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Workers install photovoltaic power panels on the roof of a factory in Tangshan, in north China’s Hebei province, on October 11, 2022. Photo: Xinhua
Opinion
Macroscope
by Chris Iggo
Macroscope
by Chris Iggo

Like the pandemic, climate change fight will drive global shifts in jobs and investment

  • The fight against global warming will drive reallocation as job types and investment patterns are expected to change worldwide
  • Obstacles to this continue to be political will, the permitting process for innovative technologies, technology limitations and infrastructure
The global economy has been beleaguered by runaway inflation, but that is now easing and should continue to do so. Central banks are committed to bringing inflation back nearer to target levels and are likely to succeed within a year to 18 months.

Moving forward, we will need to be watchful of the labour market and the potential overheating of wages. This moves very slowly but can build to be a significant pressure over time.

The Covid-19 pandemic has had major implications for the organisation of firms and cities, and there will be a significant amount of reallocation. It has forced people to think about the status of work in their life.
But the fight against global warming will equally drive reallocation, too. Job types will change, for example the move to electric vehicles (EVs) will mean a reallocation of workforce in the automotive sector. There will also be huge increases in investment in the green transition with both public and private contributions.
The pandemic plus the disruptions to global energy markets have encouraged huge increases in lower carbon activity in Asia. Chinese manufacturing and purchases of electric cars is a good example, as is the rapid extension of renewable energy production. According to a recent article in the Financial Times, China accounted for almost two-thirds of global electric car sales in 2022.

The implication is that the EV sector will create more jobs. It will require supply chains to adapt to providing components for this boom in production, as well as for the infrastructure needed in cities and on the national highway system to allow electric vehicles to become the predominant mode of private transport. In India, electric motorcycle sales are booming, creating new jobs around manufacturing, distribution and servicing.

01:08

China’s largest shipment of electric vehicles sets sail from Shanghai port

China’s largest shipment of electric vehicles sets sail from Shanghai port

Public policy is fuelling the green transition. It is being positioned as not only the right thing to do from a responsible point of view but also something necessary to support productivity and economic growth. However, one challenge is balancing the trend towards deglobalisation against the need to work together internationally on combating climate change.

The Intergovernmental Panel on Climate Change’s (IPCC) latest report offered little in the way of surprise. The United Nations-tasked scientific body said it was confident the risks and adverse impacts from climate change would escalate with increasing global warming.

To limit the rise in global temperature to 1.5 degrees Celsius above pre-industrial levels, emissions need to be reduced by at least 43 per cent by 2030 compared to 2019 levels and at least 60 per cent by 2035. We are already at 1.1 degrees Celsius above pre-industrial levels, and there are suggestions that we have reached 1.2 degrees Celsius.

01:40

‘Climate time bomb ticking’: UN chief says carbon emissions must be urgently cut

‘Climate time bomb ticking’: UN chief says carbon emissions must be urgently cut
More positively, though, the IPCC said we have the tools and know-how to take on climate change. The well-understood effects of deploying technology at scale are kicking in across sectors – including renewables, storage, electric vehicles and now green hydrogen – which could enable production of green ammonia, green steel, green shipping and more.
There is growth in all of these. For example, use of sustainable aircraft fuel has grown beyond expectations, and battery chemistry technology is rapidly improving performance. In addition, most modelling of the energy transition does not account for disruption. The models are ignorant of the historical fact of exponential change and use conservative assumptions around the spread of technology.

The reality is that technological progress is non-linear. It is pushing the cost curve lower, meaning low- or zero-carbon technologies are economically efficient and gaining market share. The process of combating climate change is characterised by growing confidence in mitigation and decarbonisation technologies while at the same time facing growing risks that we could hit some non-linear tipping points in the earth’s ecosystem.

A worker pumps fuel into a Transporte Metropolitano de Barcelona city bus at a green hydrogen refuelling station in Barcelona, Spain, on April 26. A new €16.3 billion (US$18 billion) green energy plan, partly financed by European Union recovery funds, aims to develop green hydrogen projects, increase renewable power capacity and build new storage facilities. Photo: Bloomberg
The obstacles continue to be political will, the permitting process for innovative technologies, technology limitations and infrastructure. The investment needs are huge, and there is an even bigger role for private investors. Investors are increasingly seeking to invest in businesses and technologies that both help mitigate the effects of climate change and adapt to them in a way that strives to achieve a sustainable future.
Asset owners and managers will reduce carbon emissions from their investment portfolios and ensure their investee companies deliver the reporting and strategic targets which will allow this to be achieved. On the policy front, initiatives like the US Chips and Science Act and Inflation Reduction Act as well as the European Union’s NextGenerationEU framework are already stimulating significant investment growth and should continue to do so.

Chris Iggo is chair of AXA Investment Managers Investment Institute and chief investment officer of AXA IM Core

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