Is the “Greta effect” going to last?

6 min read 13 Feb 20

Summary: A question I have often been asked lately is “is the Greta effect going to last?”. How much influence is this public figure going to have and are the social movements she inspired really going to transform our society? The honest answer is I don’t know, but human psychology in the time of social media would suggest that something else will soon capture public attention and imagination…

However, what is not going away are the facts underpinning today’s society and the role they play in shaping the economic framework we operate in.

For the last 150 years we have experienced significant socio-economic trends that brought great improvements to our wellbeing and life expectancy and that lifted millions of people out of poverty. The world population increased from 3 to today’s 7.8 billion people, world GDP grew from 1 to 85 trillion dollars. Urban population also increased exponentially and so did transportation, telecommunication and international tourism. The industrialisation process, together with globalisation and technological innovation all contributed to shape this period of “Great acceleration”.

Those socio-economic trends have been accompanied by other, similarly important earth-system trends, like the intensification of biosphere degradation, the increase in stratospheric ozone or the evident and persistent increase in CO2 particles per millions in recent times (you can find the latest daily measurement here). Manmade changes to the planet have been so significant in the last 150 years that scientists are referring to our times as a new geological epoch: the “Anthropocene”, where “ the total amount of concrete ever produced by humans is enough to cover the entire Earth’s surface with a layer two millimetres thick” (Simon L.Lewis and Mark A. Maslin, 2018 “The Human planet, How we created the Anthropocene”).

 

The earth system changes described above and their interactions are extremely important to our economic system. In a 2018 report, the WWF quoted a paper estimating the value of ecosystem services to be around $125 trillion or 1.5x the GDP of the entire world. But the way our society transformed the planet is threatening such precious and indispensable resource.

Most of the economic models through which countries and central banks used to assess the state of their society and the direction of their policies failed to include such important factors. Those models have been built around linear economic systems where the natural environment is pretty much ignored, and with it the cost to society of exploiting and altering natural resources by sourcing materials or disposing waste (it being plastic, food, or CO2). As we learn what the actual cost of such activities is and start to attribute an actual $ price to it, our system can evolve towards a more circular economy.

Such transformation requires substantial product innovation (the majority of products we consume today are often very difficult to recycle), a change in the way consumption works (for example with more focus on shared use) and renovation of certain sectors. And although initial investment is required, while addressing some of the key challenges our society is facing, a more circular economy can bring numerous efficiencies. For example by reducing energy costs, limiting waste and strengthening the supply chain.

Today, corporates with long term thinking can grasp the opportunity of becoming more environmentally and socially sustainable and gain a competitive advantage, while creating value for all its stakeholders. Of course, governments would need to support such change by adjusting regulation, tax incentives and fiscal policies; but in our capitalistic society, I believe it is the corporate world that will lead the revolution; and it can do it fast.

The market has been good at providing what people want, the question is whether consumer demand is sufficiently long-term and inclusive. We can be cynical about the ‘Greta’ effect, but in so far as it shapes consumer tastes it can play an important role in harnessing capitalism to provide positive outcomes for the planet.

In particular, the financial sector has an important role to play, not only because it provides the “fuel” to such transformation, but also because of its inter and intra sectors influence which enables it to drive different aspects of the sustainability agenda.

Conditions are ripe for change and we are starting to see the shoots of a more significant transformation:

  • Scientific evidence enable us to give the correct price to natural resources and include them in our economic models: initiatives like the Task Force on Climate-related Financial Disclosures are a good example.
  • Social media contributes to speed up the change in consumer habits and behaviour: from Greta to Attenborough, from the Oscar ceremony to major CEOs speeches in Davos.
  • Low yields and high liquidity are a fertile ground for business to invest in innovation and sustainability: the growth of green bond markets is evidence of the existing appetite. 

Looking ahead, the “Greta effect” might fade but a sustainable economy might well become the reality.

 

By Maria Municchi

The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

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