“In my opinion, technology will be the backbone to future policy commitments. Businesses delivering low carbon technologies such as renewable energy and energy efficiency will become increasingly pivotal to the long term growth of the global economy,” said Thomas. Such companies include Tesla and US clinical waste company Stericycle.
Thomas, together with Bruce Jenkyn-Jones, head of listed equities and co-manager of Impax Environmental Markets discussed the investment impact of the 2015 Paris Climate Conference (COP21) at an AIC press lunch.
“There is great scope for both making money and losing money in [the environmental] sector,” said Thomas. He pointed to energy as an emerging market opportunity, as 60% is in emerging markets. “Climate change overlaps with many other elements in investing, and is now central to many other areas,” he explained.
Paris will be hosting the 21st session of COP21, the UN summit on climate change from 30 November to 11 December. COP21 will aim to achieve a new international agreement on climate with the aim of keeping global warming below 2C.
Jenkyn-Jones outlined further how companies that measure emissions will provide investment opportunities in the future, since the climate conference will be centred on limiting CO2 emission. He also said that regulators will have more teeth going forward. Hence, they put Impax and Jupiter funds directly into solutions (that not only provide financial returns but also decrease CO2 emissions and keep cars off the road).
The Impax co-manager explained how scientists feel that there is a “carbon bubble,” in the sense that there is only a certain amount of CO2 that can continue. With existing policies, that bubble will be blown through at 2040. He also added that, as the Paris agreement will set a cap, there’s major risk for investors in energy sectors.
Wherever there is a risk with traditional energy, there are opportunities within energy efficiency he noted. The carbon tax favours renewable energy resources. One month after the Volkswagen scandal, the sale of Diesel cars increased. “In the years 2012-2015, renewable energy has seen superior earnings growth. That’s the real reason why you should invest here. The combination of real growth, and yet not too expensive at the moment,” said Jenkyn-Jones.
According to Jenkyn-Jones, US and China are fully engaged and 120 countries have pledged, in contrast to Copenhagen. “There is mounting optimism for a positive outcome to the UN climate negotiations in Paris in December. A global carbon price remains a long way off in the future but we are seeing signs that in Europe, the US and China there is quite likely to be some sort of regional or local carbon price which will impact economic activity,” he said.
