Cobalt, electric cars, pensions and climate change


Two quite interesting stories of late, first, one about cobalt (no this isn’t meant to be a chemistry lesson) and another about organisations investing in pension funds to protect workers’ pensions from climate change. They sound very different, but there is a link and common goal shared between the two stories, as I will explain.

First to cobalt. Electric cars are becoming more prevalent world wide. Companies such as Tesla, Nissan and BMW leading the way, with others including Renault, Ford, Volkswagen, Kia and Smart also in the market. Indeed, it is expected that demand for the cars will rise by 20% over the next five years.

They are increasingly being seen as must have symbols, even over and beyond their environmentally friendly claims. The zero emissions claims are heavily disputed in some quarters, but that’s for another story. One of the key components that keeps the lithium-ion batteries and by extension the cars going is cobalt. According to the Financial Times, within recent weeks, due to the expectation of rises in demand and in the price of batteries, 12 hedge funds, (including China’s Shanghai Chaos), have stock piled around 6,000 tonnes of cobalt, valued at approximately $270m. Global demand for cobalt is predicted to outpace supply by around 900 tonnes this year. The Democratic Republic of Congo produces the bulk of the metal, with around 1/3 of the market controlled by minerals giant Glencore.

Going forward, however, whether we do indeed experience these market rises and there is some return on the investment for the hedge funds is dependent on a number of factors including the price of oil (which is rising again), stability in the Congo, government incentives and tax credits such as those in California and the US, whether commerically viable alternative inputs can be found for cobalt and the public’s appetite for the vehicles.

Second, pension funds. The UK’s National Employment Savings Trust (NEST), has invested some £150m into a markets equity portfolio to protect the pensions of around 4.3m British workers, from the threat of climate change. The fund will invest in companies that shift away from producing or utilising fossil fuels based goods and services (e.g. renewable energy companies). The fund particularly targets younger members of NEST, who are more likely to be impacted by climate change.

Similarly to cobalt and electric vehicles, the underlying principle here is also about protecting the future environment. As I stated previously, without doubt there are questions about how low carbon electric vechicles really are. There is also no doubt that some financial institutions view climate change primarily through the lens of new business opportunties. Indeed, there is an underlying financial element to both these stories. However, in an age, when climate sceptics are nominated to head key national environmental protection agencies, it is vital that (more) effective mitigation measures such as investment funds and electric vehicles are put in place to safeguard our environment and futures.

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