Sustainability Amidst COVID-19 Recovery: Building Resilience
News    ·   19-06-2020

AUTHOR: Malcolm Falzon; Maxine Gauci

As efforts to tackle the pressing threats posed by climate change intensify, so has the pressure on financiers and investors to contribute to the solution. Although in its early stages, it is increasingly recognised that the adoption of sustainable finance is bound to be a key component of any sustainable development strategy.

As suggested in the first instalment of our 8-part ‘Sustainable Finance’ series, through which we will assess the pivotal role of finance in shaping a sustainable economy, the impetus for the sustainable finance movement is growing out of the perceived inadequacy of an economic model fuelled exclusively by self-interest and financial return with little or no regard to the environmental and social consequences of investments. It has taken a global health crisis of unprecedented proportions  to get many to take a collective pause and reflect on what, from the status quo, may merit a re-think. As factories and stores shut their doors and streets and skies cleared up, a real-life test case for decarbonising the world’s economy emerged. One prominent question in this respect is: what role does sustainable finance play in achieving this goal?

The COVID-19 pandemic hit at a time when, it can be said, sustainable development goals were finally gaining traction. As world leaders grappled with this global health crisis in recent months, priorities have had to be adjusted, and resources reallocated. As time goes by, an increasing number of countries, including Malta, are starting to look beyond the crisis. From immediate relief aid to long-term recovery strategies, the narrative that emerges from this second instalment of our ‘Sustainable Finance’ series is that a unique opportunity to address the climate change emergency would be missed if it were not to be taken now, in tandem with the post-COVID response. The solutions to the climate change emergency and COVID-induced difficulties must be integrated into one coherent response.

As the world wound down, CO2 emissions fell sharply as never before. No recession, civil strife or other pandemic has ever had such a significant and immediate impact on carbon output (for the better). Combining the scale of societal disruption with projected sharp drops in industrial activity and transit-related emissions, experts predict that COVID-19 is set to cause the largest ever annual drop in emissions.

While the pandemic is on track to leave its mark on 2020’s carbon bill - and many have applauded the fall in emissions - this planetary breather is no cause for celebration. Many have expressed fear that an existential climate threat looms large. While the PRC, the origin of the outbreak, restarts its factories, the economies of the U.S. and Europe, the world’s second and third largest carbon emitters respectively, lag behind in terms of getting back to business. It is difficult to say when economies will rebound. What is of concern is the ‘how’ this will unfold. As we inch closer to being confident enough to assert that the pandemic is under control and the health crisis has subsided, most leaders of stagnating economies anxious to return to pre-COVID levels of output will be tempted to return to the default means of jumpstarting economic recovery, including, it is feared, an overuse of tried and tested fossil fuels. But must this growth spurt necessarily come at the cost of neglecting what has, undeniably, proved to be an insight into what it would be like to live in a world not consumed by excess consumption and consequent environmental damage?

Recognising that, like the pandemic, greenhouse gases know no boundaries, other parallels could be drawn between the crises of rising temperatures. For starters, the unprecedented global disruption caused by COVID-19 has taught us that our way of life is vulnerable and endangered. The digital response to the outbreak suggests that pre-COVID levels of commuting, be it by land, air or sea, may not necessarily be as indispensable as we have come to believe. Although there will always be those who oppose any economic sacrifice whatsoever, it is safe to assume that many would be keen to consider making significant changes to the state of affairs prevailing pre-COVID.

On a macro level, recognition that GDP is an antiquated metric of assessing economic performance and, by default, social progress, may well be on the cards. We need to cultivate a novel way of thinking about the economy and devise new policies to guard against future threats or crises, whilst addressing climate change.

From bluer skies to cleaner seas, the unprecedented scale of lockdown has resulted in various welcome changes in our environment. However, in contrast with the slow-burning crisis that is climate change, COVID-19 proved abrupt and unforeseen. Consequently, reaching global carbon emissions targets through degrowth should not be the answer to the looming threat to the climate, as is or was the case for the pandemic in an effort to prevent mass death, but a last resort. Glen Peters, a senior researcher at the Centre for International Climate and Environmental Research (CICERO) commented that, "Such emission reductions will not happen via lockdowns and restrictions, but by climate policies that lead to the deployment of clean technologies and reductions in demand for energy."

The emergence of COVID-19 as “a public health emergency of international concern” prompted radical state intervention across the globe, unprecedented in size and scale. A similar approach, drastic as it may be, is required to confront the environmental emergency. The mounting evidence of the devastating effects that climate change will have over the decades to come can hardly be more damning, yet world leaders have generally been far less engaged in adopting effective measures to avert the climate crisis.

The concern in this respect is that, post-pandemic, direct capital towards other imminent global needs will be in short supply. The challenge is therefore that of ensuring that the response to any COVID-induced recession, despite being posited against a pandemic backdrop, is tinged with a green focus. Governments currently face a stark choice between boosting low-carbon industries, or choosing the quick economic fix of letting businesses return to their carbon-intensive activities. A successful recovery will be contingent on a greener pathway out of the COVID-19 slump through a more responsible business lens. Recovery strategies aimed at building much-needed resilience in the private sector would do well to weave environmental, social and governance (ESG) considerations into investment decisions. A push towards sustainable bond and loan financing as a source of lending offering a different slant to mainstream corporate debt, would also merit careful attention. By contrast to traditional finance, the sustainable finance looks beyond financial return, and considers financial, social and environment returns in combination.

In planning the COVID-19 pandemic recovery, UN Secretary-General António Guterres claims that there is an opportunity to steer the world on “a path that tackles climate change, protects the environment, reverses biodiversity loss and ensures the long-term health and security of humankind”. Indeed, this crisis provides an opportunity to propel the global economy towards a more resilient system that recognises that the well-being of the planet and humanity are interlinked - an opportunity to “Build Back Better”.

This piece forms part of Camilleri Preziosi’s ‘Sustainable Finance’ series, in which members of the firm’s Capital Markets and Finance teams explore and evaluate the emerging trends and opportunities in the sustainable finance economy. For further information, contact

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