Sustainability Trends Report: 2021

Generation Investment Management explores key themes and dynamics across the landscape of environmental sustainability including those leading up to COP26 and the post-pandemic recovery.

While sustainable debt issuance(+9x), private equity deal-flow (+2x), flows into ESG funds (+10x), investments into solutions for net zero and the green economy market capitalization (+2%) have all increased by large orders of magnitude, policy makers and the private sector are encouraged to accelerate the transition toward net zero while increasing environmental ambition.

Residential Markets were particularly altered by the pandemic. With urban populations declining there was a new appreciated for open spaces. The Normalized Observed Rental Index for 12 Largest Metro Areas as well as Mid-Density High-Density and Central Business District declined sharply yet Low-Density regions saw rents increase.

With evolving urbanization dynamics, the concept of regenerative, net-zero cities has been taking hold across cities like Milan, Madrid, Paris, Berlin and London. Concepts such as ‘rewilding’ that would add trees, plants and encourage biodiversity have also been considered.

The relationship between the amount of time spent at home, the change in global final energy consumption by fuel type in a “home-working” scenario were considered. 24mtCO₂ could be saved per year based on a model were employees work from home one day a week, according to the International Energy Agency.

While the EU Renovation Wave Proposal would double renovations rates, building renovation must increase by three times to align with net zero objectives in Europe. In the UK, the deployment of heat pumps will need to ramp up more than 10x by 2030 to meet net-zero goals.

While private sector investment in building performance increased from €1.91 to €5.10 in 2020 (YoY) and systems for environmental performance have advanced, decarbonization must be placed at the center of every construction phase.