Yannis Stournaras: Challenges and prospects for sustainable
growth
Keynote address by Mr Yannis Stournaras, Governor of the Bank of Greece, at the Second
Sustainability Summit for South-East Europe and the Mediterranean "Challenges and prospects
for sustainable growth", Athens, 1 October 2018.
* * *
It is a great pleasure for me to be here with you today and to have the opportunity to share my
thoughts on the challenges and prospects of sustainable growth.
The reason why central banks today have an interest in sustainable growth is, in my view,
selfevident: because financial stability without a sustainable growth model is simply inconceivable.
Economic growth has come at a growing cost to the environment. It is characteristic that 1
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August 2018 marked the Earth Overshoot Day , by which humanity had exhausted all the natural
resources that ecosystems can renew in a year. At the current juncture, sustainability is highly
relevant for our generation as well as for generations to come, as the three pillars of sustainable
development, i.e. society, the economy and, of course, the environment, increasingly come
under pressure. Therefore, redefining the concept of growth in a sustainability context will be
crucial to our future path.
According to the United Nations, a sustainable future hinges on the achievement of 17 goals by
2030. In particular, goals such as global prosperity with no poverty and zero hunger, quality
education, equality, decent work, access to clean water, affordable energy, justice, strong
institutions and climate action feature prominently on the sustainable development roadmap.
Global prosperity should be a priority for all, and the goals concern all nations, not only the less
developed ones. At a time when we are more interconnected than ever, the welfare of nations
and their citizens is also interdependent and requires a holistic approach to achieving the
common sustainable development goals. Sustainability challenges, especially those relating to
climate change, are of a global nature and require cooperation from all countries. Unwillingness
to cooperate in climate action is totally unjustified and illogical, given that climate change affects
the entire planet.
The cooperation of all is crucial to the achievement of the goals, while public and private sector
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synergies are necessary to finance this process, which entails considerable cost but also huge
value. There are many challenges and risks along the way, as established growth models will
need to be adjusted in order to ensure long-term sustainability.
Under conditions of depletion of natural resources worldwide, a focus on more efficient use and
minimisation of waste emerges as the only and urgent option. The model of a "linear" economy
prevailing today (sourcing - manufacturing - usage - disposal), on which most economies since
the Industrial Revolution have relied, is no longer sustainable. Just like nature, which operates in
a "circular" manner, business activity can become sustainable by switching from the "linear"
model to a "circular" one. Circular economy means that the value of products, materials and
resources is maintained in the economy for as long as possible and waste generation is
minimised.
The transition to a circular economy requires interventions on the supply side, such as
ecodesign and longer life cycles of products, as well as on the demand side, through a change in
consumption and dietary patterns and a more efficient management of waste, with appropriate
financial incentives and community engagement. This transition is expected to have a positive
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effect on production, employment, climate, nature, natural resources and social well-being . For
example, our dietary habits have a devastating effect on the planet's natural resources, land and
water reserves. A lower consumption of meat and dairy products would bring substantial savings
on cultivated land and water resources, reduce carbon emissions and gradually restore forests
and wildlife.
One major challenge in achieving the sustainable development goals relates to decarbonisation,
i.e. the removal or reduction of carbon dioxide from energy sources. The current and future
impacts on society and sustainable development are such that make the use of fossil fuels
prohibitive. Climate change and global warming are linked to anthropogenic activity, in particular
the use of fossil fuels and carbon emissions. We need to mitigate climate change by rapidly and
drastically reducing emissions, adopting the right energy management and high efficiency
practices, by financing green energy, fostering energy-saving investment and promoting a
zeroemission economy in the context of the respective European policies. Indeed, it seems that we
are rapidly approaching the point of no return, after which even a drastic reduction of carbon
emissions will no longer be enough to reverse the trend and stop a global tragedy, for example
the accelerated melting of polar ice caps.
Along the road, there are clearly risks, as well as opportunities: physical risks arising from the
impacts of climate change, but also transition risks arising from the adjustment to a low-carbon
economy. In the process, businesses may face costs, valuation losses and disruptions. Yet, a
careful and timely transition will also open up opportunities, associated with the development of
new renewable energy and innovative products, investment in energy saving, new infrastructure
and new jobs. The transformation of the global economy towards decarbonisation cannot but
have a positive net outcome.
Long-term value creation is a matter of effective climate risk management and transition to a
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zero-carbon economy . For this reason, central banks support transparency and the disclosure
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of data that will enable markets to lead the transition so that, with the right information, they can
price in the cost of doing business, the climate risk, and, most importantly, evaluate new
business opportunities.
