This article has been written by an expert contributor, Munro Partners
A climate of opportunity
You could be forgiven for believing that your outrage has fallen on deaf ears, especially in Australia.
However, the overwhelming worldwide demand for ESG and socially responsible initiatives from customers, employees and shareholders has influenced most corporations in changing their behaviour – virtually every company we meet is talking about their sustainability goals.
Although global momentum around climate change has been building for many years, we believe we’ve now reached a tipping point whereby the decarbonisation of the planet is inevitable. This is a generational challenge.
Virtually every European country has effectively committed to eliminating net carbon emissions by 2050, with China also announcing a 2060 target. US President Joe Biden appears determined to reinvigorate the climate agenda, recently announcing that the US will target a 50% reduction in net greenhouse gas pollution by 2030 and zero emissions by no later than 2050.
It’s important to note that the “zero carbon” 2050 target does not mean emitting any more carbon; it means emitting no carbon.
The biggest opportunity since the internet
In many ways, we liken its current state to the early stages of the technology boom, with many climate change companies set to get dramatically bigger.
However, funding this climate epidemic is going to be extremely costly.
Given the ambitious carbon goals now being announced, we think conservatively it will cost over US$50 trillion between now and 2050.
And where will the US$50 trillion+ money be spent to decarbonise the planet?
Growth winners
However, it is paramount that you maintain rigorous analysis as well as formulating these long-term thematic views. As always, at the individual stock level, there will be only a handful of climate winners and a long tail of losers.
A raft of businesses – including many corporate household names – will need to adapt or perish. The established airline and automotive industries are particularly vulnerable, along with fossil fuel producers and the industries that rely on them.
Greener pastures
In finding the companies that will benefit over the long term, we’re aware that there is more than just a political will to address climate change.
There is also an economic rationale.
For example, renewable energy is now cheap enough to compete with fossil fuels and is now less reliant on government subsidies.
The race to net-zero
Climate is at the very start of its S-curve*, with many new climate technologies still early in the adoption phase and therefore having the potential for significant growth.
Globally, fighting climate change is about far more than just clean energy and electric vehicles.
We see four structural categories from which will emerge the climate success stories that will enable the decarbonisation of our planet:
Companies at the forefront of renewable energy generation covering wind, solar and renewable diesel.
Companies benefiting from the growth of electric vehicles, battery technology and alternative transportation.
Companies at the forefront of insulation products, electrical switches, lighting and metering technology.
Companies most likely to benefit from efforts to improve recycling, alternative packaging materials and wastewater management.
To learn more, watch this video on The Case for Climate.
Munro Partners is a global investment manager with a core focus on growth equities. Established in 2016 by an award-winning investment team with a 16 year proven track record of strong returns, the business has over $5 billion in AUM and is owned and controlled by key staff. Via their proprietary investment process, they invest alongside their clients to benefit from some of the key structural changes that occur in our world today. The business is Australian domiciled, with its head office based in Melbourne.
Disclaimer: The material contained in this publication has been furnished for general information purposes only as is not investment advice of any nature. The companies mentioned are for illustrative purposes only, is not a recommendation and may or may not be held by a Munro fund. There can be no guarantee that any projection, forecast or opinion in these materials will be realised. As an actively managed fund, Munro continually assesses each portfolio holding and the views expressed in this document may change at any time subsequent to the date of issue. This information has been prepared without taking account of the objectives, financial situation or needs of individuals. No representation or warranty is made concerning the accuracy of any data contained in this document.