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INVESTORS: 5 Key Takeaways from the 2015 WSJ ECO:nomics Event

Photo: ECO:nomics WSJ, Santa Barbara, CA, USA, March 26, 2015, Left, Jeffrey Ball, Contributing Editor, The Wall Street Journal, Lisa Jackson, Vice President of Environmental Initiatives, Apple

Photo: ECO:nomics WSJ, Santa Barbara, CA, USA, March 26, 2015, Left, Jeffrey Ball, Contributing Editor, The Wall Street Journal, Lisa Jackson, Vice President of Environmental Initiatives, Apple

It is early evening Wednesday, March 25th, and I witnessed a flow of luxury cars drive through the gates of the Bacara Resort in Santa Barbara – the site of the 2015 ECO:nomics conference hosted by The Wall Street Journal. The conference is a must-attend, social gathering for green innovators, executives, policymakers, investors and think tank people engaged in the world of energy, sustainability and technology. Energy is a sector of high importance to sovereign wealth funds, endowments and pension investors. According to our proprietary Sovereign Wealth Fund Transaction Database (SWFD), wealth funds directly invested US$ 19.81 billion in the energy sector from 2013 till the end of 2014.

I enjoyed the conference and the tough questions the WSJ moderators posed to its guests. I want to highlight five interesting viewpoints and observations that I feel are relevant to asset owners and institutional investors.

1. Perspective from a U.S. Coal CEO

The event focused on a number of environmental and energy topics, but started with a tilt toward energy such as the struggling U.S. coal industry and its current state. CEO Robert Murray of Murray Energy Corporation shed some light on the American coal industry. On stage, Murray pleaded, “U.S. coal is being destroyed, folks in this audience want to see it destroyed.”

Murray views coal as a reliable baseload power source for the country, while others in the audience see carbon as killing the planet. The proportion of coal in the U.S. energy portfolio mix has dropped in recent years under a U.S. President Barack Obama administration. Murray reiterated the world is still using coal for energy purposes, building his case, noting that: China still burns coal, Europe is building more coal plants and Australia killed its carbon tax.

2. Natural Gas Kills Coal

The panels shifted toward the fast adoption of natural gas and its rapid ascent of being a key baseload power source for utilities in the United States. Tulsi Tanti, chairman of India-based Suzlon Group, a major wind turbine supplier, stated, “No need for coal, we have natural gas that can provide baseload.”

Tulsi Tanti added that wind projects are challenging due to financing costs, but insisted that the wind industry does not need any subsidiaries. John Woolard, Vice President of Energy at Google Inc. commented that solar and wind are intermittent power sources. He emphasized the importance of having a diversified energy portfolio. Woolard also mentioned natural gas is a very under-appreciated asset.

3. T. Boone Pickens – Oil Prices Will Rise Again

Oil veteran and investor T. Boone Pickens, founder of BP Capital Management, made the case that oil prices will rise due to lower rig counts. Pickens predicted oil could end up at US$ 70 a barrel at year-end.

4. Lisa Jackson and Apple

The event shifted to corporate America and its adoption of sustainability practices. Lisa Jackson, the former U.S. Environmental Protection Agency (EPA) administrator under Obama, is now vice president of Environmental Initiatives at Apple, reporting to the company’s CEO Tim Cook. Jackson commented that Apple is the largest company on sustainability. She said 100% of U.S. operations were backed by some form of renewable energy, caution that operations in the U.S. is only one part of Apple’s large global business. Jackson said that Apple’s data centers are powered by renewable energy – essentially every time one face chats on an Apple device (data is being saved), they are not generating carbon.

Jackson said times are different now, “You can’t scare people into environmentalism.” She insisted on education and understanding.

Photo: ECO:nomics WSJ, Santa Barbara, CA, USA, March 26, 2015, Left, Gerard Baker, Editor in Chief, The Wall Street Journal, Gina McCarthy, Administrator, U.S. Environmental Protection Agency

Photo: ECO:nomics WSJ, Santa Barbara, CA, USA, March 26, 2015, Left, Gerard Baker, Editor in Chief, The Wall Street Journal, Gina McCarthy, Administrator, U.S. Environmental Protection Agency

5. Big Industry Changes – Big Money

U.S. Congress passed the 1970 Clean Air Act, and in 1990 it was amended to add more than 180 hazardous substances. The night panel on Day 2 was fascinating in that the U.S. Supreme Court is weighing on a decision that could impact the U.S. energy mix for utilities. Gina McCarthy, the current Administrator of the EPA, was adamant that the EPA was not violating the U.S. constitution and was “confident to get this rule over the finish line.” If this is the case, then it is bad news for coal and great news for solar and wind companies.

Michael Maduell

The views in this article are expressed by Michael Maduell.
Michael Maduell is President of the SWFI.
www.swfinstitute.org

Asian Sovereign Funds Not Slowing Down on Tech Investing

According to data from SWFI’s Sovereign Wealth Fund Transaction Database, Asian sovereign funds invested US$ 6.05 billion directly into companies and assets in the information technology sector from Jan 2017 to November 22, 2017. In a comparable time frame from Jan 2016 to November 22, 2016, this same group of Asian sovereign funds directly invested US$ 5.02 billion in the sector. These are direct investments, not fund commitments or manager allocations.

Asian sovereign funds such as GIC Private Limited, Temasek Holdings and the Korea Investment Corporation (KIC) have demonstrated bullish signals to the technology community over other sectors. GIC and Temasek have also been major investors in the private side of deals, funding a wide range of tech startups, while providing financial firepower in buyout transactions.

Some notable direct tech investments in 2017 by sovereign funds include Meituan-Dianping, SoundCloud, Nets A/S, Visma AS, Turn, Inc. and Vantiv.

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Future Fund Makes a Guardian Out of Former J.P. Morgan ANZ Chair

The Australian government has appointed Robert Priestley – current non-executive chair of J.P Morgan for Australia and New Zealand (ANZ) and a non-executive director of ASX – to serve on the Future Fund Board of Guardians for a five-year term from November 7, 2017. Priestley replaces former Morgan Stanley Australia chief executive Steven J. Harker.

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Associated British Ports Reboots Property Development Arm to Capitalize on Land Bank

Associated British Ports (ABP) – operator of 21 major ports throughout the United Kingdom – has announced a reboot of its ABP Property division, complete with a new team of specialists in commercial development and logistics led by Huw Turner, in order to identify and develop strategically significant locations in its 2,372 acre land bank.

ABP is owned in large part by a consortium of pensions and sovereign funds, including the Canada Pension Plan Investment Board (CPPIB) at 33.88% ownership, OMERS at 30%, Singapore’s GIC Ventures Pte Ltd at 20.00% ownership, and the Kuwait Investment Authority at 10.00% ownership. Large institutional investors such as sovereign funds, pensions, and endowments have slowly increased allocation towards infrastructure over the past six years as an alternative to equities and bonds, according to asset allocation data from SWFI.

Plans

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