Increased regulation focus, green money and biodiversity will be the key players in environmental, social and governance investment issues in 2022, as a new report by Jefferies outlines what it sees as the key ESG impacts moving forward.
The reports says while decarbonization will continue to accelerate in the United States, Europe and China, it sees international cooperation declining. Additionally, Jefferies says central banks will become more forceful on green money policy and that biodiversity will become the new climate change.
Overall, the report listed 11 categories that will be regulatory strongholds in 2022.
Right off the bat, the report says the US’s Build Back Better Act, which may not pass the Senate until as late as the second quarter of 2022, will not look like the version passed in November by the House. Still, Jefferies says it sees the legislation as the largest public investment on sustainability to date.
Jefferies also sees the Securities and Exchange Commission considering mandatory ESG disclosures in the next year.
The report says it believes the SEC will iron out ESG regulations in 2022 and they will be put into action by 2023. Jefferies believes the regulations will look similar to what the Task Force on Climate-related Financial Disclosures lays out. Jefferies also sees the SEC, which has been called on to help companies improve ESG reporting, supporting SASB and International Sustainability Standards Boards frameworks because many US investors and businesses strongly advocate the initiatives.
As more businesses seek better ESG standards in Europe and the US, the EU’s Corporate Sustainability Reporting Directive (CSRD) will enter negotiations with the European Parliament in early 2022. Jefferies says they will not be simple talks because of the complexity of what is involved in the regulations and the number of companies involved. It also says a delay by the EU to implement Sustainable Finance Disclosure Regulation into 2023 due to complexities regarding the detail of the disclosures will also have an impact.
Jefferies says there should be no additional delays as companies have more than a year to prepare and further doing so could negatively impact ESG capital in Europe.
Along all the disclosure lines, Jefferies expects the IFRS Foundation, which was established by the International Sustainability Standards Board (ISSB) in 2021, to release its first draft of sustainability standards disclosures in 2022. Jefferies says it sees the ISSB becoming the global standard for ESG disclosures and recommends businesses become familiar with the approach.
The Network for Greening the Financial System (NGFS) released an updated version of its climate scenarios for central banks in June 2021, and Jefferies believes actions like this will become a catalyst for green money heading into 2022. Green, social and sustainability and sustainability-linked bonds were expected to reach $1 trillion in 2021, and Jefferies says as the NGFS framework is implemented, green money policy will shift the focus of investors.
Nature loss is also becoming more of a focus on climate issues and in May 2022 governments will layout a 10-year road map to for reversing it. It will include no net nature loss by 2030 and net gain by 2050. Jefferies says this issue could open up a whole new era for ESG investing because while carbon emissions has been a huge focus, not a lot has been done on natural capital or how nature loss impacts net zero goals. Jefferies believes this will start to change in 2022 and investment opportunities will continue to increase over the next several years.
Jefferies broke out India and China specifically, saying that ESG efforts and focuses in both countries will impact global regulations and movements. It says India will fall short of ambitious renewable energy goals over the next year but will make significant progress in the area. As for China, it could become a trend maker in establishing national carbon markets.
The report also says elections in France and the US will have ESG impacts in the coming year.
Finally, Jefferies says the success of COP27, scheduled for November 2022 in Egypt, will depend on the how well of international regulations are implemented and whether or not high-income countries invest the $100 billion climate money toward emerging economies that was first established at COP15. Investing in middle- and low-income countries has been seen as a key piece to making energy and sustainability transitions and Jefferies says investors should continue to look at funding such efforts in 2022.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
