Pandemic & Economic Crisis Downgrade Climate Change, Possibly For Years To Come

  • Date: 22/03/20
  • Eurasia Group, Top Risks 2020

The global focus on coronavirus will come at the expense of attention paid to climate change as governments, investors and companies pursue recovery and growth above all else.

In January, risk #7 described how climate change would put governments, investors, and society at large on a collision course with corporate decision-makers, who would have to choose between ambitious commitments to reduce their emissions and their bottom lines. Civil society would be unforgiving of investors and companies they believe are moving too slowly. Oil and gas firms, airlines, carmakers, and meat producers would feel the heat. Disruption to supply chains would be a meaningful risk. Investors would reduce exposures to carbon intensive industries, sending asset prices lower. All this as global warming would make natural disasters more likely, more frequent, and more severe.

The global focus on coronavirus will come at the expense of attention paid to climate change. Environmental, social, and corporate governance (ESG) investing mandates will become weaker in implementation if not in spirit, as investors and companies pursue recovery and growth above all else.

Countries will utilize their fiscal space on targeted measures to blunt the impact of the coronavirus, and whatever is left over for broad fiscal stimulus will only be partially dedicated to “green” projects, and to varying degrees across countries.

Further, collapsing oil prices will undercut the competitiveness of cleaner alternative energy sources. With large-scale protest activity diminished because of social distancing, civil society actors will turn to cyber and online tools to apply pressure on companies and governments, most of which will have less appetite and ability to respond to climate change.

The immediate risk of a clash between politics and economics over climate change significantly diminishes in the short term, even if the overarching threat of climate change remains as real as ever.

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