While dealing with a health and economic emergency, focus on climate change has been put on the backburner by some. The crisis has had a profound negative impact for many industries and businesses and those that do survive will be under significant pressure to stay open. Customer re-engagement, cash flow management and servicing debt will be top priorities. But in the medium-to-long term, climate change and sustainability will return to be key priorities for individuals and businesses.
The speed at which this crisis appeared has required many to innovate quickly. Some of these innovations have forced people to do more with less driven by financial necessity. On the other hand, others have shown that better financial outcomes are consistent with better environmental and social outcomes. Post coronavirus, both approaches are likely to accelerate new investments in ESG. However, affordability challenges from a weak economy and old invested capital will slow down the transformation to a full ESG world.
Initial indications from the capital markets show that ESG investments are performing at least as well as mainstream funds during the crisis and new capital is continuing to flow into them. The search for long-term, resilient businesses that are not susceptible to changes in social expectations, new disruptive technologies or future regulatory changes are at a premium and ESG criteria is, and will continue to be, a competitive and differentiating factor in accessing capital in the post-coronavirus world.
While the current crisis is impacting many lives and livelihoods, the net outcomes of climate change will be far worse than what we’re currently experiencing, even under some of our desired scenarios such as a ‘two degree’ world. The pain of environmental degradation and climate change will accumulate over years and decades, rather than weeks and months.
These themes were selected by comparing emerging trends before and during the COVID-19 pandemic. Within each theme, we engaged KPMG professionals to develop hypotheses on what a post-COVID-19 world might look like.