By Gregory Hershman, Senior specialist, US policy, PRI
As Congress moves to consider President Biden’s $1.9 trillion stimulus proposal, it is important that their efforts are grounded in principles of equitability, sustainability, and ultimately, responsible investment of our national economy.
Stimulus funds that are targeted can provide vital support to individuals, businesses, and industries severely impacted by the COVID-19 pandemic, while also making investments that drive sustainable economic growth and accelerate the shift to a net-zero economy. Poorly designed stimulus programs, however, can intensify economic disparities that existed before and are being exacerbated by the current crisis.
To mitigate that possibility and get the most out of every taxpayer dollar, stimulus packages should fully consider environmental, social and governance (ESG) principles by:
- Ensuring funding is equitably distributed to communities in need, beginning with those specifically impacted by the current crisis;
- Focusing funds to combat climate change, accelerating the shift to a net-zero economy, and;
- Providing comparable, consistent disclosure requirements for recipients of stimulus funding, helping us better understand whether funds supported or harmed efforts on climate action and social equity.
Impact of COVID-19 on women and minority groups
Around the world, the COVID-19 pandemic has hit women and minority communities the hardest. While women have made progress in the US gaining access to the workforce, that progress is being eroded by the pandemic. In the past year, 2.2 million women left the workforce – four times more than male co-workers. In December, the Bureau of Labor Statistics reported that the US lost a net 140,000 jobs, while men gained 16,000 jobs and women lost 156,000.
In the US, Black Americans are dying from COVID-19 at rates two times higher than their share of the population, and Hispanic communities are experiencing infection rates two to four times greater than the rest of the populations. Providing direct support to these communities must be a top priority in stimulus efforts as they deal with outsized disruption in nearly every aspect of their lives, including unemployment that continues to outpace their White neighbors. In December, Congress extended the Paycheck Protection Program, adding $285 billion. Yet only $12 billion, or 4% percent, was set aside for minority-owned businesses that account for 20% of employer businesses. Without funding set aside, it’s unlikely that funds get distributed equitably, as minorities have historically faced higher barriers for financial resources and access to capital.
Investing towards a net-zero economy
Investing in climate action can boost long-term economic growth while also creating an immediate demand for green jobs. The December 2019 stimulus bill reauthorized the Weatherization Assistance Program through 2025 and provided more than $600 million in funding for electric vehicle charging stations. Similar small-scale projects proved most effective at spurring job growth in a review of the 2009 stimulus efforts. These projects can collectively spark a sea change, if national standards for building emissions, fuel economy, and zero emissions vehicles are set in line with a net-zero economy.
National standards should be paired with limits on funding that either increase emissions or slow the transition to a green economy. Last year, nearly $2 billion in federal stimulus dollars was awarded to oil & gas companies. Although intended to pay workers, few guardrails were put in place and at least one company tried to award the exact amount it received - $9.7 million - to executives as bonuses. Fossil fuel investments place a paradoxical economic cost on the rest of the country through unaccountable impacts on environmental and public health  Instead of funding heavy-polluting industries, the focus should be on immediate aid for workers and rapid upskilling, like that recently called for by the US Chamber of Commerce, or R&D to cut emissions.
Ensuring we’re building toward a sustainable future
The 2009 American Recovery and Reinvestment Act injected $900 billion into the economy. Since the 2009 stimulus, we’ve seen that exact amount - $900 billion - in damage to American communities by “billion dollar” extreme weather events alone according to NOAA. Beyond simply knowing where tax dollars are going, companies receiving federal stimulus dollars should be required to disclose their exposure and contribution to climate change. The Task Force on Climate-Related Financial Disclosures (TCFD) has outlined principles showing what an effective disclosure would look like. Other groups such as the Sustainability Accounting Standards Board (SASB) have created working, industry-specific disclosures in line with the TCFD recommendations. Only through consistent, comparable disclosure will we know if stimulus efforts are contributing to climate solutions or simply feeding the growing cycle of climate destruction.
Not all stimulus funding is created equal. Without vision and oversight, in the long-term, stimulus funds may exacerbate the issues we’re seeking to solve. As Congress continues negotiations in the days ahead, Members should focus on environmental, social and governance principles to build back better.
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