The Climate Summit COP21 held in Paris closed on December 8, 2015 with an agreement already deemed as historical. 195 countries signed global commitments to limit global warming to well below two degrees above pre-industrial levels. For the first time in the history of climate debate, developed and developing nations found significant common ground. New mechanisms and funding were promised to aid the global battle against climate change. While there remains a lot work to be done, one cannot escape the positive shift in urgency behind the measures taken, in the willingness to find an agreement and also in the visions to achieve the goals in practice. From the various unilateral commitments from nations, cities, communities, companies and investors present in the summit; the spirit of pulling up the sleeves to work towards common goals was quite palpable and encouraging. This Spirit of Paris transcends beyond even the agreement itself. The transition towards a global energy economy with a lower carbon footprint was given a significant boost from the wide array of initiatives and commitments to abate climate change. We have moved from headline overall goals and statements to visible action from various agents operating in and around the global energy system. And to us, that is the encouraging Spirit of Paris. Movements become inevitable once a critical mass of followers is formed. In economic activity inevitable transitions generate opportunities, and this is what excites us as investors. It is now clear one ignores the energy system transition either at one’s peril or with a loss of opportunity.

The target is a hard one. The transition will take years and significant investments will be needed. Energy is omnipresent in the global economy. IEA estimates that around 68 trillion dollars of energy system investments are already planned until 2040. This figure includes all energy sources and energy efficiency measures in our built environment and transportation. The two degree goal would mean an additional 16.5 trillion dollars on top of that figure in ‘clean up’ investments for renewable energy and additional energy efficiency measures. While the sums are huge, they are in fact relatively small in comparison with the estimated overall fixed asset investment plans during the same period exceeding 450 trillion dollars. These numbers and estimates signal that the task is doable, and given that the additional investments fall into the perimeter of technological solution providers from a relatively narrow current universe, it must mean a significant opportunity for a subset of companies strategically positioned to benefit from it.

In our view the global energy economy will transform fundamentally. The energy industry growth over the past decade has been driven by the surge in primary energy demand from developing countries benefiting traditional energy industry participants. It is quite possible that the next growth phase will take place outside the traditional, fossil fuel based energy industry.  The future energy economy must be viewed with a wider focus. Therefore, here at eQ, we speak of the energy economy in order to avoid confusion with the traditional industry and sector classifications. For us, the agents of the new energy economy will be renewable energy providers, utilities with a cleaner energy focus and technology companies entering the energy space with new solutions for efficiency and alternative energy production. In this day and age, it is inevitable to include technology and IT into the universe of solution providers. The Internet of Things and the general electrification of the automotive industry offer huge opportunities, for example.

In the Spirit of Paris, eQ Fund Management Company decided to change the name of our old eQ Utilities & Energy fund to just simply eQ CO2. We have also changed fundamentally the investment philosophy of the fund. We have exited from oil industry completely and from fossil fuel heavy electric utilities. We have added renewable energy, utilities with a cleaner strategy, transportation energy efficiency solutions providers and other energy efficiency related firms including a selection of key technology companies entering the energy space. eQ CO2 seeks investments from solutions to the three main sources of carbon dioxide emissions: transportation, electricity and buildings and industry. We have a long experience in energy and infrastructure investing and firmly believe the time has come to embrace the opportunities from the energy system transition with a dedicated and balanced approach.

Right after Paris, further positive signals were delivered in the battle against climate change. In the US, the Congress agreed to roll forward the investment tax credits previously planned to end in 2016 to beyond 2020. This further boosts adoption of renewable energy in the US with the increased visibility of regulation and gives a strong statement of the desire in the US to maintain technological leadership in the new energy economy. Hopefully, similar actions will follow in the months ahead and The Spirit of Paris will live in the decisions taken by consumers, companies, nations and all the agents making up the new energy economy to further build the mass behind the movement. We are in early innings of this exciting era – now is the time to put the money behind the talk.