EUROPE’S green credentials are well known, but a recent acceleration in the push to become a carbon-neutral continent in the next few decades has opened up investment opportunities.
“It’s irrefutably the largest and most important structural theme that Europe is exposed to,” says Paul Wild, a senior fund manager at Pendal Group’s London-based subsidiary J O Hambro Capital Management.
“Europe has the world’s largest renewable electricity players. On the industrial side, it has leadership in terms of buildings efficiency. Europe leads the way in terms of passenger vehicle technology. So, as well as being politically motivated, Europe is highly exposed to green business initiatives.
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“It is one of the few areas that Europe can claim global leadership,” Wild says.
Europe’s evolution as a leader in sustainability has come relatively recently, notwithstanding parts of the continent have a long history in looking after the planet.
In December 2018, the European Union adopted the Green Deal which intended to map out the continent’s strategy to become climate neutral. Fiscal spending was biased towards green initiative such as efficient buildings, clean water, biodiversity, more public transport and recycling.
Then in the middle of last month, the EU set itself a binding target of achieving climate neutrality by 2050, subject to individual parliaments ratifying the decision. As an intermediate step, the EU has raised its climate ambition to cut emissions by at least 55 per cent from 1990 levels, by 2030.
“Currently the European Union generates about 12 per cent of its energy from renewables but it’s targeting 40 per cent by 2030. That’s a big number,” Wild says. “Clearly Europe is serious.”
“It involves everything from overhauling the carbon emissions trading system and introducing a carbon border adjustment mechanism for imports, through to a huge rollout of electric vehicle charging stations.”
“There’s opportunities around aviation fuel. The EU has a target of renovating 3 per cent of public buildings a year to make them more efficient. There are many opportunities,” Wild says.
The weight of state money going towards green initiatives is huge.
“It’s irrefutably the largest, most important, most structurally backed theme that Europe is exposed to,” Wild says.
“The region already has some of the world’s largest renewable utilities companies, best building efficiency plays, the largest wastewater recycling companies, expertise in the paper and pulp sector, and outside China, the biggest wind turbine manufacturing companies.
“The theme is politically motivated. There’s political impetus for change and laws are coming to bear forcing companies to be more green-aware. It has become an area where Europe is showing global leadership,” Wild says.
“And it’s likely to continue. The Green Party is likely to do well in the September German election. There is clearly a social awareness that is putting political pressure on countries.”
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