In 2019, the UK Government set a goal of Net Zero by 2050 with an additional pledge to reduce emissions by 68% compared to 1990 levels, by 2030.
However, The British Standards Institution’s Net Zero Barometer report, surveying 1,000 senior decision-makers and sustainability professionals in the UK, found that financial services are falling behind: while 61% of the IT sector have set sustainability goals, financial services sits at 42%. Banks need to understand and address this lag and fast - needing access to the right data to understand the problem and address it in multiple ways.
Unsurprisingly, the financial sector has come under a lot of scrutiny from regulators and the public alike, for a perceived lack of action and its role in supporting unsustainable practices. The issues have been kept in the spotlight not just by vigilante groups like Just Stop Oil, but also by recent examples like an active shareholder revolt at HSBC, pushing them to divest from energy companies.
But it is not just activists and regulatory groups. There is significant proof in the data that consumers are seeking alternatives to the traditional banking orthodoxy. Customers of retail banks have shown strong demand for green finance products, with 45% seeking sustainable credit & debit cards, and 31% seeking green loans and mortgages.
The focus on environmental, sustainability and governance (ESG) within investing has also ramped up year after year. We’re starting to see a new phase that we call ‘banking on purpose’, connecting boards and consumers in visions for a greener future, whilst increasing prosperity for the communities they support.
ESG considerations are set to loom large over companies — this will be important to maintaining reputations at a consumer, shareholder and board level.
Promisingly, data reveals that 83% of new build houses in the UK are eligible for a green mortgage. However, £2.9 trillion of UK housing stock is currently ineligible, providing a significant opportunity for banks to serve these homeowners. Offering loans to support renovations that seek to improve the energy efficiency rating of properties can help FS institutions embed consumer-focused initiatives into their offerings, rather than having them as an afterthought.
Retail banks have started to promote sustainability and are affecting change — for example, Lloyds Banking Group’s ‘Helping Britain Prosper’ strategy directly tackles the challenges of ESG for all stakeholders, securing more sustainable returns and capital generation by honing in on housing access, inclusion, and regional development, while aiming to reduce its own carbon emissions by over 50% by 2030. Its efforts are aligning with a sustainable financing portfolio, pledging over £52 billion in investment by 2024 as part of their ESG strategy.
Change is equally underway at the consumer level with NatWest introducing its own carbon tracker feature that analyses consumer transactions and applies it to a regulated emissions calculator, calculating the carbon footprint throughout the complete process. By introducing this feature as well as suggesting ways customers can reduce their own personal impact, they hope to save 1 billion kilograms of CO2e emissions per year, the equivalent of planting 1 million trees.
To ensure banks can become sustainable whilst remaining competitive, accurate measurement of emissions is critical and must include scopes 1, 2 and 3 emissions. This is not a simple task and requires a digitally enabled, agile and modern core at the centre of the business. If Financial Services firms want to drive meaningful impact, they will need to move from treating sustainability from the periphery to the core of their business priorities.
By putting environmentally friendly initiatives at the heart of their business strategies, the banking industry can fulfil the needs of their customers and ensure we all play our part in building a more sustainable future. This is certainly a positive start to the UK’s mission of reducing its greenhouse gas emissions by 2050, we still expect to see this industry ramp up its efforts as we get closer and closer to the point of no return.
In this respect, governments around the world are taking action to limit damage to our surroundings. The UK, for instance, has already begun its race towards a legally binding net-zero target, which must be reached by 2050. To start with, and to stay on track, Britain has to halve its emissions by 2030.
While the UK’s efforts are already bearing fruit, as we top the global charts in marine-protected areas and clean drinking water, there are also many other countries paving the way in the field of sustainability. Specifically, according to World Atlas, Denmark, Luxembourg, and Switzerland are currently the world’s environmental leaders. With reduced traffic and air pollution, as well as careful recycling and waste management, they are playing a substantial role in safeguarding our planet.
But it’s not all down to the governments. As businesses, we have a duty of care towards our surroundings too. What can your company do to actively emulate eco-friendly countries? What strategies can you implement to help Britain meet its ambitious targets?
As a business owner, you should always aim to lead by example. Sharing your ambitions and desire to favour an environmentally conscious workplace can set the tone for your whole team.
In Scandinavia, where sustainability goals are often on top of people’s agendas, companies tend to be very collectivist. This means that managers extend their own green mindset to their business culture and encourage their employees to follow similar eco-friendly practices. These can be simple steps such as switching off lights in unoccupied rooms, cutting down on unnecessary printing, and reducing avoidable food waste.
