Global Equities
Episode 5 - Could we be witnessing an industrial renaissance?
Gigi Pardasani
Investment Analyst
Dominic Phillips
Investment Analyst

Will the growth of renewable energy help usher in a new industrial renaissance? Judging from the early momentum of this dynamic movement — which is getting a funding boost from the recently passed Inflation Reduction Act — it’s highly probable, say equity investment analysts Gigi Pardasani and Dominic Phillips. Here they address the arguments of renewables skeptics and suggest areas of opportunity for long-term investors.

Gigi Pardasani is an equity investment analyst with responsibilities for large cap industrials. She has 12 years of investment experience and has been with Capital for six years (as of 12/31/22). She holds an MBA from Wharton and a bachelor’s from Harvard.

Dominic Phillips is an equity investment analyst with research responsibility for U.S technology systems, utilities and renewables. He has 13 years of investment industry experience and has been with Capital for six years (as of 12/31/22). He holds an MBA from Harvard and a bachelor’s from Georgetown. 

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Matt Miller: I'm Matt Miller and this is Capital Ideas, your connection to the minds and insights helping to shape the world of investments.

Whether you’re an enthusiast or a skeptic, there’s no escaping renewable energy. It’s fast becoming a force of disruption for the global energy industry – and investors – to reckon with. And with the recent passage of the Inflation Reduction Act as a headwind, could the growth of renewables usher in the next industrial renaissance? Senior writer Ken Masson posed that question to equity investment analysts Gigi Pardasani and Dominic Phillips, who shared insights into this dynamic movement and the opportunities it presents.

Now here is Ken’s conversation with Gigi and Dominic.

Ken Masson: Joining us today to talk about energy transformation, energy security and investment opportunity are equity investment analyst Gigi Pardasani and Dominic Phillips. Gigi has research responsibility for large cap industrials. Earlier in her career she also covered healthcare information technology. She has 12 years of investment industry experience and has been with Capital Group for six years. She holds an MBA in finance from the Wharton School of the University of Pennsylvania, and a bachelors degree in Romance Languages & Literature from Harvard University. Gigi is based in New York.

Dominic Phillips has research responsibility for US technology systems, utilities and renewables. He has 13 years of investment industry experience and has been with Capital Group for six years. He holds an MBA from Harvard Business School, and a bachelors degree in Economics from Georgetown University. Dominic is based in San Francisco.

Gigi and Dominic, welcome to Capital Ideas.

Dominic Phillips: [inaudible 00:10:13] great to be here.

Gigi Pardasani: Thank you so much for having us.

Ken Masson: Now today we find a host of reasons that grid modernization in the US and infrastructure broadly is becoming a prominent investment theme. Was wondering if each of you could talk a little bit about, uh, those infrastructure needs, what's driving the demand or the spending need, and who could be the potential beneficiaries. Dominic, you want to start?

Dominic Phillips: So one of the things that has really been a theme in US energy policy over the last decade or so has been the growth in renewables. Um, and, you know, you've seen a number of things drive that. You've seen a significant decline in the cost of renewable power, you've seen various tax incentives, uh, that really helped catalyze the industry 10 or 20 years ago. And I think you've seen a shift in consumer preferences to really being thoughtful about what are some of the externalities of, um, you know, the electricity and the resources that they consume every single day. And obviously we think about that a lot in terms of the car and driving, but power consumption is a huge piece of that.

And so, um, really, I think you could credibly say we're in the midst of a global energy crisis. Um, and you're certainly seeing that in Europe and other places, but you're also seeing it in the US. And really what this ties into is that you have this alignment of say maybe once in a generation alignment of desires between government, industry, consumers, and people who are worried about, um, your kind of non-economic, non-commercial effects in- impact on the environment, that everyone's rowing in the same direction, which is to say that we're looking towards a future where we can benefit US industry and economic growth writ large, while also benefiting the consumer, while also making a significant positive impact on the environment and- and, uh, furthering our goal of decarbonization and reducing some of the impact on climate change that we've, um, you know, all come to know all too well, unfortunately.

