Europe’s Green Deal’s renovation-wave strategy not only creates a potential opportunity to combat climate change, but also may present a way to boost the economic recovery, says DWS.
When the global financial crisis hit more than ten years ago, climate commitments soon were forgotten for the sake of a fast economic recovery. This is best illustrated by the collapse of the United Nations Climate Change Conference in Copenhagen back in 2009 and the withdrawal of government support programs for renewable technologies.
“That lack of political support was probably reflected in a range of factors, including, perhaps, skepticism toward the scientific evidence, as well as concerns about an apparent trade-off between a sustained economic recovery and climate-change measures needed to move toward a greener economy”, points out the asset manager in a recent publication.
Fast forward to 2020, again in the middle of one of the worst economic recessions, but thanks to many climate activists amid a much more passionate public debate about climate change. This time around, policies to tackle the latter are no longer viewed as an economic luxury. “It is rather evident that the shift to a more sustainable economy entails risks and opportunities for employment creation”, comments DWS.
One such opportunity presented the Green Deal’s renovation-wave strategy published by the European Commission two weeks ago. It aims to dramatically reduce commercial and residential buildings’ carbon footprint in Europe1. This is “vital” since buildings account for around 36% of the EU’s carbon emissions.
However, energy-efficiency investment in buildings has stagnated and is currently not growing at rates required to reach the Paris-Agreement goals as depicted the chart2. The asset manager thinks that, from a capital-market perspective, retrofitting buildings could create opportunities in sustainable equities, real estate, infrastructure, green bonds, asset-backed securities and dedicated sustainable investment funds3.
So history did not end at the failed Copenhagen Climate Summit, but rather continued with the Paris Agreement. The Green Deal aims to double Europe’s renovation rate within the next ten years which contributes to the fulfillment of the Paris Agreement and makes it more likely that the scenario for 2019 to 2030 can be met4. “Of course, it’s an open question whether an EU-wide, one-size-fits-all approach is really the best way to tackle economic and climate problems over the medium term, given the varied economic and real-estate cycles in various member states”, says DWS.
1. https://ec.europa.eu/energy/topics/energy-efficiency/energy-efficient-buildings/renovation-wave_en
2. IEA 2019; EEFIG 2020
3. https://www.dws.com/AssetDownload/Index?assetGuid=a3e81871-9921-44c9-b4f8-ae0ba2327661&consumer=E-Library
4. https://ec.europa.eu/energy/topics/energy-efficiency/energy-efficient-buildings/renovation-wave_en
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