I had intended to follow up to my recent column on Bitcoin, and its pluses and minuses.
I could not, however, let the inauguration of Joe Biden and its impact on both the economy and ESG (Environment, Social, Governance) investing go astray.
For too long, we have lived in an era of phoney wars, perpetuated by greed and what can only be seen as a complete dislike of the planet’s future.
Diplomacy is back
Such a stench of irresponsibility has been allowed to ferment further by the neoliberalist policies, which give power to corporations to do whatever they like without consequence – as long as they sponsor and control the media.
Joe Biden has made his position clear and if this is allowed to follow through, it will become the catalyst that makes ESG the three letters through the stick of rock that is – the world.
For companies that do not aspire to bring their policies into line, it is not going to be a favourable time, and lobby as they may, ESG policies will ensure the public will vote with their wallet, whether virtual or not.
Consider the former Trump adviser Dan Dimicco. Majority action launched a campaign for his departure from Duke Energy having posted comments questioning the legitimacy of Joe Biden’s win.
Hey presto. Gone.
Pressure on asset managers
ESG influencers around the world are following up on that and pressurising asset managers to divest from organisations with poor ESG policies.
To consider the impact: Basic supply and demand of a share creates its share price rise or fall. If investment managers divest from run of the mill, let alone fossil fuel stocks, that money has to flow elsewhere, and they will be favoring those with strong ESG policies.
Consider the green energy firms in Europe of Enel, Orsted and Iberdrola. They have outperformed the oil majors of Shell, BP and Total by over 300% since 2010. Those investors hanging on to the rusty hook of oil dividends missed out significantly.
Those oil majors will naturally look to protect their cash flow and move to invest, merge, or buy into the green energy movement, leading to further upward ‘pressure’ on their share prices.
Stable ethics and management
The most important point about ESG, as opposed to ethical, green or sustainable tags from the past, is the stability and sustainability of an organization exemplifying strong ESG policies. They are stable, have appropriate work ethics and management that attract and retain staff and customers alike. They are trustworthy and easy to deal with. Seems an obvious choice.
The last few years have shown that in the stability of their share prices.
Biden has moved quickly and is living by his word. Looking at Trump’s funders versus Biden’s, you will see Biden was funded heavily by climate change activists as opposed to the power hungry and greedy of Trump.
Their lobbyists will be sure to get what they want, just as Trump’s did with their appalling requests.
This was equally as evident in the election as Biden refused to take money from the fossil fuel industry.
A return to the Paris Agreement
Before Trump could escape through the back door, a US court lobbed one of his policies into a puddle. It would have taken us back years in environmental regulations, but by sending it to the US Environmental Protection Agency, this gives Biden the ability to effectively rewrite it.
Biden stated clearly he would move to resign the Paris agreement which he immediately did. His intentions are clear.
Now that clean energy is at the heart of policy, there is still further work to be successful with implementation but Gary Gensler’s appointment is important.
In this column in 2008, we talked about the potential issues that complex derivatives had in creating a bubble, which we warned about five months in advance.
Mr Gensler was appointed by Obama to put in place regulations to cut out that future risk. He frog marched them through, bouncing opposition out of the way in the process.
I am hoping the world will be a very different place in one year’s time.
About the author
Peter McGahan is Chief Executive Officer of Independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority.
If you have a query regarding ESG investments, please call Peter 01872 222422 or email [email protected] or visit us on www.wwfp.net.Last modified: February 5, 2021