September 7, 2020

Chart of the Week: Renewable energy in demand

by Fathom Consulting.

The World Renewable Energy Index has increased by more than 66% so far this year. The index is priced in euros, but when converted into US dollars and compared to the MSCI All Country World index — as highlighted in the chart — the performance is no less impressive. Investors appear to be taking the risks of global warming, and the associated policy response to address the problem, seriously.

Switching from the burning of fossil fuels to using electricity (in order to power vehicles, for example), with this electricity generated by renewable energy sources (and not by burning fossil fuels), is going to be a key aspect to incoming regulation. The share price performance of Tesla — which, until last week’s sell-off, had risen by nearly 600% this year — seems to reflect this. But trading incoming climate risks is more complex than simply buying renewable energy stocks or those of electric vehicle manufacturers.

For a start, the US election will have a significant bearing on the speed and scope of regulations. (Joe Biden has pledged to put addressing climate change near the top of his agenda, unlike President Trump.) Second, many changes to existing economic structures will be needed to make the changes necessary to halt global warming, meaning that some existing economic assets will see their values fall, while a series of new economic opportunities, over and above electric cars and renewable electricity generation, will arise.

Fathom Consulting is ramping up its research into climate economics and the economic opportunities and threats created by incoming regulation, as well as those created by global warming itself. For more information please contact enquiries@fathom-consulting.com.

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