable around the world.

Introduction

Table 2: Prioritised policy proposals for the UK with increasing transformative impact in a sequenced order and targeted

intervention clusters

IntroductionBuilding a resilient economy

Content ↑

Multidimensional Indicators, monitoring

capacity, and legal frameworks

Fiscal policy and growth

independence

Limiting power and

empowerment for change

Mandates and legal

interpretations

Metrics for the long-term

Shifting Protability

Sustainable investments and innovation

Non-nancial disclosure,

reporting and accountability

Sustainable business models

Sustainable consumption

alternatives

Sufciency

Affordability and fairness

Policy

⬎

1. Wellbeing Budget

2. Modernising UK’s scal

rules

3. New National Investment

Authority

4. Mandatory nancial

risk assessments

and disclosure

5. Green Credit Guidance

6. Land value tax

7. Resource caps and

biodiversity

8. Environmental border tax

Rationale behind this prioritisationBuilding a resilient economy

Content ↑

First, let us briefly elaborate on our rationale behind

this prioritisation of policies and present the argu-

ments for their selection along the three selection

criteria: feasibility & topicality, COVID-19 suita-

bility, and transformative potential. Generally our

approach is based on the idea that in the short

term, investments need to be targeted towards a

sustainable and resilient economy, to drive down

costs and ensure that a carbon-neutral and circu-

lar economy does not lead to more exclusion and

social polarisation.

The policies that encourage greater public invest-

ment will necessarily need to operate within an

environment of much more progressive taxation.

After all, taxation and sovereign debt issuance are

the two main ways for the public sector to raise

nance and invest in the economy. But the current

tax regime in the UK creates adverse outcomes

with individuals paying a lot more tax on their

income than those that merely inherit wealth or

see gains on their capital investment. While redis-

tribution through tax has been an ask of progres-

sive movements for a long time, it inherently does

not do much to alter the rent-seeking behaviour

and nancialisation of the markets. Taxing wealth,

capital gains, polluters and nancial transactions,

for instance, are all important but they do not per

se generate positive outcomes for the environment,

particularly if governments continue to see tax as a

way to reduce very high public decits.

The policies proposed here are tuned towards the

investment narrative which we believe to be the

comparably more effective route to transforming

the economy and shaping markets in the process.

An objective – or mission – oriented approach to

investment led by public money can signal and

drive the markets to deliver the environmental and

social outcomes we urgently need.

If sustainable behaviour is to become the norm

rather than the exception, systemic change

requires changing the rules of the entire market.

Due to the lack of environmental taxes and state

support, only a selection of sustainable business-

es is protable. Moreover, the missing environ-

mental taxes allow a tremendous externalisation

of environmental and social costs and thus subsi-

dise carbon- and resource intensive business mod-

els. Therefore, in the current economic framework,

sustainable business models will not attract the

scale of investment that is required to ensure they

are competitive and can survive in the long term.

Sustainable businesses under current conditions

might be able to compete within a certain niche,

but not in a competitive mass market.

Addressing protability and providing guidance

for investments holds the potential to shift com-

petitive advantages, innovation and technological

change. Sustainable business models would then

be the outcome, rather than the driver of system-

ic change. Sustainable businesses in niche areas

are nonetheless important examples of a differ-

ent model of operation that could encourage pol-

icymakers to implement stricter regulations. This

approach assumes that predominantly soft stand-

ards do not directly ensure that companies inter-

nalise all their external costs and face huge nanc-

ing barriers to transform their business models.

Table 2 provides an overview how each of the

selected policies contributes to systemic change.

In Table 3 the arguments for the selection are

summarised in more detail.

Rationale behind this prioritisation

Policy

⬎

Feasibility & Topicality COVID-19 compatibility Transformative potential

1. Wellbeing Budget

Successful existing exam-

ples in other countries;

need to use new state

funds properly

Necessity to reduce

government spending in the

future in order to decrease

government debt;

Strengthening of systemic

thinking in scal policy;

steering of investments

in sectors of the resilient

and sustainable economy;

improved accounting of

long-term policy goals;

support of sustainable

business models and

lifestyles; making short-

term prot maximisation at

the expense of the general

public more difcult and

strengthening sustainable

sectors shifts power

relations

2. Modernising

UK’s scal rules

Existing successful exam-

ples in other countries;

paradigm shift away from

the primacy of monetary

policy; low interest rates for

government bonds

Lesson from the suspension

of existing scal rules; new

approach to government

decits without increasing

future risks

Closing the existing

investment gap for the

achievement of climate and

environmental goals; better

mapping of long-term goals

in scal policy; avoidance

of future costs from climate

change

3. New National Investment

Authority

Existing successful exam-

ples in other countries;

need to properly manage

new state investments in

terms of long-term goals

Effective approach to use

new state funds

Orientation of scal policy

towards long-term goals;

steering of investments

in sectors of the resilient

and sustainable economy;

support for sustainable

business models and

lifestyles; making short-

term prot maximisation at

the expense of the general

public more difcult shifts

power relations

4. Mandatory nancial

risk assessments and

disclosure

No fundamentally new

practice; but stronger

enforcement of existing

practices; reduction of

future crises and credit

default risks

Banks are looking for new

investment opportunities

Steering of investments

in sectors of the resilient

and sustainable economy;

Has indirect effect on the

transparency of corporate

models and value chains;

Difculty of short-term

prot maximisation at the

expense of the general

public shifts power

relations

Table 3: Arguments for the selection of policies based on the three dimensions feasibility & topicality, COVID-19 suitability

and transformative potential. Table is continued on the next page →

Rationale behind this prioritisationBuilding a resilient economy

Content ↑

Policy

⬎

Feasibility & Topicality COVID-19 compatibility Transformative potential

5. Green Credit Guidance

Discursive shift away from

price stability as the sole

task of central banks;

pre-pandemic commitment

to review monetary policy

frameworks; existing exam-

ples in other countries

Reduction of future crises;

need for new investment

impulses from central

banks

Steering of investments

in sectors of the resilient

and sustainable economy;

making short-term prot

maximisation at the

expense of the general

public more difcult shifts

the balance of power

6. Land value tax

Existing examples in other

countries; need to generate

new government revenue

to nance debt; prevailing

high levels of wealth and

income inequality

Tax with great revenue

potential and at the same

time hardly any negative

welfare effects compared

to other taxes

Reduce privatisation of

prots promoted by public

investment; reduce one

of the main drivers of

inequality; nance a just

transition;

7. Resource caps and

biodiversity

Existing experience

with carbon taxes;

increasing perception of

the biodiversity crisis; lack

of decoupling of resource

consumption and economic

growth

Generation of new govern-

ment revenues to nance

the recovery measures

Setting hard limits for

resource-intensive busi-

ness models and lifestyles;

promotes sufciency;

Has indirect effect on the

transparency of corporate

models and value chains

8. Environmental border tax

Discussions about a Border

Carbon Tax on EU level

need to preserve domestic

jobs and ensure interna-

tional competitiveness

steering investments in

sectors of the circular econ-

omy in the UK and abroad;

global precedent for a new

way of dealing with carbon

and biodiversity leakage

instead of exceptions;

Has indirect effect on the

transparency of corporate

models and value chains

Table 3: Arguments for the selection of policies based on the three dimensions feasibility & topicality, COVID-19 suitability

and transformative potential

Rationale behind this prioritisationBuilding a resilient economy

Content ↑

A Wellbeing Budget for the UKBuilding a resilient economy

Content ↑

» A Wellbeing Budget seeks to elevate goals and

activities aligned with what people and planet need. «

Multidimensional indicators, monitoring capacity, and legal

frameworks → p. 25 —

Fiscal policy and growth independence → p. 26

Limiting power and empowerment for change → p. 27 — Sustainable

consumption alternatives → p. 37 —

Affordability and fairness → p. 39

While governments do consider a wide range of impacts, for example via equality

impact assessments or environmental impact assessments, spending does not

necessarily respond to the needs, and Gross Domestic Product retains its primacy as

the default measure of economic success and, invariably, of government prowess.

A Wellbeing Budget seeks to elevate goals and activities aligned with what people

and planet need. It promotes the attainment of environmental and socio-economic

outcomes by prioritising and redirecting government spending to initiatives that

deliver on goals such as greater equality and environmental benet.

Government departments would need to demonstrate their positive impact on a set

of politically agreed upon headline measures in order to receive budget allocations, or

a proportion thereof. A Wellbeing Budget approach increases the capacity of policy to

solve today’s most complex and urgent challenges by:

1. Taking a systems perspective and recognising interdependencies between

government activities by using a dashboard of indicators to assess the multi-

dimensional wellbeing of current and future generations. This dashboard would

better capture environmental and social impact than targets such as Gross

Domestic Product, by better illuminating wider goals and trade-offs. The elevation

of these goals protects them against being swept aside in favour of narrow short-

term nancial priorities.

2. Encouraging cross-departmental collaboration to recognise and harness scal

savings accruing beyond one departmental silo and beyond single spending

cycles.

A Wellbeing Budget for the UK

Associated clusters

A Wellbeing Budget for the UKBuilding a resilient economy

Content ↑

A Wellbeing Budget for the UK

3. Promoting precautionary policymaking that mitigates negative long-term out-

comes. Currently, substantial amounts of public funds are deployed in attending

to the harm caused by inequality and environmental depletion e. g. tax credits

to top up low wages and treatment of avoidable stress and anxiety; repairs to

infrastructure and treatment for health ailments caused by polluted air. Yet, as

the Dasgupta’s review interim report states, “it is more cost-effective to maintain

an ecosystem than it is to degrade and then restore it: conservation trumps rest-

oration”.

229

A Wellbeing Budget reduces long-term scal costs.

A Wellbeing Budget has been described by respondents to our survey as a “game

changer … that could transform decision making”; “likely to be well received and to be

transformative”; “[it reaches] the deeper levels of the problem” and has the possibility to

extend impact beyond the UK by setting “a precedent for other countries”. A strategy to

implement a Wellbeing Budget could include the following steps:

1. Build public demand via cross-political, cross-institutional and cross-sectoral

coalitions for a Wellbeing Budget, ideally with several high-prole champions

within and beyond politics and inclusive participatory processes to determine

priority goals.

2. Build capacity within government agencies to invest long-term, link spending to

various ONS measures (and commission new measures if necessary) and incenti-

vise cross-departmental collaboration.

3. Introduce a pilot for wellbeing-led spending in the 2021 budget.

4. Communicate success stories and scale up momentum for a bolder and more

comprehensive 2022 Wellbeing Budget.

Inspirations

• The 2019 New Zealand Wellbeing Budget (using the Treasury’s Living Standards

Framework) with low carbon economy as one of its ve priorities, led to considerable

spending aimed at mitigating

230

– rather than ameliorating – environmental harm.

• The Welsh Government’s Wellbeing of Future Generations Act (with budget scrutiny

carried out by the independent Future Generations Commissioner).

• Bhutan’s response to inequalities in wellbeing as revealed by its Gross National

Happiness surveys, focuses on the root causes of lower wellbeing amongst certain

population groups, such as women or rural communities.

A Wellbeing Budget for the UKBuilding a resilient economy

Content ↑

Enablers and barriers

Enablers:

↗ Emerging evidence of scal savings and tangible quality of life improvements.

↗ Strong leadership to champion the approach.

↗ Cross-party support to avoid it becoming a political tool.

↗ Deployment and building of Treasury capacities to support its implementation,

including navigating trade-offs and undertaking system-wide macroeconomic

modelling.

Barriers:

↙ Balancing immediate acute needs while simultaneously investing in

upstream preventative activities

↙ A lack of tools and processes to capture the benets and savings of

preventative spending

↙ Resources required to properly and authentically involve the public in

determining priority goals

↙ Persistence of GDP growth as central element in conceptions of economic and

political success.

Windows of opportunity

The shift in priorities sparked by the COVID-19 crisis and the enormous scale

of government spending and intervention in response constitute an opening of

political space to transformative ideas hitherto dismissed as impossible. The various

emergency budget statements and spending reviews already underway are junctures

where new ways of undertaking government spending could be adopted. As the UK

charts its post-Brexit economy in 2021 and seeks to make good on its “levelling up”

agenda, it will host the (delayed) COP26 where it will be seeking to tell a positive

story about the UK’s role in the world – all of which will be aided by a Wellbeing

Budget.

A Wellbeing Budget for the UKBuilding a resilient economy

Content ↑

Relevant stakeholders

Media attention will also be important in helping to build support: something as

process-heavy as a Wellbeing Budget is potentially challenging from a public-facing

campaigning perspective. It would need to be framed in compelling, accessible

impact-focused messaging. This challenge could be offset by the potential for

unusual cross-party political alliances and a broad coalition of the willing amongst

civil society as just set out. Moreover,

• The APPG on Wellbeing Economics, APPG on Limits to Growth, and the

APPG on Inclusive Growth can build parliamentary buy in.

• The Wellbeing Economy Governments partnership can help share practical

experience from around the world.

• The What Works Centre for Wellbeing, the Committee on Climate Change, ICAEW

and other scholars can support the evidence base and advise on processes.

• Social justice and environmental NGOs and think tanks can build the public

demand – for example the New Economics Foundation, The Equality Trust,

the Green Alliance, IPPR, the Carnegie Trust, the Early Intervention Foundation,

and education, nursing and police unions.

• Globally, networks such as WEAll, the Club of Rome, and Club de Madrid can bring

together civil society, scholars, and former heads of state willing to support the

adoption of a Wellbeing Budget.

Associated clusters

Modernising UK’s Fiscal RulesBuilding a resilient economy

Content ↑

» The UK can address the investment gaps to meet net zero

emissions by 2050 by enhancing scal space, i. e. its scope

for greater public borrowing. «

Fiscal policy and growth independence → p. 26 — Limiting power

and empowerment for change → p. 27 —

Sustainable investments and

innovation → p. 35 —

Affordability and fairness → p. 39

Presence of several market failures has resulted in systematic underinvestment in

the low carbon transition and biodiversity conservation. A mix of public investment

and regulation across other sectors of the economy will be essential in driving

a green transition. The Committee on Climate Change estimates a total resource

cost to achieving net zero emissions of between 1–2 % of GDP per year on average

by 2050 – between £ 20 billion and £ 40 billion in 2019/20 terms.

231

An analysis by

Greenpeace and other civil society groups estimate a total additional annual public

investment of £ 25 billion in meeting net zero emissions and addressing the bio diver-

sity crisis.

232

The UK can address these investment gaps by enhancing scal space, i. e. its scope

for greater public borrowing. Fiscal space is underpinned by scal rules that dene

the limits to measures available to scal institutions, like the Treasury, to manage

headwinds facing the economy. They include, for instance, relatively arbitrary rules on

limiting public borrowing to 3 % of GDP or setting targets for balancing current public

spending, which severely limit governments’ ability to appropriately respond to crises.

COVID-19 has prompted the UK government to relax scal rules. France has since

opposed a return to the stability pact and the 3 % decit rule. As monetary policy has

reached certain limits, with interest rates having been at a historical low over the last

decade, the COVID-19 crisis has shown that monetary policy must be complemented

with scal policy to deal with the crisis.

There are numerous reasons to sustain changes in scal rules to prevent future costs

from climate change or biodiversity loss. To do so, the Treasury could:

Modernising UK’s Fiscal Rules2.

Modernising UK’s Fiscal RulesBuilding a resilient economy

Content ↑

Modernising UK’s Fiscal Rules

1. Develop a new framework for regularly assessing, measuring and forecasting

safe limits to scal space, and thereby, public investments.

2. Support politicians to make an informed decision on the best combination of scal

intervention or scal prudence at a given point in time and the appropriate size

of preventative spending.

3. Enforce a Resilience Fiscal Rule, requiring all government spending to be aligned

with maximising economic resilience, rather than mere short-time economic stabi-

lisation. Such a rule would also need to work alongside a new, more sophisticated

set of indicators of and targets for “scal space”, to replace the current narrow

targets for public debt / borrowing.

Inspirations

The role of state banks like KfW in Germany providing patient capital and supporting

low yielding projects like energy efciency is well established. Thanks to its

structure, the KfW is able to borrow capital without burdening the State’s decit or

the government’s scal rules. Outside Europe, Japan has been a leader in public

R&D investments over the last two decades, while the China Development Bank has

offered patient capital to help fledgling industries to catch up with competitors.

Public investment has also often been necessary alongside regulation to address

failures such as the signicant regional disparity of low carbon infrastructure and its

associated benets, lack of private investment in regenerative agricultural practices,

peatland restoration or smart meter rollouts, to name a few.

Enablers and barriers

Enablers:

↗ The prevailing environment for interest rates and the UK’s possession of a

sovereign currency allow it to borrow considerably higher amounts of resources.

↗ The flexing of scal rules in response to the COVID-19 crisis is forcing the

government to not just drop the pursuit of austerity altogether, but also to explore

the balance between scal prudence and intervention.

Barriers:

↙ An inflexible approach to scal prudence can limit the pace of the transition that

climate science demands and thereby risk the long-term stability of public budgets.

