November 2021




Here are the top news, stories, observations and other interesting things that we hear about in the market, with relevance for selection teams and sustainable investing.



#1 The 10 Biggest Problems With Electric Cars

The world has a strange infatuation with cars. That is part of the reason why the electric car has become the poster child for the fight against climate change, despite its rather limited potential to avoid CO2 emissions. Behind the rapid growth in battery electric vehicle (BEV) sales lie a wide range of supporting policies. And behind these policies are governments that want to tap every last bit of marketing value from this highly visible climate action poster child. This is why pure BEV companies are now worth as much as the entire legacy auto industry, even though these companies (mainly Tesla) sell only about 1% of global light-duty vehicles.


This article will cover ten fundamental problems with BEVs as a leading climate change mitigation option. The aim is not to discredit electric cars as a sustainable technology (they can certainly avoid CO2 and reduce fossil fuel dependence). Instead, this article aims to illustrate the huge disconnect between the ongoing BEV investment boom and the questionable societal benefit of the technology.


Read the full article here (source: Climate Conscious)



#2 How green champion Sweden could end up exporting its carbon sins

When a Swedish court ordered the country’s biggest cement maker to stop mining limestone by its huge factory on the windswept island of Gotland to prevent pollution, ecologists cheered. Besides protecting wildlife and water supplies, the ruling could force the plant that makes 75% of Sweden’s cement and is the country’s second-biggest carbon emitter to slash output while it finds raw materials elsewhere, or even shut altogether. That might be good for Sweden’s emissions targets, but not such good news for the rest of the planet. A government-commissioned report seen by Reuters said it could force Sweden to import cement from countries that pump out more emissions in the overall manufacturing process – or risk massive job losses in the construction industry at home.


Sweden has long topped international environmental rankings and has managed to cut back on greenhouse gases for years while preserving economic growth on a path towards its target of net zero emissions by 2045. It has the world’s highest carbon tax at $137 per tonne and is a leader in the use of renewable energy. In 2018, its carbon emissions per head stood at 3.5 tonnes, well below the European Union average of 6.4 tonnes, according to World Bank data. But the stand-off over the Slite cement plant epitomises the growing tension between local environment goals and the 2015 Paris Agreement signed by nearly 200 countries to try to limit global warming to 1.5 Celsius. “We have to weigh up the global focus – doing the most for the climate – but also maintain our high ambitions when it comes to our local environmental problems,” Sweden’s Minster for Environment and Climate Per Bolund told Reuters. “These two things can be balanced.”


Read the full article here (source: Reuters)



#3 ESG adoption remains on the rise among U.S. institutional investors

The number of institutional investors incorporating ESG factors into investment decisions continues to grow, and more of those that have yet to do so are considering it, according to Callan’s ninth annual ESG survey. In its latest survey, Callan found that 49% of U.S. institutional investors incorporate ESG factors into investment decisions, above the 42% that said they were doing so in 2020 and more than double the 22% result from the first survey in 2013. The 2021 survey also registered the highest rate of respondents, 40%, that are not yet incorporating ESG factors but are considering it, up from 30% in 2020. Public defined contribution and defined benefit plans make up the top ESG incorporators in 2021, at 63%, a dramatic increase from the 36% in 2020, followed by endowments at 50% (down from 63% in 2020), while corporate defined benefit and defined contribution plans fell to 20% from 32% in 2020.


Read the full article here (source: Pensions & Investments)



#4 ESG Integration Continues to Grow Among Factor Investors

According to a recent investor survey conducted by asset management firm Invesco, the popularity and mainstreaming of ESG integration has continued to grow during the last year. This study incorporates the views of 130 institutional investors and 111 wholesale investors, collectively responsible for managing over US$31 trillion in assets. In 2021, 78% of respondents (all of them factor investors) reportedly incorporated ESG in their portfolio. Although the most important driver of ESG adoption has traditionally been demand from stakeholders and beneficiaries, this year’s respondents focused on the belief that ESG enhances long-run investment performance, through the mitigation of long-term investment risk, for example. “We believe ESG leads to the selection of more resilient companies in the long run,” Invesco’s report quoted one North American wholesale investor as saying.


Although challenges remain regarding the adoption of ESG in factor approaches, respondents noted they were gradually being overcome. “Active investing looks more compatible with ESG in the short term, as you can select from the largest investment universe. In factor, the product range is still limited but we see new products emerging,” said one European institutional investor.


Read the full article here (source: NordSIP)



#5 NordSIP Insights – Impact Investing Handbook 2021

There is enough evidence today to say that the COVID-19 pandemic has both raised awareness and appetite for impact investments. Whether a clear causality exists or just spurious correlation is not entirely clear, but who cares? As long as capital is flowing, the party will continue. Certainly, the festivities aren’t nearly big enough yet to meet the needs of the planet and its inhabitants. The momentum, however, is encouraging. Whereas concepts such as additionality, intentionality and the theory of change still puzzled most neophytes only a couple of years ago, many institutional investors have now integrated these terms into their own frameworks. Even the deployment targets, which were often conservatively downplayed by asset owners who blamed the lack of investable companies and funds, are now reasonably ambitious.


Are we ready to take this party to the next level? In this edition, we have assembled insights from no less than 10 experts. Asset managers span from fixed income, with green bond investments and microfinance to direct impact investments both in private and in public markets. We also have a chance to understand how asset owners take decisions in this asset class, from a Swedish pension giant to a Finnish development finance institute and a Danish foundation. And, of course, no party would be complete without a contribution from the GIIN, which have been driving the penetration of impact investing and today, confirms the positive momentum of the asset class, on its way to becoming truly part of mainstream investments.


The Handbook can be found here (source: NordSIP)



#6 NordSIP Insights – Transitions & Stewardship Handbook

As the clock ticks relentlessly towards the carbon neutrality deadlines of the Paris Agreement, where before investors argued about the validity of the case against fossil fuels as stranded assets, we now have regional and global energy transition policies. With our time running out, the tide has changed. The IPCC has unequivocally endorsed the view that climate change is a man-made phenomenon. The EU’s Green deal and its sustainable finance regulatory packages are setting standards for all of Europe while the Biden Administration’s commitment to transitioning towards a green economy is making its way through Congress. Corporations and financial institutions are not just paying lip-service to climate change. They are adopting specific net-zero emission targets and roadmaps. In this handbook, as with all our publications, we seeks to bring the latest market participants’ insights about how sustainable investments work in practice. For this first edition focusing on Transitions & Stewardship, a common thread of collaboration runs through the contributions of a wide range of experienced investors.


We learn about how engagements and collaborative efforts can be incorporated into passive methodologies to create Paris Aligned indices and ETFs. We dive into the solar power investment opportunities in Southern Europe and the reforms and market mechanisms facilitating them. We explore how real-asset investors must decarbonise to future-proof portfolios and protect themselves against the incoming value backlash against non-net zero properties. We talk to asset owners and hear of their collaborative efforts to nudge asset managers and investee companies towards increasingly ambitious transition goals. The transition to a more sustainable economy is crucial to successfully meeting the environmental challenges in our path. Investors can choose from a plethora of roads that lead to the net-zero carbon emissions future we have set as our collective goal. The destination is the same and is more expediently arrived at hand-in-hand.


The Handbook can be found here (source: NordSIP)


Sustainable Private Markets leaders