So that's really what sets the stage for some of the things that are happening today.

Ken Masson: That's great. Um, now Gigi, maybe just from your perspective, you could talk a little bit about those broad themes and how they, uh, may be impacting, the companies that you cover.

Gigi Pardasani: Absolutely. So from the Capital Equipment side, um, similar to how Dominic mentioned, prior to Covid there were decades really of under-investment, uh, in each country facilitated through globalization and the procurement of the lowest cost country, and really, um, leaning on freight, um, but outsourcing, global outsourcing. And so you have a very old installed base, uh, across all kinds of manufacturing in most developed countries where there hasn't been much footprint growth. And then with the arrival of the pandemic, several, uh, things happened at the same time. Manufacturers realized that they needed more resilience, which is to say visibility into their supply chain, the flexibility to change over the types of production, and, um, remote monitoring, and redundancy, and resilience also means back-up plans in case something happens to the facility, a supplier, an employee, and so all of those things are sort of defensive investments, and the third is offensive investments. So, um, in addition to an old capital stock and the need to reinforce the existing operation, a lot of companies decided "we want to take advantage of this time and expand". So you have, really, three different forms of drivers for this capital investment, each of which is independent of the other, and suggests that it should take a long time to materialize, because for every one company that does this, they have an ecosystem of surrounding sub-suppliers that will also follow them and do this, too.

Ken Masson:  Um, let's talk about one of the big drivers, the Inflation Reduction Act here in the United States, which, um, sort of adds to earlier in the year when we had the infrastructure, um, legislation. Maybe you could tell us a little bit about what that legislation means, what kind of opportunity it's driving, and who may be the beneficiaries?

Gigi Pardasani: Sure. As you highlighted, the Inflation Reduction Act really is an Act Two to the, uh, Infrastructure and Investment Jobs Act, which was passed in 2021. That funding we see as coming in and being dispersed now, and really taking a crescendo in 2024, which is when the Inflation Reduction Act kicks in that funding, and really then accelerates through 2028. And this is intentional, and there's an industrial logic whereby the infrastructure bill sets the stage for high-voltage transmission lines, 'cause if you think about it, no one's really going to build a giant solar farm if they have no place to take the power off of it and, you know, connect that. So the infrastructure bill really does the high-voltage grid transmission digging, sets the stage, and then follows up with the build-out of factories to produce wind and solar components here in the U.S., then the production rate of those increases, and then we see the real renewable, uh, energy ramp-up thereafter. And, as a side, there's a big storage component here.

So we've got a lot of different layers going on, and really what Dominic and I focus on, from the capital goods equipment, are you want companies that sell a little bit into all of these things. You want companies that make, for example, electrical equipment, so these are switch gears, these are circuit breakers, um, that are required in pretty much everything, whether it's a sub-station, whether it's a home being connected, whether it's a factory, if you think about it, you need that circuit breaker, you, you know the one in your home that you go and open up when a fuse box goes out, you need one of those pretty much everywhere.

And the companies that can deliver those not only have scale, but they have the trusted relationship with the, um, end-market customers and these are very conservative customers who are regulated, you know, the regulated utilities, the big construction builders, they're not going to risk going with a start-up and replacing their incumbent provider, like an ABB or a Siemens or Schneider or an Eaton, um, and so I think these companies have an advantage.

Ken Masson: That's great. Um, so Dominic, um, Gigi's companies are actually providing the infrastructure, the companies she covers, you, you follow the utilities and the renewables themselves, how do, how do they, uh, play into this, um, sort of cycle of expansion or change?