Modernising UK’s Fiscal RulesBuilding a resilient economy

Content ↑

Windows of opportunity

The Conservative government’s levelling up agenda remains a top priority and the

government has already indicated that it will not pursue any form of austerity, but

instead invest and grow its way out of the current crisis. This commitment offers an

opportune moment for rethinking scal policy. The Treasury is currently undertaking

a review of the scal rules’ framework, which is due to report in Autumn at the same

time as the Spending Review. As part of the review, the Treasury is exploring the

need for strengthening the scal framework to better mitigate long-term risks and

shocks, including those related to the environment and climate change. Also, the

general mainstream media discourse is shifting towards a wider acceptance of state

intervention in supporting the economy.

233

Relevant stakeholders

• Specic low carbon sectors where UK public investment can trigger global supply

chains and induce similar behaviour across other economies, compounding

the benets of domestic action. These include investments in electric vehicles,

hydrogen production, carbon capture, low carbon heating technologies and other

nature-based climate solutions.

• The “Left behind” economies of Northern UK, which bear promising potential for

employment that is built on low carbon infrastructure and services.

234

• Influential right wing think tank Policy Exchange, which has recently called for

a “credible scal activism” while ditching more orthodox neoclassical economic

approaches

235

• Organisations under the banner of “Build Back Better” that are calling for

greater flexibility from the government on its scal rules and for spending on

green infrastructure.

• A few Conservative MPs from key northern and midland constituencies who are

calling for signicant investment in local green infrastructure and jobs, driven by

a national level public investment vehicle.

A New National Investment AuthorityBuilding a resilient economy

Content ↑

» The sustainability objectives require a state-led nancing

model that meets the need for patient capital while

addressing short-termism in the nancial markets. «

Fiscal policy and growth independence → p. 26 — Shifting

profitability → p. 34 —

Sustainable investments and innovation → p. 35

Sustainable business models → p. 35 —

Sustainable consumption alterna-

tives → p. 37 —

Affordability and fairness → p. 39

Policy and regulation are critical but remain, in themselves, inadequate to drive

change at the scale demanded by science. Thus, they also put at risk the long-term

stability of the UK’s public budget. Where perceived risks to private capital are higher,

like regenerative agriculture or large-scale retrotting of homes, much needed

investment has been hard to come by. Initial annual public investment estimates

range from 1–2 % of GDP to achieve net zero and nature conservation targets. These

need to be balanced alongside public spending on innovation and commercialisation

of new low carbon solutions and processes. The high investment needs to achieve

net zero, ecosystems recovery and wider sustainable development goals require a

state-led nancing model that meets the need for patient capital while addressing

short-termism in the nancial markets.

236

A National Investment Authority (NIA) can

serve this purpose by:

1. Channelling public investment towards the objective of a sustainable economy

to help achieve the environmental and recovery objectives.

2. Systematically identifying market failures across the economy, not only with the

aim of xing them, but also to shape the market more deliberately in service

of broader societal benets.

A New National

Investment Authority

Associated clusters

A New National Investment AuthorityBuilding a resilient economy

Content ↑

3. Coordinating with the Treasury and the Bank of England on how to allow greater

public borrowing alongside modernising the UK’s → Fiscal rules.

4. Taking a twin role of direct infrastructure investment through grants, loans,

guarantees etc. alongside the role of private equity rms that attract private

capital into public infrastructure investment funds that the NIA would hold.

237

Inspirations

In countries that have achieved high degrees of green innovations, the State has

often supplied the patient strategic nance that the private sector was unwilling

to provide.

238

Central governments in such countries have actively shaped new

technological and industrial landscapes by acting as an investor of rst resort, not

simply as lender of last resort.

• In many countries patient strategic nance is increasingly coming from national

investment banks (NIBs). Germany, China, Brazil are a few clear examples

where state-driven investment strategies have been effective to achieve specic

mission-led outcomes.

• The European Investment Bank is another example that recently announced the

termination of its lending to fossil fuel energy projects and a commitment to invest

€ 1 trillion on climate and environmental projects by 2030.

239

Enablers and barriers

Enablers:

↗ Public investment authorities like the Green Investment Bank, albeit with

considerable limitations, have established a precedent in the UK on how public

capital can direct low carbon development.

↗ The current crisis of COVID-19 and the resulting ballooning of public borrowing

hasn’t yielded calls for austerity, but instead a desire to grow our way out of the

recession within the context of lowest central bank interest rates and negative

yield rates for government debt.

A New National Investment AuthorityBuilding a resilient economy

Content ↑

Barriers:

↙ Designing a bank to invest in specic low carbon or green projects with the mere

purpose of crowding in private capital, as was the case with the GIB, signicantly

limits the scope of investments and remains a major barrier for creating an

effective investment authority.

Windows of opportunity

• UK’s Energy Minister, Kwasi Kwarteng, suggested that the government was

seriously considering a new investment authority, a green investment bank 2.0,

highlighting the role that KfW has played so far in Germany.

240

• Hundreds of local authorities across the UK, having declared a climate emergency,

are poised to drive a green recovery. But a decade of austerity cuts has left them

signicantly depleted of resources. A central government-led investment program

that pursues broad outcomes through a series of region-specic strategies will

be essential.

Relevant stakeholders

• Hundreds of local authorities across the UK who have a major interest in estab-

lishing an NIA and who have recently called for a new Net Zero Development Bank

to accelerate private capital in local energy schemes that often face signicant

scal barriers.

241

Several of those that have campaigned for the green investment

bank between 2009–2012 are now calling for a similar institution to be set up.

242

• The RSA’s Food, Farming and Countryside Commission who, in its recent report,

recommended the creation of a National Agroecology Development Bank.

243

• A broad range of civil society groups, in partnership with local authorities and

businesses, is collectively arguing for a more purpose- and mission-driven public

investment authority to tackle the triple crises of climate change, biodiversity loss

and economic inequality.

Associated clusters

Mandatory Financial Risk Assessments and DisclosureBuilding a resilient economy

Content ↑

» For environmental risks, the Prudential Regulation

Authority should use stress testing exercises to take

corrective actions […] thus operating in the same way

as it does with ›economic‹ stress testing. «

Metrics for the long-term → p. 32 — Shifting profitability → p. 34

Sustainable investments and innovation → p. 35 —

Non-nancial disclosure,

reporting and accountability → p. 35 —

Sustainable business

models → p. 35 —

Sustainable consumption alternatives → p. 37

Bank loans remain one of the main direct sources for both sustainable and unsustain-

able capital expenditure. In contrast to interventions in the capital markets, where

the shifting of existing assets between investors affects companies only indirectly,

bank loans provide direct funding for companies’ business activities. By extension, it

matters greatly to whom this money is lent and how it is spent.

When deciding to whom loans are awarded, banks take a variety of risks into consid-

eration. Supervisors inside the Network for Greening the Financial System (NGFS),

including the Bank of England’s Prudential Regulation Authority (PRA), are currently

exploring the environment-related risks through tools like scenario analysis, without

imposing any corrective actions such as additional capital requirements.

This policy aims to ensure that nancial supervisors like the PRA strengthen the

assessment of environment-related risks. As the materialisation of risks in part

depends on the implementation of other policy options like resource caps, such risk

assessments should not be considered in isolation. Most importantly, rather than

waiting for the data to rightly calibrate risks, regulators should follow the precaution-

ary principle when assessing these risks. In this spirit, they should:

Mandatory Financial Risk

Assessments and Disclosure

Mandatory Financial Risk Assessments and DisclosureBuilding a resilient economy

Content ↑

1. Make sure that banks do not neglect climate and nature-related risks.

2. Review banks’ risk assessment and risk management.

3. Use stress testing to take corrective actions and impose additional capital

buffers, whenever supervised nancial institutions fail to sufciently integrate

environment-related risks thus operating in the same way as it does with

“economic” stress testing.

4. Force banks to integrate non-traditional risks by requiring them to hold higher

add-on capital that reflects such increased risks, under the discretionary

framework of Pillar II of the Basel Accord.

244

A possibility for intervention within the UK system is given within the framework

of the PRA capital buffer that is applied to supervised entities within the Pillar II B

guidelines of the Basel Accord. This buffer should be maintained by rms in addition

to their Pillar I (established risks categories) and Pillar II A (standardised risks

not captured in Pillar I) minimum capital requirements. The scoring of nancial

institutions in stress tests provides information about the size of the buffer.

The PRA is currently developing biennial climate scenarios that will start in 2021

and measure rms’ exposure to climate-related risks. Similar approaches can

be used for biodiversity related risks. To move beyond information gathering to

effectively regulating behaviour, the PRA should use the stress testing exercise to

take corrective actions and impose additional capital buffers where necessary, thus

operating in the same way as it does with “economic” stress testing.

Another input into calculating the capital buffer are supervisory judgements that, inter

alia, incorporate the sustainability of the business model of a nancial institution.

Accordingly, rms that are dependent on or specialised in lending to businesses with

high negative environmental impacts and do not have a credible transition plan could

be required to hold additional capital. Likewise, nancial rms that specialise in

nancing the transition could be rewarded with comparatively lower requirements.

In doing so, supervisors would incentivise banks to divest from unsustainable

activities, as the raising and holding of regulatory capital represents an additional

cost with no economic benet for them.

Where such actions are insufcient to address the risks of a nancial institution,

the PRA should also consider more interventionist approaches that supervisors have

applied within the Basel Framework of banking regulation. These include imposing limits

on lending, restrictions on dividends, capital distributions and bonuses, prohibitions on

investing in certain instruments, reduction of exposures to certain assets or positio

(through hedging or sale of assets), and requiring the divestment of nancial products, e. g.

where the valuations of those products would not be deemed sufciently conservative.

245

Mandatory Financial Risk Assessments and DisclosureBuilding a resilient economy

Content ↑

Finally, while the communication between banks and supervisors about risk

assessment frameworks is normally not communicated to the public, the Pillar III

mechanism that imposes market discipline through the disclosure of risks should be

used as an additional policy tool. While the PRA has already communicated to the

entities that are under its supervision that they should expect mandatory disclosure

in line with the Task Force on Climate-related Financial Disclosures (TCFD) framework

in the near future, a similar supervisory statement should be made about nature-

related risks.

246

Inspirations

• NGFS members have started to assess the risk proles of “green” and “brown” assets.

• Several regulators have started to “educate” banks by coming up with climate

stress tests and scenario analysis. A rst test of differential capital requirements

under Pillar II is carried out by the Hungarian Central Bank, which will be testing

preferential capital requirements for loans linked to energy efcient real estate

between 2020 and 2023.

Enablers and barriers

Enablers:

↗ Work on taxonomies in several jurisdictions (EU, China, Bangladesh).

↗ Work on scenario analysis enables forward looking assessments that project the

environmental risks into the future.

↗ Awareness of the two-way relationship of nancial institutions being affected by

environmental risks and contributing to (future) environmental risks by nancing

harmful practices, a concept (double materiality) which is used in the EU’s non-

nancial reporting directive guidelines.

Barriers:

↙ Pressures that nancial rms experience due to the COVID-19 pandemic.

Mandatory Financial Risk Assessments and DisclosureBuilding a resilient economy

Content ↑

Windows of opportunity

• Signicant regulatory momentum behind “sustainable nance”. ESG-related funds

have outperformed the market indices during the pandemic.

• The regulatory environment is sufciently institutionalised to not be derailed by

the crisis. In the EU, the Sustainable Finance Action Plan has received renewed

impetus.

• The economic losses from COVID-19 show that environmental risks are massive

and real; This could add further momentum.

• COP 26 adds momentum to biodiversity risks, especially in the UK.

Relevant stakeholders

• Network for Greening the Financial System (NGFS), INSPIRE Research Collective,

ClimateWorks Foundation and Task force on Nature-Related Financial Disclosures

work streams on biodiversity are ongoing.

• NGOs and research institutes like Finance Watch, Carbon Tracker, Third

Generation Environmentalism (E3G), the Institute for Climate Economics

(I4CE), 2 ° Investing Initiative and ShareAction have conducted research and /

or campaigned on differential capital requirements and risk assessment

methodologies for supervisors.

Associated clusters

Green Credit GuidanceBuilding a resilient economy

Content ↑

» Central banks can influence the costs of green

capital through their own asset purchases and

collateral frameworks. «

Mandates and legal interpretations → p. 31 — Shifting profitability → p. 34

Sustainable investments and innovation → p. 35 —

Non-nancial disclosure,

reporting and accountability → p. 35 —

Sustainable business

models → p. 35 —

Sustainable consumption alternatives → p. 37

Interventions by Central Banks (European Central Bank in the Eurozone, national

central banks outside) influence the costs of capital, which in turn have the effect of

guiding how capital is allocated by private banks. One of the most influential ways

in which central banks do this is by lending at low cost to banks via the Targeted

Long-Term Renancing Operations (TLTRO) programme in the Eurozone and the Term

Funding Scheme (TFS) in the UK, both of which are forms of Quantitative Easing. But

central banks also influence the costs of capital through their own asset purchases

and collateral frameworks and via their macroprudential policies which require

private banks to hold more capital against loans to some types of assets and less

against loans to others.

All of these activities can be considered as forms of “credit guidance” and can

be greened by building climate or other ecological risk metrics into how measures

are assessed or setting objectives related to climate risk.

247

Much of this can almost

certainly be achieved within the current mandates of most central banks. For instance,

if providing cheap liquidity under TLTRO or TFS, central banks could require private

banks to exclude certain loans, such as those to fossil fuel rms, on the basis that these

may pose a higher nancial risk over the loan period due to the climate risk they pose.

Alongside other measures to green the allocation of capital in the economy – most

notably the very strong pull of → Public investment, the greening of → Fiscal

frameworks and → Mandatory risk assessments and disclosure already covered

in this report – green credit guidance by central banks could have a very signicant

impact on the selection of activities to receive loans. For instance, rms included in

the ECB’s collateral frameworks benetted from interest rates that were on average

Green Credit Guidance5.

Green Credit GuidanceBuilding a resilient economy

Content ↑

one-third cheaper than those not included and that newly eligible rms received

more credit than ineligible ones. In other words, markets favour the assurance of

central bank support and allocate capital accordingly. Thus greening these measures

could have a very powerful effect on incentives and disincentives for high and low

carbon activities in the real economy.

Inspirations

• Role of credit guidance in most Western countries post-war reconstruction and

growth processes and were central to Europe’s Golden Age.

• Policies influencing the level of credit were imperative to the rapid expansion in

post-war Japan, the recent growth of China, the development of East Asian mir-

acles, and the growth of “other” emerging economies.

248

It is only in liberal, post

1980 western economies that the guidance of credit by central banks has given

way to the mantra of market neutrality.

249

Enablers and barriers

Enablers:

↗ Reducing risks in the balance sheets of banks. A recently published research

by the New Economics Foundation has shown that current Bank of England QE

programmes are not only carbon intensive, but, more so than the UK economy

itself, introducing signicant climate-nancial risk onto the bank’s balance sheet

and pumping cheap money into fossil fuels.

250

↗ The ECB’s mandate includes a requirement for the bank in effect to support the

European Commission’s policy agenda

251

, it would arguably not only be odd but

also opposing its mandate if the ECB did not guide credit along the lines of the

European Green Deal.

↗ Commitment of the UK government to its 2050 targets and requirements of the

Paris Agreement could be used as the guiding star for central bank activities and

could potentially be utilized to hold them accountable if current carbon-intensive

renancing and asset purchases continue.

↗ Past guidelines of monetary policy, are reaching their limits. High public debt has

not led to rising interest rates; inﬂation is less of a problem than the persistent

lack of demand.

252

Green Credit GuidanceBuilding a resilient economy

Content ↑

Barriers:

↙ Green credit guidance may be seen as active and therefore non-market-neutral by

conservative central bankers and therefore offending the tenets of independence

from government.

Windows of opportunity

• The post pandemic crisis and the need for cash and credit to be pumped into the

economy by central banks creates the policy frameworks in which green forms of

credit guidance could help reduce future risks.

• The pre-pandemic commitment by both the ECB and BoE to review monetary

policy frameworks along with the increasing traction of Paris Commitments create

the processes by which experts, economists and campaigners can gather support

and evidence for the need of establishing green credit guidance as the new norm.

Relevant stakeholder clusters

• The Network for Greening the Finance System (NGFS) is a key insider forum for

developing credible, evidence-based frameworks.

253

• The ClimateWorks Foundation has created a stream of research called INSPIRE, in

parallel with the NGFS, to help unblock analytical concerns and ll evidence gaps.

• Growing cliusters of policy-focussed groups (Council on Economic Policies in

Switzerland, The Institute for Innovation and Public Purpose at UCL in London, the

New Economics Foundation and Positive Money, both in the UK and EU), which

collaborate to support the development of credible policy to support green central

banking and to work on the inside to champion progressive banks and individuals.

• 350.org, Greenpeace and France’s Reclaim Finance are also shaping to develop

more outsider campaigns.

