Forbes, James Phillipps,
There is an absolutely gigantic wall of money moving into environmental stocks and it is only going to get bigger.
The European Commission, European Central Bank (ECB), and China have all announced major policy initiatives in the past fortnight underlining their commitment to reducing carbon emissions.
This will require trillions of dollars of investment in new greener technologies if countries are to meet their targets and much of that money will flow into private companies. Investors have been piling into environmental equities looking to profit from this trend, driving share prices higher.
The strategy has been a standout performer through the Covid-19 pandemic. A basket of 56 global stocks which Saxo Bank highlighted in January as the best positioned to benefit from climate change policy is up a whopping 78% year to date. That compares to the S&P 500’s 1.2% rise and 24.5% for the S&P Information Technology sector.
Peter Garnry, Saxo Bank’s head of equity strategy, said: “The strong performance this year highlights the huge focus on climate-related stocks both from investors but also governments.”
The European Commission this month published its 2030 Climate Target Plan, which is aiming for an ambitious 55% reduction in greenhouse gas emissions from 1990 levels.
The proposal is a significant increase from the 40% reduction target agreed in 2014 as part of its broader goal of achieving carbon neutrality by 2050.
The European Commission is linking its climate plan to a massive €1.8trillion ($2.1 trillion) stimulus package designed to help the continent’s economy recovery from the pandemic. A minimum 30% of this money “will be spent in support of our climate objectives” it said.