Foto cedidaMarie Fromaget, nueva analista del equipo de Stewardship de Allianz GI.
. Allianz GI refuerza su equipo de Stewardship con la incorporación de Marie Fromaget
Allianz Global Investors is strengthening its Stewardship team with Marie Fromaget, who will join the firm next January as analyst. She will be based in Paris and report to Antje Stobbe, Head of Stewardship.
In a press release, the asset manager has announced that Fromaget will be responsible for engagements, especially on inclusive capitalism, and voting on its holdings in EMEA.
Prior to joining Allianz GI, she was ESG analyst at AXA IM since 2018. In this role, she was in charge of research and engagement on the theme of human capital and diversity. She was also involved in strengthening the firm’s voting policy on gender diversity, and contributed to the integration of social issues within different asset classes.
“We are delighted to strengthen our team with a proven investment professional like Marie Fromaget. She brings skills in the analysis of social issues, a wealth of ESG convictions, as well as the thematic background required to both feed growing client demand and serve our ambition in active stewardship”, commented Antje Stobbe, Head of Stewardship.
Mark Wade, Global Head of Research and Stewardship, added that inclusive capitalism is one of their “three targeted sustainability thematic pillars” with Climate Change and Planetary Boundaries, as they believe they are interlinked and co-dependent. “Marie’s knowledge and experience in social issues will be key to developing our thematic engagement and voting policy in this thematic”, he concluded.
Pixabay CC0 Public Domain. Protein Capital desembarca en Estados Unidos y abre su primera oficina en Miami
Protein Capital will establish its first office in the United States. As announced a month ago, this opening responds to the company’s expansion plans through which it expects to reach its target of 30 million euros (33.75 million dollars) by 2021.
The company has revealed in a press release that its interest in entering the North American country lies in the fact that it is the main market for this type of funds. Of the 397 in the world, 66.44% are in the United States, where Miami is becoming the most important crypto hub worldwide. In addition, Protein Capital believes the city is an ideal focus for “attracting talent and creating a high-level professional team”.
Due to the new opening, Alberto Gordo, CEO, traveled to the country to meet with the team of the new office and participate in the presentation event of Protein Capital Fund.
Protein Capital is the first hedge fund with 100% Spanish capital dedicated to digital assets. Founded in February 2021, it currently manages a €15 million fund through its offices in Madrid, Luxembourg and Miami.
Pixabay CC0 Public Domain. El 90% de las compañías a nivel mundial han aumentado o mantenido sus dividendos en los últimos 12 meses
Global dividends are rapidly recovering from the pandemic, according to the latest Janus Henderson Global Dividend Index. Thanks to rising profits and strong balance sheets, in the third quarter of 2021 payouts rose at a record pace of 22% year-on-year on an underlying basis to deliver an all-time high for the quarter of 403.5 billion dollars. The total was up 19.5% on a headline basis.
Janus Henderson revealed that its index of dividends is now just 2% below its pre-pandemic peak in the first quarter of 2020. Globally, 90% of companies either raised their dividends or held them steady, which, in the firm’s view, is one of the strongest readings since the Index began and reflects “the rapid normalisation of dividend patterns as the global recovery continues”.
The exceptional strength of Q3 payout figures, along with improved prospects for Q4, have led the asset manager to upgrade its forecast for the full year. It now expects growth of 15.6% on a headline basis, taking 2021 payouts to a new record of 1.46 trillion dollars. Janus Henderson anticipates that global dividends will have recovered in just nine months from their mid-pandemic low point in the year to the end of March 2021. Underlying growth is expected to be 13.6% for 2021.
The most relevant sectors and markets
The analysis shows that soaring commodity prices resulted in record profits for many mining companies; more than two thirds of the year-on-year growth in global payouts in Q3 came from this sector. Three quarters of mining companies in Janus Henderson’s index at least doubled their dividends compared to Q3 2020. “The sector delivered an extraordinary 54.1 billion dollars of dividends in Q3, more in a single quarter than the previous full-year record set in 2019. BHP will be the world’s biggest dividend payer in 2021″, said the firm.
