Intensifying Tariff Conflicts Could Fortify China's Clean Energy Links with Emerging Countries: GIC Suggests
In the rapidly evolving landscape of global energy, Singapore's sovereign wealth fund, GIC, is making strategic moves to address the challenges and opportunities presented by the transition to cleaner, low-carbon energy technologies.
While the countries in the Global South that most benefit from China's exports of sour (clean/low-carbon) energy technologies are not explicitly listed, it is known that about half of all Chinese exports of solar and wind power equipment, as well as EVs, now go to the Global South, with emerging economies driving most of the recent growth in export volumes.
The renewable energy sector has experienced a mixed trajectory. Despite becoming the dominant source of new installed power capacity worldwide due to a decline in manufacturing costs over the last decade, renewable energy equities have underperformed oil and gas stocks and the broader market since early 2022. Fears of investment uncertainty have arisen due to Trump's tariffs on solar, battery, wind, grid, and electric vehicle (EV) industries.
However, there are structural tailwinds that remain aligned with a more climate-adjusted future. Trump's trade wars could potentially lead to closer trade ties between China and developing countries for green energy supply chains. Growing energy demand, in part due to the increased use of artificial intelligence, could sustain the accelerated renewable energy buildout.
Emily Chew, the sustainability head at GIC, has expressed concerns about the expected price volatility for cleantech components and headwinds emerging in the policy arena. She is leading GIC's efforts to address these challenges.
In 2023, GIC established the sustainability solutions group, a private equity portfolio focused on scaling emerging energy transition and industrial decarbonisation technologies. The fund also has a transition and sustainable finance group in the fixed income and multi asset space, targeting opportunities in the brown-to-green transition.
GIC has launched three climate-related investment strategies in recent years, including a climate change opportunities portfolio in public equities to deploy capital towards climate mitigation and adaptation. While a dedicated strategy on the adaptation theme is not currently planned, many of the adaptation and resilience activities identified in the Climate Bonds Initiative's new taxonomy could be investable.
Current data suggests "structurally higher temperatures" present the greatest climate-related risk exposure to GIC's investable universe. As the transition to net zero is not happening fast enough, GIC's work on climate adaptation is at an earlier stage but is increasingly relevant.
In conclusion, GIC is proactively navigating the complexities of the energy transition and adaptation challenges. By focusing on emerging technologies, strategic partnerships, and climate-related investment strategies, GIC is positioning itself to capitalise on the opportunities presented by the global shift towards a low-carbon future.
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