Good morning, good afternoon, good evening. I would like to thank the Bank of Cyprus and the organizers of the 5th Business Leaders Summit for inviting me and I am happy that this important and prestigious event can take place under continued trying circumstances in 2021.
I am delighted to speak on the important topic of Environment, Social and Governance - ESG - and how to leverage green opportunities of the post-pandemic recovery in Europe.
The COVID-19 crisis continues to cause loss of life worldwide, with more than 4.5 million deaths to date, and with infections rising at an alarming rate in many countries. Since the pandemic began, 34 percent of all Covid-19 infection cases globally have been in the Europe and Central Asia region. In fact, 10 of the 12 countries with the highest case count worldwide are in our region.
The pandemic has not been the only shock to countries in Europe and Central Asia. The region has also been hit recently by natural disasters with lasting impact. Southern Europe, Albania, Croatia, Turkey and Greece have all experienced major earthquakes in the past two years and the recent wildfires present a very clear danger to citizens across the region.
In addition to the health crisis, the pandemic has triggered a worldwide economic crisis. We are all pleased to see global economic activity picking up this year after large contraction across the world in 2020, but growth is likely to be uneven across the world and still subjected to significant downside risks.
The World Bank estimates that economic activity contracted by 2 percent in the Europe and Central Asia region in 2020. Economies with strong trade or financial linkages to the euro area, and those heavily dependent on services and tourism, were the hardest hit. We estimate that last year’s economic contraction could push an additional 6 million people into poverty, based on the $5.50 a day poverty line - commonly used in upper-middle-income countries.
We are also seeing signs that children and women are being disproportionately affected by the crisis. Across the region, the overall learning loss resulting from the COVID-19 pandemic is estimated to be as much as 30 PISA points – the equivalent of losing a whole year of schooling. A likely outcome for many young people is reduced access to higher education, lower labor market participation and consequently lower future earnings.
A World Bank survey on COVID-19 has revealed that 76 percent of women were mostly or solely responsible for household chores and home schooling during the pandemic. Women with less education were disproportionately hit by the unequal division of chores within families. And, a larger proportion of women work in sectors that were forced to close.
Billions of dollars have been spent on recovery programs to protect the global economy. At the World Bank, our COVID-19 emergency response has been fast and decisive in delivering support to developing countries, with a focus on helping the poorest and most vulnerable.
World Bank programs, in normal times around $42 billion per year, grew last calendar year to over $70 billion to meet intensified demand. Over 60 percent of our new operations are directly in response to the COVID crisis.
But our work is far from finished. Our ongoing support to clients must focus on the pressing challenges of our time and central to this are green, resilient, and inclusive transformations that will help economies capitalize on future opportunities, while protecting against future potential shocks.
Home to 10 of the world’s 20 most carbon-intensive economies, the Europe and Central Asia region has entrenched climate and environmental challenges. Natural resources – air, water, and forests – are being depleted at unsustainable rates. 1 in 8 deaths in Europe are attributable to air pollution; in the Western Balkans it is 1 in 4 deaths.
As countries strive for a post-pandemic recovery, we have an opportunity to build back our socio-economic fabric in a way that ensures sustainable growth for generations to come. And at the heart of this opportunity is a Green Transition.
Between 1990 and 2020, greenhouse gas emissions in the EU fell by roughly 23 percent, even as the economy grew by approximately 61 percent. EU countries effectively succeeded at decoupling growth and emissions. Today, Europe continues to be at the forefront of the green transition and has demonstrated that it is possible to simultaneously decarbonise and maintain economic growth. Through the European Green Deal, the EU has made bold policy and financial commitments to decarbonization, climate resilience, natural capital, and social inclusion.
Many countries in the region are using recovery programs to initiate and accelerate programs to promote energy efficient housing and sustainable transport, which can deliver jobs in the short-term, and support inclusion while addressing two of the biggest sources of carbon emissions.
