Climate Change Stocks in Focus as Biden Mulls Emergency

Mohit Oberoi, CFA - Author
By

Jul. 20 2022, Published 10:06 a.m. ET

U.S. President Joe Biden is reportedly contemplating a climate change emergency, which would help him move forward with the administration’s green energy agenda. What would a climate change emergency mean for companies that are working to address climate change?

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While the White House has denied the possibility of an immediate declaration of a climate change emergency, it hasn’t ruled it out in the future.

A climate change emergency declaration might not come this week.

Speaking on the climate change emergency, White House press secretary Karine Jean-Pierre said, “It’s not on the table for this week.” She added, “We are still considering it. I don’t have the upsides or the downsides of.”

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Biden’s climate change agenda has been stalled as Joe Manchin has been opposed to higher spending. He also opposed the BBB (Build Back Better) Act calling it "inflationary," an assertion on which economists are divided.

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Climate change stocks soared after Biden’s election.

Climate change stocks, whether in the EV (electric vehicle), fuel cells, or renewable energy space, soared after Biden’s election. He didn't disappoint markets and took a series of steps to promote the adoption of clean energy and electric vehicles. He also rejoined the Paris Climate Deal, which his predecessor Donald Trump withdrew from.

Climate change stocks had a rally of a lifetime after Biden’s election. However, soon the sell-off in growth stocks and the stalled green energy agenda took a toll on them. The valuations of most green energy stocks soared amid the rally even as many of them are loss-making companies.

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What could Biden’s climate change emergency mean for stocks?

Biden’s climate change emergency, if it is declared, would help propel climate change stocks. The global pivot towards renewable energy has taken a backseat, at least in the short term, as the Russian invasion of Ukraine has turned global energy markets upside down.

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Countries have been worried about their short-term energy security rather than the long-term consequences of climate change. Meanwhile, the record high heat in parts of Europe is yet another grim reminder that climate change is among the most pressing challenges before the global community.

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EV stocks are a good long-term investment opportunity.

EV stocks are among the best long-term investment opportunities. All the EV stocks have crashed from their peaks and some of them have started to look attractive. Among Chinese EV companies, NIO is a good bet. The company is launching several new models this year and also has a strong brand in China.

Chinese EV stocks are an attractive asset class.

NIO is also expanding into other countries. The company’s production has taken a hit in recent months amid the lockdowns in China. However, NIO delivered a record number of cars in June. The valuations also appear reasonable even as there's always the hanging sword of U.S. delisting for Chinese EV stocks. That said, Chinese EV stocks are an attractive asset class given China’s focus on EV adoption in the country.

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Tesla, which is set to release its earnings on July 20, is another attractive bet. Tesla is the world’s largest automotive company by market cap. Given Tesla's operational excellence and almost impeccable execution, it's one EV stock to always keep on your radar.

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