Deutsche Bank debate shows that growth must be part of the solution if we are to avoid disastrous climate change while reducing inequality worldwide.
Our society and all its systems are based on growth. The globalisation of this principle has lifted hundreds of millions of people out of poverty in recent decades. Yet much of this growth has come at the expense of our natural environment. As people have become more prosperous, so they have consumed more resources, and created more pollution. The scientific consensus is that our climate is now heating rapidly and that urgent measures are necessary to avert devastating consequences for the environment.
It was in this context that, in January 2020, Deutsche Bank decided to ask the World Economic Forum a provocative question: "Is growth an illusion?" With historically elevated borrowing levels and the environment under threat, we wanted to explore whether growth is in jeopardy, or whether new drivers can be discerned on the horizon. To help us do this, we invited some of the world's leading thinkers in economics and finance, academia and climatology to meet senior executives and clients at our intimate venue on the snowy Promenade in central Davos.
“Big green investments are needed but growth needs to be part of the solution and not discarded in the process.”
Global Head of Thematic Research, Deutsche Bank
Balancing growth and environmental protection: an optimistic view
One of the many sessions held here during the week, "Tackling climate change and driving growth", was presented by Claudio de Sanctis, Global Head of Deutsche Bank Wealth Management, and featured two guest speakers at the cutting edge of the climate change debate.
Lord Nicholas Stern, Chairman of the Grantham Research Institute on Climate Change and the Environment, was positive about the idea of achieving sustainable economic growth for the global economy. He was also clear that growth and ecological responsibility had to work hand-in-hand. "In the short term, it's very important that we invest in ways that incorporate much cleaner, more efficient new technologies – and they will drive growth," he said. Such investment should create a virtuous circle, he said: "In cities where we can move and breathe, we will be much more productive."
Ólafur Ragnar Grímsson is a former president of Iceland who now chairs Arctic Circle, an organisation dedicated to international dialogue and cooperation on the future of the Arctic. He too was optimistic, based partly on the tremendous strides made by China in recent years to develop and proliferate renewable sources of energy. Although the country is the world's biggest emitter of carbon dioxide, it is also now the world leader in "solar power, wind power, electrification of traffic and urban geothermal heating," he said – adding that it had all been achieved in the last decade. "One of the reasons why solar has now become cost-competitive with oil and coal is how aggressively China – and India – have come into the solar energy business."
What the shift to sustainable growth could mean for the global economy
As our CIO team reported in their Annual Outlook for 2020, global economic growth is showing signs of slowing and Resource Stewardship is a long-term investment theme that should not be ignored. Investing based on environmental, social and governance (ESG) criteria is also growing rapidly.
That view is shared by Jim Reid, Global Head of Thematic Research at Deutsche Bank. “History tells us that growth is very positive for the development of humankind in terms of prosperity, innovation and health," he says. "Without it, the human race will likely see fiercer challenges than the ones we face now." As we tackle the climate emergency, it is critical, he suggests, that "growth needs to be part of the solution and is not discarded in the process."
For more information on the growth debate hosted by Deutsche Bank at Davos in 2020, including videos and podcasts from our event contributors, please click here. You can download a special report by Jim Reid, "Davos 2020: We need to talk about (sustainable) growth", here.