Power politics: Re-examining the case for investing in decarbonisation

After a turbulent few months in the markets, Deirdre Cooper re-examines the case for investing in companies with the potential to benefit from global decarbonisation.

6 May 2022

9 minutes

Deirdre Cooper
After a turbulent few months in the markets, Deirdre Cooper re-examines the case for investing in companies with the potential to benefit from global decarbonisation.

Seismic shift

Russia’s invasion of Ukraine has triggered a seismic shift in European energy policy, centred on a rapid acceleration towards renewables. Combined with elevated oil and gas prices and heightened energy-security concerns far beyond Europe’s borders, the conflict could ultimately influence how many countries generate electricity, heat and cool homes and offices, power factories and fuel vehicles. What does all this mean for investors?

From one perspective, events in the first months of 2022 have merely strengthened an existing investment trend. The world urgently needed to wean itself off fossil fuels before Russia’s aggression on its neighbour, and it has even more reason to do so now. We remain convinced that decarbonisation is a powerful growth tailwind for select businesses, giving them the potential to increase market share, revenues and profits.

After the turbulence of this year so far – which, beyond the events already mentioned, includes soaring costs, rising interest rates and further supply-chain disruption – it seems a good time to re-examine how investors may be able to capture the opportunities presented by the transition to a low carbon economy.

Read the full paper

Specific Risks
Commodity-related investment: Commodity prices can be extremely volatile and losses may be made. Concentrated portfolio: The portfolio invests in a relatively small number of individual holdings. This may mean wider fluctuations in value than more broadly invested portfolios. Currency exchange: Changes in the relative values of different currencies may adversely affect the value of investments and any related income. Derivatives: The use of derivatives is not intended to increase the overall level of risk. However, the use of derivatives may still lead to large changes in value and includes the potential for large financial loss. A counterparty to a derivative transaction may fail to meet its obligations which may also lead to a financial loss. Emerging market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems. Equity investment: The value of equities (e.g. shares) and equity-related investments may vary according to company profits and future prospects as well as more general market factors. In the event of a company default (e.g. insolvency), the owners of their equity rank last in terms of any financial payment from that company. Sustainable Strategies: Sustainable, impact or other sustainability-focused portfolios consider specific factors related to their strategies in assessing and selecting investments. As a result, they will exclude certain industries and companies that do not meet their criteria. This may result in their portfolios being substantially different from broader benchmarks or investment universes, which could in turn result in relative investment performance deviating significantly from the performance of the broader market.

General Risks
All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results. Environmental, social or governance related risk events or factors, if they occur, could cause a negative impact on the value of investments.

Authored by

Deirdre Cooper
Portfolio Manager

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This communication is provided for general information only should not be construed as advice.

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