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The green lining of COVID-19: a time for change

The coronavirus outbreak has been a tragedy for many, a shock for us all and a crisis for economies around the globe. We have embarked on a massive experiment, slashing economic activity to limit the pandemic, sharply reducing carbon emissions and preparing for only a slow resumption of growth.

A ‘green lining’ of this global crisis has been the significant reduction in carbon emissions. Figures from specialist publisher Carbon Brief estimate that carbon emissions in China fell by 25% in February alone, while the European Union could face a drop of 25% in 2020 compared with 2019 levels. Overall, it is estimated the global emission impact of coronavirus will be -5.5%, the largest annual reduction since records began.

Australian targets at risk

Despite these promising figures, in Australia, the political focus may have shifted from its commitment to climate, and its obligations to the Paris Agreement, to economic recovery, which is currently highly reliant on ‘old technology’ industries, such as mining.

While the Australian Government is currently committed to reducing emissions by 26-30% by 2030, there appears to be reluctance to prioritise green policy and initiatives, putting these ambitious targets at risk. However, following the recent bushfires and social movements, such as Black Lives Matter, Australians are demanding environmental, social, and governance (ESG) initiatives take priority with policy makers, business, and financial institutions.

The question now is whether the world can use this moment to find a ‘new normal’ and build a less carbon-intensive economic model. It’s a model that could put the temperature goals of the Paris Agreement tantalisingly within reach.

Understanding the numbers

To achieve our commitment to a less-than-1.5-degree world, it would take a COVID-19-like event every year until 2050. Starting next year, yearly emissions cuts should be more than 7% and emissions need to peak as soon as possible. If negative emissions technologies are excluded, or fail to become available at scale, then the required emissions reductions for a 1.5-degree world would be an eye-watering 15% every year until 2050, according to the UNEP Gap Report 2019.

Chart: Evolution of CO2 emissions from 1990

Sources: AXA IM estimates, Global Carbon Project, CDIAC, Friedlingstein et al, 2019

It is a sobering thought that over the next couple of decades, we need to replicate and enhance the forced effects of the last few months. This crisis has offered policy makers and investors a rare opportunity to construct a recovery that builds on the progress already made.

The role of policy in economic growth and global warming

One clear point about the hit to global GDP, which is forecast in the IMF World Economic Outlook (April 2020) to contract by -3% this year, is that it is hoped to be temporary. That means the drop in global carbon dioxide emissions will likely be temporary too. Try as we might, to date, we have not yet uncoupled economic growth from global warming.

To create change, an obvious step is to redouble efforts to shift the energy mix. Renewable energy (including wind, solar and bioenergy but not hydro) is growing exponentially (+13.8% per year between 2013 and 2018). However, growth has been too low to offset the increase in fossil energy consumption (+1.5% of oil and +2.6% for gas over the same period) which still dominates. Growth in renewables has outpaced growth in all other forms of energy since 2010 but the share of fossil fuels in global primary energy demand remains above 80%.

Another effective tool for change is through bailouts and stimulus, which governments are offering to support economic activity in the post-crisis environment. Governments can deploy green stimulus to condition business support on a decarbonisation criteria.

Investing for change

Investors can help to build a greener economy through investing in positively evolving businesses and scaling up their company engagement agenda and stewardship commitments.

In 2019, climate change accounted for more than 40% of AXA IM’s total engagement with companies. In a 12-month period, we engaged with 217 issuers, voted at 6,016 general meetings, and 64,439 proposed company resolutions were voted on. This was an increase of engagement by 74% from 2018 levels.

Industry bodies and working groups are also an effective tool for driving conversation and change on the climate agenda. An example is the European Alliance for a Green Recovery, which brings together a coalition of policy makers, companies, trade unions and financial institutions to develop a recovery package that accelerates the transition towards climate neutrality and a healthy eco-system. Proposed concrete solutions include the ‘European Climate Emergency Fund’, which would issue debt instruments whose proceeds would be used to fund green transition projects undertaken by governments or corporations.

The Climate Action 100+ initiative is one of the best-known investor coalitions and engages with the most carbon intensive companies in the world on climate related issues. It has been mostly focused on energy supply sectors, so far, but engagement opportunities still exist in the end-use consumption sectors.

COVID delivers an opportunity for change

It is everyone’s responsibility to forge a ‘new normal’ and capitalise on the significant emissions reductions from COVID-19. To create change, government needs to harden policy thinking and investors need to invest responsibly and proactively engage with companies.

