Green indicates 'up days' for financial markets in the West. It also stands for energy transition, a development that will mark every aspect of the coming years. As investors and citizens, it falls upon us to take action, to avoid confronting 'darker shades' in the future. By Jacques-Aurélien Marcireau
We can assume that most readers in the "Old Continent" are well aware of global warming's causes and consequences. Our economy has developed enough to make it easier for us to address this issue. It has been a talking point for decades, despite our heavily polluting industries moving production facilities to other continents.
We are generally in agreement over the situation and that is the most important fact: people today are united in wanting to build a greener economy. In a world fractured over rising inequality and populism, a green stimulus is the only unifying approach.
Let us be clear that promoting this energy transition should not preclude critical thinking."
That is why almost all stimulus packages prompted by the covid-19 crisis are conditional on some engagement in favour of the energy transition, whatever the sector. This is excellent news.
The colour of recovery
Green is also the colour of unity, for companies and their relations with investors. Younger generations are more aware of environmental issues; finance is following track by gradually converting to ESG (Environmental, Social and Governance) criteria. The ‘E' for Environment deserves to come first: whatever its importance for an industry, it is a more unifying and objectifiable theme compared to the equally important but more divisive governance and social aspects in our view. We applaud this progress.
The colour of responsibility
Let us be clear that promoting this energy transition should not preclude critical thinking. Driving electric vehicles is not a real solution if rare earth production is unregulated and the energy mix which produces power insufficiently decarbonised. Green should not act as camouflage for speculative bubbles or schemes to capture rent. Nor should it distract from other issues.
For example, the fact that data centres belonging to internet giants are carbon neutral should not hide the fact that the economic ecosystems they depend on have a negative footprint. And despite recent progress, current environmental leaders have expressed their dismay at the pace of institutional change, too slow in their view.
We need to act quickly to prevent leaders of future generations being thrown into the arms of green terrorism. Green swans need to be prevented from morphing into black swans.
At Edmond de Rothschild, we have reinforced our energy transition investment capacity, driven by pragmatism and determination. And we commend moves by competitors doing the same. Green is an imperative, it is the colour of recovery, responsibility as well as an exceptional investment opportunity providing we proceed with discernment in a world which is becoming more complex with each passing day.
Rising to the challenge of the energy transition represents an unprecedented opportunity for Europe. The continent boasts numerous companies bearing solutions; they can help create a founding theme that will foster an increased sense of political unity.
The time has come to look beyond Europe's weaknesses. Instead, we should focus on its considerable strengths and start investing. Let's make green the colour of success and the symbol of our collective pride. Green could be the colour of the European beacon as it shines throughout the world.
Jacques-Aurélien Marcireau is co-head of equities at Edmond de Rothschild Asset Management
MAF Core range launches with OCF of 0.15%