By Mary Jane McQuillen, Portfolio Manager and Head of ESG, ClearBridge Investments
Following President Trump's inauguration, the government has taken a radically different stance on climate change and green technology from the Obama era. This leaves investors wondering if, in this new landscape, they can benefit from environmental, social and governance (ESG) investing given the rapidly changing regulations.
I have been getting this question (and many more) from investors and advisors following the 2017 election. I am frequently asked if I feel worried about the actions taken by the Trump Administration. To which I reply, as an active investor, you have to take it day by day. Some days there is a lot to be worried about, but we try to think about things in the long term. We're not as terribly discouraged as one might think.
For example, many states, including California and New York, have reaffirmed their commitment to reducing carbon emissions. And they have been working toward going beyond their targets. They are a big driver of the efforts in the space -- leading by example.
Beyond state-level pledges, there are also a group of corporations, the Renewable Energy 100 (RE100), committed to providing finance or powering their operations through renewable power. Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG), and Microsoft (NASDAQ:MSFT) all signed a joint statement recently, pledging that they're going to continue to use renewable power. We see corporations stepping up to the plate and making a business case as to why they want to support renewable power. And it's not just for the sake of sounding green -- it's very much about thinking long term.
Another industry slated to benefit from changing legislation is LED lighting. It's a huge part of power consumption around the world. LED currently has about 10% penetration in the United States, but we think that could be over 50% by 2025.
Consumer, industrial, food safety, agriculture and materials are all areas we see opportunity. Many companies are trying to actively reduce their water footprint, as well as the amount of emissions through their operations. Agriculture is an informed contributor to greenhouse gases.
ClearBridge has invested a great amount of time and resources to determine how ESG criteria can contribute to the performance of our portfolios. We have seen evidence that these approaches can perform. So, despite current trends in Washington, not only will green technology survive, it will grow. And professional investors are ready.
Disclaimer: Mary Jane McQuillen is a Portfolio Manager and the Head of ESG Investment at ClearBridge Investments, a Legg Mason affiliate. Her opinions are not meant to be viewed as investment advice or a solicitation for investment. © 2017 Legg Mason Investor Services, LLC. Member FINRA, SIPC.
Disclosure: I am/we are long AAPL, GOOG, MSFT.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.