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Your Investment Update – Q1 2021
Featured topic When ESG becomes the mainstream Once upon a time Environmental, Social and Governmental (ESG) investing was widely regarded as weird and whacky. You thought of earnest idealists with long hair and sandals who lacked hard-nosed business experience. How the world has changed! ESG investing has raced ahead in the last ten years… and COVID-19 has speeded it up for good. Why? Three huge and persistent forces are driving the growth of ESG investing worldwide: technology, regulations, and client demand. And they have a long, long way to go.
1 Technology The first force driving ESG investing is technology. Over the last few years, clean tech – the kind of technology associated with ESG companies – has raced ahead. Productivity is up, and prices have fallen. So in many areas, it’s now cheaper to produce using clean technology than by using the old dirty stuff. For example, in the late 1970s solar electricity was expensive and clunky, as shown in the graph. People laughed at it. But its price has fallen since to one four hundredth of 1977 levels. Suddenly it’s the cheapest electricity in the world. This is the ultimate reason why fossil fuel stocks are doomed in the long run. Clean tech stocks will outcompete them. Why? Because fossil fuels are a resource. The more you mine of a resource, the more costs tend to rise. Whereas solar power is a technology. The more solar electricity develops, the more productivity rises and costs fall. And they will go on falling.