Associated clusters

Land Value TaxBuilding a resilient economy

Content ↑

» The uplift in land value, which often affords owners of

land considerable income, remains largely untaxed. «

Limiting power and empowerment for change → p. 27 — Shifting profitabil-

ity → p. 34

Sustainable investments and innovation → p. 35 —

Sustainable

consumption alternatives → p. 37 —

Affordability and fairness → p. 39

In transformation, it is important to primarily include those people who are most

affected by the transition: Because they will potentially lose their jobs, have to

develop new skills or will see their whole region undergo tremendous change. One

possibility is nancial support. Of all the possibilities mentioned in the chapter on

→ Citizens, we focus on the Land Value Tax, because it is one way to fundamentally

change the distribution of income and thus also of prosperity.

A land value tax increases in the value of land, which accrued in value because

of community and not individual effort.

254

It can either be implemented as part of a

wider tax system or as the predominant tax in a new system that seeks to price the

use of natural assets whose supply has hard boundaries. Land and property are taxed,

for instance in the case of Stamp Duty when a property on a piece of land is sold or

through Inheritance Tax or when inherited. However, the uplift in value, which often

affords owners of land considerable income through charging rents or sale at a

higher price level, remains largely untaxed.

Proponents of Land Value Tax (LVT) have long argued that it can:

1. Help correct wealth inequalities by taxing windfall increases in land value and

thereby decrease power imbalances.

2. Deter speculative acquisition of land and “land banking” and shift investment

from land to productive assets in the real economy.

3. Help economic development in areas where land values are low, versus those

where values are high.

Land Value Tax6.

Land Value TaxBuilding a resilient economy

Content ↑

4. Increase the efciency of land use in rural areas and reduce soil sealing and the

fragmentation of landscape for example by investing into buildings, which facili-

tate the provision of affordable housing without designating new building land.

5. Boost government tax receipts, which could assist with tackling major challenges,

such as ecological crises.

The Mirrlees Review of the UK Tax System, published in 2011, concluded that a land

value tax would address many of the inequities and structural issues, arguing that,

“In particular, there is a strong case for levying a land value tax, which is a tax on pure

rent – if the practical difculty of valuing land separately from the buildings on it can

be overcome.”

255

The UK is one of the most unequal OECD countries and its taxation reflects this, the

principal symptom being the disparity between taxes on income, which operate at

a higher effective rate than taxes on wealth.

256

Steeply rising land values in the UK

are one of the main components of wealth acquisition. This effect has been very

unevenly spread with land values in some locations rising at much higher rates than

in others. Land in the UK is worth an estimated £ 4.057 trillion, which is more than

two-fths of the nation’s net worth.

257

Total UK land value has increased by more

than 450 % since 1995, a rise that signicantly outstrips that of the assets on the

land.

258

These increases in land value are a windfall for those who have benetted,

especially because of the location of the land they own.

Because land is not frequently valued, there are few estimates of the revenue that

could be raised from taxing land values. One study, which focuses on London, found

that, based on 2015 valuations, an LVT of 1.97 % could raise around £ 6.5 billion in

2017.

259

An ongoing study has suggested a locally-levied tax on commercial landown-

ers at a rate of 2.9 % of capital values could raise up to £ 6 billion.

260

Different options

for a LVT have been discussed.

261, 262

These include the extension of existing land and

property taxes, the use of a land value tax to replace all existing taxes on land and

property or the use of a Local Land Value Tax to replace business rates and council tax.

Inspirations

The 2018 Land Value Tax review, conducted for the Scottish Land Commission,

sampled 61 countries with some form of land value tax and found that most

implement such a tax alongside existing land and property taxation measures.

263

In particular the study highlights ve case studies – Queensland (Australia), Estonia,

New Zealand, Denmark and South Africa.

Land Value TaxBuilding a resilient economy

Content ↑

Enablers and barriers

Enablers:

↗ LVTs are a tool for wealth redistribution and for the recognition of land as a

valuable asset.

↗ Potential to increase tax revenues and nance recovery programs and the

green transition with few impacts on economic recovery.

264

Barriers:

↙ High administrative costs of implementation, given that taxing land requires it to

be parcelled and valued, its interaction with other land and property taxes and the

need to revise the planning system to work alongside a Land Value Tax.

265

↙ Political viability. In the UK, the relatively undisturbed centuries-old pattern of

land ownership, the huge rise in land values over the past two decades and

the predilection of UK policy towards home ownership, locks together an old and

new constituency that would likely oppose a Land Value Tax and would wield

considerable power and influence over government.

266

Windows of opportunity

Renancing the COVID-19 economic recovery programmes will require new sources

of income for the State in the medium-term. A tax levied on land values and hence on

landlords, could tap into a seam of wealth that has hitherto remain untaxed. At the

same time, it has negligible negative effects on economic recovery compared to other

types of taxes. Revenues can help local authorities or high-street businesses in the

post COVID-19 period deal with even greater nancial pressures. Further, the income

generated can support low-income households in the green transformation. This can

create acceptance for the measures proposed in the other chapters.

Associated clusters

Resource Caps and BiodiversityBuilding a resilient economy

Content ↑

Resource Caps and Biodiversity

» A tax or license trading system for resource use (similar to

that for carbon) based on biodiversity impacts of the taxed

resource could address biodiversity loss. «

Fiscal policy and growth independence → p. 26 — Limiting power and

empowerment for change → p. 27 —

Shifting profitability → p. 34

Sustainable investments and innovation → p. 35 —

Non-nancial

disclosure, reporting and accountability → p. 35 —

Sustainable consumption

alternatives → p. 37 —

Sufciency → p. 38

Currently, all drivers of biodiversity loss are accelerating, while the decline of global biodi-

versity is unprecedented.

267

The overuse of resources has been identied as the main

driver of biodiversity loss by researchers: 90 % of biodiversity damage and water stress

are caused by resource extraction and processing.

268

So far, strategies such as implement-

ing a circular economy have not proven to be sufcient in halting biodiversity loss.

269

Thus, there is an emerging consensus among scientists that global resource

extraction of renewable and non-renewable materials needs a cap, estimated

roughly at a yearly maximum of 50 billion tons globally.

270, 271, 272, 273

While this aggre-

gate level lacks a break down on resources and their associated impacts, studies

have shown that avoidance costs for stopping biodiversity loss by reducing material

consumption are lower than overall expected damage and repair costs.

274

The

introduction of a tax or license trading system for resource use (similar to that for

carbon) based on biodiversity impacts of the taxed resource could address these

challenges effectively:

1. Resource caps establish limits on resource throughput and ultimately constrain

consumption and production.

275, 276, 277

2. Caps support transformative change as increasing costs for resource inputs

modify the competitiveness dynamics in a market economy, consequently

requiring companies to redesign products and business models by taking resource

limitations into account.

Resource Caps and BiodiversityBuilding a resilient economy

Content ↑

3. Resource caps force both private and public investments to take biodiversity

impact implicitly into account (see → Modernising UK scal rules and → New

national investment authority) and ultimately, channel investment towards a

circular economy.

To implement resource caps the following steps are needed:

1. Agreeing on a science-based global goal on biodiversity loss (similar to 1.5 °C

goal in Paris Agreement) and derive resource budgets and reduction needs.

278

2. Dening assessment approaches to estimate biodiversity impacts by a given

resource in a preventive manner that allows for data gaps (similar to CO

equivalents).

3. Implementation of a resource tax resource, increasing over time, until the

resource reduction target is reached or implementation of a cap and trade scheme

that issues resource licences. Taxes or licences would differentiate between

biodiversity impacts of resources.

Our survey results suggest that resource caps could provide a crucial new source

of scal revenue which “enables the UK to [tackle pressing challenges] such as

zero-carbon innovation / infrastructure and regeneration of food, farming and land

use”. At the same time, resource caps could also send “important signals about

incentives and societal priorities”, both domestically and internationally.

Inspirations

If applied in the right manner that addresses the downsides

279

of existing approaches

like the EU Emissions Trading System (EU ETS)

280, 281

cap and trade schemes, they can

be a cost-effective option to limit resource use. Other options like resource taxes can

be just as cost-effective. The ITQ system and resource rent tax in Icelandic sheries

provided the correct incentives for sustainable harvesting of sh and made it possible

for shers to safeguard stocks through decreasing effort and catches, while at the same

time securing their long-term economic future.

282

Other examples include the Alaska

Permanent Fund

283

, Earth Atmospheric Trust

284

and the Norwegian Nature Index.

285, 286

Cap and trade schemes make use of market efciency, which will ultimately allo-

cate the resource rights at their highest valued uses.

287

In addition, raising awareness

on contributions of biodiversity and ecosystem services to human wellbeing can be

promoted.

288

Finally, caps on resource use should go hand in hand with measures to

redistribute rents and channel the gained money back into society, for instance by

funding green projects.

289

This is why our set of policies also includes land value taxes,

green credit guidance and a Wellbeing Budget.

Resource Caps and BiodiversityBuilding a resilient economy

Content ↑

Enablers and barriers

Enablers:

↗ The Science Based Targets Initiative endeavours to develop science-based targets

also for biodiversity loss.

290,

291

↗ Cap and trade schemes make use of market efciency which will ultimately

allocate the resource rights at their highest valued uses.

292

↗ Raising awareness of contributions of biodiversity and ecosystem services

to human wellbeing.

293

↗ Caps on resource use should go hand in hand with measures to redistribute rents

and rentier to channel the gained money back into society, for instance by funding

green projects.

294

This is why our set of policies also includes land value taxes,

green credit guidance and a Wellbeing Budget.

Barriers:

↙ In contrast to GHG emissions, biodiversity impact of resources and products is

difcult to assess as a broad range of variables influence the biodiversity impact

of materials. Thus, a measurement system capturing the biodiversity impact of

resources has to be developed (see → EBTs).

↙ A lack of consideration of territorial differences in biodiversity could be

problematic when implementing resource caps.

295

↙ Explicit disclosure of trade-offs and synergies between different objectives have

to be taken into account and a more balanced and transparent funding between

production of agricultural commodities and delivery of public goods is necessary.

296

↙ Socioeconomic factors should be considered, to avoid welfare losses through

regressive policies, for instance, by weakening the position of domestic industries

or bounding income from low income groups through signicant price increases

for essential goods.

297

Resource Caps and BiodiversityBuilding a resilient economy

Content ↑

Windows of opportunity

• The ongoing conversation in Whitehall on substituting the EU ETS with a domestic

carbon trading mechanism offers an opportunity to ensure that robust and

effective caps are introduced to limit the impact of carbon intensive sectors.

• Even within agriculture and transport sectors, current leading proposals on

decarbonisation have variations of resource caps with elements of trading for

credits (either in the form of electric vehicles or peatland carbon).

• Current legislation going through parliament on agriculture, environment, sheries

and trade all offer challenging but key parliamentary opportunities to introduce

resource caps, where relevant.

Relevant stakeholder

• Given the complexity and nascent nature of this policy idea, it is not easily

communicated in campaigning. But given the existing windows of opportunity,

the following clusters are well-placed to take this issue forward in terms of

policy development and advocacy.

1. The Greener UK coalition in the UK working on post-Brexit implications

for the environment and natural resources.

2. The Build Back Better coalition of progressive NGOs and grassroots

groups working towards a green recovery.

Associated clusters

Environmental Border TaxBuilding a resilient economy

Content ↑

» Establishing EBTs would treat domestic and offshore

resource extraction and use equally, based on their

respective biodiversity impact. «

Shifting profitability → p. 34 —

Sustainable investments and

innovation → p. 35 — Non-nancial disclosure, reporting and accountability → p. 35

Sustainable business models → p. 35 — Sustainable consumption

alternatives → p. 37 —

Sufciency → p. 38

To halt the unprecedented decline of global biodiversity and to ensure the effec-

tiveness of unilateral policy efforts such as resource caps, biodiversity offsetting or

environmental border taxes (EBTs) can present a crucial complementary measure

to prevent biodiversity leakage and to safeguard domestic competitiveness.

298

In the case of climate change, there is a growing consensus that border taxes such as

border carbon taxes (BCTs) will constitute an essential component of the response

to climate change.

299

This is because BCTs can help level uneven carbon taxation

schemes and are the only unilateral policy option that offers both effective protec-

tion against leakage of production and an incentive for other countries to strengthen

their climate efforts.

300

In our survey, the combination of resource caps and EBTs has

been described as “[potentially] having a big impact at home and [an even stronger]

impact abroad as it is […] a more fundamental break from the current paradigm.”

We propose to widen the idea of BCTs for avoiding leakage from carbon taxation

to a wider EBT that aims to avoid leakage from resource taxation, as proposed in the

→ previous chapter. Biodiversity leakage describes the phenomenon of biodiversity

damaging activities relocating elsewhere after being stopped locally, for example by a

cap on resource extraction that is harmful to biodiversity.

301

Leakage can lead to high

net biodiversity loss since it is difcult to measure or prevent.

302, 303

Establishing EBTs would treat domestic and offshore resource extraction and

use equally, based on their respective biodiversity impact. Environmental Border

Taxes (EBTs) would be charged depending on biodiversity impacts associated with

certain resources. This can level the competitive playing eld, reduce leakage, and

Environmental Border Tax

Environmental Border TaxBuilding a resilient economy

Content ↑

incentivise trade partners to strengthen biodiversity policy efforts.

304

Thus, preserving

competitiveness of domestic industries, if faced with domestic taxation schemes

(see → Resource caps) and addressing the problem of uneven resource reduction

efforts by including imports in or exempting exports from biodiversity constraints.

In particular, tariffs on products containing resources with strong biodiversity

impacts, such as agriculture, rare earths and chemicals, would presumably reduce the

leakage of production facilities that use these resources. When compared to unilateral

measures such as resource caps alone, EBTs may be most effective in leakage reduc-

tion and promotion of global cost-effectiveness as is the case for carbon taxes.

305

To avoid the risks of trade wars driven by unilateral protectionist trade-policy, an

EBT should not be established single-handedly. We propose to complement it with

the establishment of an international UK biodiversity fund. Revenues from tariffs

would partly be used to equip the fund. Offshore trading-partners could apply for

funding with projects that aim to reduce the biodiversity impact from the resources

used in their business model.

We identied the following steps that would be necessary to design EBTs

successfully:

1. Agreeing on a science-based global goal on biodiversity loss (equivalent

to 1.5 °C goal in Paris Agreement).

306

2. Dening assessment approaches to estimate biodiversity impacts through

resource use in a preventive manner that allows for data gaps (similar to CO

equivalents).

3. Designing a standard to calculate product-based biodiversity impacts by

trading partners.

4. Implementing a UK biodiversity fund to support offshore industries with

reducing their biodiversity impact.

5. Imposing adjusted tariffs for imported goods, where rms cannot prove that

the biodiversity impact from the resources contained in the product is below a

certain threshold.

Inspirations

The UK would be a forerunner by implementing a broader environmental border tax

(EBT), rather than limited border carbon taxes. In fact, this will be the rst of its kind,

however, the EU is currently leading the change in this policy sphere.

Environmental Border TaxBuilding a resilient economy

Content ↑

Enablers and barriers

Enablers:

↗ For BCAs, there is a consensus that these can be a WTO-consistent policy

tool when designed and implemented properly.

307

↗ Increasing awareness for the necessity to decelerate biodiversity loss.

Barriers:

↙ Difculty to draw a strict line between sectors covered and not covered.

308

↙ Considerable variation across sectors in resource intensity and associated

biodiversity impacts.

↙ Complexity in calculating the appropriate EBT margin, high administrative costs

and a requirement for a strong welfare justication, as for carbon.

309

↙ Risk of “cascading protectionism” with tariffs being possibly extended to

industries further along global value chains.

310

↙ Potential misuse of border measures for strategic reasons in presence of

market power on international markets.

311

↙ Possible violation to the WTO’s most-favoured-nation treatment (GATT) and may

conflict with the principle of common but differentiated responsibilities (CBDR).

312

Windows of opportunity

• The major window of opportunity is the EU and the Commission indicating a strong

interest in pursuing an environmental border tax, which is bound to draw in the UK

as a close trading partner.

• The post COVID-19 economic recovery requires a wide set of tax levers for the

Treasury to utilise in order to raise revenue and bridge the huge scal decit. If

pitched properly, border adjustment taxes could prove to be a vital tool in the tax

toolbox.

• Our survey suggests that the UK is well positioned to work on EBTs in the post-

Brexit period. Brexit will result in a more independent decision-making process

that can build up on the heritage of EU environmental standards and carbon

pricing / trading at the same time.

Environmental Border TaxBuilding a resilient economy

Content ↑

Relevant stakeholders

• Influential think tanks like Policy Exchange and Aurora energy have previously

made the case for carbon border adjustments tax alongside other rightwing

groups.

• The UK government’s chief climate advisory body, the Committee on Climate

Change, has advocated for a carbon border adjustments tax to achieve net

zero. This offers a clear baseline to build on extending the tax to wider biodiversity

issues, beyond just carbon.

• Other potential supporters include both economic and environmental advocacy

institutions and NGOs.

Interim conclusionBuilding a resilient economy

Content ↑

The interplay between the policies

presented here is as important as the

details of individual policies.

