Sustainable Investment And The Race to Zero Emissions During The Covid-19 Pandemic

”Sustainable funds are attracting investment at record rates, and U.K. firms are seeing the effects.”

 

JP Dallmann, CEO, ILA & Partners

The coronavirus disease (COVID-19) threw the world’s health, economic and financial systems into disarray, but the pandemic did little to distract the U.K. from the climate crisis. A recent survey by Ipsos shows two-thirds of Britons consider climate change to be as serious as the pandemic, and the majority support a green economic recovery.

Their voices are not unheard, since leaders at all levels of society are strategizing ways to “build back better” for our planet. The UN’s Race to Zero initiative is the latest push towards net-zero carbon emissions by 2050 and forms an alliance of leading net zero movements representing 21 regions, 441 cities, 992 businesses, 38 investors and 505 universities. These ‘real economy’ actors are united with 120 countries in the world’s largest coalition to reach net zero emissions by 2050 and, together, reflect about 25% of emissions globally and over 50% of global GDP.

The Focus on Climate Crisis Is Still a Priority

During this period, the financial sector saw sustainable funds experiencing a net inflow of £37 billion globally amid the panic of Q1, while investment funds overall had a net withdrawal £302.8 billion over the same quarter according to Morningstar.

The recent acceleration of investment to such funds reflects the increasing growth in sustainable investing as a whole, but more progress is required in terms of divestiture from international oil companies (IOCs), as well as in public-private coordination necessary to achieve net-zero emissions by 2050.

The Bigger Picture and Impact Companies 

During a conversation with Lord Browne of Madingley, Former CEO of BP (pictured), about the role of IOCs and exclusion of these companies as a sustainable investing strategy to help achieve the emissions target, there was a realisation that there is not a one-size-fits-all solution. To begin with, some countries, particularly those less developed, may struggle to transition as fast as others with more resources, innovation and technology.

To complement the complexity of a potential solution formula, and as he highlights in his latest book — “Make, Think, Imagine: Engineering the Future of Civilisation” — there is a key role for companies trying to find a solution or alternative to the challenges we are facing and a brighter future. These companies include those that can initially help offset the negative impact generated by the carbon creators, such as carbon capture, but there are a wide range of alternatives that can contribute immensely to the net impact. These can vary from new ways to generate cleaner energy from waste, to the creation of a vegetarian meat that is accepted and consumed by the masses.

Leaders Committing to Action

The coronavirus is set to cause the largest annual fall in CO2 emissions in history, according to analysis performed by Carbon Brief. Although without climate action, emissions will return to previous levels when industry and transportation return to normal, according to experts.

In response to the Trump Administration’s formal announcement to withdraw from the Paris Agreement in 2019, many leaders are taking action. Among them, there is John Kerry, who launched a new bilateral American coalition in an effort to achieve zero emissions by 2050. The initiative, World War Zero, aims to raise awareness around the climate crisis by hosting one million conversations with leaders across the political spectrum in 2020.

While the global pandemic remains the immediate priority for governments, policy makers and regulators should remain steadfast in their efforts to limit the global temperature rise to 1.5° Celsius as per the Paris Agreement.

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