Trump-resistant renewable energy

Despite appeals from foreign leaders, the CEOs of some of the world's largest companies (including Exxon, Apple, Alphabet and Tesla), and even his own children, President Trump decided to walk away from the Paris Climate Change Agreement last month.

Justifying the withdrawal in his ‘America first’ address, Trump cited his desire to protect the US economy from a deal that would cost Americans jobs and money.

Shares in renewable energy producers had already fallen in anticipation of the announcement and oil prices slid on the day amid expectations that restrictions would be lifted on production of US coal and other ‘old-energy’ sources.

No politician can screw up a secular trend

However, as Nigel Thomas, manager of AXA Framlington UK Select Opportunities, which is on the Chelsea Core Selection, commented recently, “No politician can screw up a secular trend. Politicians can try, but they can't interrupt [this kind of trend] for too long.”

Rathbones, who have an Ethical Bond fund that is Elite Rated by FundCalibre, agree. In a statement following the decision, they said: “No real long-term market implications are expected. It is clear that despite President Trump’s decision, the trend toward renewable energy is here to stay. Overarching global forces will continue to provide a tailwind for sustainable/renewable energy, which are already well-established investment themes.”

Georgina Laird, sustainable investment analyst at Kames Capital, whose Ethical Cautious Managed fund is also Elite Rated, added: “President Trump may claim to be focused on saving coal miners, but the fact remains that withdrawal from the Paris Accord cannot interrupt the falling solar, wind and lithium-ion cost curves.

“In terms of the investment implications, we believe that it is too late to slow the adoption of environmentally-friendly technologies; the genie is already out of the bottle in this respect. From solar power, to wind power to electric vehicles, momentum has been building for some time. Barriers to adoption have been falling and returns on investment improving to the point where subsidies are largely no longer necessary. The bottom line is that the impact on companies and sectors that operate in these sectors will be extremely marginal and we do not expect any negative repercussions for any of our underlying investments as a result of this US policy change.”

Volvo delivers a lightening bolt to motor industry

Speaking of electric vehicles, Volvo made a huge announcement last week, the significance of which reverberated around newsrooms louder than an oil drum. The Swedish car maker has moved the motor industry infinitely closer to an electric future by announcing that from 2019, it would only produce pure electric and hybrid cars.

Aberdeen Asset Management pointed out that while global sales of electric cars amounted to less than 1% of the market last year, they are expected to grow rapidly. US electric car start-up Tesla already confounded motor industry expectations last year by taking nearly 400,000 orders for its $35,000 Model 3 car. General Motors will launch ten electric models by 2020, and Toyota announced its ambition to mass-produce them by 2020.

It may be too early to sound the death-knell for the internal combustion engine, but it seems that no matter how hard Trump tries to prop up the oil and gas industry, the trend away from fossil fuels is gathering pace and there is little he or anyone else can do about it.


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Published on 10/07/2017