Everything from researching and developing new vaccines, drugs and diagnostics, to strengthening surveillance systems, to building manufacturing capacity so that next time around, we can deploy vaccines much faster and at scale. scale worldwide.
So that’s the fourth challenge.
5. LESS INCLUSIVE GROWTH
Fifth, the challenge of less inclusive growth, within and between nations. There is a real risk of a reversal of the gains that developing and emerging countries have made over the past two or three decades.
We are now at real risk of setbacks from each of these other structural changes – geopolitical instabilities, rising food and energy prices and slowing growth, and the fact that climate change and pandemics will hit the hardest. hit the poorest and most vulnerable countries hard. .
Each of these forces now makes it more difficult for developing countries to converge with the advanced world.
And that opens the prospect of a renewed divergence, which will not only be a problem or a challenge for developing countries.
It will be a challenge for the world because it will have many ramifications, including forced mass migration, and we will lose a major opportunity for global growth because the great opportunity is in the developing world.
So we all have to be concerned about it.
Remember, the last time we had big food price hikes, in 2008, it led to the Arab Spring and the major instabilities that followed.
These are not fanciful scenarios. That’s what happens. Social stability is affected and civil wars can break out when food is scarce or expensive.
We have to deal with this confluence of challenges on a global scale, deal with this perfect long storm. We need new international rules of the game or much tougher standards, and more effective systems of deterrence, to preserve geopolitical stability.
But we also need a new era of investment – investment in energy security and climate and pandemic security, and investment in the developing world.
This is a huge opportunity, but it requires new pacts between the public and private sectors, globally and nationally.
Public spending in the advanced world has benefited for several decades, and especially since the end of the Cold War, from what has been called the peace dividend.
They were able to spend less on defense and reallocate resources to other needs. These other needs do not go away.
On the contrary, social spending in many areas, especially health spending, is increasing. But defense spending is back.
The war in Ukraine has certainly forced the issue in Europe. Defense spending in the advanced world is now back, and will be in the long term, along with all other pressing budgetary needs.
Governments will have to find ways to fund this, to avoid cutting other spending and reducing people’s well-being.
But we can’t let the geopolitical security challenge keep us from investing in climate change and pandemic security.
We need to invest in the global commons, and it will become more expensive if we don’t invest early. The longer we delay strengthening the global commons, the more it costs.
Governments, business leaders and investors today must now embrace investing in the global commons – investing in sustainability, inclusiveness and health security.
There are huge opportunities for innovation. For climate change – in storage and new renewable sources, in nature-based solutions and in more efficient fossil energy production in the transition to 2050.
There is a huge opportunity for new innovations and for scaling up successful innovations.
There is also a pressing need for adaptation to climate change, not just mitigation to reduce emissions.
Building coastal defences, improving water efficiency, developing viable methods of carbon sequestration and storage, even better pest control – these are all going to be very important mechanisms for governments, the private sector and communities to strengthen adaptation.
This basically requires large-scale collaboration between the public and private sectors. Governments will not be able to afford the scale of the investment required.
If you look at climate change alone, we know that it will take about US$3.5 trillion per year over the next 30 years to invest in the infrastructure and innovations needed for a more sustainable future.
But that can’t be left to the private sector or markets either, because there are externalities that aren’t factored into the business motivation, and markets alone won’t invest as quickly as it should. would take to reach the average level that the world needs. -targets of the century.
So there are good reasons for the public sector to encourage the private sector, because the overall social returns far outweigh the private returns.
The public sector can do this by putting its skin in the game to mitigate the risks for private investors.
Second, by having a clear and predictable plan for carbon taxes and pricing. Third, by regulating the industry to tackle egregious emissions in time.
The increased momentum of capital market initiatives over the past year is a significant achievement, and we must now work hard on it.
GFANZ (Glasgow Financial Alliance for Net Zero), launched in April last year, and the Climate Finance Leadership Initiative which Michael Bloomberg leads, and the various other initiatives aimed at developing voluntary carbon markets, a more reliable system of ESG (Environmental, Social, and Governance) data and taxonomies, and enhanced disclosure standards, especially with the recently created International Sustainability Standards Board.
As many of you know, Singapore has been very actively involved in these crucial climate finance initiatives.
Carbon markets based on reliable, high-quality data will be an important part of the solution. It’s not just about helping companies and industries that are struggling to reduce their emissions.
It is about channeling resources towards nature-based solutions and other mitigation initiatives.
Don’t wait for governments to lead. Market leaders must move forward.
But neither can governments think that markets alone will solve this problem. This requires public sector involvement and, in particular, clarity of fiscal and regulatory frameworks.
Let me end by returning to the larger geopolitical challenge of this time.
We need to fortify multilateralism and the rules of the game to ensure the preservation of global stability, and that is not right. Global stability is like oxygen for the international economic system.
You don’t realize you need it when you have it, you realize how much you need it when you don’t. And geopolitical instability is now part of the perfect long storm we have entered. The world order is going through a major rift and we don’t have a solution yet.