Aviation on the way to the green (2021/06/22)
The aviation industry wants to reduce pollutant emissions. In the short term, modernisation of fleets and sustainable fuels will help; in the long term, hydrogen is moving into focus.
The aviation industry has several measures at its disposal to improve its climate footprint
Although aviation is only responsible for about 3% of global CO2 emissions, it is considered a significant source of greenhouse gas emissions. In the course of global climate protection efforts, these are to be significantly reduced in the coming years and brought to zero in the long term. In addition to improvements in wing, tail unit and fuselage technologies, the focus is particularly on aircraft propulsion technology. At present, this is mainly based on the combustion of fossil fuels, which releases CO2. However, water vapour, nitrogen oxide emissions, direct and indirect aerosol effects and condensation trails also have a negative impact on the climate. The climate impacts of the non-CO2 effects are strongly dependent on the flight altitude, the geographical location and the time of emission (i.e. the daily or seasonal cycle and the current weather conditions). ...
Looking beyond towards the bigger picture
Megatrends - a field of action for BayernLB Research
Looking into the future and identifying megatrends are activities which are currently very much in fashion. Megatrends are developments whose momentum appears to be unstoppable and scarcely able to be influenced, at least in the short term, but which have repercussions on companies, sectors, whole countries, and therefore on the capital markets as well. You, dear clients, like us, are affected to a significant extent by these trends on various levels. It is for this reason that we are planning to devote more attention to these topics in future, our rationale being that understanding megatrends and the opportunities and risks bound up with them can be of help when analysing business options especially in the current, highly volatile, market environment and in the face of a short-term and medium-term economic outlook that is fraught with a great deal of uncertainty. This publication seeks to introduce you to what is a new field of analysis for BayernLB Research. We will be committing more resources to analysing megatrends and tracing their implications for economic and financial-market developments. The insights gained on this score will supplement the assessments and forecasts which we already generate and which you can, of course, continue to rely upon. We hope that this new additional tool will provide you with valuable information and would be very pleased to receive honest feedback from you about this new service.
BayernLB megatrend research
Futurology and megatrends are en vogue at the moment: one need only think of the topic of digitalisation. Given that we do not have proven expertise in the prospective-research field, we will continue to leave this domain in the hands of the futurologists. What we at BayernLB Research do have is proven expertise in terms of macroeconomic analysis, the assessment of country risks and sectoral developments and financial-market analysis. Our objective is therefore the following: to first single out the megatrends which are most relevant for the medium-term trend in the economy and on financial markets, and then to analyse the way these megatrends can be expected to play out and influence one another, largely basing ourselves here on the assessments of experts in the different spheres. In this context, the lion's share of our megatrend research will be geared to analysing and forecasting the knock-on effects of these trends on the way economies, sectors and financial markets shape up. We are planning to compile special megatrend publications at irregular intervals but will also be delving deeper into the influence exercised by megatrends in our regular publications.
The most important megatrends
The megatrend concept goes back mainly to the 1982 book "Megatrends“ written by the US futurologist John Naisbitt. Building on Naisbitt's work, futurology today construes mega-trends as "long-term global trends“. However, opinions differ among researchers regarding the precise definition of the temporal dimension (how long is long-term?), the societal and geographical repercussions, and how such trends originate and unfold. At least there is a large degree of consensus about one set of factors: a megatrend should have a half-life of a minimum of 10-20 years, should lead to radical societal, economic and political changes, and should initially unfold slowly but then gain momentum and also be able to cope well with temporary setbacks. Both the number and the semantic range of megatrends differ depending on the research institution involved.
In the first part of this study, we will be presenting the topics which we define as megatrends relevant for developments in the economy and on financial markets. We initially approached this theme with the help of Germany's Institute for Trend and Future Research (itz), which defines 15 megatrends. These we then investigated with a view to ascertaining their relevance for the medium-term trend in the economy and on financial markets. In parallel to this, we asked ourselves whether there were other developments from the financialmarket perspective which might fulfil the criteria for being a megatrend. To remain as focused as possible, we finally narrowed the search down to the following six megatrends. The decisive factor governing selection was how heavily German companies, including banks, are affected by these trends.
- Demographic change
- Energy and climate change
- Low interest rates and high debt
- Political framework and regulation
- "Going passive"
Where the first three of these trends are on the radar screens of all futurologists, albeit perhaps in a slightly different form, the other ones in our taxonomy make more of an exotic impression. However, we are of the opinion that these topics too qualify as megatrends on account of their potential implications for developments in the economy and on financial markets. We regard our six megatrends as parent categories under which a large number of megatrends (including ones identified by "genuine" futurologists) can be subsumed. For example, the frequently mentioned megatrend urbanisation, like the topic of health-care, can be assigned to the "demographic change" category. Megatrends do not evolve independently of one another and there are therefore a number of cross-connections and mutual interdependencies (cf. the chart below). By way of illustration, there are lots of links between the megatrend low interest rates and high debt and the trend of changes in the political framework and regulatory parameters.
Repercussions of megatrends on financial-market and economic factors
In the second part of this study, we will be turning to the repercussions of the megatrends we have identified on developments in the economy and on financial markets. We will begin by providing an overview of the impact which these megatrends will have in the me-dium term on the various asset classes as well as on country and sector allocation. The next step will be to sketch the influence of the megatrend which is most important in each case on every one of these financial-market and economic factors.
Given the long-term nature of the effects generated by megatrends and of the fact that different trends occur simultaneously, it is difficult to obtain empirical evidence of the im-pact on short-term developments at the aggregate level. At the corporate level, however, the resonance of such trends can already be felt in the short run, for instance when a digi-tal innovation destroys the business model of a company or a whole sector, with start-ups successfully positioning themselves at the same time. Even over a medium-term horizon (up to five years), it is still difficult to prove the influence of megatrends at the aggregate level. Nevertheless, it should already be possible over such a time horizon to detect clear indications of the way megatrends are affecting the growth potential of individual economies and sectors or developments on financial markets.
The time horizon over which megatrends unfold their effect may differ greatly. Where some changes to political and regulatory framework conditions show up more or less overnight at the level of asset allocation, palpable repercussions are only likely to materialise in other domains over the space of decades. Even in the latter case, however, this may already have a bearing on today's investment decisions. Were lenders or rating agencies to adopt a reserved stance when granting loans or awarding credit ratings because a particular megatrend was expected to have negative repercussions on the longer-term development of companies or countries, this could already make itself felt at once through an upward shift in risk premiums or through the tightening of financing conditions via a different chan-nel (e.g. a switch to short maturities only). Under such a scenario, the future repercussions of a megatrend would already have a distinct impact on investment decisions straight away.