The climate debate represents a broad church, encompassing an enormous diversity of opinion.  I know people who (still) believe that the climate concerns are completely bogus and the creation of malicious groups wanting to recast global economic systems.  I know others who, in contrast, are convinced that it is probably too late to prevent climate devastation with famine and conflict almost certain to drive a precipitous drop in human population by the end of this century.

Given there is a scientific truth at the heart of the debate, one might expect this diversity of opinion to converge at some point.  While current polling argues suggest this is yet to occur, emerging investment trends might be a catalyst for a realignment among prominent climate groupings.

The climate lexicon tends to divide participants into a binary and pejorative division of deniers and alarmists.  I don’t like these titles as they reinforce a hyper partisan and nonconstructive mindset, but they are so well used that I won’t attempt to invent new titles to soothe my own sensibilities.  What I will do, however, is to suggest that a centrist investor group now exists, sitting between the polarised extremes

To examine how the emergence of this centrist group will influence the debate it is necessary to look at the motivation and logic behind some common denier and alarmist sub groups.  

My sense is that most deniers take a contrarian position for one of two reasons – some rebel against what they feel is a sneering intellectual elite telling them what to think, others see climate action as a threat to their self interest.  Self interest for coal miners and oil workers is pretty obvious but there are those who see decarbonisation as a trojan horse issue that will usher in a progressive agenda that they historically and/or instinctively oppose.  

The mainstream pathway to alarmism is more obvious  – conforming to what is now a clear scientific consensus.  There is, however, diversity in the level of concern among those who describe themselves as simply following the science. Perhaps this simply reflects differences in natural optimism and pessimism within society – perhaps it also reflects the scope for interpretation within the scientific mainstream . There are also those on the alarmist bench who are attracted to a narrative linking catastrophe to society’s unthinking pursuit of economic growth – a bad system doing bad things fits well with their broader world view.  For many on both sides, climate is not just about science, it is a proxy battle in a broader political and cultural conflict that effectively demands opposition to whatever the other side supports.

So where does my centrist investor group fit in?  These are the individuals and organisations that are increasingly looking to invest in and profit from new energy infrastructure.  Recognising that key elements of decarbonisation, generation assets, power distribution and electric vehicles, are now inevitable, they want to be part of the action for obvious commercial reasons.  This is not to say all are completely agnostic about the science of climate change but profit, not saving the world, is the primary driver.

The emergence of the centrist investor is, in part, the result of significant developments, both technically and with respect to public policy, in the last decade.  Technically, the economics of wind and solar have gone from requiring massive subsidies to now being the lowest cost source of incremental generation.  Public policy, which once assumed the necessity of a carbon tax and other mechanisms to incentivise decarbonisation, have continued to evolve in the face of technical developments and a heightened awareness of public opposition to new taxes. These changes have meant that green investments are not just morally good – they can be financially attractive. Private investment in new energy is complementing, if not supplanting, government investment in wind and solar and this will expand into emerging areas such as hydrogen, carbon capture and large scale battery storage

Low interest rates, the growth of infrastructure as a specific investment category and the rise in ethical and socially responsible investment initiatives are also powerful drivers for a shift into green investing.  Pressure is coming from groups like large pension funds who are seeking sources of secure, long term returns that are not available from cash and fixed interest investments. This has meant that new energy infrastructure, led by wind and solar but also including hydropower and storage investments, now competes with oil and gas pipelines, ports, terminals and toll roads for these investment dollars.  Renewable infrastructure obviously performs better from an ESG (Environmental, Societal and Corporate Governance) perspective, a fact not lost on fund managers seeking to attract and satisfy investors aligned to these goals

Will the emergence of the centrist investor impact the partisan denier/alarmist divide?  My argument is that it already has and that this will continue.  Affluent climate deniers will have a choice, join the potential investment boom or boycott it on principle – my guess many will choose the former.  Other deniers, philosophically opposed to a big government energy takeover should be happy with free market capitalism playing a major role. Concerns over a reckless, ideological pursuit of high cost, inefficient replacements for fossil fuels should be allayed by the presence of level headed, smart money players in energy markets.  The remaining deniers will eventually become like a funny old uncle who turns up to family gatherings – tweeting how a cooling trend in some random part of the world is a sign of an imminent ice age.

The response from the climate alarmist group will be more interesting, and it could see the grouping start to splinter.  The hard core alarmists who blame decades old fossil fuel executives for not listening to James Hanson’s congressional testimony will call it too little too late.  We should all hope that they will be proved wrong and as we start to decarbonisation this group becomes a variant of the funny old uncle – this time peddling impending gloom and doom.

More optimistic alarmists who believe catastrophic warming can be averted if we pull our finger out and start reducing emissions should welcome these new participants.  Climate focussed presidential candidates like Jay Inslee and Tom Steyer had campaigns that explicitly called for policies encouraging the entry of private investment into the new energy movement.  Alarmists who can stomach a capitalist takeover should welcome, or at least tolerate, the replacement of Big Oil and King Coal by Big Green and a new Electric Empire.

The group who may struggle with a dominant investor class will be the politically motivated alarmists with a strong affinity for progressive political causes such as reducing wealth inequality, reinvigorating union influence and ensuring greater workplace and managerial diversity.  These themes feature strongly in the Green New Deal which seeks to ensure that the new energy economy is fairer, more inclusive and less likely to create chronically disadvantaged communities than is the case (in their view) with the current fossil fuel based economy. Prominent political alarmists want the new energy economy to be strongly regulated, with Bernie Sanders advocating that all major new energy infrastructure to be government paid for, built and operated.  Adherents to the Green New Deal thinking are likely to oppose, either directly or through a heavy regulatory overlay, an investor takeover of the new energy economy.  This sets up the potential for the perfect to become the enemy of the good from a decarbonisation perspective.  Herein lies the potential for tension within the alarmist coalition – the pragmatists supporting privately owned wind and solar and whatever else drives down emissions and the ideological pure returning to their happy contrarian place. 

The overall thesis being presented here is that as significant elements of decarbonisation become mainstream it is inevitable that market driven capitalism, for better or for worse, will start to take over.  This doesn’t mean that full decarbonisation is ensured or that there are not still major pockets of resistance to zero carbon technology.  It does mean, however, that low and zero carbon technologies will become standard for large scale power generation and in time for light vehicle transport.  Combined, these sectors account for something like 50% of existing carbon emissions for a typical developed economy.  Government price signals and subsidies will still be needed but these will need to be adjusted to cover technologies like hydrogen and carbon capture (both ex process and direct air capture) as well as into food and agriculture which represent the other half of the decarbonisation challenge.

If this thesis is valid, deniers will gradually become irrelevant and alarmists may need to choose whether to embrace the power of capitalism or insist that decarbonisation without the justice, equity and fairness safeguards they demand requires an alternative route on the journey to zero carbon