Therefore, not only is it important to have staff that can perform their jobs to a satisfying standard, it is vital that a team holds the same green ideals as you. Following the example of Japanese multinational Sony, you may want to consider offering your workers some volunteering opportunities too. From protecting the planet to helping disadvantaged people, you will be promoting valuable activities to benefit the environment and vulnerable groups.
Carbon offsetting is one of the most efficient strategies for companies to minimise their carbon footprint. By compensating for your business’ emissions, you can actively balance out the impact you are having on the planet.
Sometimes, using energy is simply inescapable. Whether it is heating the office, downloading crucial documents, or charging electronic devices, there will be inevitable situations in which you will be releasing carbon dioxide in the atmosphere. Carbon offsetting, in this sense, can help even things out.
In fact, funding green projects elsewhere can reduce the impact of emissions in the workplace. From supporting renewable energy programmes in poorer countries to financing forest preservation, there are numerous ways to make up for your own ‘pollution’. Google parent company Alphabet, for example, has managed to wipe off its lifetime carbon footprint by buying high-quality carbon offsets.
Another tool in favour of sustainability is the increasing development of technology. Green countries across the world are relying more and more on technological innovation to tackle climate-change issues. Not only can it give you an edge over competitors, but technology can truly help your business shrink its wasteful and damaging practices.
Innovative software and equipment may be challenging to grasp at first. But it is also fair to say that its advantages outweigh any kind of drawback. To stay in line with companies from leading environmental countries, you should ensure that your own business is introducing technology as a staple of its policy.
As mentioned, Denmark stands on the podium of the world’s most sustainable countries. Its capital city, Copenhagen, is also one of the planet’s greenest cities. From vending-style machines that reward recycling contributions to electric buses and roads devoted to bicycles, the Little Mermaid’s birthplace is taking all the right steps.
As a business, why not take inspiration from Copenhagen’s promotion of bike routes and schemes? Instead of hopping in your car to drive to work, you could pedal from your home to the office. Public transport or – if you live close enough – a morning stroll are excellent options too. Again, as an owner or manager, you can act as a model and encourage your employees to cycle or walk as well.
By doing so, you will be actively reducing the number of cars on the street, decreasing road congestion, pollution, and both you and your staff’s carbon footprint.
As countries across the globe, including the UK, strive to nullify their carbon emissions in the coming decades, businesses can have their say in sustainability efforts too. Taking a leaf out of green nations’ books, ultimately, can aid your surroundings and limit your company’s impact on the environment.
Sources https://www.worldatlas.com/articles/the-world-s-most-sustainable-countries.html https://thesustainablelivingguide.com/most-sustainable-countries/ https://www.theguardian.com/environment/2021/may/04/what-is-carbon-offsetting-and-how-does-it-work https://www.telegraph.co.uk/travel/discovering-hygge-in-copenhagen/worlds-greenest-city/ https://www.rd.com/list/what-we-can-learn-from-the-most-eco-friendly-countries-on-earth/ https://www.environmentalleader.com/2013/07/worlds-greenest-companies-and-what-we-can-learn-from-them/ https://blueandgreentomorrow.com/environment/things-green-businesses-can-learn-from-scandinavia-on-sustainability/?noamp=mobile https://www.texasdisposal.com/blog/most-eco-friendly-countries/
When we reflect on the year just gone by, it remains clear that the world is still not taking the steps it needs to prevent and mitigate climate change. The worrying symptoms of the crisis are being felt across the world, from torrential rainfall in Malaysia to wildfires ravaging the mountains of Greece. The evidence is incontrovertible. Despite the devastation caused by climate change, political and business leaders have been working to turn the tide on the crisis. The three reports released by the IPCC throughout 2021 and into 2022 have all been clear - we all must play a part in tackling the crisis. Just recently, the IPCC released their starkest warning yet, which suggested that we were reaching a point of no return and that if we are to stave off the worst effects of climate change, we would need to significantly strengthen existing targets.
2021 was a big year for climate action, which is the result of an established trend in which climate change has become part of the public consciousness. Each year more people are recognising the devastating effects of climate change – according to a study in the Lancet, for example, more than 60% of young people are 'extremely concerned about climate change'. Alongside an increase in a public outcry for climate change, 2021’s long-anticipated COP26 summit also struck a chord with the public – with commitments made by world leaders being criticised for not going far enough.
However, it would be remiss to ignore the important steps international leaders made to help achieve our shared objective of keeping the planet's warming below 1.5C. For example, 153 countries strengthened existing or made new emissions targets; 137 countries pledged to end deforestation by 2030, and more than 100 countries have committed to reducing methane emissions by 30% by 2030. While further action is needed, the work achieved in Glasgow has kept the 1.5C goal alive.
