ESG Investing and IMO 2020 — The Love Story, The Opportunity
ESG is an acronym for “Environmental”, “social” and “corporate governance”, the three central factors in measuring the sustainability and ethical impact of an investment in a company or business. It basically means, invest in things that make the world a better place, or putting overall value creation above short term profit.
With the environmental challenges we face, socially responsible investing has certainly come to the forefront of investor mindsets. With the number of actively managed investments (selective valuation and selection of companies versus passive funds that buy and sell indiscriminately) continuing to decline, “Divest Harvard” continuing to demand the endowment divest completely from fossil fuels, and figures such as Greta Thunberg becoming pop culture icons, it seems as if much of what little active investment is now occurring might just be ESG related.
If you do a quick Google Trends search, you can see that ESG has been growing in interest over the past few years. For comparison, I’ve selected “IMO 2020”, which is the fuel change in the maritime industry which will go into effect at the end of this year. IMO 2020 is perhaps the most important piece of environmental legislation *ever* passed, and it will have a massive impact on global sulphur emissions.
Sulphur oxides (SOx) are known to be harmful to human health, causing respiratory symptoms and lung disease. In the atmosphere, SOx can lead to acid rain, which can harm crops, forests and aquatic species, and contributes to the acidification of the oceans. — IMO
It’s a good thing, and according to some economists and consulting groups, it’s the biggest change *ever* to the energy markets.
“It is the biggest change in oil market history,” — Steve Sawyer, senior analyst at energy consultant Facts Global Energy
As you can see, IMO 2020 is just a blip on the radar screen, while ESG volumes are massive and trending up. As the top economist at PwC recently said in an interview with CNBC Africa, “It’s just 5 weeks away and we only just came out with our report.”
