ESG – Feature


We want net zero by 2050 but nobody has a crystal ball. We need to set concrete targets and make ourselves account- able along the way. Lucian Peppelenbos, Robeco


are needed to reduce our reliance on oil and gas. “We have to clean up the power industry,” Lewis says. “This means more renewables and energy storage as well as some green hydrogen. Green hydrogen is a form of renewable energy that is not made from greenhouse gas-producing methane like its more main- stream version, which is known as grey hydrogen. “Green hydrogen is key. It is where we are going to see huge development over the next decade,” Lewis says. Political will behind green hydrogen is strong, especially in the European Union (EU). “It is a major industrial policy target for the EU,” Lewis says. “They are setting up processes and a framework to incentivise the roll out of green hydrogen.”


Not just saving the world


The good news is that saving the world does not necessarily mean having to make a lower financial return anymore. The cost of building solar and wind parks is falling as renewables take over a larger share of the national grid. “With every day that passes, the economics of renewable energy compared to conventional fossil fuel energy improves,” Lewis says. “We have reached the tipping point where renewable energy can stand on its own feet without the need for subsidies. That is a game changer. It means that private sector investment will start flowing, not only because it is the right thing to do but because it makes sense from an economic perspective.” For Lewis this is a game changer for achieving government car- bon targets. “The augment has been won and the transition is just a question of time,” Lewis says. “You cannot dispute that with way the economics are going, that the whole world is gravitating towards renewable energy,” Lewis says. Indeed, global demand for energy generated by the


30 | portfolio institutional | February 2021 | issue 100


weather grew by more than 100% in 2020, a year when overall demand for power fell. “The rest of the world went backwards but solar and wind went forwards,” Lewis says. Yet falling costs, a growing share of the national grid and increasing regulation on oil and gas does not mean that our economies are no longer reliant on fossil fuels. Lewis still expects fossil fuel demand to rise in the next few years before peaking for good in around 2025, which could come earlier given the impact of Covid.


Green dividend The Covid pandemic has indeed provided a boost to those wishing to eradicate our reliance on carbon-generating pro- cesses. With fewer people travelling the full beauty of the Him- alayas can now be seen from the ground, while you can now see your face clearly staring back at you when looking into Ven- ice’s canals. This “green shine” appears to have increased peo- ples’ drive to act on these issues and make a change. Other positive signs in the fight against climate change in 2020 were commitments made by China, Japan and Korea as well as Joe Biden re-joining the Paris Agreement. “If all of that is delivered then 63% of global emissions are committed to net zero. That would translate into 2.1 degree warming,” Peppelenbos says. “But this is based on an assumption that all of it will be delivered. And that is a huge assumption to make,” Peppelenbos says. These targets provide some reassurance and identifying the industries that need investors support is a good starting point. But can anyone really know if we are on the right track? “Nobody knows how this is going to work exactly,” Peppelenbos says. “It is the same as when the Americans wanted to put a man on the moon. They did not know how to do it, but they did it. “This is the same. We want net zero by 2050 but nobody has a crystal ball. We need to set concrete targets and make ourselves accountable along the way,” Peppelenbos says. He believes that the next 30 years will be interesting as the world tries to avoid an environmental catastrophe. “We know little about climate change going forward because it is unprec- edented, but one thing we know for sure is that change is not linear. It is disruptive and exponential. “As momentum builds, innovation can spur and these goals are attainable as long as we act upon them,” Peppelenbos says. BNP Paribas AM’s Lewis is confident that change is achievable within the time horizons set. “In the same way we have seen coal pushed off the grid, we will see more carbon intensive industrial processes pushed out of the mix,” Lewis says. He adds that the events of last year will help to harden peoples drive to facilitate change. “2020 will be viewed as a trailer for the feature film about the energy transition, which will be show- ing in cinemas worldwide over the next decade,” Lewis says.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48