ESG is an investment philosophy and corporate evaluation standard that focuses on environmental, social, and governance. ESG investing has been greatly impacted by central banks raising interest rates to bring down inflation, and the global ** and bond markets have generally declined. In addition, the energy crisis, geopolitical conflicts and other factors have further exacerbated the situation, and the conflict of interests has led to a rise in opposition to ESG investment. Despite the heightened short-term challenges, ESG investing is still seen as the key to a long-term breakthrough.
According to Morningstar, net inflows into ESG co-authored** and exchange-traded products (i.e., the difference between investor redemptions and new and new investments) fell by 76% from $649.1 billion in 2021** to $157.3 billion, the lowest since 2018 ($69 billion). Europe, as the earliest adopter of ESG standards, accounts for 80-85% of global ESG** assets, and attracted 90% of global net ESG** inflows last year. However, this figure ($141.5 billion) is down 73% from $527.1 billion in 2021.
Noah Fortune pointed out that in Europe, due to the impact of international and extreme weather, European energy ** is facing the dilemma of insufficient natural gas supply and power shortage. According to People's Daily Online, from January to October 2022, Russia's natural gas exports to Europe were only equivalent to 15% of 2021, and it was difficult to fill the European gas supply gap in the short term. EMBER released the European energy statistics report for 2022, pointing out that the electricity gap in Europe in 2022 will reach about 7%. According to Eurostat, the average energy poverty in Europe this winter is 69%, the most serious country is Bulgaria, 237% of the population will face energy poverty, followed by Lithuania with 225%, for which some European countries have restarted to turn to traditional fossil energy sources such as coal and oil. According to the Financial Times on June 21, Germany, Austria, the Netherlands and other European countries have recently announced the relaxation of restrictions on coal power generation in response to the reduction of Russian gas**. In response, European Commission President Ursula von der Leyen warned member states not to go "back" to long-term efforts to cut fossil fuel use, but to continue to focus on large-scale investments in renewable energy.
In the U.S., in August, the state of Florida banned the state's pension managers from considering ESG factors in their investment strategies due to claims that the inclusion of ESG factors in retirement could hurt returns, followed by Texas with a list of companies that were prohibited from entering into most contracts with Texas and local businesses. A number of asset managers, such as Vanguard and BlackRock, were required to participate in the Texas hearings to be questioned about their ESG investment strategies due to large losses in the ESG themes they managed**.
Noah Fortune further pointed out that ESG investment is still worth looking forward to in the face of adversity. While fossil fuels are difficult to exit completely, energy security is driving the green transition, climate commitments, and carbon pricing. According to the latest report of the European Photovoltaic Association SPE, 41 new PV installations will be added in the 27 EU countries in 20224GW, with an annual growth rate of nearly 50%. In 2022, the share of electricity generated by solar and wind power stations in Europe was 223%, and European wind and solar have become the largest electricity source in Europe**. At the same time, at the end of 2022, ESG** cash flow in Europe, Canada, Australia and other regions increased significantly.
On the whole, the global determination to support and promote green-related fields is very strong, and it still sticks to it in critical moments. Noah Fortune said that the obstruction of the global sustainable development process and the anti-ESG voices in some regions have exposed the complexity and difficulties of the current ESG development, but at the same time, it also shows the great practical significance and future development direction of ESG investment.