Navigating the Investment Impact From Evolving Carbon Rules
Unraveling the implications for energy assets in shaping investment portfolios is vital
by Dr. Pooja Khosla and Thomas H. Stoner Jr., Entelligent
For investors concerned about climate change risk, the issue of which stocks to buy, hold and sell can be quite complicated. The power sector representing the largest consumer of carbon fuels is highly regulated. When plants are decommissioned, rates are typically raised to cover the cost of investment in replacement plants and equipment. Investors must understand the risks to a company that might end up with a stranded asset. When there is adequate cost recovery, it represents a cost to users, but it’s often a benefit to shareholders. The tension for regulators is striking the right balance.
More deeply, data that measures climate risk – and penetrates sector-level analysis to security-level analysis – can be vital for investors who want exposure to the power sector while minimizing transition risk to a lower-carbon future.
Before we review what this data reveals about sectors and stocks, consider the consequences of regulation. Regulation, after all, is crucial for addressing climate change. U.S. Environmental Protection Agency rules can accelerate the transition to cleaner energy sources and encourage the adoption of technologies that reduce greenhouse gas emissions and make net zero goals real.
On the other hand, there’s concern that excessive regulation creates an unnecessary bureaucratic burden, diverting resources from innovation, infrastructure development and energy security. That last factor is the most important for a nation’s economic stability, as well as its defense, geopolitical influence, environmental sustainability and resilience.
Read the full article featuring Entelligent's forecast models as well as a look at energy companies, all here - https://greenmoney.com/navigating-the-investment-impact-from-the-epas-evolving-carbon-rules/