LONDON — The booming market in green finance faces a test this year as more investors balk at lofty share price tags even on loss-making companies and a gradual economic recovery from the pandemic boosts returns on conventional energy assets.
Driven by government promises to deliver a low carbon recovery, flows into funds investing on environmental, social and corporate governance (ESG) principles doubled last year from 2019 to $326 billion, Morningstar data showed.
But that has also made ESG one of the most crowded trades, BofA’s latest investor survey released on Tuesday found, while the supply of green securities has failed to keep pace with demand.
Emmanuel Cau, head of European equity strategy at Barclays, has warned of a “regime change” if the cycle were to turn in favor of value sectors, which benefit from economic recovery, and away from high-quality, high-value assets that are more sensitive to higher bond yields.
Cau last year cut his overweight recommendation on ESG utilities and last month upgraded conventional energy stocks to overweight, citing depressed investor positioning and the sector’s ability to capitalize on a post-pandemic recovery.
While most investors see the green investing trend as here to stay, they have grown wary after the huge price run-up.
Advertisement
Story continues below
This advertisement has not loaded yet, but your article continues below.
Article content
“Valuations in the (green) sector are significantly higher than what we want to pay so we won’t allocate as much as we’d like to,” Justin Onuekwusi, fund manager at Legal & General Investment Management, said.
Supply of clean energy assets, meanwhile, shows signs of becoming less tight.
Refinitiv data indicates equity raising by sustainable companies totalled $6.6 billion year-to-date, a 28% increase on year-ago levels, although it is still only 2.5% of total activity.
In the green bond market too, there are hints of a strong increase in supply this year after last year’s scarcity brought into focus the so-called greenium – the extra premium investors have to pay to secure a green bond.
Following last year’s heavily oversubscribed green bond issues, Nordic bank SEB predicts green bond sales will double this year to $500 billion. France tapped green markets on Tuesday, while the European Union and Britain are prepping deals.
Cumulative green bond issuance, used for funding projects such as clean energy, surpassed $1 trillion in December, according to the Climate Bonds Initiative, though Spain’s BBVA estimates this is under 1% of the global bond market.
Such has been the supply-demand imbalance that the market value of renewables developer EDPR rose in January above that of its parent EDP.
The picture, says NN Investment Partners senior portfolio manager Oskar Tijs, is best described as euphoria.
“Companies, which in many cases have been lagging for years because their earnings were low or negative, have performed… Money flows have been so strong that in some cases, you can question if it is still reasonable,” Tijs said.
Advertisement
Story continues below
This advertisement has not loaded yet, but your article continues below.
Article content
HARD TO SUSTAIN
At the height of the pandemic last year, more than 80% of sustainable equity indices outperformed non-ESG peers, the Institute of International Finance estimates.
Rising prices led one-year forward price-earnings multiples on a basket of 35 green stocks to expand by 24 points in the last year, analysis by Morgan Stanley found. Multiples at non-green peers expanded by two points.
Yet Refinitiv IBES data going back to 2016 shows two of last year’s top performing green stocks – fuel cell makers Plug Power and FuelCell Energy – have never turned a profit and are not expected to do so for years.
Carmaker Tesla enjoyed its first profit in 2020 and solar firm Enphase has been profitable for two years.
Yet these shares have rallied between 400% and 1000% in the past year.
Sharon Bentley-Hamlyn, investment director at Aubrey Capital Management, has 2%-3% of her portfolio in green energy.
“We’d love to have more but it’s difficult to find stocks that meet valuation criteria. We like to buy at 1.5-times PEG ratio or less but many of them are trading near 2-times,” she said, referring to the metric measuring share price, earnings and future growth prospects.
“You don’t want to bet the ranch on these types of businesses which are still loss-making.”
THE CRAZY GREENIUM
Investors often have to pay extra for green bonds, especially in sectors in which such issues are scarce and this greenium applies even when a green bond has a longer maturity than mainstream issues.
Advertisement
Story continues below
This advertisement has not loaded yet, but your article continues below.
Article content
Dutch mail carrier PostNL’s 2026 green bond offers 41 basis points over swaps – a measure of a bond’s credit risk – 5 bps less than a mainstream bond maturing two years earlier. .
Daimler’s 2030 green issue pays 10 bps below a conventional bond due earlier that year.
“This is crazy. You move along the curve, you take more risk, you get paid less,” said Shanawaz Bhimji, senior fixed income strategist at ABN AMRO.
Green issuers in the euro investment-grade market last year conceded an average 8 bps “new issue premium,” ABN AMRO estimates, less than half that paid across the broader market.
And investor demand exceeded issuance 5.5 times on average in 2020, versus four times on non-green bonds, ABN said.
For all the mounting caution, James Palmer, BofA’s head of EMEA equity capital markets sees supply-demand mismatches supporting prices for a while yet.