The banking sector also made a significant contribution, mainly because many regulators have lifted restrictions on payouts and because loan impairments have been lower than expected.
The index also highlights that geographies that had seen the steepest cuts in 2020 and those most exposed to the mining boom or to the restoration of banking dividends saw a rapid recovery. Australia and the UK were the biggest beneficiaries of both of these trends. Europe, parts of Asia and emerging markets also saw large increases on an underlying basis.
Those parts of the world, like Japan and the US, where companies did not cut much in 2020 naturally showed less growth than the global average. Nevertheless, US company dividends rose by a tenth to a new Q3 record. A strong Q3 means Chinese companies are also on track to deliver record payouts in 2021.
“Three important things changed during the third quarter. First and most importantly, mining companies all around the world have benefited from sky-high commodity prices. Many of them delivered record results and dividends followed suit. Secondly, banks took quick advantage of the relaxation of limits on dividends and restored payouts to a higher level than seemed possible even a few months ago. And finally, the first few companies in the US to start the annual dividend reset showed that businesses there are keen to return cash to shareholders”, commented Jane Shoemake, Client Portfolio Manager on the Global Equity Income Team.
In her view, a big driver for 2022 will be the ongoing restoration of banking dividends, but it seems unlikely that mining companies can sustain this level of payouts given their reliance on volatile underlying commodity prices: some of these have already fallen. “Miners are therefore likely to provide a headwind for global dividend growth next year”, she added.
Implications for portfolio allocations
Ben Lofthouse, Head of Global Equity Income at Janus Henderson, pointed out that dividends are recovering more quickly than expected, driven by improving corporate balance sheets, and increased optimism about the future. “Two of the most impacted sectors last year were the commodity and financial sectors, and the report highlights that these sectors have been the most significant driver of dividend growth during the period covered. We have added to these sectors over the last year, and it is great to see shareholders being rewarded by increased distributions”, he said.
Kandor Global, the Miami based RIA serving ultra-high-net-worth clients worldwide, has announced the addition of four new recruits that will strengthen the Investments and Reporting teams to enhance services to international clients. In a press release, the firm has also revealed that it has amassed 500 million dollars in assets under management after just a year of its launch.
One of the new recruits is Santiago Torres, who joins as an Associate in the Private Investments division. He previously accumulated 5 years of experience with Global Seguros de Vida, one of the largest institutional investors in the private markets sector of Colombia. “Kandor Global is confident that his experience will ensure best practices, spanning from due diligence to implementation, from an institutional perspective”, said the company. To support him in this mission joins Santiago López Zapata, who previously worked at Banco de Bogotá.
“Currently, the team has managed investments in 80 funds and we expect this number to increase as our clients have shown a strong interest in private investments due to performance and ability of a true long term investment. Our sharp and experienced team can effectively offer our clients a broad portfolio of managers while managing the processes efficiently for all parties involved”, stated Guillermo Vernet, Founder & CEO of Kandor Global.
Two additional members now reinforce the reporting team that manages a holistic view of the clients’ investments by using Addepar: Santiago López Cardona and Gabriela Díaz. According to the firm, their technological savviness will contribute to maximizing the use of Kandor Global’s current tools and incorporating others necessary in providing custom reports to clients.
“Since our launch, our focus has been in creating a strong, agile and enthusiastic team. We’re an effective team of 15 members spanning different locations in the U.S., Colombia, and Spain. In the next steps of expanding the business, we are avidly recruiting new advisors and focusing on intensive due diligence for domestic and international acquisitions,” added Vernet.
Kandor Global serves ultra-high-net-worth clients worldwide through a wide array of services: multi-family office, wealth management and private markets consulting. The firm is headquartered in Miami with an extended reach across Latin America and Europe. It is supported by Summit Growth Partners, LLC (“SGP), a partnership between Summit Financial Holdings and Merchant Investment Management.
Foto cedidaMatthew Beesley, nuevo CIO de Jupiter AM. . Jupiter AM incorpora a Matthew Beesley como nuevo CIO
Jupiter AM has announced the appointment of Matthew Beesley as Chief Investment Officer (CIO), succeeding Stephen Pearson who is retiring following a 35-year career in the industry including nearly two decades at Jupiter. He will join the company in January 2022.
