Page 17 - DIY Investor Magazine | Issue 37

The European drafts highlight the risk of replacing an over-reliance on Russian fossil fuels ‘with other strategic dependencies that could impede our access to key technologies and inputs for the green transition.’5 Without doubt, these strategic dependencies already exist. ‘CHINA ACCOUNTING FOR 90% OF GLOBAL INVESTMENTS IN NET ZERO MANUFACTURING FACILITIES’ ‘ENABLING TECHNOLOGIES AND SOLUTIONS ARE STRATEGIC GROWTH INDUSTRIES IN A CHANGING WORLD’ Instead, the US IRA represents a recognition that the pace needs to accelerate dramatically to meet long-term climate goals, and that the enabling technologies and solutions are strategic growth industries in a changing world. 17 Apr 2023 DIY Investor Magazine · The Net-Zero Industry Act refers directly to China accounting for In the same way that companies drive competitive forces that accelerate change in market sectors, competition amongst the 90% of global investments in net zero manufacturing facilities.6 US, EU and China for leadership in environmental solutions has This remarkable statistic can be traced back to a phenomenally the potential to give a much-needed boost to the rate of growth successful Chinese policy decision over a decade ago. On across clean energy, green buildings & industry, and green October 10, 2010, China issued the State Council’s Decision to mobility solutions, for example. Accelerate the Development of Strategic Emerging Industries, later incorporated into China’s 12th 5-year plan in 2011. In amongst the seven strategic emerging industries are five that the US and Europe are now directly aiming to nurture and protect.7 Fast forward to today, China dominates several environmental technology supply chains, boasting the largest global manufacturers and suppliers of critical components such as batteries and solar PV modules. Having started earlier, China has also built sufficient momentum to relax government support for such sectors. For example, electric vehicle (EV) subsidies introduced in 2010 have been reduced over time and ended completely on 1 January 2023, yet the EV market in China is expected to keep growing. EMBRACING CHANGE We see three implications of this changing landscape. The first is that this is further evidence of what we believe is a watershed moment where environmental solutions are no longer deemed peripheral, but instead integral, to future economies and markets. The second implication is that a more protectionist landscape doesn’t signal the start of a slow-down in the rate of growth for environmental solutions in real-world markets. ‘ENVIRONMENTAL SOLUTIONS ARE NO LONGER DEEMED PERIPHERAL, BUT INSTEAD INTEGRAL, TO FUTURE ECONOMIES AND MARKETS’ The third implication is that there will be winners and losers in this more fragmented – even confrontational – competitive backdrop. Establishing a leading position across the US, EU and Asian markets is becoming more challenging for environmental solutions companies, and so identifying companies positioned to benefit from the opportunities of changing policy landscape, while navigating the risks, is paramount for long-term outperformance. Thematic investment is an acceptance of, and appetite for, the future to be different to the past. By capturing structural growth opportunities through economic cycles, thematic investing provides investors with an opportunity to seek above-market returns over the long-term. While the structural growth opportunity is accelerating, so too is its complexity, and we believe this gives specialist active managers an advantage. 1. Environmental solutions include technologies such as clean energy (e.g. wind and solar power), reusable products, energy saving in buildings and transport, replacements for plastics, etc. 2. Greenhouse gases include carbon dioxide, methane and nitrous oxide. They contribute to the warming of the earth’s atmosphere. 3. Protectionism is a government policy of protecting domestic industries, for example through tariffs on imports. Its opposite is free trade. 4. Temporary Crisis and Transition Framework (europa.eu) 5. EUR-Lex - 52023PC0161 - EN - EUR-Lex (europa.eu) 6. Factsheet: Net Zero Industry Act (europa.eu) 7. USCBC Recommendations on China’s Strategic Emerging Industries (uschina. org). The seven strategic emerging industries were: (1) new-generation information technology, (2) energy-saving and environment protection, (3) new energy, (4) life science, (5) high-end equipment manufacturing, (6) new materials, and (7) new-energy cars. Jupiter Green Investment Trust PLC >