The path to net zero is far from certain. While climate-focused investments are growing at an unprecedented rate, global emissions continue to rise. Deirdre Cooper, manager of the Ninety One Global Environment fund, spoke to the FundCalibre team to discuss the latest trends in decarbonisation, the influence of political shifts on clean energy, and the role of major players like China in driving investment.
They also examine how regulation, interest rates, and market sentiment impact the sector’s performance, shedding light on the opportunities and risks shaping climate investing in the years ahead.
Why you should listen to the interview: Want to understand how climate policy and investment trends are shaping the future? This episode explores the latest investment opportunities, and explains how political and economic shifts influence climate-focused businesses.
This interview was recorded on 30 January 2025. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview.
Interview highlights:
“We’ve blown through some of the climate targets set”
“Emissions globally continued to rise in 2024, and the world is now seeing warming of about 1.5 degrees ahead of pre-industrial levels. So, to put it another way, we’ve already blown through some of the climate targets that were set by the Paris Agreement. And as a result, I think we continue to see really significant extreme weather events around the world, whether that’s wildfires in Los Angeles – and I think climate scientists have now shown some pretty solid evidence that those wildfires are directly related to much, much shorter rainy seasons – and then when the winds come, you get these just horrific events. We saw the terrible floods in Spain in the summer. Unfortunately these events are just too numerous to mention.
“On the positive side, investment in climate does continue to accelerate. Growth in the past two years was predominantly driven by China. The pace of growth elsewhere in the world hasn’t been quite as fast as we would want it to be. And that’s why I think we’re still quite far behind some of those emissions targets that we’ve set. I think with the buildup of these extreme weather events, the possibility of a Minsky moment when the world wakes up and moves much more quickly towards that net zero scenario increases significantly.”
The new three: renewable energy, electric vehicles and batteries
“With climate policy in China, you really need to see it as industrial policy. China is trying very hard to move its economy away from property as a key growth driver towards advanced manufacturing and within advanced manufacturing, they talk a lot about the new three: renewable energy, electric vehicles and batteries. We have seen phenomenal growth in all of those sectors in the Chinese domestic market.
“In 2025, we expect China to install about 250 gigawatts of solar power. To put that in context, the whole UK electricity grid is about 85 gigawatts. That’s an enormous amount of investment. You are now at a point where every week in China, more than half of the cars sold are electric, almost 90% of the two wheelers. You drive around tier one Chinese cities and you really don’t hear engine noise anymore. It’s almost entirely electric cars.
“And what’s interesting is that once you get to 50%, it’s arguably easier to get from 50% to 90% than to get from, from 10% to 25% because now the infrastructure is in place, the network effects are there. So perhaps the fact that has surprised me the most over the last couple of the years is we’re now at a place where EV penetration, the number of electric cars sold as a percentage of the total number of cars sold, is higher in countries like Thailand than it is in the US.”
President Trump and the Inflation Reduction Act
“I think we all know that President Trump is no fan of climate policy, nor is he a fan of former President Biden’s signature climate legislation known as the Inflation Reduction Act (IRA) which president Trump tends to refer to as the “Green New Scam”. From this administration, we’ve already seen the US pull out of the Paris Agreement. You’ve also seen a number of executive orders which do affect, for example, loans and grants to some earlier stage US clean tech companies. But the vast majority of the Inflation Reduction Act is implemented to tax through tax credits. The president cannot change the tax code. By law, a President also cannot disburse monies that have been allocated by Congress, but they do have the ability through executive order to change the utilisation of those funds.
“In fact, company fundamentals, long-term interest rates and so on are are far more meaningful in terms of drivers of stock prices. Look back to early in 2016 when President Trump was elected for the first time, the Clean Tech sector had a pretty tough time over the four year period of the Trump administration. But the Clean Tech sector outperformed massively, and that was predominantly driven by much, much lower interest rates in 2020. But President Biden was elected in 2020. You had a pretty good start post-election. And then of course the best-performing sector during the Biden administration was traditional energy. So we may, I think, have reached peak negativity in sentiment on climate policy.”
Conclusion: As the world navigates the complexities of decarbonisation, investment in climate solutions is accelerating. While policy shifts and macroeconomic factors create uncertainty, long-term trends favour the transition to a cleaner economy. For those looking to capitalise on this transformation, understanding how evolving regulations and market forces impact sustainable investments is crucial.
Main image: anastasia-petrova-xu2WYJek5AI-unsplash