The policies presented here are mutually support-

ive. Most policies address several of the interven-

tion areas listed in Table 1. A wellbeing budget for

the UK, the national investment authority, manda-

tory nancial risk assessments and a green credit

guidance all aim to increase and strengthen invest-

ment in the green economy. A modernised set of

government’s scal rules, a land value tax, and

resource caps create the necessary scal leeway.

Resource caps ensure that these policies are effec-

tive in reducing resource use through absolute lim-

its and a dynamic steering effect via prices. Last-

ly, a land value tax can ensure social acceptance,

while environmental border taxes aim to support

domestic economic actors.

The interaction between the policies is illustrated

in the graphic on page 84. Arrows indicate the flow

of nancial resources – for example investments

or payments that flow into unsustainable sectors

with low wellbeing gains, or into sustainable sec-

tors with high wellbeing gains.

Originating from the state, shifting from the

current national budget to a Wellbeing Budget

would force policymakers to implement proce-

dures (indicator sets, models, decision-process)

to ensure that public spending generates posi-

tive impacts for wellbeing and the environment.

It would thereby ensure that the state invests in

the sectors that are important for the society such

as resilience, economic security, care, education,

infrastructures. However, this would require that

a sufcient amount of public spending is availa-

ble to do so. This would be achieved by reassess-

ing scal space. A new scal framework supports

the Wellbeing Budget. By including long-term con-

siderations into the associated national assess-

ment framework, more space will be available for

investments to enhance resilience, mitigate cli-

mate change and conserve biodiversity.

In order to effectively utilise that scal space

to deliver the objectives as outlined in the Well-

being Budget, a New Investment Authority would

be responsible for ensuring that investments are

channelled into the appropriate sectors. It would

also provide credits and support for both business-

es with a sustainable business model and consum-

ers who want to purchase sustainable products.

These investment policy measures would consti-

tute a tremendous shift, by restraining the power

of unsustainable businesses.

These public investments would impact cap-

ital flows from public banks and the central bank

and crowd-in private nance. In addition, two pol-

icies can make private banks shift their invest-

ments towards more sustainable sectors and busi-

ness models on their own and make environmen-

Interim conclusion

The interplay of policy proposals

Interim conclusionBuilding a resilient economy

Content ↑

tally harmful activities more expensive. The rst is

a mandatory risk assessment and disclosure of cli-

mate and biodiversity related risks of credit pro-

vided by private banks, which makes environmen-

tal risks more transparent. These risk assessments

would support the second policy, green credit guid-

ance, which would drive investment in sustainable

business and raise economic and environmental

resilience by lowering environmental pressures.

These policies would reduce costs for sustain-

able business models and create economies of

scale, thus boosting green innovation in the mass

market. Sustainable products would become more

affordable and unsustainable products less so.

However, there might still be some price increas-

es, so to counter this we need some carefully tar-

geted redistributive policies to ensure a just transi-

tion and build overall political and public support for

the package of measures. This would ensure that

all people have access to basic goods and services

such as housing, water, mobility, energy and food.

To raise revenue for these efforts in a way that

would also coherently support the goals of efcient

use of natural resources, a land value tax could be

introduced.

It is impossible to foresee whether a different

incentive structure and nancial environment will

indeed prevent the costs of the environmental cri-

sis. The above measures may generate relative

gains, like increase material and energy efcien-

cy and carbon intensity. Resource caps can make

sure that these gains translate into an absolute

reduction of resource use and thereby ensure that

the economy operates within planetary boundaries.

While other policies serve to redirect investment,

resource caps go further, directly addressing the

protability of certain business models. Resource

caps would restrict activities that harm biodiver-

sity by charging higher prices for resource licenc-

es or imposing taxes. Due to this policy’s impact

on competitiveness and protability, Environmen-

tal Border Taxes would be a crucial complementa-

ry measure in protecting biodiversity leakage and

safeguarding domestic competitiveness.

It is important to note that to effectively restruc-

ture the economic and nancial system towards

sustainability, it is necessary to apply policy pack-

ages, rather than individual policies. However,

many of the prioritised policies in “the package”-

may be replaced with others that deliver a simi-

lar effect; it is only necessary that the impacts of

the chosen policies are addressed simultaneously.

For example, the goal of a land value tax or inher-

itance taxes is to lessen the extent of power imbal-

ances by reducing wealth accumulation from land

ownership. These taxes could supply households

with income needed to purchase basic goods and

services, whose prices might have risen due to the

impacts of other policies, such as resource caps.

Private Banks

Central Bank

New Framework for

Assessing Fiscal Space

Trading Partners

Environmental Border Taxes

New Investment Facility

Wellbeing Budget

Credit Guidance

Mandatory Risk

Assessments and Disclosure

Ressource Caps7.

Investment Facility

Government

high-income

households

low-income

households

Land Value Tax

Planetary Boundaries

Arrows indicate the flow of nancial resources into the resilient

(

) or the extractive economy (

⬑ These boxes are policies to change the flows.

Legend

Extractive

Economy

Resilient

Economy

Wellbeing Budget

In place of a conclusion: A story of hopeBuilding a resilient economy

Content ↑

This report and the research underpinning it is

an attempt to better understand what system-

ic change towards a more resilient and sustaina-

ble economy might look like for the UK. We have

outlined eight key proposals that provide an effec-

tive route to transforming the economy and shap-

ing markets and the behaviour of a variety of actors

in the process.

Despite the many potential benets of the pro-

posals presented in this report, they lack wide-

spread awareness or support. The world is quite

a long way from being able to implement some of

them. One reason is that the destination of a differ-

ent economy can feel abstract or irrelevant, espe-

cially to audiences that are not immersed in com-

plex economic theory or policymaking. As a result,

there is a dearth of positive visions of the future

in the media. This is a problem, as humans make

sense of the world through stories – and these

stories shape how we behave in it.

Narratives in public discourse shift culture

– and produce tangible impact through policy

change, behaviour change and advocacy. With this

in mind, we urgently need to move past the focus

on discussing what is wrong with the current sys-

tem, towards sharing positive, new narratives that

inspire people to imagine a resilient economy that

promotes human and ecological wellbeing, and to

start engaging with on how to actually make this

happen. With imagination comes hope, and with

hope, action. Clear narratives around resilience

and wellbeing, which succinctly summarise the

societal vision towards which policies work, are

crucial to provide direction, motivation and wide-

spread support. This requires seeing an idea put

into practice and thus getting a sense of what it

looks and feels like.

What might this “resilient economy”

look like?

For policymakers, it might entail more collabora-

tion with all stakeholders, including more partic-

ipatory processes with citizens and new partner-

ships to co-create and implement transformative

policy projects. Policymakers would incentivise

agencies and non-governmental actors to demon-

strate their positive impact on a suite of collective

wellbeing indicators in order to receive resourc-

es. They would be seen as the ones navigating the

economy into the future, as the supporters and the

enablers of the transformation.

For investors, the policies mentioned in this report

would reframe the goal of nancial markets from

maximising short-term nancial performance, to

the allocation of capital to support sustainable

outcomes. In order to make investments with this

goal in mind, investors would be empowered with

In place of a conclusion:

A story of hope

» It’s not enough to imagine another world is

possible, we need to feel and taste it. «

— Naomi Klein

In place of a conclusion: A story of hopeBuilding a resilient economy

Content ↑

the right information via strict standardised mon-

itoring mechanisms that allow for the assessment

and comparison of sustainability metrics of differ-

ent business models, along with traditional nan-

cial metrics, and would be incentivised by new reg-

ulatory and market based frameworks. New invest-

ment opportunities created by governments would

create more options for investors looking to invest

in more socially responsible ways. Finally, biodi-

versity labels, environmental externalities assess-

ments, and a common international standard for

calculating carbon emissions embodied in goods,

would provide the information needed to identify

sustainable nancial products. This would lead to

adequate investment in innovative and sustainable

businesses.

For business leaders, the proposed policies would

reframe the denition of success: to consider the

wider impacts on environment & society, not just

short-term shareholder prot. Based on this new

modus operandi, businesses would make deci-

sions that favour people and the planet, along with

generating prot. Sustainable operations would

likely be more protable due to lower taxation, an

increasing demand for sustainable products from

citizens, improved reputation, reduced risk and

increased innovation due to increased nancial

incentives from investors and government.

For citizens, proposed policies would result in

being treated like people, rather than as consum-

ers. All people would have nancial stability, due to

the eradication of the underlying drivers of nan-

cial inequality and concentration of power. Respon-

sible citizens would be sustainable consumers who

collectively respect environmental boundaries and

promote social justice and equal opportunities.

Satisfaction of their needs would not always rely on

more cars, Iphones and other goods, but could also

be obtained through immaterial services, strong

social relationships and meaningful activities.

It is the interplay between these actors that forms

the basis of a resilient economy. Therefore, it is

crucial to involve a relevant number of different

stakeholders: it is vital to reach a critical mass of

people and organisations coming together to form

a movement to create systemic change and call on

policymakers to implement the necessary reforms.

No one alone can achieve it. But together, actors

can demand that policy creates the framework

that makes sustainable behaviour easier and paves

the way to a resilient economy. We are aware that

the proposals in this report are far-reaching. Their

implementation is seemingly difcult. But we are

convinced that they are necessary. We need the

courage to dare something new. With this report,

we invite you to dare, so that the prosperity of

today will benet our children tomorrow and we

can ensure survival on this planet.

Content ↑

Endnotes

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32 Ibid

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37 High-impact clusters are the clusters at the top of

Table 1

38 Governance can be dened as the formal and informal

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global) that are set up to steer societies towards positive

outcomes and away from harmful ones (adapted from Bier-

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45 Jackson, T. (2017). Prosperity without Growth: Founda-

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46 Richters, O., & Siemoneit A. (2019). Growth Impera-

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161 Ibid

162 Further ideas for taxation are related to decreasing

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163 Raworth, K. (2017). Doughnut Economics: Seven

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164 Ibid

165 Ibid

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168 Ibid

169 Various ideas related to channelling public and

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170 United Nations Development Program, Global

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177 Ibid

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181 Parrique, T. et al. (2019). Decoupling Debunked:

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182 Shove, Elizabeth (2010). Beyond the ABC: Climate

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183 Jackson, T. (2017). Prosperity without Growth: Foun-

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184 Büchs, M., & Koch M. (2017). Postgrowth and

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185 Dietz, R., & O’Neill, D. W. (2013). Enough Is

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186 Steinberger, J. K., Lamb, W. F., & Sakai M. (2020).

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187 Jackson, T. (2017). Prosperity without Growth: Foun-

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191 New Climate Institute, & Climate Analytics. (2020).

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192 Ricketts, S., Hendricks B., & Thomas, M. (2020).

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193 Ferguson, P. (2013). Post-Growth Policy Instruments.

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194 Schneidewind, U., & Zahrnt, A. (2013). Damit gutes

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195 Hirsch, F. (1978). Social Limits to Growth (2nd ed.).

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196 Siemoneit, A. (2019). An Offer You Can’t Refuse:

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197 Raworth, Kate. 2017. Doughnut Economics: Seven

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198 Mazzucato, M. (2019). The Value of Everything:

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199 Roberts, R. (2018). Climate Change: The Antidote To

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200 Weizsaecker, E.,& Wijkman, A. (2018). Come On!

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201 Schneidewind, U., & Zahrnt, A. (2013). Damit gutes

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202 Ibid

203 Ibid

204 Díaz, S. et al. (2019). Summary for Policymakers of

the Global Assessment Report on Biodiversity and Ecosystem

Services. Intergovernmental Science-Policy Platform on

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zenodo.org/record/3553579

205 Parrique, T. (2019). The Political Economy of

Degrowth. Economics and Finance. Clermont; Stockholm:

Université Clermont Auvergne; Stockholms Universitet

206 Schneidewind, U., & Zahrnt, A. (2013). Damit gutes

Leben einfacher wird: Perspektiven einer Sufzienzpolitik.

München, Germany: Oekom Verlag

207 Petschow, U. et al. (2018). Gesellschaftliches

Wohlergehen innerhalb planetarer Grenzen, Der Ansatz einer

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publikationen/vorsorgeorientierte-postwachstumsposition

208 Ibid

209 Cosme, I., Santos R., & O’Neill, D. W. (2017).

Assessing the Degrowth Discourse: A Review and Analysis

of Academic Degrowth Policy Proposals. Journal of Cleaner

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researchgate.net/publication/313326676_Assessing_

the_degrowth_discourse_A_review_and_analysis_of_aca-

demic_degrowth_policy_proposals

210 Raworth, K. (2017). Doughnut Economics: Seven

Ways to Think like a 21st Century Economist. White River

Junction, Vermont: Chelsea Green Publishing

211 D’Alisa, G., Demaria F., & Kallis, G. (2015). Degrowth:

A Vocabulary for a New Era. Routledge, Taylor & Francis

Group. Retrieved from http://public.eblib.com/choice/

publicfullrecord.aspx?p=1843450

212 Ferguson, P. (2013). Post-Growth Policy Instruments.

International Journal of Green Economics, 7(4), 405-421.

Retrieved from https://www.researchgate.net/publica-

tion/264437715_Post-growth_policy_instruments

213 Raworth, K. (2017). Doughnut Economics: Seven

Ways to Think like a 21st Century Economist. White River

Junction, Vermont: Chelsea Green Publishing

214 Díaz, S. et al. (2019). The global assessment report

on biodiversity and ecosystem services. Summary for

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default/les/inline/les/ipbes_global_assessment_report_

summary_for_policymakers.pdf

215 Jackson, T. (2017). Prosperity without Growth: Foun-

dations for the Economy of Tomorrow (2nd ed.). London;

New York: Routledge, Taylor & Francis Group

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216 Schneidewind, U., & Zahrnt, A. (2013). Damit gutes

Leben einfacher wird: Perspektiven einer Sufzienzpolitik.

München, Germany: Oekom Verlag

217 Petschow, U. et al. (2018). Gesellschaftliches

Wohlergehen innerhalb planetarer Grenzen, Der Ansatz einer

vorsorgeorientierten Postwachstumsposition. Umweltbun-

desamt. Retrieved from https://www.umweltbundesamt.de/

publikationen/vorsorgeorientierte-postwachstumsposition

218 Schneidewind, U., & Zahrnt, A. (2013). Damit gutes

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München, Germany: Oekom Verlag

219 Ibid

220 Petschow, U. et al. (2018). Gesellschaftliches

Wohlergehen innerhalb planetarer Grenzen, Der Ansatz einer

vorsorgeorientierten Postwachstumsposition. Umweltbun-

desamt. Retrieved from https://www.umweltbundesamt.de/

publikationen/vorsorgeorientierte-postwachstumsposition

221 D’Alisa, G., Demaria F., & Kallis, G. (2015). Degrowth:

A Vocabulary for a New Era. Routledge, Taylor & Francis

Group. Retrieved from http://public.eblib.com/choice/

publicfullrecord.aspx?p=1843450

222 Felber, C.,& Hagelberg, G. (2017). The Economy for

the Common Good. Retrieved from https://thenextsystem.

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223 Petschow, U. et al. (2018). Gesellschaftliches

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desamt. Retrieved from https://www.umweltbundesamt.de/

publikationen/vorsorgeorientierte-postwachstumsposition

224 D’Alisa, G., Demaria F., & Kallis, G. (2015). Degrowth:

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225 Parrique, T. (2019). The Political Economy of

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02499463/document

226 D’Alisa, G., Demaria F., & Kallis, G. (2015). Degrowth:

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227 Roberts, R. (2018). Climate Change: The Antidote To

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228 Robins, N., & McDaniels, J. (2016). Financing

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229 HM Treasury. (2020). The Dasgupta Review – Inde-

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230 For example, $NZ1 billion deployed to improve the

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231 Stark, C. et al. (2019). Net Zero – Technical Report.

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232 Greenpeace. (2019). Government investment for

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233 Financial Times. (2020). Rishi Sunak should abandon

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234 Ecuity. (2020). Local green jobs- accelerating a

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235 Lyons, G., Lightfoot W., Zeber, J. (2020). A pro

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236 Mazzucato, M., & Macfarlane, L. (2019). A mission

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237 Omarova, S. T. (2020). Why We Need a National

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239 European Investment Bank. (2019). EU Bank

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241 Billington, P., Smith C. A., & Ball, M. (2020).

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242 The Climate Coalition. (2020). The plan

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243 RSA Food, Farming and Countryside Commission.

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264 Mattauch, L., Siegmeier, J., Edenhofer, O., &

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pdf/151579961.pdf

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tural_reform_fails_on_biodiversity

294 Stratford, B. (2020). The Threat of Rent Extraction in

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article/pii/S0921800919304203

295 Simoncini, R. et al. (2019). Constraints and Opportu-

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PMC4737393/

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Carbon Adjustments for Enhanced Climate Action. American

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from https://www.cambridge.org/core/journals/ameri-

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der-carbon-adjustments-for-enhanced-climate-action/

BF4266550F09E5E4A7479E09C047B984

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(2018). Embodied Carbon Tariffs. The Scandinavian Journal

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v12y2012i1p63-84.html

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

Financing the transition – how

nancial system Reform can

serve sustainable development

Nick Robins, Jeremy

McDaniels

2016 What measures are most needed to deliver

efciency, effectiveness and resilience in

ways that the nancial system can contribute

to specic sustainability priorities in the real

economy?