The asset manager has revealed in a press release that Beesley will initially work closely with Pearson to ensure a seamless handover. Besides, he will report to CEO Andrew Formica and join the Executive Committee. In his new role, he will have overall responsibility for the management of all of Jupiter’s investment professionals and strategies across equities, fixed income and multi-asset.
Supported by Jupiter’s eight-strong CIO office, “he will also have oversight of the associated functions that form the backbone of the company’s investment process”, including its dedicated stewardship, data science, dealing and performance analysis teams.
“The role of CIO is crucially important to the delivery of our strategic objectives through the guardianship of our dynamic, actively-driven investment culture at Jupiter. The fact that we have attracted a high calibre individual such as Matt is a testament to our talented fund management team and the enduring appeal of the Jupiter brand to an increasingly diverse global client base”, commentedFormica.
In his view, Beesley shares their commitment to actively-driven returns and has “a well-deserved reputation” for being an “effective and inspiring” leader: “We are confident that, under Matt’s leadership, we will continue to deliver the strong investment results for our clients that is a hallmark of Jupiter”.
With nearly 25 years of experience in the investment industry, Beesley joins Jupiter from Artemis, where he has been CIO since April 2020. Prior to this, he was Head of Investments at GAM Investments from 2017 to 2020, where he was responsible for the management and oversight of its investment strategies managed by teams based in Europe, Asia and the US. Beesley has also been Head of Global Equities at Henderson, responsible for a team managing significant assets in global, international (World ex US) and Global Socially Responsible investment strategies.
In October, inflation in the United States reached 6.2% year-on-year, a figure not seen in 30 years that coincides with supply problems, strong consumer demand and, consequently, an increase in prices. At this point, analysts move away from the transient/structural dichotomy and point to a scenario that will see rising and rigid prices appear in some sectors, while not in others.
The new data
Price growth was led by categories such as housing, used and new cars and, of course, energy, since these components have witnessed strong simultaneous restrictions on demand and supply in some areas. In a first analysis this Wednesday, BlackRock considers it likely that “inflation will remain on the high side for a while and the risks of rigid inflation persist.”
Thus, Rick Rieder, head of global fixed income investments at BlackRock, points out that “over time pandemic distortions and extreme base effects are likely to decrease, causing aggregate prices to recede towards a 2% growth rate and allowing quantities to continue expanding once supply pressures are eased, but this will not happen quickly. However, this is not a normal set of historical patterns that can be easily modeled; many inflation factors are likely to remain rigid for a while, even when the aggregate inflation metric of the PCE can normalize in the coming year.”
“It is fascinating to note that, while the supply chain interruptions we are experiencing are clearly a global phenomenon, the U.S. stands out for the dramatic way in which longer delivery times and higher prices are affecting the economy. This is likely to be due in part to the fact that the United States committed itself to an extraordinary stimulus during (and after) the acute phase of the crisis, which boosted savings, household wealth and, ultimately, an extraordinary demand for goods,” Rieder adds.
The manager considers that some cost pressures may begin to decrease in the first and second quarters of 2022. For example, the nature of the pandemic crisis, with initial blockades, social distancing and mobility restrictions, temporarily reversed a trend of more than seven decades towards greater participation of consumption in services, with a marked rebound in the share of goods in consumption.
The data does not justify a stagflation situation
“However, although many easy comparisons have been made with other historical periods of high inflation (such as the 1970s and early 1980s), and the term “stagflation” has spread quite lately, we do not believe that the data justify such concerns,” Rieder considers.
“To be more specific, in terms of rising energy costs, the lack of energy investment in recent years reflects overinvestment in the sector during the period 2012 to 2014. In fact, capital expenditure in the energy sector as part of the S&P 500 has decreased from a peak of more than 30% to recent lows of only 5%. As such, energy prices around current levels may persist or even worsen during a cold winter, but there is no structural shortage of oil, but what we are witnessing is a seasonal or perhaps cyclical phenomenon, “they add from the asset management firm.
