Climate is at the heart of Biden’s agenda

world in transition

Climate is at the heart of Biden’s agenda

Kristina Church - Head of CLIC™ (Sustainable) Solutions

Kristina Church

Head of CLIC™ (Sustainable) Solutions
Christopher Kaminker, PhD - Head of Sustainable Investment Research & Strategy

Christopher Kaminker, PhD

Head of Sustainable Investment Research & Strategy

With Biden as president-elect, we believe this is another promising signal and tailwind for our CLIC™ strategies.

We have already seen a big push toward tougher net-zero goals across Asia over the last few months, with China, Japan and South Korea all announcing increased targets and the EU Green Deal is highly focused on CLIC™ strategies, such as the circular economy, decarbonisation and nature. Action from companies has been accelerating as well, with a record 77 companies committing a science-based target (SBT) in October, breaking the previous record of 60 in June. These companies pledge to reduce their emissions in line with a well-below-2-degrees Celsius scenario, and as a whole the initiative passed the 1,000-company threshold in early October, showcasing the rapid pace at which the private sector is setting emission reduction targets.

Now with a new US president who has put climate at the heart of his election agenda, we should expect to see an increase in investment towards green technologies and infrastructure from the US too. Biden announced his climate crisis plan back in July. Biden’s climate plan targets green energy (including renewable hydrogen), transport and infrastructure as part of his “Build Back Better” agenda and pledges US$ 2 trillion over four years. His plan is focused on industries that our Climate Transition strategy specifically target in the “transitioning sectors” bucket and we believe the strategy is positioned to gain ground significantly as a direct result of future regulations globally and the extra power the full weight of the US will put behind market forces which are already churning away.

We should expect to see an increase in investment towards green technologies and infrastructure from the US

While the Blue Wave may not have materialised in Congress, leaving Biden without a Senate majority (for now), Biden has stated he will re-enter the US into the Paris Agreement on climate change on his first day in office. The US formally left the Paris Agreement on 4 November 2020 but he can rejoin the Agreement without Congressional approval and the US would see its membership reinstated 30 days later (in February 2021). This would send a strong signal internationally and domestically that the governance of the US has changed.

Biden’s Clean Energy Plan says that it will “put the United States on an irreversible path to achieve net-zero emissions, economy-wide, by no later than 2050”. Whether Biden is able to stick to the full extent of his ambitious energy plan, laid out over the summer, is yet to be seen, given the divided Congress. However, we do expect a strong focus on the power sector and an increase in renewable energy supply, as well as tougher stance on emissions from fossil fuel generation, a push for greater electric vehicle penetration and high fuel emission standards and a push to green buildings and agriculture. Biden’s climate pledge over the summer added to the $3 trillion Biden committed last year to spend on infrastructure and clean energy, as well as the $700 billion in new spending to spur manufacturing and innovation that he laid out earlier this year. We certainly expect to see an acceleration towards net-zero technologies as a result of the new presidency in the US. This in our view, increases the upside potential of many of the investment opportunities that we have identified in the Climate Transition strategy.

In our view, the acceleration in regulation focused on a green recovery presents multiple investment opportunities in the sustainability space. We are focusing on behavioural shifts as lockdowns ease and the use of technology as a key enabler of a greener return to a “new normal”. Technology advances allow greater connectivity for remote working, more seamlessly integrated transport systems and helps monitor any future spread of the virus. We believe that our focus on sustainability as a core conviction, along with a preference for high quality businesses with superior financials has provided a strong defensive nature to our strategy during the current uncertainty. We also believe our focus on adaptability and the resilience of business models to key sustainability challenges – whether the challenge is climate-related; dematerialisation and shifting supply chains; Natural Capital preservation, or a global pandemic – will also stand us in good stead to identify the industries and companies which stand to outperform over the coming months.

 

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