What’s the cost of not being sustainable?
Imagine that, instead of living 50 more years, you were to live 200 more. Or even 500. Do you think you would use your resources as you do now, or would you rather keep a little more for tomorrow? That is what living sustainably is about: concerning ourselves not only with our own needs today but also with the needs of future generations. If you believe it would be very costly to create a sustainable world, you have no idea how expensive it would be to carry on with our unsustainable one.
02/04/2025
How much would it cost us to create a more sustainable world? And how much would it cost us not to?
Living sustainably, according to the United Nations, involves meeting our generation’s needs without jeopardising the needs of future generations, those of our children and grandchildren. Sustainability goes far beyond the environment, extending to ethical and economic questions. We want everybody’s needs to be met and we don’t want to stop economic development.
And what’s a central bank like ours doing talking about sustainability?
As Soledad Núñez, the Deputy Governor of the Banco de España and driving force behind the Environmental, Social and Governance Office, says, “everyone has to talk about sustainability [...] because it involves us all.”
The Banco de España’s mission is to achieve price stability and financial stability in order to promote the stable growth of the Spanish economy. Sustainability is thus written into our DNA, as there is no stability without sustainability.
Climate change, and all the ensuing financial and economic risks, have changed central banks’ analysis models, since climate risk, as well as inequality and a lack of ethics, have been shown to have a direct impact on economic growth, inflation and markets.
What’s more, the role of the financial sector is key to the transition to a sustainable economy. Even though it does not produce CO2, its mission is to finance the energy transition of diverse companies and to channel investment towards sustainable projects. Central banks, through their regulation and supervision of banks, need to support climate risk mitigation and sustainable investments.
Governments have a huge responsibility to define the policies needed for this transition, although all economic agents (central banks, the financial sector, companies and, of course, individuals) need to join forces to achieve a sustainable economy.
Central banks are convinced that it is necessary to design strategies globally and we are coordinating our efforts through the NGFS (Network for Greening the Financial System).
The transition to a sustainable economy has economic and social costs, but the cost of doing nothing, of ignoring the risk of unsustainability, will be much higher. Examples of these costs include increasingly frequent extreme weather events, such as the flash floods in the east of Spain or the wildfires in the United States last year.
