Saturday, June 10, 2023

lifetime investment opportunity

In today’s money morning…a ‘tectonic shift’…the trend has accelerated due to the pandemic…this will create a lot of opportunities…and many more…

In 2012, BlackRock CEO Larry Fink began writing an annual public letter to the world’s CEOs. If you are not familiar with BlackRock, it is the largest investment fund in the world, with nearly US$10 trillion in assets under management.

In his annual newsletter, Fink typically gives CEOs insight on ongoing trends that he believes are important to investors.

And this year, in a paper titled ‘The Power of Capitalism’, he spoke of two major trends emerging from the pandemic.

One is the impact of the pandemic on the way we work and how it has changed the relationship between workers and employees.

Workers are demanding more work flexibility and better work environment. It is not strange that we are hearing about what many are calling the ‘Great Resignation’.

As Fink warned:

,Companies not keeping pace with this new reality and responding to their employees, do so at their own risk.,

But most of the letters were devoted to another trend emerging from the pandemic: the energy transition and the way the pandemic has changed the way we view and invest in companies.

as he said:

,Most stakeholders – from shareholders to employees, from customers to communities and regulators – now expect companies to play a role in decarbonizing the global economy. Few things will affect capital allocation decisions – and thus the long-term value of your company – more than how effectively you navigate the global energy transition in the coming years.,,

A ‘tectonic shift’

This isn’t the first time Fink has written about this.

In 2020, he warned about climate risk and how we…

,We will see a change in capital allocation more quickly than we will see a change in the climate. In the near future – and as soon as possible – there will be a significant reallocation of capital.,

And in 2021 he wrote:

,Climate change is not high on our customer’s list of priorities. They ask us about it almost every day.

,We know that climate risk is investment risk. But we also recognize that climate change presents a historic investment opportunity.,

As he wrote in the latest letter, over the years, we have seen a ‘tectonic shift’ in capital, with more than US$4 trillion flowing into sustainable investments.

The EIP Climate Tech Index tracks public companies involved in decarbonization, such as Tesla and Plug Power. As you can see in the chart below, the fund has risen higher than the NASDAQ since the initial crash in 2020 from the pandemic:

Something changed with the pandemic. While money was already flowing into the transition before the pandemic, the trend has accelerated.

In 2019, investors poured US$285 billion into global ESG-focused funds. The number rose to US$542 billion in 2020, and a record US$649 billion in 2021.

Learn more how to limit your risk when trading volatile stocks.

As Fink said, this is just the beginning:

,This is just the beginning – the tectonic shift towards sustainable investment is still accelerating. Whether it is capital being deployed into new ventures focused on energy innovation, or capital transferred from traditional indexes to more customized portfolios and products, we will see more money in motion.

,Every company and every industry will be transformed by the transition to a net zero world.

,I believe that the global economy going carbon free is going to create the biggest investment opportunity of our lives. It will also leave behind companies that are not friendly, no matter what industry they are in. And just as some companies risk being left behind, so too do cities and countries that don’t plan for the future. They run the risk of losing jobs, even in other places they get benefits. With the decarbonization of the economy, there will be huge job creation for those who engage in the necessary long-term planning.,

I mean, I couldn’t agree more.

This is a lifetime investment opportunity. No matter where you stand on the climate change debate, money is coming into this sector and it is a trend that will last for decades to come.

As Fink said:

,We focus on sustainability, not because we’re environmentalists, but because we’re capitalists and trusted for our customers.,

As more countries and companies commit to net zero, more money will flow towards this space. As of now, more than 80% of the world’s GDP already has a net-zero target.

And when we’re talking about opportunities in lithium, the energy transition will touch a number of other industries, including transportation, manufacturing, recycling and data collection — to name a few.

To be clear, not every company in this area will be a winner, many will fail.

But as the money starts coming in this sector, it will create a lot of opportunities.

And these are the kinds of opportunities my colleague James Allen and I look for at our service. new energy investors,

until next week,

Selva Fregado Signature

Selva Fregado,
For money morning

PS: Selva is also the editor of New Energy Investor, a newsletter that looks for opportunities in the energy transition. Click here for information on how to subscribe.

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