A fully flexible way to invest
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The UK is pursuing a multi-pronged approach to reduce its reliance on fossil fuels and de-carbonise the economy. Building out utility-scale infrastructure and storage facilities to support this goal will require major investments. Many industries, including steel, chemical refining, glass, and ceramics release carbon dioxide as a by-product of their production process. Carbon capture technologies can help to mitigate these emissions.
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As carbon dioxide (CO2), which accounts for 80% of all greenhouse gases1, is released into the atmosphere, it traps heat by absorbing some of the radiation naturally emitted from the earth’s land and ocean surfaces, and releases it gradually over time, warming the earth’s surface. Around four-fifths of the world’s C02 emissions are released from the burning of fossil fuels2, such as coal, natural gas, and oil for transportation and power generation. The balance is derived from various industrial forms of production and natural sources.
To create reduction targets, an assessment of the cumulative stock of emissions of greenhouses gases as opposed to level of emissions per annum is required. Scientists are generally of the view that to contain the rise in average temperatures to 1.5 degrees centigrade, atmospheric concentration of C02 should be limited to 350 parts per million (ppm)3. Yet, current levels are above this target and have been gradually rising.
The UK government has set a Ten Point Agenda to reduce the level of greenhouse gas emissions with a goal to end the sale of new petrol and diesel cars and vans by 2030. Whilst de-carbonisation technologies are expensive and immature, the UK has committed significant resources to developing carbon capture, hydrogen fuel, wind, solar, and energy storage solutions. The UK has already built the largest capacity of offshore wind in the world and has tripled its solar capacity since 2014.
Yet, these solutions are not without challenges and will require the very best in human ingenuity to overcome their current limitations. Wind farms and solar panels may account for 17.7% of the country’s current power mix4 but only provide intermittent sources of energy and prevailing battery technology restricts the effective storage potential of power. Whilst sceptics believe the laws of chemistry will constrain progress, storage systems underpinned by lithium-ion batteries, pumped hydro-power, and thermal energy offer hope for utility-scale solutions.
Creating a circular battery production system would be a step forward. Re-using a battery’s core constituent minerals and compounds perpetually would form the foundation of reliable, clean power generation5. Faster charging through advances in electro-chemistry and higher capacity retention to minimise degradation will enable a smoother transition to electric road transport. Tesla founder, Elon Musk, has spoken optimistically about the role his line of gigafactories will play in generating and storing electricity.
Recognising the strategic importance to the automotive sector, UK start-up Britishvolt plans to build a 30 gigawatt battery plant in Blyth. Upon completion in 2027, the factory is expected to produce 300,000 battery packs each year, which equates to 25% of vehicles currently manufactured in the UK6. The project supersedes the successful launch of Britain’s first lithium-ion battery storage project in the outskirts of Oxford in June 2021. The 50 megawatt system is connected to the national grid’s high voltage transmission system and linked to electric vehicle charging stations in the region.
There is a question of whether metals used in batteries, such as lithium, cobalt, graphite, nickel or vanadium can be mined on a large enough scale to produce sufficient capacity to power the world’s fleet of electric vehicles. Whilst the earth’s crust houses a plentiful supply of lithium, the cost of extraction is uncertain. The British Geological Society’s Lithium for Future Technology (LiFT) project aims to improve our understanding of the geological extraction of lithium and support innovation in mineral processing.
Whilst eliminating emissions is optimal, offsetting them would allow the world to continue to retain some carbon-emitting industries whilst still achieving a ‘net zero’ target. Since photosynthesis in trees and plants absorbs carbon dioxide to produce oxygen and wood, the role of forestry on available arable or agricultural land has become increasingly recognised. In England, a million trees are due to be planted from 2020-24 and aggregate annual capture and storage of 75-175 million tons of C02 has been targeted through more sophisticated carbon capture and storage or re-use solutions.
Carbon dioxide has a variety of uses – from the production of chemical materials, in polymers used to make plastics, as well as direct applications in carbonated drinks and enhanced oil recovery. Capturing and re-using the C02 released into the earth’s atmosphere plays an important role in meeting our climate goals. In 2019, Drax, the UK’s third largest electricity supplier, became the world’s first company to sequester carbon stored in biological materials through its biomass plant and plans are afoot to capture and compress all C02 emitted in the industrial heartlands of Teesside and Humber regions using pipelines and storage infrastructure in the North Sea connected to a saline aquifer.
Barclays has an ambition to become a net zero bank by 2050 and has a strategy to turn this ambition into action: achieving net zero operations, reducing our financed emissions, and financing the transition to a low carbon economy. You can read more about these initiatives.
Ultimately, we must all recognise the importance of climate change and the initiatives society must embark upon to provide the necessary remedies. Whilst the transition will be costly, the quality of life of future generations is at stake.
If you want to learn more about sustainable investing, visit our ‘What is ESG investing’ page.
There are a number of funds on the Barclays Funds List that focus on ESG, such as the BlackRock Sustainable Energy Fund, the Janus Henderson Global Sustainable Equity Fund, Jupiter Ecology Fund, and the Royal London Sustainable Leaders Fund. Find out more information on these funds.
We don’t offer personal investment advice so if you’re unsure you should seek that independently.
Funds are designed for the long term so you should only consider them if you can stay invested for at least five years.
These are our current opinions but the future, as ever, is uncertain and outcomes may differ.
Read the Assessment of Value report [PDF, 3.2MB] for funds run by Barclays.
The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.
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