THE OPPORTUNITY

WHAT DRIVES THE ESG MARKET?

The millennial generation and their rising spending power is a key driver of the ESG market. Millennials master social media, they are curious and they question everything, that does not have a positive sustainable impact. They are aware of the climate crisis, and they want to find intelligent solutions to improve our symbiosis with the nature.

Ending plastic waste is one of the most crucial topics among millennials. 

Millennials know what they want, they are better connected and they have access to information. They are willing to pay more for sustainable products and make positive recommendations of these products to their followers. They are not willing to promote or being employed by companies, that are not acting good, kind and responsible, i.e. have low stakeholder value. 

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"The new normal" with a global pandemic is also a major turning point for active ESG investing. Key players are viewing the health crisis as a wake-up call for sustainable behaviour:

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• Regulators are demanding more depth and transparency from corporate entities in relation to their ESG compliance, increasing the public disclosure of alternative data sets.

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• Analysts are developing new tools to obtain, track and verify alternative data sets. The use of AI is accelerating the identification of ESG compliant entities to be included in portfolios.

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• Investors are requesting sustainable investments to be included in their portfolios, driving the overall demand of new ESG compliant investment vehicles to be developed.

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Fact is, that exposure to ESG-related risks materially affects not only the shareholder value, but also the stakeholder value. High-profile examples of such ESG-related incidents include:

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• (2001): The Enron accounting fraud (and the following collapse of Arthur Andersen)

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• (2010): The Deepwater Horizon oil spill

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• (2015): The Volkswagen emissions test cheating

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• (2018): The Facebook data privacy scandal

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• (2021): Shell loses climate case that may set precedent for big oil

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Sustainable investing is adding value on top of the traditional equation. Not only is it targeting positive environmental, social and governance outcomes (without sacrificing potential return). It is also an effective tool to avoid companies that might pose financial risk due to incompliance with ESG practices (reputational damage).

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As example, hydrogen is gaining interest of many investors amongst the renewables energy space, considered promising for both clean production and storage. Global hydrogen market is expected to reach $196 billion by 2030 from $136 billion in 2020, at a more than 5% annual growth over the period. Sectors of interest for applications are many, with transportation notoriously in the spotlight.

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That's the opportunity, we are investing in.