The COVID-19 pandemic has inflicted one of the worst crises of our lifetimes for public health, individuals, businesses and society. Amid the crisis, our recent conversations with asset owners, investors and clients have underlined the increasing interest in financing the transition to a low-carbon economy, supporting sustainable and inclusive growth, and improving portfolio risk management in the face of 21st century challenges.
Pivotal political processes and developments such as COP 26 on a global level, or the new US administration’s approach to climate issues, will help focus the minds of policymakers, standard setters, investors, and the innovators of the private sector.
And as our ten trends show, we expect much more to come.
We believe that by considering sustainability factors, risks and opportunities, investors can enhance the resilience of their portfolios without compromising risk-adjusted returns.
1 – Investor engagement
More influential than regulation in 2021
We expect asset owners to call for companies and investors to provide better sustainability data – alongside clear and measurable energy transition plans. This will fast track disclosures and commitments in 2021.
2 – Impact investing
The next wave of growth
Investors increasingly factor in environmental, social and governance considerations. Next is for investors to focus on the opportunities in identifying and addressing sustainability objectives in areas from climate to inequality to healthcare.
3 – Electric transport
Adoption sooner than expected
We believe the transportation sector can be almost fully decarbonized by 2040. Many industry players think that our forecast for electric vehicles having a 40% share of global new car sales by 2030 is too high; we think it could be too low.
4 – Net zero
From aspiration to company targets
As more nations set zero emission goals for the middle of the century, we think it will be critical to slow and eventually stop new investment in the fossil economy, and to channel more investment towards essential adaption measures.
5 – Big oil
The opportunity for re-invention
Rather than view the energy transition as an existential risk to the oil majors, and they as the problem, we could regard it as a potential opportunity for them to become part of the solution. The energy transition may require USD 1.1 trillion of investment per year – inconceivable without current firms.
6 – Diversity
The destructive potential of prejudice
Diversity and inclusion could become critical issues in determining economic success or failure in the decade ahead. 2021 could see great advances in starting to close the data gap to measure diversity.
7 – Plant-based meats
Coming, ready or not
We forecast the global plant-based meat market to reach USD 51 billion by 2025 in our base case, implying a 3x increase in penetration from 2019 levels.
8 – Climate stress testing
The transformation of capital allocation
2021 will likely be the year when investors and financiers mainstream climate transition analysis. Within five years some central banks may look to set capital charges for carbon – this would have a profound impact on the cost of capital for polluters.
9 – Sustainable data
Insights from new lenses
The major index providers and market-data firms are racing to build or buy sustainability offerings. Demand for sustainability data could drive the size of the related data and services market to over USD 5 billion in the next five years.
10 – Transparency revolution
The convergence of standards underestimated
The arms race in competing standards has ended in a truce – and collaboration – called for by investors and regulators. Better quality, decision-relevant and comparable sustainability data are around the corner.