EN - Business (Newsletter) - Flipbook - Page 9
views
MORE REGULATION ON CLIMATE CHANGE
Expert View: Mike Appleby, investment manager, Liontrust Sustainable Investment team
There has been disappointment about a lack of progress at
the COP26 event in Glasgow in November 2021 but our
view is that all parts of the economy – government, companies
and individuals – are ratcheting up their ambition. As society
demands greater action and businesses show what can be done,
governments have the leeway to increase their decarbonisation
targets. Encouragingly, the path to zero carbon does not require
amazing new inventions: we are on the way towards 25% more
solar energy, 60% of global car sales being electric and all new
buildings being zero carbon ready by 2030, for example.
The required reduction in carbon emissions will impact the whole
economy, including our energy system and how we heat and
cool buildings, while also driving
transformations
in
transport,
industrial processes, agriculture
and land use. This move to an
ultra-low carbon economy will
also have a considerable
impact on investment returns:
companies contributing to the
shift should prosper while those
on the wrong side of the
transition, or not confronting
its ramifications, are at risk
of secular decline.
STRICTER CORPORATE REGIME IN CHINA?
Among overhanging issues heading into 2022 is
the ongoing struggles of Chinese property giant
Evergrande, with the company continuing
to miss debt repayments. Overall,
China’s debt-to-GDP ratio of 159% is
markedly higher than the global rate
of 101%, implying huge contagion
risks if these debts begin to turn bad.
Beijing is preparing a ‘controlled
demolition’ of Evergrande to protect its
economy, with a slowdown in the Chinese real estate sector
potentially having a major impact on global growth.
Last year also saw China aggressively reining back certain
sectors, including large tech and alternative finance as well
as education. President Xi Jinping appears to be reacting to
concerns that the Communist Party is losing influence over areas
of the economy and society as a result of the free market. It will
be increasingly important to consider what type of businesses
are viewed favourably by the government; those that widen
the wealth gap seem fundamentally at odds with a regime
attempting, at least nominally, to create an equal society.
9
