Talking Heads - Statu quo y perspectivas de la inversión sostenible

This is an edited audio transcript of the Talking Heads podcast episode Broadening the perspective on the sustainability outlook

Daniel Morris: Hello and welcome to the BNP Paribas Asset Management Talking Heads podcast. Every week, Talking Heads will bring you in-depth insights and analysis through the lens of sustainability on the topics that really matter to investors. In this episode, we’ll be discussing the future of sustainable investing in 2025. I’m Daniel Morris, Chief Market Strategist, and I’m joined today by Alex Bernhardt, Global Head of Sustainability Research. Welcome, Alex, and thanks for joining me.

Alex Bernhardt: Hi, Daniel. Thank you very much for having me.

DM: It’s safe to say we’ve seen expressions of antipathy on the part of the Trump administration towards diversity, equity and inclusion initiatives, as well as environment, social and governance [issues]. Elsewhere in the world, things haven’t changed quite so much. For example, the omnibus plan in the European Union is pointing towards simplification of the sustainability regulatory regime. When you look around the world, Alex, what does this mix of regulatory activities mean for sustainable investors?

AB: Well, for the last several years, the sustainable investment, or sustainable finance industry more broadly, has been under a lot of pressure from both sides. You have a group criticising sustainable investing for going too far, calling it woke investing. And you have another group of people saying that sustainable investing hasn’t gone far enough and has amounted to greenwashing or isn’t having the real world impacts that it claims to have.

These pressures are creating an environment in which sustainable investors are having to sharpen their sword. There’s a lot of concern about this being the end of the line for sustainable investing. I think those are very far, far from the truth. Rather, what I would say is that we’re somewhere near the through of disillusionment in the evolution of sustainable investing. You see the technology reaching maturity and the plateau of productivity.

This pressure is going to create a much more refined version of that practise for the next few years to come. I’m quite excited for the process of developing new solutions and refining existing processes.

DM: Sustainable investors are understandably concerned about the potential negative impacts of the Trump administration’s proposed policies. That said, where might we find sustainability-related efforts still thriving over the next four years, let’s say in the US?

AB: For sure there’s a lot of concern – and much of this is warranted – around the fate of the IRA, the Inflation Reduction Act in the US, which was a flagship piece of legislation that passed during the Biden administration and funnelled billions of dollars into clean energy, clean tech and other climate areas of the economy. As we’ve already seen through some of the Trump administration’s executive orders in the first couple of weeks that there’s been freezing of capital flows from the IRA.

What gives some comfort to those who are investing in climate-aligned industries in the US is that there are a number of other secular and very strong trends that are pushing towards further investment in renewable power over the next several years that have nothing to do with that legislation. Those drivers are both economic and geopolitical in shape.

On the economic side, we’ve seen a lot of, probably outsized, growth in clean tech sectors and clean energy sectors. A number of jobs have been created as a result of the drive towards electrification. Much of that taking place in so-called red states or states that voted Republican during the most recent election. We also see a lot of secular drivers in terms of demand for energy. AI and a number of other industrial factors are driving a huge increase in power demand in the US. It’s estimated that there’s going to be over 200 gigawatts additional peak demand by 2030 in the US. There isn’t really a way to meet that growth exclusively using incumbent forms of energy production technology. We will need to grow renewable-related resources at a significant pace to meet that demand growth.

Additionally, there’s a lot of well-known concern over competition between the US and China given China’s very large control over the value chains supporting clean energy development. There’s likely to be more emphasis on capturing some more of that control within the US. Through tariffs and other actions, there’s likely to be more incentive for reassuring help to support domestic manufacturing of, say, renewable power sources in the US.

It can also have knock-on environmental benefits if you’re not shipping parts of technologies all across the world. That reduces the carbon footprint of them. That’s of course a longer-term benefit that requires a lot of capital expenditure in the short term by companies to build that production capacity domestically.

DM: OK, that’s great to hear, Alex. So, there is still opportunity for potential positive developments in the US. What do you see globally?

AB: Well, the estimates that I’ve seen of the net impact of the Trump administration policies on global temperature aren’t positive. One of the most recent estimates said that global temperature could increase by a 10th of a degree Celsius by 2100 if the balance of the Trump administration advertised’s policies are implemented. That’s not great.

However, climate is very much a global phenomenon and there are many other jurisdictions in the world that have not pulled out of the Paris Agreement that continue to be very focused on meeting their NDCS or nationally determined contributions, essentially their sovereign level commitment to reduce carbon emissions. If you look at the corporate sector and the investor space, there’s still thousands of corporations and investors that remain committed to net zero and are working apace to try and see that commitment realised.

DM: Alex, if I can summarise some of the key points you shared with us, you acknowledge that the ground has shifted. Sustainable investing has had to face challenges from different parts of the political spectrum anyway. You pointed out that in the US, even with the partial reversal of the Inflation Reduction Act, there are still significant ongoing investments in other areas that relate to climate change. And finally, if we look outside of the US, most countries have not pulled out of the Paris Agreement and thousands of corporations and investors are still committed to their net zero targets. Well, thank you very much for joining me.

AB: It’s been a pleasure, Daniel.