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18 October 2021

Redmayne Bentley: Market Round Up

As the shortage of coal and gas continues to hit global supply chains, the push towards renewables is accelerating as world leaders focus on increasing attempts in green energy. A major obstacle that the global economy is facing is how to invest in an underdeveloped industry with less strain on exhausted financial resources. The solution, it seems, are green bonds which have started a new trend of borrowing by many countries. Successful debuts have been made by the UK and Europe with £10bn and €12bn invested respectively. The money raised by the bonds must be spent on projects primarily focusing on renewable energy which can help accelerate the transition from more traditional energy sources. Last month’s green gilt sale was among the most successful gilt sales, with bids totalling more than £100bn displaying the demand for such bonds among investors. Despite the substantial increase in the issuance of green government bonds, investors are demanding more return on their investments and are no longer willing to pay a premium for it. Investors now have access to a plethora of opportunities, therefore, they require more than a green energy story to invest in such bonds which are likely to flood the market in the near term with 2021 green bond issuance expecting to hit €400bn, doubling 2020’s total.

In the UK, as the energy crunch deepens, two more UK energy suppliers were forced to cease trading due to the ever-increasing wholesale price of gas. BP-backed Pure Planet and Colorado Energy, that targeted renters, have folded amid the energy crisis. Pure Planet, which was 24% owned by BP, supplied gas and electricity to approximately 235,000 customers. Meanwhile, Colorado Energy had an estimated 15,000 customers, with the remaining companies attempting to accommodate these customers under Ofgem’s Supplier of Last Resort scheme. Adding to the pressure, Yorkshire-based CNG Group, a shipping services company backed by Glencore, has notified its customers to find an alternative supplier as they plan on exiting the market. The company is facing difficulties as its customers predominantly included smaller companies which went bust, leaving the company with unpaid bills.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
Redmayne Bentley: Market Round Up
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