As the world enters this new economic environment and a situation whereby governments are holding down nominal interest rates below nominal GDP and inflation, key investment themes are arguably more reliant on goverment policy than ever before.
The renewables and energy transition is a key lever in enabling government to invest significantly in the critical driver (and likely to be the single largest policy lever) to assist in supporting inflation. It is estimated that USD 1.5-2 Trillion annually will be invested in the energy transition and renewables with energy storage / batteries being the most significant area of investment along with supporting technologies and energy generation and transmission investments by both government and private sector.
Supported by significant stimulus and expansion of central bank balance sheets which is ultimately finding its way to financial assets, the key areas of investment we see as long term opportunities within this space are the energy storage and transmission. Our view is that energy generation is relatively well progressed and somewhat commoditised whereas the storage and efficient transmission of energy with a particular focus on the storage of energy through battery technology and commodities is where the most significant weight of capital will be competing to find a home. Copper, Vanadium and battery technologies are Wattlestone’s focus areas with Vanadium being core to our focus within the group being suitable for industrial demand requirements and without the flammable / explosive properties of the more dated technologies such as Lithium.
Further to this enormous investment and policy shift supported by government debt service costs at basically 0%, infrastructure is going to be a logical and major investment theme and renewables or green infrastructure will be the focus for governments globally creating a multi decade investment thematic. This will support and create new industries, inflation important to drive down the value of the 9 trillion of government debt taken on through COVID (3 x the debt central banks took on during the Global Financial Crises) and a desire to shift to a green energy world.
