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Sustainability Trends Report 2020

STR 2020
State of sustainability

The COVID-19 pandemic has disrupted all aspects of normal life, with enormous health, economic and social costs. It has also brought home the urgency of a decisive shift to sustainability.

In Sustainability Trends Report 2020, we show that in the wake of the pandemic, many long-term trends are accelerating and some new ones are emerging. We track the implications of these new dynamics for action on the climate and inequality. We also highlight the vital role of partnerships in raising ambition on sustainability, building on the experience of collective responses to COVID-19.

Companies have a critical role to play in building back better. As in previous editions of this report, we highlight many of the exciting innovations in the world of sustainability. We examine how the world of business is contributing to the recovery and to building an inclusive, sustainable economy. We also underscore why a change in investor ethos is necessary to find a sustainable pathway out of this crisis.

The pandemic is revealing new insights into our shared sustainability challenges. The interlocking nature of our climate, ecological and social crises. The vulnerability and resilience of our societies to shocks. The depth and nature of economic and social inequalities. Our dependence on institutions and cooperation for prosperity and stability, at a time when mutual trust has collapsed. This is a profoundly difficult time for many people.

As investors focused on long-term value creation and sustainability, we need to lift our eyes to the horizon. The effects of COVID-19 will be with us for some time, but severe health impacts might be stemmed sooner with an effective vaccine or treatment. There is no vaccine for the climate crisis. Addressing racial, gender, LGBTQ and economic inequality likewise requires both urgent and sustained actions across multiple fronts.

The acceleration of sustainability trends this year provides important glimpses into the future: how we live, how we work, where we want to live and what we want, and need, to consume. Beyond the short-term impacts, there is a sense of new political and social realities forming that provide a generational opportunity. We believe the action and momentum triggered by events this year will prove a powerful catalyst for sustainability.

Could some companies and governments waver in their commitments to sustainability, blown off course by the short-term impact of the pandemic and the economic crisis? We find some areas where this is certainly a risk. Yet, for many organisations, the lesson from recent months is that sustainability and resilience are two sides of the same coin.

The pandemic has revealed companies’ commitment to sustainability in a way that is difficult to see in normal times. Many businesses have stepped up, working with others to find solutions with unprecedented speed and taking a broad view of stakeholder value when it mattered most. This redefining of what is possible must now be taken into other shared challenges for our societies, not least for climate.

Everything now depends on our collective efforts to ensure a safe, resilient and sustainable recovery. Strikingly, to limit global temperature rise to 1.5 degrees, greenhouse gas emissions need to fall by 7.6% per year for the next decade; more than the drop expected in 2020 due to COVID-19. Clearly, this means pulling all available levers. Yet, there is also a new sense of perspective. The net investment required for climate action is much smaller than the economic cost of the pandemic, and unlike the pandemic, it represents a major economic and social opportunity. The costs of inaction on climate change meanwhile, are so large they are difficult to comprehend.

Governments must chart the course for a green recovery through their industrial policies and green deals. The EU, for instance, sees its Green Deal as the “motor of the recovery”. Yet so far, there are few concrete green investment plans in place despite the wealth of opportunities. There is also too little of the global cooperation that was so crucial in pulling the world out of the depths of the global recession a decade ago.

We try to situate this moment in a historical perspective. Tremendous strides have been made in recent decades in tackling extreme poverty, improving human health and developing a raft of clean energy technologies and affordable digital solutions. The task now is to ensure these gains are protected, accelerated and felt by all.

This year, the report is organised under six chapters: Health; Energy; Buildings & Mobility; Economy & Finance; Consumer; and Trade & Travel. Before this, we take a brief look at the broader State of Sustainability.

You can read each chapter in this report report in sequence from top to bottom. You can also move from one chapter to another by clicking the arrows to the right and left of the screen. It is often possible to find information on a related topic elsewhere in the report – look out for the magnifying glass symbol.

Important information

This report has been prepared by Generation Investment Management LLP (“Generation”) for discussion purposes only and reflects the views of Generation as at July 2020. It is not to be reproduced or copied or made available to others without the consent of Generation.

