Is Green Investment Finally on the Brink of Breaking Out?

Kevin Parker, Global Head of Deutsch Asset Management

Will the U.S. Catch Up with the Rest of the World?

Hugh Wheelan of Responsible Investor conducted a great interview of Kevin Parker, Global Head of Deutsche Asset Management (DeAM) based in New York City. In it, Parker puts forth the most positive outlook yet that private money is finally coming to climate change technology. Despite Parker’s bullishness, the money has not yet surfaced for the most part, but he says it’ll be this year and investment will increase annually for the foreseeable future.

Parker says insurance companies are beginning to model the strange weather patterns that have been emerging and trying to understand the financial impacts they will have on the world. While global temperatures continue to rise, there are many inconsistencies and microclimates are emerging. Parker notes that Northern Europe for example, is becoming a colder climate because of the impacts of the Gulf Stream.

Investors who are thinking about generational wealth are putting environmental issues and the availability of energy and natural resources at the top of their investment priority, as most of them will hit major crises in the next 50 years. Savvy Middle East investors are beginning to hedge against depleting oil resources, which they say will run out in the next 50 years.

Parker says a global price on carbon is coming fast. Not surprising though, he says the U.S. is lagging behind the world on these issues.

To date, Parker says DeAM has taken in $12 billion in assets on the climate change theme, but only $50m from US investors, despite launching the country’s first climate change mutual fund. Regarding his homeland, Parker has serious doubts: “Things are obviously not happening at the federal level but they are happening at the state level.” A recent quote by the DeAM chief accusing the US administration of being “asleep at the wheel” on climate change was picked up by former Presidential candidate and Senator John Kerry to goad the government into action and “stop the investments going elsewhere.”

“The last year has been horrible for the [green] sector. It has not been easy to make money. Having said that, wind energy is clearly a long-term big winner and solar energy prices will continue to drop and become increasingly competitive with fossil fuels. We think natural gas is also a big winner and that coal is a dead man walking. There are also huge energy efficiency opportunities in buildings, building technologies and grid suppliers.”

Parker says green properties are commanding higher rents, and he sees expanding investment across the board in the green sector, particularly in infrastructyure, renewable energy, energy efficiency and water resource themes

For sustainable development proponents, it is welcome news indeed. And for responsible investors, it represents significant opportunity.

Financial News reported today that investment consultant Mercer is predicting that climate change will force a 40% shift in investments into climate sensitive sectors, including infrastructure and agriculture.

The following report by Deutsch Bank explores the issues related to climate change investment risk and return.

Investing in Climate Change
The Mega-Trend Continues: Exploring Risk and Return

The report explores the major shift in investor attitudes taking place and the potentially profound impact climate change may have on existing portfolios.

The report identifies eight key trends which will influence investors’ capital allocations over the next year:

  • The climate change megatrend persists.
  • A more sophisticated exploration of climate change risk within portfolios.
  • Policy is a key driver for cleaner energy.
  • The ambitious scale, scope and commitment of Chinese leadership will foment structural change in clean technologies.
  • Investors will look to US state projects rather than projects driven by Federal policy.
  • Natural gas as a lower-emission transition fuel in the US.
  • The risk-return profile in the climate change sector varies between asset classes.
  • Global policy makers recognize the need for more in-depth dialogue to explore how public and private partnerships can support renewable energy scale-up in developing countries.
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17 responses

      1. Rollie, don’t get sucked in. Ron read “Northern Europe for example, is becoming a colder climate because of the impacts of the Gulf Stream” and extrapolated that the whole world is cooling because of “global warming”, knowing nothing about the thermohaline circulation and its ability to redistribute heat from the equator to Europe. It’s not even worth trying to argue the enlightening effect of reading around a topic and coming to your own balanced conclusions whilst maintaining the overarching philosophy that there are no absolutes in this world, only educated guesses.

  1. Climate Change or “Global Warming” are relative terms referring to overall change in climate in distinct points on Globe due to carbon emissions and increasing industrial pollution. These comments are too elementary. While Parker mentioned Northern Europe “cooling” other parts of the world are warming up (glaciers melting). Whether you want to believe it or not, this is a happening thing. More earthquakes, tornado’s and other natural disasters now happening in areas never b4. It’s all relative. What is really amazing, are people so naive to believe the Untied Sates are “fighting for freedom and security” with sustaining its highly unnecessary wars. these last 3 wars and any further one only serve to reduce our freedom and security. there are now at least 10 nations with higher freedom rating index than the USA, number one reason they don’t spend more than half the world combined on military and “defense”, and put money into renewable energy and environment (hence lower cancer rates), education, healthcare and other “freedoms”. Our highly manipulative media has people actually believing we spend “more per student than other nations” on education (wrong-goes into private sector not classroom), “more on healthcare” (wrong again, goes into private sector/special political interest not actually taking care of people). It’s no surprise the U.S. lags behind other countries in RE investing. Our “financial advisors” tell us to invest in Haliburton, Monsanto and big oil because “that’s where the money is now”. So short sighted and socially/environmentally incorrect. But then again, we all need to make money.

