SUSTAINABILITY IS THE $120 TRILLION INVESTMENT TREND TRANSFORMING WALL STREET
Investing will never be the same again. The $120 trillion sustainability trend has left no sector untouched, and it is fueling one of the biggest transfers in capital the world has ever seen.
Blackrock, the world's largest asset manager with $7 trillion under management, has already said that its clients are looking to double their ESG investment in the next 5 years. And that is only the beginning.
Within a year, 77% of institutional investors have said they will stop investing in companies that aren't considered sustainable. Climate change is being listed as the single biggest concern for money managers around the globe. And sustainable assets already account for $17.1 trillion of the global market. But the real size of this opportunity is much, much bigger.
Investors and banks with more than $120 trillion in assets have agreed to start incorporating ESG elements into their investing strategies. And the impact of these developments can already be seen in the stock market. With up to $120 trillion in assets looking for a new home, it is no surprise that sustainable stocks like Tesla, Facedrive (FD, FDVRF), and Enphase Energy (ENPH) all soared in 2020.
Enphase took advantage of the solar boom as the oil industry took a major hit and multiple governments moved to reduce emissions. Tesla saw its stock explode as the electric vehicle movements captured the imagination of a new generation.
Facedrive, perhaps the most exciting of all, found itself at the crossroads of multiple different ESG trends just as the biggest investors in the world searched desperately for a sustainable investment. This Canadian disruptor with a $1.5 billion market cap entered one of the most exciting upcoming sectors of 2020 with its acquisition of Washington, DC-based Steer--a high-end EV subscription service that plans to transform the way we think about car ownership altogether. When it comes to finding a diversified and sustainable stock in 2021, this 'people and planet first' company is drawing a lot of attention.
What Do Institutional Investors Want?
When it comes to big wins for big money in this new segment, investors invariably turn to tech stocks that can have a large scale impact on the environment, sustainability and governance.
PwC highlighted that "public awareness of ESG-related risks has catapulted climate change and sustainability to the top of the global agenda" and now COVID has brought "the real-life impacts of overlooking ESG factors into the spotlight". So in 2021, we can expect this new COVID-driven outlook to only pick up momentum.
The CEO of Blackrock famously statedthat he believes that "we are on the edge of a fundamental reshaping of finance". And with that in mind, companies like Facedrive that look to challenge and replace companies that have failed to react to this transformation could be the big winners.
A good example of this is Uber and Lyft, the two transportation giants that entirely reinvented the taxi industry. Both those companies ignored the growing sustainability trend as their businesses exploded, they created more pollution than they displaced, and in terms of governance, they spent most of their time butting heads with local authorities and their own drivers.
And this is just one example of how Facedrive saw an opportunity to use this $120 trillion transformation to create the ride-hailing service of the future. It became the first company to offer riders a choice of EVs and hybrids, it offset the carbon footprint of its riders, and it aimed to work with local government and riders to ensure communities weren't destroyed. But that was only the beginning: Facedrive's most exciting move in the transportation space came with its recent acquisition of Steer. Backed by a subsidy of energy giant Exelon (EXC), Steer is planning the biggest disruption in the private automobile industry for decades. Steer offers a seamless, hassle-free technology that gives subscribers access to their own virtual garage of low-emissions vehicles and EVs. Even more impressively from an investment point of view, for Facedrive (FD, FDVRF), the deal includes a $2-million strategic investment by Exelon's wholly-owned subsidiary, Exelorate Enterprises, LLC. It's no surprise then that Facedrive is up 566% year to date - and things may well get better in 2021.
The Sustainability Boom Is Only Just Beginning
Many were caught by surprise in 2020 when the ESG investment trend sent stocks soaring by triple digits or even more. But that was only the beginning. There isn't an industry out there that won't be transformed by the tsunami of ESG capital forming in the stock market. 2020 may have been what Fidelity called a "bumper year for sustainable investing", but now the regulatory and social impact of all that investing is about to be felt. There will be plenty of retail investors looking at the stocks that are set for a rebound in 2021, but the real money is probably going to be made with stocks that didn't need to recover. The stocks that are ready for the new reality of markets. Stocks that are flexible, ambitious, and moved early on this new trend. Stocks like Facedrive (FD, FDVRF), where the deal flow is as fast as the trillion-dollar megatrend itself.
