Sergio Focardi is a lecturer and researcher at the Pole Leonard de Vinci and a member of the Finance Group of the De Vinci Research Center. On Thursday, September 23, he gave the webinar A New Economic Theory for the Green Transition.
The webinar has been repeated on October 5 for CFA Germany and October 12 exclusively for CFA Belgium. Some 40 participants from EEA (European Environment Agency) from the Central Bank of Ukraina, various national banks, asset managers, and academics participated in these discussions.
As they have been ignored for a long time, environmental issues are rapidly escalating into a proper state of emergency. The European Green Deal was launched at the end of 2019 by Ursula von der Leyen, President of the European Commission.
This ambitious project to make Europe a more sustainable economy articulates around three primary goals:
This webinar intends to generate solutions for a growing economy decoupled from intensive resource use. To achieve economic growth without exhausting natural resources, advanced economies must become more qualitative. To support this process, both economic theory and the practice of finance must understand qualitative growth.
The key message of the webinar is that any Green Deal will appear as a recession through the lens of the current macroeconomic theory. This is because the current macroeconomic theory considers economic growth essentially as quantitative growth. Moreover, these “classical” economic theories and models (e.g., the Smet and Wouters model used by central banks) assume that economies produce a single type of consumer goods.
In practice, economic growth is measured as real GDP growth, which is obtained from nominal GDP discounting by inflation. But the measurement of inflation ignores qualitative changes.
Together with three colleagues, Sergio Focardi is finishing a paper that presents the theory and a mathematical model of a qualitative economy, which hopefully will raise interest from government agencies.
In the webinar, Sergio developed the consequences of a theory of qualitative growth for asset management. For the presentations in Germany and Belgium on October 12, Sergio emphasized the need to go beyond ESG to adapt investment management to the reality of the current environmental crisis.
Suppose we accept that economic growth has to become more qualitative to decouple growth and intensive exploitation of natural resources. In that case, we see that there are fundamental systemic aspects of investment management.
