2020 in the rear-view mirror
2020 in the rear-view mirror
For almost everyone, 2020 was a year of extraordinary disruption at a societal, economic and personal level. This is set to continue to mid-2021 across most of Europe and its repercussions will be felt for years to come. Encouragingly, however, the last twelve months has allowed or obliged us to pause and reflect on how to “build back better” and more sustainably. Nowhere is this more evident than in the stated ambitions of governments and corporations to decarbonise our economies, reduce energy consumption and recycle waste.
The Covid crisis radically changed energy usage patterns and the question today is to what extent those changes will become permanent. The first lockdown led to a higher proportion of electricity coming from renewables and low overall demand led to problems for National Grid, accelerating the need for greater flexibility on the grid. Reduced road traffic led to a noticeable improvement in air quality, an improvement that gave a taste of what the future will be like when EVs are the dominant form of road transport. These developments, and the desire to build back better, are likely to continue to drive the already unstoppable transition to a low carbon energy system and electric transport.
Particularly noticeable in the last six months has been the investor attention at institutional levels to scrutinise the ESG credentials and performance of companies. The need for management teams to gather sustainability and diversity data, validate it and report upon it as well as setting targets for improved governance and societal contribution, has become mainstream.
Particularly noticeable in the last six months has been the investor attention at institutional levels to scrutinise the ESG credentials and performance of companies. The need for management teams to gather sustainability and diversity data, validate it and report upon it as well as setting targets for improved governance and societal contribution, has become mainstream. This has been matched by record levels of funds flowing into ‘green’ or ‘sustainable’ investment vehicles. Excluding fund-flows into money markets and commodities, the proportion of ESG directed fund-flows into equity, bond and multi-asset funds exceeded 70% in 2020.
From Cameron Barney’s perspective, it is heartening to see this appetite to fund companies that, in addition to their investment merits, are building innovative and improved infrastructure – much of which is enabled by significant technological innovation. The improvement in digital infrastructure has been especially evident in households through the pandemic, whether used for work, schooling or entertainment – although there remains a lot to be done to bring the benefits of gigabit broadband to the majority of homes and businesses in the UK and continental Europe. As of December 2020, the UK can still only claim that 27% of households can access gigabit broadband.
The UK government’s creation of an InfraBank (with its initial capitalisation of £12bn) is just the latest in a line of recent commitments made by national governments in Europe as well as the United States to fund the energy transition and other essential infrastructure. The EU Innovation Fund has been established with €10bn for deployment over ten years to invest in clean energy and industry to boost economic growth. Its ambition is to be deployed in line with the EU’s Green Deal – a set of policy initiatives intended to bring the European economies to being climate neutral by 2050. These are bold and welcome and they will undoubtedly change the make-up of Europe’s energy infrastructure.
