Articles - Politics and climate policy

 By Mhairi Gooch, Senior Responsible Investment Consultant, Alice Jenkins, Investment Intern and Gemma Osborne, Investment Intern from Hymans Robertson

 In March 2024, Carbon Brief projected that a Trump victory in November could lead to over four billion additional tons of US emissions by 2030, demonstrating the potential impact of the election outcome. However, despite strong support for climate action among key constituencies, including young people and progressives, many Americans remain unaware of the Democrats’ climate positions, underscoring the importance of clear communication in bridging this gap.

 What does this mean for investors?
 The need for long-term change is evident, and a stable policy environment to make the necessary capital commitments to climate solutions serves to reduce risk. However, with the political right demonstrating an ability to harness public discontent over climate (and other) issues, converting this into support at the ballot box, investors continue to face policy and geopolitical uncertainty when considering investment in the energy transition.

 Many risks can still be mitigated through the careful selection of suitable investments, emphasising the need to select managers with the requisite experience. However, asset owners wishing to take a step further should not overlook their ability to advocate for policies, either directly or via asset managers, that support long-term investment decision-making.

 Is it enough?
 Many countries have pledged to reduce their greenhouse gas emissions to combat climate change. But current pledges and policy will not be enough. To achieve ambitious climate goals, there must be a heightened sense of urgency and the implementation of bolder, enforceable policies. Governments should look at removing subsidies and tax incentives from fossil fuels while addressing the bottlenecks in development and planning for energy-transition projects.

 Robust international cooperation will undoubtedly reduce the global costs of the transition, with nations sharing technological advancements and aligning climate goals. Governments must also focus on just-transition policies that support workers and communities dependent on high-carbon industries, ensuring an inclusive and equitable shift to a sustainable economy.

 The UK and EU need to push for more ambitious policies to maintain their leadership role and create clear incentives for change. The US must continue to build on climate investments and avoid any setbacks that a Trump re-election threatens. The climate crisis demands decisive, courageous action, and the UK, EU and US must lead this global effort.