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Finance ministries are critical to implementing long-term plans. To drive sustainable and inclusive transformation, they need a significant infusion of environmental expertise, strategic political acumen and robust data.
Every facet of society demands a stake in its government’s long-term vision. While fundamentals like security remain a top priority, three areas – wealth, society and the environment – stand out as non-negotiable in any future planning effort.
Almost without exception, the generation of national wealth has dominated these discussions, often fixated on growth (doing more of the same and generating more volume) However, prosperity is not solely defined by financial metrics or economic growth. It’s about how we grow. It is about doing things differently, or “economic transformation”. And in today’s world economic transformation must be inclusive, ensuring benefits are shared broadly across society and environmentally sustainable, drastically reducing greenhouse gas emissions to net zero, curbing other types of pollution and halting biodiversity loss. The points where these intersect - socially Inclusive, environmentally Sustainable Economic Transformation (ISET) – have been at the core of a transformative five-year research project at ODI Global, generously supported by Sida, the Swedish International Development Agency.
Throughout the project we learned a lot as we synthesised research, using different approaches and bringing in diverse types of data addressing widely varied contexts. Crucially, we have also learned quite a lot about interdisciplinary collaboration across, what sadly remain, fairly siloed worlds.
A major finding was that, despite warm words and the existence of many ISET-aligned plans, the realisation of ISET outcomes remains significantly off track, although, interestingly, countries that were moderately successful in all three outcome areas were (relatively) more inclusive than others. This lack of progress is particularly concerning in the environmental realm, given the recent analyses from the independent scientific communities on the state of the climate (IPCC) and biodiversity (IPBES). If we are to meet the national and global goals for shared prosperity on a healthy planet, a radical shift is imperative, but how? This blog focuses on a key challenge that we face in realising ISET: the current disempowerment of environmental issues within economic and finance ministries and presents actionable solutions.
Getting the right expertise in the room(s)
A first step in long-term planning is usually a participatory or listening process that welcomes diverse voices, skill sets and world views to envision different future possibilities. For example, as laid out in our accompanying policy brief, the Kenyan Constitution requires County Integrated Development Plan to be participatory, while the Bangladesh Delta Plan benefitted from input from a wide range of actors from different disciplines and sectors of society. From here, civil servants then seek to turn these often disparate ideals into a single, tangible path forward or long-term goal. This is no mean feat, and the ambition of many of such plans and the diversity of ideas makes it clear that these planning committees have an inherent creative streak.
However, our case studies reveal the operationalisation of these long-term plans into shorter-term government business is often where we see challenges emerging. For example, it is rarely the case that national annual budgets are sufficiently updated to reflect the changes sought in these long-term plans. In part, this may be a failure during the longer-term planning to explicitly recognise that changing direction generates winners and losers (necessitating strategies) and that it requires resources that are currently occupied elsewhere (necessitating trade-offs). It might also be that the types of voices that were present in the longer-term planning are absent when it comes to more immediate economic planning. For example, although often present in the original envisaging exercises, in the more day-to-day work of governments, environmental expertise is rarely visible outside of environmental ministries and universities. This appears to have been the case in Indonesia, where weaker treatment of social and environmental issues in the country’s energy transition plan may have arisen from weak capacity in these undertreated sectors. This might not be an issue if these ministries were able to impact major policy, but in practice, they are rarely sufficiently empowered to affect more immediate economic decision-making. This is problematic because, while decisions are made without consideration of environmental expertise, we will continue to have institutional arrangements and systems of thinking that represent economic planning models of yesteryear.
Overcoming this challenge requires substantial “institutional work”. The two clearest options are: finance ministries must either upgrade their in-house environmental expertise through training existing staff or by hiring new staff, or presidential/prime ministerial offices must empower environmental ministries by providing them with a seat at the table for national budgeting decisions. Similar challenges (and solutions) equally apply to diversifying the network that surrounds finance ministries, including domestic and national consultants, CSOs, lobby groups and media contacts.
Thinking and working politically for more environmentally minded economics
Environmentally minded actors seeking to be heard by finance ministries must continue to strive to mesh environmental issues with those that prioritise social and economic priorities. Some of this is already well underway (a chapter in the final report shows how the climate finance world, for example, has already parsed much of its discourse into the language of treasuries and financial ministries). Nonetheless, there remains a need to “think and work politically”. This means acknowledging and addressing the vested interests and institutional barriers that will slow any transition towards ISET. Some of these are obvious and overt, like fossil fuel companies, while others are harder to see, like government ministries with binding mandates that may inadvertently prevent them from supporting ISET. There are also barriers to being socially inclusive in environmental work that need to be acknowledged: the poorest, women and marginalised groups may not own the natural resources on which they depend, but they often manage them. Insights like this make considering the people most impacted by environmental decisions an important part of achieving environmental objectives.
Moving forward here is extremely context-specific: and can involve working tactically to react to propitious political moments, listening and designing appropriate measures to placate those who oppose change, and continuing to build coalitions (including, often, surprising groups, for example, many export-focussed businesses welcome clear domestic environmental standards that align with their international competitors) that can agree on the need to advance the environmental agenda.
Build the data to measure and demonstrate environmental and ecological economics
In countries that advance evidenced-based policy, reliable and timely data that supports government initiatives is key. Yet, a glaring disparity exists between the frequency, fidelity and volume of data for economic planning and the data scarcity of the environmental sector. This is a deliberate choice for governments and their statistical offices. We can, and should, measure pollution statistics and the positive impact of pollution-reduction measures with the same level of granularity as we measure labour statistics or, even, how we measure inflation, but most governments are not set up to do so. This data gap makes it harder to attribute the benefits of ISET and limits governments’ abilities to have informed discussions about the necessary trade-offs that ISET entails.
In essence, finance ministries require a paradigm shift: greater access to environmental expertise, more politically savvy solutions to align annual budgeting with long-term plans, and more comprehensive data and tools to measure and demonstrate environmental and ecological economics. The future of prosperity depends on it.
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Authors
[### Sam Pickard
Research Associate](https://odi.org/en/profile/sam-pickard/)
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