By Andrey Dashkov, analyst, Casey Research
If you’ve been following along in the Dispatch, you already know green investing is a trillion-dollar trend…
Over a hundred trillion dollars are committed to climate goals, like net-zero emissions.
But at the end of the day, we’re really interested in one thing.
And that’s, “How do you make money with green investing?”
But before that…
I’m Andrey Dashkov, and I’ve been a Casey Research analyst for over 11 years. 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 big shifts in the market…
And today I’ll tell you about one of the biggest market shifts in history… and how to profit from it.
2022 Is Perfect for ESG Stocks
The United States Securities and Exchange Commission (SEC) will introduce ESG-related disclosure requirements. This should happen in early 2022.
The SEC could give recommendations about climate risk management… as well as matters like greenhouse gas emissions.
The SEC also started issuing letters to public companies.
It’s asking them to share the costs of compliance with environmental regulations… and share the effects of environmental measures on their operations.
In other words, we’ll start learning more about how much it costs companies to move to more sustainable business practices…
… And how expensive it is to ignore climate risks.
This is where the market will start re-evaluating ESG’s (environmental, social, and governance’s) value.
In short, I expect the companies that do well to release that information and get good treatment on Wall Street.
And that means more money… and higher valuation.
Just recently, 69 large banks and asset managers, which handle over $10 trillion, announced they would push their holdings to decarbonize.
And JPMorgan committed $2.5 trillion to green initiatives already. I won’t be surprised to see other major banks follow.
The new requirements could lead to re-ratings and recommendation changes. For example, if a company decides not to adjust to new requirements and investors’ expectations, it could face lawsuits and activist investor rebellions.
Exxon is a great example. Back in June 2021, a small hedge fund called Engine No. 1 put three directors on Exxon’s board to make the oil giant reduce its carbon footprint.
It’s up 50% since then.
ESG Strategy = More Money
Companies that come up with a clear ESG strategy will do well in the markets.
That’s where you want to be as the ESG trend goes on.
But it’s not just the government that wants transparency.
Opinions on climate change differ. But the majority public opinion is that being climate-friendly is good.
Sixty percent of Americans think climate change is a threat to their well-being, according to Pew Research Center. That’s the highest percentage since these polls started in 2009.
In other words, there’s massive support for sustainability.
And with government regulation coming, it will become more expensive for public companies to ignore.
Some of them will fight activist investors, but ESG has already won the long-term fight.
How to Play It
To profit, think about two things.
First, look at your portfolio and understand the ESG-related risks your holdings have.
Some of them already do “sustainability reports.” Reading those is a good first step.
Second, you want to position yourself to profit before the SEC’s new rules drop.
Check out the iShares MSCI USA ESG Select ETF (SUSA). It tracks an index with companies “that have positive environmental, social, and governance characteristics.”
An ETF (exchange-traded fund) like this is a great start, but you should always do your due diligence.
ESG is a new topic in the United States. But it’s here to stay with trillions of dollars backing it.
You can’t afford to ignore it.
Analyst, Casey Research