Case studies

on sustainable

energy, climate risk

assessment and

sustainable land

use; Geographies:

India, EU, France,

Netherlands,

Sweden, UK,

California, Brazil,

Indonesia

Repurpose subsidized credit to comply with environmental

indicators (e. g. no deforestation in Brazil). Improve

disclosure, data and risk analytics (e. g. for energy

efciency). Integrate nancial sector considerations into

sectoral environmental policy. Think in system terms to

identify key drivers of change in nance.

System thinking approach of the

study.

Delivering the sustainable

nancial system the world

needs

Steve Waygood and

others

2017 How can private nance be aligned with the

Sustainable Development Goals (SDGs)?

SDGs or sustainability aligned benchmark. Guidance on

duciary duty to include non-nancial objectives. Financial

education to build demand for long-term products.

Doughnut economics: seven

ways to think like a 21st

century economist

Raworth, Kate 2017 How can we frame an economy that

integrates social wellbeing into planetary

boundaries within the “safe and just operating

space for humanity”?

Doughnut frame-

work, planetary

boundaries

Seven steps to think like a 21st century economist:

1. Change the goal

2. Tell a new story

3. Nurture human nature

4. Get savvy with systems

5. Design to distribute

6. Create to regenerate

7. Be agnostic about growth

Economics as a sphere in which

people produce, distribute and

consume products and services

that satisfy their wishes and

needs. Distinguishes between

four supply spheres: individual

household, market, commons,

state. Economy is not a closed

cycle, but an open system with

constant inflows and outflows of

raw materials and energy. The

most important resource flow is

not money, but the energy cycle.

The IPBES Global Assessment

report – Summary for

policymakers of the global

assessment report on biodi-

versity and ecosystem services

of the Intergovernmental

Science-Policy Platform on

Biodiversity and Ecosystem

Services.

IPBES – Díaz, J. Settele,

E. S. Brondízio E.S., H. T.

Ngo, M. Guèze, J. Agard,

A. Arneth, P. Balvanera,

K. A. Brauman, S. H. M.

Butchart, K. M. A. Chan,

L. A. Garibaldi, K. Ichii, J.

Liu, S. M. Subramanian,

G. F. Midgley, P. Miloslav-

ich, Z. Molnár, D. Obura,

A. Pfaff, S. Polasky, A.

Purvis, J. Razzaque,

B. Reyers, R. Roy

Chowdhury, Y. J. Shin, I.

J. Visseren-Hamakers, K.

J. Willis, and C. N. Zayas

(eds.). IPBES secretariat,

Bonn, Germany. 56

pages.

2019 Status, trends and drivers of change in nature

for better evidence-informed policy decisions

and action at the local, national, regional and

global levels.

State-of-the-art

literature review.

Revolves on a

conceptual model

which represents

the links between

nature and human

wellbeing (as

well as drivers,

institutions, and

other elements).

Scenario-based

modelling is used in

one specic Chapter

(Ch. 4).

• Reforming subsidies

• Address over and under consumption

• Reducing unsustainable production

• Reforming trade regimes and nancial systems

• Reforming models of economic growth

Acknowledging nature’s

contributions to people’s life to

consider environmental impacts

in economic decision-making.

Biodiversity loss means loss of

wellbeing, including economic

welfare.

Content ↑

102

Appendix

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

Financing the transition – how

nancial system Reform can

serve sustainable development

Nick Robins, Jeremy

McDaniels

2016 What measures are most needed to deliver

efciency, effectiveness and resilience in

ways that the nancial system can contribute

to specic sustainability priorities in the real

economy?

Case studies

on sustainable

energy, climate risk

assessment and

sustainable land

use; Geographies:

India, EU, France,

Netherlands,

Sweden, UK,

California, Brazil,

Indonesia

Repurpose subsidized credit to comply with environmental

indicators (e. g. no deforestation in Brazil). Improve

disclosure, data and risk analytics (e. g. for energy

efciency). Integrate nancial sector considerations into

sectoral environmental policy. Think in system terms to

identify key drivers of change in nance.

System thinking approach of the

study.

Delivering the sustainable

nancial system the world

needs

Steve Waygood and

others

2017 How can private nance be aligned with the

Sustainable Development Goals (SDGs)?

SDGs or sustainability aligned benchmark. Guidance on

duciary duty to include non-nancial objectives. Financial

education to build demand for long-term products.

Doughnut economics: seven

ways to think like a 21st

century economist

Raworth, Kate 2017 How can we frame an economy that

integrates social wellbeing into planetary

boundaries within the “safe and just operating

space for humanity”?

Doughnut frame-

work, planetary

boundaries

Seven steps to think like a 21st century economist:

1. Change the goal

2. Tell a new story

3. Nurture human nature

4. Get savvy with systems

5. Design to distribute

6. Create to regenerate

7. Be agnostic about growth

Economics as a sphere in which

people produce, distribute and

consume products and services

that satisfy their wishes and

needs. Distinguishes between

four supply spheres: individual

household, market, commons,

state. Economy is not a closed

cycle, but an open system with

constant inflows and outflows of

raw materials and energy. The

most important resource flow is

not money, but the energy cycle.

The IPBES Global Assessment

report – Summary for

policymakers of the global

assessment report on biodi-

versity and ecosystem services

of the Intergovernmental

Science-Policy Platform on

Biodiversity and Ecosystem

Services.

IPBES – Díaz, J. Settele,

E. S. Brondízio E.S., H. T.

Ngo, M. Guèze, J. Agard,

A. Arneth, P. Balvanera,

K. A. Brauman, S. H. M.

Butchart, K. M. A. Chan,

L. A. Garibaldi, K. Ichii, J.

Liu, S. M. Subramanian,

G. F. Midgley, P. Miloslav-

ich, Z. Molnár, D. Obura,

A. Pfaff, S. Polasky, A.

Purvis, J. Razzaque,

B. Reyers, R. Roy

Chowdhury, Y. J. Shin, I.

J. Visseren-Hamakers, K.

J. Willis, and C. N. Zayas

(eds.). IPBES secretariat,

Bonn, Germany. 56

pages.

2019 Status, trends and drivers of change in nature

for better evidence-informed policy decisions

and action at the local, national, regional and

global levels.

State-of-the-art

literature review.

Revolves on a

conceptual model

which represents

the links between

nature and human

wellbeing (as

well as drivers,

institutions, and

other elements).

Scenario-based

modelling is used in

one specic Chapter

(Ch. 4).

• Reforming subsidies

• Address over and under consumption

• Reducing unsustainable production

• Reforming trade regimes and nancial systems

• Reforming models of economic growth

Acknowledging nature’s

contributions to people’s life to

consider environmental impacts

in economic decision-making.

Biodiversity loss means loss of

wellbeing, including economic

welfare.

103

Content ↑

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

Assessing the degrowth

discourse: A review and

analysis of academic degrowth

policy proposals

Cosme, Inês, Rui Santos,

und Daniel W. O’Neill

2017 Which areas of impact are covered by

degrowth policy proposals and where are its

underdeveloped parts/blind spots?

Literature review of

128 peer-reviewed

papers and 54 that

include proposals

for action.

Meta-study, analyzing policy proposals concerning three

goals: 1) Reduce the environmental impact of human

activities. 2) Redistribute income and wealth both within

and between countries. 3) Promote the transition from a

materialistic to a convivial and participatory society.

Degrowth – Vocabulary for a

new era

Giacomo D´Alisa

Federico Demaria

Giorgos Kallis

2015 What are the different strands of critique and

proposals of the degrowth community?

Recommendation for a transition to a degrowth economy,

that goes along with new allocations between private and

public provisioning of goods and services, a stricter focus

on environmental limits, a different concept of wellbeing

and more equality.

New understanding of wellbeing,

that is less based on personal

gain and more on redistribution,

because evidence has shown,

that above a certain level of

national income, it is equality and

not growth that improves social

wellbeing (Wilkinson and Pickett

2009).

Climate and nature and our

1.5° future – WWF synthesis of

the IPBES and IPCC reports

Stephen Cornelius

Sophie Yeo

Christopher Weber,

Fernanda Carvalho,

Leanne Clare, Mandy

Woods, Pauli Merriman,

Roz Pidcock, Vanessa

Perez-Cirera

2019 What are the systemic changes needed

for limiting global warming and halting

biodiversity loss?

Synthesis review

of IPCC and IPBES

reports structured

by ecosystem

type. Case studies

and specic WWF

recommendations

based on the

reports.

Climate pledges consistent with the 1.5°C goal. Nature-

based solutions part of countries’ climate commitments.

Coordinate climate, biodiversity and sustainable

development policies. Align nancial flows with the needed

systems transformations. Address the international

impacts of domestic policies.

Nature-based solutions, sustain-

able consumption and production

can be synergically used to tackle

climate change and biodiversity

loss.

Mobilising Private Sector

Capital in Support of the UN

Sustainable Development

Goals

UNDP, Global Ethical

Finance Initative, R.J.

Fleming & Co

2020 How to incentivise the investment sector to

support the UN SDGs?

Survey and

interviews with over

100+ senior reps

from investment

space

SDGs

Products: BONDS (e. g. Sustainable Bonds: Green Bond,

Green Sukuk, Green Securitisation Bond, Blue Bond,

Sustainability Linked Bond, Social Bond, Forests Bond]

Impact Funds, Blended Finance, Green Loan, Sustainability

Linked-Loan)

Challenges in integrating –

(1) Risk & Return, (2) Scale,

(3) Ratings – ESG rating are

inherently subjective and

investors have to undertake

own analysis of sustainability

factors – (4) Measuring &

Reporting – several initiatives

without standard or widespread

adoption (5), Liquidity-lacking

due to supply/demand imbalance

(6), Government support

– policy is critical to shaping

investment climate in markets,

(7) Greenwashing.

The Business of Wellbeing

Mira Bangel and Michael

Weatherhead

2020 How can businesses participate in a wellbeing

economy?

Co-created guide

with SenseTribe

w/interviews

with partners and

stakeholders

Businesses want to participate

in a wellbeing economy, but

competition prevents it.

Creating incentives for sharing

innovations to enable other

businesses is key.

Using TCFD’s to manage

climate risk: next steps for UK

government, investors and

businesses

Aldersgate Group 2019 How can the nancial sector address climate

risk?

1. Reporting of climate change risk should be mandatory

to provide data and create a level playing eld

2. Governments should require companies to disclose

what actions they’re taking to manage identied risk

3. Market participants must be encouraged to look beyond

usual business planning timelines

4. Corporate Reporting Lab should be established to

develop impartial sectoral scenario guidance companies

in same industries

5. UK must keep up with international trends on climate

disclosure

6. Investors must make voice heard and engage with

companies

Establish a leveled playing eld,

introduce Mandatory reporting,

corporate Reporting Lab should

be set-up, go beyond “BAU”

timelines and more forward

thinking.

Content ↑

104

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

Assessing the degrowth

discourse: A review and

analysis of academic degrowth

policy proposals

Cosme, Inês, Rui Santos,

und Daniel W. O’Neill

2017 Which areas of impact are covered by

degrowth policy proposals and where are its

underdeveloped parts/blind spots?

Literature review of

128 peer-reviewed

papers and 54 that

include proposals

for action.

Meta-study, analyzing policy proposals concerning three

goals: 1) Reduce the environmental impact of human

activities. 2) Redistribute income and wealth both within

and between countries. 3) Promote the transition from a

materialistic to a convivial and participatory society.

Degrowth – Vocabulary for a

new era

Giacomo D´Alisa

Federico Demaria

Giorgos Kallis

2015 What are the different strands of critique and

proposals of the degrowth community?

Recommendation for a transition to a degrowth economy,

that goes along with new allocations between private and

public provisioning of goods and services, a stricter focus

on environmental limits, a different concept of wellbeing

and more equality.

New understanding of wellbeing,

that is less based on personal

gain and more on redistribution,

because evidence has shown,

that above a certain level of

national income, it is equality and

not growth that improves social

wellbeing (Wilkinson and Pickett

2009).

Climate and nature and our

1.5° future – WWF synthesis of

the IPBES and IPCC reports

Stephen Cornelius

Sophie Yeo

Christopher Weber,

Fernanda Carvalho,

Leanne Clare, Mandy

Woods, Pauli Merriman,

Roz Pidcock, Vanessa

Perez-Cirera

2019 What are the systemic changes needed

for limiting global warming and halting

biodiversity loss?

Synthesis review

of IPCC and IPBES

reports structured

by ecosystem

type. Case studies

and specic WWF

recommendations

based on the

reports.

Climate pledges consistent with the 1.5°C goal. Nature-

based solutions part of countries’ climate commitments.

Coordinate climate, biodiversity and sustainable

development policies. Align nancial flows with the needed

systems transformations. Address the international

impacts of domestic policies.

Nature-based solutions, sustain-

able consumption and production

can be synergically used to tackle

climate change and biodiversity

loss.

Mobilising Private Sector

Capital in Support of the UN

Sustainable Development

Goals

UNDP, Global Ethical

Finance Initative, R.J.

Fleming & Co

2020 How to incentivise the investment sector to

support the UN SDGs?

Survey and

interviews with over

100+ senior reps

from investment

space

SDGs

Products: BONDS (e. g. Sustainable Bonds: Green Bond,

Green Sukuk, Green Securitisation Bond, Blue Bond,

Sustainability Linked Bond, Social Bond, Forests Bond]

Impact Funds, Blended Finance, Green Loan, Sustainability

Linked-Loan)

Challenges in integrating –

(1) Risk & Return, (2) Scale,

(3) Ratings – ESG rating are

inherently subjective and

investors have to undertake

own analysis of sustainability

factors – (4) Measuring &

Reporting – several initiatives

without standard or widespread

adoption (5), Liquidity-lacking

due to supply/demand imbalance

(6), Government support

– policy is critical to shaping

investment climate in markets,

(7) Greenwashing.

The Business of Wellbeing

Mira Bangel and Michael

Weatherhead

2020 How can businesses participate in a wellbeing

economy?

Co-created guide

with SenseTribe

w/interviews

with partners and

stakeholders

Businesses want to participate

in a wellbeing economy, but

competition prevents it.

Creating incentives for sharing

innovations to enable other

businesses is key.

Using TCFD’s to manage

climate risk: next steps for UK

government, investors and

businesses

Aldersgate Group 2019 How can the nancial sector address climate

risk?

1. Reporting of climate change risk should be mandatory

to provide data and create a level playing eld

2. Governments should require companies to disclose

what actions they’re taking to manage identied risk

3. Market participants must be encouraged to look beyond

usual business planning timelines

4. Corporate Reporting Lab should be established to

develop impartial sectoral scenario guidance companies

in same industries

5. UK must keep up with international trends on climate

disclosure

6. Investors must make voice heard and engage with

companies

Establish a leveled playing eld,

introduce Mandatory reporting,

corporate Reporting Lab should

be set-up, go beyond “BAU”

timelines and more forward

thinking.

105

Content ↑

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

2019 Global Sustainable

Development Report

Independent Group of

Scientists appointed

by the UN Secre-

tary-General: Co-chairs;

Peter Messerli, Endah

Murniningtyas

2019 Current shortfall of Sustainable Development

Goals by 2030

SDGs and

assessment of SDG

achievements.

Put inequality at heart of global development agenda.

Promote agreement, inclusivity and consensus to achieve

policies that work for the common good, rather than

narrow self-interest, across both the public and the private

sectors.

Emphasis on the role of science

for designing and implementing

development policies (systems

approach).

UNISDR (2017) Build Back

Better in recovery, rehabilita-

tion and reconstruction.

(Consultative version)

UNISDR 2017 Best practices for disaster recovery across

countries?

Building of a

common framework

through identifying

common termi-

nology, agreeing

on priorities and

learning from best

practices.

Strengthen policies, laws, programs that promote

(incentivise), guide (ensure), and support Build Back Better

in recovery, rehabilitation, and reconstruction in public and

private sectors, and by individuals and households.

Learning from best practices

across the world offers solutions

for global-scale challenges.

The Tragedy of Growth

Positive Money 2020 How can the UK government move past GDP

measurement toward measurements of

wellbeing?

• Abandon GDP as a indicator of progress

• Transition to a non-nancialised and non-growing system

• Incorporate a dashboard of social and environmental

wellbeing indicators into the policy process

Foster balanced creditor – debtor

relationships – founded on ways

of guaranteeing access to means

of payment and access to credit

UBI issues via central bank

currency, direct clearing facility,

banks and modern debt jubilees

as policy.

Nature’s Return: Embedding

environmental goals at the

heart of economic and nancial

decision-making

Ludovic Suttor Sorel and

Nicolas Hercellin

2020 1. Is private nance up to the task [nancing

the preservation of biodiversity]?

