ESG CHAPTER “ONGOING POLITICAL ACTIVITY WILL HELP TO DRIVE INTEREST IN ESG IN 2022. WE ARE SEEING THE IMPLEMENTATION OF VARIOUS NET ZERO POLICIES ACROSS THE GLOBE, INCLUDING THE EUROPEAN FIT FOR 55.”
EDWARD LEES & ULRIK FUGMANN CO-HEAD OF ENVIRONMENTAL STRATEGIES GROUP, BNP PARIBAS ASSET MANAGEMENT
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e think interest will continue to grow for ESG among hedge fund managers and investors in 2022. More investors want ESG disclosure, and this is driving continued adoption of ESG policies across the industry. There is no reason to think this will reverse. As an indicator, ESG-themed ETFs had strong inflows over 2021. The key themes across the space are easier to articulate for the “E” than for the “S” or “G”. There remain renewables (solar and wind), EVs, batteries, and various parts of the water industry. Interest is growing in hydrogen, smart meters/grid, relevant software applications, recycling, and biodegradable or less toxic products.
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Ongoing political activity will help to drive interest in ESG in 2022. We are seeing the implementation of various net zero policies across the globe, including the European Fit for 55. This creates investment opportunities and helps to spur ESG momentum. As an example, the EU recently released its Gas Markets and Hydrogen Package, which puts forward legislative proposals to limit methane emissions linked to fossil fuel imports and sets rules for hydrogen to be used in European pipelines. While US environmental policy has hit a stumbling block in Senator Manchin, do not suppose that the discussions in Washington are over. The rest of the Democratic party are discussing ways to break the
impasse using executive action or breaking the bill into several pieces. Further momentum is likely to come from weather events. Weather, in any given year, is hard to predict, but we know the trend is one of warming that causes more intense storms. Just look at the recent tornados in Kentucky that killed over 70 people and caused significant damage. More of this will come, which will increase popular support for conscientious investing. This is especially prevalent in younger generations who next year will all be a little bit older, with a little more money and influence.
HEDGE WEEK GLOBAL OUTLOOK REPORT I JANUARY 2022
