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For Professional Clients and, in Switzerland, for Qualified Investors only. In Israel for Sophisticated Investors only.
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IDEAS AND KNOWLEDGE TO INSPIRE YOUR INVESTMENTS THINKING
25 February 2021

New generation

Much has already been said about the implications for renewable energy of Joe Biden’s victory in the US presidential election. Under Ex-President Trump, the US was increasingly starting to look isolated and disconnected from climate reality, but there are strong expectations that President Biden will allow a global consensus to form on climate management, hence accelerating the low-carbon energy transition. Indeed, Korea and Japan have already signed up to net-zero emissions for 2050 and – more importantly – China is targeting 2060, while Russia is also contemplating such a pledge.

 

In November 2020 alone, seven utility companies in the US committed to close or repurpose around 9,500 megawatts of coal-powered electricity production, while 2020 looks set to establish a new record for wind-generation capacity in the US1. Therefore, based on environmental statements and track records, a Biden presidency looks more promising in terms of the US integrating more ESG practices within the nation’s companies and their investors. In contrast, Trump previously took a harsh stance on some more environmentally friendly business approaches.

 

When analysing the US energy market, it’s clear to see it is increasingly driven by pure economics, not policy, and that the country has a rising demand for and use of renewables. Renewables are increasingly cost competitive with fossil fuels, especially coal. Despite the previous administration’s support for coal, in April 2019 renewables provided more of US power needs than coal (23% vs 20%)2. In fact, 2019 was a record year for renewable-energy investment in the US3.

 

Even despite a Biden presidency, the fossil-fuel industry is increasingly aware that it faces a challenged future, with demand, even in the developing world, set to diminish over the next decade. In our view, oil companies are also increasing their investment in renewables, carbon capture and hydrogen as they try to remain relevant in a changing world.

 

Andrew Parry, head of sustainable investment, Newton Investment Management.

 

1 Institute for Energy Economics and Financial Analysis (IEEFA.org). 20 November 2020.
2 EIA. U.S. electricity generation from renewables surpassed coal in April. 26 June 2019.
3 Reuters. U.S. clean energy investment hits new record despite Trump administration views. 16 January 2020.

 

 

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