G7 must invest $10 trillion for sustainable recovery, says new report

Report calls for more investment to help nations move from rescue to recovery after coronavirus pandemic

File photo: British Prime Minister Boris Johnson departs from the G7 foreign ministers' meeting on May 5, 2021 in London, England. Getty Images

G7 nations should collectively spend $1 trillion a year over the next decade to put the world on a path to sustainable growth, a report requested by British Prime Minister Boris Johnson said on Monday.

As wealthy countries move from rescue to recovery, investment must flow in the right direction, said lead author Prof Nicholas Stern, former chief economist at the World Bank and author of the landmark Stern Review on the Economics of Climate Change.

The shift to green energy, protection and restoration of nature, reducing social inequality and helping to send vaccines to developing nations must all be pursued at once, the report said.

"The world is confronting a complex set of interwoven challenges," Prof Stern said at the report's release.

"Unless you tackle them together, you are not going to do very well on any of them.

"Get it right and we have a much more attractive way of growing and developing.

"Get it wrong and we have a lost decade for development, stuttering growth, increased problems of social cohesion in the richer world, and we undermine the future of the climate and biodiversity for generations to come."

A G7 gathering in England starting on June 11 is an opportunity for wealthy nations to take the lead, he said.

Formed in the mid-1970s, the G7 club of major industrialised nations consists of the US, Germany, Britain, Japan, France, Canada and Italy.

The report calculated that $1 trillion a year spread across the seven economies would be about 2 per cent of their pre-pandemic GDPs.

The independent report said G7 nations should not leave the June meeting without closing the $20 billion funding gap for Covax, the UN-led effort to vaccinate the developing world against Covid-19.

How much has been provided in recent years is sharply contested but even the most generous tallies fall tens of billions short.

"$100bn is small in relation to the overall investment demand," Prof Stern told AFP.

"But it is important symbolically because that was a commitment by the rich world to help with the transition in the poor world. It is a symbol of the trustworthiness."

The report calls for structural policies that leave no doubt about where things are going.

These include: the rapid phase-out of fossil fuel subsidies totalling hundreds of billions a year; increasing the price companies pay for carbon pollution; and building climate resilience and environmental protection into all development policies.

The disclosure by corporations of exposure to climate risk, which is now done on a voluntary basis, should become mandatory, the report said.

A recent report from CDP, a non-profit group that tracks corporate environmental policy, found that half of financial institutions have failed to assess the effects of their portfolios on climate change.

Plans announced by dozens of nations accounting for more than half the global economy – including the US, China and the EU – to become carbon neutral by mid-century must also be challenged.

Cop26, the November climate summit to be hosted by Britain in Glasgow, "will be a test of whether the delivery plans are credible", Prof Stern said.

"Countries must not only set out targets but how you actually get there."

The report was prepared by Prof Stern and a team from the London School of Economics and Political Science.

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