ESG essentials… in the news this week

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Climate graph of the week

In a global first, the University of Oxford conducted a study examining the environmental impact of thousands of food and drink products in the UK. Meat, fish and cheese products had the highest impact, with fruit, vegetables and bread with the lowest. Further analysis also demonstrated an overlap between those foods with low environmental impact and higher nutritional value.

Such data could have implications for food labelling, with product labels including environmental impact in the same way as nutrition. A growing body of research suggests this steers consumers to make greener choices. 

Read the full article here.

In defence of ESG: A response to The Economist 

The Economist recently declared that ‘ESG’ is ‘three letters that won’t save the planet’, and that the sector should be boiled down to focus solely on emissions.

Responsible Investor’s co-founder, Hugh Weelan, argues this is an example of the muddled thinking and pigeonholing that permeates much of the critique of ESG. The sector deals with pertinent and urgent issues which are often interrelated and are financially relevant to investors and those whose money they steward. Finance has power and responsibility in a market economy.

ESG also cannot be homogenised: there are numerous investing approaches taken by asset managers. Clearly ESG is complex, intertwined, with much more practical work needed to make the industry pragmatic and profitable. Should it be dismissed though? We don’t think so, and neither should investors. 

Read the full article here.

Greenflation: what are the drivers and how long will it last?

The costs associated with going green, such as the productivity drop as such transitions occur, are causing concern for investors as nations plan to accelerate their energy independence. So-called ‘greenflation’ is being compounded by macroeconomic factors like the Covid-19-related supply chain issues and Russia’s war in Ukraine. 

Geopolitical factors affect the strength of economies meaning the price of commodities fluctuate. Nowhere is this clearer than in the case of grain following Russia’s invasion of Ukraine, for example. Separately the cost of mature renewable installations like wind and solar has decreased over time as the infrastructure available to develop, install and run them becomes more widely available. As such, not all greenflation is the same. 

Arguably given the urgent demand for renewable energy globally, investors should not be deterred by shorter-term geopolitical events causing greenflation. This is particularly pertinent given the fact that once up and running, the costs of renewable energy fall significantly. 

Read the full article here.

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