Max Severijns

The warning that climate-related damage will be more difficult to insure is growing. A challenging time is coming for real estate investors, as their investment horizon becomes riskier.

Despite much debate in the market about the hows and whys of ESG integration, impact investing is steadily making its way into the financial mainstream. In 2021, the first year in two decades in which extreme poverty once again rose, with lasting consequences for the world’s most vulnerable people in particular, the financial industry once again demonstrated the importance of real, tangible impact.

Chinese President Xi Jinping, leader of the world’s largest CO2 emitter, is conspicuous by his absence at the COP26 climate summit in Glasgow. Critics consider the ‘unclear’ Chinese climate policy the nail in the coffin of the Paris Agreement. 

Gamestop and Dogecoin are passé. The world of internet memes – “fast-spreading internet jokes” - has a new hobbyhorse: Nancy Pelosi. The buying and selling of shares by the “Queen of Stocks”, as the Speaker of the US House of Representatives is called on financial meme pages and TikTok accounts, is being closely watched by retail investors.

In the run-up to the Japanese elections later this month, Prime Minister Fumio Kishida has promised to discontinue “Abenomics”. According to him, the economic programme has not led to broader growth. Lodewijk van der Kroft, managing director at Comgest, said investors need not worry about such statements. “This is election rhetoric for the stage, Abenomics will not be thrown out with the rubbish.”

While the price of gas shot through the roof last week, it seems that a real energy crisis can be avoided in the short term now that Vladimir Putin is going to supply extra gas. Nevertheless, the unexpected turbulence in the energy market is reason for ING to reassess its investment strategies. It is a perfect storm.

With the upcoming COP26 Climate Change Conference in Glasgow, the pressure on pension funds to green their investment portfolios increases. At the same time, the debate on fossil investments is intensifying. But what is the best roadmap: exclusion or engagement? Pension fund PME chooses option 1, while asset manager PGIM explicitly favours option 2. 

PME: disinvestment logical

The search for yield is causing a rotation among institutional investors from classical investments to better yielding alternatives, such as hedge funds. Insurers such as AXA expect hundreds of billions in ultra low or negative yielding government bonds to be exchanged for other investments in the coming years.

With the Chinese government cracking down, foreign investors are reassessing their exposure to China. It is a balancing act between capitalising on the lucrative opportunities the country offers and protecting portfolios against the apparent arbitrariness of the government. The attentive investor can nevertheless hold on to a common thread.

Research by French think-tank Edhec shows that ETFs that are so-called “Paris aligned” take the climate score into account for no more than 12% of the factors underlying stock selection. Climate scores, at best, play second fiddle.