World Economy

Inequality and climate change will be at the forefront of developments in 2020, says Saxo Bank's chief economist

Key Points
  • Loose monetary policy is contributing to inequality, said Steen Jakobsen, Saxo Bank's chief economist.
  • Oil and gas companies are still relevant for investors despite the recent focus on renewable energy, he added.
Youth march along Pennsylvania Avenue to the U.S. Capitol Building as part of the Global Climate Strike protests on Sept. 20, 2019 in Washington, D.C.
Samuel Corum | Getty Images

Top issues in 2020 will include inequality and climate change, Saxo Bank's chief economist said on Monday.

"Across the board, inequality and climate will actually come to the forefront in 2020," Steen Jakobsen told CNBC's "Squawk Box."

"It's not even going to be in the radius. It's going to be an agenda that dramatically changes the way we perceive things."

However, it will be difficult to have a consensus on where countries and nations want to go; "things are going to get worse before they get better," he said.

Easy monetary policy fuels inequality

The issue of inequality is driven by easy monetary policies, said Jakobsen.

"The inequality we see every single day (is) by the discrimination that happens through the monetary policy," he said.

"The lower interest rates go, the more regulatory capital the banks need to put aside, and that increases the hurdle rate to actually access private credit in the system," he said.

"The monetary policy is now so loose that it has actually become discriminatory against not only the elderly and young people, but against the society as a whole," he said.

The only place that facilitates lending, the banking system, is "under attack" from monetary policy, he said.

Green is not the new black

As for investing in renewable energy, Jakobsen said oil and gas companies are still relevant for investors, particularly as they now trade at a 20% discount to companies in the renewable energy sector.

"The return on investment is only half of that of the capital," he said of the renewable energy sector, leading to a problem of cash depletion. "They are destructing capital on a day by day basis."

In contrast, oil and gas companies have high cash flows and technological knowledge alongside experience in how to manage long-term projects and infrastructure, said Jakobsen.

"What needs to be happening is that you have both the black economy and the green economy working together as a unit, because that is the only way you are going to have a credible...and predictive way of getting climate change onto the front seat of what goes on," he said.