ESG Essentials: in the news this week

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Sustainable funds face threat from tech sector turmoil

There is currently uncertainty around the growth of ESG funds, which thus far have been booming, with global sustainable assets doubling in the six months to September 2021 to reach $3.9tn. According to this piece, it’s because many ESG funds have big investments in tech giants, whose businesses thrived during the pandemic. Concern comes from not knowing how well such firms will continue to perform post-pandemic, having already taken a hit since the beginning of the year.

That said, ESG fund managers argue that sustainability has now become so ingrained into investment strategies cross-sectorally that a significant reversal is unlikely. “We have climate plays in every sector of the market,” said Simon Webber, fund manager at Schroders, who thinks companies such as homebuilder Kingfisher, insurer Munich Re and carmaker BMW will be big winners in the climate transition.

Read the full story here.  

The Power of Capitalism  – Larry Fink’s 2022 letter to CEO’s 

Larry Fink, co-founder of Blackrock, wrote his annual address this week to the CEOs and Chairs of the companies Blackrock invests in. The letter covered how COVID-19 has altered the relationship between employers and employees, access to capital, and the growing role of sustainability and ESG. 

The importance of sustainability in governance is increasing, and stakeholders expect companies to actively decarbonise their businesses. Economies are being disrupted by emerging sustainable technologies, and divestment away from entire sectors means that ever-more funds are available to invest sustainably.

Fink also highlights the importance of empowering clients with choice on ESG votes. Blackrock is pursuing an initiative to give clients the option to partake in proxy votes at the companies their money is invested in.

Is this the beginning of a tilt towards a better governance? Read the full story here.  

Dimming the sun, rising heat costs and WEF top global risks 

This week the WEF published its Global Risks Report for 2022, evidencing widening global economic disparity and vaccine inequality: in the poorest 52 countries, home to 20% of the world’s population, only 6% have been vaccinated. Moreover, the richest 20% of the world’s population will have recovered half their losses in 2021, while the poorest 20% will have lost 5% more of their income. 

Such divergence will create tensions, both within and between borders, which will worsen pandemic recovery rates and complicate coordination efforts to tackle common challenges, namely climate change. As economic inequality widens, the chances of political collaboration to tackle challenges lessens – this means our climate patterns get increasingly more intense and irregular, and plunge populations further into poverty. 

The WEF goes into great depth about how the COVID pandemic has caused and exacerbated certain trends and the potential solutions at our disposal. We highly recommend reading at least the executive summary; it sets into context the geopolitical and social trends happening to us right now, providing a much-needed sense of perspective on, and incentive for, change.

Read the full story here.  

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