7 min read

The Leaky Methane Cauldron

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Happy Lunar New Year, everyone!

As ESG and sustainability become mainstream and baked into the investing strategies of many who are looking to align their values with their investments, it’s fair that more people will analyze it, question it and evaluate its true worth and potential. Some critics may even suggest it’s as fake a commitment to improving the world as the snow at the Beijing Winter Olympics.

This is a plus for the movement since it forces all of us to put on our critical thinking hats and brings forth more clarity and understanding. Skepticism also pushes market players and regulators to detect greenwashing and fraud, an area where there’s plenty of room for improvement. This conversation is good—let's keep it going.

As you listen to these discussions and think about what you might add at the next happy hour when this comes up, we think some points are worth repeating:

ESG and good returns are not mutually exclusive: There’s extensive data to back this up. You can also ask Norway’s sovereign wealth fund, the world’s biggest owner of stocks and an uncompromising ESG screener. Its deputy CEO recently said ESG and returns now go hand-in-hand.

ESG and sustainable investing have real-world positive impacts: Whether it’s net-zero commitments in response to the threat of divestments, the world’s largest asset manager backing more ESG shareholder resolutions, giants like Costco being pressured to use science-based climate targets, or the proliferation of green bonds and diversity disclosures, investor demand for sustainability is triggering real change at America’s most powerful corporations. It’s also led to a surge in clean technology and social impact-focused startups going public, and caused regulators to consider new rules for disclosures, proxy battles and pension funds.

ESG investing ≠ screening by values: ESG is a way to measure risk to company bottom lines. Since its criteria are social, environmental, and governance issues, it may look similar to values-based investing, but it’s not the same. Because ESG funds try to hold shares in companies of any sector best positioned to succeed long-term in a rapidly changing and warming planet, some flying the ESG flag may not align with all your values. Diligence and research still must be done if you don’t want to be too disappointed by finding certain companies in your portfolio. We’ve got your back on this and will keep adding resources to make this research as easy as possible.

Sustainability is here to stay: While greenwashing is definitely real and a problem, it’s a mistake to dismiss a fundamental shift in the market, industry, and society as a whole as a marketing ploy or asset bubble. The climate emergency, as well as key issues like human rights, transparency, and diversity and inclusion, are front and center in the minds of regulators, consumers, workers, and—because it’s good for the planet and their pocketbooks—investors.

News you can use

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  • Globally, investors poured $142 billion into sustainable funds last quarter—12% more than Q3—bringing total assets to $2.47 trillion. US funds saw a record $70 billion net inflows in 2021, although that slowed in the final three months. You can view the US funds that attracted the most money in Q4 here.
  • The gaming industry resembles Pac-Man right now, with a spate of takeovers in preparation for the metaverse. Already this year Microsoft is buying Activision, Take-Two is buying Zynga, and Sony is buying Bungie. Are consolidation and tech monopolies bad for gamers and the art form? The FTC will have to make a call. In the meantime, we’ll keep playing free Wordle no matter who owns it.
  • Ford is reportedly planning to invest $20 billion to convert its factories worldwide to electric vehicle production. It’s already committed $30 billion to EVs and will launch the much-awaited electric version of its F-150 pickup this year.
  • The future of work is already here for HR recruiters. In a global survey by job site Monster, nearly half (49%) said flexible working schedules help them retain talent and 42% said they are a cost-saving solution. All this while another study shows the average worker saved an hour every day in January by not commuting!
  • February is Black History Month in the US. It’s a time to celebrate and honor the contributions of Black leadership in all sectors, including finance, and acknowledge the past and continued struggles against racial injustice. Now’s a great time to learn about the first banks owned by and serving Black Americans, the many leaders who broke barriers in business and finance and Black Wall Street.

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