Macro-economic Implications of Sustainability

Alexander S. Preker and Susan C. Hulton

Chapter 17 in Sustainability:Business and Investment Implications, 2023, pp 481-520 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter demonstrates strong links between the sustainable use of non-renewable and renewable resources, and macro-economic performance. The chapter goes beyond earlier discussion of factors that contribute to climate change and the narrow focus on the fossil fuel industry to include consideration of a broader range of non-renewable and renewable resources that are an integral part of a sustainable environment. The chapter describes both physical and transition risks. And it highlights relevant linkages that exist between mitigation and/or adaptation strategies and macro-economic performance in terms of gross domestic product (GDP), national wealth, economic growth, inflation, stagnation, deflation, consumer spending, borrowing, employment, unemployment, monetary policy, and fiscal policy. The review indicates that well-planned and well-executed sustainability policies and action plans can confer significant macro-economic benefits. At the same time, it reveals that overzealous and poorly executed mitigation strategies as well as failure to pursue adaptation in the meantime can damage industrial performance and lead to significant negative macro-economic outcomes in terms of slowing growth, damaging supply chains, contributing to inflation, increasing unemployment, and reducing sectoral competitiveness. The chapter warns about the potentially damaging effect of expanding the environmental (E) sustainability agenda to the social (S) and governance (G) spheres. And it raises doubts about the use of industrial policy to achieve durable industrial transformation. The chapter presents cautionary remarks about several hidden threats to macro-economic performance from overambitious, poorly designed, and badly executed sustainability policies. These threats include pitfalls associated with lack of realism, mission creep in corporate governance, single-issue capture, hidden political agendas, greenwashing, whitewashing, and loss of competitiveness. The chapter concludes that if these threats are addressed effectively, “doing business” in this area could possibly provide an attractive commercial opportunity for businesses and investors, while at the same time it might advance the sustainability agenda and contribute to macro-economic performance.

Keywords: Sustainability; Sustainability Risks and Opportunities; Sustainability: Business and Investment Implications; Sustainable Finance; Sustainable Investing; Impact Investing; Sustainable Entrepreneurship; ESG; Business Case for Sustainability; Investment Case for Sustainability; Introduction to Sustainability; Introduction Sustainable Finance; Introduction to Sustainable Investing; Introduction to ESG; Introduction to Impact Investing; Sustainability Handbook; Sustainability Textbook; Sustainable Business Textbook; Sustainable Business Handbook; Sustainable Finance Textbook; Sustainable Finance Handbook; Impact Investing Textbook; Risk Management & Sustainability; The Corporate Sustainability Spectrum; Business and Financial Implications of Climate Change; The Financial Case for Embedding Sustainability Core to Business Strategy; Corporate Sustainability & Financial Performance; Shareholder Engagement; The Pressing Needs For A Sustainable World; Scale-up; Impact Entrepreneur; Impact Entrepreneurship; Sustainability Science and Challenges; Internalizing the Externalities; The Role of Government; Fiscal Impact; Macro-economic Performance; Realism; Mission Creep; Single Issue Capture; GreenWashing; Whitewashing; Hidden Agendas; Transparency; and Competitiveness (search for similar items in EconPapers)
JEL-codes: L21 L26 M1 Q01 (search for similar items in EconPapers)
Date: 2023
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