From the way we heat our homes to the quality of the air we breathe, Boris Johnson’s ‘green industrial revolution’ is set to transform the way we live, work and travel.
The ten-point plan was announced last Wednesday along with £12billion of government investment to help reach net-zero carbon emissions by 2050.
Sales of new petrol and diesel cars will be banned from 2030 and gas boilers prohibited from new homes from 2023.
Charging ahead: Boris Johnson’s ‘green industrial revolution’ is set to transform the way we live, work and travel
Critics warn the investment is not nearly enough to tackle an issue of such magnitude. Others claim the deadlines are far too ambitious. But what is undisputable is the opportunities for investors looking to support Britain’s green transformation.
Rob Burgeman, investment manager at wealth manager Brewin Dolphin, says: ‘We’ve identified a problem, now there is a lot of money and resource piling in to solve it. As an investor, you need to follow the money. There will be winners and losers, but all of that capital investment will have some return to it.’
Clean energy has wind in its sails
Of the ten points in Johnson’s plan, proposals to build enough offshore turbines to power every home by 2030 present the biggest investment opportunity.
So says David Harrison, manager of investment fund Rathbone Global Sustainability. ‘Offshore wind power will have to quadruple from ten gigawatts a year to 40 gigawatts by 2030,’ he explains. ‘Therefore it’s one of the most interesting areas to get exposure to as an investor.’
His fund invests in Danish company Orsted, which operates 12 wind farms in the UK and has two more coming on stream. ‘Orsted should be one of the natural beneficiaries of growing demand for wind power,’ says Harrison. ‘Over the next five to ten years there will be so much growth.’
The Rathbone fund has also invested in wind turbine business Vestas. As well as selling and manufacturing turbines, Vestas services and maintains them.
Offshore wind presents particularly good opportunities for investors seeking an income, says Will Argent, manager of fund Gravis Clean Energy. ‘We invest in infrastructure projects and look for a relatively stable, predictable cash flow from the assets,’ he says. The fund targets an annual income of 4.5 per cent although it is currently a little under that.
The fund invests in Greencoat UK Wind, which invests in UK windfarms, as well as The Renewables Infrastructure Group, which invests in wind and solar projects in the UK and further afield.
Full throttle for electric vehicles
The ban on sales of new petrol and diesel cars by 2030 will inevitably create huge opportunities for electric vehicle makers.
Yet more good news for electric car company Tesla, not that it needed it. Tesla saw its share price soar by 14 per cent last week after it was announced that it had been selected to join the S&P 500, a stock market index that measures the performance of the 500 largest companies listed on the US stock exchange.
With a market capitalisation of nearly $387billion (£292billion), Tesla is valued more than longstanding companies Disney, Toyota and Coca-Cola.
It is the biggest holding – 12 per cent – in runaway investment trust success story Scottish Mortgage and is one of the main reasons the fund has delivered an astonishing return of 96 per cent over the past year.
Yet for investors looking to profit from the transition towards electric vehicles, there are many companies working behind the scenes that could offer more interesting investment opportunities.
Rathbone’s Harrison believes US company Aptiv is well placed. ‘It manages the infrastructure of electric vehicles,’ he says. ‘It’s like the nerve centre.’ Harrison says that rather than trying to predict which auto manufacturer will thrive from the electric vehicle transition, investors could gain exposure to most of them through Aptiv.
That’s because it supplies leading car manufacturers, including BMW and Ford, as well as Google through its driverless car initiative – and likely Tesla, although Aptiv has never confirmed this.
Harrison also rates Dutch company ASML, which supplies machines to companies making chips for electric cars. ‘It ensures a clean environment in which to manufacture microchips,’ explains Harrison. He adds that the company has a 90 per cent market share and will benefit from the anticipated growth in electric vehicle sales.
‘We always try to look at things tucked away in the supply chain that other investors haven’t heard of,’ he explains.
Electric vehicles will create impressive investment opportunities, believes Harrison. ‘Although we are seeing an acceleration in electric vehicles sales, penetration in most markets is still well below five per cent.
