Consumer staples analysts are most convinced that subsidies would encourage their companies to make the transition. “Introducing subsidies and incentives would encourage product development in low carbon-products such as plant-based products or cultured meat, which are currently too expensive,” says one analyst covering European consumer staples companies. 

Incentives would also help some hard-to-mitigate sectors within industrials. “Subsidies and tax incentives are critical for the development and adoption of sustainable aviation fuel,” argues an analyst covering Chinese aviation.

Market-based solutions could work for the highest emitters; three-quarters of our energy analysts think that a carbon price would most encourage their companies to decarbonise. One North American energy analyst says: “A carbon price would directly incentivise the industry to find the most cost-effective way to cut their emissions. I strongly believe that a carbon tax is the most efficient way to lower carbon emissions globally.”

Ultimately, however, governments will need to use every policy in the toolbox to encourage companies to make the necessary changes in time. An analyst covering North American consumer discretionary companies sums it up: “In reality, it's probably a combination of carrot (subsidies) and stick (regulation)”.  

 

Terry Raven

Terry Raven

Director, European Equities