ESG investing is an investment strategy in which environmental, social and governance factors are integrated into the due diligence and financial analysis of investment managers. Getty Images
ESG investing is an investment strategy in which environmental, social and governance factors are integrated into the due diligence and financial analysis of investment managers. Getty Images
ESG investing is an investment strategy in which environmental, social and governance factors are integrated into the due diligence and financial analysis of investment managers. Getty Images
ESG investing is an investment strategy in which environmental, social and governance factors are integrated into the due diligence and financial analysis of investment managers. Getty Images

Why ESG investing is not at risk of becoming a bubble


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Increased investor focus on environmental, social and governance metrics is driving a race to the top as companies look to raise their ESG profiles.

Is ESG investing on the brink of becoming a bubble? Some investors wonder. They look at soaring clean energy stocks and palpable investor enthusiasm for electric cars and question whether ESG investing is a fad. We really don’t think so.

The concern reflects a confusion – combining two different strategies, ESG investing and investing in sustainability themes.

ESG investing represents a lasting adoption of a new investing methodology that can strengthen businesses and boost portfolio returns by considering material E, S and G metrics.

By contrast, companies that are emerging to address sustainability trends are prone to rise and fall with market sentiment – both from periods of rapid growth and correction from elevated valuations.

ESG investing vs investing in sustainability

ESG investing is an investment strategy in which environmental, social and governance factors are integrated into the due diligence and financial analysis of investment managers. Companies that focus on ESG factors tend to have better and more stable long-term performance.

On the other hand, investing in sustainability themes involves investing in companies, technologies and projects that target specific sustainability themes and are set to grow rapidly and consistently.

In the UAE, 80 per cent of investors know what sustainable investing is, 80 per cent expressed an interest in ESG investments and 40 per cent of those who had not yet invested in sustainable solutions said they planned to do so in the future, according to a survey by Standard Chartered. Also, Saudi Arabia plans to deploy 50 per cent of its investments in renewable and sustainable power sources.

Companies that focus on ESG factors tend to have better and more stable long-term performance
Tara Smyth,
region head, Middle East, North Africa and Turkey, JP Morgan Private Bank

How to spot an investing bubble

Spotting a bubble is never simple, but generally there are the following patterns:

  • A narrative of opportunity and rapid growth that persuades people that they need to “get in now”
  • Favourable financial conditions, often accompanied by government support
  • Visible, rapid growth

Some sustainability themes have recently shown early warning signs of a bubble and we expect this pattern will likely repeat. Periods of investor exuberance and retreat will come and go throughout the decade, even as sustainability themes become increasingly entrenched in the global economy.

A shift in perspective

In contrast to sustainability trends that may lead to bubble-like valuations, ESG is not a trend to be investing in. It’s something entirely different – an evolution of investment strategy itself.

In essence, that’s why we believe ESG investing cannot become a bubble. There has been a shift in how companies and investors view ESG factors and the importance they attach to them relative to other investing considerations.

Companies similarly focus on material ESG issues. Indeed, many firms are looking to do more to incorporate ESG considerations into their business strategies – to both strengthen their bottom lines and raise their current ESG profiles with investors.

We do see some risk of “greenwashing” where companies act to create the illusion (but not the reality) of positive ESG change. But, on the whole, we see a virtuous cycle of rising shareholder expectations driving a race to the top among companies with the highest ESG ratings. These companies then reap the rewards, which could include a better share price performance relative to their peers.

A modest boost to risk-adjusted returns

When investors focus on material ESG issues, they can deliver stronger results. Research also shows that incorporating ESG factors appears to provide a modest boost to returns and risk-adjusted performance.

Amid growing evidence of the effectiveness of ESG investing, asset managers who ignore these issues may find themselves less and less able to attract and retain assets.

Talk of a bubble in ESG investing underestimates the hold these issues now have on the finance industry. We believe the changes in corporate and investor attitudes towards ESG investing are irreversible.

Investing in sustainability themes can temporarily become a bubble, but it’s a different story for ESG investing.

It’s not surprising that many people have combined two separate subjects, ESG investing and sustainability themes. They do cover much of the same territory after all. But the differences between them are significant.

While sustainability themes can deliver above-market returns while aligning investor capital to key impact areas, they can temporarily lead to a market bubble. ESG investing, on the other hand, represents a shift in investment methodology – well beyond any potential market bubble.

Tara Smyth is region head for the Middle East, North Africa and Turkey at JP Morgan Private Bank.

