In the shift to renewable energy sources, the Mackenzie Resource Team says investors can apply a valuation framework that uses a sustainability lens to find opportunities.
The Sustainable Movement: Resource opportunities in the shift from Oil to Lithium
Mackenzie Resource Team says the shift to renewable energy should generate opportunities for resource investors.
BENOIT GERVAIS, Portfolio Manager, Head of Mackenzie Resource Team: Well, climate change is going to force us to make a number of impactful changes to the way we live our lives, and that will bring a number of opportunities to the resource market for the several decades to come.
We have to move from the inefficient and polluting to the efficient, clean and sustainable. Think of the resources that are in front of us like lumber which have negative or low emission associated with them, they will be viewed favourably versus cement.
Natural gas, which is a great complement to renewable electricity, it can come on and off as the sun shines or the wind is blowing.
Specialty materials like lithium and other alloys will allow us to travel lighter and more efficiently.
For most people, a technological shift is not about if but rather when it will happen and under what timeframe are we going to move from the polluting and the inefficient?
And more specifically, today is about the electrical car and how fast the masses will likely adopt that technology. So we went back in history and looked for conditions necessary for rapid adoption. One, it has to be much cheaper. Think of the PDF versus a Xerox paper. Or two, it has to be a much better offering. Think of the smartphone versus the flip phone. In the case of the car, it may mean a car that drives you around while you’re working or you’re sleeping. Neither of those conditions are today present, which makes us believers that a more gradual pace of adoption is more likely, but we’re looking ahead and maybe a breakthrough will come.
While technology is likely to make our world cleaner and more efficient, it’s also likely to make this world more energy intensive, not less. Take today and the Amazon movement which basically talks about getting parcels delivered the same day or the next. Forces all of those parcels to travel by air and not by sea. And remember, speed consumes energy to the square.
When it comes to the more established trends, we still see half the world’s population, 3.5 billion people, consuming one-tenth the gigajoule of an average European.
For instance, in India, we saw President Modi set the goal to electrify every single village in India. That means more electricity, more air conditioning, for more people.
The good news is that the Mackenzie resource team has been looking at investments in this space through the lens of sustainability for a very long time. In order to be a good citizen, keep your (inaudible), keep the right to be an operator, you ought to be sustainable.
And today, this transition is presenting itself a little different. We’re going to have to factor in the cost of polluting—think of your CO2 emission rights—or the cost to replace your product lines into something that is not polluting or polluting a lot less. This is all the cost of doing business.
There are enormous opportunities presented to ourselves today for the next several decades and we want people to be part of it.
- Mackenzie Minute: March 9, 2018
Portfolio Manager Onno Rutten says the Mackenzie Resource Team is watching for indicators of more global economic growth while gauging market confidence in the pricing of resource equities.
March 9, 2018
- Mackenzie Minute: November 24, 2017
Benoit Gervais, Head of the Mackenzie Resource Team, says resources are positioned for outperformance in a widening global economic expansion.
November 24, 2017
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