Eq: Tech
Privatized space launches were a hot topic in news cycles this year, with success from SpaceX and private launches of billionaires Bezos and Branson. However, space didn’t just move headlines this year, it moved bottom lines as well. Privatized space infrastructure investment drew $3.9 billion in 2021Q3, setting an annual record of $10.3 billion. Space investments are broadly divided up into infrastructure (which posted the record year), distribution, and application. Special Purpose Acquisition Companies (SPAC) were the predominant factor in space investments. The capital was raised in private markets and mergers to go public happened frequently this quarter by Rocket Lab, Spire Global, BlackSky, Momentous, and Redwire. The trend won’t stop this quarter as more deals SPAC deals are expected to place and set more records in Q4. Space investment has raised nearly $231.2 billion in private equity since 2012.
FINSUM: While a lot of major deals are done in private equity, retail investors can look to ETFs like ARKX to invest in this growing market segment.
(New York)
ESG is taking over Europe and PWC is forecasting that ESG could make up €775.7bn to €1.2tn by 2025. That figure would make ESG 27-42% of Europe’s entire private financial market, for context it is about 15% currently. Driving that projection is the EU’s new sustainable finance disclosure regulations. Almost a third of the firms surveyed cited regulation as a primary force pushing their ESG investment. Sustainable investing in Europe is also seeing large growth in a public investments like pension funds. Finally, PwC said they see a new wave of private funds coming in the future rather than a re-rigging of existing financial funds to be more ESG friendly.
FINSUM: Public investment is a critical piece of Europe’s ESG investment, which is why it was very important when the U.S. opened the doors for public sustainability investment recently.
Facebook was blacked out on Monday October 5, 2021, which they claim was related to technical issues on their backbone routers. This came just before Frances Haugen, former product manager for Facebook’s civil integrity team, said that regulators need to intervene in the ‘crisis’. Haugen told ‘60 Minutes’ that she saw Facebook consistently choose profits over public safety at Facebook.She took with her tens of thousands of documents that prove these claims. Additionally, she filed complaints with the SEC that Facebook misled investors and advertisers by not sharing the whole picture about its platform.
FINSUM: This was a huge hit to Facebook stock on Monday, but it piggybacked on the rest of tech’s rally Tuesday morning to see some recovery. It is difficult to tell how long this may loom over the stock.
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(Bangkok)
Southeast Asia is bursting on to the Fintech scene with a host of new companies. Ascend Money, is one of Thailand’s darlings and just became the country’s newest unicorn. Ascend found early funding from Jack Ma’s Ant Group Co. and Charlene Pokphand Group, and just secured $1.5 billion in its latest round of funding. Ascend plans to use the funding to improve its mobile wallet app TrueMoney. They view this latest funding as a testament to the positive ecosystem in Thailand for start ups and financial technology companies. Still Ascend’s $14 billion operation that spans Cambodia, Indonesia, Myanmar, the Philippines, Thailand, and Vietnam, faces competition from established financial firms in the region like Siam Commercial Bank Plc and other financial start ups.
FINSUM: This story is a reflection of the bourgeoning Fintech industry in the South East Asia region, no doubt the leader in emerging markets for new technology companies.
The UN's new report on climate change paints an alarming picture, warning that temperatures are rising faster than previously expected[1]. It adds impetus to President Biden's infrastructure plan, expected to be approved by the Senate this weekend[2], which includes significant dollars ringfenced for investment in green fuels.
But ramping up renewable fuels isn't the only way the infrastructure plan could combat climate change. The bill also plays heavily on 5G connectivity, which some opinion-makers hope could prove good for the planet. Erik Ekudden, CTO and Head of Technology & Strategy at the 5G stock Ericsson, says that "[5G] uses, applicable across various sectors, can drive down costs, energy usage, emissions, waste and mitigate climate change."[3]
5G can reduce emissions
By connecting remote devices through internet of things (IoT) sensors; collecting, sharing, and storing the data they gather; and powering artificial intelligence (AI) and machine learning (ML) engines, 5G can help cut emissions across a number of sectors. An earlier UN report estimated that taken together, advanced 5G-powered ICT solutions could lower greenhouse gas emissions by 20% by 2030[4].
