Eq: Tech

The boom in credit inflows to ESG might be an obvious sign environmental risk isn’t actually priced in. Coal companies have got credit ratings boosts, mortgage increases in flood zones, and a myriad of other issues. These are all signals that risks aren’t properly priced into fixed income markets according to Tom Graff of Brown Advisory. Natural disasters are becoming more frequent yet greenwashing keeps this from accurately being a factor in ESG. However, there is an advantage for investors to take advantage of mispricing, if disasters isolate countries energy independence could be underpriced in many countries around the world, the anti-Russia position.

Finsum: Fixed income regulators are could be turning a blind eye to sources of credit risk which investors might be able to exploit in the early days of greenwashing.

Biden has hit a brick wall with his climate legislation, and now is going out of his way pleading that oil companies double down on drilling efforts to curb gas prices in response to Russia-Ukraine invasion. However, the SEC is expected to propose new regulation that will force companies to disclose data around their climate risks. This legislation will only come into effect as early as 2023, but it will put a major spotlight on the biggest polluters and carbon contributors. Many believe these changes will force companies to pay higher costs for their carbon use and maybe make it harder for companies to invest in green bonds and funds around these companies.

Finsum: This isn’t enough to end greenwashing; foriegn governments are well ahead of the US in terms of ESG regulation.

While ESG has run white-hot the last three years the main gripe was greenwashing, that was until now as anti-trust is on the horizon. An attorney from Arizona Mark Brnovich is opening an investigation into ESG investing with regards to anti-trust. The idea is pretty simple, while a top-down approach comes from legal agreements like the Paris accord, companies are suddenly allowed to coordinate and self-regulate among each other as to what constitutes good practices. Additionally, they may use ESG as a mechanism to compel or influence the removal of financing for companies from different industries. This coordination takes place through groups like the Climate Action 100+ rather than through the hush tones of a golf course but the effect is a coordinated one targeting companies or industries.

Finsum: There is a compelling case that without legal parameters ESG will turn into anti-energy coordination and tech-centric greenwashing campaign.

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