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Green economy is here to stay – Ninety One CEO Hendrik du Toit

But this does not mean switching off the fossil economy.
Businesses must be given a chance to transition. Ninety CEO Hendrik du Toit. Image: Supplied

The move to a greener economy could work out well for the resource sector, says Ninety One founder and CEO, Hendrik du Toit.

During the Covid-19 crisis there has been an acceleration in the move away from the use of fossil fuels and though such a shift might be disruptive to many business models, it could work out well for players in the resource space, says du Toit, who was speaking on the group’s results for the year to end-March.

His views somewhat echoed that of Sibanye-Stillwater CEO Neal Froneman who said last week that there was a potential supercycle coming in the mining sector.

Read: Potential mining supercycle on the way – Froneman

Froneman said the shift was particularly good for platinum group metals, which are used in the making of greener fuel cell-based energy.

Resources get a boost

Du Toit made the same point that the rejigging of the economy away from fossil fuels will support the resource sector.

“Where will the palladium and platinum come from that you need for batteries?” he asks.

Platinum group metals are not the part of the resource sector that stands to gain.

“Think of simple things like steel. Wind farmers use huge amounts of steel.”

He adds: “The commodity producers are going to help us transition the global economy to a better one.”

In Du Toit’s view, despite the newfound urgency to move away from fossil fuels, carbon-based energy will still be around for a while, as this conversion will likely take up to 30 years. This means as this switch happens, more effort will be put into mitigating the negative impact of using these fuels.

Green fund pays off

The speed of this shift to a green-based economy, along with the disruption brought by the Covid-19 crisis, however, has made it difficult to make a call on the market implications of these events.

Even so, Ninety One has tapped into this trend with its Global Environment Fund, which invests in businesses that contribute to “positive environmental change through sustainable decarbonisation”.

This fund, which was only started at the end of February 2019, now has over $1 billion in assets under management and has risen in value by 75.8% for the year to end April.

The move to a green economy, nevertheless, possess a challenge for Ninety One as it invests in businesses that it has no direct operational control over.

“We own shares in companies that may or may not do new things. What we require from the companies is a transition plan. If the company has a credible transition plan … that is up to them.”

No easy answers

This could see some businesses adapt to the coming greener economy. Others, however, could opt to “run down the business” and still generate “significant cash flow” for the shareholder, which will in turn invest in more eco-friendly companies.

This means Ninety One is not asking for an “exclusion of all emitters” from its portfolio because they could easily end up very cheaply in private hands, which might care more for the cash than the environment.

Du Toit gives the example of a mining house spinning out its coal operations. As the mining house no longer has carbon-generating coal mines on its books, it looks like it has reduced its carbon footprint.

In truth, the mines are still operating, but just under new owners.

The new owners could give the go-head for the mining company to open new mines, which will actually have a negative effect on the  environment.

Du Toit says when it comes to making this transition, stakeholders have to be practical and understand that there are implications, especially for the developing world.

If the investment community no longer puts money into any project that generates emissions, it could see technology attract all the investment, while projects in emerging countries engage backing from questionable actors.

“They will be more reliant on bad projects.”

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Let’s all jump onto the bandwagon!

Currently, there is no such thing as a true ‘green’ economy. Just political rhetoric as everyone in politics sings from the same hymn sheet, unfortunately.

Politicians need a reason that resonates with ignorant leftist voters, to devalue currencies to hide the cost of socialist vote-buying policies. The war against covid and global warming motivate those myopic voters to support the devaluation of the purchasing power of their salaries and savings. They fund the bribes out of their own pockets.

This situation reflects the essence of socialism.

Most of the go-green decisions are green only in saving greenbacks. We are past the tipping point of expensive green.

Mine with intermittent power being augmented by diesel, 50miles transport. If you do the math they are stupid if the DON’T do a solar smart grid. Yes big capex but small in mining terms and very substantial opex benefits and operating safety / reliability. Plus they get to apply a green coat.

On the supply side, it is frustrating that SA still is not going big on local manufacture of flow batteries. I should not be buying lithium batteries for big battery bank at a factory. I should and want to buy flow batteries. Given duties, the cost/MWh should beat Lithium by 50% minimum and lifetime is multiples of Lithium. Effective cost of storage should be a third of lithium. We could export those like crazy not just into Africa

Absolutely.
All the properties that make lithium great for applications like cars are a moot point for stationary storage :
Wh / L – Who cares
Wh / kg – Who cares

All you need is decent coulombic efficiency, cycle life and of course the right price.

He sure looks like that other guy.

These chaps have a way with words that makes even BS sound intelligent.

du Toit is highly respected in both South Africa and the U.K. He has taken Ninety One AM to one of the top 120 fund managers in the world. He is a straight talker and maybe you just don’t understand the topic that well.

I don’t think so.
Straight talking and The Green New deal are incompatible.

Nothing more boring than watching EV racing, including the Isle of Man silent bike going around.
Give me the roar of power any day.
Trees need Co2. Plant more of them. In any case, the jury is still out on the link between CO2 and climate change.
CO2 is easier to pin onto human actions and therefore easier to tax. How do you tax water vapour? How do you tax Methane emissions without putting a flow meter on the rear end of the offending animals?

End of comments.

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