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Virus impact could boost climate change strategies

22 March 2020

The impact of the Covid-19 Corona virus could change the way people work, where fund managers invest and lead to positive outcomes for the climate, according to Schroders.

Business travel has slowed down substantially in recent weeks as the world attempts to halt the spread of Coronavirus, while the majority of employees are now working remotely. The behavioural changes that this is forcing upon people in such a dramatic fashion are likely to lead to a re-evaluation of the necessity for face-to-face meetings, says Schroders lead portfolio manager, global equities, Simon Webber.

He said: “As an investor looking at climate change trends, these changes in working practices are interesting in an environmental context.  Even 10-15 years ago it was clear that the tools to facilitate meetings and conferences virtually were becoming available.

“In theory, they should dramatically increase productivity – just think of all the unproductive time and cost associated with airports, planes, hotels and taxis. Yet their use has not taken off as much as expected and business travel has been a major growth industry for the aviation and high end hotel business.”

However, Webber believes that being forced to work from home for an extended period of time will mean that companies must focus their resources on getting  systems fit for purpose, while employees, clients and customers will grow accustomed to it. As such, managers will increasingly recognise the benefits of shifting more permanently in this direction.

He continued: “For many services businesses, business travel-related emissions are the largest source of their carbon footprint. But more and more companies are committing to manage down their own footprint in line with the Paris agreement to limit greenhouse gas emissions. If the airline industry is unable to find an alternative propulsion technology to jet engines, the only way for businesses to reduce travel-related emissions is to travel less.

“The investment consequences are more permanently negative for industries reliant on ever-growing long distance travel. The International Air Transport Association said on 5 March that the 2020 revenue loss for the sector could be between $63 billion and $113 billion. That was before the latest round of travel restrictions. While it is tempting to think that this will just bounce back once the virus is contained, it is likely that behavioural habits will have already begun adjusting.”

Webber said there would also be investment opportunities, with remote working software, video conferencing technology and better employee personal technology all likely to experience greater demand.

Webber added: “In a nutshell, until the aviation industry develops a technological solution that doesn’t involve burning things in the upper atmosphere, we simply can’t fly all over the place all the time and expect to solve the climate problem.

“It is quite possible that 2020 will mark the inflection point where the corporate sector realises that it can do more with less travel. In that respect, getting used to virtual meetings and the immense productivity gains it can bring will be a positive side-effect of the crisis response.”

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