Rieder believes that the risks derived from inflation have increasingly become a priority for Federal Reserve policymakers, since excessive accommodation for too long, or essentially making the economy warm up, could well have unintended consequences on the market that further erode confidence and eventually harm the recovery: “We were pleased to see the Fed’s recent decision to start reducing asset purchases, which will be an important evolution for policy, but our eyes (and those of those responsible of policy formulation) will focus on inflation data in the coming months.”
Julius Baer: there is no need to fear slower growth and high inflation
Shortly before the publication of October inflation data in the United States, Julius Baer analyzed the situation in two axes:
Economic growth is slowing down due to supply constraints, while demand remains solid.
Inflation remains largely transitory, since autonomous inflation dynamics are the exception, not the rule.
“The slowdown in economic growth that has fallen from the highest growth rates of all time in the first half of the year and, together with high inflation rates, gives the remarkable impression of stagflation. At the same time, demand remains robust, which contradicts concerns of stagnation. Strong demand in many areas and insufficient supply are in fact the main cause of high inflation. But the response on the supply side is increasingly visible,” they announced from the entity.
The U.S. labor market and inflation
The U.S. labor market added 531,000 new jobs in October and the September data were revised upwards to 312,000 new jobs. Unemployment fell and hourly pay continued to increase, although at a slower pace than in the previous month. As a result, the U.S. labor market remains quite tight, “which fuels fears that high inflation will not only be less transitory, but vicious circles between wages and prices are emerging,” Julius Baer points out.
“While a spiral of prices and wages is a clear possibility, it is unlikely to happen. Formal links in wage contracts between inflation and wage increases remain quite rare and current wage increases are, in most cases, in line with productivity growth, which reduces the pressure to increase prices due to higher wages. The risk of other types of vicious inflationary circles also remains remote, at least in the U.S. and the Eurozone,” explain the bank analysts.
“The depreciation of exchange rates due to high inflation, which leads to higher import prices, is not a problem. In addition, credit dynamics are quite mediocre, despite historically low interest rates and flexible credit conditions, which prevents high inflation from further boosting demand. Therefore, high inflation remains largely a transitory phenomenon, with some more permanent driving factors such as higher rental inflation in the future, while autonomous inflation dynamics are largely absent,” they conclude from Julius Baer.
Since its creation in 2014, Brazilian-born firm, Leste Group, has been consolidating its presence in the alternative asset market, with offices in Miami, London, Sao Paulo and soon New York.
In an interview with Funds Society, Stephan de Sabrit, the firm’s managing partner and co-founder, shared that something that makes them special is their revolutionary partnership model, whereby Leste, as a holding company, partners with world-class investment managers, which are completely dedicated to their line of business.
Leste supports them with compliance issues, and all they need to launch their business, “leaving the front office to the partners, while Leste takes care of everything that goes on behind the scenes,” says Sabrit, adding: “We bring capital and structure, but we also support them as investors and participate in their investment committees.”
An example of this is its partnership with Cassio Calil, through which they recently launched a new mobility strategy that will invest in solutions related to mobile device financing, subscriptions and early updates.
Its clients are mainly UHNWI in Latin America, but they also offer solutions to US residents. “In the case of Brazilians, with rates of 14.5% it was difficult to imagine them taking risk in alternatives, but when rates dropped to 2% there was a change in mentality… [clients] began to look at alternatives and they also realized that they invest abroad,” recalls the manager.
The firm offers investors a wide range of strategies in real estate, credit, risk, liquid markets and other alternative asset classes. Regarding the situation generated by the COVID-19 pandemic, the manager mentions that “not everything is always rosy”, and that the parts related to hotels of both his real estate portfolio in the US and the one in Brazil were affected, but that “little by little they are recovering, and fortunately, we with the partners in this business we were able to cope”. For de Sabrit, being very transparent and explaining the situation to clients allowed them to maintain trust.
His team, which is close to 100 people, coming from different cultures and geographies, seeks to connect and leverage their local knowledge of the markets in which they invest “so that nothing is lost in translation.” Another advantage that he highlights is the ability of his team to originate operations and business, “which allows us to be one step ahead.”
