The deniers and anti-woke brigade are on one side. These individuals include some powerful political figures who can push legislation to “defend oil and gas interests.” On the other hand, there are many that see the ESG opportunity, including some of the biggest financial services firms in the world.
It seems like the old saying “take off your nose to spite your face” applies here!
Greg Abbott, the governor of Texas, recently signed legislation that restricts or outright prohibits the use of ESG criteria in state investments that aim to maximise returns. For instance, Texas adopted two laws in 2021 that forbid banks from bidding on government contracts if they “boycott” oil and gas industries or “discriminate” against weapons, according to a Bloomberg story. Ron De Santis, a Florida pension fund manager, has adopted the mantle of “Anti-Woke Warrior” in America and wants to outlaw it.
The banking sector, on the other hand, is kicking back, arguing that excluding ESG funds from people’s pensions and investments might cost them a lot of money in addition to being anti-capitalist, anti-public opinion, and anti-positive for humanity. Since 2014, returns from ESG stocks have outperformed those from fossil fuel firms, according to Bloomberg.
In their paper Gas, Guns and Governments, Financial Costs of Anti-ESG Policies, Fed economist Ivan Ivanov and professor of finance Daniel Garrett claim that Texas’s anti-ESG legislation led to the “abrupt exit” of five of the state’s largest bond underwriters, including Citigroup, JPMorgan Chase, Goldman Sachs, Bank of America, and Fidelity Capital Markets, at a cost to taxpayers of hundreds of millions of dollars in reduced competition and lacked
Politicians are beginning to receive instructions from the finance sector.
I hope that the financial sector is motivated by goals for people and the environment rather than just financial gain, but this incident once again shows how crucial the financial sector is to advancing an ESG agenda and, in particular, to the discussion of climate change.
I was looking into possible ESG investments. I questioned whether the anti-ESG, anti-woke community was actually missing out on any meaningful business opportunities by its legislation. It works out to be a lot… which takes me to a discussion I had with Hubert Danso, the CEO and chairman of Africa Investor (AI), an institutional infrastructure investment platform geared toward Africa.
Hubert claims that more than 30 nations have pledged to achieve net-zero emissions. This indicates that the climate agenda is viewed as one of the best investment opportunities of a lifetime by many in the investing sector, especially pension funds, sovereign wealth funds, and institutional investors. In the end, they want to put money into endeavours that can spur development, yield solid returns, and, as a result, have a really favourable effect on the environment.
Hubert concentrates on Africa. He clarified that projects with a focus on the African climate are now known as Nationally Determined Contribution (NDC) projects. Governments have committed to these initiatives as a part of the COP procedure. By 2030, Africa must complete $3 trillion worth of NDC projects. To put it into perspective, from the year 2000 to the year 2020, the globe has only been able to raise $2.8 trillion for renewable and renewable energy-related investments.
Given that only 2% of that $2.8 trillion was allocated to Africa, it will be a tremendous job for Africa to mobilise more in the next eight years than the world was able to do in the previous 20. Africa has a lot of wind and sun, and it has enormous potential. I was standing on the Red Sea shoreline in Egypt in February when I realised I would have to travel 4,000 miles over the desert to reach the Atlantic. That much solar potential is impressive.
Hubert claims that Africa has a technical wind potential of 180,000 terawatt hours per year, which is sufficient to electrify the continent 250 times. Combine that with the rest of the world’s energy requirements. It is conceivable that Africa may export this natural capital on a net basis. Hubert declares that it is time for innovation, private sector thought, and private capital mobilisation.
Hubert also discussed the African Green Infrastructure Investment Bank, which is modelled after the UK’s establishment of the UK Green Investment Bank after realising they lacked the resources to finance the offshore wind sector. The process of developing the enabling legal and regulatory framework with African governments has begun in order to achieve two crucial goals:
- The banking sector, the anti-ESG movement, and the environmental potential of Africa
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