Stockholm (NordSIP) – As the COVID-19 pandemic unravelled, one of the few positive outcomes observers hoped for was that it would decrease carbon emissions and stem the damage created by climate change. From China to the world, anecdotal evidence emerged suggesting that something good might actually result from the pandemic, with sustainable investors hoping that COVID-19 might be a watershed for ESG. Unfortunately, according to the latest Climate Progress Dashboard update from Schroders, these short-term adjustments do not appear to be improving the planet’s long-term changes.
Based on its analysis of the situation, the British asset manager estimates that global temperatures remain on course to rise by 3.9°C as of the end of June 2020, unchanged from the previous quarter.
Admittedly, the latest analysis of the implied temperature rise implies an improvement has taken place since it was launched in 2017, when the asset manager estimated the implied temperature rise to be 4.1°C. This fell to 4°C a year later. However, it is important to bear in mind that by the end of last year that temperature had fallen to 3.8°C. The last two quarters have actually been a step back in the fight against climate change. More importantly, these figures pale in comparison to the goal set by the Paris agreement in 2015 of limiting long term temperature rises to no more than 2°C above the pre-industrial baseline of 1850.
“On the face of it, the Covid-19 crisis appears to have sparked a turning point in global greenhouse gas emissions. If current lockdown trajectories continue, global energy demand may fall by 6% and carbon emissions by 8%, according to data from the International Energy Agency,” Andrew Howard, Global Head of Sustainable Investment, Schroders, comments.
Schroders’ pessimism is based on the cost and reactive nature of these adjustments. “However, there is also an unprecedented economic cost. The International Monetary Fund has predicted the global economy could shrink by as much as 5% this year. It has revealed unemployment levels have already reached the highest levels seen in at least half a century,” Howard adds.
“We believe that as economies recover from the Covid-19 crisis, falls in emissions are likely to be reversed, if recoveries from past crises provide any guide. Tougher structural changes are needed if we are going to avert the equally devastating long-term impacts of the climate crisis,” Howard argues.
According to Schroders the bad news are driven by the lack of increased renewable energy capacity and fossil fuel production. Nevertheless, changes in carbon prices, oil and gas investment and fossil fuel reserves do imply lower temperature rises than in the previous quarter.