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According to dealroom, climate tech startups have raised a record $32B in 2021 globally,4.9 times more investment since the Paris Climate Agreement was signed five years ago.
Hi, I am Molly. I would share with you information about asset allocation, especially the holdings and opinions of professional investors, as well as the books for beginners.
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Have you invested in ESG stocks or funds? What do you think of this?
$Tesla (TSLA.US)$ $Rivian Automotive (RIVN.US)$ $NIO Inc (NIO.US)$ $BYD COMPANY (01211.HK)$
Hi, I am Molly. I would share with you information about asset allocation, especially the holdings and opinions of professional investors, as well as the books for beginners.
Have you invested in ESG stocks or funds? What do you think of this?
$Tesla (TSLA.US)$ $Rivian Automotive (RIVN.US)$ $NIO Inc (NIO.US)$ $BYD COMPANY (01211.HK)$
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$Dow Jones Industrial Average (.DJI.US)$ $SPDR S&P 500 ETF (SPY.US)$ $Nasdaq Composite Index (.IXIC.US)$ As these transitions from under-appreciated to fully priced-in occur, some lessons for the next stage of ESG investing are emerging. For institutional investors in this second age of responsible investing, the pathway to generating superior, risk-adjusted returns under an ESG lens will be through the ability to identify themes, handicap their likely trajectory and successfully map the impacts to asset class, sector, industry and company dynamics. No one needs to wonder anymore whether these broad phenomena, many exogenous to the financial system, can have a powerful impact on financial assets. The focus will inevitably turn from the macro to the micro, away from will things change? to how will that change impact society?
At the start of the last decade, it wasn’t all that difficult to identify corporations whose stock prices would be impacted by a large scale transition to alternative energy sources. Large oil companies, for example, stood out easily—especially in the wake of the Deepwater Horizon disaster. In a similar vein, businesses with poor track records on social and governance issues could be flagged relatively easily by ESG-aware investors—and many remained unrepentant. But that’s changed dramatically in recent years, with ESG matters becoming front and center in corporate boardrooms worldwide. Now, the same oil-and-gas behemoths that made for easy targets 10 years ago have doubled down on their investments in alternative fuels—in some cases, becoming significant investors in green energy.3 Traditional mining companies, such as BHP, are now some of the largest investors in rare-earth metals that enable clean technology. Meanwhile, many of today’s well-known tech giants, routinely criticized in the past for poor governance and a lack of attentiveness to social issues, are working hard to improve their operating structures and have stepped up their commitments to the pressing social matters of the day.
The long and short of all of this is that, for a variety of important reasons, advocates for the vital importance of ESG factors in investing have won the battle. Look no further than the chart at the top of this article to see the evidence. Ignoring these factors is no longer an option—nearly all companies must seek to move down the ESG risk spectrum. This is clearly good from an ESG values standpoint, but from a return-seeking standpoint, it likely means that the opportunity for outsized returns has decreased. In other words, the companies who rate highly on the widely proliferating ESG scoring systems are likely to be lower risk than their counterparts, but any massive gains from increased awareness of the issues is likely behind them. Why? Because the knowledge of how these companies are positioning for the future, in regard to environmental, social and governance risks, is now recognized public information—in other words, widely known. This means, for instance, that a company’s plans to achieve carbon neutrality or boost the diversity of its executive team have already been factored into its stock price—leading to possibly higher valuations, sure, but possibly also to less dramatic upside surprise. We refer to this as the working of an efficient market in information—If everyone knows it and everyone values it, there is no extraordinary return to be extracted.
As these transitions from under-appreciated to fully priced-in occur, some lessons for the next stage of ESG investing are emerging. For institutional investors in this second age of responsible investing, the pathway to generating superior, risk-adjusted returns under an ESG lens will be through the ability to identify themes, handicap their likely trajectory and successfully map the impacts to asset class, sector, industry and company dynamics. No one needs to wonder anymore whether these broadphenomena, many exogenous to the financial system, can have a powerful impact on financial assets. The focus will inevitably turn from the macro to the micro, away from will things change? to how will that change impact society and corporations?
So, then, where can investors who still want to achieve strong returns while maintaining a focus on ESG matters turn in this second era of ESG investing?
