Helene Winch, investment specialist at renewable energy investment company, Low Carbon shares her thoughts on divestment and why the finance community should look to make more responsible investments for a low carbon future, and for impressive returns.
Warren Buffet once said, “The investor of today does not profit from yesterday’s growth”. This utterance could not be more applicable to today’s diverse investment climate, where the widespread divestment ‘movement’ is gathering momentum and global recognition. Today’s investor needs to look ahead for growth opportunities and anticipate the impressive returns that are to be had from divesting stocks and equity from the fossil fuel sector, and reinvesting into renewable energy projects. It’s this mind-set that can help the UK create a low carbon economy for future generations.
It’s a matter of education
We only have to look through the papers of late to see the widespread attention that divestment is generating. High-profile individuals, governments and institutions such as the Church of England, Bill Gates, The Rockefeller Foundation and the Norwegian government have all vocalised their support for the divestment movement. Furthermore, it has been reported that altogether individuals and organisations responsible for at least $50bn in investments have said they intend to sell all or some of their fossil fuel investments. Such positive action and endorsement should not be underestimated, and can position divestment as an attractive weapon in the fight against global climate change.
Aside from helping to protect the environment, more needs to be done to prove that tangible financial returns are to be had by divesting from fossil fuels and re-investing into renewable energy projects such as large-scale solar farms and onshore wind projects, for example. The energy industry and investment experts can do more to educate institutional investors as to the significant, lower-risk returns that renewable energy projects can generate. This is a question of raising awareness as to these alternative investments that can improve the UK’s overall energy mix and carbon intensity and at the same time improve our energy security. After all, if we are to move to a low carbon economy, we need to invest more heavily in low carbon assets.
Proven technologies, proven returns
Make no mistake – renewable energy has a strong proven track record. Solar photovoltaic (PV) panels have been generating electricity for at least twenty years. The scale of solar PV projects and investment has significantly increased in that time, with corporate giants such as Apple realising the potential of investing in solar PV for its Silicon Valley HQ. Moreover, onshore wind power, also in its twentieth year, was described by the Department of Energy and Climate Change (DECC) as ‘the leading individual technology for the generation of electricity from renewable sources during 2014’. The statistics are clearly there for all to see – debunking the myth that renewable energy is too ‘new’, or ‘unproven’ a technology.
We have recently been experiencing a large drop in the price of oil highlighting its volatililty. One day an investor may be confident she/he will see an impressive return, the next oil sector share prices drop. Renewable energy, on the other hand, is not volatile in the same way. Solar panels and wind turbines generate electricity all year round – you may drill for oil, but you won’t always find it. And even if you don’t believe in climate change as an investor, these renewable energy investments can stand up for themselves financially. They are typically long-term, inflation-linked contracts, generating attractive, stable returns.
Renewable energy projects are more often than not analysed as part of the private equity industry sector, rather than a form of core infrastructure – another myth here for us to debunk. Investments in the solar and wind sector, for example, are predicted to be the best outperformers (between 0.5% to 3.5% additional annual returns) over the next 35 years. Perhaps not so surprisingly, coal, one of the main focuses of the divestment movement, is predicted to be the worst performer (between -1.2% to -4.9% additional annual returns). It’s worth noting, the positive annual returns from renewables is similar in scale to the negative from coal.
Most renewable energy projects are therefore, essentially infrastructure projects – the words ‘green’ or ‘renewable’ don’t often have to be mentioned at all. Moreover, over 40% of electricity demand has been met by renewable energy generation in recent years, which strongly suggests that renewable energy is a core, resilient electricity source that is here to stay.
The ’new age’ investors
According to a recent report – “Investing in a time of Climate Change” – commissioned by global investment consultancy firm, Mercer, we need institutional investors to take the on role of a ‘climate aware future makers’. These are pioneering investors who understand the impacts of climate change and can lead the charge in showing more risk-averse investors on how to invest into renewables. Future makers are those who realise that our FTSE 100 will not be dominated by BP, Shell or other fossil fuel stocks for ever, and that cleantech companies will slowly but surely creep onto this mainstream market. Finally, a climate aware future maker will look to apply the personal investments made in his/her personal life and apply this to his/her business life. “If I make such impressive returns with solar PV on my household roof for example, then how much money is to be made by investing in solar PV projects at scale?”
At present, there is no UK legislation in place that is motivating investors into investing in renewables. This is moving into effect in neighbouring France, with the government calling on institutional investors to disclose and measure the carbon intensity of their investment portfolio as well as informally in Scandinavia. I hope to see this call to action and level of engagement emulated by governments in the UK and across Europe – this will ultimately create a more mainstream and positive renewable energy investment environment for years to come. It will help to initiate more climate aware future makers for the task ahead.
