Too Good To Be True?
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Sometimes everything can feel a bit upside down… Maybe it’s because we are still recovering from our Spotify Wrapped reveals or are reeling from the impact of inflation on our holiday gift purchases, but the fact that every time we get positive economic news (like higher-than-expected activity in the services sector), the broader stock market drops can make for some real head scratching — even if we know it’s driven out of fear that a strong economy will embolden the Fed’s interest-rate-raising campaign.
Investors who value sustainability are seeing similar tension around the growth of and pushback on ESG-focused investing. A stark reminder of this came a few days ago when Florida’s CFO announced that the state would divest $2B from BlackRock because of its ESG agenda. Yesterday, Vanguard (another manager of $7T in assets) exited a major net-zero group in the face of political pressure. The Financial Times offers a glimpse into how impact and ESG investing are getting battered from both ends of the American political spectrum — with the left demanding more disclosures and the right saying that efforts to fight climate change and improve diversity have gone too far.
Other trends suggest that ESG isn’t going away anytime soon. One big takeaway from last week’s Fortune Impact Initiative was that many companies are doubling down on their ESG and diversity, equity, and inclusion initiatives. A Bloomberg survey of finance professionals found that more than 60% expect ESG to be a standard part of, or increasingly critical to, running a business. BlackRock’s Larry Fink joined this chorus (while also being targeted for his advocacy of stakeholder capitalism and ESG investing) at last week’s NYT DealBook conference, where he noted record inflows from investors to BlackRock so far this year.
In contentious times, it can be helpful to stay focused on your personal values and goals, whether they relate to social equity, the climate, your faith, or any other worthy cause. Aligning your investments with your values is a way to achieve returns while building the world you want to see. The media hype highlights one issue we aim to address over here at FWIW — there’s still a lot of confusion about what ESG, sustainable investing, and impact investing actually mean. So, if you ever find yourself lost in the acronyms, check out our glossary or guide to the ESG alphabet soup. Is there a term you want to understand but don’t see here? Drop us a note so we can add it to the list.
News you can use
- Will history repeat itself? The Indicator from Planet Money asks whether recent tech layoffs signal that we could be heading for another dot-com bust that makes ripples throughout the economy. The bottom line — many experts don’t think so. Tech companies may be slowing down, but they’re not going away, and the rest of the labor market is still strong (evidenced by last Friday’s jobs report), although many companies are taking a conservative approach as the threat of a recession still looms. That said, this is something we will keep an eye on.
- The world will add as much solar capacity in the next five years as it built in the last two decades, predicts the International Energy Agency (IEA). The IEA’s new report highlights how the global energy crisis, sparked by Russia’s invasion of Ukraine, has motivated countries to speed up adoption of renewables as part of a campaign to reduce reliance on fossil fuels. You can read more about investing in solar energy here and in our Guide to Cleantech Investing.
- On Monday, Foresight Sustainable Forestry Co. became the first investment fund to launch under the London Stock Exchange’s new market for carbon credits. The voluntary market offers a way for investors and companies to purchase carbon credits to offset emissions and meet net-zero goals.