At the start of the last decade, it wasn’t all that difficult to identify corporations whose stock prices would be impacted by a large scale transition to alternative energy sources. Large oil companies, for example, stood out easily—especially in the wake of the Deepwater Horizon disaster. In a similar vein, businesses with poor track records on social and governance issues could be flagged relatively easily by ESG-aware investors—and many remained unrepentant. But that’s changed dramatically in recent years, with ESG matters becoming front and center in corporate boardrooms worldwide. Now, the same oil-and-gas behemoths that made for easy targets 10 years ago have doubled down on their investments in alternative fuels—in some cases, becoming significant investors in green energy.3 Traditional mining companies, such as BHP, are now some of the largest investors in rare-earth metals that enable clean technology. Meanwhile, many of today’s well-known tech giants, routinely criticized in the past for poor governance and a lack of attentiveness to social issues, are working hard to improve their operating structures and have stepped up their commitments to the pressing social matters of the day.
The long and short of all of this is that, for a variety of important reasons, advocates for the vital importance of ESG factors in investing have won the battle. Look no further than the chart at the top of this article to see the evidence. Ignoring these factors is no longer an option—nearly all companies must seek to move down the ESG risk spectrum. This is clearly good from an ESG values standpoint, but from a return-seeking standpoint, it likely means that the opportunity for outsized returns has decreased. In other words, the companies who rate highly on the widely proliferating ESG scoring systems are likely to be lower risk than their counterparts, but any massive gains from increased awareness of the issues is likely behind them. Why? Because the knowledge of how these companies are positioning for the future, in regard to environmental, social and governance risks, is now recognized public information—in other words, widely known. This means, for instance, that a company’s plans to achieve carbon neutrality or boost the diversity of its executive team have already been factored into its stock price—leading to possibly higher valuations, sure, but possibly also to less dramatic upside surprise. We refer to this as the working of an efficient market in information—If everyone knows it and everyone values it, there is no extraordinary return to be extracted.
As these transitions from under-appreciated to fully priced-in occur, some lessons for the next stage of ESG investing are emerging. For institutional investors in this second age of responsible investing, the pathway to generating superior, risk-adjusted returns under an ESG lens will be through the ability to identify themes, handicap their likely trajectory and successfully map the impacts to asset class, sector, industry and company dynamics. No one needs to wonder anymore whether these broadphenomena, many exogenous to the financial system, can have a powerful impact on financial assets. The focus will inevitably turn from the macro to the micro, away from will things change? to how will that change impact society and corporations?
So, then, where can investors who still want to achieve strong returns while maintaining a focus on ESG matters turn in this second era of ESG investing?
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In part, that’s because environmental, social and governance (ESG) pressures are stifling investment in oil and gas.
Investment in oil, gas and coal has been subdued for several years (Display, below). Companies are under pressure to return cash to shareholders and invest in energy transition businesses rather than fossil fuels. What’s more, hydrocarbon energy investments have a long lead time and capex has been insufficient to maintain medium-term production, further complicating transition planning efforts.
Global Investment in Exploration and Production Capex to Remain Subdued
Capex peaked in 2014, bottomed in 2016, but then fell further in 2020 and is expected to be flat over the next five years.
Effectively the world is living off major investment decisions in oil and gas that were made before the oil price fall in 2015. If nothing changes, hydrocarbons markets could tighten even more, triggering even higher-than-expected price hikes.
Investors have been deterred from the energy sector for two reasons. First, perceived ESG concerns may lead to further derating. In fact, deteriorating support for the sector has pushed oil stocks to extremely low valuations with a price/free cashflow ratio near 25-year lows (Display, below). Second, a collapse in demand for hydrocarbons may leave unused reserves “stranded” and effectively worthless.
In our view, stranded asset fears are misplaced. We think energy stock prices are predominantly valued on a discounted cash flow analysis based on existing projects; that means no value is placed on fields that aren’t yet producing or will produce soon. Most oil and gas companies have about a 10-year reserve life - a period in which fossil fuels will be critical for a smooth energy transition and short enough for investors in select oil and gas stocks to receive satisfactory returns. And if investor aversion continues to act as an additional brake on investment, energy prices will remain high, buoying cash returns to shareholders.
$Dow Jones Industrial Average (.DJI.US)$ $S&P 500 Index (.SPX.US)$
Investment in oil, gas and coal has been subdued for several years (Display, below). Companies are under pressure to return cash to shareholders and invest in energy transition businesses rather than fossil fuels. What’s more, hydrocarbon energy investments have a long lead time and capex has been insufficient to maintain medium-term production, further complicating transition planning efforts.
