Code red for humanity could be green light for these climate change stocks

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Investments

As the UN’s latest climate change report suggests we’re reaching the point of no return on climate change, Wall Street has been eyeing up eco-friendly stocks trying to hold back the tide.

Climate change stocks

UN’s damning climate report

The UN published a climate report on Monday that suggests the planet is at a crossroads.

According to the latest figures, limiting global warming to 1.5-2°C above pre-industrial levels will be “beyond reach” in the next two decades unless immediate action is taken to limit worldwide greenhouse gas emissions.

The world now has to move towards a fossil fuel-free state, according to the UN’s report, before heat extremes become too much for health and agriculture to thrive. That means a dramatic cut down on coal and gas-fired power stations, internal combustion powered vehicles of all sizes, and a mass shift towards renewable energy.

“The alarm bells are deafening, and the evidence is irrefutable: greenhouse gas emissions from fossil fuel burning and deforestation are choking our planet and putting billions of people at immediate risk,” UN Secretary-General Antonio Guterres said on the report’s publishing.

The Paris Agreement signed in 2015 was meant to instil a sense of urgency amongst the nations of the world. There, nearly every sovereign state on Earth pledge to keep global warming levels at 1.5°C.

But there are problems with this. The US recently called upon OPEC to pump more oil, despite green energy being a cornerstone of the Biden administration’s term ambitions. China too needs to do more to remove coal-fired power stations from its infrastructure and adopt more eco-friendly means.

With some 100 companies responsible for over 71% of all the world’s harmful emissions, there has to be more government oversight, coupled with personal responsibility on the part of consumers if the planet is to remain hospitable for humanity.

Greenwashing, the idea that companies say they’re doing their best to lower emissions without taking any action, will be intensely scrutinised from here on out.

But in any case, a new wave of climate-consciousness could spur on renewable energy stocks, as well as shares in companies that are doing their best to limit their carbon and ecological impacts.

Which climate change-tackling stocks are on Wall Street’s radar?

In a research note published after the UN’s climate report, Alliance Bernstein created a list of equities it believes could offer investors good returns based on their climate credentials.

When putting its list together, Bernstein focussed on stocks that could help investors with “separating climate leadership from greenwashing for your net-zero portfolio.” The bank selected companies with science-based targets that align with the 2015 Paris Agreement.

Bernstein also looked at firms which offer employees climate incentives, i.e., financial or other bonuses given to employees and company members based around meeting climate and emissions targets.

The final list is actually a mixed bag. If you were anticipating pure renewables energy plays, guess again. According to Bernstein, companies that offer such incentives tend to stick to their emission reduction goals, although it didn’t specify what form those incentives take.

So, who are Bernstein’s “leaders in climate actions?”. Climate change stocks that make the list are:

  • AstraZeneca
  • Pfizer
  • Walmart
  • Inditex
  • Sainsbury’s
  • AT&T
  • Vodafone
  • Yum Brands
  • WSP
  • Equinix
  • Mastercard
  • Adobe
  • Microsoft

US Presidential Election: Not Red, Not Blue, but Green to win?

US Presidential Election

With a recent poll showing that 14% of registered voters see climate change as the most important challenge facing the country, victory in November may well hinge on the success or failure of the respective parties to own this issue. For context, such a figure implies that around 30 million voters could cast their ballots this Autumn with the environment at the forefront of their thinking – that’s two to three times as many as in 2016.

Of those who care about climate change, one-third describe themselves as ‘very progressive’, suggesting that it is the Democrats who have the most to gain from grasping the initiative on the environment.

Voters focus on green policies, but does Biden?

Despite this potential vote-grabber for Biden, the issue features only 25th on a list of policy proposals on the Biden 2020 website. His plan has three main avenues of execution:

  • Reinstating Obama-era regulation through executive order
  • Investing $1.7 trillion in green energy and jobs through an act of Congress
  • Leading international treatymaking efforts on the world stage.

That’s a long way from the $16 trillion investment into the “Green New Deal” that Bernie Sanders was promising. Herein lies the dilemma which will ultimately decide Democratic fortunes this year – how can they appeal to the middle whilst also ensuring that their base turns up to vote? It looks like climate change isn’t a hill for them to die on.

Rebranding climate issues for rust belt voters

The electoral system also explains why the climate features so far down Biden’s list. The rust belt is a crucial cluster of states for both parties when it comes to grabbing electoral college votes, and many of these rely heavily on so-called ‘dirty industries’ for employment and prosperity. Pennsylvania is the main example of this, where Trump secured victory by less than 45,000 votes in 2016. As the third largest coal-exporting state in America, voters in this area may not react well to Biden’s green vision, allowing Trump to take home 20 crucial electoral college votes.

There is however an opportunity to re-brand green credentials as a wider vote winner. The climate issue is ripe for conversion into an anti-China policy, thanks to their role as global polluters in chief. With approval of China down to -40% in the wake of coronavirus, and Trump likely to leverage this sentiment in his own favour, the environment offers the Democrats a line of attack which can be employed without turning off their core base of support.

How will America’s Climate Policy shift after the US Presidential Election?

There are three main scenarios that could play out in the US Presidential Election.

Scenario One: Trump Wins a Second Term

With or without a Republican Congress, Pres Trump would likely continue to use executive orders to cut back the environmental regulations that were instituted by the Obama administration. So far, Trump’s repeals have included the moratorium on federal coal leasing and the extent to which federal agencies must take account of the environmental impact of their actions.  

  • This would benefit fossil fuel companies

Scenario Two: Biden beats Trump, and the Democrats gain Congress

In this instance, the Democrats would have carte blanche to deliver on all of Biden’s campaign pledges, including the $1.7 trillion of government spending. In the wake of coronavirus, huge government investment will be expected, providing the perfect cover for such a policy. However, with a majority only guaranteed for two years, and other objectives clearly taking priority, it is unclear whether a Pres Biden would deliver the entirety of his environmental agenda, even in the greenest of scenarios.

  • This would benefit companies that can boost their green credentials
  • It would harm “dirty energy” businesses

Scenario Three: Biden beats Trump, but the Democrats fail to capture the Congress

Here, Biden would have to rely on the power of executive orders and the office of the Presidency to implement parts of his climate proposal. As easily as Trump repealed them, Biden could reinstate Obama’s regulations. Also, he could use America’s status on the world stage to influence treatymaking and catalyse future climate accords. However, the $1.7 trillion investment in green energy and jobs is not possible without congressional approval, leaving the former VP with a half-delivered promise.

  • This would be like half a heart transplant: the economic damage of regulation would be incurred, but without investment elsewhere to compensate

Despite any green rhetoric, the truth is that the environment simply isn’t a priority for the Biden campaign, and this is unlikely to change once in office. A New Deal might be in the offing to respond to the huge economic downturn, but it’s unlikely to be a very Green one.

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