2022 Perspectives for the Public Sector

Citi Perspectives for the Public Sector 15 Sustainability: Global Trade as an Ally T he repercussions of climate change have the potential to cause huge disruption to global trade. More frequent extreme weather events and rising sea levels will impact the seamless exchange of goods and services across borders, by both land and sea. According to the OECD, “maritime shipping, which accounts for around 80% of global trade by volume, could experience negative consequences, for instance from more frequent port closures due to extreme events.” 1 Ironically, trade is also often cited as being a contributor to climate change and undermining efforts to improve environmental, supply and governance standards. The charge is that while international trade may improve economic efficiency, longer supply chains — linked by heavily polluting shipping routes — inevitably increase carbon emissions. Critics would also argue that trade all too often creates poorly paid, hazardous jobs in developing countries that offer little security. Such arguments are overly simplistic given the complexity of global trade and the importance of considering climate change within a broader range of environmental, social and governance (ESG) issues. Shipping produces vastly less carbon emissions than air freight to carry a given load, for example. Moreover, while climate change is an existential issue for the planet, it cannot be the sole driver of decisions about trade and the future sustainability and economic security of the world. Taking a holistic view of trade According to the World Bank, over one billion people have moved out of poverty because of economic growth underpinned by open trade since 1990. 2 Trade can bring prosperity at both national and international levels and improve the lives of people across the globe, especially the poor. It is an engine of growth that creates jobs, reduces poverty and increases economic opportunity: it can therefore do much to deliver the ‘S’ in ESG. With regards to trade’s impact on the ‘E’ in ESG, a nuanced approach is valuable. As a recent OECD Trade and Environment report notes, “economic growth resulting from trade expansion can have an obvious direct impact on the environment by increasing pollution or degrading natural resources.” 3 1 https://www.oecd.org/trade/topics/trade-and-the-environment/ 2 https://www.worldbank.org/en/topic/trade/ 3 https://www.oecd.org/trade/topics/trade-and-the-environment/ Dustin Ling Global Public Sector Banking, Citi Donna Mcnamara Global Head of Trade Product Commercialization and ESG Strategy, Citi Kerri Escobedo Global Public Sector Banking, Citi