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Climate change fight should be 'mostly good' for S&P 500, BoA says

By Alexander Bueso

Date: Friday 12 Feb 2021

LONDON (ShareCast) - (Sharecast News) - The fight against climate should be "mostly good" for the S&P 500, strategists at Bank of America argued, pointing out the gargantuan costs for humanity, even if mostly over the truly long-term, should we fail.
As research from the group of 30 showed, on their current path, rising temperatures could slash global gross domestic product by as much as 25% by 2100.

By way of comparison, last June, the International Monetary Fund projected that global GDP would shrink by 4.9% in 2020, although it was seen bouncing back by 5.4% during the following year.

According to the 2005 Sterne Review prepared for the British government however such losses from climate change would be permanent, leaving global GDP on a fixed lower trajectory.

The new US administration had already enacted a range of policies aimed at curbing 'bad' behaviour, via regulation and changes at the agency level.

Now, Congress was expected to push through further measures, possibly including a carbon tax and a large green infrastructure programme with the aim of accelerating development of a clean energy economy.

Although the US had "some work to do" to catch up with other regions, especially Europe, "the net positive impact on the economy will likely boost corporate profits," BoA said.

Long-term 'losers' from such a policy shift were likely to be in the traditional commodities-driven sectors.

In fact, firms with the highest direct carbon emissions and emissions/oil price betas had already de-rated and to a large extent had been expunged from investors' portfolios.

Nearer term however, BoA said: "we could see more upside than downside risk to Energy and traditional commodities based on the cyclical recovery that appears underway."