Is it possible to re-fuel the post-COVID economy while also reducing emissions?

And while there is much to celebrate in these novel partnerships, the scale and intensity of the response has triggered concerns that other key global issues - such as climate change - may be falling by the wayside as a result.

Yet if COVID-19 has provided a new blueprint for governments and corporates to come together to address public health and safety emergencies, could that blueprint be applied successfully to other issues? And in particular, could it be applied to the public health and safety challenge represented by climate change?

Public trust in corporate crisis contribution

Public faith in business has been tested in recent decades, measured notably by Edelman's annual Trust Barometer survey. In the 2020 study, 58 per cent of respondents said they neither trusted, nor mistrusted business. In a more recent survey on brand trust and the coronavirus pandemic, 62 per cent of the 12,000 respondents agreed that their country will not effectively make it through the pandemic without the support of brands and corporations. And 55 per cent of respondents believed that companies are responding more quickly and effectively to the pandemic than the government.

Further, the survey showed that a key public expectation of corporates was not to act alone. 90 per cent of respondents expected corporations to partner with governments and relief agencies to address the crisis, with 86 per cent agreeing that corporates should provide a safety net, stepping in where they are needed to fill gaps in government response.

"Now more than ever there are opportunities for corporations to partner with governments," says Scobie Mackay of Macquarie Commodities and Global Markets. “As an increasing number of corporates make ambitious voluntary commitments to decarbonisation and sustainability, there are real opportunities to leverage fiscal stimulus to accelerate the energy transition. This partnership can fuel the economy and reduce emissions; it doesn't have to be a choice between the two."

The government balancing act

For governments building out their responses to COVID-19 it is imperative that short-term fiscal policy does not come at the cost of responsible long-term economic management and environmental impact. This can be challenging, particularly in election years or for governments already under significant economic strain.

Long-term stimulus packages that help expand supply of emission-reducing projects to meet increasing energy demand will play an important role. To do this, governments must recognise that strong economic performance does not conflict with progress on climate change.

"By reducing financial risks, governments can work in partnership with corporates to scale up new technologies such as hydrogen and carbon capture while further reducing the cost of already prevalent energy platforms such as wind and solar," adds Templeton.

Solar photovoltaic power generation is one such example to showcase the benefits of increased investment and government support. Once deemed inefficient and expensive to construct, over time costs for both the construction and power generation of solar have reduced significantly. Now, more frequently than not, solar is less expensive than most fossil-fuel options, even without subsidies or financial incentives.

South Korea, a country regarded as having one of the most effective initial responses to the novel coronavirus appears to be carving a green economic opportunity out of the COVID-19 shock. Early in 2020 South Korea's ruling democratic party won an absolute majority in their parliamentary elections, enabling a path for their proposed "Green New Deal" agenda to progress.

"South Korea has made this Green New Deal the centerpiece of their future economic recovery. It includes provisions for investments in renewable energy, taxes and even a government backed agency to support worker transition to the green economy," says Templeton.

However, it has not been without challenges. At a similar time to the Green New Deal announcement it was reported that the state-owned Korea Development Bank had approved a package of emergency loans for Doosan Heavy Industries & Construction, the country's largest coal plant manufacturer. This need to balance the short-term with the long-term has long been at the crux of the energy transition dilemma.

Are corporations uniquely positioned to fight climate change?

Mackay believes that COVID-19 offers a unique opportunity to accelerate participation and investments in the energy transition for the long-term. “Financial institutions and investors are increasingly responding to shareholder pressure by pricing in the future cost of climate risk. This is manifesting in cheaper capital for businesses that are climate-aligned," adds Mackay. “This presents a unique opportunity and tangible incentive for corporations to access, use and deploy capital toward the climate transition – particularly when combined with appropriate green recovery incentives from the public sector."

The global financial shock of the pandemic has also provided corporations and investors alike a stark reminder of the implications and financial risks of climate change.

“While the private sector can make charitable efforts to address these issues, for corporations to make long-term scaled contributions, care should be taken to ensure public-private partnerships are fundamentally aligned with corporate purpose and profitability. When this happens, risk can be lowered and capital formation can increase dramatically," says Brooks Preston, of Macquarie Infrastructure and Real Assets (MIRA). “Ongoing private participation can also help reduce fiscal pressure on public entities, thus providing public organisations an additional incentive to accelerate sustainability and resilience investments."

Investing in sustainability has both good short and long-term benefits, adds Preston. “But to really improve the chances of combating climate change there needs to be increased coordination and collaboration between governments and corporations. As seen with the coronavirus response, this ultimately provides better outcomes on a social and financial level for all stakeholders."