It may soon be time to step out of our front doors and venture back into the big, wide world again. Our lives will take us all to different places and we will all get there in different ways. Many people will be wondering how they are going to travel to work once the lockdown lifts and others will only have thoughts for that long overdue opportunity to go on holiday. This week’s letter from lockdown visits the subject of travel, explores how this may change in the post-pandemic era and makes a connection with the transport-related investments that form part of our Responsible Futures portfolios.
To fly or not to fly
To recap, the Responsible Futures investment strategy is driven by the UN Sustainable Development Goals (SDGS). There isn’t an SDG that specifically states that we must travel by cleaner, greener methods of transport. However, the emissions generated by our current means of travel have a significant impact on goal number 11 -“Sustainable Cities and Communities” and Goal 13 – Climate Action.
In fact, on waking up one day this week, the first thing I heard on the radio was the fact that the most powerful thing any one person can do to reduce personal carbon emissions is to cut back on plane travel. Becoming a vegan is also pretty effective apparently, but you would have to stick to a vegan diet for two years to reduce your carbon footprint by as much as you would if you skipped one long haul flight.
I was very sad not to be able to board a flight to the US in April to attend New York Tartan week, at which my daughter had a coveted performance slot and was also going to wear the UN SDG Tartan created by the Global Ethical Finance Initiative. I had made a tentative claim that this would be my last long-haul flight, despite the fact that half the Kowalski clan live in America. I’ll now face that decision again next year, by which time the air travel market may have changed significantly.
The need to socially distance means less people on planes, who I presume will each have to pay a higher share of the cost of getting that big metal bird across the ocean. Ticket prices may also be affected by a need to recoup the losses the industry has suffered over the last few months and reduced competition, with a number of airlines going out of business. It is also expected that business travel will reduce, due to the rise in video meetings, and historically the hiked prices paid for corporate travel has subsidised the amount that the holidaymaker pays.
While I would not want to price any one out of being able to afford an adventure or a family holiday, I would be prepared to pay a bit more if I decide to go to NYC Tartan Week next year. It’s a trip of a lifetime and I am happy to offset that extravagance against other economies. I’d certainly see value in having less people on the plane with me and not having to fight a psychological war with the passenger in front who has put their seat back.
Similarly, I think that love could continue to make the world go around if getting married did not involve stag dos to Krakow and Budapest and I personally won’t be going on any more mini breaks that start at an airport. I’m certainly more likely in future to pay a bit more for the privilege of getting on a plane than I am to invest any of my pension savings in an airline company, as the headwinds do not favour fossil-fuelled businesses that are not positioning themselves for a lower carbon world.
Compute or Commute
Whilst we pause and wait for the call to jump back on our hamster wheels, we hear reports that people do no want to go back to life the way it was pre-lockdown. The latest rallying call from our leaders is that we must “build back better”. There are so many ways in which we could improve quality of life and protect the planet, but the reality is that this all requires funding. I understand that the UK was £50 billion in the red in the month of April alone and we need to spend every pound wisely.
I was therefore pleased to read a UN Report which concluded that a green transformation of the transport sector could create up to 15 million new jobs worldwide. The EU seems already to be on this journey, with a leaked version of its COVID recovery plan incorporating the decarbonisation of transport, via a “Renaissance of Rail” , a boost to the sales of green vehicles and a doubling in the number of charging points.
At home, you are going to see some changes once you venture back into our city centres. From Glasgow, through Newcastle, Manchester and as far as Brighton, local authorities are proposing significant measures to make navigating the town more attractive for pedestrians and cyclists. This is partly driven by the need for social distancing but also brings great benefits in reduction of congestion and pollution. From closing the main thoroughfares to cars, widening pavements and adding new bike lanes, these measures are described as not being not anti-car but pro-city.
Our Responsible Futures Portfolios currently invest in a number of companies that are set to benefit from this drive towards more sustainable transport solutions. Global equity exposure is provided in part by the Liontrust Sustainable Future Global Growth and the Baillie Gifford Positive Change funds. Both of these investment managers are seeking growth opportunities in companies that are fast-tracked to benefit from a transition to green transport.
The Liontrust Fund is steered in part by its Connecting People theme – the need to reduce the environmental impact of travel while increasing global connectivity. Travel by rail is recognised as being cleaner, safer and less affected by congestion than road and air but we need to get the trains working more efficiently and effectively. With this in mind, Liontrust have invested in German brake system manufacturer Knorr Bremse, a supplier to the Japanese bullet train E6 for many years, the company recently won the supply contract for the new generation of France’s TGV high-speed trains. High-quality brakes allow trains to go faster but also mean more carriages can run on the same amount of track, which can have a major impact on those reliability, punctuality and capacity requirements the industry needs to challenge airlines in earnest.
The Baillie Gifford Positive Change Fund has a real interest in opportunities arising from the disruptive change it sees coming in the automobile industry. When this Scottish investment house was first founded, one of its first trades was to lend to tyre makers, believing Henry Ford’s pioneering Model T automobile would revolutionize the world. Now it sees a new and equally transformative transport revolution coming. Think a huge increase in electric car usage, a major move from owning a car to hiring one on demand to ultimately seeing cars driving themselves. That’s a day I hope I live to see! The Positive Change fund, not surprisingly, invests both in Tesla and in Alphabet’s Waymo self-driving car project.
Coming soon to an office near you
As with the country as a whole, Cornerstone staff will be coming back to the office fold in a phased and considered way, doing their best to keep themselves, others and the planet safe. I have to give a special commendation here to Nigel, our trendsetting Paraplanner, who got on his bike sometime ago for the daily commute. His drying lycra does make the office a little untidy but its well away from the meeting rooms. Similarly, Jen our MD has been an early adopter of the Tesla trend and is doing more mileage than any of use at the moment, driving back and forth to the nearest charging point.. Myself and one or two others take our life in our hands on the buses each day and are delighted that we won’t be having to share a seat for the foreseeable future, avoiding the rush hour and the crush hour.
While face to face meetings will obviously be available for any client or business connection who wants one, there will be an increase in video calls internally and for those clients who like the format and the time it can save. Overall therefore, we expect a decrease in the number of journeys we make as a business.
Cornerstone is keen to make its contribution to a responsible future, whether by reducing our carbon footprint as a business, providing responsible investment portfolios for our clients or helping families make financial provision for the next generations.
As it’s so important for kids to get out, get fresh air and exercise in a sustainable manner, this week’s Letters from Lockdown tip is www.thebikeclub.co.uk, a monthly subscription bike rental network for families. Given one of the quarantine jobs in our house was clearing out the garden shed and finding several outgrown old bikes in there, it seems a great idea to me.
~ Rebecca Kowalski
Please note that the content of this letter is for information purposes only and should not be considered as a recommendation to invest in any particular investment strategy or any individual company.
Although our physical offices are currently closed, we are business as usual from home, and available by phone and email as always. Please get in touch!