The proper assessment and supervision of the financial risks stemming from the transition to a
zero-carbon economy are important factors in promoting sustainable development and
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safeguarding the smooth functioning of the financial system . In addition, commercial banks can
play an important role in moving towards a low-carbon economy by reducing their exposures to
high-carbon investment, while banking supervisors could take into account sustainability
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considerations in the calculation of bank capital requirements .
The transformation of cities represents another significant challenge from the perspective of
sustainability. As put by Amina Mohammed, UN Deputy Secretary-General, "It is clear that it is in
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cities where the battle for sustainability will be won or lost" . Today, over 80% of the global GDP
is generated in urban areas, which are hubs of collaboration and progress, innovation, culture,
science, productivity, exchange of ideas, goods and services, and societal development.
Urban development in a manner that cities can continue to generate jobs, prosperity, social and
economic gains without drying up land and resources, is a crucial bet as it is projected that
twothirds of the world's population will be living in urban or suburban areas by 2050. This
concentration will exacerbate the existing problems and add new ones, unless best practices are
adopted that will make our cities sustainable and inclusive, with highly interconnected networks
and "smart" infrastructures, quality services and low environmental and energy footprint.
The advances in technology, innovation and science, which are the driving force of growth
through total factor productivity, as well as a catalyst for a sustainable future, also pose a
significant challenge. Technological progress and the digital age have created a new landscape,
that of the 4th Industrial Revolution, in which digital technology helps to raise productivity,
reduces the costs of production - parts of which are now dematerialized, e.g. printed books are
replaced by e-books - increases accessibility and supports urban governance. Although the
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impact of modern technology on employment and prosperity is expected to be overall positive ,
there are issues that need to be tackled, mainly relating to the structure of work and to social
cohesion. In this regard, policies to ensure that the benefits of technology are equitably shared
across society will be key to the achievement of sustainability goals in the long run.
Last but not least, on the path to sustainable development lies the environmental challenge,
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which is now more important than ever. According to the World Economic Forum's report for
2018, among the top five global risks, three are environmental and all three are associated with
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climate change . In this light, the Bank of Greece is committed to invest significantly in UN
sustainability goal no. 13, i.e. climate action, a horizontal goal that contributes to the achievement
of all other goals. Thus, over the past ten years, the Bank of Greece has been actively involved in
research, in-depth dialogue and the provision of scientific documentation through the activities of
the interdisciplinary Climate Change Impacts Study Committee (CCISC).
Ecosystem goods and services form the basis of the global economy. Awareness of their
economic value and measuring that value in financial terms promotes the sustainable utilisation
of natural resources and management of natural systems. Within the CCISC, environmental and
energy economists, in collaboration with climatologists, physicists, biologists, engineers and
social scientists, study the impacts of climate change on the Greek economy, analyse the
economic, social and environmental consequences of climate change in Greece, and suggest
ways for the transition of the Greek economy to sustainable growth models.
Overall, the studies highlight the wealth of Greece's natural resources, but also the risks to the
country's natural and human environment, and find that the impact of climate change on all
sectors of the national economy is adverse to extremely adverse. Under an inaction ("business
as usual") scenario, the Greek GDP could, ceteris paribus, fall by 2% annually by 2050 and even
further by 2100, while the total cost to the Greek economy could reach a cumulative €701 billion
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by 2100. ,
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According to a vulnerability assessment , which quantifies and ranks the expected climate risks
for Greece, agriculture is the sector projected to be the most strongly hit by climate change in
Greece, while the impact on tourism and coastal systems will significantly affect household
income and the economy as a whole. Of particular importance are water reserves, on which
both agriculture and water supply depend.
The work so far undertaken by CCISC has highlighted the importance of a concrete adaptation
policy as a necessary damage control measure. For this reason, under a Memorandum of
Understanding signed with the Ministry of Environment and Energy and the Academy of Athens,
we have drafted the National Climate Change Adaptation Strategy (NCCAS) and we are currently
elaborating on its implementation. This strategy sets out the general objectives, guiding principles
and implementation tools for an effective and growth-oriented adaptation strategy, in line with
European directives and international experience. Moreover, it is the first step in a continuous and
flexible process for planning and implementing the necessary adaptation measures at national,
regional and local levels and aspires to leverage the capabilities of Greece's public authorities,
economy and society at large, in an aim to address the impacts of climate change in coming
years.