Dominic Phillips: Absolutely. So, if you think about it, the Inflation Reduction Act, um, really came about just about three months ago, and so we've now had a little bit of time to digest what all this means, and at a high level, it's a package of tax and fiscal incentives that, um, among other things, it's designed to incentivize rapid growth in carbon-free power generation. So obviously, that, that impacts the utilities. But I think really what's still underappreciated, um, even now, several months after the bill has come out, is just how transformative this ultimately could be. Because, keep in mind, some of these tax credits already existed, and so the question is why is this so different? And there's a, there's a few reasons.

One is, as Gigi was pointing out, the way this bill is designed, it gives long-term visibility into tax and fiscal support for all of these newer technologies, whether it's renewable energy, whether it's green hydrogen, whether it's energy storage, and that point in particular is very important. Um, and what it does, is it catalyzes all these different technologies in a way that we catalyzed solar 20 years ago. So I would say that essentially right, and if you think about that, you know, the price of a solar panel has come down, you know, close to 99% over the last 20 years. Um, point to point.

And so, what's, what's critical about all this, is that you now have the long-term visibility if you're an industry, if you're a utility, or if you're an industrial company selling to those utilities, or if you're an industrial company that needs to know the price of power going forward, you have long-term visibility into a very rapidly declining cost curve, and you have long-term visibility into a very significant, uh, CapEx growth environment. Because very clearly this energy transition which we've talked about for years, but if you look at the numbers, it's still in it's early innings, is now going to be dramatically accelerated because it makes economic sense, um, and there's a multiplier effect, and I think, you know, when you look at some of the things in the bill that are less appreciated, effectively, um, there's now going to be more or less a guarantee, uh, for lending into some of these emerging technology sectors around renewable energy, for obviously the tax incentives, but moreover, the technology and the development of these advanced technologies that the bill will result in, should decrease the cost curves of renewable energy much more rapidly relative to even what we've seen, especially in some of these emerging technologies.

And so it becomes inescapable that this will eventually, that this will reach, you know, significant momentum over the next several years. And so, you know, yes, obviously there's these significant benefits for the utility sector in terms of the CapEx wave, uh, that they will be, um, benefiting from over the next several years, but the multiplier effects in the broader economy and the consumer and the environment, I think are dramatic.

Ken Masson: So, in a nutshell, there'll be billions of dollars spent up front that will lower costs for U.S. consumers and companies dramatically in the future, and many of the companies you both cover will actually be the beneficiaries of that spending, and there's a great visibility there, which is part of what makes this such a compelling investment thesis.

Dominic Phillips: And, and more importantly, you know, I think, electricity as a commodity is priced at the margin, meaning that it's always priced based on current demand, and supply, and so one of the things that this bill will create is that, you know, historically we've built power plants, which is a large capital investment, and then you burn coal or natural gas or what have you, and, you know, you pay on an ongoing basis for the resource that you consume and burn, um, to generate electricity. Renewables, of course, have essentially zero variable costs, you know, sunlight is free, wind is free, um, there's only some small maintenance costs attached to it.

And so to the extent that you shift the energy mix more and more to these zero-variable cost assets, and by the way, isn't how much the bill incentivizes energy storage, we think that some of these renewable energy resources can be come less and less intermittent over time, and more and more what they call near-firm, which is to say that they can become part of the overall energy mix in much bigger way, what that does is it will collapse the price of power, um, to a degree where essentially power could become at the margin, near free, which is already happening in some places, by the way. During the day in California power in many cases is free, um, because there's too much of it being generated relative to demand. Keep in mind, it's hard to store power.

So, these sorts of things will have dramatic impact on GDP growth and how the entire industrial universe is architected in the U.S., and particularly the U.S. relative to other countries that may not be moving as aggressively towards renewables, or that have a different energy supply mix.

Gigi Pardasani: No, I mean, this is a really critical point. Um, and I think what Dominic's describing, the collapse in the power prices enabled by, you know, the forces at work, is the natural response that we've gotten so far is, well, um, that's either going to be too expensive or how could that happen or, you know, there's various forms of, um, push-back to it which we have also found logical, but what we really still think is misunderstood are sort of two or three key points. Um, the first is that the financing enabled by all of these new programs really goes towards private credit. So what used to be viewed as "oh, it's just so expensive", actually that's been solved. Um, and it's been solved through the incentives in these programs. So, that's kind of gone.

