Make America Green Again

PARTNER CONTENT

by Kames Capital

The IMF, and others, have been critical of President Trump’s announcements regarding US import tariffs. Many have warned of the risks of a US-China trade war spilling into the global economy and of tit-for-tat protectionism.

by Ryan Smith, Kames Capital

Perhaps if the President had framed his ideas from an environmental perspective (unlikely I know), they may have been better received. But in fact, this is what Californian lawmakers are doing.

How? The Buy Clean California Act, signed into law in October last year, calls for the state to set a maximum ‘acceptable lifecycle global warming potential for different building materials’, specifically steel, glass, insulation and certain types of pipes. Washington State wants to do something similar but also include concrete.

The act is a big deal because California is the 6th largest economy in the world. It spends $10 billion a year on infrastructure projects like bridges, highways, government buildings, universities.

Proponents of the California law were inspired to act following the construction of the San Francisco Bay Bridge. The bridge, which opened in 2013, was constructed from steel from a carbon-intensive Chinese mill, despite the project also receiving bids from ‘cleaner’ mills in Oregon and California.

A lot of articles have talked about the changing dynamics in global commodity markets driven by environmental concerns. But where and how stuff is made increasingly matters. And policies like those of California and others (e.g. Sweden and Switzerland) requiring manufacturers to prove their products’ environmental footprint requires independent audit of a materials lifecycle, including the types of energy used in its manufacture.

The West have tended towards outsourcing a lot of our greenhouse gas emissions to developing countries.

That loophole is slowly being closed.

The Kames Global Sustainable Equity Fund holds the following relevant companies:

Kingspan

Approximately 30% of global greenhouse gas emissions are attributable to buildings. Kingspan is the global leader in high performance building insulation. The company is aiming to be 100% renewably powered by 2020.

Steel Dynamics

Essentially there are two ways to make steel: primary steel production using a basic oxygen furnace (BOF), where the raw input is iron ore, or via an electric arc furnace (EAF) using steel scrap. Globally, the steel industry contributes 6-7% of human-originated greenhouse gas emissions. EAF offers significant environmental advantages, not least 67% less CO2 emissions versus BOF. Steel Dynamics’ steel production is 100% EAF and the company operates some of the most modern ‘mini-mills’ in the US.

 

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Companies mentioned may not necessarily be held in any of Kames Capital funds. The information and opinions contained in these pieces are derived from proprietary and non-proprietary sources deemed by Kames Capital to be reliable, are not necessarily all inclusive and are not guaranteed as to accuracy. Reliance upon information in this material is at the sole discretion of the reader.

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