“Trump likes coal and oil. Biden wants to take the U.S. back to the Paris Agreement and favors green technology. What does this mean for the Stock Exchange and how should you as an investor think and act in the final sprint of the American presidential election?”
The quote comes from SEB’s private economist Jens Magnusson. He believes the stock markets might be disappointed if Biden wins. Of course, the environmental issue is not the only one on the American agenda and, of course, it is complicated, but it still says something about the short-termism of the stock market. The question is, does it even keep up with time?
The transition is faster than we can imagine
Because it’s going fast now. Five years ago, Tom Fanning, CEO of Southern Company bet $8 billion that natural gas would dominate American electricity in the same way coal has done historically. Five years ago. He seems to have changed his mind. The website is now adorned with wind turbines and numerous indicators show that the demand for gas is declining as renewable energy sources become more competitive. And as Tom Farrell, Chairman of the Board of Dominion Energy – one of America’s largest power companies – said in July: “To state the obvious, permitting for investment in gas transmission and storage has become increasingly litigious, uncertain and costly.” Last summer, Dominion decided to sell off virtually all of their gas assets. There are very much renewable energy sources in the website images there as well these days. It’s fast. Are we keeping up? Are the stock markets keeping up? Are the American voters keeping up?
The shortcoming of the human brain
If you are just slightly conspiratorial, you might suspect that this post is political. It’s not. We often remind each other at Greengoat not to be political, that we start from complexity and refrain from choosing sides as long as possible. So, this post is not political. It is simply a question of how hard it seems to be to think ahead. It doesn’t help much that we KNOW that we are going the wrong direction. We’re still act like there’s no tomorrow. And there might not be if we keep doing what we’re doing.
Light in the dark
There are lots of good things happening too. We see it in meetings with customers every day. As a CEO put it the other day: “The Group has set sustainability goals on us that we will not achieve unless we change the way we work radically. We simply need to review the entire value chain and challenge our existing business models.”
It’s not something you do in a coffee break and it places quite high demands on a management that needs to look beyond the next quarterly report. It requires commitment and understanding throughout the organization and it takes courage to challenge business models that have worked just fine for decades, but don’t do the job anymore.
The art of balancing right and fast
In addition, WWF reports that the share of palm oil has increased in the biofuel we are using in Sweden. This is, of course, due to the EU’s objective of reducing the use of fossil fuels. It easily gets wrong when the quest for speed is high.
We like speed. It’s required right now, but at the same time it must be more right than wrong. Otherwise, we run the risk of losing commitment and speed. So, the final take on today’s mind spin is simply: Think big, start small and prepare for strong progress. Then you don’t have to look back and wonder what happened.