Maybe solvency

In terms of finance, we need the huge fiscal powers of the state — powers demonstrated by successive unprecedented governmental responses to the 2008 financial crisis and COVID-19 — to be focused on the green transition. This time around we cannot just inject the system with liquidity; finance must be directed towards creating a sustainable economy — changing old industries such as steel and cement, and investing in green technologies and renewable energy. This must occur through an aligned set of policies and a range of mechanisms including innovation agencies, procurement and patient long-term finance provided through public development banks. Ambitious policies need to be structured to ‘crowd in’ private investors, with conditionalities attached to ensure the result is truly inclusive and sustainable. A new social contract is required. Specifically, green conditionalities need to be built into public–private partnerships, public procurement contracts and bailout deals. A good example of the state taking the initiative and leading the green economy agenda is Germany’s state-owned development bank, KfW, which offers loans to the steel industry that include conditions to reduce carbon content and emissions. The French and Dutch governments’ COVID-19 bailouts for their national airline carriers, Air France and KLM, were made conditional on planes reducing emissions per passenger and cutting domestic flights in favour of rail travel — by 40% in France. But such one-off deals need to be rolled out across multiple markets — they should be normalized in both good times and bad. New metrics that measure commitments to decarbonization need to be internalized into markets so that investors and regulators can mandate companies to report the price of carbon they assume in their strategic planning. Shareholder value just doesn’t cut it anymore. The Green New Deal needs to radically transform capitalism — if it is to be saved from itself, and us from it. The only way to do this is through reorienting the economy around mission thinking. This means redesigning financial systems, public–private partnerships and public policy to align with the Sustainable Development Goals. Only then will we build a more innovative, sustainable and resilient economy, capable of meeting the climate challenge, rather than reacting to one crisis after another.