Over the prior week the Eagle Global Renewables Infrastructure Index (RENEW) fell 0.6%, underperforming the S&P 500 by 2.6%. The Eagle North American Renewables Infrastructure Index (RENEWNA) returned +0.7%, underperforming the S&P 500 by 1.3%.
Source: Bloomberg. *Please review disclosure information at the end of this post.
Macro Mash Up
Global Climate Conference enters Week 2. Week 1 ended with some wins and some losses. India pledged net-zero by 2070, though China declined to raise its ambitions further (currently: 2060). Analysis suggests cumulative commitments to date reduce annual emissions by 9 billion tons by 2030, leaving the world 13 billion tons short of keeping the climate from warming more than 1.5° Celsius.
The Group of 20 agreed that methane emissions are contributing to climate change and will work to cut methane emissions. More than 100 countries have signed the “Global Methane Pledge” that seeks to cut methane emissions by 30% by 2030. However, there are no specific targets by individual countries and several of the world’s largest emitters (e.g., Russia, China, India) did not sign on.
Countries representing 85% of the world’s forests agreed to halt deforestation and land degradation. Also, over 100 countries joined a global pledge to protect 30% of the oceans in their territories by 2030. These agreements represent positive steps given forests and the ocean’s critical role as carbon sinks, though similar pacts were reached – and breached – during the 2014 conference.
The goal to set a path towards ending coal consumption saw some progress as the Group of 20 said it will stop funding coal plans abroad. However, the United States and China refused to join the pact and the pact fell far short of making meaningful progress. There is a strong desire to end coal consumption as it is the dirtiest of all fossil fuels and accounts for the largest share of global emissions, though much of the developing world is leaning on coal to raise their economy up.
There are several initiatives remaining to discuss at COP26, though chief among them is rules for a global carbon market. A global carbon market could allow for a more effective transfer of capital to developing countries as developed countries and companies trade carbon offsets. Negotiations are ongoing, though tricky as both the United States and the European Union are adding clauses that complicate reaching a global consensus.
US Congress passes bipartisan infrastructure bill. The House of Representatives passed the Senate’s bipartisan infrastructure bill, temporarily ending weeks of intraparty battles for Democrats. The bill directs billions towards several climate-friendly initiatives, such as initial financing for a network of electric vehicle chargers, improvements to the electricity networks, initial financing to help capture and sequester carbon emissions, and more. Next up is the Biden Administration’s “Build Back Better” reconciliation bill, where the bulk of the White House’s green initiatives are written.
Sweden calls for European Union to ban crypto mining. Sweden’s Financial Supervisory Authority said that cryptocurrency mining should be banned as it “leads to large emissions of greenhouse gases”. The practice requires a significant amount of energy to piece together bits of data to create a cryptocurrency, energy that in many cases is generated by fossil fuels and threatens climate transition.
United Kingdom’s business department hints support for biomass. Assuming effective carbon capture and storage technologies are implemented, biomass could have a “carbon negative” impact according to the “Department for Business, Energy & Industrial Strategy”. The department is expected to outline its full strategy next year, though the announcement is seen as a positive for companies who have converted coal plants to burn biomass (e.g., wood pellets).
Vestas Wind Systems (VWS DC). Onshore wind turbine manufacturer heavyweight, Vestas, reported weaker than expected earnings and reduced guidance due to “supply chain instability and high component, material and transport costs” that it expects to last throughout 2022. The results and commentary weighed on companies with European renewable exposure, particularly OEMs.
Engie SA (ENGI FP). Engie announced that it entered into exclusive negotiations with Bouygues to sell its power services business, Equans, for an enterprise value of €7.1 billion. The proposed transaction is expected to close in the second half of 2022, subject to regulatory approvals. Proceeds are expected to be directed towards helping Engie finance its renewable energy pipeline.
Nextera Energy (NEE). The company filed proposals with regional grid operator PJM Interconnection to construct transmission lines off the coast of New Jersey. While the lines are designed to carry electricity from an offshore wind farm, Nextera currently has no plans to construct offshore wind turbines. The project (“New Jersey Seawind Connector”) is designed to minimize marine and environmental impacts.
Breakdown: RENEW Index
Breakdown: RENEWNA Index
*No Warranties. The accuracy and/or completeness of any Eagle Global Advisors index, any data included therein, or any data from which it is based is not guaranteed by Eagle Global Advisors, and it shall have no liability for any errors, omissions, or interruptions therein. Eagle Global Advisors makes no warranties, express or implied, as to results to be obtained from use of information provided by Eagle Global Advisors and used in this service, and Eagle Global Advisors expressly disclaim all warranties of suitability with respect thereto.
You Must Make Your Own Investment Decision. It is not possible to invest directly in an index. Index performance does not reflect the deduction of any fees or expenses. Past performance is not a guarantee of future returns. You should not make a decision to invest in any investment fund or other vehicle based on the statements set forth in this document, and are advised to make an investment in any investment fund or other vehicle only after carefully evaluating the risks associated with investment in the investment fund, as detailed in the offering memorandum or similar document prepared by or on behalf of the issuer. This document does not contain, and does not purport to contain, the level of detail necessary to give sufficient basis to an investment decision. The addition, removal, or inclusion of a security in any Eagle Global Advisors index is not a recommendation to buy, sell, or hold that security, nor is it investment advice.