Global Investment in Exploration and Production Capex to Remain Subdued
Capex peaked in 2014, bottomed in 2016, but then fell further in 2020 and is expected to be flat over the next five years.
Effectively the world is living off major investment decisions in oil and gas that were made before the oil price fall in 2015. If nothing changes, hydrocarbons markets could tighten even more, triggering even higher-than-expected price hikes.
Investors have been deterred from the energy sector for two reasons. First, perceived ESG concerns may lead to further derating. In fact, deteriorating support for the sector has pushed oil stocks to extremely low valuations with a price/free cashflow ratio near 25-year lows (Display, below). Second, a collapse in demand for hydrocarbons may leave unused reserves “stranded” and effectively worthless.
In our view, stranded asset fears are misplaced. We think energy stock prices are predominantly valued on a discounted cash flow analysis based on existing projects; that means no value is placed on fields that aren’t yet producing or will produce soon. Most oil and gas companies have about a 10-year reserve life - a period in which fossil fuels will be critical for a smooth energy transition and short enough for investors in select oil and gas stocks to receive satisfactory returns. And if investor aversion continues to act as an additional brake on investment, energy prices will remain high, buoying cash returns to shareholders.
$Dow Jones Industrial Average (.DJI.US)$ $S&P 500 Index (.SPX.US)$
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$Dow Jones Industrial Average (.DJI.US)$ The energy sector generates around three-quarters of greenhouse gas emissions today. It’s clear that renewable energy sources are the world’s only effective long-term solution to global warming. But meanwhile, the energy price spike (Display, below) is pressuring businesses and consumers.
If current trends continue, we believe similar price spikes will recur. And if policymakers and investors fail to plan the journey to a renewable world strategically, it will be hard to reach the ultimate destination of the Paris accords - net-zero carbon emissions by 2050 and limiting the rise in global temperatures to 1.5° C—to thwart a climate catastrophe.
Current and historical analyses do not guarantee future results.
Through November 8, 2021Data has been normalized to 2020. European Gas represented by TTFG1MON OECM Index (USD), Australia Export Coal represented by API31MON Index (USD), Brent Crude represented by CO1 Comdty (USD), US Gas represented by NG1 Comdty.
What’s driving the current energy crunch? In a perfect storm, demand leapt as the world returned to work after COVID-19. But unusual weather patterns meant renewable power sources failed to perform as expected, while hydrocarbon supplies were hit by disruptions globally. Investor aversion to fossil fuels like oil and coal is only a subsidiary factor in today’s price crunch, which we expect will moderate next year as several temporary factors reverse. Still, with shareholders and other stakeholders pressing energy companies to limit oil and gas investment, today’s problems are likely a foretaste of more crunches to come.
If current trends continue, we believe similar price spikes will recur. And if policymakers and investors fail to plan the journey to a renewable world strategically, it will be hard to reach the ultimate destination of the Paris accords - net-zero carbon emissions by 2050 and limiting the rise in global temperatures to 1.5° C—to thwart a climate catastrophe.
Current and historical analyses do not guarantee future results.
Through November 8, 2021Data has been normalized to 2020. European Gas represented by TTFG1MON OECM Index (USD), Australia Export Coal represented by API31MON Index (USD), Brent Crude represented by CO1 Comdty (USD), US Gas represented by NG1 Comdty.
What’s driving the current energy crunch? In a perfect storm, demand leapt as the world returned to work after COVID-19. But unusual weather patterns meant renewable power sources failed to perform as expected, while hydrocarbon supplies were hit by disruptions globally. Investor aversion to fossil fuels like oil and coal is only a subsidiary factor in today’s price crunch, which we expect will moderate next year as several temporary factors reverse. Still, with shareholders and other stakeholders pressing energy companies to limit oil and gas investment, today’s problems are likely a foretaste of more crunches to come.
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$Dow Jones Industrial Average (.DJI.US)$ In the short term, the market implications of climate change events may be focused more locally; for example, supply chain disruptions related to hurricane damage or businesses considering where to place their operations based on the likelihood of severe weather events. However, as we see events grow in number, size, or severity, there could very well be a multiplier effect which contributes to market volatility as investors grapple with the increased uncertainty of weather-related events. In the intermediate to longer term, we believe there are market implications driven by the allocation of investor capital toward companies which seek to address the issues at hand and in turn allocate their capital towards investments that provide solutions through new innovative products or cleaner, more efficient manufacturing, for example.