The manager hopes to open an office in New York in the short term, which will be driven by a Venture Debt strategy in the US that has already had its first closure. By 2022 they are preparing a Permanent Capital Strategy for Real Estate in the United States, which will be available to the firm’s foreign investors, “allowing them to take advantage of the largest real estate market in the world, with professional management, and without sacrificing liquidity,” he mentions.
“We have significant ambitions and we want to grow three to four times to reach 8 billion in AUM in 2025,” Sabrit concludes.
The recent U.S. listings of futures-based bitcoin exchange-traded funds (ETFs) expand the range of channels for investors looking to obtain cryptocurrency exposure. However, according to Fitch Ratings, synthetic or direct fund exposures present trade-offs around risk transparency, pricing, operational complexity and the evolving path and scope of regulation.
In Fitch’s opinion, the lack of opposition from the U.S. Securities and Exchange Commission (SEC) for the first ETF based on bitcoin futures reflects the relative comfort of regulators around the trading of instruments within regulated venues rather than an endorsement of the underlying cryptocurrency and is likely to advance the development of similar products.
The current market capitalization of bitcoin ETFs and mutual funds is dwarfed by the Grayscale Bitcoin Trust, a Canadian trust invested in cryptocurrencies. This trust had approximately CAD26 billion in AUM at end-July 2021. However, the firm points out that the U.S. is poised to become the global leader in crypto ETFs with significant market interest and a focus on regulation. Conversely, China recently banned crypto investing.
According to Fitch Ratings, investors in futures-based ETF funds will be exposed to additional price volatility risk and tracking discrepancies between bitcoin and futures prices. Futures-based funds may also underperform funds with physical crypto exposure due to the associated costs of entering into new future contracts and from lack of upside from any software updates – so-called “hard forks” – that yield new coins. In addition, contango (or backwardation) markets may result if the futures price is above (or below) the expected future spot price, further increasing risks for less experienced retail investors.
“The rapid growth in funds may also push the limits on the number of contracts that a fund can own, increasing the challenges of fund/ETF management. Custodial considerations stemming from the physical investing in crypto assets may leave ETFs and funds vulnerable to additional financial and operating risks. Financial institutions with exposure to or that facilitate bitcoin ETFs face increased financial, operational, regulatory and reputational complexities and risks. However, benefits could include higher, more diversified revenue and AUM growth from increased market share and franchise position in cryptocurrencies”, says the firm.
In its view, trading interruption, redemption risks and price volatility are key risks for funds and ETFs investing in cryptocurrencies. Liquidity, while likely still available to ETF investors in periods of elevated price volatility (i.e. crypto price declines), would likely be at substantial discounts. However, until regulatory further clarity is established, including addressing critical definitional questions, crypto investments not only run the risk of becoming substantially devalued due to inherent volatility of the underlying asset, but also from regulatory change or other development that could ban some investments, which could negatively affect investors accessing the sector through trading or fund accounts.
The existing vehicles in Canada demonstrate some of the risks associated with volatility in the underlying assets. Specifically, a number of Canadian Bitcoin ETFs issued market disruption notices in May 2021 indicating that continued stress could force the ETFs to temporarily suspend trading. However, Canadian ETFs were able to continue operating normally through a period of significant volatility, suggesting that ETFs functioned as intended. This may add weight to applications to regulators for cryptocurrency-backed ETFs and mutual funds in other markets.
According to Fitch Ratings, “physical” crypto ETFs are not exposed to futures market dynamics but instead face custody and bankruptcy-remoteness risks, alongside cybersecurity risks associated with electronic wallets holding crypto assets. These represent just some of the risks that the SEC is focused on, ahead of a November deadline for approving (or not opposing) the launch of physical bitcoin ETFs.
Foto cedidaMariano Belinky, Ex-CEO de Santander AM.
. Mariano Belinky ficha por Motive Partners como industry partner
The private equity firm Motive Partners, focused on financial technology, has announced the appointment of Mariano Belinky as an Industry Partner. The company has revealed in a press release that he will focus on areas that bring “strategic value” to its investment mandate.
