How technology can help the transition to a green economy and the role that commercial creditors will play in this

In early 2021, when the storm Christophe blew in the North of England, our colleagues in Manchester suffered extreme floods. A few months later, the same thing happened to our colleagues in London. Then our colleagues in Bangalore. Then our colleagues in New York. Events like these should be rare and unprecedented, but instead become regular events around the world, leaving damage, disruption and, in some cases, death in their path.

For many, the answer to tackling the challenge of climate change lies in technology. Most global greenhouse gas (GHG) emissions come from several sectors, each of which is disrupted by technology:

Automotive: The automotive sector is witnessing a break with evolving battery and fuel cell technology. Demand for electric vehicles (EVs) is growing – the rate of this technological disruption is staggering – three years ago EVs accounted for only 2% of all new car sales in the United States. A year later, it doubled to 4%. Last year it doubled again to 8%, and this year it is expected to double again to 16%. Within 10 years, most new car sales will be electric (source: iea.org). This will affect the whole value chain of cars, affecting both upstream and downstream sectors / activities. Therefore, banks need to understand the level of credit on how the risk goes down the value chain and the ripple effects that the carbon leakage lever (such as technological disruption) can have across the sector.

Construction and building: The construction industry accounts for a significant share of global greenhouse gas emissions, and the materials used, as well as the heating, cooling and lighting of buildings, contribute to the industry’s carbon footprint. Everyone in the industry as a whole agrees that building more green infrastructure is crucial to reducing emissions from the sector. As such, more and more countries are introducing energy codes for buildings, certification of green buildings is increasing and investment in energy efficiency technologies such as smart homes and automation systems is increasing.

Production: To date, manufacturing companies have been relatively protected from regulatory pressure, but are now facing increasing pressure from shareholders and consumers. To deal with this, manufacturers will need to consider the implications for their entire value chain – at the design, supply, construction and operation stages. New technologies that reduce production steps, the use of materials or the number of parts will reduce the energy involved in the value chain and reduce the use of raw materials. This also applies to technologies that allow the production of materials or components that increase recycling and recycling.

Oil and gas: Directly and indirectly, the oil and gas industry accounts for 42% of global greenhouse gas emissions. As a result, creditors are facing increasing pressure from shareholders to reduce lending to industry, and with rising fuel prices, economies and governments around the world are catalyzing efforts to move to more sustainable energy solutions. Fortunately, renewable technologies are getting cheaper – the price of solar energy in the United States has fallen by more than 70 percent since 2011, while the price of wind has fallen by almost two-thirds.

Agriculture: The agricultural sector is prepared for disruptions and agritech (agricultural technology) facilitates this. These include technologies such as precision farming, protein alternatives, farmed meat and carbon sinks. Studies show that the global agro-technological market will cost $ 22.5 billion by 2025, which will increase from $ 9 billion in 2020.

All of these technologies will require investment – according to McKinsey, the net price of the world, reaching net zero by 2050, will be £ 257 trillion or £ 9.2 trillion a year. This is a great opportunity for commercial lenders to help their commercial customers move to a green economy, given the level of investment required.



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The views expressed above are those of the author.



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