The Sustainabilist | GREEN RECOVERY
FEATURE
Green Stocks are a Mega Trend not to Ignore Long-term prospects on green stocks remain positive as political capital globally in green industries increases, backed by the adapting sentiment
By Peter Garnry Head of Equity Strategy at Saxo Bank
S
ince our big research note on green stocks in January, where we
equities, the world has changed. The green machine, however, has continued to be bid up by investors around the world. Despite elevated valuations, we remain long-term positive on green stocks prospects - every long-term investor should consider green The rationale is simple: the climate crisis. While global green industries in solar, wind, hydro, fuel cells, electric vehicles, await November’s US presidential election, investors must consider when to tilt portfolios towards green industries. But regardless of whether Joe Biden’s Clean Energy Revolution plan ever gets stage time, US political capital in green industries can only increase over time and 38
stimulate economic growth in the direction of a green future. After pulling the US out of the 2016 Paris Climate Agreement, and systematically dismantling many of the previous administration’s major successes in climate and environmental policy, a President pave the way for four years of drastic reform and major investment in specific US sectors under Biden. The Biden administration is looking to spend USD 1.7 trillion in Federal money on top of local state and private sector commitments, as part of a policy plan to ensure the US achieves a 100% clean energy economy and net-zero emissions no later than 2050. That signifies a huge boost for any company or industry that would enable Biden’s US towards a 100% clean energy economy. From electric vehicle manufacturers through to solar, wind, waste management, recycling and water efficiency solutions, a Democrat government would start investing in a broad range of clean and environmental solutions and commitments. But Biden’s US will not go it alone. Governments around the world are already transitioning towards greener energy. As part of concerted transitions to renewable energy policies, over 160 countries have already made major commitments to renewable energy, decarbonisation and energy storage.
“In leading energy diversification drives in the Middle East, the UAE government is integrating a range of climate change measures into national policies, strategies and planning. With Dubai and Abu Dhabi both running horses in the UAE’s competitive and complementary solar race, Barakah Nuclear Energy Plant in Abu Dhabi’s Al Dhafrah region is already contributing clean energy over the national grid”. Weller also notes that “as political capital in the Gulf, and hopefully the US, increases over time, so will clean and environmental solutions driven by a strong fiscal impulse from developed countries. Europe may prove the pacesetter, but this global drive can only encourage institutional investors to opt for alternative energy equities as governments promote renewables, reinforce energy efficiency and accelerate the phase out of traditional fossil fuels to further stimulate the worldwide green economy”. The race is on and early adopters are already ‘in the green’. Covid-19 has impacted the green stock mega trend by changing general sentiment, forcing central banks and especially the Fed to move interest rates to the lower bound and duly increasing the value of high duration assets. With green stocks prospects inherently viewed as long-duration assets, high potential growth and cash flows in futures afar remain on the cards. With Covid-19 also spurring increased volatility in capital markets and accelerating the global trend of self-directed online trading and investment, a new breed of environment-first ethical traders is eyeing green stock baskets. They are shopping in the right supermarket.
