GlobalData TS Lombard is pleased to introduce our new investment research theme Decarbonomics, covering the economics and politics of reducing global reliance on greenhouse gas emissions.

Climate change is a topic of critical importance for the global economy, and will be a key policy, economic and corporate strategy driver both now and for the next decade. The theme is global, and encompasses many different facets: political angles like Biden’s energy policy, Germany going green, how China can get to a carbon neutral stance, COP26, what OPEC does next; technological angles like new energy sources; and of course how to actually trade the theme over short, medium and long-term horizons.

What is Decarbonomics?

The economics and policy of reducing global reliance on greenhouse gas (aka “carbon”) emissions in energy production, manufacturing, transportation and other sectors of the economy.

Why are we covering Decarbonomics?

This theme is inextricably linked to geopolitics – China/US trade and tech frictions, global energy policy, government-driven transformations – and fits right in to where we already have deep strength. We will leverage our existing strengths to help clients understand and act on what will be a major economic driver for the foreseeable future.

An ever more important investment theme

• Climate change is a topic of critical importance for the world, and with it, the global economy.
• It’s at or near the forefront of many governments’ agendas: from Biden’s Earth Day summit in April to the 26th UN climate change conference (COP26) in Scotland in November.
• Major economies (EU/UK, Japan, South Korea) have committed to going net-zero emissions by 2050; China has targeted the same for 2060. With the Biden administration on board too, a structural alignment of similar policy drivers across the US, Europe and Asia will galvanize change in a way that has not been possible in the past, aided by the falling costs of renewables and batteries that make the former already cost-competitive with their fossil fuel rivals in many areas.
• In the auto sector, a growing number of regions (e.g. UK, China, Japan, California/Massachusetts) have recently brought forward their targets for phasing out new fossil-fuel-only cars to the 2030s, spurring automakers like GM, Ford and Jaguar Land Rover to commit to similar targets.
• ESG fits in naturally with this theme. With the US Fed recently joining the global climate-focused network of central banks (NGFS) and China also stepping up its green finance plans, this will propel more corporations towards lower-emissions investments.
• Decarbonomics is a key policy, economic and corporate strategy driver both now and for the next decade. It will converge with and be inextricable from the fourth industrial revolution, in which 5G, AI, IoT, smart grids, smart EVs/self-driving cars and smart cities will transform the world we live in today – creating new fractures for the global economy as traditional supply chains get disrupted, but also generating immense new growth opportunities.

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