On January 20th Joe Biden was sworn in as the 46th President of the United States. One of his campaign pledges was a commitment to take the US back into the Paris Climate Agreement, which the country had left.
Here in the UK, the Government has committed to a series of green initiatives. This includes the banning of the sale of new petrol and diesel cars and vans from 2030.
Opening in the North East is the UK’s first-ever battery ‘gigaplant’. The project will cost £2.7bn and will employ 3,000 people at the plant, producing lithium ion batteries for electric vehicles. The opening will create a further 5,000 jobs in the supply chain. In Europe, electric car makers Tesla have plans for a huge new plant in Germany.
In the early days, ‘ethical’ investments had a mixed performance record. With critics arguing that they usually only performed well in bull markets.
Those early funds typically avoided investments in companies associated with tobacco, gambling, the arms industry and so on. Now the focus has shifted to ESG investing. Fund managers are looking at a company’s environmental, social and governance ratings. This is alongside traditional investment metrics.
In a recent note to their clients, Goldman Sachs stated, ‘Prior to this crisis there was a meaningful and increasing focus on ESG investing and it is likely that this focus will only increase following Coronavirus.’
We have all seen how companies like Netflix and Zoom have benefitted from the pandemic in the short term. In the longer term, we may well see a fundamental shift in investment. This is because we now look at how companies have responded to the pandemic with the ‘social’ and ‘governance’ elements becoming more important than the ‘environmental.’
Is green investment set to bloom?
So far the evidence from the US is good.
Despite the last year being difficult for world stock markets, ESG funds have more than held their own, with some comfortably outperforming the main indices.
We are, unquestionably, going to see a greater emphasis placed on ESG investing in the years ahead. There is clear evidence that the Millennial generation want to work for companies that share their values. Therefore, as this generation become investors, they are going to want the same from their investment funds.
If you would like to discuss ESG investing with us, please contact us.
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