End Of The Electric Mania?

Posted on 01/12/2024

Recently SWFI reported that ESG has been a disappointment for many asset managers as various renewable energy companies have gone bankrupt or are in danger of doing so. BlackRock has moved away from ESG promotion to the extent that had become the norm for the firm. However, sovereign wealth funds and pensions continue to provide demand for ESG. That desire is becoming less widespread.

For instance, Hertz Global Holdings is looking to drive into the sunset, but it won’t be EVs powering the drive. The rental company wants to unload 20,000 electric vehicles and reinvest in gas-powered cars. Tesla units are among the inventory to be sold. EVs have been expensive for the company to repair, putting in doubt its plan to make a quarter of its inventory electric.

There is also pushback from states. Tennessee Attorney General Jonathan Skrmetti said in a statement: “We allege that BlackRock’s inconsistent statements about its investment strategies deprived consumers of the ability to make an informed choice. Some public statements show a company that focuses exclusively on return on investment, others show a company that gives special consideration to environmental factors. Ultimately, I want to make certain that corporations, no matter their size, treat Tennessee consumers fairly and honestly.”

Another concern is the lack of clear standards and reporting, leading to allegations of greenwashing. The UK’s Financial Conduct Authority (FCA) went so far as to implement a package of measures “to improve the trust and transparency of sustainable investment products and minimize greenwashing.” FCA wants eco-friendly investment, and is hoping the standards could lead to legitimate ESG investing. Research has shown that investors aren’t confident that sustainability-related claims made about investments are genuine. FCA says the terms “green,” “ESG” or “sustainable” are no longer trusted.

The future of sustainable, green, or ESG investing is in some doubt as returns don’t match expectations and consumers see disappointment with some aspects of electric products. Even so, there is a firmly established market for sustainable investments. Whether that market grows or shrinks from current levels will be a closely watched factor.

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