Responsible Investment Officer
When I was a New York exchange student in 2008, I was asked by a journalist for my thoughts, as an outsider, on the presidential battle between McCain and Obama. I gave my own personal preference, but also commented that it struck me that the battle was more about personalities than topical issues. That contrast has become even more extreme in the current battle between Joe Biden and Donald Trump. But doesn't this focus on the candidates' characters also conceal a grain of truth about the actual influence of the president? What will the election battle outcome mean for sustainability in an economic recovery?
In the 2016 election campaign, Trump promised that he would stop the "war on carbon"; the shale energy revolution would unlock vast wealth for American families. He did his utmost to achieve this: he overturned a number of Obama's environmental laws and appointed a former lobbyist for the carbon sector, Andrew Wheeler, as head of the EPA – the US Environmental Protection Agency. But no matter how hard Trump's administration promotes carbon, his enthusiasm has had to yield to federal courts that reverse his policy plans and also to the realities of the market: carbon power generation is less interesting to power companies because the cost price is now well above that of more sustainable energy sources.
“US emissions fell by nearly 3% in 2019, partly due to the closure of coal-fired power stations.”
We can see the same thing happening with shale oil, one of the pillars of Trump's energy policy. The price of a barrel of crude oil has to be at least USD 60 to make shale oil exploitation profitable. The low oil price in recent years has brought serious financial problems to shale oil producers and over 99,000 people have been laid off work.
These developments also have an impact on the carbon emissions of the country. US emissions fell by nearly 3% in 2019, partly due to the closure of coal-fired power stations ( until recently responsible for around a third of the country's total greenhouse gas emissions). This has continued the falling trend in CO2 emissions over the years – started during Obama's presidency – and Trump's "pro-coal" policy doesn't yet have any disastrous climate consequences.
Apart from the federal courts and market impacts, a range of regional initiatives has been taken to fill the vacuum surrounding sustainability that Trump has created. Federal states, cities, companies, universities and others have joined up to coalitions supporting the Paris Climate Agreement, including We Are Still In, the US Climate Alliance and Climate Mayors. The growing momentum for climate action has delivered an impressive series of new laws and concrete measures that will be needed in order to realise the ambitious promises on climate.
While these initiatives are limiting the negative impact of Trump's intentions, experts are warning that the election outcome may prove to be a tipping point, because the US Senate has already appointed 200 federal judges under Trump – almost a quarter of the total number. If the Republicans hold on to the Senate, half of the federal judges that are appointed over the next four years would be Trump appointees, resulting in a conservative majority on the US Supreme Court.
This means that there would be few mechanisms left during a second term that could be deployed against Trump's plans to scrap the environmental laws, to improve the competitive position of the US fossil fuel sector. Large companies and financial institutions might still be able to exert some influence. The EU could introduce a border adjustment CO2 tax. However, the brightest hope for climate activists is still predicated on avoiding a second Trump term.
So, my question for you is: how are you dealing with these uncertainties as a sustainable investor? How much will the election result of 3 November impact business’ values that focus on increasing sustainability? Will you be anxiously watching the TV that night, or is the impact not that big?
Best regards, Ruud