We have been given a glimpse of the kind of adjustments our world needs to make if we are to definitively tackle the looming threat of the climate crisis. Far from distracting us from this, COVID-19 should harden our resolve while teaching us valuable lessons.


Lise Moret is Global Head of Climate Change Strategy at AXA Investment Managers. The full version of this article is linked here.


Ian A
August 02, 2020

Unlike my son, I am pessimistic about the world's future. The tenor of the preceding responses serves to reinforce my belief.

August 04, 2020

Yes, ideology over evidence. Do humans deserve to go the way of the dinosaurs? Probably. The sad thing is, Australia could be a renewable energy superpower, exporting energy to Asia and India. We could have a thriving manufacturing sector, using our cheap renewable energy and plentiful land. We could have cleaner air and less congestion and free public transport on our emissions free trains and buses. We could have cheap power bills and free university education. We could become a high- tech hub in our region, attracting the best and brightest, and have more quality jobs. Unfortunately the Government are too blinkered to see the opportunities available in the global transition to de- carbonise.

August 04, 2020

I'm with Ian A on this one.

The pandemic has made me think that governments can't change everything and to rely on governments all the time just gives more and more debt.

Time for everybody to wake up

July 30, 2020

Head of Climate Strategy chez AXA Investment.
Lise, hardly an unbiased opinion. Climate Change is real......thank goodness.....or we would still be locked into the ice age. During this brief warm period all the human civilisations have risen and fallen until the current, and best , ones emerged. Nothing has been better than the carbon-enhanced Western Capitalist Civilisation that we enjoy now !
Every other civilisation has relied on slaves to produce wealth....ours does not....and is the only one which produces sufficient excess wealth to 'drag the entire World out of poverty and into prosperity ' as the statistics show.
Until the world started burning coal and oil they burnt wood.....that is ...trees ! The Industrial Revolution began using water
mills and windmills but converted to steam power and eventually internal combustion engines ! This release of trapped carbon in the fuels they burnt probably also fueled the "green revolution" whereby crops and plants starved of atmospheric carbon monoxide began to thrive and produce more abundantly......a double benefit wouldn't you say ?
The thriving plants [ both terrestrial and aquatic ] are not only the source of all food and all oxygen as well .
Cut back the carbon dioxide and you stunt the plants , reduce the food supply and reduce the oxygen level!
Now if that is NOT a death wish then I don't know what is! The planet will be here long after we are gone ! In the meantime, a bit of warmth and comfort and a reliable food supply is what we very evidently need and thrive on. So we just need a vaccine, some help from our neighbours and a return to work and recreation and getting "back to normal" as soon as practicable ....and that's it !

July 31, 2020

Ooops! That "starved of atmospheric carbon monoxide" should read "starved of carbon dioxide" is after all ,
the "stuff of life on THIS planet " and it is from this tiny trace gas in the atmosphere , 0.04 % , that ALL LIFE depends upon.......
Carbon Monoxide :
Carbon monoxide (CO) is a colourless, odourless gas that is very stable and has a life of two to four months in the atmosphere [ and , thankfully , it oxidises to Carbon Dioxide anyway ! and can be utilised in photosynthesis !! FOOD .]

O Perks
July 30, 2020

Over 500,000 deaths so far world-wide from Covid-19. Zero deaths from anthropogenic global warming. Plenty of experts and green politicians, for years, predicting catastrophic climate change, none predicting a pandemic. Long time alarmists such as Michael Shellenberger admitting that they exaggerated constantly. I think the general public will become extremely circumspect about climate change alarmism, and articles such as yours Lise.

William Jones
July 30, 2020

Sorry Lisa, but "understanding the numbers" requires me to suspend belief in the scientific method, and adopt a quasi religious belief in the veracity of climate change models.
I have no doubt that the Earth has been warming since the original scare about global cooling in the early seventies. I also have no doubt about the health impacts engendered by cooking on open fires and old technology electricity generation.
I have no doubt that the current fashion to blame greenhouse gases (yes CO2 is one such) will be seen by future generations as a unfortunate distraction in living with the consequences of a continuously changing global climate and an Earth with an unsustainable human population.

Bill Watson
July 30, 2020

If you mean CO2 emissions when you refer to "carbon emission", it would be more factually correct to refer to them as "oxygen emissions" as there is more oxygen in CO2 than carbon. If the world seriously believed CO2 emissions were such a problem we would enthusiastically embracing nuclear energy.

July 30, 2020

Why do I suspect that once the vaccine kicks in, and we need economic growth to restore jobs, we won't worry much about this opportunity?


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