Looking ahead to 2021, APCO Worldwide’s business experts analyzed potential trends and provided their predictions for the new year. As the sections examine the future of hospitality, global energy, financial technology and capital markets, all signs point to continued focus on health, tech and safety. Read the insights from our colleagues below.
Hospitality – Valeria Rubello
The COVID-19 pandemic has greatly impacted the travel and tourism sector. As the global population adjusted to travel restrictions, the sector came to a near-total standstill. According to the WTTC (World Travel and Tourism Council), by October 2020 142.6 million jobs were lost together with $3.8 billion in GDP.
While it will be harder for the business travel segment to get back on its feet, in 2021 we can anticipate leisure travelers’ preferences to shift towards more familiar choices, like short-range vacations and personal experiences that favor social distancing and the outdoors. This will be particularly true until vaccination plans are well under implementation.
Health, safety and trust will continue to be paramount next year as the fear of being stuck in another country and concerns for contagion will guide consumer behavior in the near future. Collaboration among the extended value chains will be essential to ensure readiness and regain consumer trust.
Global Energy – Sumin Nam
The COVID-19 pandemic postponed for one year this year’s annual UN Climate Conference (COP26), originally scheduled to take place in Glasgow, Scotland, in November 2021. However, this gives member states of the Paris Accord more time to set more ambitious and strict climate targets and show a roadmap of how these goals should be achieved. The former process has been in full force. The EU, UK, Canada, Japan and South Korea have committed to being climate neutral until 2050, with China to follow in 2060. And the United States, under President-elect Joe Biden, has declared to decarbonize the economy by the middle of the century.
This puts pressure on the energy industry—2021 comprises the moment of truth on how this can be achieved. On- and off-shore wind, PV and energy efficiency—accompanied by national phase-outs of emission-intensive coal power—are key to a cleaner energy sector. Sufficient availability of clean power is additionally necessary for the acceleration of hydrogen, considered key for sector coupling and reducing emissions of the heavy industries. Notably, this technology opens significant opportunities for companies on international cooperation (import of green power and/or hydrogen itself) and revamping the existing business models to fit a greener future, a point especially valid for gas, oil and grid transmission corporations.
FinTech – Theo Moore and Robert Kopitsch
Digitization and tokenization will shape financial services in 2021. The digital transformation, which was under way before the COVID-19 pandemic, has accelerated. Next year, we will see efforts to secure enhanced access to data in consumer and wholesale spaces, an increased focus on operational resilience and cybersecurity, and an ongoing platformization of financial services due to the shift from card-based to mobile-based payments.
At the same time, however, the critical change to the macro-landscape will be the looming inescapability of U.S. and EU digital currencies. The core of this change will be tokenization, which would enable currencies to go beyond being simply electronic and into a space where they can truly interact with the wider digital world, from individuals monetizing their own personal data to businesses interacting with the ever-expanding Internet of Things. With China’s intentions already clearly signaled in the digital currency space, the question is how Americans and the Europeans will decide to proceed. 2021’s moves on a digital dollar and/or euro, even though limited to frameworks and foundation setting, will be of singular importance to a global economy hoping to bounce back from 2020.
Capital Will Decarbonize – Jeff Zelkowitz
Capital providers and financial markets will accelerate the transition towards global net-zero carbon emissions.
Major shareholders like Blackrock have already stepped up their engagement of public company Boards and C-Suites on climate change. Moves by institutions to decarbonize their portfolios to deliver on the goals of the Paris Agreement are on the horizon. The latest signal in how this investment may shift is the recent pledge by 30 asset managers representing $9 trillion in assets to set portfolio decarbonization targets consistent with the requirement to keep global warming to 1.5°C.
We will very likely see a shift to mandatory reporting requirements on climate risk and integration of this data in how investment professionals and C-suites make decisions. The CFA Institute is recommending that investment professionals include carbon price expectations in their analysis. It also noted that the investment industry is coalescing around the Sustainability Accounting Standards Board (SASB) and Task Force on Climate-related Financial Disclosures (TCFD) as the most useful to investors regarding the materiality of climate-related risks. A universal ESG reporting framework led by the Big Four accounting firms Deloitte, EY, KPMG and PWC and by Bank of America aims to integrate these standards and provide clarity to investors to ensure capital is aligned with progress on the SDGs, including measuring and improving impacts on the environment as part of the transition to a low-carbon future.
Finally, the consensus on carbon pricing and scaling of carbon markets will create new market signals and investment opportunities. The Business Roundtable, the U.S. Commodity and Futures Commission and major banks including Citi, Morgan Stanley and JP Morgan Chase have called for carbon pricing as the most efficient way to ensure financial markets shift capital away from strategies that increase climate risk and towards decarbonization. UN Climate Envoy and former Bank of England chief Mark Carney convened a financial sector taskforce to release a blueprint in early 2021 for a transparent, efficient carbon market at scale that facilitates the exponential growth in offsets that will be needed to meet carbon reduction goals and shift a tremendous amount of investment towards green opportunities.