2. Are current regulatory proposals able to

scale up the mobilization of nance for

nature?

3. If not, what interventions can bring deep

and lasting changes to the provision of

nance for nature?

Exploration of

(neoclassical)

Modern Portfolio

Theory and the

Capital Assets

Pricing Model

to illustrate the

inadequateness of

the current nancial

system to nance

environmental

projects.

• Update the metrics for tracking environmental impact

from the Rio Markers to the BioFin ones [in EU].

• End counterproductive agricultural subsidies and redi-

rect them for transitioning to nature preserving practices

• Exempt public investments in nature from public decit

rules as they can be counted as capital investments

• Better enforce environmental regulations

• Explore blending of public and private nancing for a

limited number of areas

Counters the nancial innovation

arguments.

Towards a performance

framework for a sustainable

nancial system

Wally Turbeville 2016 Exploring the connection between available

liquidity and fulllment of investment flows

for sustainability (and the need to divert

from unsustainable activities) to assess the

functionality of the nancial system and come

up with recommendations for reform.

Revisits Mynski’s

Financial Instability

Hypothesis, the

Efcient Market

Hypothesis and the

work on the cost of

intermediation from

Phillipon and the

Bank for Interna-

tional Settlements.

Assess the nancial system not by self-referential metrics

like amount of transactions or liquidity of the market but in

terms of its system outputs, i.e. whether or not it delivers

the investments that are needed for the transition towards

a sustainable economy.

Framework to conceptualise

nance as a system as well as

meaningful categories to assess

its functionality.

COVID-19: the future of UK

economic policy

Giles Wilkes; Kiran

Horwich

2020 Examining the big policy questions that lie

ahead (through COVID-19), and how they

might develop through four key phases of

action.

Measuring Prosperity –

Navigating the options

Christine Corlet Walker;

Tim Jackson

2019 How can we move beyond GDP in measuring

prosperity?

1. discusses the benets and disadvantages

of the different types of alternative

indicators

2. contribute to challenge of aggregation and

the question of monetization

3. a roadmap for interested parties to better

understand what makes a successful and

influential indicator

The “story indicator” must be clear and distinct from the

story captured by GDP. It can benet from simplicity and

aggregation, allowing them to compete with GDP on the

public stage. The “decision-aid indicator” requires closer

attention to technical characteristics as well as inclusion of

end-users and political context.

Content ↑

106

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Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

2019 Global Sustainable

Development Report

Independent Group of

Scientists appointed

by the UN Secre-

tary-General: Co-chairs;

Peter Messerli, Endah

Murniningtyas

2019 Current shortfall of Sustainable Development

Goals by 2030

SDGs and

assessment of SDG

achievements.

Put inequality at heart of global development agenda.

Promote agreement, inclusivity and consensus to achieve

policies that work for the common good, rather than

narrow self-interest, across both the public and the private

sectors.

Emphasis on the role of science

for designing and implementing

development policies (systems

approach).

UNISDR (2017) Build Back

Better in recovery, rehabilita-

tion and reconstruction.

(Consultative version)

UNISDR 2017 Best practices for disaster recovery across

countries?

Building of a

common framework

through identifying

common termi-

nology, agreeing

on priorities and

learning from best

practices.

Strengthen policies, laws, programs that promote

(incentivise), guide (ensure), and support Build Back Better

in recovery, rehabilitation, and reconstruction in public and

private sectors, and by individuals and households.

Learning from best practices

across the world offers solutions

for global-scale challenges.

The Tragedy of Growth

Positive Money 2020 How can the UK government move past GDP

measurement toward measurements of

wellbeing?

• Abandon GDP as a indicator of progress

• Transition to a non-nancialised and non-growing system

• Incorporate a dashboard of social and environmental

wellbeing indicators into the policy process

Foster balanced creditor – debtor

relationships – founded on ways

of guaranteeing access to means

of payment and access to credit

UBI issues via central bank

currency, direct clearing facility,

banks and modern debt jubilees

as policy.

Nature’s Return: Embedding

environmental goals at the

heart of economic and nancial

decision-making

Ludovic Suttor Sorel and

Nicolas Hercellin

2020 1. Is private nance up to the task [nancing

the preservation of biodiversity]?

2. Are current regulatory proposals able to

scale up the mobilization of nance for

nature?

3. If not, what interventions can bring deep

and lasting changes to the provision of

nance for nature?

Exploration of

(neoclassical)

Modern Portfolio

Theory and the

Capital Assets

Pricing Model

to illustrate the

inadequateness of

the current nancial

system to nance

environmental

projects.

• Update the metrics for tracking environmental impact

from the Rio Markers to the BioFin ones [in EU].

• End counterproductive agricultural subsidies and redi-

rect them for transitioning to nature preserving practices

• Exempt public investments in nature from public decit

rules as they can be counted as capital investments

• Better enforce environmental regulations

• Explore blending of public and private nancing for a

limited number of areas

Counters the nancial innovation

arguments.

Towards a performance

framework for a sustainable

nancial system

Wally Turbeville 2016 Exploring the connection between available

liquidity and fulllment of investment flows

for sustainability (and the need to divert

from unsustainable activities) to assess the

functionality of the nancial system and come

up with recommendations for reform.

Revisits Mynski’s

Financial Instability

Hypothesis, the

Efcient Market

Hypothesis and the

work on the cost of

intermediation from

Phillipon and the

Bank for Interna-

tional Settlements.

Assess the nancial system not by self-referential metrics

like amount of transactions or liquidity of the market but in

terms of its system outputs, i.e. whether or not it delivers

the investments that are needed for the transition towards

a sustainable economy.

Framework to conceptualise

nance as a system as well as

meaningful categories to assess

its functionality.

COVID-19: the future of UK

economic policy

Giles Wilkes; Kiran

Horwich

2020 Examining the big policy questions that lie

ahead (through COVID-19), and how they

might develop through four key phases of

action.

Measuring Prosperity –

Navigating the options

Christine Corlet Walker;

Tim Jackson

2019 How can we move beyond GDP in measuring

prosperity?

1. discusses the benets and disadvantages

of the different types of alternative

indicators

2. contribute to challenge of aggregation and

the question of monetization

3. a roadmap for interested parties to better

understand what makes a successful and

influential indicator

The “story indicator” must be clear and distinct from the

story captured by GDP. It can benet from simplicity and

aggregation, allowing them to compete with GDP on the

public stage. The “decision-aid indicator” requires closer

attention to technical characteristics as well as inclusion of

end-users and political context.

107

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Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

From containment to recovery:

Environmental responses to

the COVID-19 pandemic

OECD 2020 Focus on immediate steps that governments

can take to ensure COVID-19 emergency

measures do not derail efforts to address

environmental challenges and improve envi-

ronmental health and resilience of societies.

The regulatory compass

towards a purpose-driven

approach to nancial

regulation – Finance

Innovation Lab

Christine Berry, Anna

Laycock, Rob Nash and

Marloes Nichols

2018 What is the purpose of nance and how can

reforms make the nancial system closer to

deliver on this purpose?

Case studies • Update metrics for performance assessments

• Reform the mandates of regulators and change the

mindsets of people involved in nance

Blueprint for Better business

Blueprint for Better

Business

2019 What is a purpose driven business?

1. Honest and Fair with Customers and Suppliers

2. A Good Citizen- seeing each person affected by

decisions as if they were a member of the decision-

makers own community

3. A Responsible and Responsive Employer – treats

everyone with dignity and provides fair pay

4. A Guardian for Future Generations

Framework on how businesses

can do more for employees and

community as a whole.

Will COVID-19 Fiscal recovery

packages accelerate or retard

progress on climate change?

Cameron Hepburn, Brian

O’Callahjan, Nicholas

Stern, Joseph Sitglitz,

Dimitri Zenghelis

2020 Will COVID-19 Fiscal recovery packages

accelerate or retard progress on climate

change?

Policies can deliver both economic and climate goals,

co-benets can be captured, prioritise policy design

Green scal recovery packages

can act to decouple economic

growth from GHG emissions and

reduce existing welfare inequal-

ities that will be exacerbated by

the pandemic in the short-term

and climate change in the

long-term.

Successful non-growing

companies

Andrea Liesen, Christian

Dietsche, Jana Gebauer

2014 Who are the successful non-growing

companies and what is their potential in a

post-growth economy?

Document analysis

(i. e. systematic

procedure that

“entails nding,

selecting, apprais-

ing (making sense

of), and synthesis-

ing data contained

in documents”

• Produce not cheaper and more, but less and more

valuable products

• Spare resources by reducing output

• Increase the immaterial benet of the printing process

e. g. experience quality, focusing on useful printing

products

• Distribute prots and provide reasonable compensation

for all employees

• Identify indicators that allow to more easily measure and

communicate success of non-growing companies

• Aim for better not bigger

• Focus on quality of products/

services and quality of work

and life

• Make contribution to reduce

absolute amount of resource

use

Global Futures: Modelling

the global economic impacts

of environmental change to

support policy-making (WWF

report)

Justin Andrew Jackson,

Uris Lantz Baldos,

Thomas Hertel, Chirs

Nootenboom, Stephen

Polasky, Toby Roxburgh

2020 What is the impact of different scenarios

concerning the (non)-preservation of ecosys-

tems on GDP by the year 2050?

Ecosystem model

is pegged onto

computable general

equilibrium model

through input-out-

put accounts,

where inputs are

shocked due to the

deterioration of the

environment. The

integrated model

uses representative

agendas, discount-

ing, and GDP growth

trajectories that

are obtained from

historical trends

and carbon prices

from Integrated

Assessment Models

Shift to sustainable economic practices and restoration of

land leads to less adverse economic effects, while being

able to maintain food for the world populations. Hence,

policy and behavioural shifts that comply with a conserva-

tion scenario should be undertaken.

Estimates on the monetary

losses from the destruction

of ecosystem services like

pollination or coastal

ecosystems.

Content ↑

108

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

From containment to recovery:

Environmental responses to

the COVID-19 pandemic

OECD 2020 Focus on immediate steps that governments

can take to ensure COVID-19 emergency

measures do not derail efforts to address

environmental challenges and improve envi-

ronmental health and resilience of societies.

The regulatory compass

towards a purpose-driven

approach to nancial

regulation – Finance

Innovation Lab

Christine Berry, Anna

Laycock, Rob Nash and

Marloes Nichols

2018 What is the purpose of nance and how can

reforms make the nancial system closer to

deliver on this purpose?

Case studies • Update metrics for performance assessments

• Reform the mandates of regulators and change the

mindsets of people involved in nance

Blueprint for Better business

Blueprint for Better

Business

2019 What is a purpose driven business?

1. Honest and Fair with Customers and Suppliers

2. A Good Citizen- seeing each person affected by

decisions as if they were a member of the decision-

makers own community

3. A Responsible and Responsive Employer – treats

everyone with dignity and provides fair pay

4. A Guardian for Future Generations

Framework on how businesses

can do more for employees and

community as a whole.

Will COVID-19 Fiscal recovery

packages accelerate or retard

progress on climate change?

Cameron Hepburn, Brian

O’Callahjan, Nicholas

Stern, Joseph Sitglitz,

Dimitri Zenghelis

2020 Will COVID-19 Fiscal recovery packages

accelerate or retard progress on climate

change?

Policies can deliver both economic and climate goals,

co-benets can be captured, prioritise policy design

Green scal recovery packages

can act to decouple economic

growth from GHG emissions and

reduce existing welfare inequal-

ities that will be exacerbated by

the pandemic in the short-term

and climate change in the

long-term.

Successful non-growing

companies

Andrea Liesen, Christian

Dietsche, Jana Gebauer

2014 Who are the successful non-growing

companies and what is their potential in a

post-growth economy?

Document analysis

(i. e. systematic

procedure that

“entails nding,

selecting, apprais-

ing (making sense

of), and synthesis-

ing data contained

in documents”

• Produce not cheaper and more, but less and more

valuable products

• Spare resources by reducing output

• Increase the immaterial benet of the printing process

e. g. experience quality, focusing on useful printing

products

• Distribute prots and provide reasonable compensation

for all employees

• Identify indicators that allow to more easily measure and

communicate success of non-growing companies

• Aim for better not bigger

• Focus on quality of products/

services and quality of work

and life

• Make contribution to reduce

absolute amount of resource

use

Global Futures: Modelling

the global economic impacts

of environmental change to

support policy-making (WWF

report)

Justin Andrew Jackson,

Uris Lantz Baldos,

Thomas Hertel, Chirs

Nootenboom, Stephen

Polasky, Toby Roxburgh

2020 What is the impact of different scenarios

concerning the (non)-preservation of ecosys-

tems on GDP by the year 2050?

Ecosystem model

is pegged onto

computable general

equilibrium model

through input-out-

put accounts,

where inputs are

shocked due to the

deterioration of the

environment. The

integrated model

uses representative

agendas, discount-

ing, and GDP growth

trajectories that

are obtained from

historical trends

and carbon prices

from Integrated

Assessment Models

Shift to sustainable economic practices and restoration of

land leads to less adverse economic effects, while being

able to maintain food for the world populations. Hence,

policy and behavioural shifts that comply with a conserva-

tion scenario should be undertaken.

Estimates on the monetary

losses from the destruction

of ecosystem services like

pollination or coastal

ecosystems.

109

Content ↑

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

Growth, Degrowth and Climate

Change: A scenario Analysis

Peter A. Victor 2011 What are the various scenarios of economic

growth that impact GHG emissions?

Many models

comparing BAU,

low/no growth

scenarios against

one another

Low/no growth economy scenario to see how it can affect

GHG emissions, government spending, carbon tax, working

time, population, poverty, unemployment, and debt.

As GDP rises, so does debt, GHG

emissions and poverty. In low/no

growth scenario, GHG reduces,

unemployment, debt and poverty

all reduce.

Wellbeing Economics for the

COVID-19 Recovery

Milena Büchs, Marta

Baltruszewicz, Katharina

Bohnenberger, Jonathan

Busch, James Dyke,

Patrick Elf, Andrew

Fanning, Martin Fritz,

Alice Garvey, Lukas

Hardt, Elena Hofferberth,

Diana Ivanova, Amanda

Janoo, Dan O’Neill,

Monica Guillen-Royo,

Marlyne Sahakian, Julia

Steinberger, Katherine

Trebeck, Christine Corlet

Walker

2020 How can governments build back better

toward economies focused on wellbeing?

Policies for building

back better are

contrasted with

building back worse

policies.

• Doughnut economics framework in Amsterdam

• Wellbeing Economy Government partnership

• Green Deal

• Pop-up bike lanes

• Green recovery plans

• Sharing partnerships

• Basic incomes

• Freezing debt payments for low income countries

• Put dividend and bonus payments on hold (banks and

coops)

• Quantitative Easing measures or direct public money

creation

Best practice examples.

Recommendations in the

IPCC special reports on global

warming of 1.5 ºC, land, the

ocean and cryosphere

IPCC 2018 What are the impacts of impacts of global

warming of 1.5°C above pre-industrial levels?

Scenarios • Avoiding carbon overshoot can only be achieved if global

CO2 emissions start to decline well before 2030

• A wide range of adaptation options should be used to

reduce the risks related to global warming

• Mitigation strategies to reduce net carbon emissions are

required to avoid more severe impacts.

Limiting global warming to 1.5°C

requires rapid and far-reaching

transitions in energy, land, urban

and infrastructure (including

transport and buildings), and

industrial systems. Climate

change generates negative

impacts on sustainable develop-

ment, eradication of poverty and

reducing inequalities.

Come On! Capitalism, Short-

termism, Population and the

Destruction of the Planet

von Weizsäcker and

Wijkman

2017 How to create more resilient economies

and why our current economic systems is

insufcient?

SDGs, planetary

boundaries, regen-

erative principles

– Fullerton, blue

economy etc.

• Rethink taxation

• Strengthen recycling and reuse targets

• Strengthen existing policies of promoting renewable

energy

• Introduce design requirements for new products for ease

of repair and maintenance

• Use public procurement to incentivise new business

models

• Make material efciency a core part of climate mitigation

policies.

• Launch investments, primarily in infrastructure, to

support the circular economy

• Support innovation in low-carbon solutions

• Exempt all secondary materials from VAT

Climate Change: An Antidote

To Democracy’s Mid-life Crisis

Richard Roberts 2018 How to make climate policy that is effective?

1. A flatrate, no-exceptions tax on emissions.

2. Investment in renewables and low-emission transport

infrastructure, which will also create jobs.

3. Enhanced protections for natural carbon sinks in public

hands.

4. Funding for research into carbon capture and use,

energy storage and next generation renewables.

5. Higher mandatory energy efciency standards for all

new buildings.

6. Scrappage schemes

7. Investment in climate adaptation and resilience.

8. Public awareness campaigns to promote dietary

changes that both reduce emissions and improve

health.

9. Lowering the voting age to 16.

Content ↑

110

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

Growth, Degrowth and Climate

Change: A scenario Analysis

Peter A. Victor 2011 What are the various scenarios of economic

growth that impact GHG emissions?

