Much has been written about energy transition over the past year, spurred by a wave of policies and announcements targeting net zero carbon emissions by companies and countries around the world. Amid the ongoing United Nations Climate Change Conference, known as COP26, this month’s commentary reflects on developments related to energy transition over the past year.
After a strong global economic recovery in the first half of the year, increasing concerns over supply chain complications, continuing inflation and the Delta variant led to downgraded expectations for the pace of growth for the remainder of the year. Despite these issues, equity markets were mostly flat for the quarter.
Emerging market (EM) equities experienced a bout of volatility during the third quarter, driven largely by China, as the central government’s regulatory campaign weighed on sentiment, while concerns over a power crunch and growing credit risk in the property market led to downward revisions to economic growth forecasts. Further, persistent tightness in global shipping and commodity markets led investors to increasingly question the transitory inflation narrative, as the Federal Reserve (Fed) inches closer to tapering its quantitative easing.