More recently, last June, the Bank of Greece released a book entitled "The Economics of Climate
Change", which provides a comprehensive, state-of-the-art review of the economics of climate
change and a literature review in the emerging area of environmental macroeconomics and
focuses on the design of economic policy aimed at controlling the climate externality. With this
publication, the Bank of Greece aims, among other things, to lay the foundations for addressing
the role of monetary policy under conditions of global warming and exploring the link between
monetary policy and climate change, a topic that remains high on our research agenda. It
acknowledges, of course, that monetary policy is not the primary tool for tackling climate change
but rather plays a supplementary role alongside fiscal, environmental and structural policies.
Scientific research and current developments confirm the need for a dynamic strategy and an
action plan to address sustainability challenges. I am sure that the presentations during this first
day of the conference, and even more so tomorrow, will shed light on crucial aspects of the path
towards achieving the sustainable development goals by 2030 and beyond.
I would like to congratulate the organisers for taking this initiative and wish them the best of
success in this conference.
1
See www.overshootday.org/newsroom/press-release-july-2018-english
2
According to the United Nations Conference on Trade and Development (UNCTAD), the achievement of
sustainable development goals will cost between 5 and 7 trillion US dollars per annum.
3
European Commission, Implementation of the Circular Economy Action Plan, 2018 Circular Economy Package,
available at: ec.europa.eu/environment/circular-economy/index_en.htm και Europa, EU law and publications,
Document 52017DC0623, available at: eur-lex.europa.eu/legal-content/EL/ALL/?uri=CELEX:52017DC0623
4
Carney, M., "A transition in thinking and action", speech at the International Climate Risk Conference for
Supervisors, De Nederlandsche Bank, Amsterdam, 6 Αpril 2018, available at:
www.bankofengland.co.uk//media/boe/files/speech/2018/a-transition-in-thinking-and-action-speech-by-mark-carney.pdf?
la=en&hash=82F57A11AD2FAFD4E822C3B3F7E19BA23E98BF67
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According to Mark Carney (Governor of the Bank of England) and Michael Bloomberg (chair of the Task Force on
Climate-related Financial Disclosures), "... financial disclosure is essential to a market-based solution to
climate change. A properly functioning market will price in the risks associated with climate change and reward
firms that mitigate them. As its impact becomes more commonplace and public policy responses more active,
change has become a material risk that isn't properly disclosed..", The Guardian, 14.12.2016, available
aclimate t : www.theguardian.com/commentisfree/2016/dec/14/bloomberg-carney-profit-from-climate-change-right-
information-investors-deliver-solutions
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www.ecb.europa.eu/pub/pdf/other/ecb.mepletter171010_Urtasun.en.pdf?
utm_medium=email&utm_source=nefoundation&utm_content=8+-+response&utm_campaign=banks-22Nov&source=banks-22-Nov
7
Financing a sustainable European Economy, Interim Report, EU High-Level Expert Group on Sustainable
Finance, July 2017, available at: ec.europa.eu/info/sites/info/files/170713-sustainable-finance-report_en.pdf
8
See "Battle for Sustainability Will Be Won or Lost in Cities, Deputy Secretary-General Tells High-Level General
Assembly Meeting on New Urban Agenda, UN-Habitat", available at:
www.un.org/press/en/2017/dsgsm1080.doc.htm
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Interview of Yannis Stournaras, Governor of the Bank of Greece, with Christos Chomenidis for the newspaper Ta
Nea, 17/03/2018, available at: www.bankofgreece.gr/Pages/el/Bank/News/Speeches/DispItem.aspx?
Item_ID=513&List_ID=b2e9402e-db05-4166-9f09-e1b26a1c6f1b (in Greek)
10
World Economic Forum, The Global Risks Report 2018, 13th Edition, available at: wef.ch/risks2018
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These risks are: (1) extreme weather events; (2) major natural disasters; and (3) failure to mitigate and adapt to
climate change (3).
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GDP contraction relative to base year GDP at constant 2008 prices.
13
CCISC (2011), The environmental, economic and social impacts of climate change in Greece, Bank of Greece,
pp. 453-457, available at: www.bankofgreece.gr/BogEkdoseis/ClimateChange_FullReport_bm.pdf
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Τhe vulnerability analysis is included in CCISC (2015), National Climate Change Adaptation Strategy (NCCAS),
pp. 7-13, available at: www.bankofgreece.gr/BogDocumentEn/National_Adaptation_Strategy_Excerpts.pdf