Now that political leaders have come together to double down on decarbonisation targets, the time has come for public authorities to design bold policies to tackle climate change. At the same time, businesses have a crucial role to play in decarbonising as fast as possible to prevent global warming and stay relevant. Many companies are already rising to the challenge. For example, in March of 2021, 30 of the UK's biggest companies signed up to the United Nations Race to Zero campaign and many have been making good on their commitments. For example, both BT and Vodafone reached their goal of powering 100% of their UK network by renewable sources, while AstraZeneca more than halved their greenhouse gas emissions (scope 1 and 2).
However, while more than 1,000 companies, including 82 Global Fortune 500 companies, have announced Net Zero targets, committing to ambitious goals is far from enough to accomplish a meaningful sustainability transformation and a significant reduction in global emissions. There is great momentum in setting targets but achieving Net Zero implies a transformation journey far beyond the incremental change most companies are accustomed to.
Engie Impact’s own research shows that while several companies have set goals, few have proposed a detailed strategy to reach them. I don’t believe that the lack of planning and foresight is a reflection of their attitude to climate change. It instead highlights the complexity of overhauling the existing setup. It is, undoubtedly, a huge challenge, but businesses must not bury their heads in the sand. Technology, skills and knowledge on sustainability are available and advancing rapidly – it's in a business’s best interests to adopt them and tackle climate change head-on.
To encourage businesses to design and implement effective decarbonisation strategies, we must look beyond the method of attempting to force companies to change through government legislation. The recent introduction of mandatory climate risk reporting in April should inspire more companies to get their sustainability house in order. The regulatory pressure will only increase.
However, while new regulations are essential, they are not a silver bullet, so companies must recognise the tremendous value in introducing sustainable business practices. Ultimately, it is in their best interests to invest in sustainability transformation. Those companies that engage in sustainability transformation will improve their bottom line as they reduce costs, by consuming less, unlock new revenue streams, retain and attract the best talent, create a competitive advantage compared to their peers, increase client loyalty, be financed through cheaper capital etc. And on top, they will help mitigate the effects of climate change.
Since the last Earth Day, the spotlight on climate change has gained further momentum, with more of the world's largest companies announcing ambitious Net Zero targets and investing in their sustainability transformation. Meeting these targets will not be easy, but the good news is that investing in sustainability has become cheaper, with companies now able to take advantage of funds allocated for sustainable projects and a significant reduction in the cost of technologies. These changes have also coincided with advancements in sustainability digital platforms to enable a seamless transformation at enterprise scale. Businesses can now leverage data to simulate precisely how much carbon they can reduce by implementing new internal processes, saving time and enabling companies to expedite their journey to Net Zero.
Sustainability transformation is not a choice, it is a business imperative. Companies that refuse to invest in sustainability transformation will quickly become irrelevant as consumers opt for their greener competitors. While Earth Day continues to shine a positive spotlight on sustainability each year, the fight against climate change is happening every second of every hour. We still have a chance to win the battle, but the time is NOW.
Mathias Lelievre is the CEO of ENGIE Impact.
Factset estimates that around 70% of global investment companies are still exploring how to best deploy and understand the growing opportunity presented by ESG alt-data. A Vanson Bourne survey also revealed organisations that incorporate ESG alt-data into their business strategies found that an average of 76% (USA) and 67% (UK) of their investment decisions are now informed by ESG factors.
This type of research highlights the importance of ESG considerations in investing and demonstrates the importance that organisations place on environmental and social impact when doing business. It’s no wonder that most professional investors out there, having seen the value that this data can deliver to their clients, are now exploring more avenues for collecting ESG alt-data. Ultimately, this information is mission critical for savvy investors.
But before you decide to make use of ESG alt-data, you need to first understand clearly what it is, what its benefits and limitations are, and how you can most effectively deploy it to help your business's decision-making be more impactful and successful. Omri Orgad, Regional Managing Director at Bright Data, tells us all about it.
Alternative (alt) or external data is a subset of data, driven by the growing demand for real-time, on-the-spot insights. While all industries can benefit from analysing alt data, its key uses lie within the financial sector, where startups, VCs, and all manner of organisations have a really heightened need for it. This is because their decisions and future innovations involve product development and predicting future market trends. But to really bring something unique and disruptive to saturated markets, investment heads must perform comprehensive market research and dig deep into data lakes such as ESG. However, doing so is not always the easiest of tasks!
The phrase “ESG alt-data” covers all information related to the impact an organisation has on its surroundings. This includes metrics such as air quality, board independence, water use, discrimination lawsuits, executive pay, etc. Given the diverse nature of the potential data points, this data varies in type and size, making it complex and daunting to collect and understand. The financial services sector can now measure sustainability at a far deeper level than ever before, thanks to the increased availability of non-traditional ESG data sets. It is now possible to create a comprehensive framework that identifies the organisations that are best positioned for long-term profitability using ESG alt-data.
