As Joe Biden transitions into the White House, some are looking at how his administration can support socially responsible investments like those that track environmental, social, and governance, or ESG, principles.
Sustainable funds have already brought in record inflows so far this year, with global inflows up 14% in the third quarter alone. The inflows could accelerate further as Biden’s administration focuses on policies around systemic change, Yahoo Finance reports.
“There are lots of different opportunities under a Biden administration for investment, not only in solar or wind but also in the entire infrastructure. And so there are lots of different plays that investors can have, when it comes to climate change, that aren’t necessarily specifically tied to solar or wind,” Jefferies ESG Equity Strategist Lauren Puffer told Yahoo Finance Live. “So we think that there is a huge opportunity for lots of investors to get involved under a Biden administration.”
Biden has already spoken about recommitting to the Paris Agreement as soon as he is in office, targeting zero emissions by 2050. Furthermore, he has been stressing more job creation in sustainability and investing into some key ESG sectors – Biden previously announced plans for a $2 trillion spending plan for a green economy. Consequently, investors see the change in U.S. policy as a bullish move for clean energy like solar.
However, disclosure issues may emerge as companies are forced to add up the costs of carbon emissions, and how harmful their businesses are to the climate. Consequently, Puffer believes that companies will likely have to step up disclosures, or provide more detailed information on their businesses.
“We might see the SEC actually put together material disclosure parameters that will enforce that disclosure across all different companies within the United States that trade,” Puffer said. “And so we think that that will actually help to push forward an ESG agenda, because then companies of all types will have to be held to certain accountability standards for that disclosure.”
The improved data may then help investors make more informed decisions concerning where to invest their money when targeting ESG standards.
“There is a big opportunity for certain investors that have been in ESG analysis for a number of years to really capture some alpha in that disconnect of disclosure, because they understand where those holes might be,” Puffer said. “But for the rest of the investment community who’s still ramping up on the disclosure perspective, I think there is a little bit of a wait and see as to who wins out on that disclosure— on those disclosure metrics.”
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