Morgan Stanley have recently released a report which highlights that Sustainability Stocks are outperforming a number of other, traditionally more trusted investments – The Report – ‘Sustainable Reality‘ states; “Investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments. This is on both an absolute and a risk-adjusted basis, across asset classes and over time, based on our review of US-based Mutual Funds and Separately Managed Accounts (SMAs).”
The study showed that sustainable equity mutual funds, which invest principally in stocks, met or exceeded the median returns and were less volatile or equally as volatile 64 per cent of the time during the seven years examined.
The findings come after a survey by Morgan Stanley last month showed that nearly three-quarters of investors believe that ethical companies can be more profitable and are better long-term investments. But at the same time, more than half said that sustainable investing could require a financial sacrifice.
Audrey Choi, chief executive of the bank’s Institute for Sustainable Investing, said the latest report dispels that myth.
“Sustainable investing presents the opportunity for individuals and institutions to align their investments with their values, but there are clearly many investors who have reservations over whether sustainable investing will require them to sacrifice investment performance,” she said in a statement.
“Ultimately, we believe that sustainable investing is simply a smart way to invest, and our review shows preconceptions regarding sub-par performance are out of step with reality.”
A growing number of investors are exploring sustainable investing. In 2012, $1 out of every $9 of US assets under professional management was invested in some form of sustainable investment, primarily in public equities. In 2014 that number increased to $1 out of every $6 – to a total of $6.57 trillion now invested sustainably.
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Department of Energy and Climate Change (DECC) have released new, more accurate figures to show the spread of the UK’s green economy and totalled it at worth £122bn.
The Department for Business Innovation and Skills (BIS) has for a long time kept tabs on what it called the Low Carbon and Environmental Goods and Services (LCEGS) sector, which in July 2013 it revealed employed more than a million people and was worth £128bn that year, some eight per cent of GDP.
The problem with LCEGS figures was that they included a mix of industries that we’re not directly related to the green economy, e.g. nuclear power.
The new figures from DECC cover 24 sectors in six broad groupings:
- low-carbon electricity
- low-carbon heat
- energy from waste & biomass
- energy-efficiency products
- low-carbon advisory & finance services
- other low-carbon industries such as low-emissions vehicles.
What’s more, they tell an extremely positive story. There are 11,550 companies in these sectors, directly employing a total of 269,800 people, with a further 190,800 employed within the supply chain. This means about 1.5 per cent of all UK jobs are in the low-carbon economy. In Scotland, the figure is just under two per cent.
To read more visit the BusinessGreen website.
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SunEdison, one of the world’s largest renewable energy development companies, today announced that it has secured non-recourse project financing from Japan-based Shinsei Bank for its Tarumizu project, a 9.6 megawatt utility scale solar photovoltaic power plant being built in Japan.
The Tarumizu project is one of the first utility scale solar projects built by a US company in Japan to receive non-recourse funding from a leading Japanese bank.
“This project is a significant milestone for SunEdison in the growing Japanese renewable energy industry,” said Netoshi Kuriyama, Representative Director and Country Manager for Japan at SunEdison. “With this project, we have proven that we can develop bankable projects with leading Japanese financial and EPC partners and we look forward to rapid growth in the Japanese market.”
The electricity will be used to power some 3,000 households on the southern Japanese island of Kyushu, contributing to Japan’srenewable energy industry and to the electrification of rural Japan. Shinsei Bank will be lending SunEdison 80% of the total project cost for the 9.6 megawatt project. The financing agreement was signed in January and the first drawdown occurred on February 24th. The project is expected to achieve commercial operation in September of 2015.
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Leading German utility-developer RWE are planning to invest €1bn in Renewable Energy, with an emphasis on offshore wind. RWE power plants generate 165 billion kilowatt hours of electricity per year, which covers about a third of Germany’s demand for electricity.
RWE and has a broad energy mix, from hydro via coal and gas to nuclear and are looking to expand their reach into Renewable Energy through 2015-2017.
Chief executive Peter Terium (pictured) described the sector as “a major technology whose high load factor helps ensure grid stability”.
He said that onshore wind would be the company’s second priority as it is “market-ready right now, depending on location”. The key regions are Germany, the UK, the Netherlands and Poland.
