- At the end of November, Spanish oil company Repsol unveiled plans to cut oil production and exploration and to double down on its renewable energy spending.
- Meanwhile, BlackRock – the world’s biggest investment manager – promised to support more climate change-focused shareholder proposals.
- Fast forward to this week, and Norway revealed that over half of the new cars sold in the country last year were electric.
- And there’s good news for the environment going forward too: Democrats secured control of the Senate last week, meaning clean energy spending is now firmly on the American agenda.
✍️ Connecting The Dots
Norway set a world record this week by becoming the first country where electric car sales overtook sales of those powered by petrol, diesel, and hybrid engines. China – the biggest car market in the world – has some way to go before it’ll catch up with the Scandinavian frontrunner, but it’s feeling good about it: it’s expecting “new energy vehicles” – think electric vehicles (EVs), hybrids, and hydrogen-powered vehicles – to jump from 5% of all current new car sales to around 20% by 2025.
The US might make some eco-friendly strides soon too. Democrats won control of the US Senate late on Wednesday, securing them both chambers of Congress and the presidency – and investors reckon that might’ve just paved the way for the country’s most progressive climate strategy in history. But it doesn’t seem to have fazed the oil industry bigshots so far: they think the incoming president’s plans will be toned down because they’re too ambitious.
In any case, most energy companies already know which way the wind is blowing and have started moving toward renewable energy sources. Just look at Spanish oil company Repsol: it announced a five-year plan at the end of November to double down on its transition away from the slippery elixir. And if energy companies don’t have the environment on their minds, they soon will: shareholders themselves are increasingly forcing them to clean up their strategies. The world’s biggest investment manager is ready to back them: BlackRock announced at the end of last year that it’ll be supporting more climate change-focused shareholder proposals moving forward.
1. The electric revolution runs on batteries.
Batteries are by far the most important and most expensive part of EVs, making them a key factor in the carmakers’ profitability. No wonder more manufacturers are developing them in house, rather than relying on third-party suppliers. Of course, if those suppliers are the ones to crack the code to more efficient technologies – just like one Bill Gates-backed company has done recently – they could prove to be a better investment in the long run.
2. Doing good doesn’t come without the bad.
Climate-friendly investments are more popular than ever, with environment, social and governance (ESG) strategies raking in record amounts of money during 2020. But ESG investing is imperfect. For one, there’s still no agreed-upon definition or calculation for ESG investments, which could mean you become a shareholder in problematic businesses. And while there’s more and more research showing ESG funds generate better returns than their less socially responsible peers, the companies included in them might be seeing their valuations rise purely because they’re labeled “ESG”.
🎯 Also On Our Radar
As electric vehicle development cranks up to fifth gear, tech companies want to jump on that non-carbon-emitting bandwagon. Reports emerged last week that Chinese search engine giant Baidu will work with carmaker Geely to build EVs, while Apple is apparently considering teaming up with Hyundai to develop self-driving EVs.