While all industries can benefit from analysing alt data, its key uses lie within the financial sector, where startups, VCs, and all manner of organisations have a really heightened need for it.
ESG alt-data can help examine Unique Selling Propositions (USPs) by aggregating similar solutions in the industry that are currently being invested in by venture capitalists (VCs). Finding the same type of companies trying to solve similar pain points can form a better view of who the future competitors might be. Alt-data can also aid in making the right kind of investment-focused decisions. During the past year, more and more hedge funds have increased their use of online data to analyse present market shifts and anticipate future ones as well as tune their investment strategies accordingly.
ESG alt-data helps to accurately inform you of the short- and long-term risks and returns of an investment venture, too. For example, it would be wise to consider climate change data and information about historical natural disasters before investing in construction in a particular region. Much of this public data exists across the largest database in the world – the World Wide Web. This is where public online data collection comes in – providing new and innovative ways to look at ESG data that go far beyond the traditional ways we have all become accustomed to.
According to AIMA and other sources, by 2024, there will be over 5,000 separate alt-data sets available. Even though the amount of ESG data available continues to grow, not all of it is of high quality, and some will be irrelevant to your specific use case. As a result, merely gathering any raw ESG alt-data you may find will not provide you with the information you require. Also, make sure you verify the source of the information you’re collecting or having collected for you and first ask yourself “why is this data valuable to me?”
It’s also important to allocate sufficient time to test and analyse the data you collect. Every hour spent on this task will be well worth it, enabling you to more accurately determine how a company or sector is performing from an ESG perspective. It’s important not to cut corners at this stage, however tempting it may be. There are also faster-automated tools that can take care of the “heavy lifting” for you and swiftly deliver top-quality data.
Speaking of faster-automated tools, the bigger question now is, how? How do I collect these large amounts of public data from the web? How do I make sense of and analyse it?
Well, automated data collection tools can help tap into those publicly available data pools. Such tools help to gather information and relate it back to those groups that need it to guide their predictive insights. Collecting publicly available images, statistics, social media posts, news articles, etc. enables investors to gain a much more holistic view of an organisation’s ESG picture. Investors can also simply get consumable information by accumulating their own ESG alt-data, which is useful for reporting progress to stakeholders who lack in-depth financial services knowledge. For, example, it’s preferable to say, “the organisations we’ve invested in have 20% more female employees than the sector average” than quoting an opaque figure, by saying, for example, “the organisations we’ve invested in have an average ESG score of 89.3”.
Given that 97% of information specialists in the UK and US financial services sectors report that ESG data is used in some or all strategy decisions, there’s no doubt that the importance of ESG alt-data in financial decision-making will continue to grow for many years to come. To get the best possible results, investors should take advantage of the new data-gathering opportunities on offer – including online data collection tools. With such platforms, calculating investment returns, future growth opportunities, and possible profits has become much easier and significantly faster.
2020 saw a flurry of announcements from companies across the world, pledging ambitious, and often aggressive, carbon targets. From Microsoft’s carbon negative goal to BlackRock’s pledge to stop investing in companies with high sustainability-related risks, organisations are becoming increasingly accountable for their actions when it comes to the environment and climate change.
A recent study into the sustainability attitudes and actions of senior executives found that 75% of executives believe sustainability will provide a competitive advantage in the future, yet only 30% believe they are successful today. Of course, setting and publicising goals is only the first step. To become a true leader in sustainability transformation, it must be embedded in every part of the business, especially the finance department.
Only one in 25 (4%) of Chief Financial Officers currently have responsibility for developing and monitoring corporate sustainability goals, according to ENGIE Impact’s study. Instead, executives pointed to Chief Sustainability Officers (26%) and Chief Operation Officers (25%) as bearers of that responsibility. This finding points to a missed opportunity to ensure that the strategy, funding, and execution of sustainability projects are optimised to meet an organisation’s goals. Given that capital and investment is critical to the success of corporate sustainability initiatives, as underscored by finance authorities such as the Bank of England, the question for CFOs and their teams is “How can we position finance as a lever to make sustainability happen?”.
Accelerating decarbonisation: integrating sustainable finance
As demand for more sustainable action from organisations rises, so does the need for capital. With their oversight of an organisation’s budgets and investments, CFOs and finance departments should be firmly in the driving seat of the sustainability transformation journey. Finance teams need to think beyond their traditional investment approaches if they are to succeed and help the organisation meet its carbon goals.
