Market participants are hopeful of a more rules-based foreign and environmental approach under the incoming US administration, though policy outcomes may not change dramatically.
Lake There is a lot of talk about a “green new deal” but I do not think it will go anywhere, and this is probably not a good label for it anyway. We know significant underlying shifts are happening in the energy sector and that these require a substantial amount of investment. A lot of this is driven by economics – we do not have to get into an argument about whether it is greener or cleaner, we can just have a lower-cost source of energy.
A lot countries are now committed to net-zero carbon emissions by 2050, which increases the demand for and volume of all the things needed to drive this and in turn improves the economics.
With this backdrop, Biden will sign the Paris Accord again as soon as he can. I understand the incoming administration has a detailed plan for its energy policy and it is bringing a level of professionalism to the COVID-19 response. I suspect the administration around energy will be put in quickly.
Anyone who thinks Biden will be soft on China has not read enough of what he and his policy advisors have said. I think a firm hand with China will remain in place. We can expect, though, that it will be done in a more diplomatic way than under the prior administration.
There will be all sorts of activity in green and social bonds. But there will probably be even more flow around vanilla investment in large-scale infrastructure, whether it is solar and wind farms or grid upgrades. This will go on for a long time.
In some ways the signing of the Paris Accord is a political statement that does not really have any effect on these things, which are driven by simple investment decisions. In Australia, there has been a lot of controversy around renewable energy but a lot of money has been spent on it. A lot of activity is driven by economics and to me this is more important than the political signals.
Porcelli Anyone who thinks Biden will be soft on China has not read enough of what he and his policy advisors have said. I think a firm hand with China will remain in place. We can expect, though, that it will be done in a more diplomatic way than under the prior administration.
I think the cabinet seats will be key in determining the degree to which the new administration goes down this path. This will give us a sense of how it will be tackled.
Lindbloom We agree on China – that the policies will largely remain although they may be delivered more softly. As for the rest of the world, we are more optimistic on relations, the return of the rules-based order and the US returning to some agreements and forums. Therefore we think the election will be positive for developed and emerging debt markets.