Hurricane Laura and Typhoon Bavi left heartbreaking trails of destruction last week, triggering fresh headlines around the connection between severe weather and climate change—and fresh debate about the right climate policy in the midst of a pandemic, according to Christopher Smart, Chief Global Strategist & Head of the Barings Investment Institute.
“During those dark days of the coronavirus crisis this spring when job losses literally fell off the charts, there were calls to set the climate crisis aside in all-out pursuit of getting as many people back to work as possible. But as the tortuous path to recovery comes into view, climate concerns look set to shape the next phase of global economic growth more than ever, amid new work patterns, generous government spending and corporate priorities that have shifted significantly since the last time the global economy cratered in 2008.
“Beneath what remains of the debate over the causes of climate change, especially in the United States, global investors have increasingly understood that the money they put to work is increasingly affected by environmental regulations that restrict carbon emissions, by innovative technologies that provide cheaper and cleaner sources of energy, and rising social attention to sustainable practices. Political agendas aside, increasing insurance costs, falling coastal property values and the expanding share of renewable energy sources all testify to the growing importance of climate concerns on investment returns.
“But the Great Lockdown suddenly overwhelmed these dire-but-distant worries as it threatened to tip the global economy into depression. The Trump Administration’s Environmental Protection Agency announced it would “exercise enforcement discretion” with regard to violations of environmental laws due to the pandemic. Quarantines and travel restrictions delayed further international climate talks. Restaurants struggling to stay in business shifted to paper napkins, Styrofoam boxes and dreaded plastic straws.
“Yet as the path to recovery comes into view, whether it continues as a sharp V or sags into a limp U, climate not only remains on the policy agenda but may have even risen a couple of notches on the world’s list of priorities.
“While the quarantine measures themselves have had only minimal impact on carbon emissions, the pandemic surge in telework and virtual conferences looks lasting. Transportation accounts for roughly 14% of the world’s greenhouse gas emissions, most of which come from cars and trucks. Still, fewer daily commutes (assuming trust returns to public transportation) and a sharp decline in business travel may make a dent.
“A much bigger boost to green practices will come from the massive amounts of money the world’s governments are injecting into the economy to drive the rebound. The European Union’s expanded budget in response to the pandemic includes as much as €550 billion in investments that specifically help reduce emissions and envisions taxes on plastic waste and tariffs on imports deemed to be polluting.”
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