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COVID 19 – a prelude of things to come?
Even though the COVID-19 global outbreak has been termed a black swan event, it should not have taken us by surprise.
For almost 20 years now, alarms have been raised from within the health and environmental sectors on rising and intensifying infectious diseases due to a warming climate. Many reports have highlighted an increase in famine, disease and weather-related disasters which will push countries over and above their carrying capacity. A report in 2019 from the Centre for Disease Control (CDC, USA) 2019 report highlighted that climate effects will create new health threats and will likely amplify existing health issues across the board. Thus, while the present COVID-19 pandemic and climate change may have a tenuous causal relationship, this global health crisis is a glimpse of what is to come in a climate-changing world.
Historically, the climate crisis has been a ‘problem of the future’. With COVID-19 bringing the world to its knees within a matter of months, however, it has painted a stark picture of what our future may look like if climate-borne diseases take a toll on us. To put this into context, this pandemic has taken over 40,000 lives in about 5 months, but the World Health Organisation estimates that global warming will snatch another 250,000 lives per year across the next few decades if we do not take preventive measures now.
From the onset of 2020, one thing is for sure – globally, we are not ready to tackle what is to come. Nonetheless, COVID-19 has surfaced a series of opportunities that climate leaders can take action on.
COVID-19 implications on climate action
This pandemic has manifested itself, among others, in two interesting interplays.
On one hand we have seen positive environmental impacts. In China, for instance, with large industrial plants shutting down and far less cars on the road, the country had seen 20% improvement in its air quality in February. Countries like Italy, India and Singapore have sighted dolphins and other fish in city harbours (from reduced water pollution and shipping traffic).
On the other hand, the supply shock from Chinese manufacturing lockdown, unprecedented travel limitations and work from home mandates across the world, coupled with oil supply war between Saudi Arabia and Russia have created a glut in the fossil fuel market. The price of crude oil has dropped below $25 per barrel which has suddenly given leverage to hereto uneconomic carbon-based energy systems.
Sadly the fallout of the pandemic means that Asian economies will see an austere economic period, with businesses taking a hard call on recruitments and budget cuts while rethinking their strategies until ‘normalcy’ returns. Till then, this series of triggers has the potential to recalibrate climate investors’ focus in this new economic reality, particularly their expectations around financial returns. Not only will their decisions potentially jeopardize investment flows into clean solutions, but they will also lead to associated consequences on industries including the petrochemical sector as plastic production will surge due to low input costs.
Amid this economic and health chaos, one question looms over most impact investors and sustainability executives: can we still afford to continue our green efforts in this environment of economic uncertainties?
Overcoming socio-economic vulnerabilities with climate action
Rebuilding a post COVID-19 world stronger than before has definite possibilities. We have seen humanity rising up during this period to think beyond its individual needs. Similarly, the pandemic has presented a myriad of long-term opportunities for climate investors to pursue.
A time when distinguished climate leaders will emerge – While oil prices may deter investors from green solutions in the short term, fuel prices will eventually rise again once this crisis is resolved and the economy picks up. As such, companies and leaders need to rethink infrastructure spend with a long-term horizon; investments should take us into a clean energy future as opposed to fossil fuel lock down.
No doubt this will require a strong stewardship from organizational leaders. These leaders must not only balance necessary cost-containment manoeuvres with strategic, commercial actions, but also guide cultural perceptions and bolster confidence within their companies. Instead of perceiving carbon reduction as mere window-dressings, businesses ought to see it as an opportunity for growth. Ultimately, how nimble corporates, governments and investors are in shaping their sustainability programmes during this recession depends very much on how committed these entities are in prioritising long-term goals over short-term benefits.
Reassess supply chain priorities for sustainability – With COVID-19 significantly disrupting trans-national supply chains, it offers an opportune time for businesses to think about the spectrum of risks that black swan events like this cause. Since different countries will be impacted in varying degrees, local businesses, corporates and governments will have to re-assess the sustainability of their supply chains and develop more localised production lines to reduce international reliance.
These risks will be exacerbated by increasingly unpredictable weather patterns and climate-borne diseases that have the potential to cause repercussions across all sectors. Strategic and collaborative steps, therefore, need to be taken to strengthen supply chain performance and build operational and community resilience across supply chains.
Finding the silver lining – I am heartened to witness many grant making foundations converting their existing project grants into general support for their grantees so that start-ups and non-profits have the flexibility to respond to the pandemic. This will also create space for on-the-ground solutions to scale and innovate, thereby not only surviving sustainably during wide-spread lock-down but also providing services for communities most in need.
While there is an immediate need for countries to focus on the COVID 19 crisis, Elen Mountford – Vice President for Climate and Economics at the World Resources Institute – asserts that investing in clean technology and infrastructure could help put it back together again. Unlike the 2008 recession, where fossil fuel industries received bailout money, the green investment solutions are plentiful and competitive today, with the capacity to drive job creation at scale. The European Union (EU) has also recognised that greening the economy will be an integral part of the post COVID-19 recovery and is helping various markets to lay out sustainable plans that will boost their economies.
To learn more about climate-smart investment opportunities amidst present vulnerabilities, explore the AVPN Climate Action Platform. Don’t miss out a chance to also learn about where other investment opportunities are to rebuild a world reeling from the pandemic.