The move was unveiled as RWE revealed it had achieved its earnings targets for 2014 with a total € 1.4bn for the fiscal year, €400m of which was realised in 2014 – €250m more than expected.
The operating result fell “as expected” to €4bn, a drop of 25% year on year, on the back of “persistently low prices on the wholesale electricity market and the unusually mild weather”.
EBITDA was “significantly better than planned” at €7.1bn while the group’s external revenue declined from €52.4bn to €48.5bn.
The operating result for the renewables division decreased by 8% to €186m with “impairment we recognised on facilities such as the new 46MW biomass power station at Markinch in Scotland” a major factor.
RWE added that the “expansion of wind power capacity also positively influenced the result, and the burdens from impairment losses in 2013 did not recur”.
Electricity generation fell by 5% to 208.3bn kilowatt hours in 2014.
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When it comes to a love of the open road, the United States stands apart. Americans drive more than motorists anywhere else in the world, according to the World Bank. When the average price of a gallon of gasoline dropped from $3.70 to just above $2 — a 45 percent drop — in seven months, economists predicted American households would put their unexpected $150 billion windfall to use in shopping malls, restaurants, and online. The hoped-for spending boom has yet to truly materialize – stuck in traffic? – but it’s still on the way.
U.S. consumer spending increased 4.3 percent in the fourth quarter – the biggest quarterly jump since 2006. But that included a slight decline (0.3 percent) in December, despite the fact that personal income also rose by 0.3 percent that month. Meanwhile, retail sales excluding automobiles and gasoline were completely flat in December and inched up just 0.2 percent in January.
But the larger economic backdrop is getting steadily more supportive of an increase in consumer spending. Job growth, as evidenced in non-farm payroll data, is faster than at any time since 1999. At the same time, consumer credit is expanding rapidly. The 6.9 percent increase in 2014 is the fastest annual growth rate since 2001. And while consumer confidence dipped in February, it’s still running at pre-crisis levels.
Then there’s the fact that the savings from cheap oil – and presumably, the wealth effect from those savings – haven’t fully materialized, largely due to seasonal factors. Consumers spent $8 billion percent less on energy on an annual basis in December, but savings aren’t expected to peak until March at $16 billion.
Gasoline usage gradually increases as the weather warms and doesn’t peak until August. The real savings, in other words, will start to hit home when Americans who have been hunkered down for winter start venturing out again. But it’s also true that good news simply takes time to sink in. “On average, it takes 6 months of declining gasoline prices for the consumer to believe that it’s here to stay and feel comfortable enough to spend,” says Barbara Reinhard, Chief Investment Officer in the Americas for Credit Suisse’s Private Banking and Wealth Management Division. “So we think that you are about to see a strong trajectory for consumer spending in the US, and globally as a result of the decline in commodity prices.”
A second catalyst for a consumer spending uptick has nothing to do with gasoline. Consumers crank up their thermostats the most in January and February, which in many cases means racking up big heating oil bills. The Northeast uses 81 percent of the nation’s heating oil, and February temperatures have shattered record lows from Washington, D.C. to snow-inundated Boston.
But this year, despite the bitter cold, the Energy Information Administration forecasts that Americans who warm their homes with heating oil will spend 30 percent less ($1,645) than they did last year, thanks to lower prices. Those who use propane can expect to spend 23 percent less in the Northeast and 35 percent in the Midwest.
While total spending on energy decreased just $1.6 billion in the Northeast in December, EIA forecasts suggest those savings will surge to $2 billion in February and up again, to $3 billion, in March. Retailers with large customer bases in the Northeast, including DSW (27 percent of stores) TJ Maxx (26 percent), Dick’s Sporting Goods (26 percent), Burlington Coat Factory (23 percent), and Macy’s (23 percent), may see a benefit from consumers having more money in their pockets, according to Credit Suisse. For retailers and other consumer-focused businesses, March may well come in like a lion and out like a lamb.
Ever since commodity prices began to fall last year, investors have regarded Latin America with caution. After all, the region is heavily dependent on exports of oil and gas, metals and agricultural products. With global prices for those goods falling significantly in recent months, some countries are facing declining government revenue and weaker growth. Of those most affected, there’s the obvious example of Venezuela, which depends on oil for around half of its government revenue. Then there’s Argentina, which is hurting from lower soy prices. Chile, too, is impacted by significant declines in copper prices.