He is busy discussing with companies that own sustainable businesses “whether they can and should separate them to get the valuations that the market is prepared to afford.”
(Reporting by Joice Alves and Yoruk Bahceli; editing by Sujata Rao and Barbara Lewis)
Share this article in your social network
Advertisement
Story continues below
This advertisement has not loaded yet, but your article continues below.
The StarPhoenix Headline News
Sign up to receive daily headline news from the Saskatoon StarPhoenix, a division of Postmedia Network Inc.
By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. You may unsubscribe any time by clicking on the unsubscribe link at the bottom of our emails. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300
Thanks for signing up!
A welcome email is on its way. If you don’t see it please check your junk folder.
The next issue of The StarPhoenix Headline News will soon be in your inbox.
We encountered an issue signing you up. Please try again
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
Losing a loved one is never easy, and the legal steps that follow can add even more stress to an already difficult time.
For years, families in Vancouver (and Canada in general) have struggled with a complex probate process—filled with paperwork and legal challenges.
Thankfully, recent changes to Canada’s probate laws aim to make this process simpler and easier to navigate.
Let’s unearth how these updates can simplify the process for you and your family.
What is probate?
Probate might sound complicated, but it’s simply the legal process of settling someone’s estate after death.
Here’s how it works.
Validating the will. The court checks if the will is legal and valid.
Appointing an executor. If named in the will, the executor manages the estate. If not, the court appoints someone.
Settling debts and taxes. The executor (and you) pays debts and taxes before anything can be given.
Distributing the estate. Once everything is settled, the executor distributes the remaining assets according to the will or legal rules.
Probate ensures everything is done by the book, giving you peace of mind during a difficult time.
Recent Changes in Canadian Probate Laws
Several updates to probate law in the country are making the process smoother for you and your family.
Here’s a closer look at the fundamental changes that are making a real difference.
1) Virtual witnessing of wills
Now permanent in many provinces, including British Columbia, wills can be signed and witnessed remotely through video calls.
Such a change makes estate planning more accessible, especially for those in remote areas or with limited mobility.
2) Simplified process for small estates
Smaller estates, like those under 25,000 CAD in BC, now have a faster, simplified probate process.
Fewer forms and legal steps mean less hassle for families handling modest estates.
3) Substantial compliance for wills
Courts can now approve wills with minor errors if they reflect the person’s true intentions.
This update prevents unnecessary legal challenges and ensures the deceased’s wishes are respected.
These changes help make probate less stressful and more efficient for you and other families across Canada.
The Probate Process and You: The Role of a Probate Lawyer
(Image: Freepik.com)
Working with a probate lawyer in Vancouver can significantly simplify the probate process, especially given the city’s complex legal landscape.
Here’s how they can help.
Navigating the legal process
Probate lawyers ensure all legal steps are followed, preventing costly mistakes and ensuring the estate is managed properly.
Handling paperwork and deadlines
They manage all the paperwork and court deadlines, taking the burden off of you during this difficult time.
Resolving disputes
If conflicts arise, probate lawyers resolve them, avoiding legal battles.
Providing you peace of mind
With a probate lawyer’s expertise, you can trust that the estate is being handled efficiently and according to the law.
With a skilled probate lawyer, you can ensure the entire process is smooth and stress-free.
Why These Changes Matter
The updates to probate law make a big difference for Canadian families. Here’s why.
Less stress for you. Simplified processes mean you can focus on grieving, not paperwork.
Faster estate settlements. Estates are settled more quickly, so beneficiaries don’t face long delays.
Fewer disputes. Courts can now honor will with minor errors, reducing family conflicts.
Accessible for everyone. Virtual witnessing and easier rules for small estates make probate more accessible for everyone, no matter where you live.
With these changes, probate becomes smoother and more manageable for you and your family.
How to Prepare for the Probate Process
Even with the recent changes, being prepared makes probate smoother. Here are a few steps to help you prepare.
Create a will. Ensure a valid will is in place to avoid complications.
Choose an executor. Pick someone responsible for managing the estate and discuss their role with them.
Organize documents. Keep key financial and legal documents in one place for easy access.
Talk to your family. Have open conversations with your family to prevent future misunderstandings.
Get legal advice. Consult with a probate lawyer to ensure everything is legally sound and up-to-date.
These simple steps make the probate process easier for everyone involved.
Wrapping Up: Making Probate Easier in Vancouver
Recent updates in probate law are simplifying the process for families, from virtual witnessing to easier estate rules. These reforms are designed to ease the burden, helping you focus on what matters—grieving and respecting your dead loved ones’ final wishes.
Despite these changes, it’s best to consult a probate lawyer to ensure you can manage everything properly. Remember, they’re here to help you during this difficult time.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.