By Andrey Dashkov, analyst, Casey Research
Casey Research founder Doug Casey says that the best time to buy is when there’s “blood in the streets.”
That chaos leads to market inefficiencies and wild swings in value. It can create massive opportunities for those who can look through the noise and understand where the value lies.
ESG investing (as a reminder, ESG stands for “environmental, social, and governance”) is chaotic now.
It’s in its early stages, so there’s not a lot of clarity.
But that’s exactly where the biggest opportunities are.
There may not be blood in the streets, but there’s a lot of noise.
In a moment, I’ll tell you how to cut through it… and how to position yourself for huge gains as an ESG investor.
After all, very few people understand what it means to be one.
If this is your first time reading the Dispatch, welcome. If you’ve been here before, welcome back.
I’m Andrey Dashkov, and I’ve been a Casey Research analyst for over 11 years. I’ve worked under great newsletter editors… Incredible investing minds like Nick Giambruno… Louis James… Doug Casey… and Dave Forest have all helped shape my writing and thinking.
I’ve learned a lot over the years – including how to make huge gains from smart speculations…
And ESG is the smartest speculation I see right now.
Billions Are Made From the Right Vision
Whether you’re aware of it or not, your investment decisions are based on a vision.
If you envision a growing economy, you buy stocks.
Otherwise, you seek havens.
Bonds are one. They are liquid and popular among institutions. They get “bid up” when the market’s big players anticipate an economic slowdown.
If you envision a crisis, gold could be an answer. It has been the ultimate “safe haven” for millennia.
Crypto investing is based on the vision of the future where cryptocurrencies are commonplace.
Even the U.S. dollar is based on the vision of the U.S. economic strength and the government being able to throw its weight in support of the greenback.
In other words, what you see is how you invest.
And smart investors have a diversified portfolio. You shouldn’t bet the farm on any single scenario.
It may sound corny…
But if hundreds of millions of people believe in the U.S. dollar, that belief turns into value.
If trillions of dollars start backing bitcoin, it gets taken seriously.
And if hundreds of trillions of dollars get committed to a vision of the future where the world wants to reach net-zero emissions and support green industries… well, you better be on the right side of that trade.
Because what ESG really represents is a massive shift in how governments and markets allocate capital.
This Trend Is Already “Too Big to Fail”
You may recall the “meme stock” saga of 2021.
As a reminder, a handful of stocks like GME got popular among the members of several online communities who bid up their prices.
That trend sent shockwaves through the market… but it didn’t last long.
Because the people trading those stocks were on their own.
Compare that to the Fed’s well-choreographed dance designed to calm the market and make sure it doesn’t get spooked by a sudden interest rate hike.
Or to the U.S. government’s bailout of Fannie Mae and Freddie Mac.
Sometimes, investment trends get such massive support that they become “too big to fail.”
And ESG is one already.
One hundred ninety-two parties (191 countries plus the European Union) signed the Paris Agreement.
It’s one of the biggest environmental deals of the century.
And $130 trillion in assets under management, or about 40% of the total, are now “aligned with net-zero goals.”
This is money that could be put into projects and companies deemed to be part of the global “clean transition.”
So Where Are the ESG Stocks?
Let me offer you a “rapid test” for an ESG stock.
It doesn’t quite matter if it has an ESG rating or not. These change, after all, and every provider has its own method. A company that scores well according to one rating could get a poor rating with the criteria slightly changed.
So look at the business itself.
Ask yourself these questions:
Does this company…
… have the technology that can potentially deal with climate change?
… work to address waste mitigation and recovery?
… have something to do with the “circular economy?” (Think: refurbishing and recycling.)
… develop methods to reduce pollution in any form, such as greenhouse gases?
… have a clean energy solution that would reduce the world’s reliance on coal or fossil fuels?
… supply any resources to the companies from the list above? Those are the “picks-and-shovels” stories of the ESG megatrend… the ones that also make up the infrastructure.
If the answer is yes to any of the above, turn your attention to this question: How important is that business to the company’s overall strategy?
It only counts if ESG-linked activities represent most of the company’s business. Otherwise, the impact on its share price might not be substantial.
If a coal company buys a wind turbine but most of its revenue comes from coal, the wind turbine may not affect the company’s valuation when measured against ESG goals.
A start-up that has valid-looking technologies addressing recycling issues, for example, is a different story. It may get access to funding and markets that its peers will not.
As always, do your due diligence. But if a company’s business model works toward some of these goals, it has a shot of getting all the financial benefits of being a part of the green revolution.
Analyst, Casey Research