ESG Essentials: Chile nationalises lithium production, greenwashing concerns in ETFs

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As ESG ETFs rise in number, concerns grow regarding greenwashing

Concern among regulators about fund managers “greenwashing” is growing as a result of the rise in the number of ETFs that use ESG metrics – with numbers reaching almost 1,300 by the end of 2022. ESG ETFs have dramatically increased in popularity in recent years, but vary wildly in approach. According to the Financial Times, many insiders are worried that the continued growth of the market could lead to an increased risk of greenwashing. 

Some of the largest funds including BlackRock, Amundi and UBS have moved to remove ETFs from being able to be classified as Article 9, the EU’s strictest ESG category, due to complaints over incomplete disclosures and shifting regulatory requirements. 

The UK’s Financial Conduct Authority (FCA) is considering introducing new labels for sustainable investments, as well as proposed restrictions on investment managers using terms such as “green” and “ESG” in marketing documents in order to tackle the risk of greenwashing. 

As this market grows, calls to make language and regulations clearer will only increase. Without such standards, investors could lose confidence in some green funds altogether. 

Investment in Green Tech must increase to meet the net zero transition, says Bloomberg

Bloomberg Green released its annual list of twelve innovative companies tackling the most pressing challenges in the transition to net zero. The article highlights several pressing issues, most notably the need to create a more sustainable food system and secure greater supplies of critical minerals such as lithium. These problems will require innovative solutions from the public and private sectors, both of which will require much greater investment in order for the planet to reach net zero by 2050. 

In 2022, $1.1 Trillion was invested in green tech, equivalent to the annual GDP of the Netherlands, but even this figure pales in comparison to the funding that will be needed to promote and implement nascent tech, deploy existing solutions and modernise infrastructure.

Investors will play a crucial role in solving these challenges, using capital and influence to encourage better corporate behaviour. Planet Tracker is among the first organisations to set concrete steps investors can take to create a nature and people positive food system in their landmark Food Roadmap. Investor-led interventions like these will be crucial in addressing the funding gap and the broader issues posed by the climate challenge. 

Chile nationalises lithium production, increasing the role of the state in critical minerals

In a decision with wide ranging implications for green technology, the President of Chile, the second largest producer of lithium, has announced intentions to nationalise the extraction of the mineral in the country. 

Lithium, which is used in a wide range of applications, most notably battery technology, has long been regarded by investors as a crucial factor in reducing emissions. According to the plan, Chile will create a state-owned mining company that will become a major player in global lithium production given Chile’s large deposits. The country intends to create several public-private partnerships to extract lithium, with a large degree of state oversight. 

As Reuters reported, some investors were initially wary of this approach, but the move did not significantly affect lithium prices, which have dropped by 70% in 2023, perhaps showing that the wider market is willing to bide its time and see whether the measure is successful. In any case, it shows that policymakers in Chile and elsewhere have become increasingly aware of how vital mining has become to the transition and are willing to act decisively to strengthen their position. 

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