Trump effect could slow green investment momentum

The US President-elect’s pledges to reverse commitments to reduce carbon emissions made under Barack Obama’s administration has led to fears that funds could switch their focus towards more fossil fuel-intensive sectors.

Global equity manager at Henderson Global Investors, Hamish Chamberlayne, said: “It’s a gross understatement to say that a Trump presidency is not something that sustainable responsible investment-minded investors would have wished for.

“Could that slow down the rate of growth [in US renewable investments]? Undoubtedly. But we are talking about the rate of growth rather than a reversal here. It’s reasonable to think it will be proportionately less than under a Hillary administration.

“We could see money flowing into perhaps more carbon-heavy parts of the economy for a period of time.”

Awareness of, and assets invested in, sustainable-focused strategies have spiralled in recent years. The Principles for Responsible Investment, which was set up in 2006 by the United Nations to encourage fund managers to invest sustainably, has seen the assets it represents grow from around €25 trillion in 2011 to over €60 trillion now.

Lisa Woll, chief executive of US sustainable investment lobby group US SIF, said there was a “great risk of the new administration undercutting momentum” on the carbon-reducing initiatives instigated by the Obama administration, such as the US’s pledge to reduce carbon emissions made at the UN’s climate change summit COP21 last year.

She said: “Because the new administration has indicated that they believe climate change is a hoax, there is little evidence that they will take action to address the climate at this time.”

Steffen Hoerter, global head of ESG at Allianz Global Investors, which runs €22.7 billion in sustainable responsible investment strategies, added: “You would have to think about the knock-on effect [of a Trump administration] on the international effort to reduce greenhouse gases and the move to low-carbon economies.”

Trump has also repeatedly promised to revive the US’s ailing coal-mining industry, which could make it harder for investors to avoid such sectors. Matt Christensen, global head of responsible investment at Axa Investment Managers, which runs €414 billion in ESG and impact investments, said: “We do know he has an energy-first, America-first approach, favouring job growth in carbon-intensive areas as opposed to renewable areas.”

Others questioned whether the new administration would focus on encouraging good corporate governance, given Trump’s chequered business background. Mike Fox, head of sustainable investment at Royal London Asset Management, said: “As a businessman, he’s clearly not big on corporate governance.”

However, Fiona Reynolds, managing director of the Principles for Responsible Investment, argued that momentum behind ESG strategies is now “virtually unstoppable” and unlikely to be stopped by Trump’s policies.

She added: “Investors have also woken up to the new opportunities created by renewables and are taking positions accordingly. The US will be feeling pressure around China becoming the world’s leader in green finance, with other developing countries following suit, so they won’t want to be left behind amid this changing landscape.”

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