Will the environmental benefits of lockdown last?
June 08, 2020
At the same time as global coordination has been proven possible at a remarkable pace, we’ve also seen what a cleaner, healthier environment could look like. With further collaboration and cooperation, much more could be achieved.
Last Friday (5 June) marked World Environment Day, a day to take stock and consider actions we can all take for a greener and brighter future. The UNFCCC launched it's Race to Net Zero campaign, and the IMF, World Economic Forum and HRH Prince of Wales launched the Great Reset Agenda, calling for greener, smarter and fairer growth, post pandemic.
The human and economic consequences of Covid-19 are devastating. It has also caused a significant fall in greenhouse gas emissions - albeit temporary and with a negligible impact on warming - a regeneration of natural environments, and improved air quality. The question is whether such environmental benefits can endure once the economy reopens fully. We are at an important crossroads for the planet where we can decide if traditional high-polluting industries will be our path to recovery or whether we will choose a green recovery in response to the looming climate crisis, public sentiment, and economic signals, such as the falling oil prices and increasing competitiveness of renewables. If the 2008 financial crisis is anything to go by there is a risk we will fail to take bold, decisive action to set us on a more resilient path to recovery and continue to feed bad carbon habits. But, there is cause for optimism - crises are catalysts for change and it will be important to create an enabling environment that promotes the climate-positive behavioural changes we have seen.
Our research (PwC Quantibus, UK, April 2020) shows that almost two thirds (63%) of people feel our environment will improve as a result of the pandemic. Likewise, the majority (57%) of the 1,000 people asked believe that a reduction in pollution will be one of the long-term impacts of coronavirus. Through providing frontline services to staying in their homes, most individuals have shown willing to do what’s needed for the greater good. Business must now prove it is willing to do the same.
PwC is among the organisations proposing principles for low-carbon economic growth and calling on the government to deliver a recovery plan that integrates wider social, environmental and climate goals. These include measures like coupling decarbonisation targets with corporate rescue packages, aligning tax components of stimulus plans to climate commitments, and banking some of the environmental benefits such as reductions in commuting. Rebuilding ‘green’ can stimulate economic growth and create jobs while achieving a more resilient system. Indeed, the Chancellor has signalled plans for a ‘green industrial revolution’ to create jobs for those who have lost their employment during the pandemic.
Without collective action, efforts to prevent climate catastrophe and ecological breakdown will fail. We need a coherent global vision on net zero, which should include trade, investment, and development policies. But we must also recognise that collectives can be national, local, and industry-specific as well as international. One of the things that comes through loud and clear in the just-published Where next? series, produced by Strategy& in collaboration with our Leaders of Industries, is the huge range of climate and environment-related opportunities and challenges that exist at an industry-level.
In asset and wealth management, for example, there is a chance to shore up interest in environment, social and governance (ESG) focused investments - more than half of which have outperformed the wider global stock index due to lower exposure to oil and energy. In the energy sector, the collapse of oil prices could be the impetus needed to accelerate transition to clean energy. The UK Chancellor plans to boost investment in clean energy in a stimulus package to be announced in July, but some cash-strapped governments may find lower fossil fuel prices too attractive an option to stimulate growth to resist. In power & utilities, a challenge will be the potential fall in future returns on conventional assets which might have funded their transition. The fight here is to keep momentum, and look to long-term rewards and resilience.
There is the investor side and the stock side of real estate. Improving energy efficiency of existing stock can not only save emissions but generate green employment. Societal expectations will continue to put pressure on landlords to commit to sustainability goals. Real estate companies must not lose sight of environmental, social and governance (ESG) issues. They should consider these policies, which could attract responsible investors, an investment in their financial resilience. Those in consumer goods would abandon their sustainability commitments at their peril, particularly with over half of people (54%) feeling a stronger connection to their local community and more (57%) believing society will improve in the long term as a result of the pandemic.
The appetite for a greener future could accelerate trends across other industries, too. For example, in the automotive industry, the transition to electric vehicles could come faster if renewed public environment awareness were combined with increased government subsidies as part of a stimulus package. Greater focus on automation to improve operational resilience offers manufacturing the chance to move away from carbon-intensive processes and contribute to a much hoped for, less polluted future. Changes to the way we travel will necessitate the need for new infrastructure that supports sustainable options and nudges behaviour in a positive direction. In addition to serving the climate agenda directly, this could create green jobs and contribute to the levelling up agenda.
This is not just a temporary shutdown; reopening of economies will fundamentally reshape some sectors as we know them and recovery will take time. It is important that decisions being taken now factor in climate lest businesses will be left leaving themselves exposed to further shocks. This is an opportunity for some industries to reinvent themselves as low-carbon, while others must find ways to continue to fund existing climate momentum. And while they will emerge from this crisis at different stages, this is a once-in-a-generation opportunity for all industries to play a role in securing our wellbeing, planet health, and economic recovery.