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$Dow Jones Industrial Average (.DJI.US)$ $SPDR S&P 500 ETF (SPY.US)$ Impact investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values-based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating.
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ESG investing strategy is not new but the momentum is growing as shareholders demand action and as the consequences grow for companies which fail to adapt.
Different reasons fuel investors appetite to investing. Some do it for moral reasons choosing to shun companies that do not align with their views while other considers from social factor such as equal pay practices.
Some examples of sustainable fund include $Nuveen Esg Large-Cap Growth Etf (NULG.US)$ $FRANKLIN CLEARBRIDGE SUSTAINABLE UNIT (FCSI.CA)$ even beaten $S&P 500 Index (.SPX.US)$ on certain period. Well, the trends is moving forward to Esg. Good luck in investing 🍀
Different reasons fuel investors appetite to investing. Some do it for moral reasons choosing to shun companies that do not align with their views while other considers from social factor such as equal pay practices.
Some examples of sustainable fund include $Nuveen Esg Large-Cap Growth Etf (NULG.US)$ $FRANKLIN CLEARBRIDGE SUSTAINABLE UNIT (FCSI.CA)$ even beaten $S&P 500 Index (.SPX.US)$ on certain period. Well, the trends is moving forward to Esg. Good luck in investing 🍀
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$Nucor (NUE.US)$ Nue definitely has a premium over the other steel companies because it has had a solid record of paying dividends without cutting them and a stronger balance sheet. It is the JNJ of the steel world as you pay for the quality, balance sheet safety and history. I think all of the steel companies are cheap given their cash flow and growing revenues/earnings.
The caution by many analysts and investors is whether high steel prices are the new norm and if steel companies are now at the top of their cyclical pattern. The 4th quarter is going to be another blowout in earnings by all of the steel entities and likely the 1Q of 2022. The CEO of CLF has said that 2022 will be stronger than 2021. Whether steel prices drop next year or in the future, the balance sheets are drastically improving in real time for all of the companies. They will return more capital to shareholders in the future with increased dividends and buybacks. They will also be able to whether a downturn better in the future with better credit ratings and less debt to deal with.
The writing is on the wall if investors are following the quarterly reports. The industry has consolidated in the last decade and tariffs will keep U.S. steel companies protected from foreign steel. These are high beta stocks so it doesn't surprise me to see huge swings in share prices but the important thing is to keep your eye on the quarterly reports and balance sheets as each quarter is getting stronger with time.
$SPDR S&P 500 ETF (SPY.US)$ $Dow Jones Industrial Average (.DJI.US)$
The caution by many analysts and investors is whether high steel prices are the new norm and if steel companies are now at the top of their cyclical pattern. The 4th quarter is going to be another blowout in earnings by all of the steel entities and likely the 1Q of 2022. The CEO of CLF has said that 2022 will be stronger than 2021. Whether steel prices drop next year or in the future, the balance sheets are drastically improving in real time for all of the companies. They will return more capital to shareholders in the future with increased dividends and buybacks. They will also be able to whether a downturn better in the future with better credit ratings and less debt to deal with.
The writing is on the wall if investors are following the quarterly reports. The industry has consolidated in the last decade and tariffs will keep U.S. steel companies protected from foreign steel. These are high beta stocks so it doesn't surprise me to see huge swings in share prices but the important thing is to keep your eye on the quarterly reports and balance sheets as each quarter is getting stronger with time.
$SPDR S&P 500 ETF (SPY.US)$ $Dow Jones Industrial Average (.DJI.US)$
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$Dow Jones Industrial Average (.DJI.US)$ ESG - sounds like a good way to not make as much as of a return as you could.
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$SPDR S&P 500 ETF (SPY.US)$ ESG is nothing more than policies of integrity and accountability.
83% of investors around the globe want ESG.
Capitalism will keep pushing ESG forward despite tantrums from barbarians.
Those who don't like ESG are the very same poor souls who are always complaining how unfair the world is. The irony is over their heads.
83% of investors around the globe want ESG.
Capitalism will keep pushing ESG forward despite tantrums from barbarians.
Those who don't like ESG are the very same poor souls who are always complaining how unfair the world is. The irony is over their heads.
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lusy bubb : Which stocks does ESG invest in?
Molly wealth talk OP lusy bubb : ESG just means Environment, Society and Governance.Sometimes, you could think it is Sustainable Investing.
I guess, many people's answers are TSLA, BYD and so on.