What Biden Could Mean for Climate Change
This week, we talk about what the incoming Biden administration could mean for climate-change policy in business and finance.
Welcome to our weekly chat about the environmental and social issues that influence the way we work, spend our money and live our lives. We're your hosts, Maitane Sardon and Dieter Holger. Want to get our newsletter every Wednesday? Hit the subscribe button in the upper right corner and please share with your friends!
Hi Dieter! Last weekend, former Vice President Joe Biden was declared the president-elect of the U.S. His victory has investors and the public wondering what this means for environmental and social policies going forward.
One thing investors are watching closely is how he tackles climate change. Biden pledged to re-join the Paris Agreement after the U.S. formally withdrew on Nov. 4. He said he wants the U.S. to reach net-zero emissions by 2050 and to transition from fossil fuels like oil to renewables such as solar and wind.
The International Energy Agency says the U.S. has one of the world’s biggest carbon footprints. It released 4.8 gigatons of energy-related CO2 emissions into the atmosphere last year. Biden unveiled plans to spend $2 trillion over four years through a mix of executive action and congressional legislation in areas like electric cars and renewable energy to fight both climate change and the economic downturn by creating jobs. This may include boosting incentives for electric vehicles and upgrading battery-charging infrastructure.
Stock analysts say renewable developers and manufacturers, power-grid operators and electric vehicle makers could get a boost if Biden successfully implements his plans. This could include car makers like Tesla and General Motors or utilities like NextEra Energy, the largest renewable energy utility in the U.S. NextEra has edged out the market valuation of oil giant Exxon Mobil, which was the biggest U.S. company by market cap just seven years ago.
The president-elect also wants to put more electric cars on the road and toughen emissions standards for auto makers. He says he wants to create 1 million jobs in the auto industry as part of his climate-change plan.
Biden’s plan will be hard to get through Congress if Republicans keep control of the Senate, but an infrastructure package could contain green investments, too. Both parties have voiced support for an infrastructure bill and could work out a deal that also addresses climate change.
I’ve also read that some investors are buying renewable-energy stocks and bet against fossil-fuel companies in a bid to cash in on Biden’s climate agenda. Hedge fund Hite Carbon Offset, which bets that carbon-intensive energy companies will lose value, was up 35.3% this year through October, the Journal reported, citing a person familiar with the returns.
In recent years, investing in renewable energy has been one of the best ways to make money, while the traditional oil-and-gas industry provided more disappointing returns. Let’s see if that trend accelerates after Biden takes office.
What am I looking at? The chart above shows the five-year performance of the iShares Global Clean Energy ETF (ICLN) and the Energy Select Sector SPDR Fund ETF (XLE). Both are exchange-traded funds that invest in a basket of different energy stocks, but ICLN invests in renewables and XLE is heavy on fossil fuels. The ETFs show that there has been an inverse relationship between the performance of renewable energy and oil-and-gas stocks.
Maitane: Now let’s open it up to our readers: What role do you think the U.S. president should play in green finance and business?
Share your thoughts below, email us or catch us on Twitter. Your words could appear in our next edition! Have a great week and remember to wash your hands. 👋
Meet the team:
Elevate the Conversation is produced by the editorial teams of The Wall Street Journal and Dow Jones Newswires. Here's a little bit more about us, along with our contact information. We'd love to hear from you.
Dieter Holger, Reporter: I have a knack for uncovering values-based investing trends and I’m obsessed with spreadsheets and charts. I really enjoy ‘80s music, skateboarding and yoga (but I’m bad at both). dieter.holger@wsj.com @dieterholger
Maitane Sardon, Reporter: I have a passion for amplifying the voices of those at the center of stories. I love running on Barcelona’s beaches and binging on chocolate ice-cream to compensate (it’s all about balance). maitane.sardon@wsj.com @sardonmaitane
Catherine Lindsay, Editor: I like breaking down complex ideas and explaining them. On the weekend, you’ll find me wandering the city with my film camera at the ready. catherine.lindsay@wsj.com @CathsLindsay
Tammy Lian, Designer: As a visual producer, I'm always excited by the challenge of creative problem solving. In my spare time, you can usually find me taking care of my ever-growing collection of plants and drinking tea. tammy.lian@wsj.com @violian.tammy