When President Trump recently met with Prince Charles, the “Prince of Whales”, one quote taken from the subsequent interview of Trump struck me:
“He wants to make sure future generations have climate that is good climate, as opposed to a disaster, and I agree.”
This is not only a noble aim, but I think one which would garner near-universal agreement. However, BP’s recently-presented annual statistical review was a stark message that we may be diverging from our aim of a “good climate” for future generations. BP’s chief economist, Spencer Dale, stated that “the world is on an unsustainable path”, revealing that “the increase in carbon emissions [in 2018] is roughly equivalent to the emissions associated with increasing the number of passenger cars globally by a third”.
Let’s take a moment to think of an equivalent scenario. Imagine, in 2018, it was well known and well understood that the number of passenger cars on our roads had increased by one third, would we really feel that the world was on anything other than the brink of disaster regarding climate change?
Averting disaster will be difficult from here, though we are moving in the right direction. For example, this week the UK set a stretching and legally-binding target to have net zero emissions by 2050, with Theresa May saying there is a “moral duty to leave this world in a better condition than we inherited”.
In the financial markets, there are an increasing number of opportunities to invest in green bond issues. Over the past two weeks the utilities sector has seen three green bond issuers, two of which are new to the financing structure. We continue to evaluate these on their own investment merits of course (and are wary of “greenwashing”), but it is pleasing to see borrowings being dedicated to environmentally-friendly projects, particularly in the utilities sector where the arguments for this issuance type are so strong.
Some reasons to be optimistic, then, but as with our investing decisions we prefer cautious optimism as we endeavor to achieve President Trump’s (and indeed most people’s) objective of a “good climate”.
About the author
Kenneth Ward is an investment manager in the Fixed Income team, specialising in the utilities and mining sectors. Kenneth also has responsibility for managing a range of institutional credit portfolios. He joined Kames Capital in 2010 initially working as a performance analyst between 2010 and 2014 and previously worked for RBS Trustee and Depositary Services as a securities analyst. Kenneth studied Mathematics at Heriot-Watt University and is a CFA charterholder. He has 11 years’ industry experience. *As at 30 April 2019.