The dawn of the divestment age
Divesting from fossil fuels and reinvesting in renewable energy has its clear benefits – it can help combat the negative effects of climate change whilst generating impressive, stable returns for our most pioneering and forward-thinking institutional investors. It’s not a gimmick to be dismissed, it’s not a myth. Investing in renewable energy presents strong growth opportunities now, and for future generations. In the UK, we are lucky to have some of the sharpest financial brains that are out there – no ‘problem’ is too big to solve. We hope to see more investors and financial institutions lead the charge in educating the industry on the true benefits of renewable energy investment in the thick of the divestment age.
http://www.ft.com/cms/s/2/5ca02a4c-8792-11e4-bc7c-00144feabdc0.html#axzz3hYmuUlDS and http://divestinvest.org/philanthropy/signatories/
 Estimated impact on sector returns compared to current expected returns of 6-7% per annum, second Mercer report, “Investing in a time of Climate Change”
Oil holds close to 13-month high, supported by sharp drop in U.S. output
By Julia Payne
LONDON (Reuters) – Oil prices remained close to 13-month highs on Thursday, with profit-taking limited by an assurance that U.S. interest rates will stay low and a sharp drop in U.S. crude output last week due to the storm in Texas.
Brent crude for April hit $67.70 a barrel during the session, its highest since Jan. 8, 2020. By 1437 GMT, it had slipped 48 cents, or 0.7%, on the day to $66.56.
U.S. West Texas Intermediate was down 49 cents or 0.8% at $62.73, after also hitting a 13-month high of $63.79.
Tamas Varga, analyst at PVM Oil Associates, said the dip was partly due to profit taking after a three-day rally.
An assurance from the U.S. Federal Reserve that interest rates would stay low for a while weakened the U.S. dollar, while boosting investors’ risk appetite and global equity markets.
The winter storm in Texas caused U.S. crude production to drop by more than 10% or 1 million barrels per day (bpd) last week, the Energy Information Administration said. [EIA/S]
Fuel supplies in the world’s largest oil consumer could also tightened as its refinery crude inputs had dropped to the lowest since September 2008, EIA’s data showed.
ING analysts said U.S. crude stocks could rise in weeks ahead as production has recovered fairly quickly while refinery capacity is expected to take longer to return to normal.
Barclays, which raised its oil price forecasts on Thursday, said it oil could rally again on the weaker-than-expected supply response by U.S. oil operators to higher prices.
“However, we remain cautious over the near term on easing OPEC+ support, risks from more transmissible COVID-19 variants and elevated positioning,” Barclays said.
The Organization of the Petroleum Exporting Countries and allies including Russia, a group known as OPEC+, are due to meet on March 4.
The group will discuss a modest easing of oil supply curbs from April given a recovery in prices, OPEC+ sources said, although some suggest holding steady for now given the risk of new setbacks in the battle against the pandemic.
Extra voluntary cuts by Saudi Arabia in February and March have tightened global supplies and supported prices.
(Reporting by Florence Tan; Editing by Steve Orlofsky and Edmund Blair)
GameStop shares rise in early trade before being halted
By Aaron Saldanha and Thyagaraju Adinarayan
(Reuters) – GameStop Corp shares shot higher in early trading on Thursday before a series of NYSE trading halts, a day after an unexpected surge doubled the price of the video game retailerâ€™s stock. The stock hit $160 at the open before being halted after several minutes of trading. Shares were changing hands at around $129 before the second halt.
The early rise built on Wednesday’s rally in GameStop and other so-called “stonks” – an intentional misspelling of “stocks” – favored by retail traders on social media sites such as Reddit’s WallStreetBets.
The new frenzy has puzzled analysts, with some ruling out another short squeeze of the stock which had battered some hedge funds, and fueled more hype after some Twitter users pointed out a cryptic tweet of an ice-cream cone photo from activist investor Ryan Cohen – a major shareholder in GameStop and a board member.
A short squeeze takes place when the price of a heavily shorted stock rises sharply, forcing short-sellers who had bet against the stock to buy it at those prices to avoid further losses.
“Short interest, though still significant, is now starting out from a different base than last time when it was more than 100%,” said Ankit Gheedia, Head of Equity and Derivative Strategy, Europe for BNP Paribas.
“And this time around (GameStop trading) is likely to have a smaller impact as people who got burnt last time may not participate in this episode.”
GameStop shares were still well below their peak of $483 in January.