For example, corporate capital expense budgets often have strict payback periods (typically two years or less). As a result, companies defer sustainability projects, such as carbon mitigation strategies that don’t offer direct operational benefits or quick paybacks, which only serves to increase the long-term costs of meeting carbon reduction goals. Subject to these constraints, sustainability and operation teams focus instead on quick payback projects that don’t necessarily have a significant sustainability impact. With many companies pledging to meet carbon reduction goals by 2030 or sooner, they can’t afford to delay more transformational projects.
The benefits of portfolio financing
In our survey, only 6% of all C-suite respondents revealed their companies had significantly adopted third-party financing to meet ambitious carbon goals, presenting a potential sticking point for finance teams when it comes to addressing sustainability.
In a general business context, third-party relationships are often used to boost capacity for projects and provide additional expertise. In a finance and sustainability context, third-party financing also allows companies to smooth out the costs of sustainability projects. Unlike the payback constraints of internal financing, external financing benefits from longer tenors, enabling finance teams to accommodate a range of projects, as those with quicker payback periods balance those with longer paybacks. In this way, they can optimise for the portfolio of projects that deliver deeper and more cost-effective carbon levels than if they were financed separately. This approach is a popular one - according to our survey, 64% of companies that are successful in sustainability transformation used the portfolio approach to finance projects at scale.
Still, third-party financing is not a solution that is likely to scale with a company’s increasing sustainability ambitions. Although it allows for companies to take on more projects than with internal financing, executing a large portfolio of projects can prove challenging (both technically and from a financial structuring perspective), and companies may be wary of increasing their debt load for projects that they and their investors do not deem core to their business.
The Energy-as-a-Service approach
For finance teams to truly maximise sustainability outcomes within their organisation, one of the most robust financing models is Energy-as-a-Service (EaaS). Unlike internal and third-party financing, the EaaS model allows a company to shift responsibility for its energy assets to a third-party. Responsibility for the design, implementation, financing, maintenance, and performance of the target portfolio of projects is externalised and transferred to EaaS providers, with the goal of ensuring that its customers’ expected energy targets are achieved.
EaaS contracts tend to be longer than third-party financing, especially when more capital-intensive projects, like on-site renewable energy generation, are involved. But this longer contract term also means that, if scoped correctly, an organisation can generate enough savings (from lower energy costs and more efficiencies) to cover the contractual EaaS payments.
Another advantage for companies is that there is also less risk involved with EaaS approaches―both in terms of reputation and pressure to meet goals―since the performance risk also shifts to the EaaS providers. Rather than financing the investment in particular energy assets, a company’s payments are tied to particular energy outcomes being delivered (e.g., units of renewable energy generated, or certain levels of efficiency attained).
The opportunity to step up
Achieving the important carbon goals and sustainability targets that companies have established will require tightly coordinated and well-resourced internal efforts. CFOs and other finance leaders are key players in this undertaking; they have an opportunity to partner with sustainability and operational teams to drive sustainability strategies and projects forward by applying the financing approaches that best match their organisation’s ambitions. Indeed, internal capex financing may not be a viable, long-term investment option for many ambitious sustainability projects due to the risk of not being able to meet carbon goals.
Instead, companies and finance departments must invest with a portfolio lens, balancing the financial benefit of short-term payback projects with the deep carbon reductions of more intensive projects. As companies adopt more significant sustainability targets, EaaS contracts will become an increasingly attractive way to achieve their goals while managing risk and externalising financing. By rethinking finance approaches to be more innovative and in line with future demands, finance departments can ensure that their company stays on track to achieve its sustainability goals.
Institutional investors have maintained more than $1 trillion worth of investments in the thermal coal industry despite the sector’s significant contribution to climate change and green commitments from many top investors.
New research from 25 climate groups including 350.org Japan, Rainforest Action Network, Reclaim Finance and Urgewald discovered that around $1.03 trillion was invested in the thermal coal sector by the end of last year across 4,500 institutional investors.
Of the funding, 60% came from US-based organisations, with BlackRock and Vanguard alone making up 17%. Researchers described the two asset management companies as “in a class of their own” on coal investment.
Looking into the banking industry, researchers found that 381 banks have lent a total of $315 billion to the coal industry in the past two years, with commercial banks also helping the sector to raise more than $800 billion on share sales and bond issues.
The three most significant coal lenders were based in Japan, but Citigroup and Barclays ranked as fourth- and fifth-biggest respectively. Both banks have lent over $13 billion to companies involved in the coal industry.