The second is the storage question, because the main push-back is well, how can you make it the marginal cost of production? Yeah, wind is free, but the capital cost of building it, well, that's part one, solved for, but part two is the storage cost. You have to build out some more storage. Well, that's also being solved. And that's being solved in the controls sector, which is the, um, industrial control companies and automation companies have actually found a new way of predicting when the sun will come out and when the wind will blow, as opposed to petrochemical, uh, controls, which is based on polynominals, aka chemistry.

Um, so in the controls universe, when you can actually do dispatch and have an entire transmission line, substation, turbines, all communicate, that optimizes for when the power's being generated and store it in the grid in places that don't otherwise have a big storage need, such as a backup generator that's already sitting there, um, you know, the cars, and this, this area is a specific one that, you know, Tesla has focused on. Lockheed-Martin has focused on it, it's called energy storage systems or battery energy storage systems. Um, this too is being solved. So you do not need the storage footprint and the build-out of the costs necessarily.

And lastly, on this point, um, having this, call it the smart grid, as well as the software that does the controls, is going to solve a lot of the, as well as the battery density, it's called low-frequency storage, where you bring down the modulation of that power flow, so you just need less room to store it, again that's a controls solution, and these bills do include a lot of funding for science and development of the research on these specific areas.

Ken Masson: Would you, uh, be willing to give just some examples of companies in that control area, that automation area, that are generally the companies that, you know, are participating in these changes?

Gigi Pardasani: Yes, so this type of software program is called a DERM, like, think of dermatologists, but it stands for Distributed Energy Resource Management. Incumbents today that sell DERMs are ABB, Schneider, Siemens, Emerson Electric, General Electric, the kind of the host of traditionals. Now, their product is viewed by the utilities as practical but it's still not totally there. Then you have a host of private incumbents and these are start-ups and that's where the real interest lies. And then the third are non-industrial, so Tesla has an excellent DERM. Lockheed Martin has a DERM. Um, there's a, there's a whole list of them and this is going to remain a fragmented market until the leaders emerge and, uh, where consolidation takes over. So it's really a rising tide.

Ken Masson: And so, of course, that's where active investing and research, uh, really comes to play an important role in identifying what things will look like years down the road. Um, perhaps we can shift gears a little bit, but one of the questions that might arise among our audiences might be, okay, yes, this is a longer term investment theme that probably has been accelerated much quicker than many people realize but in the interim, the concerns about energy security as, you know, the geopolitical, um, issues that are arising up around the word, including war, and also what goes on in the meantime.

Does that play into your thinking of your investment pieces for many of these companies and, um, is there a way to benefit off that shift towards security in the shorter term?

Dominic Phillips: Well, I've seen a couple of things on that front, um, because you're right. This is an extremely unique period in time where everyone has a long-term roadmap of where they want to get to and then things happen in the short term that completely change, uh, what you think you might need and completely change how you define energy security and reliability in the short term.

Um, you know, it's a little bit like the Mike Tyson thing. Everyone has a plan until they get punched in the face. Um, and so, absolutely that's been happening. Um, and I think, you know, from the US utilities perspective, there's still this focus on the long-term but at the same time, there's a recognition that we need to deliver energy security in the short term.

However, there's a significant tension arising between these longer term carbon reduction goals that have been set and the ability to invest to create energy security now, and I'll give you an example, and this is specific to LNG, which is less the focus of the Inflation Reduction Act but of course, very important at this moment in time, particularly for Europe.

Europe signed a bunch of agreements that basically said, "We're going to significantly decarbonize our economies by 2040, you know, that's 18 years away. However, if you're a US utility, if you want to build a new US LNG plant on the Gulf Coast, um, you generally want 20 year contracts at least.