GameStop was the fourth most traded stock by Fidelity’s customers on Wednesday, with buy orders outnumbering sell orders nearly 2-to-1, as per the broker’s data.
The latest surge comes days after Reddit trader Keith Gill, who runs the YouTube channel Roaring Kitty, doubled down on GameStop and bought additional shares last week.
Gill testified to Congress last week that he remains bullish on GameStop, with his words “I like the stock” gaining popularity, being quoted by hundreds of his online followers and featuring on financial-themed meme pages online.
Gill, known to followers as DeepFâ€”ingValue on Reddit, reportedly boosted his stake in GameStop soon after his Congressional testimony.
Reddit discussion threads were buzzing again about GameStop on Thursday, with members exhorting others to pile in as the rally gathers steam.
“Bought lots more #GME today, let’s keep fighting !!,” wrote one Reddit user Fundssqueezzer, while another user Responsible_Fun6255 said, “Rise of the planet of the ape: GME edition”.
Earlier on Thursday, GameStop’s Frankfurt-listed shares trebled at one point, overshooting the 100% surge on Wall Street overnight, as European retail traders joined in the fresh buying push.
The sharp moves surprised the market, which thought the excitement behind the recent Reddit-fueled rally had died down.
GameStop shares skyrocketed in January as retail investors, urged on by WallStreetBets, bought the stock as a way to punish hedge funds that had taken an outsized short bet against it.
The squeeze hurt Melvin Capital’s Gabriel Plotkin, whose firm was left needing a $2.75 billion lifeline supplied by hedge fund Citadel LLC’s Kenneth Griffin and Point72 Asset Management’s Steven Cohen.
The risky trading strategies employed by some traders on Reddit have drawn the ire of investing legends such as Charlie Munger, long time business partner of Warren Buffett.
“It’s really stupid to have a culture which encourages as much gambling in stocks by people who have the mindset of racetrack bettors,” said Munger, Berkshire Hathaway’s vice chairman.
GameStop’s U.S.-listed shares soared nearly 104% on Wednesday. The volatility in GME, AMC Entertainment and other stocks led to outages on Reddit and periodic trading halts by the New York Stock Exchange.
Online brokerage Robinhood said in a tweet that the NYSE action would impact all brokerages, but that it had not paused trading on the shares.
“It’s a pretty risky play to try and buy now … what we might (see) at the open of the cash market is some people trying to get in,” said Oriano Lizza, premium sales trader at CMC Markets in Singapore, which does not offer pre- or post-market trade.
The latest surge comes after a couple of weeks that saw the shares move in relatively tighter ranges.
“It’s a marathon, not a sprint. Whatever happens resist the urge to sell. The longer we hold the higher it goes,” said @catchme1fyoucan, an Italy-based user of retail trading platform eToro, in a discussion on GameStop.
(Reporting by Aaron Saldanha in Bengaluru, Tom Westbrook in Singapore and Danilo Masoni in Milan; Additional reporting by Sagarika Jaisinghani; Writing by Anirban Sen; Editing by Jason Neely, Bernard Orr and Nick Macfie)
Moderna expects $18.4 billion in COVID-19 vaccine sales in 2021
By Manojna Maddipatla and Manas Mishra
(Reuters) – Moderna Inc said on Thursday it expects COVID-19 vaccine sales of $18.4 billion this year, above the $15 billion in sales forecast by Pfizer Inc for the only other vaccine authorized for emergency use in the United States so far.
Both vaccines, developed using a technology based on messenger RNA (mRNA), are being distributed at an unprecedented speed as cases mount in the United States, with deaths from COVID-19 surpassing the dire milestone of 500,000.
Moderna, whose shares rose 4% to $150.7 in trading before the bell, has been aiming to ramp up production of the vaccine, its first and only revenue-generating product.
It now aims to produce at least 700 million doses this year and expects to raise production to as much as 1 billion doses by improving its manufacturing process..
“2020 demonstrated the power of harnessing mRNA to make medicines,” Chief Executive Officer StÃ©phane Bancel said in a statement.
“I believe that 2021 will be an inflection year for Moderna.”
Moderna expects cost of sales to be about 20% of product sales in 2021, well above the 4% it recorded a year earlier.
The company also said it had completed enrollment for a mid-to-late stage study of the vaccine in adolescents between the ages of 12 and 17, while a study in children aged six months to 11 years will start in the near-term.
Moderna’s chief medical officer, Tal Zaks, would leave the company in late September, the company added.
(Reporting by Manojna Maddipatla and Manas Mishra in Bengaluru; Editing by Anil D’Silva)
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