Based primarily in the London offices, Belinky will focus on originating and diligencing transactions across financial technology, seeking to spot trends ahead of time, and sourcing deals and capabilities that can support the growth of Motive’s portfolio companies.
Motive Partners believes the adoption of new digital channels, innovative processes and game-changing technologies “will yield value-creating opportunities for forward-thinking alternative investment firms“. This appointment demonstrates its intent to continue building capabilities to support its platform’s mission of outsized returns, focusing on operator and innovator led value creation.
“We believe technology has the ability to unlock huge value for investment firms. All aspects will evolve, from how we invest to how we interact with our portfolio companies and clients”, commented Rob Heyvaert, Founder & Managing Partner at Motive Partners. In this sense, through Motive Create and Belinky’s appointment, they are seeking to extend their edge, as they “weaponize financial technology ideas” to empower their operations and portfolio companies by embedding these new financial capabilities to transform operations and gain scale.
Meanwhile, Belinky claimed to be “extremely excited” to join the firm and contribute to further accelerate its growth and those of its portfolio companies. “Fintech has reached a maturity point as an industry, and I believe Motive as a platform is uniquely positioned to capture the immense opportunities the space has created. I’m looking forward to joining forces with a terrific team of Investors, Operations and Innovators to make it happen”, he added.
Prior to joining Motive Partners, Belinky was the Global CEO of Santander Asset Management where he led the turnaround of the company since its re-acquisition from Warburg Pincus and General Atlantic. Prior to this, he co-founded and ran InnoVentures, Santander Group’s $400m fintech-focused global venture capital fund. Belinky has also been a junior partner with McKinsey and Company, where he advised global banks and asset managers across Europe and the Americas, and he was previously part of the research technology team at Bridgewater Associates.
Pixabay CC0 Public Domain. Descarbonización: el coste de pasar de la inacción a la inversión y al crecimiento económico
The first week of COP26 has yielded some positive announcements about decarbonization, reducing methane emissions and access to clean energy by 2030. However, the success of this summit will be determined by the levels of commitment, policies and financing that are mobilized.
In the opinion of Eva Cairns, Head of Climate Change of abrdn, hardly any clear action plans to achieve the objectives have been detailed and there are no legally binding implementation mechanisms. “We need action plans to halve emissions by 2030 and not just offer vague long-term ambitions. This also applies to the 130 billion dollars promised by the financial community on Financing Day to reach the zero emissions target by 2050. Discussions on the climate financing promise of $100 billion for the developing world are underway and are expected to be fulfilled by 2022 based on Japan’s increased commitment. Much more is needed to reflect the obligation of the developed world to help mitigation and adaptation in the developing world,” warns Cairns.
Moving from general objectives to concrete actions because, according to Bank of America, inaction also has a high cost. In one of its latest research, the form argues that climate change is not an abstract problem but affects the world economy mainly through storms, floods, droughts and sea level rise. “There are also indications that climate change and its reduction play a role in the recent rise in energy prices. Given the prospects for regulation, investment in dirty energy capacity is likely to be low and dependent on high prices. Meanwhile, green energy is not increasing fast enough to fill the void. Changes in wind and rain patterns seem to have affected the supply of wind and hydraulic energy, while China has imposed restrictions on emissions from power plants, causing shortages of electricity. All this underscores the importance of making the transition well. In fact, some economists consider carbon taxes to be one of the most effective ways to promote a more natural transition,” the firm says.
In fact, it is estimated that the potential impact of not acting could mean a loss of more than 3% of GDP each year until 2030, which would increase to $69 trillion in 2100; and a loss of 5% of the value of the global stock market ($2.3 trillion) permanently eliminated by the revaluation of climate policy, with a potentially extreme impact on the profits of companies in certain sectors.
If inaction has a cost, the energy transition that leads economies to achieve zero net emissions and decarbonize their production systems also has a cost. The International Energy Agency (IEA) estimates that achieving zero emissions will cost $150 trillion over the next 30 years, or 5 trillion annually. But BloombergNEF (BNEF) raises the figure to 174 trillion dollars or 5.8 trillion a year, that is, about three times the current investment received by the energy system.
