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JPMorgan Asset says climate risks loom for Brazil, South Africa growth

Emerging markets face a difficult shift to a low-carbon economy.
A volunteer firefighter walks along Transpantaneira road at the Pantanal wetlands region in Porto Jofre city, Mato Grosso state, Brazil, on Friday, Sept. 11, 2020. Image: Bloomberg

Emerging markets such as Brazil, Russia and South Africa face a more difficult shift to a low-carbon economy because they lack room to cushion the change by ramping up government spending, according to JPMorgan Asset Management.

The three countries don’t have the headroom to take on more debt to alleviate short-term pain, strategists led by Jennifer Wu wrote in a report Friday, adding India will probably find the transition difficult too. Canada and Australia, also comparatively carbon-intensive, have more room to borrow, they said.

The cost of moving to a low-carbon footprint “either can be borne by today’s households and businesses or it can be financed by public debt and shifted onto future generations, with much of the debt ending up on sovereign balance sheets,” the strategists said. A hybrid approach involves public-private partnerships, they added.

While there’s much uncertainty about the exact impact of climate policies in the most exposed nations, a shift could reduce Russian gross domestic product by more than 6.5% over the next three to four decades, according to the report. Switzerland, the European Union and Japan look more ready for the changes as they rely less on fossil fuels, are willing to make the transition and often lead in green technology, the strategists said.

“The Earth’s atmosphere is changing in ways that have not been seen in some 800,000 years — the evidence is overwhelming,” the strategists said. Investors “need to take into account important geographical and sector differences in the trajectory of climate policy.”

Renewable energy and green infrastructure stand to gain, while traditional energy, consumer cyclicals, materials and some utilities could be hit hardest. Integrated oil companies’ price-to-book ratios have a positive correlation with a measure of their exposure to technologies underpinning the carbon transition, according to the report.

A reduction in the emissions that contribute to global warming could be achieved via carbon taxes and regulations, debt-funded green stimulus or a combination of both, JPMorgan Asset Management said. Central banks could reorient quantitative easing programs toward greener assets, potentially reducing yields on green bonds relative to others, according to the report.

© 2020 Bloomberg

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Has Donald Trump read this article?

Climate change has as many supporters as deniers, who, are not given as much airtime as c/c supporters. Simply, the world is over populated and the planet is getting screwed as we try to house and feed everybody. This is apparently the main reason for warming of the planet. Batteries, solar etc are band aid solutions for a fractured leg.

A pastor recently spoke on this topic and he advanced a very convincing spiritual argument why climate change is a hoax.

Who the f is JP Morgan?

@JP Morgan… focus on the US and Donald Trump … focus on their huge debt pile.

Stop putting SA into the ground.

We already 6 feet deep and its time we get out of this mess.

What does a Bank know about Climate Change (a Fake Science used to push the agenda to depopulate the world) ?

JPM is part of the globalist elite wanting to control the world via a single World Government using covid and climate change to push their agendas- take note how the UN will play a more central role going forward in pushing for centralization of Govt and legislation. Our flowerly worded (no-action) president is enjoying his moment at the UN as we speak.

Future will be: loss of basic rights, removal of physical cash (try dodging tax with electronic currencies – under pretense of saving you from the dreaded covid), Chinafication of economy (more central govt control in all aspects of business), centralisation through internaltional bodies (UN, World Bank, IMF etc) , apps/micro-chips to track your every move and don’t forget the mandatory vaccines against a virus barely worse than the normal flu (although mainstream media does their very best to keep you fearful)

The world forward looks like a world that will not end well.

End of comments.

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