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Climate action is front and center for both the Biden administration and many of the world’s largest companies. Read the latest Markets in a Minute for a look at the opportunities and obstacles in the race to a clean-energy future and the implications for investors.
Markets in a Minute: Climate Change
President Biden has set ambitious goals for tackling climate change and has already secured billions to advance those goals with the help of the bipartisan infrastructure bill. Yet even before a fraction of that money is spent, the push for a clean-energy future is already transforming the private sector and the investment landscape.
Just how ambitious are Biden’s climate goals? And why the sense of urgency?
In the United States, the burning of fossil fuels (coal, oil and natural gas) for energy is the largest source of greenhouse gas emissions from human activity. In this regard, not much has changed over the past 100-plus years. So, how do we get to our climate goals?
Nonetheless, dramatic changes are already underway in the private sector, creating new opportunities (and potential risks) for investors:
According to a Cornerstone Macro report, it took nearly two centuries for coal to replace wood as the world’s primary energy source and a century for oil to eclipse coal. By making climate change a top priority, the Biden administration is certainly hoping that the adoption of clean-energy sources doesn’t take nearly that long. For investors interested in benefiting from these investments, it’s helpful to keep in mind how long these shifts can take and to be mindful of the risks they can introduce to a portfolio. For instance, all the solar-focused companies in the U.S. make up less than one-tenth of one percent of the S&P 500’s overall market cap. So targeted investments in this area should be kept small.
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