Researchers concluded that the actions of major banks and asset managers were not in line with the goals set out by the 2015 Paris Agreement, where leaders agreed to take action to limit global temperature increases to 2°C this century. Part of the agreement involved cutting back fossil fuels, including coal – and especially thermal coal, which is one of the worst fuel sources for climate change.
Paddy McCully, Rainforest Action Network’s climate and energy program director, described Wall Street as “a huge driver of climate pollution around the world” and identified its coal industry investments as driving the planet deeper into its climate crisis.
“Vague net zero announcements for 2050 – an entire generation into the future – are masking financial institutions’ refusal to take decisive action now,” he said.
UK-based consumer goods giant Unilever said on Monday that it would give shareholders an advisory vote on its plans to curb emissions at its next annual general meeting in May, becoming the first blue-chip company to give investors a voice on its climate plan.
Unilever has set a goal to reach net zero carbon emissions from its own operations by 2030, and to reduce the average carbon footprint of its products by 50% by the same deadline. The firm announced in June that all of its products would be carbon neutral from production to point of sale by 2039, and now plans to create a €1 billion climate and nature fund to invest further in improving the environmental impact of its operations.
Unilever will publish a detailed action plan outlining how it expects to hit these targets in Q1 2021, after which it will report progress against the plan annually and seek shareholder approval of its current measures. This plan will be updated every three years.
“It is the first time a major global company has voluntarily committed to put its climate transition plans before a shareholder vote,” Unilever said in a statement.
In order to achieve its climate goals, the company said it would need to transition its operations to 100% renewable energy, eliminate deforestation from its supply chain and rework many of its flagship products.
“Climate change is the most pressing issue of our time and we are determined to play a leadership role in accelerating the transition to a zero carbon economy,” Unilever CEO Alan Jope said.
Unilever is one of the world’s largest consumer goods companies, with a market cap of $120 billion. Through household brands including Ben & Jerry’s, PG Tips and Domestos, the company claims to reach over 2 billion customers worldwide.
Ofgem, the UK’s energy industry regulator, will allow energy networks to go ahead with a green energy investment programme into the country’s energy infrastructure worth over £40 billion, which will run from 2021 to 2026.
The programme is aimed at improving services, reducing the impact of UK energy networks on the environment, and setting a fairer price for customers.
In addition to a £30 billion initial payment to network companies running the country’s energy grid, Ofgem said it would make “unprecedented additional funding” available for green energy projects to arrive in the future, which will be aimed at reducing emissions from the energy system and eventually hitting net zero targets.
Companies have indicated that £10 billion of such projects could be in the works, though Ofgem added that there is no limit on the additional funding that it could provide, subject to good business cases being presented.
“Our £40 billion package massively boosts clean energy investment,” said Jonathan Brearley, chief executive of Ofgem. “This will ensure that our network companies can deliver on the climate change ambitions laid out by the prime minister last week, while maintaining world-leading levels of reliability.”
Brearley added that the costs incurred by the new investment “must fall fairly for consumers”, adding that the regulator would reduce the returns paid to shareholders by 40% to bring them closer to current market levels.
Last month, Ofgem said that it is considering lifting its cap on household tariffs by £21 annually to help companies that have been struck by an increase in unpaid bills – meaning that millions of UK customers may pay more for their utility bills from April 2021 to help energy suppliers cover the cost of those unable to pay for energy due to the COVID-19 pandemic.
As a famous 2000s TV show said, ‘it’s not easy being green’, and in some ways they were absolutely right. But as a small business owner, there are lots of things you can do to ensure your small business is on the right side of the green argument.
Climate change and global warming are two very complicated issues that have no clear answer. There are arguments for and against almost every type of renewable energy source. Of course, there are no political infringements on the entire green issue as well, but one thing we can all probably agree on is this: we should all be attempting to be better stewards of our planet.
Being better planetary stewards doesn’t have to mean everyone needs to go vegan, that you need to turn your heating off, ditch your car for a bicycle, and only washing in your local river. Instead, it means making changes to the way you work and the way you live that are better for the planet. If we all made little changes, we would soon make a big difference.
The complex issue of businesses going green can give anyone a headache. Which bits should you change? What can you legally do? They are all very difficult questions, and the answers do need to be weighed up using a proper costing analysis too to ensure that any changes won’t eat into potential profits.
There are marketing issues too. When the general public gets wind of a company trying to ‘do better’, there are usually two responses. One, your audience and customers are proud of your efforts, and you win ‘brownie points’ with them, or two, there will be another segment of your audience who are furious with you because you’re not doing ‘enough’. It’s worth considering the rough and the smooth and having clear answers for each side.
Don’t let the latter response put you off. Everyone has got to start somewhere, and so here are three ways your business can ‘go green’ that are easy to start right now.
