The COVID-19 pandemic represents the most serious global public health challenge for over 100 years. When the crisis passes, we will have a unique opportunity to build a new world as the pandemic has the potential to facilitate the transition from fossil fuels to renewables. Amid the difficult challenges we face, this is an area where we can be hopeful for the future.
The COVID-19 pandemic has impacted all areas of our lives and highlights how globally interconnected we are, particularly in terms of commerce and trade. We are only just beginning to digest the implications of the enormous shock to the global economic and financial system arising from the crisis, and the huge fiscal and monetary support enacted by governments and central banks worldwide.
Amid the chaos of the pandemic, it is easy to overlook another - and potentially more serious - long-term threat to humanity and the biosphere - climate change. In a note I wrote recently on the impact of COVID-19 on the ESG and climate investing landscape available here, I described climate change as a "slow-burning pandemic".
The COVID-19 crisis has reminded us of the importance of rigorous and objective scientific research, of innovation in the development of solutions, and of the need for cross-border collaboration. These are all lessons we can take in tackling climate change. But will COVID-19 materially change our attitudes to the climate threat?
In the short-term, progress will likely be subdued and some climate-related initiatives (such as COP-26 scheduled for November 2020 in Glasgow) have been postponed. More importantly, however, the pandemic may create a heightened sense of urgency among policymakers and the private sector to address potentially catastrophic climate change risks.
The pandemic is also having a more direct impact in greatly reducing oil demand, amid a backdrop of an oil price war between Saudi Arabia and Russia. This has resulted in a sudden and unprecedented decline of the oil price with oil futures trading at negative territory for the first time in history in April 2020. At this level, exploration projects will be far less attractive and job losses are likely in an industry that is already challenged by government regulations on carbon emissions and the rise of renewables.
At State Street Global Advisors, we are committed to providing our clients with the necessary information and tools to contribute to the transition to a low carbon future. Our range of strategies enable investors to mitigate and adapt to climate change risks and ensure their portfolios are resilient as we transition to a low-carbon economy.
We have written previously in '2020 Vision' and 'The Trillion Dollar Windfall' of the inevitable peaking and decline of fossil fuels in the coming decade, and the rise of renewables as an energy source globally.
In this new paper, we highlight why the COVID-19 pandemic will catalyse the shift from fossil fuels to renewables and why this transition is both needed and inevitable.