Focus on ESG Likely to Drive Development of Green Tech

Date: January 27, 2021

Source: News Room

Large inflows into environmental, social and governance (ESG) funds will drive development of green technologies, all electric vehicles, hydrogen fuel cells, and advances in renewable energy systems-- solar, wind, and batteries. Publicly traded green company stocks have recently risen in value as institutional investors poured $80 billion into sustainable or ESG funds world-wide in the third quarter of last year, up fivefold from the quarterly rate in 2018, according to Morningstar. This could give technologies not currently economically feasible time and capital needed to do so. For example, between 2009 and 2019, the cost of photovoltaic solar power fell by 89 percent and that of onshore wind by 70 percent.

Investment in ESG will likely get a big boost from initiatives laid out by the incoming Biden administration. President-elect Joe Biden campaigned on requiring companies to provide more detail on environmental risks and greenhouse-gas emissions as part of a broader agenda to combat climate change. Jon Hale, head of sustainability research at Morningstar, says any moves by the Biden administration would follow calls from many others seeking ESG regulations.

Ultimately, most of the capital needed to transition away from fossil fuels will come not from glamorous green companies such as Tesla but all the others, who produce and consume most energy. More public research and development, a carbon tax or tradable emissions permits would redirect their investments far more effectively.

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