The world has made great strides in the push toward a greener future and sustainable finance is playing an important role in that. The COVID-19 pandemic has in many ways accelerated that push, and we are set to enter a new and important phase.
In late September, China drew significant attention after pledging to be carbon neutral by 2060. The economic giant will see greenhouse gas emissions peak by 2030, Xi Jinping recently told the UN general assembly.
For many markets, this position and that taken by many countries and their regulators as part of the Paris Accord will be transformational.
For some time now China has been shifting the focus of its economy and investing in renewables. This will also drive the way it approaches outbound investment and the Belt and Road initiative. The latest announcement reinforces this message and will lead to a sizeable shift in the energy mix globally.
The ESG (environmental, social and governance) imperative for institutional investors and banks like ANZ is to shift our portfolios away from the traditional fuels to new energies. And with costs falling and encouraging policies in places like Europe, the UK and in pockets of Asia, the next phase looks like being a very interesting one for investors.
At ANZ we’ve watched as our customers have embraced green and sustainable financing as they switch their businesses to power on renewable energy, and invest in new technologies. Some of our customers are investing in the electrification of transport, building out electric vehicle supply chains.
But many new technologies under development are yet to be viewed as economically sound. There is an important role for governments and development banks to play in supporting investment in this technology.
In May, the European Investment Bank pledged to invest €1 billion in building a pan-European battery industry. Government support like this can go a long way in the development of new technologies, helping drive energy efficiency, enable storage, and development alternative fuels.
With a change in the energy mix comes a shift in supply chains, which are moving from traditional regions like Asia to areas closer to where the end users are based. This is a really interesting shift and has become more acute through the pandemic, as we have seen numerous disruptions to supply chains as a result of restrictions on freedom of movement and goods.