Back in March, responding to the publication of new research indicating how companies with strong environmental credentials have been outperforming others during the Covid-19 pandemic, I wrote that one fact was axiomatic - "sustainable finance was going to be even more front and centre in the post Covid-19 world".

HSBC had published a research note which highlighted that, within general stock market "turmoil" of that period, shares of companies focused on climate change or ESG outperformed the market over the past three months as the virus has spread.

The note stated that while the environment has been directly impacted by the pandemic through reduced air travel, home working, online deliveries, and temporarily lower industrial emissions, there were also signs that ESG factors had provided useful guidance for investors looking to understand how companies and sectors are exposed to the crisis.

Going forward the economic rules of the game are clearly going to change - Covid-19's impact on a whole range of economic and social variables are not even close to being determined. 

It is too early to call the impact of Covid-19 on global climate change policies. For sure it has stalled the momentum of greenhouse gas emissions for now - they will certainly fall in 2020 and perhaps 2021. Climate scientists have calculated that carbon emissions in China have declined by as much as a fifth since early February. A slowdown in emissions in Europe is less marked but still substantial and noticeable. These declines are results of falls in industrial output and hence consumption of fossil fuels.

Despite the maelstrom that is the Covid-19 global crisis, it is important to register climate change remains with us. But as Nicholas Stern, Chair of the Grantham Research Institute on Climate Change recently said, climate change is a bigger threat that does not just go away because of Covid-19. Economic models are going to change, though exactly how, no-one yet knows. 

With this in mind, the Covid-19 lockdown may prove a formative global experience, quickly narrowing the definition of what is essential. But when our hydrocarbon-heavy economies restart, the need to move beyond vague promises is going to be even more pertinent. 

Coronavirus arrived just as the climate movement had gathered serious momentum. In 2019 both the UK and France agreed to net zero emissions targets, Greta Thunberg had become a household name, and central bankers were talking about "climate stress tests" and "green quantitative easing", which had become a legitimate policy topic, not just one for Corbyn and McDonnell.

The danger is that as countries exit the lockdowns and seek economic growth, many will be tempted to conclude that environmental concerns are a luxury they can ill-afford. That would be a mistake. The crisis has already had immense social effects in the way people work and commute. These should be built into a strategy for economic recovery when the crisis recedes. 

Yet the signs are that momentum won't be lost. Writing jointly on World Earth Day, the Co-Heads of Cop26, Alok Sharma (UK Business Secretary) and Sergio Costa (Italian environment minister), wrote:

"Ahead of the COP26 summit, efforts to rebuild the global economy will begin. We believe these should focus on supporting a clean, inclusive and resilient recovery building on the principles of the Paris Agreement and the Sustainable Development Goals. We will work together to ensure that the linked challenges of public health, climate change and biodiversity are addressed."

The decision to delay COP26 was inevitable and was sensible given current challenges. But come 2021, I imagine the world will be ready for some triumphalist spirit, so, after months of isolation, I hope we'll be able to use COP26 next year as an opportunity for people, government and businesses to come together and make real change happen.

Originally published 29 May 2020.

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