Environmental Finance: Global Challenges and
Opportunities following the COVID-19 Recovery
Professor Martina Linnenluecke
Centre for Corporate Sustainabiltiy and Environmental Finance
Macquarie University
Setting the Scene
2020 has shows the nature
of global interconnected
risks
•
COVID-19 crisis has had
significant social and
economic impacts
•
Impacts are likely not
isolated but followed by
other risks
•
Current stimulus
packages already greatly
surpass the rescue
packages during the
2007/2008 Financial
Crisis
Setting the Scene
Setting the Scene
Business and Global Environmental Change
Global Environmental Change
U.S. Global Change Research Act of 1990
"Global change" means changes in the global
environment (including alterations in climate, land
productivity, oceans or other water resources,
atmospheric chemistry, and ecological systems) that
may alter the capacity of the Earth to sustain life.
Sustaining Human Life
Steffen et al. (2015)
Tipping Points?
How far can we go? Is there a tipping point?
From a Desirable to an Undesirable State
Our precarious predicament
Global Environmental Change
Threats to Businesses, Assets, Profits, and Human Capital
The Impacts on Business
What are the planetary boundaries?
Climate change
What does this mean for businesses?
BREACHED
Boundary: < 350 ppm CO2
• Limits on carbon emissions; regulatory changes
• Clean energy transition
Loss of biosphere integrity
BREACHED
• Pressure from degraded ecosystems (terrestrial,
freshwater, marine)
• Decline of natural resource inputs (fibre or fuel)
Changes to biogeochemical flows
nitrogen and phosphorus
BREACHED
• Restrictions on use of phosphorus and nitrogen,
especially in agriculture
Land use change
BREACHED
Release of novel entities
Multiple boundaries, yet to be quantified
• Possible changes in regulation or restrictions
Atmospheric aerosol loading
Regionally determined.
• Increased regulation
Freshwater abstraction
Global boundary: 4000 km3 water use/year
• Water shortages with implications for waterdependent industries
Ocean acidification
Boundary: ≥80% of pre-industrial ocean CaCO3
• Impact on commercial fisheries and tourist areas
(e.g., Great Barrier Reef)
Loss of stratospheric ozone due to
CFCs
P Boundary: max. 6.2 million tons P/year
N Boundary: max. 62 million tons N/year
Boundary: no less than 75% biome intactness
Boundary: latitude-dependent
• Degradation of ecosystems and ecosystem
resilience
• The discovery of the ozone hole led to stricter
standards
• Phasing out of ozone-depleting substances
Global Environmental Change
The Case for Action
The Paris Accord
At the Paris climate conference (COP21)
in December 2015, 195 countries
adopted the first-ever universal, legally
binding global climate deal.
•
Global action plan to avoid dangerous
climate change and limit warming to
well below 2°C
•
The Paris Agreement entered into
force on 4 November 2016
•
Key elements – mitigation (selfdefined mitigation goals beginning in
2020), adaptation, loss and damage,
support for developing countries
•
US exits today (Nov 4, 2020)
COVID-19 Impacts
Significant worldwide impacts
•
Initial global slowdown of emissions
and pollution
•
Significant economic rescue
measures, focus on green recovery
and substantial increase in recent
carbon neutral announcements
•
Long-term impacts of large-scale
government injections in the
economy to be seen
COVID-19 Stimulus
Leading economies have announced “Green Recovery” Plans
Green Recovery
Leading economies have announced “Green Recovery” Plans
Example: The European Union
•
Recovery and Resilience Facility: financial support for
investments and reforms, including in relation to the green and
digital transitions and the resilience of national economies,
linking these to the EU priorities
•
A top-up of the current cohesion policy programs between
now and 2022 under the new REACT-EU initiative
•
A proposal to strengthen the Just Transition Fund, to assist
Member States in accelerating the transition towards climate
neutrality.
•
A €15 billion reinforcement for the European Agricultural Fund
for Rural Development to support rural areas in making the
structural changes necessary in line with the European Green
Deal and achieving the ambitious targets in line with the new
biodiversity and Farm to Fork strategies.
•
Kick-starting the EU economy by incentivising private
investments (incl green and digital transition)
•
Future crisis preparedness (Health, resilience, green and
digital transitions)
Financial Shareholder Threat Case
… Shareholder pressure…
Divestment
Linnenluecke, M.K., Smith, T., et al. (2015). Divestment from fossil fuel companies: confluence between policy and strategic viewpoints.
Australian Journal of Management, 40(3): 478-487.
Research Topics
Ongoing research
Linnenluecke, M. K., Birt, J., Lyon, J.,
& Sidhu, B. K. (2015). Planetary
boundaries: implications for asset
impairment. Accounting & Finance,
55(4), 911-929.
Ding, A., Daugaard, D., &
Linnenluecke, M. K. (2020). The
future trajectory for environmental
finance: planetary boundaries and
environmental, social and
governance analysis. Accounting &
Finance, 60(1), 3-14.
Stranded Assets
The Business Opportunity Case
… Business Opportunities…
Research Topics
Post-COVID Outcomes
Brammer, S., Branicki, L., &
Linnenluecke, M. (2020). COVID-19,
Societalization and the Future of
Business in Society. Academy of
Management Perspectives
Summary and Podcast:
https://journals.aom.org/doi/full/10.546
5/amp.2019.0053.summary
Research Topics
Valuing Opportunities
Clean Technology
good
news
Linnenluecke, M. K., Han, J., Pan, Z., &
Smith, T. (2019). How markets will drive
the transition to a low carbon economy.
Economic Modelling, 77, 42-54.
cash
flow
abandon
good
news
bad
news
abandon
•
Estimates of total wealth creation
through cleantech patent
development are in the range
US$10.16 to US$15.49 trillion invest
good
news
bad
news
abandon
good
news
bad
news
abandon
bad
news
Earth at Night
Contact
Centre for Corporate Sustainability and Environmental Finance
ccsef@mq.edu.au
Professor Martina Linnenluecke
martina.linnenluecke@mq.edu.au