“Most of this item will go to the electrification of various human activities and the electricity system (between 3 and 5 trillion a year until 2030), while hydrogen will gain ground until 2040/50 (0.5 trillion annually). The decarbonization of non-energy emissions, such as agriculture and land use, will need even more capital. This will require job mobility between sectors, which can be a challenge given the requirements to retrain employees and the challenges of labor supply in the short term, which can lengthen the transition,” Bank of America clarifies.
All this investment could be an opportunity to boost employment and GDP. But, according to Bank of America, climate change studies focus on the wrong side of the economy: the impact on aggregate demand and not on productive capacity. “For example, the latest IEA report argues that moving towards zero net emissions would reduce employment in the traditional energy sector by 5 million people by 2030, but would add 14 million jobs in the clean energy sector,” the firm explains. These reports argue that “the increase in jobs and investment stimulates economic production, which translates into a net increase in world GDP until 2030.” World GDP growth is, on average, 0.4% higher in the period from 2020 to 2030.
The drawback would be that inflation could be between 1% and 3% higher, according to the IEA. Bank of America experts disagree, as they believe that by the time climate change mitigation efforts are underway, the world economy will probably be close to full employment, as is likely to be the case in the United States. Therefore, “to staff the industry means removing workers from the rest of the economy. At the same time, the construction of green energy infrastructure will require more than double the investment in the sector, from approximately 2% of current GDP to an average of 4.5% in the period 2020-2030. In addition, in the long term, although this transformation offers opportunities, accelerating the transition to a low-carbon economy too fast could harm growth, closing sectors at the expense of others and competing for resources when the economy is close to full employment,” they explain.
In the short term, central banks could accommodate the increase in demand, allowing their economies to overheat. Hence the estimate of the IEA in the increase in inflation. However, Bank of America experts also do not agree with that estimate: “If the Federal Reserve allows the economic potential to be permanently overcome, inflation will not only increase, but could take an upward trend. As in the 1970s, there will be a feedback loop between price inflation, wage inflation and price expectations,” they explain.
Driving decarbonization
All experts and analysts agree that the holding of COP26 is a unique opportunity to delve into these reflections and draw up coordinated plans to achieve decarbonization. This is the topic of the latest report by Goldman Sachs Investment Research, which identifies five questions of interest to be addressed at this conference.
Carbon pricing: It is a key instrument for decarbonization, but it also has to be a fair instrument, which prevents carbon leakage and provides greater confidence and transparency for voluntary compensation. According to the entity, the reduction of carbon emissions alone is unlikely to achieve Net Zero’s ambition for carbon by 2050. “We believe that carbon offsets are a crucial driver for carbon elimination through nature-based solutions and direct carbon capture, contributing about 15% to the decarbonization of emissions from the most difficult sectors to debate by 2050. We believe that discussions around higher standards, greater supervision and better liquidity of voluntary carbon credits worldwide could contribute to creating an efficient path to zero net carbon,” they explain.
Consumer choice: Governments could impose the disclosure of the carbon footprint in products/services and set standards in a coordinated manner at the global level, which would allow consumers to choose low-carbon products and manage their carbon budgets. In his opinion, “it is a missed opportunity to take advantage of consumer pressure on global companies to decarbonize their value chain, finance carbon offsets and aspire to a zero net carbon label.”
Capital market pressure: According to his report, the ESG boom is pushing capital towards decarbonization, but regulatory uncertainty and lack of global coordination are generating structural underinvestment in the key sectors of materials, oil and gas and heavy transport, which increases price inflation and concern for affordability.
Net Zero: Net Zero’s national commitments and further carbon reductions by 2030 will be at the center of intergovernmental discussions. “We have modeled two paths to Zero Net Carbon by sector and technology, and we see the importance of clean technology ecosystems, including renewable energy, batteries, hydrogen, carbon capture and the circular economy,” he argues.
Technological innovation: In their 1.5° C scenario, they estimate that $56 trillion in investments in green infrastructure is needed to reach the Zero Net Carbon target by 2050, which represents approximately 2.3% of world GDP at its peak.
