The sustainable economy is becoming a reality. What opportunities does it offer?
Sustainability is one of the most important issues of our time. The focus of global economic growth is increasingly shifting to the decarbonization of value chains. In what areas do investors have good prospects of benefiting from a shift toward a sustainable economy?
New opportunities in a sustainable economy
"Only a short time ago, hardly anybody would have thought of climate protection as a financial opportunity," says Felix Baumgartner, Head of Premium Clients at Credit Suisse, in his opening address to the second annual Credit Suisse Thought Leadership Series. That has changed, however, he adds. The question to ask is obvious: "Is sustainability the biggest economic opportunity of our time?"
On June 9, 2021, at Credit Suisse's Virtual House, Prof. Jeffrey Sachs and Dr. Barbara Frei discussed that question and how the coronavirus pandemic is influencing these trends.
In the Paris Agreement on climate change, the global powers agreed to limit global warming to less than 1.5 degrees Celsius. Can we still achieve the goals of the agreement?
Dr. Barbara Frei: Yes. Last year, for example, global CO2 emissions fell by 7% due to COVID‑19. In order to maintain those effects over the long term and in sufficient strength to prevent a further increase in global temperatures, there needs to be a quick and fundamental change. The technology is available, and sustainable business models are working today even without subsidies.
Prof. Jeffrey Sachs: To achieve the climate goals, we need to radically decarbonize our energy system and use renewable energies as much as possible. We need more electric vehicles and mass production of hydrogen. In the recent past, activist shareholders of the ExxonMobil and Chevron oil companies also pushed through motions on faster decarbonization of the value chains. Investors are finally realizing that they will lose a lot of money if they continue investing in the old energy system.
The transport industry is one of the biggest producers CO2 emissions. How can companies decarbonize their value chains?
Prof. Jeffrey Sachs: By putting their money in electric vehicles or hydrogen. Private and local public transportation can easily be electrified. Battery capacity for heavy transport is still inadequate at present, but hydrogen could serve as an alternative fuel in that sector. As battery technology improves, it will make sense to have electric drive systems for trucks as well. The fact that Tesla currently has the highest market capitalization of any automobile company shows what direction the markets are headed in.
The real estate sector is responsible for around 17% of all CO2 emissions. In what direction are developments headed when it comes to green properties?
Dr. Barbara Frei: With existing buildings, their energy consumption can often be reduced by as much as 40% with digital technologies. That's why it is important to begin thinking about doing this when remodeling them or even when planning new properties. Increasing digitalization, in smart cities for instance, helps reduce consumption. When available energy is not used, it can be made available to other users.
What impact is the economic recovery from the effects of the COVID‑19 pandemic having when it comes to progress in the area of sustainable development?
Dr. Barbara Frei: At the beginning of the pandemic, people feared investments in sustainability could decline – for example, through the European Green New Deal. But surprisingly, the opposite occurred. The pandemic became an accelerator of sustainable developments, mainly driven by stronger digitalization. Sustainability is causing business to boom in many places.
How is sustainability affecting the innovation and competitiveness of companies in Europe?
Dr. Barbara Frei: I believe the fear that digitalization will cause jobs to disappear is unfounded. Instead, it will create new jobs, especially in sustainable sectors. At first, there could be a painful phase with major restructuring, but European companies will emerge from it stronger and more competitive. I am convinced that, with our new focus on technology, we will also create sustainable jobs across Europe.
What new sustainability trends have been created by the pandemic?
Prof. Jeffrey Sachs: We are headed towards a world that is green and digital. And we are doing so more rapidly than expected. The digital transformation during the pandemic was breathtaking. There will be more intelligent systems – in the transport industry, in real estate, and in manufacturing. Even the financial sector is now moving decisively in the direction of green and digital technologies.
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