Investing in the Decarbonisation Economy
- Even by conservative estimates, capital investments to reduce greenhouse gas emissions are expected to be massive.
- The average cost of solar and onshore wind energy is lower than power from conventional sources, which is increasing demand for renewable energy and clean technology.
- To capitalise on the investment opportunity, we believe it is just as important to focus on companies aiding avoidance of global emissions as it is to focus on companies that reduce their own global emissions.
- Importantly, fossil fuels like oil, gas, and coal are not expected to be fully replaced as the transition to renewable energy unfolds—estimates suggest that these traditional sources of energy will simply grow at a slower rate.
- Innovative oil and gas companies can play a role in the decarbonisation solutions and, in our view, those in the vanguard should be considered an important component of the overall investment opportunity set.
Read on to view the full paper by Jennison Associates.
Risks—Investing involves risks. Some investments are riskier than others. The investment return and principal value will fluctuate, and shares, when sold, may be worth more or less than the original cost. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, and political and economic uncertainties. Emerging and developing market investments may be especially volatile. Emerging markets are countries that are beginning to emerge with increased consumer potential driven by rapid industrial expansion and economic growth. Investing in emerging markets is very risky due to the additional political, economic, and currency risks associated with these underdeveloped geographic areas. Investments in securities of growth companies may be especially volatile. Due to the recent global economic crisis that caused financial difficulties for many European Union countries, eurozone investments may be subject to volatility and liquidity issues. Value investing involves the risk that undervalued securities may not appreciate as anticipated. It may take a substantial period of time to realize a gain on an investment in a small or midsized company, if any gain is realized at all. Diversification and asset allocation do not guarantee profit or protect against loss.
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