You've got a problem because if you're a European utility, you can't say we're going to use significantly less natural gas in 2040, and then turn around and sign a natural gas import agreement that will last 20 years.

And so, there's this mismatch between the long-term goals and the investment requirements. And so, there's a variety of short term ways, um, I would say, to bridge the immediate constraints that countries are facing but I have not gotten the sense that as a result of these, let's call it shorter term challenges, that the longer term is being shifted, you know.

And part of the issue is, for example, we've always been constrained in pipeline capacity in terms of getting gas, um, North/South in the US, particularly in the Eastern seaboard which is demanded by LNG, and I haven't necessarily gotten the sense that just because there's the short-term crunch in the price of hydrocarbons, particularly in Europe, that all of a sudden folks are more willing to build infrastructure, uh, that might be obsolete in 20 years.

So that's the challenge that we're facing. I think there's a number of ways that you can address this more flexibly in the short-term but I would say that what we're seeing now from an energy crisis perspective, you know, that's a two year scenario, but at the end of the day companies, particularly in the energy sector, tend to be most focused on the 20 year scenario.

Ken Masson: Got you. Gigi, are there companies in your coverage area that stand to benefit from those short-term needs and those longer term goals and needs?

Gigi Pardasani: Yes. Well, so I think there will be several but, I was just thinking of our, my, parents' generation. Um, you know, my mom was born in 1946 and she says that what's happening now reminds her of when Chernobyl happened and there was a global political movement to shut down all nuclear and that, um, the world will tend to respond to these big geopolitical events in ways that are not necessarily dictated by energy security needs and how if the proliferation of nuclear today, you know, and things like Fukushima, really would solve a lot of this energy curtailment issue but that we won't do it for reasons outside of the typical economics.

So, history sort of tends to run and maybe looking at that period would have some sort of useful learnings, um, that I'm curious about. But vis-a-vis your question on the companies. Caterpillar, Baker Hughes, you know, Alstom, Mitsubishi, uh, Hitachi, these are traditional pipeline power generation providers for both natural gas, onshore/offshore. Um, they can also power hydrogen. Caterpillar has 90% market share in the US and, um, Baker Hughes and, um, Alstom and Siemens are more global but still Caterpillar provides all the kind of super majors.

And I think in the LNG chain, obviously Baker Hughes, but Caterpillar is the natural gas vertically integrated, you know, from the wellhead, really to the point of compression and offshore taking to the LNG facility. And they also have what they call pipelayers, so the party that lays these, you know, 900 ton pipes down in the earth.

So that company to me is the most comprehensive beneficiary, both from, uh, as Dom referenced, the direct spending, but all that peripheral spending is really where you need this company to physically facilitate the energy transition on a long-term and on a short-term in terms of energy security because the companies also need to be able to service your project for 20 years.

Ken Masson: Right.

Gigi Pardasani: And that company has that ability to do so.

Ken Masson: That's great. And Dominic, I guess just by definition, the companies in your coverage area participate in both sides of this equation. Um, are there any particular companies that you think with two, you know, maybe system build outs, or something like that?

Dominic Phillips: Yeah. No, absolutely, and by the way, we think this is exactly where the Capital approach can add tremendous value because we're at this point in time where the short-term is particularly confusing and difficult to understand and creates questions about the long-term. Um, but crisis and war, and this is more common in the European situation, tends to be accelerants of change in ways that we can understand by connecting the dots across these industries.

And so, there's going to be a number of beneficiaries. A number of them will not necessarily be the obvious ones but let me give you a few [inaudible 00:34:46] from the companies that I spend time on that I think will benefit. Um, number one is a company called AES which is a renewable developer. They own a very large commercial solar operation in the US which is a business that obviously turbo-charged, um, by the Inflation Reduction Act.

