Blog: Green leadership - an investment that pays. - Hoofdinhoud

What will deliver healthy cities, green countryside, clean oceans and a future for our children? In a word: investment. From May 30 to June 3, the European Commission will host Green Week, an event that will highlight, across Europe, how the idea of a ‘trade-off’ between the economy and the environment is outdated.

Instead, our future will be built on investment that integrates economic opportunity with sustainable environment practice. I will be celebrating the link between investment and our environmental future with a different focus each day.

It is said that necessity is the mother of invention; in that case investment is the “wealthy aunt”. Our week will illustrate that to make progress we need to encourage risk-takers and innovators. And that is not just encouragement for the inventors.

Some of the biggest risk and innovations are by investors. Access to finance can be difficult for companies in environmental sectors because of a lack of understanding of the new business models driving them. Projects can be too risky or too long-term for traditional investors.

But not taking into account environmental pressures is a risk in itself for investors. Pressures on resources can lead to supply shocks and price fluctuations that have a strong impact on investment performance, and these factors need to be increasingly taken into account by fund managers and investors.

Many companies are also taking a longer-term perspective, realising that investment on the basis of quarterly performance is short sighted and will not build sustainable profits. Governments are also taking a look at rules surrounding fiduciary duties, governance and reporting to tackle these market failures in our financial systems.

The Investment Plan for Europe addresses precisely this element. The European Fund for Strategic Investments (EFSI), the heart of the investment plan, has an overall target to mobilise investment of at least €315 billion in Europe over three years, with an estimated €50 billion of investment already triggered by the end of 2015.

EFSI investments will help raise private finance, especially in areas where commercial banking is hesitant to get involved. Of the 54 projects the European Investment Bank has pre-selected for EFSI financing a total of 18 are environmental. This is real innovation.

Other tools such as the natural capital financing facility are overcoming the undervaluation of natural capital and exploiting the potential of eco-system services, and some member states are leading the way in launching green bonds.

It is also said that “leadership is an investment that pays off”. This is definitely the case when we look at environmental leadership, as we have seen in recent years. Those companies that have best weathered the storm of recession are the ones that have shown leadership, embraced environmental concerns, and invested in forward looking projects.

In the EU, green industries grew by more than 50 per cent between 2000 and 2011, and jobs in environmental goods and services increased from 2.9 to 4.3 million between 2000 and 2012.

The circular economy is a case in point. If designed right, circular economy models can enable a triple win. There are economic gains to be made from using raw materials and resources more efficiently and being less dependent on imports.

There are environmental gains from moving away from a linear economy, where we throw away products that could be repaired or recycled. There are social gains to be made from longer lasting and more efficient products, from preventing waste, further improving local waste management, recycling, repair and re-use services. Not to mention the significant additional employment opportunities created by moving further towards a circular economy.

To really make these changes happen, we need to provide the framework conditions for investor confidence, and we need to harness the financial system towards sustainable projects, not only for green goods and services, but financing sustainable solutions in agriculture, industry, energy, water, construction, transport, sanitation and many other areas.

On each day of Green Week we will be asking one of the following questions.

• How can we make cities a better place to live?

• How do we make sure our countryside stays healthy and productive in the long run?

• How do we finance the changes needed to make our future green?

• How do we make sure our oceans are healthy and productive in the long run?

• How can we ensure the long-term prosperity and well-being of future generations?

The European Union has been at the forefront of efforts to build a financial system that supports sustainable development; but there is still much to be done. If we combine all our efforts and creative minds, surely we can come up with answers to these questions and together commit to take a number of steps for investing in a greener future.

I hope you will find Green Week inspiring and that you will join the many dialogues and conversations wherever you are and with whatever time you can invest.

Karmenu Vella is European Commissioner for the Environment, Maritime Affairs and Fisheries.

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This article originally appeared in http://www.timesofmalta.com/articles/view/20160530/opinion/green-leadership-an-investment-that-pays.613741

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