Jordan Kelly, Trainee Investment Manager, Sustainable MPS
The Coronavirus pandemic has engulfed the world economy and resulted in governments taking drastic action to both curb the spread of the virus, and prevent economies from grinding to a halt and deteriorating longer-term conditions. People are aware of the health implications and, to some extent, the economic impact. However, another important topic that has risen to the surface of public debate and concern is how we will continue to address climate change. The global lockdown saw improvements in carbon gas emissions and cleaner waterways, which gave rise to the notion that we could 'reopen' our world in a more environmentally conscious manner. Prior to the escalation of the pandemic, the Spring Budget 2020 indicated just how high on the UK Government's priority list climate change was and now even more so. Governments are heeding public opinion on 'a green economic recovery'. Despite the uptick in attention to this crucial issue and increasing public support, is the UK Government doing enough?
Deforestation and destruction of our natural land is widely documented with the Rainforest Alliance estimating that deforestation alone causes 10% of greenhouse gases worldwide. Recent disasters such as the loss of vast amounts of the Amazon, known to many as 'the earths' lungs', and bushfires in Australia compound manmade problems. In order to combat some of the damage we have already encountered here in the UK, the Government has pledged to invest in the Nature for Climate Change (NCC) Fund, which is part of the Government's '25 Year Environmental Programme'. This programme highlights ambitions for clean air and water, enabling plants and wildlife to thrive whilst mitigating and adapting to climate change. The Fund specifically aims to plant enough new trees over the next five years to cover an area the size of Birmingham (75,000 acres), the UK's third largest urban area as reported by Chancellor Rishi Sunak.
A third of UK greenhouse gas emissions are emitted as a consequence of producing heat. 50% of these emissions are from the domestic sector, 20% from the commercial sector and 30% from the industrial sector. New heat networks have been developed, comprised of underground pipes carrying hot water. The Government has pledged further investment into the 'Heat Network Investment Project' in order to support the development of better efficiency in our heat networks. This project will terminate in March 2022 to make way for the 'Green Heat Networks Scheme'. The new scheme is set to run over three years to ensure the networks adopt the most cost-effective low carbon heat sources. These investments are essential in both building new, and improving existing, networks in order to ensure the UK's heat supply emit as low carbon as possible. Additionally, it enables the recycling of waste heat back into the system.
The UK Government currently spends an estimated £17bn a year on measures to combat climate and environmental challenges. A further £3bn pledge has been announced since lockdown toward green investment packages aimed to "kick start" an environmentally friendly revival of the UK economy, through the creation of thousands of green jobs. However, studies suggest that this amount would not be sufficient to meet the previous target of an 80% reduction in greenhouse gas emissions by 2050. The Institute for Public Policy Research think tank suggests in order to meet this reduction target, the Government would need to spend an additional £11bn a year. Regardless of the sum of the annual spend, one certainty concluded from the Budget and additional commitments since, is that climate change is quickly moving up the Government's priority list. The importance the Government is placing on the issue is even more evident by the extended focus on the 'green recovery' from the ongoing pandemic.
Return to Insights
This communication is provided for information purposes only. The information presented herein provides a general update on market conditions and is not intended and should not be construed as an offer, invitation, solicitation or recommendation to buy or sell any specific investment or participate in any investment (or other) strategy. The subject of the communication is not a regulated investment. Past performance is not an indication of future performance and the value of investments and the income derived from them may fluctuate and you may not receive back the amount you originally invest. Although this document has been prepared on the basis of information we believe to be reliable, LGT Vestra LLP gives no representation or warranty in relation to the accuracy or completeness of the information presented herein. The information presented herein does not provide sufficient information on which to make an informed investment decision. No liability is accepted whatsoever by LGT Vestra LLP, employees and associated companies for any direct or consequential loss arising from this document.
LGT Vestra LLP is authorised and regulated by the Financial Conduct Authority.