But there's other benefits that they have that are less obvious, which is to say that it's a company that historically built a lot of coal plants, including in Europe. Um, as a result of the energy situation in Europe now, those coal plants are actually more valuable than they've ever been in recent history. And so what that means is, AES can actually go and sell these coal plants in the market and accelerate its own transition to renewables.

And so that's sort of this interesting counter-intuitive dynamic whereas you see higher and higher commodity prices as a result of the current scarcity, it actually accelerates some of this change in conjunction with the Inflation Reduction Act towards alternatives, uh, and towards other technologies.

So that's where the quote/unquote obvious first order effects of high commodity prices and the current situation globally aren't necessarily the ones you'd expect when you actually look at the companies. In many ways, the direction could be less predictable, um, unless you really understand the businesses in the industry. So that's one.

Another one is NextEra, which is a very large renewable developer in the US, and again, this is sort of in the category of well, of course they might benefit given that it's their core business. But I think there's another more subtle subject here which is that they're actually going to be looking at developing new technologies, like green hydrogen, um, where they can effectively, over time, um, be able to develop entire new business lines in hydrogen transportation, in new sorts of power generation and potentially even in transportation that we don't see today.

I mean, if you think about it, if the Inflation Reduction Act succeeds in causing a significant shift in transportation to electrification and perhaps even hydrogen powered vehicles, well then ultimately, utilities will be at the gas station, right? And so, there's this significant shift that's happening in the industry that you wouldn't necessarily appreciate by just saying you're a company that builds renewables and renewables are growing. That's of course true, but there's a second order effect where I think the investment returns will be even more compelling.

And the third I'll mention is a company called Heliogen, uh, which is a very small company at this point. This is a company that has an entirely new technology for renewable energy. Effectively what they do is they capture the sun's heat and use it to generate energy for industrial purposes. And if you think about it, a very significant portion of global electricity usage is just to generate heat which is essentially unnecessary if you can actually just capture the sun's heat directly and apply it to whatever process you're trying to do, whether it's burning water or running a furnace or what have you.

And so, this is a company that like all of new technologies, needs to get its costs down, needs to get market adoption, needs to get the snowball rolling down the hill, but the Inflation Reduction Act will enable that, I think, in a very significant way.

And it will enable it with all sort of new and emerging technologies, um, whether it's in batteries, energy storage, new renewable technologies, new carbon capture technologies. If you look at just the amount of venture capital funding that's gone into the global energy industry, I think it will grow dramatically. It's already been growing but as a result of the Inflation Reduction Act, it will continue to grow rapidly and so we'll start to see all these sort of beneficiaries come out of the woodwork that in the past we haven't seen.

Um, so we're very excited about the potential both for product development and new technology development.

Ken Masson: That's great. Um, are there any, um, challenges or potential setbacks that the Inflation Reduction Act might not play out as expected.

Gigi Pardasani: Labor, I mean, the- the number one thing we hear cited is, "Can you get people to come and do it?" We have an investor in our group who said that, um, when Las Vegas was being built, the biggest source of pushback was, "Well, there's not enough airport capacity, planes won't be able to arrive. And the airport just built five more runways. So, you have to think of those things that can be solved and are fungible and others that are sort of more structural. Politics I don't think is a, uh, another one of our counter consensus views because a lot of this is gonna be occurring in Appalachian states, with a heavy coal presence.

So, they're gonna be incentivized financially, will get bonus, uh, credits for reconverting existing facilities to produce solar, that's in these bills. So, I actually don't think it's politics. Labor's the number one of just the educational output for, for example, linemen and women, line people. Um, they are needing 5 to 7,000 a year, and only a couple hundred are graduating. So, I think the education component, and that again gets solved, but it's a longer term thing, and then thirdly it's just the financing. Um, where, really a- a key message from the work that Dominic and I have done is the financing is an underappreciated enabler of this movement. And that is both on the utility power market, as well as the private credit market, and the creation of public financing entities and revolving credit line. These things take time.

Ken Masson: Those are good.

