There’s Still Time to Jump on This Bandwagon — ESG Funds Outlook
Prior to ESG, managers were only accountable for corporate profits (which could be based on a wide array of factors, including good personnel policies and good community relations) and investment managers were only accountable for consistent high risk-adjusted returns. Making the environment better, improving society, and ensuring good governance outside of the boardroom was considered to be the job of government, civil society, or not-for-profit entities.
Because of their wealth, scope, and influence, companies have been hijacked by the power elite and ideologues to carry water for a host of social programs and causes from public housing and education to climate change. What one thinks of this evolution in the purpose of a corporation is irrelevant. It’s happening, and investors need to take it into account.
According to this article, assets under management in ESG funds are now over US$2 trillion, more than the largest sovereign wealth funds. These funds and large asset managers such as BlackRock are scouring the corporate landscape for companies that meet their ESG investment criteria. Since there is a scarcity of attractive ESG companies relative to the funds chasing ESG investments, the stocks of good candidates are likely to outperform.
Funds are also putting pressure on corporate management to conform existing corporate practices to ESG measurements or face shareholder revolts. Since the ESG target companies are overwhelmingly green (in areas of solar and wind power, recycling, and efficient construction), investors may find even better opportunities in blue projects involving water recycling, irrigation, and cutting-edge vertical farming. These trends are just beginning, so there’s still time for investors to jump on the red-hot green and blue bandwagon and put their portfolios in the black.
Here’s the truth about solar and wind power: It’s expensive and unreliable
If you listen to the climate alarmists, they’ll tell you we only have a few years to save the planet. If we don’t eliminate CO2 emissions quickly, the planet will warm, sea levels will rise, storms will intensify, cities will be inundated, and lives will be lost to starvation, disease, and dehydration. Every one of those claims is empirically false, but that doesn’t stop the global power elite from trying to shut down the oil and gas industries and replace power generation with solar, wind, and hydro power, or so-called renewable sources.
Here are the facts: The best evidence is that the planet is not warming, but may be cooling under the influence of a periodic minimum in solar flare activity and increased volcanic activity, which creates an atmospheric ash layer that cuts down on sun intensity. Sea levels may be rising slightly, but the tempo is about seven inches in the next 100 years. That’s hardly cause for alarm considering that sea levels rose 400 feet since the end of the last ice age and humans adapted just fine.
CO2 is a trace gas that makes up just 0.04% of the atmosphere (400 parts per million) and doesn’t impact anything as far as science can tell, except that it is essential for plant nourishment. There is some danger that if CO2 levels are reduced too much, plant life may suffer.
The reason hurricanes are producing more property damage is not because the storms are more intense — peak intensity in the past 100 years was in the 1940s. Rather, it’s because morons with federally subsidised flood insurance are building mansions on sandbars where they don’t belong, and the mansions get blown away in predictable storms.
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The polar bears are doing just fine
Remember when the same climate alarmists said in 1988 that the New York City subways would be flooded by 2010? It never happened. By the way, the polar bears are doing just fine. Recent reports show the polar bear population is thriving and one report showed that polar bear obesity is an emerging problem because the bears have so much to eat.
Yet, the claims of the alarmists are even worse than being junk science. According to this article, the ‘solution’ to these non-problems doesn’t work either. Simply put, solar and wind power cannot replace oil and gas in producing electricity to supply the grid. The reason is that solar and wind are unreliable.
When the wind doesn’t blow and the sun doesn’t shine (which is often in most places), there is no power output at all. The only way to overcome the reliability problem is with batteries, which are immensely expensive. And battery production itself uses up enormous amounts of electricity and uses poisonous chemicals and metals, creating disposal problems.
A policy fiasco in the making
Solar and wind can be supplements to oil and gas (and nuclear) power, but they cannot replace them due to unreliability and the expense of batteries. The Biden administration seems determined to push the Green New Deal anyway. Get ready for higher energy costs, power outages, death and damage from cold spells, and possible lines at the gasoline pump. The Green New Deal is a policy fiasco in the making that will take us back to the 1970s.
All the best,
Strategist, The Daily Reckoning Australia
PS: This content was originally published by Jim Rickards’ Strategic Intelligence Australia, a financial advisory newsletter designed to help you protect your wealth and potentially profit from unseen world events. Learn more here.