Green investing helps drive low-carbon aluminium, En+ Group chair says

A growth in investing based on environmental, social and governance (ESG) issues is rapidly advancing a widespread market appreciation of low-carbon products, including aluminium, the chairman of En+ Group said.

Lord Gregory Barker said that while mainstream investors previously did not turn their attention to so-called “green investing,” there is now an increasing recognition that a large, geopolitical industrial shift is coming.

“The really shocking thing has been the success of the disinvestment movement in the fossil fuel industry,” he told Fastmarkets during a webinar interview this week.

“The calamitous fall in the value of oil and gas and in particular coal stocks has really woken up a lot of investors that previously were not that bothered, and I certainly see that with the discussions I have with financial investors,” he said.

En+ Group is the majority-owner of UC Rusal, the world’s largest low-carbon aluminium producer. Its ALLOW brand creates less than 4 tonnes of carbon dioxide per tonne of aluminium produced, in terms of both direct and indirect smelter emissions.

“We’re now seeing a dramatic increase in the deployment of renewable, clean energy right the way around the world, a dramatic fall in the cost of that energy to make it competitive with traditional fossil fuels, and the increasing seriousness with which governments around the world are now attacking this agenda,” he noted.

“Rather than just talking the talk, they’re adopting very clear, legislatively binding targets, and so this is becoming real,” he added.

Despite jurisdictional differences in legislative approaches to climate change, including the withdrawal of the United States from the 2015 Paris Agreement on climate change mitigation, Barker said he remained optimistic that progress is being made.

“The bottom line is this agenda is much more long-term than any one leader anywhere in the world, and business and investors recognize that, civil society recognizes that, and you can’t stand in the way of what is now a mega-trend for investors and for business,” he said.

Reduced industrial activity and international travel during the Covid-19 pandemic has revealed what a lower emissions environment can look like, although the global economic downturn has pushed other issues higher up the legislative agenda at the moment.

“In the short term, in the immediate term, obviously [climate change] has taken a back seat,” Barker acknowledged, although noted that recovery plans had placed decarbonization at their center as governments worked to rebuild economies.

“It’s not surprising that people are making the link between Covid-19 and a green recovery. One of the most trending hashtags on Twitter at the moment is #buildbackbetter,” Barker told Fastmarkets.

“It makes no sense from a climate change point of view for the European Union, for example in its green recovery stimulus package, to be handing out money to fast-track the rollout of electric vehicles – whether in the form of subsidies to consumers or business loans to the manufacturers – if all you’re doing is sucking in very high-carbon aluminium from the other side of the world,” he said.

Chinese aluminium
According to Barker, the heart of the problem lies primarily with Chinese aluminum production, which can have a carbon footprint of up to 18 tonnes of carbon per tonne of aluminium. But, Barker said, there is scope for China to move to low-carbon aluminum through the shuttering of its coal-fired electricity generators and adding hydroelectric power capacity.

“We know China’s capability for building very large infrastructure projects in eye-wateringly short amounts of time. So if there is the political will there [in China], you could certainly see in the 2020s and 2030s, China managing to increase the amount of aluminium that is produced from clean sources of electricity rather than very dirty, very polluting coal that it is at the moment,” he added.

Not all aluminium companies will be able to make this transition, but Barker said this will be an unfortunate consequence of the transition to a greener economy that is now required.

“If you are a major producer of high-carbon aluminum, and you make a good living from that, in a highly competitive world, you probably don’t want the status quo to change, or you’ll put off change for as long as you can fight it,” he said.

“The hard reality is, there will be winners and losers, and there will be some countries that can’t make that transition. But the global economy constantly evolves,” he told Fastmarkets, noting that the United Kingdom used to be the global center for the manufacturing of cotton, for example, and at one point was the largest miner of coal, neither of which are the case now.

“So, the global economy will constantly develop; just because you’re ahead in one particular sector you can’t just press freeze and hold it at that,” he concluded.

To listen again to the Fastmarkets webinar interview with Lord Barker, click here.