- In cities, tracking and charging for solid waste disposal could cut solid waste by 10-25% per capita by 2030[5], with a commensurate drop in energy used to process it.
- Live traffic updates enable smart traffic lights to refine sequencing in real time, improving traffic flow and cutting emissions from vehicles idling in holdups by up to 21%[6].
- 5G is a key technology behind driverless cars, which have fewer sudden braking and accelerating incidents that burn more fuel.
5G can cut waste and pollution
Advanced agro-tech solutions use 5G and IoT sensors in fields and orchards to give farmers real time, reliable information about disease, hydration, and soil and weather conditions, so they can make better decisions about fertilizer and pesticide use. AI-powered drip delivery systems allow them to apply the chemicals they do use in more accurate ways, reducing runoff into groundwater.
It's a similar story for heavy industry and manufacturing. "Lights off" production uses robotic process automation (RPA) that relies on IoT data, lag-free edge computing, and ML. Without employees on site, there's less need for lighting and temperature control.
Smart factories reduce human error that causes environmental incidents and wastes raw materials and energy. Ericsson estimates that their 5G-powered smart factory uses 5% less energy, produces 5% less waste, and is 24% more efficient overall than the baseline[7].
5G can increase food production
As well as helping farmers cut pollution, 5G is widely expected to boost food yields[8]. 5G's stronger connectivity could bring reliable internet to rural areas that are currently severely underserved, so farmers can refine planting and animal husbandry decisions.
IoT devices can detect the early signs of infestation, disease, or changes to soil conditions, enabling farmers to resolve the issue before crops or herds are seriously affected. Real time hydration information can also cut water usage; crucial when water levels are dropping, and agriculture accounts for approximately 70% of the world’s annual consumption of freshwater[9].
5G can lower energy consumption
Smart buildings use IoT to automatically turn off lights and adjust temperature control systems to use less energy. The Empire State Building in New York, for example, implemented smart meters some years ago to help tenants optimize their energy usage. It's seen energy costs drop by 38%, and reduced CO2 emissions by 105,000 tonnes in one year.[10]
New smart grids are more reliable and energy efficient, reducing energy wasted through leaks and power surges. Better monitoring of energy consumption through IoT and ML also means energy companies can measure production against demand, and balance consumption needs with output from renewable energy to reduce their use of fossil fuels.
5G can boost disaster management
As made clear in the UN report, the next century will be marked by natural disasters such as landslides, wildfires, and floods. 5G stocks can help us cope:
- IoT sensors can deliver early warnings about wildfires, landslides, avalanches, and flooding, helping speed up evacuation and prevent loss of life and property.
- Edge computing and AI engines predict extreme weather events and plot the path of wildfires and hurricanes.
- Augmented reality (AR) headsets use latency-free video analytics data streamed over 5G to give firefighters visibility into the heart of wildfires, helping them fight them more safely and effectively[11].
- 5G enables rescue teams to use drones, GPS, and emergency communication to work more efficiently, and to bring aid where it's needed most.
Improve wildlife stewardship
On a more positive note, 5G can help safeguard protected habitats and track endangered species. For example, a pilot project in the UK's Sherwood Forest uses 5G to monitor the health of the trees and the creatures who live in and around them[12].
5G sensors monitor microbe and acidity levels in water tables to detect changes instantly, so action can be taken before serious incidents occur. IoT sensors in gas, chemical, and water pipes also check constantly for cracks to prevent leaks. It's estimated that 5G sensors and analytics on water systems can reduce water loss by up to 25%[13].
Is 5G an energy monster?
There are fears that 5G's extra computing power could raise energy consumption. A recent report from France warns that 5G networks could release an extra 3 to 7 billion tonnes of CO2[14], and in China, power consumption from 5G technology is predicted to increase by 488% by 2035[15].
But others allay these concerns. 5G networks themselves are around 90% more energy efficient than 4G networks[16], and it's only the initial stages of the rollout which need more power. “Once the network is more mature, all energy efficiency features will kick in and energy consumption will be optimised,” said Joop Hazenberg, European External Affairs Director at GSMA[17].
According to Ekudden, much depends on the choices made by 5G providers and infrastructure contractors. 5G rollout powered by renewable and green energy shouldn't raise emissions noticeable, and once it's in place, it should drive a net reduction in power usage.[18]
Or the next ESG investment choice?
