One of the highlights of HSBC's recent programme of webinars, was a conversation with Professor Lord Nicholas Stern, Chair of the Grantham Research Institute of the London School of Economics. Lord Stern answered questions from webinar viewers, together with those posed by fellow webinar participants Christian Deseglise, Head of HSBC Sustainable Finance and Investments, and Zoe Knight, Group Head of the HSBC Centre of Sustainable Finance.

    A new sustainable growth path

    Christian Deseglise asked Lord Stern to open the webinar by outlining the lessons to be learnt from the COVID-19 crisis and how they might be used as an opportunity to embark on a new growth path. Lord Stern began by highlighting how the scale of the drop in global output caused by COVID-19 was truly unprecedented, citing the UK as an example, which had not seen a similar decline since the bursting of the South Sea bubble some 300 years earlier. He also drew a careful distinction between the current situation and the 2008 financial crisis, which had primarily affected more affluent countries, whilst COVID-19 had been genuinely global both in its growth impact and its tragic health consequences.

    Lord Stern explained how this impact would be severe in terms of public and private liquidity shortages, loss of confidence and business insolvencies. “Nevertheless, there is a real opportunity for strategy and policy to define the nature of the recovery and our subsequent future in a sustainable way,” he said. “Clearly, an important part of this process will be to recognise that there is no possibility of reverting to previous dangerous growth paths.”

    These paths had been dangerous enough just from the point of view of climate, but they also had a direct connection with the current and future pandemics. This was because by damaging climate and biodiversity, they disrupt relationships among and between wild, domesticated and human animals making the emergence of further zoonotic pathogens – of which COVID-19 was just one example of many (e.g. Ebola, HIV AIDS, MERS, SARS) – ever more likely. It was therefore imperative that policy did not risk exacerbating that climate/pandemic connection by reverting to previous unsustainable growth paths.

    The sustainability and resilience agenda that would be the logical alternative to this reversion presented multiple opportunities, such as the retrofitting of buildings, installation of rooftop solar and the adaptation of cities to be friendlier to cyclists and pedestrians. All these were quick to deliver, labour intensive and large economic multipliers – all of which fitted exceptionally well with the pandemic recovery phase. They would also be fully consistent with infrastructure plans for longer-term transformation. 

    Build back better

    Zoe Knight raised the point that after 2008 there were only limited attempts to focus strongly on a green recovery, which prompted the question of how austerity could be avoided this time and what could be done to build back better in the context of slowing climate change.

    Lord Stern agreed that rushing into austerity post-2008 was clearly a mistake. Therefore, this time dogma such as that around debt to GDP ratios and permissible deficits should put aside in favour of a more analytical approach on how to promote the growth that would allow these ratios and deficits to be reduced. A major element in global strategy for growth and recovery should be the approach taken around debt relief and credit extended to developing countries, as few of them would have the options available to more developed nations of simply printing money or issuing substantial new debt denominated in own currency.

    “On the investment side, building back better is technically perfectly feasible, because of the extraordinary transformation seen in the last decade or so, whereby renewables for power have become cheaper than fossil fuels globally,” he said. “At the same time, understanding of the problem has also radically changed, so there is now a much broader grasp of the need to achieve net-zero carbon emissions by 2050.” This combination meant that mankind was now far better equipped to build back better than it was in 2008, and so achieve a sustainable recovery followed by a longer-term transformation.

    Public policy and how to motivate it

    One webinar viewer made the point that while there was generally better understanding of the need to address climate change, some governments were still dragging their feet. The viewer therefore wanted to know what could be done to apply pressure to get things moving. Lord Stern responded by highlighting the importance of local action and local politics in driving communication with national governments. Individual consumer choice and action was also a potent force for good here and in this regard he singled out the resurgence of younger people as strong voice for change.

    He also pointed out that the current situation was a particularly apposite moment to introduce carbon pricing, with oil prices low and governments looking for revenue. This, coupled with growing recognition of just how polluting and damaging burning fossil fuels could be, meant that political acceptance of carbon pricing could be more widespread than in the past if well implemented, including from the perspective of income distribution. However, it was important also to stress the point that carbon pricing promoted cleaner, more sustainable and more efficient investment and was not a negative or a burden, particularly when we recognise the opportunities for use of revenues.

    The role of the private sector

    Shifting the conversation from the political to the business arena, Zoe Knight asked about the degree of leadership coming from the private sector on climate change. In response, Lord Stern cited a number of prominent examples of this:

    • A recent joint statement in the Financial Times from a dozen CEOs of global multinationals across a wide range of business sectors that underlined the need to build back better
    • The WEF's launch of 'The Great Reset' conference theme for Davos in 2021, which included, for example, a statement by the CEO of BP committing the company to zero carbon by 2050
    • The commitment of the International Chamber of Commerce (representing 45 million members worldwide) to keeping the global temperature increase below 1.5°C and achieving net-zero emissions by 2050

    “I think the extent to which the private sector has already moved on climate change is remarkable,” said Lord Stern. “I would further note that firms which behave more responsibly on climate change also outperform on conventional measures of performance, such as profitability.”

    Excuses for delay and the better alternative

    Zoe Knight mentioned that some still held the view that sustainable development had never been the cheaper option, and so post-COVID was not the time to embark on it. In response, Lord Stern made the point that delaying immediate climate action and reverting to 19th/20th century technology was actually a riskier approach that resulted in stranded assets and stranded jobs. Ultimately this made financing harder to acquire, as the perceived risk to lenders would be higher.

    In the immediate term, the priority would be to maintain full employment, but it was important that this was not used as a pretext for lapsing into climate malpractice as quick fix. Lord Stern then referred to his initial remarks as he observed that as the transition into the recovery phase took place, employment could be grown through labour-intensive projects, such as installing electric vehicle charging stations or extending broadband and investing in natural capital such as restoring degraded land or planting trees. These activities had the triple benefit of building employment, being environmentally friendly and sustainable and acting as rapid economic multipliers. Further ahead, there would be the opportunity to develop new sustainable ways of doing things on a far larger scale, further boosting employment opportunities – even in business sectors not historically regarded as inherently sustainable.

    The Paris Agreement and the role of nuclear power

    While some felt that the departure of the US from the Paris global climate change agreement had left a leadership vacuum for China to step into, Lord Stern’s view was more nuanced. He observed that many US states, cities and business were still firmly committed to the agreement and acting accordingly. Nevertheless, he did see an opportunity for China and Europe in collaboration to influence climate change and global politics for the better. There was an urgent need for greater internationalism, because so much of what needed to be done required broad cooperation across health, trade and finance, as well as climate change.

    Lord Stern then moved on to consider the role of nuclear power in tackling climate change. While he felt the long term future of energy clearly lay in renewables, the need for speed in reducing carbon output made it necessary to make use of every option available. “At least in the interim, I do not believe that nuclear power should be automatically discarded,” he said. “You only have to look at Germany’s decision to revert to coal to see the very considerable damage that can be done by dispensing with nuclear power precipitately.”


    The strong underlying conclusion of the webinar was that the connection between COVID-19 and climate change and the urgency of action on both emphasised the importance of addressing the latter as part of any recovery strategy for the former. Many projects that could have an immediate impact on reducing carbon output also had the beneficial corollary of boosting employment and stimulating growth extremely efficiently. Therefore, in the current environment, responding intelligently to climate change was also an easy economic win.

    Nevertheless, progress would require a combined effort by consumers, businesses and governments, but also from financial institutions prepared to think innovatively. On this point, Lord Stern concluded the webinar by complimenting HSBC on its climate change leadership and the speed with which it had acted.

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