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Sustainable investing in a post-Covid world

The coronavirus outbreak has sent shockwaves through the global economy, and as businesses struggle to cope with the impact, one thing has become increasingly clear. 

In its wake, the pandemic will leave major changes, reshaping the ways most of us live, work, learn and find entertainment on a day-to-day basis. But, amid the alarm and disruption, it has also created the opportunity and impetus to consider what all of us – from governments to public and private enterprises and individuals - should be doing to “build back better”. 

That means rejecting a blind resumption of past practice and expectations and, instead, committing to bold and effective measures to promote the principles of a green economy and sustainable investing. 

The first steps have already been taken through digitisation and initiatives to boost energy efficiency. But Covid-19 is now accelerating the process, as populations around the world realise the imperative of tackling issues like public health, pollution and global warming - and governments promise the funding to make it happen.       

“There is a huge amount of interest in a ‘green-shaped’ recovery,” says Phineas Glover, Credit Suisse’s head of ESG (environmental, social and governance) research for the Asia-Pacific region. “People see it is the way to stimulate growth in the short term, deal with some of the recent fallout, and tackle the next big systemic crisis of climate change.”  

But those, he adds, aren't the only compelling reasons for backing the concept of a green stimulus. For instance, a number of respected studies have shown a very clear “multiplier effect”, with new jobs and attractive returns in developed markets laying a foundation for sustainable growth. 

In addition, renewables and green technologies have improved in terms of productivity and price competiveness over the past decade. There is a clear need for new investment in everything from transport infrastructure and power systems to construction projects, renovation and the development of smart cities. And the sheer scale of the related recovery packages announced by the EU and others - though much of the funding is not yet earmarked – has the potential to be truly transformative.    

“So, for a green recovery, the fundamentals are there,” Glover says. “When we talk about job creation, the evidence stacks up, and in the global scheme of things, there will be a much bigger lift than after the 2008-09 financial crisis. Back then, the argument was less clear and the productivity trade-offs were less obvious.”  

Some areas, he notes, look particularly exciting and are sure to attract substantial investor interest. One is the expected energy transition to lower-cost hydrogen, which will help to address the debate in industries that rely of fossil fuels. The EU is already giving broad policy support and stands ready to double funding.  

Another is the future of mobility, heralded by the wider adoption of electric vehicle (EVs) and cleaner, fuel-efficient options able to reduce emissions. Allied to this are the multimodal developments designed to promote high-speed rail travel and reduce the dependence on cars. 

And a third is the so-called “circular economy”, which is built around the theme of recycling plastics and other resources. This has taken on greater urgency for developed nations which previously preferred to sort and export their waste to other parts of the world. With a change in regulations since 2018, they have been obliged to confront the problem on their own doorsteps, which has spurred interest in waste-to-energy schemes and preventive action at source.   


“Taking the opportunity to tackle these issues through a green stimulus can build momentum in such markets,” says Sydney-based Glover. “It is still a pressing priority to put in place funding for waste infrastructure, but we do find new policies globally in a similar vein.” 

He adds that in the area of ESG-themed investing, recent years have seen an explosion of different models and solutions. They now range from the plain vanilla of listed stocks to green bonds, impact investing, and even buying offsets to protect the rainforest canopy.   

In general, he believes the digital revolution can be very positive for sustainable development goals. Online retail lowers carbon emissions; the internet of things (IoT) optimises energy usage; and advances in “telemedicine” can promote health and well-being. All these areas will continue to present investment opportunities.   

“Governments are now faced with the necessity of balance sheet repair,” Glover says. “But the pandemic means there will also be more focus on healthy living and conditions like obesity. The health cost and preventable deaths caused by [the usual] air pollution is a big part of the narrative around Covid-19, People are connecting the dots, and we may even see an acceleration of initiatives to ban cars with internal combustion engines.”  

Overall, he notes, when faced with economic calamity, governments can’t simply take a “go with what I know” approach. 

“There may be inherent problems with the speed of decision making and tensions within the system, but ultimately you deploy the technologies and green energy needed to improve productivity.” 

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