‘It’s becoming obvious that all existing and renewable players are increasing investment. With government support, we will see an interesting investment opportunity develop.’
The Government’s ten-point plan also pledges a £1.3billion investment in charging points – located in homes, streets and trunk roads.
Harrison believes Dutch company Alfen could benefit as its business is focused on charging points as well as battery storage and smart grids. ‘It’s introduced electric vehicle charging points in Holland and already has a couple in London,’ he says.
Market set to heat up for insulation firms
The green plan pledges to improve insulation in homes, schools and hospitals. Rathbone’s Harrison believes insulation company Kingspan will benefit. ‘Around 19 per cent of all emissions come from heating buildings,’ he adds. ‘It’s an area ripe for improvement.’
Brewin Dolphin’s Burgeman is a fan of Pictet Global Environmental Opportunities, a fund that holds companies focusing on energy efficiency. It also invests in companies tackling other key environmental issues such as waste management and pollution control.
Revolution for electric bikes
Low-carbon transport is to benefit from a £5billion investment as part of the green industrial revolution.
One company that could do well is Taiwan-listed Giant Manufacturing. Jon Forster, manager of investment fund Impax Environmental Markets, points out the company builds electric bikes and ‘has benefited from a massive ramp-up in global sales through the pandemic’.
Power up with energy storage
As we rely increasingly on wind and solar energy, what will happen on days when the wind doesn’t blow and the sun doesn’t shine?
Chris Holmes, investment adviser on environmental infrastructure fund JLEN Environmental Assets Group, believes battery storage will have a strong part to play in dealing with these energy ‘gaps’.
‘The cost of batteries has fallen rapidly over the last three to four years,’ he says. ‘Also, the technology has advanced to allow much longer dispatch times into the grid.’ JLEN has invested in two connected battery storage plants next to hydroplants.
Moving beyond the ten-point plan
WHILE the plan for the green revolution is a great starting point, there are many other opportunities to create a greener future.
JLEN’s Holmes mentions solar power and building interconnectors which help the purchase and sale of renewable energy with our continental neighbours. Meanwhile, Impax Environment Markets invests in several companies making manufacturing and supply chains more energy efficient. For example, USlisted Repligen makes filtration technology for drug manufacturing to reduce the water, energy and chemicals they use.
Forster believes the Government’s positioning has changed in recent months. ‘No one forecast the pandemic,’ he says. ‘Now we are thinking about what other tail risks there are that could derail us.’
He adds: ‘Companies are trying to align with what consumers are demanding.
‘Due to the pandemic, we know what empty shelves look like, we know what clean air smells and tastes like, and we care more about our essential needs.’
PENSION CAN HELP BEAT CLIMATE CHANGE
Investing to help tackle climate change is relatively straightforward if you have an investment Isa, investment portfolio or self invested personal pension (Sipp).
You can simply pick those investment trusts, funds or companies you believe are focused on a green agenda.
But green investing is trickier through a workplace pension. Most workers save into a ‘default’ fund offered by their pension provider, which rarely takes green issues into consideration.
Screenwriting legend and Comic Relief founder Richard Curtis held an online ‘Pension Party’ four days ago to raise awareness of the issue.
Guests included Sir Richard Attenborough, comedian Aisling Bea and Christiana Figueres who oversaw the delivery of the Paris Agreement on Climate Change. ‘The big mystery has always been where are the trillions going to come from that are needed to really change the world,’ Curtis told party guests. ‘And it suddenly became clear to me that the answer is: it’s invested money.’
He added: ‘There is £3.1trillion invested in UK pensions alone, £48trillion invested around the world, and it’s our money. That got me thinking that focusing on our pensions on green issues is the most important thing most of us can do.’
Curtis’s Make My Money Matter campaign is calling on pension savers to be a ‘net zero hero’. Savers can go to website makemymoneymatter.co.uk and send an email to their pension provider calling for their pension funds to be carbon net zero by 2050.
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