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Climate change investing - the greatest opportunity of our times?

24th May, 2021

Davy Global Fund Management hosted a webinar on 26 May where Brian Kennedy, Portfolio Manager, discussed the potential growth opportunities presented by climate change and outlined a number of key themes.

Some of the world’s largest economies have accelerated their transition to low-carbon energy sources:

  • The Biden administration in the US has been dynamic on climate change and has set a new target of reducing greenhouse gas emissions by 50-52% by 2030. Of a proposed US$2 trillion infrastructure plan, US$750bn has been ringfenced for sustainable activities
  • The EU has pledged to become climate neutral by 20501, with regulation centered around driving investment towards sustainable activities
  • China has committed to phasing down its coal-fired power plants over five years from 2025 to 2030 and has also committed to net-zero carbon dioxide emissions by 2060

Such a concerted drive towards low-carbon energy is creating enormous opportunities across the renewable energy spectrum, particularly in wind and solar. These are the themes we are following most keenly:

Renewable energy

Renewable power generation needs to increase 12x to meet 2050 net-zero targets. We see the balance of opportunity divided between equipment manufacturers and utilities supplying renewable energy.

Pollution control: the greening of carbon-intense processes

COVID should accelerate the decarbonising of inefficient manufacturing and other industrial processes, such as making electric vehicles. These are expected to grow from 2% of global vehicle production to 12% by 20242.

Resource conservation

The OECD expects global water demand to grow by 55% between 2000 and 20503, which is faster than population growth. However, the Earth’s total fresh water is declining. Water, unlike energy, does not have green substitutes.

Sustainable financial system

This includes companies that promote the sustainable distribution of capital, such as exchanges that connect investors with companies. Also included are fintech companies, sustainable investors and companies that disseminate sustainability data.

Low carbon leaders

Carbon taxes and an increased carbon price are increasingly seen as effective ways to deter carbon emissions. As a result, we find attractive those companies that excel at decarbonising their business processes, from supply chain to end product.

 

1European Parliament resolution of 14 March 2019 on climate change (A European strategic long-term vision for a prosperous, modern, competitive and climate neutral economy in accordance with the Paris Agreement)

2‘EVS in the driver seat’, UBS, Sep 2020  

3OECD Environmental Outlook to 2050: The Consequences of Inaction

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