Although the disasters at Three Mile Island, Chernobyl and Fukushima are not the most joyful stories to be discussing this Christmas, there’s little wonder that public perception remains sceptical about nuclear power.
However, as the prices of fossil fuels continue to escalate, and given the focus on the phasing out of coal and other fossil fuels at COP 26, the nuclear conversation is again rearing its head.
As of October 2021 there are 441 nuclear reactors in operation in some 30 countries around the world. In the United Kingdom, 13 nuclear power reactors are in operation.
Fun trivia facts are often shared during the festive season, so it may interest people to know: just one nuclear reactor can power enough Christmas lights to wrap around the globe 27 times over!
Source – US Department of Energy
Phasing out fossil fuels
As a little recap, COP 26 saw two significant agreements on the phasing out of coal and fossil fuels. It was announced that more than 40 countries had committed to moving away from coal, while some 20 countries stated that, from 2022, they would no longer fund unabated fossil fuel projects abroad.
While timescales were pretty vague, in terms of the 40 countries committed to moving away from coal (which didn’t include the two biggest emitters of carbon, in the US and China), the goal for the world’s major economies was set as “in the 2030s (or as soon as possible after that)”. In comparison, the timeframe for transitioning away from coal is the “2040s (or as soon as possible thereafter)” for the rest of the world.
Supplying power to a growing population
The problem is that with several renewable energy sources still in their infancy, we think the use of nuclear power is set for a head-on collision course between the need for more energy and sustainability. If the global population is going to rise from 7.9 billion people today to the expected 10 billion by 2050, and we are going to try and cap carbon emissions to keep global temperatures under control, any energy source that can positively contribute to this has to be back in the discussion.
As a result, we understand the need to embrace the nuclear conversation because we expect the next decade to be a turbulent one of transition in terms of energy prices, meaning all options need to be back on the table. While we support the move away from fossil fuels, there seems to be a growing realisation that renewable energy on its own will not meet the increased energy needs of an expanding global population. In short, we need everything that is available.
Investing in nuclear energy
It is a theme we have been talking about with managers much more over recent months. Having posed questions to the managers of the funds we hold, the consensus was to exclude companies involved in nuclear energy.
Our ethos is to take a pragmatic approach to nuclear energy within our model portfolios. We choose a selection of fund managers who currently do and don’t incorporate nuclear, which in our opinion, leads to better diversification.
Looking at our typical medium-risk, Sustainable portfolio, investors currently have circa 1% exposure to nuclear energy. On the flip-side, the exposure is about 2% in our Core range. Overall, this is a relatively small allocation to nuclear in our portfolios, but this may increase in the coming years if attitudes to nuclear energy evolve in tandem with science. The current reality is that nuclear power is a possible solution to the enduring energy conundrum, and there are few other viable options.
This communication is designed for professional financial advisers only and is not approved for direct marketing with individual clients. These investments are not suitable for everyone, and you should obtain expert advice from a professional financial adviser. Please note that the content is based on the author’s opinion at the time of writing/publish date. Our views and opinions regarding certain investment themes and topics can alter over time as the macroeconomic background changes and other industry news is made publicly available, this is not intended as investment advice.
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