Sustainability is a hot topic in the finance world, starting several years ago when many of the larger banks were pressured to move away from oil and gas and move towards the low-carbon economy. Having now seen the positive environmental impact that came from enforced COVID-19 lockdowns, there is now a call for sustainability to be a key component of the economic recovery. Transferring billions internationally on behalf of our clients, we have noticed a shift in where this money is going and what it is facilitating to suggest that a greener economy is achievable. As always, exchange rates can play a pivotal role in the growth of new industries that rely on international investment or global supply networks,
Prior to 2008, solar cells and panels were mostly sourced from Europe, but since the market became more saturated the majority are now imported from China, Malaysia and Taiwan. These countries have notable world-leading solar farm projects, but a lot of the new projects are taking place in developing countries in Asia, South America and Africa.
As well as importing the technology and components, developing countries also rely on overseas investment from larger economies like the US to kick start projects. However, the risk associated to a certain currency may affect the confidence of the investor, therefore currency hedging becomes a crucial factor in the planning stage to ensure the investor is protected. In 2013, the sharp decline of the Indian Rupee meant that US investors lost significant profits on renewable energy projects.
Since 2016, we have seen a growing number of new clients being involved in renewable energy projects around the world, not to mention the emergence of flat-pack homes which are designed with solar panels. It was even suggested recently that flat-pack homes could be the answer to the affordable housing shortage in the UK. With developments like these we expect to see a continuation of the trend In the last 4 years, where the percentage of total FX volume attributed to renewable energy and sustainability projects has risen five fold, resulting in FX volume of over £137 million.
The Lithium Age
At the start of 2019 the growth of Electric Vehicles (EV) was highly anticipated. New climate agreements and legislation seemingly pointed towards the EV revolution. As the batteries in electric vehicles rely on lithium, this led to a surge in production ready for sales of EV to kick-off and even had some people asking 'Is lithium the new gold?' However, it didn't quite materialise as the slow-down of the EV market led to over-production and depreciation. Now, midway through 2020 it seems that lithium could be back in the spotlight.
Chile and Argentina - with their salt plane brine deposits - are two of the biggest Lithium producers in the world, alongside Australia and of course China, who rely heavily on Lithium for their vast electronics manufacturing operations. Since the start of the year we have taken on a number of clients who are directly or indirectly involved in importing lithium to the UK or producing the batteries for EV. We have seen over £20 million this year already, which is more than the whole of 2019.
UPFX and our pride in sustainability
With a passion for what we do, we not only want to help our clients but we also want to leave a positive impact on the world in general. With some of the largest banks starting to take a lead on sustainability, we also want to do our bit to ensure that the transition to a greener economy can continue apace. Along with thorough money laundering checks, our team also like to know that the transfer meets our sustainability requirements.
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