The new age gold rush had investors and hedge funds sprinting to the euro area investing in the carbon market where prices doubled last year, but hedge funds are betting California is the big break. If the U.S. is serious about its climate aspirations then the price of carbon will have to increase and California is already a leading collector in the tax of carbon. There has already been an 85% increase in the price of carbon per ton this year stateside and those tax dollars are funding municipality-related climate initiatives such as wildfire prevention. However, the carbon taxes come at a cost. The higher built-in tax drives up consumer goods prices when inflation is already on the minds of every American. Overall investors like Blackstone see gains coming.
FINSUM: In the long-term, this could be another major global financial market that is centered in the US.
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ESG investing is all the rage, but it has its limitations. Passive funds prevent real change by creating a stagnant environment that doesn’t encourage change, just look at how much C02 has increased despite all of the ESG inflows, or greenwashing where companies appear to be more environmentally servicing than they necessarily are. Active ESG investing (AESG) could be a game changer because it can rely on qualitative analysis and trends of a company to select them in an ESG fund rather than a gameable statistic. Additionally, active funds can have a bigger impact on diversity in board selection because it can have real corporate accountability rather than once again hitting a target statistic. Active funds can also put together better incentive structures to bring more companies into the ESG fold.
FINSUM: AESG funds is the logical evolution of standard ESG by merging two booming subsectors, and this is the time for active fund outperformance given ultralow yields.
The COP26 summit was last week, and the United Nations climate change conference drew leaders from around the globe to address rising global temperatures and greenhouse gas emissions. On Tuesday the conference pivoted to the role of science and innovation in greenhouse gas reduction. The 23 countries came together to announce four ‘innovation missions’. These missions would undertake projects for new clean technologies, c02 removal and new renewable fuels and chemicals. Global temperatures on a projection to rise by 2.4 degrees celsius by 2030, outpaces the target set by the Paris agreement. French President Macron suggests that nuclear energy be a larger part of the energy production in Europe moving forward in order to combat climate change.
FINSUM: C02 reduction is a growing technology field in the combating climate change and plants are being built around the globe.
Job growth had been performing below expectations in recent months, but the Recent BLS Report showed the Economy has bounced back with 531,000 jobs. Perhaps even more significant is the gender breakdown of these new positions: 57% of the new jobs were created for women. While the report is a positive, it is not all good news. Many of the new jobs created were for retail and hospitality, which have lower wages and don’t offer as many benefits. Still, wages are on the rise in this sector of the economy given the domestic labor glut. Finally, it will take time to restore the labor market to its pre-pandemic numbers. In fact, at this rate it will take another 8 months to recoup the job losses.
FINSUM: Minimizing labor disparities is a sign the economy is healing, but it's also a means for better economic growth in and of itself.
ESG has been for 2021 what the dotcom expansion was for the year 2000, but maybe that growth will fall off like tech did in the early 2000s. This month was startling for the ESG investors as debt issuance took a dive. Green bond issuance slumped 28% and other categories like social bond sales and sustainability loan offerings were down 54% and 49% (respectively) month-to-month. Annually ESG is still in a wonderful place in comparison to last year as the cumulative bonds are over $500 billion ahead when compared through the first 10 months. This volume is concerning still as investors had higher projections for 2021 than are currently being met.
FINSUM: ESG is nowhere near over but ‘faux’ green bonds could be catching enough attention to slow the ESG trend.