Environmental concerns are creating a big impact on business and finance and the trend can only increase. Companies of every size and description should be asking themselves how to meet the challenges and opportunities of the new green economy.
The huge attention accorded to the November floods in the Midlands and Yorkshire pale in comparison to the mega-coverage of the bushfires 10,000 miles away in Australia.
I believe this is driven by a growing public apprehension that such occurrences result from climate change caused by man-made global warming.
From the Extinction Rebellion protests that began in April to the climate protests across Australia this month, people are voting with their feet and increasingly, their wallets.
The respected trend forecaster Lidewij Edelkoort expects big brands will close as customers spend less on high fashion and low-value clothing. Ms Edelkoort, who had advised Zara and Prada, also predicts a rail boom as ‘flight shaming’ hits aviation, amid a growing realisation that having less stuff will make us happier.
The Blue Planet II episode on plastic pollution had a huge effect on popular attitudes. Plastic bag consumption has dropped by 90% since a 5p charge was introduced at supermarkets and large stores in 2015 to cut litter and limit damage to marine wildlife. A survey by the energy supplier Ørsted found 73% of UK consumers would choose products from companies that use renewable energy over those that don’t.
Green consumerism is on the rise and millennials are leading the way. The message is clear: trashing the environment is bad for business. The good news is, there’s a huge opportunity for products and services that help make a better world.
Helped by improved technology and falling costs, more than 900,000 homes benefit from solar power, providing better control over energy bills. Integrating technologies such as battery storage, electric vehicles and energy management apps are set to slash household emissions further.
In transport, experts predict global electric vehicle sales will rise from 2m in 2018 to 4m in 2020, 12m in 2025 and 21m in 2030 as battery manufacturing costs fall significantly. Europe is set to become number 2 in the EV market in the 2020s, driven by tightening fuel economy regulations and growing commitments from domestic vehicle manufacturers.
EVs need power from somewhere, and investors are backing the expansion of the UK’s charging infrastructure. The UK electricity grid is being transformed to replace fossil fuel with greener sources. Renewable energy such as wind and solar generated a record 38.9% of electricity in third-quarter 2019, with fossil fuel-derived power falling to a new low due to lower reliance on coal.
Meanwhile British firms are developing longer-term storage technologies to make renewable electricity immediately available, whatever the weather. These include copper-zinc batteries, ‘cryogenic’ processes and re-using car batteries. Several UK universities are central to such advances.
But it’s not just consumer demand driving the energy transition. The Government has pledged to cut greenhouse gas emissions to zero by 2050, and all new cars must be zero-emission by 2040 – an objective boosted by the £246m Faraday Challenge to find the best home-grown technologies.
At the other end of the supply chain, investment and financial services are undergoing a green revolution. Last month the Bank of England governor Mark Carney warned pension schemes must cut their investments in fossil fuels to avoid the risk of becoming ‘worthless’.
In October, the London Stock Exchange launched a Green Economy Mark to recognise companies and funds contributing to the global green economy, and a Sustainable Bond Market to promote greater choice for debt investors focused on social good and the environment.
On the same day a packed audience at the LSE’s Sustainable Finance & Investment Summit heard investors, issuers, regulators and advisers describe how climate change was now at the centre of investment decision making. Soon, activities seen as harming the environment would be unable to find funding in public markets.
London has made progress in securing its position at the centre of green finance globally.
For example, 13 London-listed investment trusts focused on renewable energy infrastructure show total net assets of £8.7bn while three ‘environmental’ investment trusts account for £832m, according to The Association of Investment Companies website.
IPOs in 2019 included Aquila European Renewables and Octopus Renewables Infrastructure. The £2.2bn market-cap Renewables Infrastructure Group raised £227.6m in October. Calisen Group hopes to raise £300m in a main-market IPO that would value the smart meter company at £1.5bn.
On AIM, eEnergy raised £2.2m in a placing and reverse takeover to expand its activities in making buildings energy-efficient.
This month the UK battery company Zenobe, which operates 73MW of grid-scale capacity, raised £25m in debt from Santander to fund expansion. Private-equity investors such as Deepbridge, Zouk and WHEB and have honed their green investing skills, while corporate advisers are boosting their sustainability practices.
The green revolution has begun and no sector of the economy will be unaffected.
Entrepreneurs should therefore be asking: how sustainable is their business – really (no ‘greenwash’); where can improvements be made to produce short- and longer-term results; and how are they communicating their strategy and performance?