Many models

comparing BAU,

low/no growth

scenarios against

one another

Low/no growth economy scenario to see how it can affect

GHG emissions, government spending, carbon tax, working

time, population, poverty, unemployment, and debt.

As GDP rises, so does debt, GHG

emissions and poverty. In low/no

growth scenario, GHG reduces,

unemployment, debt and poverty

all reduce.

Wellbeing Economics for the

COVID-19 Recovery

Milena Büchs, Marta

Baltruszewicz, Katharina

Bohnenberger, Jonathan

Busch, James Dyke,

Patrick Elf, Andrew

Fanning, Martin Fritz,

Alice Garvey, Lukas

Hardt, Elena Hofferberth,

Diana Ivanova, Amanda

Janoo, Dan O’Neill,

Monica Guillen-Royo,

Marlyne Sahakian, Julia

Steinberger, Katherine

Trebeck, Christine Corlet

Walker

2020 How can governments build back better

toward economies focused on wellbeing?

Policies for building

back better are

contrasted with

building back worse

policies.

• Doughnut economics framework in Amsterdam

• Wellbeing Economy Government partnership

• Green Deal

• Pop-up bike lanes

• Green recovery plans

• Sharing partnerships

• Basic incomes

• Freezing debt payments for low income countries

• Put dividend and bonus payments on hold (banks and

coops)

• Quantitative Easing measures or direct public money

creation

Best practice examples.

Recommendations in the

IPCC special reports on global

warming of 1.5 ºC, land, the

ocean and cryosphere

IPCC 2018 What are the impacts of impacts of global

warming of 1.5°C above pre-industrial levels?

Scenarios • Avoiding carbon overshoot can only be achieved if global

CO2 emissions start to decline well before 2030

• A wide range of adaptation options should be used to

reduce the risks related to global warming

• Mitigation strategies to reduce net carbon emissions are

required to avoid more severe impacts.

Limiting global warming to 1.5°C

requires rapid and far-reaching

transitions in energy, land, urban

and infrastructure (including

transport and buildings), and

industrial systems. Climate

change generates negative

impacts on sustainable develop-

ment, eradication of poverty and

reducing inequalities.

Come On! Capitalism, Short-

termism, Population and the

Destruction of the Planet

von Weizsäcker and

Wijkman

2017 How to create more resilient economies

and why our current economic systems is

insufcient?

SDGs, planetary

boundaries, regen-

erative principles

– Fullerton, blue

economy etc.

• Rethink taxation

• Strengthen recycling and reuse targets

• Strengthen existing policies of promoting renewable

energy

• Introduce design requirements for new products for ease

of repair and maintenance

• Use public procurement to incentivise new business

models

• Make material efciency a core part of climate mitigation

policies.

• Launch investments, primarily in infrastructure, to

support the circular economy

• Support innovation in low-carbon solutions

• Exempt all secondary materials from VAT

Climate Change: An Antidote

To Democracy’s Mid-life Crisis

Richard Roberts 2018 How to make climate policy that is effective?

1. A flatrate, no-exceptions tax on emissions.

2. Investment in renewables and low-emission transport

infrastructure, which will also create jobs.

3. Enhanced protections for natural carbon sinks in public

hands.

4. Funding for research into carbon capture and use,

energy storage and next generation renewables.

5. Higher mandatory energy efciency standards for all

new buildings.

6. Scrappage schemes

7. Investment in climate adaptation and resilience.

8. Public awareness campaigns to promote dietary

changes that both reduce emissions and improve

health.

9. Lowering the voting age to 16.

111

Content ↑

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

The Economy For the Common

Good

Christian Felber, Gus

Hagelberg

2017 How to build an economy for the common

good?

ECG Frameworks • Ethical market economy designed to increase quality of

life for all

• Promote values of human dignity, human rights,

ecological responsibility

• Need for Common Good balance Sheet

• Common Good companies benet in marketplace

through consumer choice, cooperation partners,

common-good-orientated lending institutions

• Common Good companies should benet from

advantages in taxation, bank loans and public grants and

contracts

• Biz prots serve to strengthen and stabilize a company

and to ensure the income of owners and employees over

the long term

• Companies no longer forced to expand and grow

• Reduce income inequality is mandatory in order

to assure everyone equal economic and political

opportunities

Future Fit Positive Pursuit

Guide

2020 What can businesses do above and beyond its

pursuit to break-even to speed up transition

to future-tness?

Future Fit

Frameworks

• Create positive impact

• Reduce negative impact

• Amplify the positive impact of others

Ökonomien der Transformation

– Ansätze zukunftsfähigen

Wirtschaftens

WWF Deutschland 2020 Describes and criticizes concepts of Green

Economy, Bio Economy, Circular Economy

and checks practical examples of sustainable

development.

Best Practices Moves away from the absolute growth paradigm and

establishes thinking in a holistic and sustainable way.

World Bank (2020) Proposed

Sustainability Checklist for

Assessing Economic Recovery

Interventions, April 2020

World Bank Group -

Climate Change

2020 What are the steps to be taken for assessing

the sustainability of economic recovery

interventions?

Checklist divided

by topic and

short-term/

long-term

Aspects for assessing sustainability of economic recovery

interventions:

• Impacts on employment

• Economic activity

• Timeliness and risk

• Impact on human, social, natural, cultural and physical

capital impact on technologies

• Impact on fundamental market failures, increase

resilience and adaptive capacity

• Decarbonisationation

Addresses market failures and

impacts on different forms of

capital, including natural and

cultural in economic recovery

interventions post COVID-19

crisis.

COP26 Universities Network

Brieng (April 2020) A net-zero

emissions economic recovery

from COVID-19

COP26 Universities

Network (Jennifer Allan

et al.)

2020 How can the transition to net-zero emissions

contribute to recovery and economic growth

after covid19?

Policy survey • Reduce emissions

• Invest in cleaner technology/research/infrastructures,

invest in nature-based solutions

• Establish a Sustainable Recovery Alliance at COP26

UK could lead a climate-safe

recovery from COVID-19 by

leading a Sustainable Recovery

Alliance at COP26

Evergreen Action Plan

Sam Ricketts, Bracken

Hendricks and Maggie

Thomas

2020 How can we contribute to defeating the

climate crisis and build a new, socially and

environmentally sustainable economy?

n. a. • Invest in green and socially inclusive economic progress,

especially regarding job creation

• Use foreign policy to promote global action against

climate change

National and international

mobilization is key.

Envisioning a Not-For-Prot

World for a Sustainable Future

Jennifer Hinton 2019 How can we contribute to a Not-For-Prot

Business model for a sustainable economy?

Change directive for businesses to move beyond making

money.

Prot is not an end goal in itself.

Prot is only a means to create

a deeper end, community benet.

Committee on Climate Change

(2020) Letter to Prime Minister

on COVID19 recovery

Committee on Climate

Change (Lord Deben,

Baroness Brown of

Cambridge), Helen

Brown, Saamah

Abdallah, Ruth Townsley

2020 How can actions towards net-zero emissions

and to limit the damages from climate

change help rebuild the UK with a stronger

economy and increased resilience? How can

governments use local wellbeing indicators to

inform policy making?

Prioritisation of

actions based on

six principles of

resilient recovery.

Happy City Index,

1. Use climate investments to support the economic

recovery and jobs.

2. Lead a shift towards positive long-term behaviours.

3. Tackle the wider “resilience decit” on climate change.

4. Embed fairness as a core principle.

5. Ensure the recovery does not “lock-in” greenhouse gas

emissions or increased climate risk.

6. Strengthen incentives to reduce emissions when

considering scal changes.

7. “Measure what matters”.

• Investments in low-carbon and

climate-resilient infrastructure

• Support reskilling, retraining

and research for a net-zero,

well-adapted economy

• Upgrades to buildings

• Facilitation of walk, cycle, and

work remotely

• Tree planting, peatland

restoration, green spaces and

other green infrastructure

Content ↑

112

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

The Economy For the Common

Good

Christian Felber, Gus

Hagelberg

2017 How to build an economy for the common

good?

ECG Frameworks • Ethical market economy designed to increase quality of

life for all

• Promote values of human dignity, human rights,

ecological responsibility

• Need for Common Good balance Sheet

• Common Good companies benet in marketplace

through consumer choice, cooperation partners,

common-good-orientated lending institutions

• Common Good companies should benet from

advantages in taxation, bank loans and public grants and

contracts

• Biz prots serve to strengthen and stabilize a company

and to ensure the income of owners and employees over

the long term

• Companies no longer forced to expand and grow

• Reduce income inequality is mandatory in order

to assure everyone equal economic and political

opportunities

Future Fit Positive Pursuit

Guide

2020 What can businesses do above and beyond its

pursuit to break-even to speed up transition

to future-tness?

Future Fit

Frameworks

• Create positive impact

• Reduce negative impact

• Amplify the positive impact of others

Ökonomien der Transformation

– Ansätze zukunftsfähigen

Wirtschaftens

WWF Deutschland 2020 Describes and criticizes concepts of Green

Economy, Bio Economy, Circular Economy

and checks practical examples of sustainable

development.

Best Practices Moves away from the absolute growth paradigm and

establishes thinking in a holistic and sustainable way.

World Bank (2020) Proposed

Sustainability Checklist for

Assessing Economic Recovery

Interventions, April 2020

World Bank Group -

Climate Change

2020 What are the steps to be taken for assessing

the sustainability of economic recovery

interventions?

Checklist divided

by topic and

short-term/

long-term

Aspects for assessing sustainability of economic recovery

interventions:

• Impacts on employment

• Economic activity

• Timeliness and risk

• Impact on human, social, natural, cultural and physical

capital impact on technologies

• Impact on fundamental market failures, increase

resilience and adaptive capacity

• Decarbonisationation

Addresses market failures and

impacts on different forms of

capital, including natural and

cultural in economic recovery

interventions post COVID-19

crisis.

COP26 Universities Network

Brieng (April 2020) A net-zero

emissions economic recovery

from COVID-19

COP26 Universities

Network (Jennifer Allan

et al.)

2020 How can the transition to net-zero emissions

contribute to recovery and economic growth

after covid19?

Policy survey • Reduce emissions

• Invest in cleaner technology/research/infrastructures,

invest in nature-based solutions

• Establish a Sustainable Recovery Alliance at COP26

UK could lead a climate-safe

recovery from COVID-19 by

leading a Sustainable Recovery

Alliance at COP26

Evergreen Action Plan

Sam Ricketts, Bracken

Hendricks and Maggie

Thomas

2020 How can we contribute to defeating the

climate crisis and build a new, socially and

environmentally sustainable economy?

n. a. • Invest in green and socially inclusive economic progress,

especially regarding job creation

• Use foreign policy to promote global action against

climate change

National and international

mobilization is key.

Envisioning a Not-For-Prot

World for a Sustainable Future

Jennifer Hinton 2019 How can we contribute to a Not-For-Prot

Business model for a sustainable economy?

Change directive for businesses to move beyond making

money.

Prot is not an end goal in itself.

Prot is only a means to create

a deeper end, community benet.

Committee on Climate Change

(2020) Letter to Prime Minister

on COVID19 recovery

Committee on Climate

Change (Lord Deben,

Baroness Brown of

Cambridge), Helen

Brown, Saamah

Abdallah, Ruth Townsley

2020 How can actions towards net-zero emissions

and to limit the damages from climate

change help rebuild the UK with a stronger

economy and increased resilience? How can

governments use local wellbeing indicators to

inform policy making?

Prioritisation of

actions based on

six principles of

resilient recovery.

Happy City Index,

1. Use climate investments to support the economic

recovery and jobs.

2. Lead a shift towards positive long-term behaviours.

3. Tackle the wider “resilience decit” on climate change.

4. Embed fairness as a core principle.

5. Ensure the recovery does not “lock-in” greenhouse gas

emissions or increased climate risk.

6. Strengthen incentives to reduce emissions when

considering scal changes.

7. “Measure what matters”.

• Investments in low-carbon and

climate-resilient infrastructure

• Support reskilling, retraining

and research for a net-zero,

well-adapted economy

• Upgrades to buildings

• Facilitation of walk, cycle, and

work remotely

• Tree planting, peatland

restoration, green spaces and

other green infrastructure

113

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Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

September 2020 (and March

2021): the temporary and

the permanent impacts of

coronavirus, Dieter Helm, 25th

March 2020

Dieter Helm 2020 What will be the temporary and more

importantly the permanent effects once the

immediate emergency is over?

Qualitative scenario • Support to health service

• Measures of prevention and resilience to mitigate effects

of future pandemics and impacts from environmental

destruction

COVID-19 crisis will accelerate

renationalisation, intergenera-

tional conflicts and the retreat

from globalisation.

Why We Need a National

Investment Authority

Saule T. Omarova 2020 How can the US federal government mobilize

economic resources and manage emergency

bailouts in response to systemic crises in a

fully national, well-coordinated manner?

Set-up of a “national investment authority”, responsible

for:

1. Monitoring and management of capital allocation

2. Formulation of rapid crisis response/emergency bailout

mechanisms

3. Implementation of long-term economic development

strategies on the federal level

US Treasury and FED’s lack of

transparency and accountability

can equally be applied to the

European Central Bank.

MDBs (multilateral devel-

opment banks) response to

COVID19

Chris Humphrey (ODI) 2020 How to scale up multilateral nancing to face

the COVID-19 crisis?

• Bond rating

• Financial

investment for

development

Essential to expand lending to developing countries in a

coordinated manner among the major MDBs, with explicit

support of G20 and other shareholders.

MDB lending is crucial for

developing countries to recover

from COVID-19.

Jackson, Tim. 2017. Prosperity

without growth: foundations

for the economy of tomorrow

Tim Jackson 2017 What can prosperity possibly look like in a

nite world, with limited resources and a

population expected to exceed ten billion

people within a few decades? How is a new

understanding of prosperity made possible in

world that is not relying on economic growth?

• Become

independent of

growth

• Redene

prosperity

Re-dene:

a. enterprises

b. work

c. investment

d. money

e. the role of the State

CAN INTERNATIONAL (2020):

Fundamentals for Recovery &

Economic Stimulus Packages

in response to COVID-19, May

2020

Climate Action Network

International (CAN)

2020 What are the short- and long-term measures

to be implemented by governments

and all stakeholders to respond to this

pandemic and incoming climate related

challenges?

• Not bail out dirty industries.

• Planning and investments shall meet environmental and

social standards.

• Equity should be at the hearth of policy responses to

crisis.

• End fossil fuel subsidies.

Resilience depends on equity.

A government roadmap for

addressing the climate and

post COVID-19 economic

crises

Climate Action Tracker 2020 How can we synergistically solve COVID-19

and climate change crisis?

Scenario modelling

and projections

Green economic recovery would solve COVID-19 and the

climate crisis if certain actions are taken and some are

avoided.

Trade-offs and synergies

between COVID-19 and climate

change.

Post-Growth Policy

Instruments

Peter Ferguson 2013 Framework to evaluate post-growth policy.

Most effective policies reduce average

working hours, expand low productivity

sectors and reduce inequality. Specic

policy instruments include public sector

expansion and the promotion of cooperatives,

the introduction of citizens’ basic income

schemes, environmental tax reform, the

abolition of fossil fuel subsidies, reforms to

monetary policy, nancial regulatory reform

and the introduction of alternative measures

of progress to gross domestic product.

Wellbeing Budget New Zealand

New Zealand

Government

2020 What is the New Zealand government doing to

build a wellbeing economy?

Policy measures $ 3 B in operating funding/year

to ensure government services

continue to support NZ people

through extraordinary time.

Expand low productivity sectors

and reduce inequality.

Designing Border Carbon

Adjustments for Enhanced

Climate Action

Michael A. Mehling,

Harro van Asselt, Kasturi

Das, Susanne Droege,

Cleo Verkuijl

2019 How to design border carbon adjustments in

conformity with international trade law?

Historical overview

and policy analysis

Design and implement BCAs as to conform to international

trade law and WTO rules.

Illustration of the legal uncertain-

ties of GATT prescription when

designing BCAs.

Content ↑

114

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

September 2020 (and March

2021): the temporary and

the permanent impacts of

coronavirus, Dieter Helm, 25th

March 2020

Dieter Helm 2020 What will be the temporary and more

importantly the permanent effects once the

immediate emergency is over?

Qualitative scenario • Support to health service

• Measures of prevention and resilience to mitigate effects

of future pandemics and impacts from environmental

destruction

COVID-19 crisis will accelerate

renationalisation, intergenera-

tional conflicts and the retreat

from globalisation.

Why We Need a National

Investment Authority

Saule T. Omarova 2020 How can the US federal government mobilize

economic resources and manage emergency

bailouts in response to systemic crises in a

fully national, well-coordinated manner?

Set-up of a “national investment authority”, responsible

for:

1. Monitoring and management of capital allocation

2. Formulation of rapid crisis response/emergency bailout

mechanisms

3. Implementation of long-term economic development

strategies on the federal level

US Treasury and FED’s lack of

transparency and accountability

can equally be applied to the

European Central Bank.

