The virus hit us unprepared, but the world has acted to contain it. By contrast, climate change has been around for a long time, but across the globe, little is being done. Do you sense the irony?
There is a lot to be learned from the pandemic. We have seen that global co-ordination and co-operation is paramount to ward off a global threat. Also, most of us now probably trust scientists more than policymakers. Another learning is that fast action can keep financial and social costs low. This all applies to climate change as well.
For all the misery Covid-19 has caused, the wakeup call it represents is welcome. Given that climate change is another disaster waiting to happen, the timing seems perfect to steer the economy away from its fossil-fuel addiction.
Environmental concerns are back on everybody’s mind, and green agendas are being pushed around the world. Government efforts to crank up the economy or help coronavirus-hit businesses often come with tough conditions to meet sustainability standards.
For instance, in Germany, purchases of new cars may be subsidized by the state, but only if the new eco-friendly vehicles replace high-emission ones. This is an example how to reconcile short-term economic goals with longer-term environmental targets.
In France, the state’s rescue package for Air France/KLM limits the airline’s ability to subsidize short-haul flights. Such measures are likely to benefit France’s high-speed rail network.
On a supranational level, there’s the EU Green Deal, a roadmap towards a sustainable economy. Over the next ten years, up to 1 trillion euros are expected to flow into areas like decarbonization, energy-efficient buildings and clean mobility. This should make the European Union carbon-neutral by 2050.
The corporate world is prepared, and the environmental technologies on hand are mature and competitive. Wind and solar parks continue to spring up despite the pandemic, and they generate cash flows and returns. This is a stark contrast to other infrastructure projects such as airports or shopping malls that experience huge problems right now.
Within our clean tech portfolios, our longstanding focus on such companies has helped us during the past few months, allowing us to outperform the broader market since the start of the year. It has also reduced the need of extraordinary portfolio adjustments. At the same time, we used the volatility in the market, and some significant corrections in stock prices, to top up existing positions. A couple of new positions were added as some high quality companies became more attractive. For example, we built a holding in Daikin Industries, a manufacturer of high-end air conditioners, and TeamViewer, a software company providing remote-control solutions.