Investing

Volcanic week for ESG stocks; and Latin America's growing Paris problem

By David Callaway, Callaway Climate Insights

Mount Etna’s erupted more than 200 times in the last 3,500 years, but there’s no truth to the rumor its blasts coincide with global financial crises. So I would be wary about talk this week that the decline in clean energy and electric vehicle shares is anything other than a healthy correction.

Bad news tied to SPACs, Lucid Motors, and Workhorse Group (WKHS), coupled with pushback on Wall Street, and in some cases among central bankers, toward the speed of transition from fossil fuels sent ESG stocks tumbling, but along with the rest of the markets.

The iShares Global Clean Energy ETF (ICLN) is down more than 10% in the past four days and electric vehicle stocks such as Tesla (TSLA), Nio (NIU) and Lordstown Motors (RIDE) are all lower as well.

A JP Morgan note Wednesday added fuel to the fire by suggesting that the ESG stock rally of the past year was simply part of a “reset agenda” created when Covid hit as investors imagined a clean new world to come. The note said now that vaccines are helping end the Covid era, money will shift out of clean energy and back into hard-hit fossil fuels, airlines, and travel/hospitality sectors.

The incredible rally in EV stocks and the SPAC surge in the past few months was an obvious bubble that needed to deflate, and in that context investors should be consoled that the deflation is occurring as part of a larger market correction.

There will be more losers than winners in the march toward transition to clean energy. But the march itself hasn’t ended. And the $51 billion that went into ESG funds last year isn’t going to flee because of a couple busted stock deals. The end of the Covid era is good news for the economy, and investors should consider that as they take stock of more reasonable valuations provided by this volcanic week in markets.

More insights below. . . .

Latin America is falling behind on its Paris goals. What comes next?

. . . . Latin America is falling behind on its Paris goals, as larger countries such as Argentina, Brazil and Mexico are crippled by domestic politics and weak governments, writes Michael Molinski. While some small countries have earned climate stripes for their work with renewable energy, their progress is dwarfed by the rising emissions of their larger neighbors. Only strong international action can help avert a catastrophe.

The biggest problems are in Brazil and Argentina, which continue to ignore rules against deforestation and, in some cases, to allow criminal activity to go on untouched by police. Read our two-part series about the destruction of the Amazon.

“It will be interesting to see if President Joe Biden exercises pressure this year on the Bolsonaro administration to enforce rules against deforestation,” said Rittl. “Brazil has applied for membership to the Organization for Economic Cooperation and Development. Biden, theoretically, could block Brazil’s membership.”. . .

Read the full story

ZEUS: Hong Kong’s ESG plan, a talk with Elsa Pau

. . . . As the world waits for China’s next climate move, one Hong Kong entrepreneur is preparing for the ESG revolution, writes David Callaway. Financial publisher and family officer adviser Elsa Pau isn’t bullish on Hong Kong’s own green future, but she’s sufficiently excited enough about China’s prospects to start a new fintech portal to screen ESG funds. BlueOnion has all the performance stats most screeners do but adds a dash of qualitative data, including the relative temperature of each fund it tracks to the Paris Accord. Pau says Asia is ripe for more transparency in green funds after too much greenwashing in the industry, and tells why Larry Fink gives her a headache. (Note to readers: We are running the Zeus column again today after a busted link yesterday might have made it difficult to access). . . .

Read the full ZEUS column

Book review: The Next Great Migration, by Sonia Shah

. . . . On the list of international security threats, migration is near the top. With as many as 200 million people expected to be climate refugees in coming decades, most political discussions deal with “the problem” of migration, writes Jack Hamilton, in his review of Sonia Shah’s new book, The Next Great Migration. But Shah argues that we’re looking at migration through the wrong lens, as a condemnation of “the other.” Instead, we should see it as a natural occurrence among all living things. And that legal and safe pathways must be created, as walls will not stop what is coming.

Shah gets us to rethink human migration by making a larger point. Plants, animals, and people have been moving since time immemorial. It is a law of nature, not an anomaly.

“Over the past handful of years,” Shah writes, “as the climate’s grip on how we move has become increasingly apparent, new evidence of the centrality of migration in our biology and history has emerged.”. . .

Read the full review

Data driven: Most U.S. voters want clean energy, even in swing states

. . . . Some 63% of U.S. voters support a government mandate for 100% clean electricity by 2035according to a February 2021 poll conducted by the Evergreen Collaborative and Data for Progress. Not only do a majority of voters support transitioning to renewables, the poll noted that swing states all exhibited support for switching to clean energy as well. Read more about why advocating for clean energy is becoming more viable as a political platform in the United States. . . .

Read the full data point

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