Good morning and afternoon, all. I’m Dijana Jelic, the Product Specialist for the RBC Emerging Markets Equity Team.

And I’m delighted to be joined by Portfolio Manager Ashna Yarashi-Shah.

On today’s webinar, we’ll be sharing with you some of our latest research on the technology industry, and in particular how rapid technological change is impacting environmental, social, and governance factors.

Now throughout history, technological breakthroughs have brought dramatic shifts in society, from the advent of agriculture to the various industrial revolutions shown here.

Today, we’re in the midst of a new connected revolution, which can be defined as the coming together of various digital technologies that are blurring the lines between our virtual and physical realities.

Consider, for example, the implications of millions of users connected through multiple smart devices, or the rise of artificial intelligence and machine learning. Now these innovations have been made possible as a result of the exponential growth in computing power in recent decades, a theory that’s become known as Moore’s law.

Now one fact which really puts this into context is that there is more computing power in one single smartphone today than in the entire computing system responsible for man’s first mission to the moon in 1969. The COVID-19 pandemic has further accelerated the pace of technological adoption and really highlighted its growing influence in all aspects of daily life.

Now the main beneficiary of all of this has been Big Tech. Of the 10 largest companies in the world today, 9 of them are tech companies. Now given this backdrop, the technology industry is rightly inviting greater scrutiny in terms of sustainability and ESG.

Now, what is clear from the research that we have done is that the relationship is very complex. On the one hand, technology is a vital enabler of positive social, economic, and environmental change, but on the other, it does pose material ESG risks.

Today we’ll be focusing on two areas where we are seeing particularly interesting dynamics, and that we feel warrant greater attention. I’ll be exploring technology’s relationship with climate change and the environment. But first, Ashna will be discussing how technology is impacting the labour market, and what we expect from the future of work in emerging markets. Over to you, Ashna.

We have been in the midst of a multi-year growth trend in terms of technology adoption in EM due to a number of different factors, such as the demand for rising connectivity, increasing automation, rising wages, and a restoring of the supply chain.

We expect this trend to accelerate over the next decade as the world of digital connections gets broader and faster, with a rising importance on ubiquitous connectivity. This in turn can have a lasting impact on economic growth.

In fact, the relationship between economic growth and technological innovation is well established by large bodies of literature. For instance, a positive correlation can be observed between economic indicators, such as GDP per capita and technological innovation or automation. And the left-hand-side chart shows a positive relationship between GDP per capita of a country and its innovation ranking as determined by the Global Innovation Index. We have focused here on the Output Sub-Index of the Global Innovation Index, which focuses on the technology element.

Additionally, at the heart of this trend of digitalization is the 5G revolution, which is expected to be a key enabler of many technologies and increased connectivity. 5G’s key attributes include faster speeds, lower latency, and vastly increased network capacity, all of which are key for a large-scale enterprise digital transformation at a decreasing cost.

Looking at the right-hand-side chart, we find that EM countries such as South Korea, Taiwan, and China have been leading the adoption of 5G.

Not only are we seeing a rapid acceleration of newer and more powerful technologies driving productivity and efficiency in the workplace, but there is also a seismic shift in the composition of the workforce and the way in which we are working. We expect this to enable increased female participation, as well as the participation of a younger and more digitally savvy generation.

Over the coming decade, we expect to see a rising share of female participation in the workforce. On the left-hand side of the charts, you can see that females are expected to gain more jobs compared to men by 2030. We expect this not to only be driven by factors such as improving literacy rates and urbanization, but also factors such as rising technology and the ability to work more flexibly.

According to academic research, global GDP could experience a 26% uplift just by minimizing the gender disparity in the workforce. Not only can rising female participation have a positive impact on the economy, but research also suggests that it corresponds with a higher innovation and lower risk of displacement by automation.

Additionally, EM is home to 85% of millennials globally and 89% of Generation Z. This generation is expected to be the most educated generation, much more digitally connected and exposed to technology from a young age and are well poised to gain from the future of work, with more than 50% of Generation Z surveyed wanting to work in technologies such as 5G and Internet of Things over the next five years.

However, at the same time, Gen Z are also much more focused on other factors, such as being able to work more flexibly, and we think that this can be supportive of independent forms of work and other areas such as the gig economy.

Now, over recent years, the proliferation of digital platforms has accelerated the growth in freelance or gig work. Digital platforms are transforming independent work, building on the ubiquity of mobile devices, the enormous pools of workers and customers they can reach, and the ability to harness rich real-time information to make more efficient job matches.

Our research finds that the gig economy is particularly prevalent in EM, which we believe is due to a large proportion of young, digitally savvy population and a high share of informal employment. Workers are not only able to utilize the gig economy as a primary source of income but are also able to supplement their income with a secondary source through the gig platform. Interestingly, more than 60% of jobs created between 2019 and 2020 were gig-related, suggesting further growth in this area over the coming years.

Thank you, Ashna.

Now technology’s critical role in the fight against climate change is widely acknowledged. For instance, declining renewable energy costs due to advances in technology, coupled with more efficient and affordable batteries, are making climate-friendly energy and transportation more accessible.

You can see on the left-hand-side chart here that renewable energy is expected to be the fastest-growing energy source in the coming decades, while electric vehicles are forecast to account for over half of all passenger vehicle sales by 2040.

At the same time, an expanding human population and rising income levels are creating unprecedented demand for food. This is putting huge pressure on the environment, as the agriculture industry alone is responsible for about a quarter of all global greenhouse gas emissions. It’s also posing significant social and political risks when you take into account that the majority of the world’s population live in countries that rely to some extent on imports for food.

Fortunately, novel technologies are creating solutions to these growing problems. One example is cellular agriculture. And you can see, on the right-hand-side chart, increasing investment in this area in recent years.

Now while technological innovation is playing a critical role in the path to a lower-carbon world, the rapid expansion of the technology industry poses its own environmental challenges. One particular area of concern is energy consumption.

Now tech companies are huge users of electricity, largely driven by semiconductors, but increasingly, data centres. Now to put this in context, of all the economies in the world, only the U.S. and China consume more electricity than the tech sector. These energy demands are only going to continue to grow as artificial intelligence and machine learning demand greater computing power.

But that said, technology companies are aware of the risks and have been taking increasing action to lower their environmental footprint. This is led by the likes of Amazon, Google, Facebook, and Microsoft. And you can see here that these companies represent some of the largest corporate buyers of renewable energy today.

Now the rise of e-commerce has brought many benefits to consumers, for example, greater convenience and affordability. However, it has also contributed to significant growth in plastic and packaging waste.

The chart on the left shows that high income levels tend to be correlated with higher plastic waste per capita. Now as the world gets richer and consumption is increasingly driven by e-commerce, the threat of packaging to the environment is likely to increase.

Now electronic waste, or e-waste, is another major issue. In 2019, it was estimated that over 50 million metric tons of e-waste were generated globally. And that’s expected to increase to 74 million by 2030. Now over 80% of e-waste is not formally collected and managed in an environmentally sound manner. And e-waste contains a number of toxic substances which pose significant risk to the environment and also to human health.

Now we hope you enjoyed hearing about our research insights today. I think the key takeaway for us is that the relationship between technology and ESG is highly complex, and it warrants a detailed assessment of materiality by country, company, and subsector.

For further information, please visit the RBC Emerging Markets Equity team site or contact your local RBC representative.