  2. HSBC: World is hurtling towards Peak Planet
    By Giles Parkinson on 27 March 2013

    Global investment bank HSBC says the world is hurtling towards a “Peak Planet” scenario where the global carbon budget from 2000 to 2050 is consumed well before 2030.

    To address this, a peak in greenhouse emissions will need to be achieved as a matter or urgency, and by 2020 at the latest. “This is a tough task – but not impossible in our view,” it writes. “There is a growing recognition of the severity of the situation … and we believe
    that ambition is about to pick up again”….

  3. Ethical Markets Media
    Green Transition Scoreboard® Finds Over $4.1 T in Private Green Investments
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    The year 2013 promises long strides away from the fossil-fueled Industrial Era as illuminated by the Ethical Markets Green Transition Scoreboard® (GTS) which tracks private
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  4. Financial Times – June 24, 2013
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    Insurers have issued a rare warning that the speed at which the oceans are warming is threatening their ability to sell affordable policies in a growing number of places around the world. Parts of the UK and the US state of Florida were already facing “a risk environment that is uninsurable”, said the global insurance industry trade body, the Geneva Association.

    They were unlikely to be the last areas with such problems, said John Fitzpatrick, the association’s secretary-general. He said governments needed to invest more in flood defences and tighten building restrictions in risky locations to mitigate the fallout
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  5. Triple Pundit
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    Higher performance turbines, lower manufacturing costs and lower prices for consumers drove new U.S. wind energy construction to record heights in early 2014 — despite the U.S. Congress still debating whether or not to renew the federal renewable energy production tax credit (PTC), which expired Dec. 31. In many parts of the U.S., wind energy is now the cheapest form of electricity generation – cheaper than natural gas and even coal…

  6. TriplePundit
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    More than 70 global companies signed the Trillion Tonne Communiqué, coordinated by The Prince of Wales’s Corporate Leaders Group, to limit cumulative carbon emissions to 1 trillion metric tons… Companies that signed the Communiqué include major multinationals such as Acciona, Adidas, CalSTRS, EDF Energy, ING, Mars, Shell, TetraPak and Unilever. The signatories have a collective turnover of about $900 billion…

  7. Norfolk sea level rise takes shine off waterfront homes
    By Aaron Applegate
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    September 28, 2014

    “… The newlyweds forged a compromise. They would search for a home in Norfolk to be near Josh’s office. But it could not be in a flood plain, susceptible to rising seas, storm surge and escalating flood insurance prices.

    Their decision is one glimpse into the changing dynamics of coastal real estate. A growing awareness of sea level rise and flooding, coupled with rising flood insurance premiums as the federal government phases out subsidies, has the potential to reshape segments of the Hampton Roads market…”

  8. Eight out of 10 Americans Now Believe the Climate is Changing, According to Munich Re America’s Inaugural 2014 Climate Change Barometer Survey
    December 02, 2014

    PRINCETON, N.J.–(EON: Enhanced Online News)–Of the 1,000-plus Americans surveyed, 83 percent believe that climate change is occurring. 63 percent are concerned about changes in the frequency and intensity of natural disasters, such as floods, hurricanes, and tornadoes. From a regional perspective, Americans living in the Northeast are more concerned (71 percent) about changes in the severity of weather events than those living in the West (65 percent), Midwest (60 percent), and South (59 percent).

    “Our survey findings indicate that national sentiment over whether or not climatic changes are occurring has finally reached a tipping point,” said Tony Kuczinski, President and CEO of Munich Re America.

    “Nowhere in the world are the insurance industry and its customers more affected by the rising number of natural catastrophes than in North America,” Kuczinski continued. “Driving adaptation and mitigation efforts will require a persistent public-private effort that spans the insurance industry, government agencies, and the American public. A critical step in this process is to continually bring relevant information to the forefront and to promote an open and robust discussion about solutions”…

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