Looking back at the COP26 and the opportunities born for natural resources investors, Daniel Sullivan, head of global natural resources at Janus Henderson, highlighted the significant changes reshaping the industrial economy, many of which are expected to accelerate into 2030.
Prime among these changes is the transition from fossil fuels to renewable energy.
“Starting with coal and now oil, soon natural gas will also be given diminished investment attention, higher carbon abatement hurdles and operators will need to dramatically change their businesses to thrive in the long-term,” Mr Sullivan explained.
“The case is similar for vehicles as diesel and petrol are being phased out, while electric vehicle manufacturing and sales are ramping up.
“In agriculture, carbon emissions also require management, while in our cities and buildings, society can collectively have a large impact through the widespread adoption of energy-efficient inclusions, using renewable power sources and breaking wasteful habits, such as lighting, heating or cooling office blocks unnecessarily,” he continued.
Moreover, the accelerating adoption of recycling, the circular economy and the shift towards hydrogen as a source of clean energy, are expected to add to the diverse opportunity set offered by natural resource companies.
Investors, he said, need to be closely watching these developments and positioning for growth and opportunities in these decarbonisation-enabling industries.
“As investors operating across the mining, energy and agricultural sectors, the consideration of material environmental, social and governance (ESG) factors is critical,” Mr Sullivan noted.
“As we see it, the key long-term opportunities across our diverse investment area include copper for economic electrification, raw materials used in battery and electric vehicle production, renewable energy and the services that support them and agricultural and food science for healthy sustainable food. These are supported by investments in recycling, the circular economy and hydrogen,” he said.
While carbon isn’t set to vanish overnight, as energy transitions to net zero carbon, and consumption falls considerably, additional costs or taxes are expected to progressively make these industries less attractive to investors.
“It is hard to imagine, but the pollution has to be paid for, prevented and remediated,” Mr Sullivan said.
The United Nations Climate Change “Conference of the Parties”, known as “COP”, is a meeting of the 197 countries that have ratified the convention. The first COP was held in Berlin in March 1995 and 20 years later, the Paris Agreement was adopted in December 2015.