Dominic Phillips: I would, I would just add, definitely there'll be some bottle necks. Uh, and I agree with Gigi, I mean, I think labor is one that may take time to resolve. Um, certainly from the perspective of changing the power mix, uh, transmission is one. Even land is one, permitting is one. And so, there's all these things that need to still be worked through in order to make this kind of broader vision a reality. Um, but I think what the Inflation Reduction Act does is it- it makes the economics and not to mention the environmental benefits of all of this CapEx and investment, um, so compelling that, um, the value will resolve these challenges ultimately.

Gigi Pardasani: To really bring it home for our audience, if you look over multiple decades, really centuries, industrial leaps, um, uh, including power gen, are enabled through productivity improvement. So, the diesel engine replacing steam is one. You know, a tractor replacing a plow. Um, these are the big leaps in, uh, flight, you know, aircraft, elevators. Uh, a new change where something is a real big impact on customer ROI and mobility, and the financing around the bill setup. The entire point of our research is that this is a productivity jump, not the build out of- of renewable, but the subsequent collapse in power prices. Because power is the number one fixed cost input to a manufacturer and to oil and gas extraction, metals and mining.

I used to do metals and mining and the number one, uh, cost in my model, I remember, was power. Ele- electricity. And if you think about it, it's, um, s- what we're describing will be similar to the telecom market, from the ‘80s to today, where it used to be you paid per minute long distance and it was heavily expensive, and then the proliferation of fiber optic cables made the internet and connectivity virtually free, and now you pay 50 bucks a month. So, paying 90% lower power costs is going to enable a massive productivity gain and margin gain that can be recycled into higher wages, more capital investment.

The second major point to convey is that this paradigm means that the way we look at co- companies has changed. For the last 20 years, spending on capital expenditure has been viewed negatively. "Oh, that company is spending on CAPEX, they should do buybacks instead. They should do M&A instead." We now view that as the opposite, which creates investment opportunities. Companies that are undergoing significant CAPEX today to increase capacity may be down in the market and the investors may not like it this quarter, but next year and the subsequent year, the resulting revenue and profit share as a result of expanding now, can increase profits. Whereas the companies that have been conservative and have not grown now maybe are putting up better numbers, but they will not be there to capture that same revenue growth, then.

So, I think this paradigm shift continues to be underappreciated and supports investment in the capital equipment sector. Um, and these are the companies we've talked about, Caterpillar, Rockwell Automation is one I have not mentioned, which is really a toll taker on all of US manufacturing, because they do the controls and equipment here. And 70% of all factories in the US are built using Rockwell equipment and software. Um, and they have a particular presence in solar, so they can do what they did for the auto industry for solar. Anyway, those are just some higher level thoughts of- of kind of the why, of while the work that we're doing really matters just for our sector but- but for all, over a much longer time period than a couple of years.

Ken Masson: That's great.

Dominic Phillips: The key is that all- all of these economic benefits that- that accrue from this investment, that can be made in the metals mining manufacturing power generation industries will also decarbonize these industries. And so, that has huge, huge-

Gigi Pardasani: Hm.

Dominic Phillips: positive benefits for the world, because, you know, as Gigi said, I mean, these- these negative externalities we as in society globally didn't pay attention to for many, many years. And now there's alignment where what makes economic sense also makes tremendous environmental sense, uh, and sense for the consumer. And so that's gonna be really exciting.

Ken Masson: Great, uh, very compelling conversation and something that takes us out of the sometimes discouraging news headlines of today, um, Gigi Pardasani and Dominic Phillips, thanks so much for joining us today on Capital Ideas.

Dominic Phillips: Thank you for having us.

Thank you very much for listening.

We are always trying to get better. If you have any feedback, including topics you would like to see addressed in future episodes, please send us an email at Capital Ideas podcast Australia. For capital ideas, this is Matt Reynolds, reminding you that the most valuable asset is a long-term perspective.


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