3 Fact Checks on ESG Investing
What they told you might be a lie
Hello Impact Nation - Elisa here 👋
Last Thursday, I was invited to speak at a cozy online gathering by Alex G. Lee and his group.
We had good fun, enlightening brainstorming, and … the usual few participants were shocked by my unorthodox ideas.
You know what I mean – I only pick impact startups that can be profitable or that are open to working with me to become profitable. It’s impact investing, not charity, nor just being compliant with some ESG scoreboard.
More people are joining this philosophy every day (and the new subscribers are proof of that).
In the current bear market/employment and funding crisis, making an impact is more important than ever.
Let’s start with some fact-checking about what the media tells us every day.
This Week We Are Diving Into:
1. 3 Fact Checks on ESG Investing (What they told you might be a lie)
2. Good Gossip
3. News & Opportunities
4. Coming Soon: Interview with Nisa Amoils
The Impact Lady
3 Facts Checks on ESG Investing (What they told you might be a lie)
Let’s deep dive into what the media tell us every day.
1. “Everybody talks about ESG but investors don’t invest in it”
Fact check: FALSE
ESG funds’ assets under management have increased from $1.28 trillion in 2019, to $1.65 trillion in 2020, and to $2.74 trillion in 2021 (Data by Morningstar Direct↗).
This is probably the highest growth % besides the crypto industry.
True, ESG investing is under increasing scrutiny for ‘greenwashing’ (deceptive PR and marketing tactics used to persuade investors that a fund is environmentally friendly when it’s not).
But the increased control is due precisely because ESG investment is successful.
If investors didn’t care about ESG, nobody would feel the duty to control the presence of shady marketing tactics.
2. “ESG investing is just for millennials”
Fact check: FALSE
The fact that Millennials are more interested in ESG investing, is often twisted to maintain that nobody else is interested. This is simply false.
True, 99% of Millennials and Gen Z are interested in sustainable investing, and this percentage is higher than any other age group.
Yet, an astonishing 79% of U.S. individual investors are also interested in sustainable investing (Data by Morgan Stanley↗).
Besides, Baby Boomers are estimated to transfer $30-$68 trillion by inheritance to Millennials and Gen Z. The so-called “Great Transfer” has already started.
Even if the younger generation were the only ones interested in sustainable investing (they are not), betting on impact investing would be the smart choice.
3. “ESG investing comes at the expense of investment performance”
Fact check: FALSE
Top-tier ESG-focused companies have actually seen higher growth and higher active returns than the rest of the market – respectively +2.89% earnings growth and +1.31% active returns (Data by MSCI ESG Research↗).
The fake news is based on another twist of real data.
“70% of investors believe that sustainable investing carries lower performance, and still are interested in investing for good.” (Data by Morgan Stanley↗).
The fact that investors are open to accepting lower returns (true), is often twisted by the media to maintain that ESGs carry lower performance (false).
The opposite is true. The existence of motivated investors (the percentage increases to 83% among Millennials) proves the health of ESG investing.
However, there are occasions when the media are not entirely wrong.
While companies with top-tier ESG ratings offer better performance than their non-ESG counterparts, the results are opposite among the bottom-tier businesses – Respectively -9.22% earning growth and -1.25% active return.
That’s where we can intervene, help, and make an impact.
Although the bottom-tier companies are not necessarily young startup companies, there is indeed a lack of business sense in the impact-in-tech industry.
Most impact startup founders tend to be good-hearted and aim to do good, even at the cost of failing their own company. This rarely happens in the traditional tech industry.
We investors, leaders, and advisors should prize their good hearts, while working on improving their mindset. To do real good, they need a successful company – a company that is still alive.
And if you are a founder, hopefully, you’ll be able to use these three negotiation tools while pitching investors.
Do good, have fun, make money.
Congrats to …
Dr. Swenja Surminski ↪ has been appointed Managing Director of Climate and Sustainability at Marsh McLennan, the global professional services firm.
Ellie Tang ↪ has been appointed Director of Sustainable Investing at Fidelity International, the investment management firm.
Poppy Allonby ↪ has been appointed Head of Environmental, Social, and Governance Enablement at T. Rowe Price, the investment management company.
Souleymane Ba ↪ has been appointed Partner at Just Climate, a sustainability-focused investment firm chaired by former U.S. Vice President Al Gore.
Ecosapiens ↪ raised $1.5M to help consumers fight climate change with a Web3/NFT platform. Lead Investor: Boost VC. Other investors: Slow Ventures, Menlo Ventures, CRV, Alumni Ventures Blockchain Fund, Climate Capital, Chaos Ventures, UpHonest Capital, Ben Taft's Genius Fund, Ovo Fund.
Roetz ↪ raised €1.8M to launch the first circular e-bike. Lead Investors: Veth Investments and entrepreneurs Pim Claassen and Alexander van Citters.
Zolar ↪ raised €100M Series C to expand its supplier network for small solar systems to meet the rising demand for clean energy. Lead Investors: Energy Impact Partners (EIP) and GIC, Singapore’s sovereign wealth fund. Other Investors: Inven Capital, Heartcore Capital, Statkraft Ventures, and Pirate Impact Capital
News & Opportunities
HSBC suspends senior executive for denying climate crisis. According to BBC, HSBC executive Stuart Kirk was sacked because of his keynote “Why investors need not worry about climate risk” and his reference to climate scientists as “nut-job” – Both were unexpected considering that Mr. Kirk was a leader in the bank's responsible investing team.
Tesla got dumped from an ESG Index. The event unleashed a storm of critics again ESG ratings. However, many of our readers had anticipated this kind of event after listening to our podcast interview with Fabio Scacciavillani.
Attacking ESG investing might be part of the Republican strategy for the U.S. midterm elections. Bloomberg drafts an interesting analysis of ESG as a “hate factory”.
Hyundai announces $5 billion investment in the U.S. to build its first dedicated electric vehicle and battery manufacturing facilities.
The U.S. Department of Energy just launched a $3.5 billion program to take carbon dioxide out of the atmosphere and store them in ‘Carbon Hubs’.
Germany, Denmark, Netherlands, and Belgium sign a €135 billion offshore wind and green hydrogen pact to generate up to 150 GigaWatt.
The Japanese Prime Minister is considering issuing a $157 billion ‘Green Economy Transformation Bond’. Japan may issue a new type of bond exclusively dedicated to the country’s decarbonization.
The European Union announces a plan to become independent of Russian energy. The plan intends to invest €300 billion ($316 billion) in grants, loans, and infrastructures, and it matches a ban on coal from Russia scheduled for August this year.
🚀 COMING SOON
Impact Investing in Crypto And Web3 - With Nisa Amoils, Managing Partner A100x Ventures
Video interview available from Thursday - Stay tuned
It should not be necessary to add any disclaimer but … Let’s say it anyway! This is not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. DYOR - Do Your Own Research!