The Green New Deal: A new era for sustainable development

Fortis Investments Paradigm Shift The Green New Deal: a new era for sustainable development For professional investors June 2009 Abstract The economic crisis has turned into an opportunity for sustainable investment strategies. Almost half of the fiscal stimulus packages recently announced by the G-20 countries will be spent on the environment and social sectors – the main focus of sustainable investment. At a micro level, this is creating significant growth opportunities for the best-positioned companies in these areas. This USD 1000 billion spending effort is already being recognised as a global “Green New Deal”. The original “New Deal” in the 1930s was about more than fiscal stimulus – the US government asserted itself as a positive agent in the marketplace and concepts of social welfare were given new prominence. Echoing this historic turning point, unparalleled spending efforts are now coinciding with demand for change. Over the past decade, the understanding of sustainability and the associated technological platforms has gradually matured. Boosted by stimulus funding, promising concepts can now be rolled out on an unprecedented scale. This marks a step change in sustainable development. In this paper we present our analysis of the G-20 stimulus packages, which together represent more than USD 2000 billion of spending. This is a snapshot of Fortis Investments’ Sustainable and Responsible Investment (SRI) team’s ongoing research to identify sustainable investment opportunities resulting from economic stimulus spending. For our latest analysis, please visit www.sriblog.fortisinvestments.com*. Florian Sommer Head of Sustainability Research Adam Child Investment Associate Julien Duprat Senior Investment Specialist, SRI * To be launched at the beginning of June 2009 1 Fortis Investments 2 Paradigm Shift I June 2009 I 2 I 3 4 5 6 7 Paradigm Shift 8 The Green New Deal: 1 2 a new era for sustainable development 3 4 5 6 7 8 Summary 9 As part of the recently-announced economic stimulus packages, the backing. The stimulus packages mark a radical change: never G-20 governments have allocated about USD 1000 billion to social before have funds been made available on such a scale to boost and environmental sectors. We can draw a number of conclusions from sustainable development. this: n Healthcare, greener transport and energy infrastructure are n Consensus about, and the capacity for, sustainability have been major recipients of funding. Stimulus funding will speed up the established. Over the past decade, sustainability has become widely transformation of industries and boost sustainable innovations such accepted as an overarching policy goal by governments around the as smart grids and greener cars. world. Furthermore, the understanding and capacity of governments to manage sustainable development have significantly matured. n This is a unique opportunity for sustainable investment strategies. The economic stimulus packages will lead to n There is now USD 1000 billion of funding for sustainable unprecedented demand for environmental and social products and development. Until now, efforts have largely been focused on services. This will benefit many of the companies that form the core developing policies and regulatory infrastructure with little financial of sustainable investment strategies. Figure 1: Breakdown of G-20* stimulus packages in USD billions and total stimulus spending as % GDP** UK: USD28bn Canada: USD 32bn 1.41% GDP 2.6% GDP Germany: USD 108bn 3.47% GDP France: USD 34bn 1.36% GDP S. Korea: USD 35bn EU: USD 45bn Italy: USD16bn China: USD 585bn 4.90% GDP US: USD 787bn 0.81% GDP 0.29% GDP 12.14% GDP 5.62% GDP Mexico: USD 4bn Japan: USD 278bn 0.49% GDP 5.70% GDP India: USD 8bn 0.70% GDP Indonesia: USD6bn 1.32% GDP Brazil: USD63bn 4.77% GDP Australia: USD 32bn 3.61% GDP Environmental Stimulus Social Stimulus Other Stimulus * Saudi Arabia and South Africa are excluded due to difficulties identifying discretionary funding; Argentina, Turkey, Russia have not included sustainable provisions in their respective stimulus packages ** GDP figures are based on the IMF’s April 2009 forecasts Source: Fortis Investments, 2009 Fortis Investments Paradigm Shift I June 2009 I 3 I Introduction A new consensus and role for governments As part of our SRI research framework we have analysed the environmental There is a new consensus that public funding should help to promote and social implications of the G-20 countries’ economic stimulus more sustainable growth. In an open letter to the G-20, the United Nations packages. Our sustainable investment strategies focus on technologies Environment Programme (UNEP) called for public investment equal to 1% and business activities that aim to generate social or environmental of global GDP to provide the critical mass of infrastructure needed to lay benefits. The ten strategies we concentrate on are shown below. the foundations for a sustainable global economy. Focusing exclusively on the “green” aspects of the stimulus packages, only China and South n Clean and Efficient Energy Korea fulfil this target. However, if we include social investments in our n Clean Water and Air calculations, we can add Australia, Brazil, Canada, Germany, Japan and n Resource and Waste Management the US to this list.