Make it a priority in your business to conserve water wherever possible. Not only will this mean you’re helping the planet by looking after a finite resource, but if you can demonstrate that, unlike other businesses your size and in your location, you are making an effort to save water, customers will more likely head your way. You can even cut your water bills by conserving water. However, if you want to ensure that you make even more savings that can be put towards making your company even greener, then get in touch with a company that can cut back your business water rates by comparing the best deals. All the money you save from this can help you to continue on your green journey.
There are lots of transport options you can encourage your staff to look at, and it’s always best to lead by example here. Whether you choose to take part in the bike to work scheme, invest in public transport loans, or you start a carpool, there are lots of options and many helpful government-backed schemes that you can take advantage of.
There is solid scientific evidence that having more greenery in the office can make staff feel happier and healthier. Make sure you go for real plants and flowers, and if you’re in the retail, food, or service industry, your customers will appreciate the little effort too!
Karoline Gore explores the current state of the EV market and the trends that have sparked its rise – and what this may portend for automated vehicles too.
The electric vehicle (EV) market is one that has an absolutely undeniable place in the future, but investment markets haven’t reflected that in value. According to experts providing comment in USA Today, Tesla saw a bear market in the early part of 2020, before striking upwards into their now sky-high value. A few key events have led to this surge, but they’ve now successfully started a trend. For a few key reasons, EVs have now established themselves as a bull market that will continue to rise – and big names are showing the way.
Tesla and their associated manufacturers are, of course, big names, but they lack a little bit of credibility as compared to the old-school big American auto houses. While EVs have an unassailable status as the future of the automotive market, it’s been a slow process to get these older manufacturers onboard. This has changed with the huge market intervention of GM, who have recently put $2 billion into EV production to up their share of the market. This has led to news outlets, including CNN, advocating an investment portfolio that looks into companies like GM – a sharp change from recent months; March saw their stock drop to a low not seen since before 2012. This type of disruption from the institutional auto manufacturers of the USA indicates the upwards trend and interest in the market; something which should only continue to become more relevant in a geopolitical sense.
The Trump administration has been broadly opposed to green measures, whereas a Biden government has promised to become more climate-positive. Whatever the ultimate outcome of the election, there are indications that public opinion will keep moving forward in favour of green measures. According to the BBC, areas of industry and energy production have continued to grow where they favour green measures, and shrink in areas where they rely on fossil fuels and processes harmful to the environment. This points towards a future where society is dictating what products they want, and that’s a good one for EVs – especially when considering their logical, efficient endpoint.
EVs will ultimately give way to automated vehicles. There are already plenty of models on the market that achieve 1 and 2 stage automation, meaning that the driver still has most control, with stage 3 being absolute control by the computer of the vehicle. This is the logical place where EVs will move to in the future, and offers huge benefits for business. Businesses as huge as Walmart have already invested heavily in the technology, given the benefits it can bring to the bottom line. As a result, automation can only grow, and putting money into the industry will only yield returns as the years go on.
For that reason, this form of investing favours a long-term view. That being said, it’s a good time to start getting involved – before huge gains are made by the big auto houses and the industry is swamped.
On the heels of Election Day, capping one of the most contentious presidential election cycles in US history, markets have been roiled by the combination of an unclear victor – with millions of absentee ballots yet to be counted across several key states – and a premature claim by President Donald Trump that he had won the race.
European markets reversed their gains from Tuesday, when investors had been betting on a clean victory for Democratic presidential nominee Joe Biden. The FTSE 100 lost 1.1% as trading opened, with the CAC 40 and DAX falling 1.4% and 1.9% respectively. Yields on popular bonds also slipped as investors took refuge, with demand rising for US Treasuries and German Bunds.
Wall Street futures fell following Trump’s comments on Wednesday morning, but quickly recovered. The S&P 500 gained 0.5% while the Dow Jones lost 0.2%, and the tech-focused Nasdaq jumped by 2.5%.
“The polls are proving wrong again,” said Giles Coghlan, Chief Currency Analyst at HYCM, pointing to the near certainty of a contested election in accounting for markets’ new uneasiness. “As we are already seeing this morning, the Dow Jones and US Dollar will be in a volatile state until there is a clear outcome that both parties will accept.
“US stocks are selling off on the uncertainty, reversing the gains expected from a Biden victory as projected by the polls. This will also have significant ramifications on the performance of other major currencies and assets. So long as the uncertainty remains, I’m expecting investors to sell global equities, and their holdings in currencies like the Euro and US Dollar. At the same time, we should see inflows into the Japanese Yen.”
