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As the global economy faces mounting pressure from environmental degradation, investors and economists alike are grappling with a pressing question: Can economic growth persist if natural capital—the foundation of our ecological and economic systems—continues to erode?
Paul Gruenwald, Global Chief Economist for S&P Global, tackled this issue on a recent episode of Upside & Impact: Investing for Change, hosted by VegTech Invest’s CEO, Elysabeth Alfano. The discussion centered around the economic implications of declining natural capital, including the tremendous pressure from our current food system, the necessity of integrating environmental considerations into financial models, and the potential for “green growth” to sustain economic expansion.
The Case for Green Growth
Traditional economic models have long focused on physical capital—factories, infrastructure, and investment portfolios—while treating natural capital, such as forests, oceans, and clean air, as an external, cost-free input. This oversight has led to a depletion of natural resources at an unsustainable pace with our food system as the leading cause of deforestation and biodiversity loss according to the United Nations Environment Programme. As Gruenwald points out in the discussion, economic growth cannot continue indefinitely if it relies on the degradation of the very systems that support life and commerce.
However, there is an emerging shift in economic thinking. Gruenwald’s research highlights a key tipping point: if we continue depleting natural capital without reinvesting in its regeneration, we risk hitting irreversible thresholds that could contract economic growth. By integrating natural capital into economic decision-making, investors and policymakers can ensure a more resilient and sustainable economy.
Gruenwald explains this further in a clip from the interview here: https://www.youtube.com/watch?v=Y7HhXmPPkus
The Role of Carbon Pricing, Food Systems Transformation and Policy Incentives
One of the primary ways to realign economic growth with environmental sustainability is through carbon pricing mechanisms, such as carbon taxes. Gruenwald explained that a carbon tax would internalize environmental costs, making emission-intensive industries such as animal agriculture, less competitive while incentivizing investment in renewable energy and sustainable agriculture.
While some may argue that such taxation interferes with free markets, Gruenwald countered that markets are not truly free when externalities like pollution are unpriced. Alfano reiterated the sentiment by explaining that markets are inefficient when they don’t take in all the information of the business cycle, such as the destruction that comes from animal agriculture. By equating the social cost of carbon with its private cost, a carbon tax would create a more efficient market that accounts for long-term sustainability.
Investment Opportunities in a Green Economy
The shift toward sustainability presents a massive opportunity for investors. As economies transition to low-carbon models, significant capital will flow into renewable energy, sustainable food systems, and clean technologies. Gruenwald emphasized that China, for instance, has made substantial strides in renewable energy, positioning itself as a leader in solar, wind, and battery production.
Similarly, the transformation of the food system offers a compelling investment thesis. Traditional livestock agriculture is a major contributor to methane emissions, a potent greenhouse gas. Boston Consulting Group’s research suggests that investing in food system transformation is three to forty-times more impactful in reducing emissions compared to other green technologies. Innovations in diversified and cultivated proteins provide a pathway to reducing emissions while meeting global food demand.
This is the main thesis of the VegTech™ Invest fund in the public markets.
Measuring What Matters: The Future of Green GDP
One of the most significant shifts that must occur is the integration of natural capital into economic metrics. Currently, GDP remains the dominant measure of economic progress, yet it fails to account for environmental costs. Some countries are now developing “Green GDP” models, which track natural capital depletion alongside economic growth. As Gruenwald suggests in their discussion, incorporating these measures into financial reporting will provide investors with better visibility into the long-term economic health of their portfolios and the market as whole.
The Just Transition: Balancing Growth with Sustainability
A key challenge in achieving a sustainable economy is ensuring a “just transition” that supports both economic development and environmental responsibility. Emerging markets, which are still in the process of industrialization, require growth opportunities that do not repeat the environmental mistakes of the past. Gruenwald highlighted the potential for these economies to “leapfrog” traditional industrialization methods, much like many nations bypassed landlines for mobile technology. However, when one looks at Africa and the industrial chicken plants that are being established it isn’t clear that critical mistakes won’t be repeated.
The Path Forward for Investors
For investors, the message is clear: Aligning portfolios with sustainable investments is not just an ethical imperative—it’s an economic necessity. Companies that fail to account for natural capital risks will face increasing regulatory, operational, and reputational challenges. Meanwhile, those that integrate sustainability into their business models will be well-positioned for long-term growth.
VegTech™ Invest’s focus is on the intersection of sustainability and financial performance, identifying opportunities where innovation drives both profitability and positive environmental impact. As the global economy transitions to a greener model, investors have the opportunity to participate in a financial transformation that ensures long-term prosperity without sacrificing the planet.
The bottom line? Economic growth and environmental sustainability are not mutually exclusive. By rethinking our approach to investment and economic planning, we can build new systems of energy, transportation, building materials and food where both thrive in harmony.
Listen to the full audio podcast here. Watch the full video interview here.
Related: Proven Strategies for Effective Shareholder Engagement: Insights From VegTech Invest