Amid the horror of the pandemic, people have demonstrated their ability to innovate and change behaviour rapidly, writes Chris Holmes.
The UK is months into the Covid-19 crisis and with some aspects of lockdown lifting, there is hope that we might be starting to see, to paraphrase Winston Churchill, if not the beginning of the end, the end of the beginning.
Life has certainly changed since March and many people may be wondering what life will look like for the next few months, or even years. With the change and adaptations that we are making in our lives, we must not forget that our planet already faces another existential crisis – the climate crisis.
Arguably, the impacts of this could be much greater than the current crisis we face – coastal flooding, extreme weather, drought and forest fires could severely disrupt agriculture, infrastructure and livelihoods. We have seen the impact that the current pandemic has had on our economy; many commentators fear climate impacts could be worse.
It is ironic that it has taken a pandemic to bring about the changes that many have called for, such as reducing carbon emissions. Notwithstanding the heavy cost on our livelihoods and economies, there are undoubtedly lessons that we can apply from the pandemic to work towards a zero emissions target and kickstart the movement to a greener, more resilient economy.
A scientific and political solution
While sat at home during the crisis, we have seen the importance of scientists and industry experts in providing insight and thoughts on how to navigate through the pandemic. It has become clear how important the interaction between scientists, government, business and consumers has been in solving the current pandemic. This should act as a blueprint for solving the climate crisis, where different stakeholders collaborate towards achieving our net zero target. The current crisis has demonstrated our ability to mobilise, innovate and change our behaviours rapidly to fight the disease. We must take this same collective approach to address the climate crisis, bringing together different motivations, resources and skills to address the issue.
According to the BBC, no war, recession or previous pandemic, has had such a dramatic impact on CO2 emissions over the past century as Covid-19 has had over the past few months. The impact this crisis has had on our environment is undoubtedly the most positive consequence of a disease that has devastated the world. Of course, this is not sustainable, and soon these levels will rise as people go back to work and the government attempts to kickstart the economy.
The role of environmental infrastructure investing
The coronavirus crisis has significantly impacted financial markets, with severe volatility and significant market retrenchments. Particularly badly hit have been many of the companies that are most closely linked with carbon generation, such as airlines, and oil and gas companies.
By contrast, investing in environmental infrastructure assets, such as wind and solar plants, have proven very robust during these uncertain times, having experienced little-to-no disruption.
There is a strong indication that environmental infrastructure assets will continue to be resilient and may even provide a cornerstone for economic recovery as we continue to adapt to climate change.
In addition to initiatives supporting renewable energy, government commitments towards investing in infrastructure – announced in the Budget earlier this year – look set to remain an important policy focus as we recover from coronavirus, navigate Brexit and then face the challenge of managing climate risks. This is likely to shine a light on the emerging environmental infrastructure sector as governments – in the UK and abroad – look to build assets that are more resilient to future challenges and risks.
Finally, the sector continues to offer highly attractive yields at a time when low interest rates and government bond-buying programmes are severely contracting yield opportunities.
A green revolution
Crises have the power to fundamentally transform the way we do things. In recent weeks, we have witnessed remarkable resilience, innovation and adaptability. If we can harness this spirit and ethos, it can act as the catalyst to launch a “green revolution”, building a resilient and sustainable economy for future generations.
In the horror of the recent pandemic, we have breathed cleaner air, seen wildlife return to our cities, and walked or cycled through traffic-free streets. We have seen a blueprint for a better future.
In this, environmental infrastructure will play a vital role, providing the strong base on which we can deliver a positive step change in creating a more resilient and sustainable society.
Chris Holmes is co-lead investment adviser to JLEN Environmental Assets Group.