Green investment is on the rise, and emissions control is becoming one of the hot topics within the sector. Despite huge efforts in some quarters, CO2 emissions rose globally in both 2017 and 2018, and drastic action is needed to curtail climate change. Mounting pressure from both consumers and governments makes this a prime investment opportunity.
One of the biggest reasons for this is stakeholder demand, from consumers, investors, and partner businesses.
Maersk Line, the world’s largest container carrier, is committed to developing a zero carbon vessel by 2030 and has already invested $1 billion in energy efficiency solutions over five years.
The attempt by such a large business to shift to zero carbon will create major demand for technology that can reduce carbon release, such as more efficient engines and gas scrubbers.
This will create opportunities for the companies researching and producing such technology, and for those investing in them.
The uptake of scrubber technology will also be given a boost by stakeholder demand for ways to improve existing resources.
According to the American Bureau of Shipping (ABS), alternate ship designs won’t be a solution for emission targets for at least a decade.
In the meantime, scrubbers can make existing ships more environmentally friendly, and so keep pollution down while keeping business flowing.
Awareness of environmental harms and their economic consequences has shifted the balance of risk assessment. Investment firm Schroders estimates more than $20 trillion in economic losses over the 21st century if we don’t curb current levels of carbon emissions and temperature increases.
The risks for people are becoming very real. According to a World Meteorological Organization (WMO) report, 62 million people were directly affected by climate change in 2018, with two million of them made into refugees by climate change.
This shifting balance is driving structural changes in industry and the global economy. Initiatives such as carbon trading schemes make manufacturers pay for previously externalised costs, as well as creating new networks of trade and collaboration. Success in future won’t just be about which companies can create the most economic value – it will be about which ones can do it at the lowest carbon cost.
This is reflected in the rise of companies providing lower emission solutions, such as low-energy lighting, wind turbines, and smart meters. The market for electric vehicles alone grew by 54% in 2017 and there’s been a proliferation of charging points for those vehicles.
Such deep changes will create opportunities for investors who get in early on emission control technologies such as gas scrubbers for power plants, as these will rise in value once carbon trading schemes and the real costs of pollution are factored in.
Fossil fuels currently represent 63% of power generation - that figure is expected to be just 29% by 2050, according to the International Energy Agency. Those who want to keep using fossil fuels will have to do so more cleanly if they’re to thrive in the new market - and that means scrubber technology will have to be used.
New standards, both regulatory and voluntary, are shaping the market.
One example of this is the Poseidon Principles, a framework agreement to align investors with the International Maritime Organization’s (IMO) aim of halving CO2 emissions from the maritime industry by 2050. Created by a coalition of investment banks, international experts, and industry stakeholders, these principles give direction to those looking to invest greenly in the shipping industry.
The Poseidon Principles were inspired in part by the Equator Principles, a previous risk management framework for mitigating environmental and social risk. These principles are already used by 96 institutions in 36 countries, giving them a big impact.
Though not universally adopted, the widespread use of such standards means that they are creating opportunities for investors. For example, the push to reduce air pollution in shipping through the Poseidon Principles will increase the demand for gas scrubbers, which are used to remove toxic gases from ships’ exhaust fumes.
Depending on the region, compulsory regulations are also a factor. While every government approaches environmental regulation differently, every government is now tackling it, and many are looking to introduce stricter standards. This increases the demand for emissions control technology, which is of use to so many important sectors. For example, gas scrubbers are useful in cleaning up both shipping and energy generation.
It's Already Working
This isn’t just speculation. The old wisdom that environmental investment gave lower returns is being swept away by reality.
In 2015, an Oxford University analysis found that taking environmental, social, and governance factors into account, led to better share price performance in 80% of cases studied and better accounting results in 88% of cases.
Investing in greener technologies, including emissions control, is already a good bet, and it’s only going to become more lucrative as humanity works to clean up its act.