MDBs (multilateral devel-

opment banks) response to

COVID19

Chris Humphrey (ODI) 2020 How to scale up multilateral nancing to face

the COVID-19 crisis?

• Bond rating

• Financial

investment for

development

Essential to expand lending to developing countries in a

coordinated manner among the major MDBs, with explicit

support of G20 and other shareholders.

MDB lending is crucial for

developing countries to recover

from COVID-19.

Jackson, Tim. 2017. Prosperity

without growth: foundations

for the economy of tomorrow

Tim Jackson 2017 What can prosperity possibly look like in a

nite world, with limited resources and a

population expected to exceed ten billion

people within a few decades? How is a new

understanding of prosperity made possible in

world that is not relying on economic growth?

• Become

independent of

growth

• Redene

prosperity

Re-dene:

a. enterprises

b. work

c. investment

d. money

e. the role of the State

CAN INTERNATIONAL (2020):

Fundamentals for Recovery &

Economic Stimulus Packages

in response to COVID-19, May

2020

Climate Action Network

International (CAN)

2020 What are the short- and long-term measures

to be implemented by governments

and all stakeholders to respond to this

pandemic and incoming climate related

challenges?

• Not bail out dirty industries.

• Planning and investments shall meet environmental and

social standards.

• Equity should be at the hearth of policy responses to

crisis.

• End fossil fuel subsidies.

Resilience depends on equity.

A government roadmap for

addressing the climate and

post COVID-19 economic

crises

Climate Action Tracker 2020 How can we synergistically solve COVID-19

and climate change crisis?

Scenario modelling

and projections

Green economic recovery would solve COVID-19 and the

climate crisis if certain actions are taken and some are

avoided.

Trade-offs and synergies

between COVID-19 and climate

change.

Post-Growth Policy

Instruments

Peter Ferguson 2013 Framework to evaluate post-growth policy.

Most effective policies reduce average

working hours, expand low productivity

sectors and reduce inequality. Specic

policy instruments include public sector

expansion and the promotion of cooperatives,

the introduction of citizens’ basic income

schemes, environmental tax reform, the

abolition of fossil fuel subsidies, reforms to

monetary policy, nancial regulatory reform

and the introduction of alternative measures

of progress to gross domestic product.

Wellbeing Budget New Zealand

New Zealand

Government

2020 What is the New Zealand government doing to

build a wellbeing economy?

Policy measures $ 3 B in operating funding/year

to ensure government services

continue to support NZ people

through extraordinary time.

Expand low productivity sectors

and reduce inequality.

Designing Border Carbon

Adjustments for Enhanced

Climate Action

Michael A. Mehling,

Harro van Asselt, Kasturi

Das, Susanne Droege,

Cleo Verkuijl

2019 How to design border carbon adjustments in

conformity with international trade law?

Historical overview

and policy analysis

Design and implement BCAs as to conform to international

trade law and WTO rules.

Illustration of the legal uncertain-

ties of GATT prescription when

designing BCAs.

115

Content ↑

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

Gesellschaftliches Wohl-

ergehen innerhalb planetarer

Grenzen – Der Ansatz

einer vorsorgeorientierten

Postwachstumsposition

Umweltbundesamt 2018 What is the role of economic performance

(growth) and its future development in

maintaining planetary boundaries? What are

the best policies that degrowth and degrowth

could possibly deliver? How would the

perspective of a “precautionary post-growth

position” look like?

Policies from

degrowth and green

growth perspective

Instruments to achieve environmental objectives and

to reduce the dependence on growth in the area of

employment and social security systems

The Green Swan: Central

Banking in the Age of Climate

Change

Patrick Bolton, Morgan

Despres, Luiz Awazu

Pereira da Silva, Frederic

Samana, Romain

Svartzman

2020 What is the role for central banks in the

complex, non-linear affair of climate change?

Which actions can they take within their

mandates?

Non-equilibrium

models (e. g. Stock

flow consistent,

Agent based).

Sensitivity analysis,

Case studies on risks

and transmission

channels between

climate change,

ecological transition,

real economy and

nancial stability.

Socio-technical

systems change

model (Geels et al.

2017)

Integrate climate-related risks into macroprudential

supervision through stress testing and micro-supervision

of nancial institutions strategies and risk management

procedures. Use Central Banks’ own portfolios to promote

green (extra-nancial) objectives. Update collateral

frameworks for Quantitative Easing to reflect climate-

related risks – thus abandoning a false notion of “neutral-

ity”. Cooperate with governments and scal policy for

nancing a transition. Engage in multilateral cooperation.

Integrate sustainability into corporate and national

accounting frameworks

Comprehension of climate-

related risks need to go beyond

established policy and modelling

practices.

Network for Greening the

Financial System: A call for

action Climate change as a

source of nancial risk

Network For Greening

the Financial System

(63 central banks and

supervisors). Secretariat

is provided by the

Banque de France

2019 Understanding how climate change affects

the nancial system and the economy.

Scenario analysis,

granular modelling

of transmission

channels. Critical

stance towards

integrated assess-

ment models

1. Integrate climate-related risks to prudential

supervision.

2. Manage own portfolios according to sustainability

criteria.

3. Bridge data gaps.

4. Build awareness and institutional capacity.

5. Achieve robust and internationally standardised

disclosures.

6. Support the development of a taxonomy for economic

activities.

Focus on scenarios and trans-

mission channels instead of

macro modelling.

Growth imperatives:

Substantiating a contested

concept

Oliver Richters, Andreas

Siemoneit

2019 Economic growth remains a prominent polit-

ical goal, despite its conflicts with ecological

sustainability. Are growth policies only a

question of political or individual will, or do

“growth imperatives” make the inescapable?

Literature review Limit resource consumption and redistribute economic

rents.

Integrating Climate-related

Risks into Banks’ Capital

Requirements

Maria Berenguer, Michel

Cardona, Julie Evain

2020 Unpack the debate about using differentials

in capital requirements to green the nancial

system.

• Development of a taxonomy

• Being explicit about which goal (reduction of risk or

industrial policy) one wants to achieve

Debate about capital

requirements

The UK: Global Hub, Local

Dynamics: Mapping the

Transition to a Sustainable

Financial System

Nick Robins and Jeremy

McDaniels

2016 Describe developments in sustainable nance

in the UK and make recommendations for a

strategy.

Ecosystem mapping

exercise through

case study

• Social Innovation: aligning nance with individual values

and social purpose, from socially responsible investment

through fossil fuel divestment to new green peer-to-peer

initiatives.

• Institutional Stewardship: placing sustainability factors at

the heart of mainstream nancial sectors, most notably

investment management.

• Housing Finance: improving the environmental and energy

performance of the UK’s housing stock through new ways

to mobilize nancing.

• Capital Markets Mobilization: incorporating sustainability

into equity and debt market disclosure, analysis and

capital raising.

• Prudential Governance: embedding sustainability into the

oversight of the safety and soundness of key sectors and

the system as a whole.

• Public Balance Sheet: mobilizing scal and other resources

to facilitate the transition to a low-carbon, green economy.

Content ↑

116

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

Gesellschaftliches Wohl-

ergehen innerhalb planetarer

Grenzen – Der Ansatz

einer vorsorgeorientierten

Postwachstumsposition

Umweltbundesamt 2018 What is the role of economic performance

(growth) and its future development in

maintaining planetary boundaries? What are

the best policies that degrowth and degrowth

could possibly deliver? How would the

perspective of a “precautionary post-growth

position” look like?

Policies from

degrowth and green

growth perspective

Instruments to achieve environmental objectives and

to reduce the dependence on growth in the area of

employment and social security systems

The Green Swan: Central

Banking in the Age of Climate

Change

Patrick Bolton, Morgan

Despres, Luiz Awazu

Pereira da Silva, Frederic

Samana, Romain

Svartzman

2020 What is the role for central banks in the

complex, non-linear affair of climate change?

Which actions can they take within their

mandates?

Non-equilibrium

models (e. g. Stock

flow consistent,

Agent based).

Sensitivity analysis,

Case studies on risks

and transmission

channels between

climate change,

ecological transition,

real economy and

nancial stability.

Socio-technical

systems change

model (Geels et al.

2017)

Integrate climate-related risks into macroprudential

supervision through stress testing and micro-supervision

of nancial institutions strategies and risk management

procedures. Use Central Banks’ own portfolios to promote

green (extra-nancial) objectives. Update collateral

frameworks for Quantitative Easing to reflect climate-

related risks – thus abandoning a false notion of “neutral-

ity”. Cooperate with governments and scal policy for

nancing a transition. Engage in multilateral cooperation.

Integrate sustainability into corporate and national

accounting frameworks

Comprehension of climate-

related risks need to go beyond

established policy and modelling

practices.

Network for Greening the

Financial System: A call for

action Climate change as a

source of nancial risk

Network For Greening

the Financial System

(63 central banks and

supervisors). Secretariat

is provided by the

Banque de France

2019 Understanding how climate change affects

the nancial system and the economy.

Scenario analysis,

granular modelling

of transmission

channels. Critical

stance towards

integrated assess-

ment models

1. Integrate climate-related risks to prudential

supervision.

2. Manage own portfolios according to sustainability

criteria.

3. Bridge data gaps.

4. Build awareness and institutional capacity.

5. Achieve robust and internationally standardised

disclosures.

6. Support the development of a taxonomy for economic

activities.

Focus on scenarios and trans-

mission channels instead of

macro modelling.

Growth imperatives:

Substantiating a contested

concept

Oliver Richters, Andreas

Siemoneit

2019 Economic growth remains a prominent polit-

ical goal, despite its conflicts with ecological

sustainability. Are growth policies only a

question of political or individual will, or do

“growth imperatives” make the inescapable?

Literature review Limit resource consumption and redistribute economic

rents.

Integrating Climate-related

Risks into Banks’ Capital

Requirements

Maria Berenguer, Michel

Cardona, Julie Evain

2020 Unpack the debate about using differentials

in capital requirements to green the nancial

system.

• Development of a taxonomy

• Being explicit about which goal (reduction of risk or

industrial policy) one wants to achieve

Debate about capital

requirements

The UK: Global Hub, Local

Dynamics: Mapping the

Transition to a Sustainable

Financial System

Nick Robins and Jeremy

McDaniels

2016 Describe developments in sustainable nance

in the UK and make recommendations for a

strategy.

Ecosystem mapping

exercise through

case study

• Social Innovation: aligning nance with individual values

and social purpose, from socially responsible investment

through fossil fuel divestment to new green peer-to-peer

initiatives.

• Institutional Stewardship: placing sustainability factors at

the heart of mainstream nancial sectors, most notably

investment management.

• Housing Finance: improving the environmental and energy

performance of the UK’s housing stock through new ways

to mobilize nancing.

• Capital Markets Mobilization: incorporating sustainability

into equity and debt market disclosure, analysis and

capital raising.

• Prudential Governance: embedding sustainability into the

oversight of the safety and soundness of key sectors and

the system as a whole.

• Public Balance Sheet: mobilizing scal and other resources

to facilitate the transition to a low-carbon, green economy.

117

Content ↑

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

Greening Monetary Policy

Dirk Schoenmaker 2019 Should Central Banks take the carbon

intensity of

assets into account in the context of mone-

tary policy?

Legal argument for

the ECB, numerical

examples for green

tilting.

Green tilt of central banks’ corporate bond portfolio. Proposes an incremental green

quantitative easing path that

might be easier to implement

than full scale suggestions.

OECD Green Budgeting

2020

Standardise accounting Green budgeting

Into the wild – Integrating

nature into investment

strategies

Hugo Bluet, Ciprian

Ionescu,

2019 How can nance contribute to the decrease of

the degradation of biodiversity?

Case studies,

revisiting of

biodiversity and

other ecosystem

foot-printing and

scenario tools

1. Task force on nature related disclosures in analogy to

FSB TCFD

2. Ensure that biodiversity is integrated in ESG ratings – in

the longer-term methodologies should be harmonized

3. Develop a framework to assess biodiversity risk.

4. Develop biodiversity labels for nancial products

State of the Apes The Impact

of Infrastructure Development

on Biodiversity

Jo Alexander 2019 What should institutional investors do to mini-

mize harmful impacts on biodiversity when

investing in infrastructure projects? What

risks does the failure to consider biodiversity

questions entail?

Investors and banks should establish processes to monitor

biodiversity as well as dispossession of indigenous land

when nancing infrastructure projects.

A Green Stimulus to Rebuild

Our Economy;

Johanna Bozuwa et al. 2020 What kind of economic stimulus should we

pursue to respond to COVID-19, climate

change and rising inequality in the US?

Policy option menu

grounded on four

key strategies

• Create new family-sustaining, career-track green jobs

• Deliver strategic investments

• Expand public and employee ownership

• Make rapid cuts to carbon pollution

Climate change is a challenge

but also presents opportunities

for ghting unemployment and

inequality.

Issues in the design of scal

policy rules

Portes and Wren-Lewis 2014 Repositioning scal rules as enablers of

government spending to aid resilience and

solve social and environmental issues rather

than merely maintaining stable debt-to-GDP

ratios.

• Fiscal rules that target necessary decit

• “Fiscal councils” to help guard against either under or

overuse of scal space

Just about managing demand:

Reforming the UK’s macro-

economic policy framework

Ale Stirling 2018 1. New scal rules which would enable more

active scal policy in a downturn, including

greater public investment.

2. Revision of the Bank of England’s mandate

to help interest rates rise faster in time for

the next recession.

3. New mechanism to delegate an economic

stimulus to a new National Investment

Bank and purchase its bonds to ensure a

direct injection of demand.

Demand.

Public Finance for a Green New

Deal

Stirling and van Lerven 2019 What kind of scal rules and policy framework

(macroeconomics) do we need to tackle the

climate emergency?

New scal rules and coordination between treasury and

central banks

Government borrowing is key

to tackle climate and wider

ecological crisis

Content ↑

118

Title Authors

Pub -

lished

Key Questions

Theories, Models,

Methods

Recommendations

Useful Insights and

Arguments

Greening Monetary Policy

Dirk Schoenmaker 2019 Should Central Banks take the carbon

intensity of

assets into account in the context of mone-

tary policy?

Legal argument for

the ECB, numerical

examples for green

tilting.

Green tilt of central banks’ corporate bond portfolio. Proposes an incremental green

quantitative easing path that

might be easier to implement

than full scale suggestions.

OECD Green Budgeting

2020

Standardise accounting Green budgeting

Into the wild – Integrating

nature into investment

strategies

Hugo Bluet, Ciprian

Ionescu,

2019 How can nance contribute to the decrease of

the degradation of biodiversity?

Case studies,

revisiting of

biodiversity and

other ecosystem

foot-printing and

scenario tools

1. Task force on nature related disclosures in analogy to

FSB TCFD

2. Ensure that biodiversity is integrated in ESG ratings – in

the longer-term methodologies should be harmonized

3. Develop a framework to assess biodiversity risk.

4. Develop biodiversity labels for nancial products

State of the Apes The Impact

of Infrastructure Development

on Biodiversity

Jo Alexander 2019 What should institutional investors do to mini-

mize harmful impacts on biodiversity when

investing in infrastructure projects? What

risks does the failure to consider biodiversity

questions entail?

Investors and banks should establish processes to monitor

biodiversity as well as dispossession of indigenous land

when nancing infrastructure projects.

A Green Stimulus to Rebuild

Our Economy;

Johanna Bozuwa et al. 2020 What kind of economic stimulus should we

pursue to respond to COVID-19, climate

change and rising inequality in the US?

Policy option menu

grounded on four

key strategies

• Create new family-sustaining, career-track green jobs

• Deliver strategic investments

• Expand public and employee ownership

• Make rapid cuts to carbon pollution

Climate change is a challenge

but also presents opportunities

for ghting unemployment and

inequality.

Issues in the design of scal

policy rules

Portes and Wren-Lewis 2014 Repositioning scal rules as enablers of

government spending to aid resilience and

solve social and environmental issues rather

than merely maintaining stable debt-to-GDP

ratios.

• Fiscal rules that target necessary decit

• “Fiscal councils” to help guard against either under or

overuse of scal space

Just about managing demand:

Reforming the UK’s macro-

economic policy framework

Ale Stirling 2018 1. New scal rules which would enable more

active scal policy in a downturn, including

greater public investment.

2. Revision of the Bank of England’s mandate

to help interest rates rise faster in time for

the next recession.

3. New mechanism to delegate an economic

stimulus to a new National Investment

Bank and purchase its bonds to ensure a

direct injection of demand.

Demand.

Public Finance for a Green New

Deal

Stirling and van Lerven 2019 What kind of scal rules and policy framework

(macroeconomics) do we need to tackle the

climate emergency?

New scal rules and coordination between treasury and

central banks

Government borrowing is key

to tackle climate and wider

ecological crisis

119

Content ↑

Page intentionally left blank.

ZOE. institute for future-t economies

Thomas Mann Str. 36, 53111 Bonn, Germany

+49 (0) 228 / 387 576 02 — info@zoe-institut.de

www.zoe-institut.de/en

institute for

future-ﬁt

economies