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The major challenges of the time

March 11, 2024

Leaders from some of the largest global economies have declared that tackling climate change and economic inequality are “existential” and “convergent” goals. In 2024, Brazil will host the most important discussions on sustainable and inclusive growth. inclusive growth, when it hosts Business 20 – or B20, a global dialog forum that connects the business community with the governments of the G20, the world’s nineteen leading economies, the European Union and the African Union. The theme: economic growth for a sustainable future.

In a recent survey, the McKinsey Global Institute (MGI) tried to understand the size of the dual goals – and how much it costs to tackle them. Here are the main findings:

Beyond ending poverty, the next challenge is progressing toward economic empowerment, which enables people to realize more of their potential. 

“Economic growth has fueled tremendous poverty reduction in the past half century. Many have argued that the $2.15 per day extreme poverty line needs a complementary benchmark to gauge progress beyond that point. We frame this higher bar as the empowerment line, the level at which people can afford to meet essential needs such as nutrition, housing, healthcare, and education; they also gain a modest sense of security and have reduced risk of slipping back into poverty. Empowerment starts at $12 per day in purchasing power parity terms globally, with regional variations to account for different norms and costs. As of 2020, some 730 million people lived in extreme poverty, while 4.7 billion were below the empowerment line.”

The pursuit of economic empowerment must be viewed in conjunction with global net-zero commitments. 

“Addressing the causes of climate change is a pressing economic and social challenge—and at today’s emissions levels, the carbon budget to limit warming to 1.5°C is trending toward being exhausted by 2030. Achieving net-zero emissions, as many countries have pledged to do, would require a major increase in investment and in the capacity of energy and resource systems.”

Businesses and the market economy can generate half the combined resources through growth and innovation. 

“This involves not only maintaining baseline growth but also boosting productivity even further through investment in technology, new businesses, and human capital. Accelerated growth and better-paying jobs could close almost two-thirds of the global empowerment gap. On the climate transition, even with current policies, we see potential for almost $10 trillion of low-emissions alternatives to become viable for private actors, especially in power and mobility. All told, growth and innovation, even without policy changes, could unlock just over a third of the step-up needed in net-zero spending.”

Source: McKinsey