TSC Thursdays - COVID19, A Turning Point In Climate-Smart Investment?

TSC Thursdays is a weekly TSC blog post with top trending news and issues pertaining to UN Sustainable Goals. TSC’s SDG COVID Impact Dashboard applies our proprietary models and methodologies to filter the global chatter through a dynamic issue taxonomy to track and visualize COVID-19's impact across 17 SDGs in real-time. For more insights on global SDG commitment, sentiment and activity explore our SDG COVID Impact Dashboard here: https://sdg-covid.tsc.ai

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TSC's SDG COVID Impact Dashboard identified positive sentiment for “Climate Smart Investment” within the theme of Climate Action.

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1

Is pandemic a good time to push climate-smart investment strategies?

COVID-19 and the recession that followed has affected a multitude of industries, not only financially but also from a longer-term stakeholder conscience perspective. As some have called this pandemic a “stress test” for climate change impact, many of these sectors will be - or are already being - pushed to adopt the notions of renewable power, energy and resource efficiency, sustainable agriculture, green buildings, and clean technology. The World Bank’s blog - “Coronavirus makes investing in climate adaptation more urgent than ever” - depicts how the urgency of investing in a sustainable future should be expedited further post COVID-19. What are these circumstances that can accelerate or trigger such a transition? Can we now expect to see traditional industry players to join into this effort or will climate-smart strategies remain for the textbook examples of the sustainability class?

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2

Tracking global shifts in sentiment on key topics

TSC’s Atium software provides real-time sentiment trends, including Heatmaps showing shifts in coverage globally, regionally and even on state level. We witnessed a gradual shift in coverage on the topic of climate-smart agriculture over the past 6 months:

• In April of this year, the sentiment Heatmap shows a negative sentiment on the issue in Sub-Saharan Africa, the Middle East and Southern Asia and South America. A severe drop in oil prices hinted for many, a delayed transition to clean energy. Why adopt renewables when fossil fuel prices are at an all-time low? Furthermore, the looming food crises in these regions, caused by strained global supply chains, triggered debates around the lack of climate change-ready solutions. If the pandemic has already aggravated such food security concerns, what about the long-term effects of climate change?
• In August however we notice much more positive sentiment in the regions previously mentioned. Governments have stepped up in the meantime to announce green recovery plans, climate investment funds are booming including in these regions, and carbon emission reduction efforts are initiated across to retain clean airs and healthier populations.

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It does seem that as little as 4 months were enough to change the scene of climate-smart investments in some of the most challenging geographies in the world.

A strategic shift to climate-smart investment appears handsome when it pays well to your bottom line too. An emphasis on climate-smart investment plays in favour of the increased trend of ethical “green” investors - with climate change resilience becoming a defining factor for organisations and their wider stakeholder sphere, more and more investors seek to place their equity in companies that share a similar goal of a sustainable future. The pandemic has clearly accelerated this movement.

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3

Has the shift from fossil fuels to renewables truly commenced?

Atium’s Sentiment Heatmaps allowed us to follow a high-level shift amongst others in Africa, Middle East and South America. To gain a better understanding of the developments on the ground, the next step would be to extrapolate further insights from these regions and place focus on key organisations in the O&G industry. How did they choose to respond to the dire circumstances their industry is being placed in by the pandemic? Will we notice synergies or gaps with the trends highlighted by the geographical Heatmaps?

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Atium’s Share of Voice Analysis allows us to compare O&G peers’ coverage on the topic of climate-smart agriculture from both a volume and sentiment coverage perspective. Again, we notice a strong shift in all three regions from negative to positive sentiment, similar to the Heatmap. The strongest shift occurred in the Middle East followed by Africa and South America.

• In April, the key O&G players were covered very negatively as the oil price plummeted and there was increased uncertainty on the market’s support for fossil fuels given the unprecedented circumstances.
• The switch to positive sentiment in August came from the public realisation that gas is losing to renewables, shifting away from fossil fuels due to public pressures from investors and policymakers, renewables being more cost effective, and fossil fuel investors having lost equity on the markets and not wanting to lose any more. The Middle East had such a leap in positive sentiment from UAE’s Ministry of Industry and Advance Technology and ADNOC’s dedication to diversify into clean energy, and set a goal to construct the largest solar project in Abu Dhabi. This is what sets the Middle East apart from the other geographies because of government support to changing economic circumstances. The Ministry of Industry and Advance Technology is newly established by the UAE government in July to drive economic growth, diversification and value retention. Sheikh Mohammed said the post-COVID economy will require flexible thinking. ADNOC’s strategy to support the new ministry’s mandate was approved by Abu Dhabi’s Supreme Petroleum Council.
• The key players, BP and Total, are rethinking their reliance on O&G and noticing that the cost of carbon emissions will not be beneficial to their bottom line. Which is why they are diversifying more towards renewable energy sooner as to set up the infrastructure for the future. This is shown by Total investing in a solar project in Qatar, and BP announcing it will not explore in any new countries as they set focus on selling O&G assets.
• Other players like ExxonMobil and Petrobras are not easily giving up O&G yet, as they are still actively pursuing further exploration despite the pressures from the public. Petrobras has sought partnership with big tech to enhance its O&G operations, and for ExxonMobil it is business as usual.

The oil and gas industry saw firsthand the effect a global pandemic can have on an industry with the oil price falling substantially and supply chains halting their production. Globally there are O&G operators that felt the increased pressure and realized that a shift was needed for the business to prosper in a post-COVID era. Some of these operators found themselves in a position where they already had some diversity in their business offerings and leveraged this diversity in their advantage during COVID-19. Shifts towards more renewable energy production was a seed planted by investors and aligned executives for a fruitful harvest; COVID-19 is the fertilizer and the harvest came early this year.

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