Private and Public Investments play in Building a Sustainable Economy
Workshop 2 – Natalie Maldonado
Professor Monica Kinney
More and more, the word sustainability is used in the business field and economy. Participation to change the way we perceive their roles in all the different frameworks and area of operations sending the message about caring for our resources and its impact as well as for the return to our communities and those benefits as consequence of their strategies to grow a sustainable environment and society to future generations
Private and Public Investments play in Building a Sustainable Economy
Budgeting for Public Investments and Economic Growth
Harry Stein (2016) writes in his article “Budgeting for Public Investments and Economic Growth” the following quotations:
Public investments—such as education, public health, and infrastructure—are a fundamental element of any pro-growth budget that seeks to address the problems of slow growth, stagnant wages, and a lack of consistent full employment. Many public investments have a broad economic impact by enabling more Americans to participate in the economy and benefit from economic growth, such as when improved roads and transit systems connect workers to new job opportunities. (Stein, 2016)
Economic research confirms that a broad range of public investments work to grow the economy, but these varied positive effects are difficult to simulate in theoretical economic models. To clarify, an economic model is a set of mathematical formulas based on assumptions about how the economy works. While the formulas used in these models can simulate the generic effect of an increase in government spending, it is much more complicated to simulate what that government spending is actually doing.
Economic models are taking on an increasingly prominent role in the fiscal policy debate. New congressional rules require the use of economic modeling for some cost estimates—a process called dynamic scoring—and some tax analysts are using economic models to simulate the effects of tax proposals from presidential candidates.
The first step toward building a more pro-growth budget is understanding how federal programs actually affect the economy. The ultimate goal is to invest in sectors that promote shared prosperity. In 2015, the Center for American Progress proposed a comprehensive budget plan that substantially increases public investment. Unlike that budget plan, however, this issue brief is more narrowly focused on the first step—understanding the economic impact of government programs.
Budget analysts traditionally consider infrastructure, education, and research to be public investments that promote long-term growth, in contrast to other government programs that support current consumption. One advantage of the traditional definition of public investment is that the federal government has collected data using this definition dating back to 1940, which enables consistent comparisons across time periods. The Office of Management and Budget, or OMB, however, notes, “The distinction between investment spending and current outlays is a matter of judgment.”
Infrastructure programs that build the nation’s physical capital—such as transportation and water projects—are a textbook example of public investment. A 2014 study by the International Monetary Fund finds that “an increase in public infrastructure investment affects output both in the short term, by boosting aggregate demand … and in the long term, by expanding the productive capacity of the economy with a higher infrastructure stock.” In the case of transportation, this could mean that workers are connected to new job opportunities through infrastructure investments that make an unmanageable commute manageable. In contrast, underinvesting in infrastructure imposes high costs on the economy in terms of lost time and increased expenses.
A recent study by the Washington Center for Equitable Growth found that investing in universal prekindergarten would deliver $8.90 in benefits to society for every $1 spent by increasing employment and education for parents, strengthening long-term economic prospects for children, improving public health, and reducing crime. Boosting high school graduation rates and investing in higher education increase future earnings of students, which also reduces the likelihood that they will need public assistance in the future. (Stein, 2016)
The private sector’s role in promoting sustainable development
Peter Bakker (2016) in his insight about the substantial economic opportunity writes the following quote:
With an annual US$5-7 trillion needed to finance the SDGs (The Sustainable Development Goals) alone (according to UNEP), and an estimated US$90 trillion needed to support the aims of the Paris Agreement over the next 15 years (The Climate Group), business has a critical role to play as a source of investments and as a driver of technological development and innovation, not to mention as an engine for economic growth and employment. (Bakker, 2016)
He continues explaining in his article the measurement that all those members are willing to do in order to collaborate to sustainability and the call to integrate more business to this task He writes:
But even though sustainability investments can offer better returns, when it comes to the SDGs it is a daunting task for any CEO to focus on 17 goals and 169 targets. With this in mind, the WBCSD collaborated with the UN Global Compact and GRI to develop the SDG Compass which provides guidance on how to align business strategies with the SDGs and measure their impact. We complemented these efforts by developing the SDG Business Hub, a dynamic online platform showcasing business insight, emerging tools and resources in this space. Each of these valuable resources are designed to point business in the right direction for achieving the SDGs and enhancing company practice.
A price on carbon is a cost-effective way to accelerate low carbon innovation, shift investment towards low carbon technologies, and help ensure sustained economic competitiveness. The business community believes that global, robust and stable carbon pricing will be fundamental for the successful implementation of the Paris Agreement.
The Low Carbon Technology Partnerships Initiative (LCTPi) is one of the initiatives that demonstrates how the private sector can drive systemic transformations of the kind we need across all of our economic systems. Involving more than 150 businesses and 80 partners from around the world, LCTPi is a collaboration led by WBCSD to accelerate the development of low-carbon technologies and scale up their deployment.
An independent impact analysis by PwC shows that the LCTPi plans could deliver as much as 65 per cent of the necessary emissions reduction, while stimulating between US$5 trillion and US$10 trillion of investment into the low carbon economy and creating between 25 million and 45 million jobs around the world each year.
This is just one of many initiatives operating around the world. A recent report by We Mean Business, titled The Business End of Climate, shows how bold climate action, supported by smart policy, can keep the temperature rise below 2°C. The report looks at five initiatives that companies have joined as part of their efforts to address climate change: Science-Based Targets, EP100, RE100, Zero Deforestation and LCTPi.
The good news is that the world is catching on to the possibilities for business involvement. In 2015, clean energy investment surpassed fossil fuel investment – but this is only the beginning. It’s possible to go much further, and we must go faster. Numerous opportunities are available for businesses to streamline efficiency in transport and logistics, while offering new ways to manage natural resources and increase the world’s capacity to mitigate harmful greenhouse gases – not to mention the fact that addressing climate change represents a US$4 trillion opportunity, while the cost of inaction could create between US$6 trillion and US$14 trillion in losses. (Bakker, 2016)
Both sectors (Privat and Public) on each of the challenges they have are cooperating to create a sustainable environment. Each of these sectors under join efforts from each of its components is creating strategies to ensure a better future and the less possible impact on our resources and environment. Whether it is the reduction of taxes to create a better participation in the economy and generate growth or the investment in technologies to reduce carbon pollution or the increment of greenhouse gas emissions, we can be sure that our society is demanding more and more sustainable growth to create a better environment, economy, and quality of life.
We need to create a precedent, creating awareness and using ethical principals in the way we manage and lead the businesses under our responsibility. It is an effort that must include all stakeholders to educate and awake this numbness society that can feel and sense that our mother earth is having trouble to keep providing the resources needed to maintain and nurture life as we unconsciously are thinking that everything has an endless supply and carelessly we waste it being distracted with the paradigm of consumption or consumerism.
Bakker, P. (2016). The private sector’s role in promoting sustainable development. Retrieved from https://www.wbcsd.org/Overview/News-Insights/Insights-from-the-President/The-private-sector-s-role-in-promoting-sustainable-developmentStein, H. (2016). Budgeting for Public Investments and Economic Growth. Retrieved from https://www.americanprogress.org/issues/economy/reports/2016/09/14/143064/budgeting-for-public-investments-and-economic-growth/