WHAT ABOUT ESG?

Aside from Bitcoin, the major investment trend for the 2020s is Environmental and Social Governance (ESG) and green-themed investing. The issue with ESG is that without government incentives, many of the economics do not stack up.

ESG supporters counter that subsidies lead to more deployment, resulting in lower prices and more deployment again. The large price drops in solar and wind and in batteries came as a result of this virtuous cycle. It’s possible that thanks to ongoing subsidies, we could be on the cusp of a future with clean and cheap energy.

Cheap energy can be the key to productivity. When oil supplanted coal as a primary energy source, it heralded innovations like the internal combustion engine and the airplane. It surely is no coincidence that productivity in the West began to slow around the Arab oil embargo in 1973 and in real terms, oil prices have never fallen below the pre1973 point since then.

There are already many companies out there that have slapped the ESG label on their business model and have seen their stock price soar irrespective of business prospects. I plan to give them a wide berth except for my interest in mining companies or indeed Panasonic, one of the world’s largest battery manufacturers and the main supplier to Tesla.