ESG Investment Is Sustained Despite The Energy Crisis


This second half of 2021 is being marked by a global energy crisis , which has caused brutal increases in gas prices, and also raised those of oil. More expensive energy, if it ends up triggering inflation, can weigh on long-awaited global growth. Factory closures are already taking place, unable to bear the cost of energy. See more articles on sustainability in the Economist Sustainable Investing and ESG.

With this crisis as the main driver, the truth is that investment funds focused on one of the most polluting sectors, energy, are celebrating: in 2021 they are revalued by 49% , with data from Morningstar as of October 8. The rise in gas and black gold prices had a lot to do with this rise .

The data contrasts with the much more timid 18% that sustainable products are noted, those labeled as article 8 or as article 9 – the so-called light green and dark green – according to the European Regulation of Disclosure of information related to sustainability.

Dirty funds get 32 ​​profitability points from those with a green seal
The ‘dirty’ funds obtain 32 profitability points from those with a green seal

Is it possible that this scenario will harm funds that invest based on ESG (environmental, social and corporate governance) criteria ? The experts consulted by the Economist do not believe it .

Victoria Torre, from Singular Bank , explains that the current energy crisis has been triggered by a series of specific factors: “It has gone from a stage of contraction in energy consumption due to confinement, to a very vertical recovery that has generated imbalances between supply and demand “.

To this have been added other logistical problems, as well as the gas shortage in some countries, which has pushed up the price of oil. “But this crisis will pass (…) and, basically, the role of clean energy continues . And even more so, since this crisis has highlighted the importance of having alternative sources of energy, thus reducing dependence of resources such as gas or oil, called to progressively decrease, “says Torre.

“Long-term ESG investment should not be confused with the opportunism of now entering oil or gas”, explains Carlos Garay (Sabadell Urquijo Gestión)

The commitment to clean energy is not a short-term issue, adds this expert, with whom Carlos Garay, head of ASG investments at Sabadell Urquijo Gestión, agrees. “Sustainability is not a fad, but a structural trend that should be present in any portfolio,” he explains.

A trend driven by multiple factors: “On the one hand, the European Regulation for the Disclosure of information related to sustainability ; on the other, investors, who are increasingly demanding more sustainable companies; and, thirdly, the companies themselves, who already have proven that the more sustainable they are, the more capital they attract, and the better they perform on the stock market”At the same time, recalls Garay, within the European Reconstruction Plan, sustainability is a guideline.

For all this,” this type of long-term investment should not be confused with the temporary opportunity to position itself at this time in oil or gas. “Sustainable investment, he adds, allows positioning” in better managed and less leveraged companies , which as an investor give you less fright. A sustainable fund doesn’t go up 40% one year and plummet 50% the next. “

“No, I do not believe that the energy crisis we are experiencing is going to harm ESG investment”, also affirms Luis Buceta, director of Investments in Spain at Creand AM (Gesalcalá, SGIIC, SAU) and vice president of CFA Society Spain. “It is true that part of the cause of the energy crisis is precisely a consequence of the application of ESG criteria: the oil industry has not invested in capital for more than 10 years, because its cost is excessively high” , Explain.

What is certain, he adds, is that ” there are those who misinterpret the ESG criteria. There is a very simplistic way of applying them, which consists of excluding companies such as oil or mining companies”, to reduce the carbon footprintof funds, “but you have to think that the world still needs oil to survive; it is not possible to give it up overnight. What these companies need is to carry out an orderly transition , because otherwise they will they can generate big imbalances like the ones we are witnessing, “he says.

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