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US election: Trump win raises questions about low-carbon momentum

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The election of Donald Trump as the next US president should not signal the death knell for investor action on climate change, according to the Institutional Investors Group on Climate Change (IIGCC), although it and others said it raised questions about the implications for other countries’ political commitment to tackling climate change.

Responding to the US presidential election result, Stephanie Pfeifer, chief executive at the IIGCC, said: “Investors are predictably concerned the extraordinary result of the US election risks uncertainty around the political agenda on climate.

“However, the urgency implied by the latest science and the economic imperative for action will continue to inform growing efforts by investors to manage climate risk assertively and to seize the opportunities presented by the need to secure a swift and smooth transition to a low-carbon economy.”

This transition is already underway, with a “remarkable and irreversible” pace and scale of change, she said, and the IIGCC will continue to press the G20 economies “to double global investment in clean energy, tighten climate disclosure mandates, develop carbon pricing and phase out fossil-fuel subsidies”.

Trump campaigned with policies focused on promoting fossil fuels and nuclear energy and said he would “cancel” the Paris Agreement on climate change that was brokered by the UN at the 21st Conference of Parties (COP21) in December last year.

It has been noted that the Paris Agreement has sufficient backing to remain legally binding even without the US, as more than 100 countries accounting for more than 55% of global emissions have ratified the accord; it entered into force last Friday, 4 November.

The implications of Trump’s election for energy sources did not feature highly in much of initial asset management reaction to the vote, but some did address the topic, from a macro and/or industry sector impact perspective.

Geir Lode, head of global equities at Hermes Investment Management, said Trump’s election raised questions about a possible weakening of other countries’ commitment to mitigating climate warming.

“COP21 in Paris last year marked a change in the fight against global warming as governments across the world boldly pledged to slow carbon emissions in their respective economies,” he said.

“A reversal of the US’s commitment to reduce emissions could lead to other governments reneging on their promises.”

Caveats about needing to wait for more clarity about Trump’s policy priorities peppered much of first reactions from asset managers to the election result, but Léon Cornelissen, chief economist at the €276bn asset manager Robeco, said “[it’s] clear that beating global warming won’t be one of his priorities”.

He expects Trump will seek an extensive deregulation of the oil, gas and coal sectors.

“This will further increase the current surplus and is the reason why oil prices are dropping,” he said.

Others noted that fossil-fuel sectors could benefit from a Trump presidency, although his talk about wanting to increase infrastructure spending could be positive for companies with a green business offering.

Matthew Beesley, head of global equities at Henderson Global Investors, said: “Trump’s disdain for the environment has been much discussed; we can expect to see energy stocks to rally.”

Erik Weisman, chief economist at MFS Investment Management, said fossil fuels could be advantaged, noting that “Trump repeatedly promoted US energy independence during the campaign, calling for leasing federal land for energy exploration, repealing some regulations on coal and reviving the Keystone XL pipeline project”.

But, according to Charlie Thomas, manager of the Jupiter Global Ecology Growth SICAV fund, renewable energy companies need not necessarily suffer in the medium to longer term under a Trump presidency, and green business could stand to benefit from “common ground” between Democrats and Republic on the need for US infrastructure investment.

“This bodes relatively well for companies providing environmental solutions – particularly in water, smart energy and rail transport infrastructure,” he said. 

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