The net-zero emission goals set by the governments are raising the Inflationary pressures arising. According to Seema Shah, chief strategist at Principal Global Investors, the rising inflation rate will extend beyond energy prices.
The inflation caused by green goals, referred to as the “greenflation,” increases energy prices and consumer costs. At the same time, the global efforts to transition to green energy are triggering inflation even more.
In research done alongside the COP26 climate conference, Shah showed that investors don’t consider the cost of businesses adjusting their business plans to their green goals.
To move toward more environmentally friendly activities, the European Union’s Emissions Trading System requires manufacturers, power companies, and airlines to pay a certain fee for each ton of carbon dioxide they produce. Some industries are certain levels of free carbon. This permission has been granted to them to compete with major international companies that are not under carbon regulations and taxes. Many industries, however, will lose their permits for carbon emission by the year 2060.
Climate Penalties on the way
Experts believe that penalties will become tougher in the upcoming years. This will be the case for the companies that fail to meet the climate targets set by U.N. Royal Dutch Shell officially became the first company that had to align its policies and plans with the Paris Agreement and the goals set at that conference. This was after The Court ruled that the oil major has to decline its carbon emission 45% by the year 2030.
With new regulations and policies, all sectors are now looking for employees who have green skillsets. Shah pointed to recent modeling done in Britain. He mentioned that the new jobs created to advance net-zero ambitions on average offer a salary nearly 18% higher than the national average in this county.
The U.K. has reported 1.1 million job vacancies in the three months to August, which is a 40-year high record. While unemployment has fallen to 4.5%, this shows that the labor market has become significantly tighter. The government, on the other hand, has promised 440,000 well-paid green jobs by the year 2030. Companies have to fill these and meet the national targets. Moreover, they have to employ skilled workers to ensure they can provide high-quality data on sustainability.
Giants such as Facebook, Amazon, Apple, Netflix, Google should also perform well under new regulations due to their relative stability. This is while other traditional bond proxies like utilities will struggle as the energy prices continue to rise.
