Building back better?
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Photo (cropped) Adam Schultz on Flickr/USA.gov
Sponsored article: As US President Joe Biden signs a $1.9trn American Covid-19 rescue plan into law, what environmental benefits can markets expect from the new US government and what is its wider strategy for a cleaner, greener future? In this article, Newton portfolio manager Paul Flood considers the likely road ahead and the prospects for renewables.
A new US president has brought renewed hope to sustainability-minded investors that the US can reshape its outlook from the climate change scepticism of ex-president Donald Trump to a more progressive view on future energy and infrastructure development.
Biden was keen to present his green credentials in the run up to last year’s US elections with what his campaign team described as “a nine-point plan for a clean energy revolution and environmental justice.” The plan pledged to hold polluters accountable, while making historic new investment of $400bn over 10 years in clean energy and innovation*.
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So far, Biden has made good on at least one key environmental pledge: his move to reinstate the US to the Paris Agreement within hours of being sworn in as president, reversed an historic and controversial decision to leave it made by Trump back in 2017.
Positive signs
Yet, while climate change continues to present clear and present dangers in the US—with the recent Texas winter storms and devastating wildfires in California last year just two cases in point—the ongoing Covid-19 pandemic continues to dominate headlines. This has presented the US government with some tough choices on its immediate spending priorities.
Despite this, Newton multi-asset portfolio manager Paul Flood sees positive signs of change and is hopeful the US will pursue a more renewable friendly investment agenda which could also influence policy in other markets.
“Beyond the pandemic, things have changed quite a lot over the last year. It is good news that the US is coming back into the fold by seeking to join the Paris agreement again which is, in itself, supportive of renewable energy generation and green technologies,” he says.
With the COP26 United Nations climate change conference taking place in Glasgow this November, Flood is optimistic markets will hear some further good news on renewables initiatives.
“While we wait and see what comes out from global leaders at the COP26, my view is we will see a pick-up in investment in renewables. At a US level, the roll-out of renewables under a supportive president is only going to accelerate,” he adds.
Flood says that while the previous Trump administration had shown little public enthusiasm for renewables at a federal level, a number of US states had also driven forward with their own renewables scheme at a local level regardless of Trump’s views.
Renewables benefits
Looking ahead, he believes a post Covid-19 environment could play well for a renewables market where climate change may soon rise back to the top of the agenda in many countries.
“There has been a push towards fiscal spending and support for reopening the economy across a number of markets, including European countries. There is also a growing alignment in thinking on the benefits of renewables and clean energy in terms of our efforts to tackle global warming,” he adds.
And what of the end investor? Here, Flood believes renewables investment will prove popular and can offer significant benefits for investors seeking to diversify their portfolios.
“From an investment standpoint, operational renewables can offer significant returns and be a fantastic inflation hedge, because they tend to have inflation linked revenues.
“In a market where inflation concerns are starting to impact bond markets, renewables can play a useful role in offsetting some of the potential risks tied to fixed income in a rising interest rate or inflationary market,” he concludes.
Article by BNY Mellow Investment Management editorial team EMEA, following an interview with Paul Flood, Newton Investment Management, a BNY Investment Management Company.
*The Guardian: Biden returns US to Paris climate accord hours after becoming president. 20 January 2021.
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