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Joe Biden’s imminent arrival at the White House with an ambitious environmental program is forcing Wall Street to prepare for a different future, one that gives us hope we might just have a future.
What is that future and what does it mean for the business world? Investors seem to be increasingly clear that for a start, this means abandoning companies focused on fossil fuel production. More and more funds are excluding these companies from their portfolios, following BlackRock’s decision, making them the favorites of increasingly savvy investors. Being green is no longer simply an ethical decision, it’s now more profitable too.
A growing number of investment banks have already announced zero net emission targets for 2050, and are committing to providing information not only on exactly how their finances contribute to the climate emergency, but also on the extent to which their assets are at risk due to the impact of the climate emergency. Last week, the U.S. Federal Reserve issued a press release that, for the first time, makes it clear that failure to immediately address the climate emergency will put the U.S. economy at risk. After four wasted years thanks to a denialist idiot, it is time to put things right. Even people in the petrochemical industry are moving into the renewables sector, aware it is a safer long-term employment option.
For years now, the world’s energy generation infrastructure has been moving toward renewables, which represent significantly lower costs than fossil fuels. Throughout the world, the vast majority of new infrastructure is focused on renewables, and the plans for 2025 are, in practically every country, even more ambitious. In the United States, the investment funds that once backed fracking are abandoning it at the same speed they entered it and turning their attention to renewables. The country knows that a shift toward the total decarbonization of its grid could mean savings of billions of dollars.
China’s plans to become emissions neutral by mid-century, the return of the United States to the Paris Accord, and the major economic package announced by Joe Biden to combat the climate emergency, coupled with the sharp decline in economic activity during 2020, mean that the goals of the agreement remain achievable. What is needed now is for investors and consumers to be aware of the enormous importance of these goals, and to prioritize them in their investment and consumption choices. Never has voting with our pockets been so important for our future.
For companies, this will mean the need to certify their environmental impact through procedures like the CDP, formerly known as the Carbon Disclosure Project, an international non-profit organization based in the United Kingdom, Germany and the United States, which helps companies and cities disclose their environmental impact in a credible manner. It aims to make environmental reporting and risk management an auditable business standard, driving disclosure, understanding and action toward a sustainable economy, and enabling serious action to be properly differentiated from mere greenwashing. Since 2002, more than 8,400 companies have used its methodology to make their environmental information public. The most polluting companies in the world are often those whose footprint is not so clear to investors and consumers, and this type of procedure helps to make it clearer who is who.
As the costs of renewable energy production fall, economies of scale applied to batteries and electric cars expand, financial innovations enabling the expansion of solar roofs on homes, and the application of artificial intelligence to energy generation and consumption, myriad opportunities for investment present themselves.
Joe Biden’s win coincides with the likely economic recovery that will follow the containment of the pandemic thanks to multiple vaccines. Whether this economic recovery is driven by the right criteria, rather than simply returning to how things were before last February, is becoming increasingly critical. Renewables are the key both to a proper economic recovery and to the generation of jobs. It is time to accelerate the elimination of fossil fuels, and thus demonstrate that the human species is capable of learning from experience, and of resuming its activities based on other criteria.
We need a future that allows us to have a future. It is time to live up to our expectations.
