We’re so glad you could join us. This newsletter, to be delivered twice monthly, will explore pertinent issues related to smart technology, clean energy and sustainable agriculture. Our goal is to keep a finger on the pulse of industry trends and how they relate to Novus’s goals and success.
What will the Biden administration mean for green investors?
Yesterday the Electoral College formally elected Joe Biden the next president of the United States. For investors focused on clean energy and environmentally sustainable economic development, the incoming administration — expected to usher in sweeping changes to better the planet as well as the way we do business – will be one to watch.
Although we can only speculate how Biden’s policies will take shape and play out, brushing up on administration bios and market trends can give some idea of what’s to come.
Here are some things to know:
Biden has a background in green energy initiatives
As vice president, Biden ushered in the implementation of the American Recovery and Reinvestment Act of 2009 (ARRA), a fiscal stimulus bill that, among other things, pumped $90B into green initiatives, which ultimately boosted demand for green skills.
While on the presidential campaign trail Biden announced a $2T climate control plan, called the Clean Energy Revolution, which is the second tier of an overall economic recovery plan. In addition to creating 10m jobs related to a green energy infrastructure, the plan aims for U.S. to achieve carbon neutrality by 2035 and net-zero emissions by 2050.
Since winning the election, he’s actively sought to create a cabinet of “climate-ambitious” advisers and has discussed global efforts with foreign leaders as well as Pope Francis during congratulatory calls.
Positioning climate change as a liability creates obligations for action
Janet Yellen, Biden’s pick to helm the U.S. Treasury, is also known for her interest in climate friendly change. A founding member of the international Climate Leadership Council, Yellen has a knack for explaining the climate crisis in economic terms. She’s described climate change as a “risk to banking organizations.”
The Trump administration has echoed this assessment. According to a September report from the U.S. Commodity Futures Trading Commission: “Climate change is already impacting or is anticipated to impact nearly every facet of the economy, including infrastructure, agriculture, residential and commercial property, as well as human health and labor productivity.”
Framing climate change as an economic liability could obligate the government to intervene. The Dodd-Frank Act – passed in response to the 2008 housing crisis, blamed largely on the practice of subprime lending – is meant to protect consumers increasing regulations on the financial industry. It might not be a stretch, then, for the Biden administration to rationalize increased capital requirements or more stringent lending terms for fossil fuel projects.
And the market could play a leading role in
It would be naïve to assume Congress will rubberstamp the incoming administration’s efforts, but that won’t be an insurmountable hurdle if green business developments become more attractive to investors.
And it might not be a hard sell. Municipalities, utilities and companies have been increasingly receptive to clean energy because it’s less expensive than fossil fuels. So it’s no surprise clean energy stocks have outpaced fuel fossil. Today, about a third of managed U.S. assets are subject to an environmental, social and governance (ESG) analysis – up 42% since 2018. Globally, investment in renewables is expected to reach $16T by 2030.
We’re already seeing the effects of this shift. Shell recently announced it would close a refinery in Louisiana, laying off some 650 workers. The COVID-19 pandemic took the brunt of the blame for decreased oil demand. Still, BP in its annual report recognized that global oil demand likely has hit its peak. To stay afloat, these companies have already started investing in lower-carbon technology.
In the meantime, Congress will be under pressure to prioritize policies that create jobs for those displaced workers. Green jobs could be a big part of the solution. And there are already systems in place that could incentivize green business development.
Qualified Opportunity Zones – areas identified by the government as economically distressed – might be eligible for preferential tax treatments for new investments. This gives startups focused on renewable energy, ag-tech and other burgeoning industries additional incentive to establish roots and conduct business in these areas.
Rural areas, in particular, could enjoy a huge economic boost from development in green energy and sustainable agriculture. Workers previously employed by oil and coal companies could assist with building the infrastructure necessary for a low- or no-carbon grid, and in green energy generation.
With the recently announced merger with AppHarvest, an ag-tech startup focused on growing produce in a controlled indoor environment, once approved by Novus Capital Corporation shareholders, our investors will have a vested interest in policies that contribute to the success of clean energy, agriculture and rural economic development.
In Other News
Global Agri-Food Systems
A recent study shows sustainable farming methods are able to maintain – and in some cases increase – their output. These results are a solid rebuttal to the claim that eco-friendly efforts diminish yields.