It might be too much to suggest that investors who want to support environmentally friendly causes should put their money into 5G stocks, but at the same time, investors who are excited about being part of the cutting edge of 5G innovation don't need to feel guilty about the impact it has on the planet.
Investing in Defiance's FIVG 5G ETF allows investors who want to join the 5G transformation to mitigate their exposure to risk by spreading their investment over a range of leading 5G stocks, thereby helping balance their portfolio.
N.B. This is sponsored content and not FINSUM editorial.
[1] "AR6 Climate Change 2021: The Physical Science Basis", released August 9, 2021 https://www.ipcc.ch/report/ar6/wg1/
[2] "Infrastructure on track as bipartisan Senate coalition grows" August 10, 2021 https://apnews.com/article/joe-biden-business-c299d5d2a32188989b58cb5feec12f5d
[3] "Digitalization with 5G enables further acceleration of climate action" January 21, 2021 https://www.ericsson.com/en/blog/2021/1/digitalization-5g-climate-action
[4] "ICT Sector Helping to Tackle Climate Change" August 12, 2016 https://unfccc.int/news/ict-sector-helping-to-tackle-climate-change
[5] "The global economic impact of 5G" https://www.pwc.com/gx/en/tmt/5g/global-economic-impact-5g.pdf
[6] "FEATURE: How 5G will transform smart transportation in cities in 2021" October 14, 2020 https://www.traffictechnologytoday.com/features/feature-how-5g-will-transform-smart-transportation-in-cities-in-2021.html
[7] "Digitalization with 5G enables further acceleration of climate action" January 21, 2021 https://www.ericsson.com/en/blog/2021/1/digitalization-5g-climate-action
[8] "Agriculture’s connected future: How technology can yield new growth" October 9, 2020 https://www.mckinsey.com/industries/agriculture/our-insights/agricultures-connected-future-how-technology-can-yield-new-growth
[9] "WATER IN AGRICULTURE" May 8, 2020 https://www.worldbank.org/en/topic/water-in-agriculture
[10] "Achieving sustainability in a 5G world" December 2016 https://www.brookings.edu/wp-content/uploads/2016/11/gs_20161201_smartcities_paper.pdf
[11] "5 Ways 5G And IoT Could Help Change The World" August 9, 2021 https://www.forbes.com/sites/tmobile/2021/08/09/5-ways-5g-and-iot-could-help-change-the-world/?sh=51adc6085557
[12] 5G Connected Forest, started March 1, 2020 https://uk5g.org/discover/testbeds-and-trials/5g-connected-forest/
[13] "The global economic impact of 5G" https://www.pwc.com/gx/en/tmt/5g/global-economic-impact-5g.pdf
[14] "Deploying 5G will lead to spike in CO2 emissions, French climate council warns" December 20, 2020 https://www.france24.com/en/europe/20201220-deploying-5g-will-lead-to-spike-in-co2-emissions-french-climate-council-warns
[15] "Superfast but not so clean: China’s 5G network is causing its carbon emissions to soar" June 4, 2021 https://www.euronews.com/next/2021/05/28/superfast-but-not-so-clean-china-s-5g-network-is-causing-its-carbon-emissions-to-soar
[16] "5G 90% more energy-efficient than 4G, Nokia study finds" December 8, 2020 https://www.smart-energy.com/industry-sectors/digitalisation/5g-90-more-energy-efficient-than-4g-nokia-and-telefonica-find/
[17] "Friend or foe? The potential climate benefits of 5G" June 4, 2021 https://energymonitor.ai/tech/digitalisation/friend-or-foe-the-potential-climate-benefits-of-5g
[18] "Superfast but not so clean: China’s 5G network is causing its carbon emissions to soar" June 4, 2021 https://www.euronews.com/next/2021/05/28/superfast-but-not-so-clean-china-s-5g-network-is-causing-its-carbon-emissions-to-soar
Responsible investors have long believed that investing with embedded consideration of environmental, social, and governance (ESG) factors is a compelling approach to identify investment opportunities: well-run, thoughtfully managed companies built for the long term, ready to foster societal transition and dynamically adapt to our rapidly changing world. This belief is simple enough to justify: identification, application, and integration of ESG risks and opportunities can provide investors with additional, independently derived insight into a company’s management quality, strategic positioning, operational efficiency, and potential risk exposure.