Major Moves And Ambitious Acquisitions
Keeping up with the newsflow coming out of this ambitious company is a challenge in itself. In 2020, there seemed to be a new major acquisition every month. The much hyped Steer acquisition was first reported in September.
In July, Facedrive stormed another space--the rapidly growing food delivery business that is now being defined by merger mania. Facedrive acquired assets of Foodora Canada—until then a subsidiary of global giant Delivery Hero--along with 5,500 restaurant partnerships and hundreds of thousands of active members. Facedrive Foods now operates out of 19 cities in Canada, with an eye on expansion into the US markets in the near future.
In August, Facedrive launched TraceScan, the COVID tracking app with state-of-the-art COVID contact-tracing and a huge competitive advantage because it includes wearables. It wasn't long before Air Canada signed up to TraceScan and the Ontario government began trials with it.
Then it added Amazon and Canadian telecoms giant Telus to Facedrive's Corporate Partnership Program. Both Amazon and Telus will be getting corporate pricing and services from Facedrive's carbon-offset rideshare and food delivery platform.
The names in this space are undeniably huge, but nothing is larger than the financial potential of this shift. When it comes to investing in 2021, ignoring the sustainability trend is an error investors simply can't afford to make.
Energy Providers Are All The Rage
Renewable energy providers are some of the top picks for ESG investors, as well, but few have performed as well as Enphase Energy (ENPH). Enphase is a Fremont, California-based company that designs and manufactures software-driven home energy solutions used in solar generation, home energy storage, and web-based monitoring and control. Despite the tough first half of 2020, Enphase has remained a favorite on Wall Street. Since January of last year, Enphase has seen its share price rise by a massive 472%, and it's only just getting started. As the renewable push kicks into high gear, and with the United States expected to spend over $1.7 trillion on green energy initiatives over the next decade, Enphase might just emerge as one of the biggest winners.
NextEra Energy (NEE) is another shining star in the renewable world. NextEra is the world's leading producer of wind and solar energy, so it's no surprise that it has received some love from the 'millennial dollar.' In 2018, the company was the number one capital investor in green energy infrastructure, and fifth largest capital investor across all sectors. No other company has been more active in reducing carbon emissions. Though its price movement hasn't been as exciting as Enphase, it has remained on a consistent upward trajectory. In fact, long-term investors who bought in just 5 years ago would be sitting pretty on 300% returns. And the icing on the cake? It pays dividends. Not even the supermajors in the oil industry can ignore the ESG demand from investors. They've been diversifying their portfolios to hedge their bets in the rapidly changing new reality of energy.
And no other oil major takes this more seriously than Total (TOT). Total has led the charge to go green. It is not only aware of the needs that are not being met by a significant portion of the world's growing population, it is also hyper-aware of the looming climate crisis if changes are not made. It's also one of the most conscious companies in the business. Total checks every box in the ESG checklist. It is promoting diversity and safety, making massive changes in its operations to ensure that its business is environmentally sound, and has even committed to going carbon neutral by 2050 or sooner. It's no surprise that shareholders are loving its forward-thinking approach.
Big Tech's Influence On The ESG Trend
Nvidia Corporation (NVDA) has made major progress towards a more sustainable tomorrow. But what makes NVIDIA even more special is that it is tackling the ESG trend on all fronts. In fact, it was ranked as one of the world's top 100 companies to work for due to its incredible working conditions, hiring practices and professional development programs. In addition to its ranking as one of the world's top companies to work for, it was also ranked on MIT Tech Review's 50 Smartest Companies list and the Human Rights Watch's Corporate Equality Index. In 2020, Nvidia has done something that many other companies have struggled to do. Not only has it stayed afloat in one of the most trying years in recent history, it has thrived. Since January 2020, Nvidia's share price has increased from $293 to $525, representing a noteworthy 80% increase in value.
Apple (AAPL) is another leader in Big Tech's sustainability push. From the products themselves, to the packages they came in, and even the data centers powering them, Steve Jobs went above and beyond to cut the environmental impact of his company. After his passing, Tim Cook took these principles to heart, and picked up the torch, transforming all of Apple's operations into models of a sustainable future. Now, all of Apple's operations run on 100% renewable energy. And it's already having an impact. Not only have they decreased their average product's energy use by 70 percent. They've reduced their total carbon footprint by more than 35 percent in just a few short years. All while securing the title as the World's Two Trillion Dollar Company.
By. Rick Peters
FN Media Group Presented Oilprice.com Market Commentary
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