A Clean Recovery
Have you heard about COVID? Yeah. Say what you want about it, but it looks like this year we’ll start seeing one of the biggest economic recoveries in history.
And no, we aren’t going back to the “old normal.” The future is green, and if you play this fact in a smart way, you could see life-changing results.
Post-COVID Future Will Be Green
They call it a “green recovery.” Governments and investors pour trillions of dollars into projects to support the global economy.
These projects will not only provide jobs but also help us deal with the climate crisis and more…
The US, the European Union, and China lead the pack. In 2020, “green bonds” raised over one trillion dollars.
This means that investors put over one trillion dollars in projects that have achieving climate-related goals baked into the financing contracts.
…but this is only the beginning.
Private and Public Money Will Pour into ESG
In 2021, global governments are about to invest over $3 trillion in the post-COVID recovery.
But this will be pennies compared to the amount of money flowing into the megatrend of Environmental, Social, and Governance (or ESG) investing.
ESG is a giant trend. It covers companies becoming more aware of the climate (E for Environment) and social impact of what they do as well as diversity goals (the G, or governance, part).
The government is paving the way for private money to follow. And it’s rearing to go.
This will be one of the defining megatrends not only of the 2020s but the whole 21st century.
Some analysts project that the ESG megatrend will swallow over $50 trillion in assets under management (or AUM) in just four years.
To give you some context, that will be about one-third of the total assets under management in the world.
Think of all the wealth out there. The trend I’m talking about will be one-third of it.
Where Will This Money Flow Into?
Mostly into stocks. And you better be on the right side of this megatrend to profit from it.
Stocks that have and achieve climate-related goals will be included in ESG exchange-traded funds (or ETFs).
And we’re not only talking trendy stocks like Tesla (which is already featured in about 200 ETFs).
There are companies working in industries as varied as clothing and even oil and gas (yes!). Regardless of their sector, they set climate, social, and governance milestones for themselves. As a result, they get on the radar of the ESG investing machine.
ESG Is Good Business in the 21st century
And they do that not only because it’s good for the planet or because they want to virtue-signal (although let’s admit it, there’s also that).
Becoming sustainable is good business. It’s good PR. As a result, you get investor awareness and the ESG money that’s looking for suitable targets.
And we’re talking about “smart money” here: asset managers and hedge funds who think ahead of everybody else. The smartest investors in the world have realized that ESG is a megatrend that they need to get exposure to.
Institutions Are on Board, and You Should Be, Too
For example, BlackRock, an asset manager with over $8 trillion in assets, said it would launch ESG-friendly versions of its flagship portfolios.
And that over time, it expects these portfolios to get flagship status themselves.
Pension funds are on board, too. Canadian pension funds with over $1.2 trillion in assets have joined forces to demand better ESG data from companies they work with.
In other words, the ESG trend is shaping up to be one of the biggest investment trends in history.
We’ll be writing more about it here at The Financial Star. Make sure to subscribe to our updates, so you don’t miss anything.
How to Play It Now
In the meantime, take a look at this ETF: Vanguard ESG International Stock ETF (VSGX). It holds a portfolio of ESG-friendly stocks mostly in Europe, the Pacific, and Emerging Markets. Analysts say, and I agree, that these will be the highest growing regions for ESG.
Thank You For Your Loyal Readership.
The Financial Star Team.