Governments are stepping up investments in renewables to support increasingly ambitious climate actions under the 2015 Paris Agreement. This includes programs to explore advanced technologies such as energy storage and exploring the development of hydrogen.
A green transition brings multiple opportunities – improved environmental quality, health, and well-being – and transformed and modernized industry and infrastructure, accelerated economic diversification and competitiveness, new jobs, and strengthened resilience. But reaping these gains will require substantial investment. In Cyprus, the investment needs are estimated at over 12 billion euro for the transport sector and close to another 1 billion euro for other sectors to reach the energy efficiency and renewable energy targets for 2030.
It is encouraging that the EU member states are already taking action. The Cyprus Recovery and Resilience Plan 2021–2026 focuses on a green transition and digital transformation to strengthen the economy’s resilience and the potential for sustainable long-term growth and welfare. The plan also focuses on energy efficiency and renewable energy, sustainable transport, smart and sustainable water management, and aims to promote a new growth model and diversification of the economy. All of this can contribute substantially to the country’s move towards climate neutrality.
For a small island economy like Cyprus, sustainable agricultural development is of great importance, given the high vulnerability to climate and external shocks.
For developing countries, COVID-19 is compounding the risks posed by climate change. That’s why, at the World Bank, we are redoubling efforts to marshal our resources to help client countries, including through a new Climate Change Action Plan.
We are already the largest provider of climate finance to the developing world, with $83 billion committed over the last 5 years. And over the next 5 years, 35 percent our investment financing will go toward supporting developing country climate benefits. Over the same period, half of our financing will be dedicated to adaptation measures to help countries get ahead of the challenges.
We have made bold commitments under the new Climate Change Action Plan we recently announced – and we are matching those commitments with bold solutions. Here is how we are doing so in Europe and Central Asia:
One: Moving away from coal. We are ramping up our support to help countries and regions shift away from coal use. This means managing the social and economic consequences by working with communities and local authorities, in partnership with national governments, to ensure that the transition is just and inclusive. For example, the World Bank is supporting the European Commission’s €18 billion Just Transition Fund to help member states, particularly in Central, Eastern and Southern Europe, meet the EU’s climate neutrality goal by 2050.
Two: Measuring progress: We are launching new intelligence products to monitor progress and identify areas for improvement. Our new Country Climate and Development Reports will support preparation and implementation of countries’ nationally determined contributions, or NDCs. We are currently preparing four Country Climate and Development Reports for the region and will initiate more for delivery next year.
Three: Getting innovative: We are supporting countries through results-based lending for those undertaking key policy and institutional reforms to accelerate climate action. Doing so, the Bank is leading the way for other institutions to also come in and step-up climate-related investments.
Translating bold climate objectives into policies and investments will require close attention to individual country circumstances and strong cooperation between national governments and international institutions. It will require urgent investments at scale in all forms of capital - human, physical, natural and social - to address structural weaknesses and promote growth. This will include significant reforms of fiscal systems, which will be needed to mobilize domestic resources in a way that promotes inclusiveness and helps finance the transition, in addition to strong private sector involvement.
When it comes to Environment Social and Governance (ESG) – the very topic of this event - In 2019, the World Bank launched its Sovereign Environment, Social and Governance Data Portal. The portal is designed to help investors better align ESG analysis with key sustainable development policy indicators and analysis, as well as to increase data transparency and support private sector investments in emerging markets and developing countries. It’s a great example of how our work and data can inform investment choices and lead to improved development outcomes. High-quality data is essential for investors to make sound decisions aligned with the UN’s Sustainable Development Goals.
In closing, COVID-19 and climate change both impose challenges at the global, national and local level. A strong and coordinated response is required.
I am optimistic. In times of crisis, opportunity also presents itself. We as a global community must take this unprecedented opportunity to protect the world’s human and natural capital, while also reducing poverty and inequality in our societies and delivering prosperity for all.