But it’s not like these countries didn’t know they’re dependent on revenue sources that follow a boom and bust cycle. Shouldn’t they have planned for this? Many countries do seem to be trying. In recent years, several in the region have created sovereign wealth funds and oil stabilization funds—including Venezuela, Mexico, Peru, Colombia and Panama. The idea is a good one: Latin American exports are largely concentrated in industries that don’t offer significant job creation and are dependent on world commodity prices. It makes sense, then, to stash away some of the spoils in boom times in order to have extra cash during the lean years. And why is it so important to have extra revenue on hand? It may sound simple, but public spending is a major stimulus for growth, so it hurts economies when governments have to cut outlays in times of lower global prices.
So which countries get good marks and which don’t? If we examine the market-friendly countries in the region, there’s an obvious comparison. Chile, the world’s largest copper exporter, has acted with more foresight than anyone else. And oil-exporting Mexico – well, let’s just say it hasn’t done the same. First, let’s take the former. Chile’s government is required to deposit an amount equivalent to between 0.2 and 0.5 percent of the previous year’s GDP into a pension reserve fund. It is also required to put a percentage of its fiscal surplus into its so-called Economic and Social Stabilization Fund. Of course, it’s one thing to have rules, and another to follow them. But Chile actually does, and does so methodically. The size of the latter fund has increased from $2.6 billion at its inception in 2007 to $14.7 billion in December 2014.
There’s no time like the present to have that cushion. The price of copper, which represents more than half of Chile’s total exports, has fallen 12 percent to $2.6 per pound since last June. That was a major reason the economy only grew 1.8 percent last year, the slowest pace since 2009. Despite the declines in revenue, the country has yet to draw on the fund or announce any spending cutbacks. It may tap the fund this year if copper keeps falling, but that wouldn’t have a negative impact on the economy. “If they need to cut spending, they could fill it with proceeds from the stabilization fund,” says Alonso Cervera, Credit Suisse’s economist for Mexico and Chile.
Then there’s Mexico, whose public spending decisions pretty much ebb and flow based on current revenues. The country, which depends on oil for roughly one-third of government revenue, spent without much reservation between 2000 and 2013. It didn’t put away much of its money, and is suffering as oil has fallen 60 percent since last June. In fact, the government has cut public spending by about 0.7 percent of GDP for this year. “Mexico wishes it has a stronger oil buffer than what it has,” Cervera says. “It wouldn’t need to cut spending that much if it could draw on a fund.”
The moral of the story? Countries that are heavily dependent on commodities exports shouldn’t spend in a manner that’s too pro-cyclical, like Mexico does. “When times were good, Mexico spent significantly; now it is retrenching, after oil prices have fallen 50%,” Cervera says. “Whereas in Chile, government spending has not been a function of how much revenue is coming in.” The proof is in the numbers. Chile’s fund equaled 5 percent of GDP at the end of last year, while Mexico’s oil fund only held 44 billion pesos ($3.0 billion), equal to a mere 0.2 percent of GDP. “If Mexico had 5 percent of GDP saved in an oil fund, that would make a huge difference to its economy,” Cervera says. “You have to save for a rainy day.”
Statkraft, leading Norwegian energy company, will take a 50% stake in Triton Knoll, 900MW offshore wind farm off the east coast of the UK. The joint venture with RWE Innogy, will create a wind farm which will generate sufficient energy to power 800,000 households per year.
This key renewable energy project is predicted to deliver 1,900 jobs and cost between £3-4bn. The project received development consent from the UK Government in 2013 and onshore construction is due to commence in 2017.
Both companies will apply to the Planning Inspectorate in early 2015 for a development consent order (DCO) for the electrical system.
Statkraft head of offshore wind Olav Hetland said: “The project itself is blessed with ideal characteristics for an offshore wind farm, including shallow waters, strong wind resource, and excellent ground conditions.
“In addition, it is in an area of seabed which Statkraft knows very well from its Sheringham Shoal and Dudgeon offshore wind projects.”
RWE Innogy CEO Hans Bunting said: “Securing partners for projects such as Triton Knoll has been a key objective in our renewables strategy, and this latest successful partnership with Statkraft highlights the attractiveness of our developments and RWE’s continued commitment to offshore wind.”
RWE Innogy and Statkraft together have interest in over 6.5GW of offshore wind assets.
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