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Today, 91% of the world’s population inhabits places where air quality fails to meet World Health Organisation (WHO) guidelines. The COVID-19 pandemic has heightened awareness surrounding the costs of air pollution, while global lockdowns have improved air quality temporarily.

With WHO air quality guidelines set to be updated this year, a new report by Barclays Research analysts explores the actions required to effect long-term change in the air we breathe and the associated investment opportunities.

Air pollution is the world’s fourth biggest killer

Man-made air pollution is a global phenomenon – and a global killer. The WHO estimates poor air quality is responsible for 4.2 million premature deaths a year, as well as contributing to a wide range of health concerns. The World Bank ranked air pollution as the fourth-highest risk factor for attributable deaths – just below tobacco smoke.

Top five risk factors and percentage of global attributable deaths
Top five risk factors and percentage of global attributable deaths

Source: World Bank and the Institute for Health Metrics and Evaluation (IHME), 2013; Barclays Research

… and costs the global economy trillions of dollars every year

Air pollution also has far-reaching financial implications. Associated healthcare costs were estimated by the Organisation for Economic Co-operation and Development (OECD) to be $21bn in 2015, projected to rise to $176bn by 2060. Economic impact includes increased ‘welfare losses’ e.g. the lifetime economic loss from premature deaths and lost working days through illness.

Conversely, the US Environmental Protection Agency found that for every dollar spent in the US on air pollution control, $30 of benefits can be realised. It is likely that the pay-off for developing nations is far higher.

Economic impact of air pollution
Economic impact of air pollution

Sources: World Bank, OECD, Data-Driven Yale, US Environmental Protection Agency

The world’s four most harmful air pollutants

Source: Barclays Research.

Tackling air pollution needs to start with the world’s cities

By 2050, 68% of the world’s population – or a projected 6.6 billion people – will live in urban areas, including an estimated 50 ‘megacities’. Focusing efforts to reduce air pollution on cities will therefore have the greatest sustained impact on human and economic wellbeing. Our Research analysts see a number of trends emerging to create cleaner cities:

1. Exclusion of pollution laggards

Highly polluting industries may not be welcome in the cities of the future. From low/zero emissions zones and cities such as London and Los Angeles targeting 100% electric vehicles by 2025 and 2050, to stringent pollution standards for new development, smart city design will put pressure on multiple sectors to reduce their contribution to air pollution.

2. Harnessing air quality data

Air pollution varies hour by hour and street by street. The development of continuous, hyper-local emissions data to monitor air pollution will facilitate the integration of clean air technology (see below) into smart cities and help policymakers implement highly focused measures to tackle air quality.

3. Investment in clean air technology

Although the main focus will be on minimising pollutants entering the air, a wave of clean air technology is being deployed in cities from Amsterdam and Berlin to Hong Kong to extract pollution from the environment through air-purifying construction materials, synthetic trees, anti-smog turbines and road-based air filters.

4. Innovation in ‘last mile’ e-commerce delivery

As e-commerce grows, ‘last mile’ parcel delivery has become a major contributor to traffic congestion. Legislation will be required to reduce the emissions impact of this rapidly growing logistics segment, possibly leading to solutions such as bundled delivery and micro-fulfilment centres to serve specific districts.

The race to clearer skies: clean air as a competitive advantage

As countries emerge from the COVID-19 shutdown, the expected update to the WHO air quality guidelines this year should keep the spotlight on urban air quality and inspire policy action internationally.

At an industry level, our Research analysts see seven sectors as crucial to improving air quality and having significant opportunities to make cleaner air a point of commercial differentiation. From emergent clean air technology providers to incumbent industries such as autos, capital goods, energy and chemicals, those companies that actively contribute to clearer urban skies are most likely to secure a place in the cities of the future.

Air quality opportunities by sector
Air quality opportunities by sector

Read the full report

Authorised clients of Barclays Investment Bank can log in to Barclays Live to read the full report.

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About the analysts

Katherine Ogundiya is a member of the Sustainable & Thematic Investing team within Equity Research at Barclays. Katherine joined the team in August 2018, following completion of the Compliance graduate scheme at Barclays. Katherine read Law at the London School of Economics.

Hiral Patel is a VP in the newly formed Sustainable & Thematic Investing team within Equity Research at Barclays focusing on Thematic Research. Hiral joined the team in June 2018 following five years covering the European Technology, Payments and FinTech sector. Prior to that, Hiral qualified as a Chartered Accountant with KPMG where she worked in Audit covering Financial Services. She graduated from the University of Warwick in 2009 with a degree in Economics, Politics and International Studies.

Anushka Challawala is a member of the Sustainable & Thematic Investing team, Equity Research. Anushka joined the team in September 2018 following two years covering European Telecoms. Anushka graduated with a BSc in Management from the University of Warwick.

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