The final trend we discussed was how markets will be impacted by climate action. As nations strive to fulfill goals laid out in the Paris Climate agreement, aiming for net zero carbon emissions by 2050 will require a radical transformation of our food, energy and transport systems.
The clearest pathway is in the electricity generation sector, where good alternatives to coal and natural gas already exist. Though many renewables relied on government incentives in the past, cost reductions have occurred so naturally – and so dramatically – that it’s now possible to access alternative sources of energy at competitive rates without any subsidies at all. For example, the UK’s latest offshore wind auction saw some prices below those offered by the country’s newest nuclear power station.
Support for the transitions is sweeping; France, Sweden and the UK are among the countries that have committed to full de-carbonization, and joining them are some of the Fortune 500’s biggest names, including Amazon.com, Daimler and Duke Energy. Closer to home, we find that many younger Canadians are looking to redefine business, investment and public policy objectives to include a focus on sustainability issues.
On the institutional side we’ve already seen some pension funds divest away from industries with low Environmental, Social and Governance (ESG) scores to take a positive approach to responsible investing (RI), while at the same time we’ve seen ordinary Canadians demand greater input on how their dollars impact the world from a social perspective. The bottom line is ESG is not going away.