December 2020
M&G I NVESTM E NTS
WHY INFRASTRUCTURE WILL BE KEY TO A
‘GREEN’ RECOVERY Alex Araujo, fund manager at M&G Investments
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longside their immediate priority to protect health, governments around the world are looking to ensure that the pandemic does not do irreversible damage to the global economy. Huge fiscal stimulus packages, amounting to trillions of US dollars, have been pledged in 2020 to try and prevent a protracted recession. Infrastructure investment is high on the agenda, not only because it can lay the foundations for long-term economic growth but also because it is essential. Indeed, the need to reverse decades of chronic underinvestment in US infrastructure is one of the few things that presidential candidates Donald Trump and Joe Biden agreed on. As the urgency to move towards a zero-carbon economy has grown, the requirement for new and improved infrastructure has come into focus. I believe that calls for a ‘green’ recovery will only accelerate investment in solutions that support the low carbon transition.
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BUILDING BACK BETTER’ In Europe, the issue of sustainability is central to the €750 billion “Next Generation EU” recovery plan, which promotes investments that help cut greenhouse gas emissions and advance renewable energy and energy efficiency. It is hoped that large-scale public investment, combined with regulatory changes, will galvanise the private sector investment needed for the bloc to reach its goal of being climate neutral by 2050, in line with 2015 Paris Agreement commitments. The infrastructure built today will determine whether climate targets are met. After all, the OECD estimates that more than 60% of global greenhouse gas emissions are related to physical infrastructure . A transformation of the systems that form the backbone of modern society is therefore urgently needed. To meet the climate and development objectives articulated in the UN
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