The broader investment community has caught on. In 2020, ESG funds saw greater inflows than in any year prior, a nearly 140% increase over 2019 and nearly ten times greater than in 2018. Corporations have responded to this shift, with a record number of companies appointing their first Chief Sustainability Officer (CSO) in 2020, a year that saw more CSOs recruited than in the previous three years combined.
SUSTAINABLE FUND ANNUAL FLOWS AND ASSETS
Source: Morningstar. Data as of 12/31/2020
Includes Sustainable Funds as defined in Sustainable Funds U.S. Landscape Report, Feb. 2020.
Includes funds that have been liquidated, does not include funds of funds.
The transformative potential in the hands of ESG investors has grown by orders of magnitude. This exponential growth has brought an increasingly crowded field with a variety of approaches to ESG, creating ambiguity in the marketplace over what it means to be intentional as an impact investor. An authentic, intentional, and holistic approach relies on aligning active ownership strategies (e.g., shareholder resolutions, public policy participation, voting proxies) with stated investment goals, an ESG-led research process, and impact-oriented themes and targets.
Dispelling a Persistent Myth
There has been a widespread misconception among investors that ESG factors are non-financial. This is not entirely accurate. ESG factors can instead represent unpriced externalities and unmanaged risks that are uncorrelated with traditional financial metrics. By incorporating ESG factors into security analysis, investors can identify a host of material issues core to business fundamentals, enhancing the ability to recognize patterns that are not already priced in.
In addition to risk-mitigation, businesses that proactively accelerate the adoption of positive ESG practices and the development of solutions-oriented products have a unique opportunity to exceed revenue expectations and thus be rewarded with higher ratings over time. These companies may see an improving competitive position versus peers, while those that are on the wrong side of this transition may see changes in their cost of capital and an accompanying deterioration in their competitive position. Investing in the transition to a more just, sustainable world gives investors access to solutions-fixed revenue streams while altering the trajectory on climate action and racial equity among a host of other vital issues.
Identifying strong business fundamentals and ESG process leadership — underpinned by the belief that businesses with forward-thinking managements are higher quality — combined with insights gained from global, proactive, and sustained shareowner engagement can together form a positive feedback loop for better investment decision-making. Managers with the knowledge and experience to employ this holistic approach understand the need to incorporate the product dimension into impact and support companies whose products and services are solutions for societal, environmental, and human rights problems.
ACTIVE OWNERSHIP STRATEGIES
The Way Forward
We are at an inflection point where ESG is transitioning from niche to mainstream. True to the original spirit of the movement, we should hope not to build a new investment establishment in the image of the old, but instead to forge a dynamic, holistic, evolved approach, generating positive impacts by holding companies accountable as stewards of people and planet. As investors, holding ourselves to the same high standards we demand of portfolio companies will go a long way toward making these impacts sustainable.
We hope that you will join us on the journey.
By Liz Su, CFA and Kevin Hart, CIMA of Boston Common Asset Management
Past performance is not a guarantee of future results. Investing involves risk including possible loss of principal.
This does not constitute investment advice or an investment recommendation.
This represents the views and opinions of Boston Common Asset Management. It does not constitute investment advice or an offer or solicitation to purchase or sell any security and is subject to change at any time due to changes in market or economic conditions. The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes.
Applying ESG investment criteria to investments may result in the selection or exclusion of securities of certain issuers for reasons other than performance, and may underperform investments that do not utilize an ESG investment strategy. The application of an ESG strategy may affect an investment's exposure to certain companies, sectors, regions, countries or types of investments, which could negatively impact performance depending on whether such investments are in or out of favor. Applying ESG criteria to investment decisions is qualitative and subjective by nature, and there is no guarantee that the criteria utilized or any judgment exercised by an investment manager will reflect the beliefs or values of any particular investor.
AMG Funds LLC (“AMG Funds”) is a wholly-owned subsidiary and U.S. retail distribution arm of AMG. AMG Funds offers long-term investment strategies through a unique platform that includes a family of funds and separate accounts managed by a selection of AMG's investment managers.
N.B. This is sponsored content and not FINSUM editorial.