Turning to the energy transition, it is looking increasingly unlikely that the target to keep global warming to a maximum increase of 1.5C is going to be achieved. The energy transition has not stalled, however, and is making positive progress. We believe the genie is out of the bottle for renewables, for example. The International Energy Agency observed that 2023 was a record year for the installation of renewables with 507GW, an increase of almost 50% on the previous year.
The vast majority of the technology we need to reduce emissions is available and encouraging companies to decarbonise and investing in businesses that can drive forward the energy transition both have important roles to play. By understanding which companies will experience long-term structural growth from this trend, as well as if that growth will be profitable, we now see a great investment opportunity in those businesses which help move us to a much lower carbon energy system.
An example is Sustainable Energy Efficiency Income Trust, which has unique projects in energy efficiency and waste streams. One such project is in Spain with the olive oil industry. Only 10% of an olive is used to produce extra virgin olive oil, with the other 90% going to waste. The Sustainable Energy Efficiency Income Trust project takes the waste - olive pomace – and from that produces extra olive oil called orujo. They are then left with the waste of that process in a biomass which is used to power electricity and the heat required in the production of olive oil. This process is very efficient in terms of resources and is a great example of a circular economy process that is also profitable.
Humanity faces an enormous challenge to stabilise the climate. While we will almost certainly exceed 1.5C in warming in the coming years, every 0.1C of warming we can avoid is critical. Sustainable investing is one point of influence that people can use to accelerate the change.