The information presented herein is based on Generation’s analysis of publicly available data and is intended to present a global perspective on different areas that Generation believes represent a sustainable economy. The jurisdictions and time periods presented herein may vary, as the data shown is what Generation used in its own assessment and believes to be the most complete view to support each identified area of sustainability and the associated trends. 2020 and other historic estimates made throughout the report were extrapolated from cited research and based on previous trends and known current data. While the data is from sources Generation believes to be reliable, Generation makes no representation as to the completeness or accuracy of the data.

The pandemic has accelerated many sustainability trends, and given rise to some new ones
Figure 1: Change in share of employees working remotely full-time, US, by sector, since pandemic
Figure 2: People who have used telehealth services for the following, 2020

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There is palpable restlessness for change in society

The urgency of tackling the climate crisis and action on equality and justice have never been clearer. Young people are playing a critical role.

Figure 3: “Regarding the overall impact on humanity, are you more concerned about the impact of coronavirus or climate change?” Survey in Britain, 2020, by age
Figure 4: Black Lives Matter protests 2020

Showing 3964 cities or towns with protests worldwide since May 25th 2020. Updated June 25th 2020.

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Many people are gaining a new appreciation of the natural world
Figure 5: Visits to parks, US, 2020

David McNew/Getty Images

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The world economy has entered a period of unprecedented economic instability

The world faces a deep recession in 2020. Uncertainty about the future is at an all-time high.

Figure 6: Global economic-policy uncertainty index, 1997-2020
Figure 7: Global economic growth, 1990-2021

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In light of these trends, it feels as if the ground is shifting. Could the world be at an “Earthrise” moment?

Taken in 1968 on the Apollo 8 mission, this photo of Earth floating in space helped inspire the environmental movement, as people came to understand our common interest in protecting our planet.

NASA, Apollo 8 Crew, Bill Anders; Processing and License: Jim Weigang

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There is still time (just) to address the serious risks building up in the climate system.

Extreme weather is on the rise, as a result of higher global temperatures. For instance, worldwide insured losses from wildfires have jumped in recent years. COVID-19 has underscored the importance of taking scientific advice seriously.

Figure 8: Global land and ocean temperature anomalies, 1880-2020

Relative to base period 1901-2000. Downloaded 12/06/20

Figure 9: Number of catastrophic events, global, 1980-2019

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Carbon emissions are set to fall in 2020 due to COVID-19, but new approaches are needed

Emissions need to halve this decade. Yet there are already signs that emissions are rebounding as the economy restarts, a pattern that has been seen after past recessions.

Figure 10: Global CO₂ emissions, 1958-2020
Figure 11: Emissions trends required for a 1.5°C pathway, 1990-2030

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For now, many countries are prioritising “brown” stimulus over “green”

The Green Stimulus Index examines economies to assess the green or brown orientation of their stimulus funding based on: the scale of funds flowing into environmentally intensive sectors; the existing green orientation of those sectors; and the efforts which steer stimulus toward (or away from) pro-environmental recovery.

Packages in parts of Europe and Canada offer more promise, with at least a portion of spending targeted at sustainable projects. The EU's recovery plan is the greenest to date.

Figure 12: Stimulus packages in response to COVID-19, by type of stimulus, 2020

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Our future depends on building back better, together

This report highlights the role of business and investors, alongside other stakeholders, in making this a reality. The study in the Oxford Review of Economic Policy, from which this graph is taken, lists the five most important policies as: clean energy infrastructure, building efficiency retrofits, education and training for workers, natural capital investments and clean R&D.

Figure 13: Policies to build back better

Alphabetic labels reference policy IDs
A. Temporary waiver of interest payments
B. Assisted bankruptcy (super Chapter 11)
C. Liquidity support for large corporations
D. Liquidity support for households, start-ups and SMEs
E. Airline bailouts
F. Not for profits, education, research, health institution bailouts
G. Reduction in VAT and other goods and services taxes
H. Income tax cuts
I. Business tax deferrals
J. Business tax relief for strategic and structural adj.
K. Direct provision of basic needs
L. Education investment
M. Healthcare investment
N. Worker retraining
O. Targeted direct cash transfers or temporary wage increases
P. Rural support policies
Q. Traditional transport infrastructure projects
R. Project-based local infrastructure grants
S. Connectivity infrastructure investment
T. Clean energy infrastructure investment
U. Buildings upgrades (energy efficiency)
V. Green spaces and natural infrastructure investment
W. Disaster preparedness, capacity building
X. General R&D spending
Y. Clean R&D spending

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