Rethinking Everything In Times Of National - And Global - Emergency
The Astra Zeneca share price in 2020 carries within it important comment on whether our existing financial mechanisms and tools accurately reflect what we value as human beings. Or indeed, whether we should be a little braver about changing them when needs dictate - as in a global pandemic.
All year there has been frenetic trading and wild share price fluctuations on stock markets in the shares of pharmaceutical companies on the back of rumour and news on potential vaccine breakthroughs. By comparison AstraZeneca has been largely unaffected - because it was always clear that “the Oxford vaccine” developed in collaboration at Oxford University’s Jenner Institute was going to be made on a not-for-profit basis while the pandemic raged, and be available to everyone across the world. The collaboration was announced in April 2020. When news of the vaccine breakthrough was announced this week on November 23, Astra Zeneca saw a 3.8% fall in share price - no short-term gain to be had here.
Astra Zeneca share price all year to November 25,2020. Source: London Stock Exchange
Saïd Professor of Vaccinology Sarah Gilbert has also always made it clear that her motivation as a scientist is to save lives and to normalise social and economic life around the world for all. But there is a long-term benefit for individuals closely working on the vaccine, the university, and a range of investors if the virus recedes and the vaccine is then sold at a profit later, as a defence, as this article explains.
AstraZeneca will only take a profit when Covid-19 is no longer a pandemic. It is an example of public-private partnership that is of critical importance in all thinking towards building for a better future. “Ethical margins” of profit have also come up elsewhere in the race for a Covid-vaccine, as mentioned in my last Governance Watch column for a boardroom consultancy.
PROFESSOR SARAH GILBERT AT THE JENNER INSTITUTE.
PHOTO CREDIT: UNIVERSITY OF OXFORD / JOHN CAIRNS
The pandemic should have made us think about what responsible capitalism is all about. Stock prices have soared again and again on that most fundamental of human emotions: hope. But for hope to be real, it has to be sustainable long-term, and the definition of that sustainable growth model is now the struggle that governments, businesses, regulators and civil society are facing.
Delivering his Spending Review 2020 (which determines how much is spent on public services) against the latest economic forecast today, the U.K’s Chancellor of The Exchequer Rishi Sunak spoke about “ an economic emergency” that required a “once in a generation investment in infrastructure” with £100 billion in capital spending next year.
The last post on Board Talk looked at the U.K’s move towards sustainability leadership ahead of COP26 next year, and since then there have been many further announcements on movement in this direction. The latest one yesterday follows Prime Minister Boris Johnson’s Ten Point Plan for a “green industrial revolution” to create 250,000 new green jobs, tackle climate change and build back from coronavirus.
Yesterday the UK announced it is to launch the fourth round of the Contracts for Difference (CfD) scheme – to open in late 2021 – which will aim to double the capacity of renewable energy compared to the last round and expand the number of technologies supported, with offshore wind, onshore wind, solar, tidal and floating offshore wind projects all eligible to bid. The government is also launching another consultation on the Supply Chain Plan on policy to better encourage sustainable and efficient supply chains. It expects this consultation to be of interest to those considering developing new low carbon energy projects in Great Britain (GB) and businesses involved in low carbon electricity generation supply chains, among others.
Huge capital expenditure on infrastructure coincides both with a massive growth of investment in funds focusing on ESG issues, and the rising issuance of green bonds. According to Climate Bonds, the international, investor-focused not-for-profit, global issuance passed US$150 billion in October 2020, and the yearly global green bond and loans market has reached $194.6 billion.
Prominent certifications in 2020 include sovereign green bonds issued by Chile and the Netherlands, major Chinese banks, auto manufacturer Volkswagen and Japanese fast train network operator JRTT. In terms of financing infrastructure, it is interesting that French rail operator Societe’ du Grand Paris (SGP) is the single largest certifier for the year to date with $10.6bn.
“Financial markets can help to support the transition to a more sustainable economy and reduce vulnerablity to climate-related risks” states the European Central Bank in a paper on the performance and resilience of green finance instruments In its November Financial Stability Review. “Although possible market failures can stem from incomplete, inconsistent and insufficient disclosure of environmental data, the increase in bond issuance in response to the pandemic provides an opportunity to deepen the green financial market. And the continuing shift towards ESG funds can also help to foster the green transition, especially given the potentially important role of equity markets in financing green projects. The resilience of green finance instruments during the recent market turmoil suggests that investors do not need to make sacrifices on performance to help foster the transition to a greener economy” it adds.
Image credit: Financial Stability Review November 2020 European Central Bank
In terms of momentum building, according to the Climate Bonds Initiative between 2014 to 2019 the average annual growth rate of Climate Bond Standard issuance was 288% - a steady rise. In fact, the first Certification in 2014 was for the Willersley Solar Farm, which is a U.K. based solar project. “The Climate Bond Standard will be expanding in 2021. You’ll see the addition of new criteria for resilience investments and, above all, transition finance. And you'll see it become a 'universal adapter' for rules and regulations in different markets and regions” said Sean Kidney, CEO, Climate Bonds.
More businesses are looking to the stirrings of green shoots of momentum in the midst of political change. Snam, the Italian energy infrastructure group, has today announced it is aiming for a 50% cut in emissions by 2030, before reaching net zero within two decades as it refocuses its efforts on renewable energy, particularly hydrogen.
“By moving away from fossil fuels, our network goes from being a potential problem to an enabler of the transition,” said chief executive Marco Alverà. “Following the zero emissions targets announced by China last month and the USA’s John Kerry this week, I think we have a great opportunity.”
The U.K too, is backing hydrogen for a reduction in carbon emissions and BP plc has made it a key part of its re-invention as an energy company of the future.
As an aside, Snam’s website I found has a statement on the company’s ethics. It states: “Snam is inspired by values of transparency, honesty and fair play. Its corporate governance is aligned with the international best practices. Our actions are based on continuous stakeholder relations, and a focus on sustainability and business ethics.” Perhaps there is some circular reason in my rambling here after all.
When the U.K. Chancellor Rishi Sunak delivered his Spending Review earlier today, he said that one of the reasons for a £4bn “levelling up” fund in the expenditure announced was that people in places they call “home” want to say that “this place is better than it was five years ago.” What he termed “a new holistic approach to local areas in funding the infrastructure of every local area” was, in effect, a recognition of the importance of paying attention to stakeholders.
That is what will dictate the way in which businesses are governed - and valued - post-pandemic, and possibly in the future and also, more immediately, how governments fare.
Cover image photo credit: Navneet Mahajan at Unsplash (Rajpura, India )
