WATCH ON DEMAND: Financial Aid for Energy Transition post-COVID-19

In 2019 climate change was front and centre of global political debate. We entered 2020 anticipating engaging dialogue in the lead-up the United Kingdom’s hosting of COP26.  The United Nations Climate Change Conference is now postponed by a year and priorities have shifted as we enter the second half of 2020.

In May 2020 Ben Arnott of the Energy & Utilities Business Committee hosted a panel of Banking and Financial sector specialists to discuss the challenges of the Energy sector. Panellists included Nikki Kemp, World Economic Forum - Sustainable Development Investment Partnership ASEAN, Richard Michael, UK Export Finance, Galid Lahdahda, Standard Chartered Bank, and Jackie Surtani, Asian Development Bank.

The webinar is now available for replay below and forms part of BritCham’s ‘Road to Net Zero’ initiative. Setting the scene, Ben introduced a world where changes to the nature of work have been accelerated due to the measures imposed during the pandemic. A new era of banking and finance, reshaped by fintech, was already upon us, and a total re-imagining of the energy sector was already well underway, ably supported by many banks and Financial Institutions.

While global growth may have to take a back-seat, banks and financial institutions will have an important role re-establishing trade, financing re-development activity, and restoring normality in society. This will require real tenacity within financial institutions, advising their clients on rarely confronted issues and maintaining extreme discipline in capital allocation. A renewed focus on infrastructure development seems likely, with a shift of focus to towards different asset classes already predicted. The continuation, or acceleration, of the drive to decarbonise the economy is already gathering significant support. Further, on the human capital front, it is expected that different skill sets and capabilities in banks and financial institutions will be required in the future.

Unlike the Global Financial Crisis, COVID has led to a double whammy with an ‘all-hands-on-deck’ approach to business continuity across all sectors. Health, safety and well-being of workers and general populations at the forefront of governments minds and actions.

Multilateral financial organisations moved quickly with multibillion-dollar packages which soon multiplied as the crisis grew.  Focus initially on welfare, hospitals the second focus on PPE, supply chain, and essential infrastructure.

Business did not completely stop; Banks had a flurry of activity around supporting customers and clients facing liquidity crisis. They are now reviewing new business with more scrutiny, applying multiple sensitivities on models. New projects are being supported across the board. A lot of support from governments has held off insolvencies. If they run out of fuel, there could be a second wave of financial impact with need for protection from defaults and a second round of emergency liquidity.

Whilst the banking sector appears to have learned the lessons of the GFC it is uncertain how long the crisis will continue to impact credit, put pressures on the capital of banks and how they will adjust allocations to existing loans. There is not a crisis on banks, at least not yet. Capital and liquidity have been shored up. Banks are stronger and able to withstand what they are experiencing - for now.

Governments have memory of the Asian Debt Crisis, GFC and have a reluctance to stretch budgets, dig too deep and face issues once the crisis is behind them. Many countries don’t have a safety net or central bank with levers to get on an even keel. It’s uncertain if there will be a COVID second wave, and impact of livelihoods eliminated, and savings depleted.

What is happening is unprecedented and the jury still out how long this will continue and what will be the impact on businesses and the general man and women on the street. Governments, banks, financial institutions, and corporates will need to dig deep. There needs to be a combined effort to save jobs and livelihoods.

Take a look at the webinar like and subscribe and tell us what you think in the comments. With thanks to committee members Ben Arnott, Bree Miechel and Allard Nooy for planning this webinar for Britcham.