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Biden tipped to accelerate climate, ESG investing

 — 1 minute read

Climate policy could be the prime implication for Australian investors from the US election, a credit expert from Nikko Asset Management has said, with the Aussie government facing pressure to switch its stance under a Biden presidency.

John Sorrell, head of credit at Nikko Asset Management Australia has written a paper considering the effects of the US election for Australia’s government and investors. 

Looking at the local fixed-income market, interest rates are expected to stay low, while corporate bond yields across most sectors are also tipped to be held down by government support or investors chasing yield. 


Dr Sorrell has concluded perhaps the only investing ramification from the US election may be an even faster uptake in ESG incorporation, as the US pivots on climate change and the Australian government is expected to face international pressure, particularly around its coal industry. 

“I think it’s probably the only area where (particularly in the investment market) we will be affected,” Dr Sorrell told InvestorDaily. 

“Essentially, it stops us from being a little bit lazy on the issue, and it means that we will need to catch up to the rest of the world. Now if we’re bringing China and the US more into alignment, with their views on the subject, we can’t afford to be left out. 

“I think it will push the action at the government level.”

There have been years of delay, or lack of interest from countries. Australia has been able to stay inert as politicians in its ranks fought over the issue, while the Trump government has expressed scepticism and removed the US from the Paris Agreement. 

Joe Biden has made it clear he will move the US back to the Paris Accords and will be taking action towards an energy transition. 

However, the extent of Mr Biden’s actions could be dampened if the Republicans retain control of the Senate – much could hinge on the two undecided seats in Georgia. 

“The concrete side of it will be a question of how we relate to the US, how much Biden can get through executive order because it looks like the Senate will not be under his control,” Dr Sorrell said. 

“There are a lot of imponderables which means that you can’t be firm on anything, but we will see a very different theme on the environmental side.”

At an investor level, there has already been momentum behind focusing on ESG and environmental issues, with a rise in relevant products and fund managers considering climate risk in the last few years. The Australian government may be forced to catch up. 

“A large proportion of the industry has adapted, it is a norm now,” Dr Sorrell said, reflecting on the consideration of ESG and climate change in investment. 

“But when I talk to investors, there are some who are not concerned about it.”

Moving forward, Dr Sorrell has suggested that the Australian government could consider related tax policies – implementing tax rebates or penalties for companies, depending on how they have acted or facilitated an energy transition. 

“It’s a very difficult thing for a government to actually focus on but… a better expression of how we get to the carbon neutral standard will be a big step forward, because there’s a lot of vagueness in the plans at the moment,” he said.

The electricity sector will be the most impacted, with renewable energy providers likely to gain some positive weight, as coal and other fossil fuels cop the brunt of the transition. Dr Sorrell added any utility which uses energy will benefit from refocusing their capacity for clean power.

What will happen before Biden takes over?

Although many have celebrated a Biden victory, uncertainty still lingers for the remaining days of Donald Trump’s reign.

The electoral college vote is still yet to confirm Mr Biden as the new US president and Mr Trump is yet to concede.  

It is already evident that Mr Trump will use his remaining time in office to push his agenda, having put through an executive order on Friday banning Americans from investing in firms that help China’s military. 

“He is obviously using this time and I don’t think he will stop using this time until Inauguration Day,” Dr Sorrell said.

“It’s quite clear that he doesn’t really accept the results. So he will be using this as a method of expressing his own opinions.”

But contrary to the current volatility, investors are likely to look ahead. 

“I would expect that the markets will probably look over a lot of this noise and be more focused on what they think will happen once Biden does take presidency,” Dr Sorrell said. 

“Of course there will be little fluctuations as news comes through and if some strange executive order does move the goalposts, that could change.”

An executive order that could change everything, would have to be an extreme action that could not be undone by Mr Biden – it could be a substantial move such as banning Chinese nationals, Dr Sorrel speculated. But the likelihood of an order fitting that criteria is low.

Biden tipped to accelerate climate, ESG investing

Climate policy could be the prime implication for Australian investors from the US election, a credit expert from Nikko Asset Management has said, with the Aussie government facing pressure to switch its stance under a Biden presidency.

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Sarah Simpkins

Sarah Simpkins

Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth. 

Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio. 

You can contact her on [email protected].

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