We expect major upheavals in the financial markets over the next few years. In this article we explain our cyclical framework for these challenging times and why you should invest in commodities now.
Published: 16th of June, 2021
t o r c k c a p i t a l m a n a g e m e n t
Energy Revolution – Part 1
The Need for an "Energy Revolution"
31st of August, 2021 - torck capital management AG
Heatwaves, deadly floods and wildfires – the consequences of global warming are felt across the globe: This summer alone, heat waves have killed hundreds of people in the United States and Canada, floods have devastated Germany and China, and wildfires have gained the upper hand in Siberia, Turkey and Greece. These disasters are predicted to become more frequent and intense as the planet continues to heat up.
This month, the urgency for a far-reaching global energy sector transformation was further underscored by a new landmark report on climate change. The report which was released by the IPCC, a body of scientists convened by the United Nations, has concluded the world is likely to temporarily reach 1.5°C of warming within 2040 even in a best-case scenario of greenhouse gas emission reductions (see Figure 2).
It is a call to action for all 189 countries that have committed to limiting global warming to well below 2°C by 2050 in the 2015 Paris Agreement. Surface temperatures have already risen by 1.1°C since the 19th Century and are accelerating faster since 1970 than in any other 50-year period over at least the past 2,000 years (see Figure 1).
Since the Paris Agreement the world’s carbon output has risen by 4% and should we see a doubling of greenhouse gas emissions by 2100, chances are that global warming may rise to 4.6°C relative to 1850-1900 with a severe climate impact. According to estimates, only the equivalent of another 10 years of current global emissions can be released to still achieve the climate goals. Hence, there is a clear need for governments to accelerate their plans to cut emissions.
The IEA, an autonomous inter-governmental organisation within the OECD framework which acts as a policy adviser to its member states in questions of energy security and clean energy transition, in the Sustainable Development Scenario analysed that to put emissions on a trajectory consistent with the Paris Agreement requires the annual installation of solar PV cells, wind turbines and electricity networks to expand threefold by 2040 from today’s levels, while sales of electric cars need to grow 25-fold over the same period (see Figure 3).
The deployment of renewable energy combined with improved energy efficiency provides the most cost-effective way to achieve climate goals, according to IRENA, an intergovernmental organisation that also supports countries with their clean energy transition.
Therefore, numerous governments have raised their ambitions and taken steps to accelerate their renewable energy deployment. The speed of change in each country and sector will be determined by technological innovation, political momentum, regulation and consumer preferences for products and services that have a smaller carbon footprint, as well as the ability of supply chains – from the supply of battery and base metals to the production of batteries, EVs, wind turbines and solar panels – to accommodate a transforming energy sector. Perhaps most crucial now is for governments to provide economies with clear and strong signals about energy transitions.
This was our first in a series of blog articles to show why now is the time for governments to call for an “Energy Revolution” and take serious action in the fight against climate change. In our next article you will learn more about major economies’ current stance on climate policy and how China, the EU and the US plan to extend their investments in clean energy technology.
Continue reading with part 2 here.
At torck capital management it is our aspiration to both drive meaningful change with our investments and seize exponential opportunities for return in a time of market disruption. Our new Energy Revolution Fund – set to launch at the end of September – builds on the thesis that a worldwide clean energy transition will kick-start another “super cycle” of rising commodity prices, which was last seen in the early 2000s when China’s economic growth took off. This has the potential for exponential returns from an investment in hand-picked junior mining companies that supply the world with critical minerals for the shift from a fuel-intensive to a material-intensive energy system that is powered by clean energy technology.
Follow our upcoming blog articles to learn more about how the clean energy transition will impact the demand for critical minerals and create a strong investment case for junior mining companies.