Just six months ago, we couldn't have predicted that the horror of the summer bushfires – after one of the worst droughts on record – could be topped.
Then came the COVID-19 pandemic, the worst public health crisis the world has faced in 100 years.
While the nation's focus remains firmly fixed on managing this crisis and the long road to recovery, the uncomfortable truth is that this won't be the last major economic and social shock we'll face.
Fires, floods, storms, viral superbugs, geo-politics, cyber-crimes or other events – major shocks will sadly be part of our future as much as they’ve littered our past.
That's why it’s critical that post-pandemic recovery initiatives by businesses, including the finance sector, have an eye on building even greater economic resilience through actions that prioritise human wellbeing, social equity and environmental protection, particularly those outlined in the United Nations Sustainable Development Goals (UNSDGs), to which Australia committed in 2015.
Yes, many businesses are facing the challenge of fighting for financial survival today. But those that have signed up to UNSDGs, will know that if we fail to deliver on the goals, the economic cost of future crises is likely to be exacerbated.
Troublingly, Australia’s UNSDG report card to date, released earlier this month, is mixed: We’ve made strong progress in health and education, but have performed poorly in addressing inequality, housing affordability and climate change.
And despite widespread praise for Australia’s response to the pandemic, including the federal government’s historic more than $250 billion economic support package, further progress towards the UNSDGs will face ongoing challenges given the alarming rise in unemployment, under-employment, and government and household debt resulting from the pandemic.
We will have to double-down on efforts.
Like many other countries, Australia is turning to infrastructure investment to boost the economy, the government recently announcing a $1.5bn allocation to fast-track critical infrastructure projects, contributing to the biggest round of global infrastructure investment since the post-2008 financial crisis stimulus measures.
There are abundant opportunities to prioritise infrastructure that is sustainable, technologically advanced and resilient. For example, climate resilient infrastructure, social housing, energy efficiency programs and electricity transmission networks that better connect distributed energy sources.
Looking at various recovery plans around the world, it seems two common themes – green and digital – are emerging as central planks in many support packages, including in Europe, Germany, China and South Korea.
The European Commission’s comprehensive €750bn ($1.2 trillion) plan includes a €560bn recovery and resilience facility “to press fast-forward” on its twin priorities of green and digital transitions, the Commission’s president noting that its choices will “define tomorrow’s future for the next generation”. Similarly, the International Monetary Fund, which has pledged to lend governments up to $US1 trillion to aide recovery, has urged policymakers to direct funds towards a “green recovery”. And US presumptive presidential nominee Joe Biden outlined his plan to invest $US2 trillion to boost clean energy and rebuild infrastructure to achieve an emissions free power sector by 2035.
The finance sector has a huge role to play, both in the recovery and changing Australia’s trajectory on climate change and social indicators – and recognises this. In fact, it was a driving force behind the establishment last year of the Australian Sustainable Finance Initiative (ASFI), a collaboration between 90 finance organisations, along with civil society groups and academics, to support the transition to a more resilient and sustainable economy, and ensure Australia’s ongoing prosperity.
Over the past year, ASFI has made good progress towards creating a roadmap for the finance sector to achieve these aims, publishing an interim report in December 2019. But the emergence of COVID-19 has added another dimension to this work with important lesson being integrated, and ASFI expects to release the final roadmap and recommendations later this year.
This work is of even greater need right now to ensure a coordinated plan across the finance sector, that can mobilise capital for sustainable finance initiatives while enhancing the stability of the financial system through better management of sustainability risks.
Recovering from the pandemic will be a hard slog, with a lot of heartache yet to come.
But we – as businesses and financial organisations – must not lose sight of the role we play in building even greater economic resilience, including tackling climate risk, so our children and grandchildren are better prepared for the future.
Choices made now will shape our economy for decades to come.
The views expressed are those of the author and do not necessarily reflect those of the Westpac Group.