By David Harrison, Fund Manager of Rathbone Greenbank Global Sustainability Fund at Rathbones
Government after government has announced huge spending plans to tackle climate change in the past year, yet they were actually late to the party.
Most businesses had already felt the sea change around the world – these people are their customers after all – and they have been investing heavily in meeting these low-carbon needs. For years, companies have been more aware of their carbon footprints and have been working to reduce them. Energy and automotive businesses have been making real progress in reordering how we power our lives and transportation. This is where the real change will have to come from if the world is going to hit its targets on reducing greenhouse gas emissions.
Automakers and their supply chains have been proactively investing in vehicle electrification technology, and over 2020 demand accelerated at a much faster pace than anybody could have anticipated. Led by a stonking second half of the year, worldwide plug-in electric vehicle sales jumped to 3.24 million, compared with 2.26 million in 2019. This was during a year when lockdowns sent overall passenger car sales slumping by a third to 63.8 million. Keeping perspective, the total number of passenger cars sold each year is typically in the region of 70 to 80 million, so there’s a long road ahead of the universal take-up of electric cars.
The same acceleration in growth can be seen in the global power grid: renewables made up 80% of all new power generation assets worldwide in 2020, becoming the clear focus for the future energy mix. Solar and wind made up the lion’s share of new renewable generation, accounting for 48% and 43% respectively. Hydro remains the single largest producer of renewable power, at just over 40%, yet new assets are more difficult to approve, build and finance, so growth there is much slower.
When the pandemic hit, I was confident that the world would be able to deal with the blow and fight back. The pandemic and its effects were complicated, the path convoluted, but the result wasn’t in doubt. The only thing that was unclear was the time it would take to get there. Betting against human ingenuity and tenacity is never the right call. Given the technology we have today, mixed with the simple necessity of solving an urgent problem, I had faith. This has played out, with the rapid development of multiple vaccines and the amazing adaptability of people and businesses to keep on living in the meantime. Facing climate change, I feel the same way. The focus of businesses, households and governments, the technological advances we make every day, we’ll get there. But, like with the pandemic, the question is how much time it will take? And the science tells us that time is running low.
In the case of both power generation and vehicle electrification, we are still at the early stage of a long-term journey – electric vehicle penetration is still below 5% of the global transport fleet and renewables’ share of power production is below 40%. It’s extremely important that the growth in these industries is sustained in the coming years. That requires lots of investment, continued improvements in technology and solid business models.
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