The increased global demand for energy has led carbon dioxide levels to be the highest they’ve been in the past 3.6 million years. In 2021, CO2 emissions accumulated 36.3 gross tons, the highest average annual concentration in the atmosphere to date. This has led to the megatrend of decarbonization, with many investors demanding that companies adhere to aggressive net-zero targets.
So, with the carbon transition already underway, investors are asking where the opportunities and risks are. In an episode of the “Disruptive Forces” podcast, Ron Silvestri and Jim Tyre, senior research analysts and portfolio managers from the Neuberger Berman equity research team, discussed the megatrend of carbon transition with host Anu Rajakumar.
“The trend, in my view, of decarbonization and a more climate-resilient future, is the most powerful mega trend I’ve witnessed in my 30-year investment career,” said Silvestri. “Countries continue to focus on drastically reducing planet warming, greenhouse gas emissions in the atmosphere, and as a result, there has been an absolute surge in sustainable infrastructure and renewable energy projects globally to help facilitate a more climate-resilient future.”
Silvestri added that he was also seeing “a heightened emphasis on clean energy” that’s “accelerating momentum.”
“From a global perspective, over 120 countries have made carbon commitments,” he said. “This compelling overall opportunity entails a massive 50 trillion investment in sustainable infrastructure through 2050.”
Tyre added that electrification “is one of the main sub-themes that” Neuberger Berman invests in, and estimated “that there’s $14 trillion of needed investment in the electrical grid alone by 2050 to support transition goals.”
“This should provide decades of runway of very strong growth for many companies throughout the value chain, in which we look to invest,” Tyre said.
Launched in April, the actively managed Neuberger Berman Carbon Transition & Infrastructure ETF (NYSE Arca: NBCT) seeks to invest in companies that are focused on or are transitioning their business to focus on one or more of the following themes:
- Low-carbon resources — issuers focused on producing renewable energy, such as solar, wind, geothermal, and green hydrogen, and the related storage and transport of these energies.
- Electrification — issuers that help enable the replacement of technologies that use higher carbon-emitting fuels with those that use low-carbon resources as a source of energy, including those that support smart grid and electric vehicle-charging solutions, as well as electricity transmission and distribution that helps expand usage of low-carbon solutions.
- Carbon reduction solutions — issuers that directly facilitate the carbon reduction goals of infrastructure owners, including innovative raw materials, industrial gases, engineering and construction service providers, environmental services providers, and environmental technology providers.
Neuberger Berman currently manages $18 billion in thematic equity investments for global clients as of December 31. These ETFs are designed to broaden access for individual investors and their advisors.
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