Will capitalism turn green in 2021?

With the coronavirus vaccine rollout earmarked for 2021, most people around the world can’t wait to get their lives back. But will the capitalist business model that underpins the global economy remain permanently altered by events in the past year?

Climate change and its related challenges suggest that major changes could be afoot in how the global consumer-driven, resource-intensive economy operates, analysts at UBS suggest.

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However, while 2021 is a crucial year for climate change, the analysts said the old model of consumerism is likely to be revived if vaccinations quickly become widely available.

“We think the combined effect of the Covid aftermath and the development in parallel of greenhouse gas emissions mitigation/ adaptation efforts could potentially prompt a shift in sectors and markets towards investment-led green ‘growth’ and a better stakeholder balance,” the UBS team led by analyst Julie Hudson commented in a note on Wednesday.

The real-world effects of the pandemic on jobs, livelihoods and ways of life “could potentially be sufficient to change (or at least, begin to change) the market and economic paradigm that has been in force for several decades,” they added.

Although colleagues in utilities and oil sectors are pessimistic, the analysts said the recent and ongoing acceleration in the ascendance of the idea of “net zero” looked likely to shape 2021, with the UK due to host the UN climate change summit and bringing in a range of new policies as it exits the EU.

But while purposeful investment is becoming increasingly popular, the fields of economics, accounting and finance worldwide may need to change the way ‘growth’ is defined and measured for this shift to happen, as suggested by the government’s climate change advisor, Lord Deben.

As well as taking into account human health, biodiversity and the environment into the definition of economic growth, it would mean that the carbon footprints of energy, transport, building, agricultural and food system resource must be addressed, which would require extra investments in infrastructure and research and development.

While such change would be obviously be positive for companies in clean energy, sectors such as materials, infrastructure, industrials, selected consumer sectors and technology would also face positive changes, the analysts said, while it would be negative for those in extractives, fossil fuel-driven energy and materials and some consumer discretionary sectors.

“The main storyline here is that ‘real’ effects (job losses and food insecurity arising from the Covid shock, or warming-driven crop failures and storm surges) arising from a physical shock require a ‘real’ response,” Hudson wrote.