Please find below our Investment Market Update as at 10th July 2020.
Blue Sky Investment Market Update
Something very positive
Infrastructure asset owning companies around the world are well placed to deliver attractive returns to investors as they provide essential services that allow the global economy to function. Furthermore, they are well positioned to benefit from structural changes in both developed and emerging markets.
I’ve written before about infrastructure being a hot topic as the global economy is changing. The transition towards a global green economy is increasingly urgent and the renewable energy industry is seeing unprecedented levels of demand and awareness. Environmental governance is central to infrastructure development. Examples of highly attractive global Infrastructure assets are numerous.
We always like something positive, don’t we? So why not uncover what is happening around the world other than negative news surrounding the virus and the incessant avalanche of weak economic reports!
Webinar 15th July
Tune in if you are interested in investing into attractive risk adjusted investments. 30 mins of your time is all that is required to find out more about one of the main themes attracting lots of money and interest.
I will be joined by Nigel Aitchison, a Partner and Head of Infrastructure at the Foresight Group. To join us please email email@example.com and you’ll be sent an easy to follow link.
There seems to be something to report every day at the moment. The UK keeps us busy enough in this respect but as we know, there is never a dull moment on the world stage either, not least with Mr Trump!
US and European banks in Hong Kong are conducting emergency audits of their clients to identify Chinese and Hong Kong officials and corporates that could face US sanctions over a new national security law. Donald Trump is expected to sign into law as early as next week, the Hong Kong Autonomy act.
The legislation will give the administration the power to impose sweeping sanctions on officials accused of undermining Hong Kong’s semi-autonomous status, as well as banks and state entities that do ‘significant transactions’ with them. At least two large international banks in Hong Kong were studying which of their clients and partners might be exposed to sanctions under the act, and with which they might have to terminate their business relationships – as reported in the Financial Times.
The US and the conflict with ESG
It’s well-known that Donald Trump often sends conflicting messages. He has called climate change “mythical”, “non-existent” and “an expensive hoax”, but also subsequently described it as a “serious subject that is very important to me”. If the latter is true why is his regime then trying to prevent defined contribution schemes from offering sustainable investments as a default?
It has been proposed by the Department of Labor that private pension administrators are not to sacrifice financial returns if they put money into ESG orientated investments. They have said that “private employer-sponsored retirement plans are not vehicles for furthering social goals or policy objectives that are not in the financial interest of the plan”!
Investor behaviour across the globe and the positive flow of money is at odds with the argument that investing into companies that adhere to strong environmental and social governance (ESG) compromises returns.
At least we know what we are doing!
Recently, the UK government released a statement specifying the details of the clean, green recovery they are looking to support. They are backing improvements in transport, rebuilding our natural infrastructure (there we go again) and innovation.
- Additional funding to attract investment in ‘giga-factories’ which mass produce batteries and other electric vehicle components, enabling the UK to lead on the next generation of automotive technologies
- £10m of funding will be made available immediately for the first wave of innovative R&D projects to scale-up manufacturing of the latest technology in batteries, motors, electronics and fuel cells
- To spend up to £1bn to attract investment in electric vehicle supply chains and R&D to the UK
- To support the rollout of ultra-low emission vehicles in the UK via support for a super-fast charging network for electric vehicles, and extension of the Plug-In Grant schemes
- The UK will also aim to produce the world’s first zero emission long-haul passenger aircraft.
Rebuilding our natural infrastructure:
- Re-foresting Britain by planting 75,000 acres of trees every year by 2025
- £40m Green Recovery Challenge Fund to help halt biodiversity loss and tackle climate change through local conservation projects, connecting more people to the outdoors by delivering up to 5,000 jobs.
- Up to £100m of new funding for research and development of a brand new clean technology, Direct Air Capture (DAC), which captures CO2 emissions directly from the air around us. If successful, DAC technology could be deployed across the country to remove carbon from the air, helping sectors where it’s tough to decarbonise such as aviation
- To help bring forward this technology, the government is exploring options around carbon pricing and incentives, where the government may pay a price per tonne of CO2 captured.
Critics may argue this isn’t enough, but at least they are embracing the ethos of ‘Sustainability’.
Oh, and the markets!
Equities are up across Europe and the UK today… well marginally anyway!
Have a lovely weekend!
I have the club championships at Broadstone Golf Club on Saturday and Sunday. Wish me luck and hopefully I won’t be so distraught that I can’t write the update on Tuesday!
Gary and the Investment Team
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.