- ESG (environmental, social, governance) investing has resulted in rapidly growing interest in companies admired for their ESG impact, as well as for their financial strength.
- Certain commodities have an important role to play in lessening our environmental footprint in key areas such as transportation and electricity generation.
- Although the near-term outlook for some commodities is clouded by oversupply, the expected dynamic growth in electric vehicle (EV) demand, as well as progress toward grid parity in electricity production, point to strong longer-term demand for lithium, copper, and other materials.
One trend we're watching closely for 2020 is ESG investing. ESG investors apply certain filters to their investment universe to highlight companies admired for their ESG impact, as well as for their financial strength. According to the US SIF Foundation's 2018 Report on US Sustainable, Responsible, and Impact Investing Trends, there is now more than $12 trillion invested in a variety of socially responsible ways. That's one out of 4 of the total assets under management in the US alone.1 And it's clear that certain commodities have an important role to play in lessening our environmental footprint in key areas such as transportation and electricity generation.
In transportation, consumers are increasingly turning to electric vehicles (EVs) rather than those powered by internal combustion engines. The global EV market, powered by batteries reliant on commodities such as lithium, cobalt, and nickel, is expected to grow significantly in many segments over the next 2 decades.
While the near-term outlook for lithium and some other commodities is clouded by oversupply, there could be a supply crunch by the mid-2020s. In fact, lithium's use in every lithium-ion EV battery type means it is likely to have double-digit annual growth, making up over 80% of total lithium demand by 2030.2
Copper is also a major component of EVs, as it's used in electric motors, batteries, inverters, wiring, and charging stations. According to data from the International Copper Association (ICA), hybrid EVs contain about twice as much copper as a conventional internal combustion engine, and pure EVs contain roughly 4 times as much.3 What's more, ICA predicts that copper's use in EV transport may become even greater with the emergence of energy-independent vehicles that use solar photovoltaic panels to harness renewable energy.
The use of wind and solar power for electricity generation offers similarly intriguing possibilities. Falling costs for renewable energy have brought us much closer to "grid parity," the point at which the cost of producing electricity from renewable sources is on par with production from fossil fuels. Copper, steel, and many other commodities have key roles to play in this rapidly growing market, and we will be watching these developments carefully in the coming year.
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