AGL AWARDS

Golden Ball - best Emirati player: Khalfan Mubarak (Al Jazira)
Golden Ball - best foreign player: Igor Coronado (Sharjah)
Golden Glove - best goalkeeper: Adel Al Hosani (Sharjah)
Best Coach - the leader: Abdulaziz Al Anbari (Sharjah)
Fans' Player of the Year: Driss Fetouhi (Dibba)
Golden Boy - best young player: Ali Saleh (Al Wasl)
Best Fans of the Year: Sharjah
Goal of the Year: Michael Ortega (Baniyas)

Four tips to secure IoT networks

Mohammed Abukhater, vice president at FireEye in the Middle East, said:

- Keep device software up-to-date. Most come with basic operating system, so users should ensure that they always have the latest version

- Besides a strong password, use two-step authentication. There should be a second log-in step like adding a code sent to your mobile number

- Usually smart devices come with many unnecessary features. Users should lock those features that are not required or used frequently

- Always create a different guest network for visitors

Other workplace saving schemes
  • The UAE government announced a retirement savings plan for private and free zone sector employees in 2023.
  • Dubai’s savings retirement scheme for foreign employees working in the emirate’s government and public sector came into effect in 2022.
  • National Bonds unveiled a Golden Pension Scheme in 2022 to help private-sector foreign employees with their financial planning.
  • In April 2021, Hayah Insurance unveiled a workplace savings plan to help UAE employees save for their retirement.
  • Lunate, an Abu Dhabi-based investment manager, has launched a fund that will allow UAE private companies to offer employees investment returns on end-of-service benefits.
Company%20profile
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MATCH INFO

Uefa Champions League semi-final, second leg

Roma 4
Milner (15' OG), Dzeko (52'), Nainggolan (86', 90 4')

Liverpool 2
Mane (9'), Wijnaldum (25')

The specs

Engine: 2.0-litre 4-cyl turbo

Power: 247hp at 6,500rpm

Torque: 370Nm from 1,500-3,500rpm

Transmission: 10-speed auto

Fuel consumption: 7.8L/100km

Price: from Dh94,900

On sale: now

Jetour T1 specs

Engine: 2-litre turbocharged

Power: 254hp

Torque: 390Nm

Price: From Dh126,000

Available: Now

Avatar: Fire and Ash

Director: James Cameron

Starring: Sam Worthington, Sigourney Weaver, Zoe Saldana

Rating: 4.5/5

DUBAI%20BLING%3A%20EPISODE%201
%3Cp%3E%3Cstrong%3ECreator%3A%20%3C%2Fstrong%3ENetflix%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%20%3C%2Fstrong%3EKris%20Fade%2C%20Ebraheem%20Al%20Samadi%2C%20Zeina%20Khoury%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%202%2F5%3C%2Fp%3E%0A
UAE v IRELAND

All matches start at 10am, and will be played in Abu Dhabi

1st ODI, Friday, January 8

2nd ODI, Sunday, January 10

3rd ODI, Tuesday, January 12

4th ODI, Thursday, January 14

The specs: 2018 Ford F-150

Price, base / as tested: Dh173,250 / Dh178,500

Engine: 5.0-litre V8

Power: 395hp @ 5,000rpm

Torque: 555Nm @ 2,750rpm

Transmission: 10-speed automatic

Fuel consumption, combined: 12.4L / 100km

Heavily-sugared soft drinks slip through the tax net

Some popular drinks with high levels of sugar and caffeine have slipped through the fizz drink tax loophole, as they are not carbonated or classed as an energy drink.

Arizona Iced Tea with lemon is one of those beverages, with one 240 millilitre serving offering up 23 grams of sugar - about six teaspoons.

A 680ml can of Arizona Iced Tea costs just Dh6.

Most sports drinks sold in supermarkets were found to contain, on average, five teaspoons of sugar in a 500ml bottle.

'Doctor Strange in the Multiverse Of Madness' 

   

 

Director: Sam Raimi

 

Cast: Benedict Cumberbatch, Elizabeth Olsen, Chiwetel Ejiofor, Benedict Wong, Xochitl Gomez, Michael Stuhlbarg and Rachel McAdams

 

Rating: 3/5

 
'Worse than a prison sentence'

Marie Byrne, a counsellor who volunteers at the UAE government's mental health crisis helpline, said the ordeal the crew had been through would take time to overcome.

“It was worse than a prison sentence, where at least someone can deal with a set amount of time incarcerated," she said.

“They were living in perpetual mystery as to how their futures would pan out, and what that would be.

“Because of coronavirus, the world is very different now to the one they left, that will also have an impact.

“It will not fully register until they are on dry land. Some have not seen their young children grow up while others will have to rebuild relationships.

“It will be a challenge mentally, and to find other work to support their families as they have been out of circulation for so long. Hopefully they will get the care they need when they get home.”

Updated: December 08, 2021, 4:00 AM