Giles also remarked that there are still reasons to be optimistic in the medium and long term. “Regardless of who is the next US President, the coming US stimulus bill should lift US stocks, once we have a winner confirmed,” he said. “Furthermore, over the medium term, even if gold sinks a little lower on a firmer US Dollar, the price of this safe haven asset should still rise in the coming months and into 2021. Low interest rates are projected to remain unchanged for the next three years by the Federal Reserve, and the large quantitative easing program will support the longer-term appeal of gold.”
Nigel Green, founder and chief executive of deVere Group, urged investors to exercise caution as the results of the election are challenged in court. “This monumental uncertainty in the world’s biggest economy is going to send global stock markets into a tailspin as investors get rattled about a clear outcome taking longer to reach than they hoped,” he said.
The CEO added that renewables, industrials and cyclical stocks are likely to perform well under a Biden administration, while the oil and gas, financial and healthcare sectors will likely do better under Trump.
“History shows stocks tend to rise regardless of which party controls the White House, but it matters how your portfolio is balanced,” he said. “Therefore, investors should sit out the temporary volatility until the picture becomes clear.”
Giles Coghlan, Chief Currency Analyst at HYCM, takes a look at both candidates and the significance their victories might have for investors.
This week’s US presidential election will certainly be one for the ages. American voters will be heading to the polls today to elect Joe Biden as the 46th US President or continue with another four years of President Donald Trump. If you believe the polls, Joe Biden is edging ahead of Donald Trump. If 2016 taught us anything, however, the polls should be viewed with a grain of salt.
Investors and commentators have certainly learnt some important lessons, with many adopting a ‘wait and see’ approach. Those who hedged against a Trump victory in 2016 saw their portfolios take a big hit, though the equities rally in response to Trump’s corporate tax cuts likely helped such investors recuperate their losses over his premiership.
For now, it is important to consider what either a Trump or Biden victory could mean for the financial markets. Both candidates have touted some policies which will no doubt affect the performance of different assets. While everything is still up in the air, there are still significant observations to be made which I have detailed below.
First and foremost, I expect that investors will flock to green energy companies listed on the Dow Jones if the Democrats emerge victorious. Although not fully implementing the “Green New Deal” proposed by Democratic members of the House of Representatives, Biden has voiced his support of renewable energy and shown a willingness to gradually ween the US economy off its’ dependence on petroleum oil. At the very least, a Biden administration would be keen to re-join the Paris Climate Accords that Trump pulled the US out of in 2017.
Biden’s strong chances at securing the Presidency at present have already bolstered green energy stocks, with the First Trust Nasdaq Clean Edge Green Energy Index Fund currently trading at an all-time high. Upon a Biden victory, there could be an immediate surge in stocks related to renewable energy; including companies involved in solar, wind, and battery storage.
First and foremost, I expect that investors will flock to green energy companies listed on the Dow Jones if the Democrats emerge victorious.
Although The Economist currently places the chances of a Trump re-election at only 5%, it’s still worth considering how the markets would react to such an eventuality.
One would anticipate an immediate short-term dollar bounce as global markets prepare for the potential heightening of the US-China trade war. As for the long term, although the Dow Jones reacted positively to Trump’s previous corporate tax cuts; more reforms would be needed to counter the negative effects of the aforementioned trade war.
There have been signs that Wall Street, no longer the political monolith it once was, has soured to Trump – indicating a lack of fear that equity markets would be negatively affected by a Biden win.
However, there is one outcome investors should be especially wary of: one in which Trump loses the electoral college but refuses to participate in a peaceful transfer of power.
Trump’s consistent attempts to cast doubt on the legitimacy of this week’s election has inspired numerous American business leaders to warn the public about such a scenario, with LinkedIn co-founder Reid Hoffman recently stating: “the health of our economy and markets depends on the strength of our democracy", and that any dispute regarding the election’s outcome would "cause havoc in the business world”.
This is understandable. If 2020 has shown us anything, it’s that markets react negatively to instability and uncertainty. Uncertainty about who is the legitimate President of the United States, therefore, would imbue a fairly high amount of uncertainty into the global markets. This has essentially already been demonstrated throughout the year, with markets wavering each time Trump casts doubt concerning his eventual departure from office.
So, in summary, there are multiple ways that that different outcomes of this week’s presidential election could influence global market stability. For those nervous about their portfolios it is important not to make any rash decisions in a bid to secure short-term gains or to mitigate sudden unexpected losses.
While the financial markets will undoubtedly react to the events listed above, investors should always take a long-term perspective. Understanding how currencies, commodities, and financial markets are likely to be affected by a changing geopolitical environment is always paramount; however, the long-term impact is always more consequential than the immediate one. Those hoping to make effective, prudent investment decisions would do well to remember this.
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