Environmental transformation and renewable energy in the economy… We follow the concept of global supply congestion in the component of disruption in supply chains, inflationary pressures, rising metal and mineral prices that may pose challenges for the energy transition. Regarding the use of fossil fuels and minerals, it is inevitable to develop forward-looking technologies within the scope of renewable energy, with the impact of scarce resources and environmental degradation. The fact that investments in critical areas such as electric vehicle technology, solar panels, and emission reduction will have an important place in the transformation to a green economy will bring about a much more serious evaluation of companies' ESG scores at the point of adaptation to environmental technology.
Green bond issuances by years and countries… Source: Bloomberg
New investment themes… The energy transition is likely to outpace demand by the end of this decade. If there is a deficit in the renewal of energy sources, it will be due to underinvestment in green energy sources. This actually reveals the necessity of companies to be more interested in technology and new economy themes. The economy is undergoing a layering transition and its theme is technological progress and renewable energy. As physical constraints disappear and green finance develops, the weight and return of investments in this field will evolve to a point that increases. This will add financial benefit elements to the non-financial benefit.
Climate change, adaptation to the theme of environmental awareness… Factors such as the changing climate, health and safety risks have increased the sensitivity to green investments. We think the lessons learned from the pandemic are also increasing the global green transformation pressure on capital. Companies that make progress in their net zero emission policies can gain further advantages in the theme of green investment. Progress towards carbon neutrality can provide significant financing returns and investment attractiveness for the ESG criterion, which will be addressed further and will also affect the overall credit profile. The green economy, which will form the risk and opportunity theme of the investment profile, will increase its weight in the coming years and a constantly increasing trend will be followed in green debt instruments. Even if we manage to keep global warming 1.5°C to 2°C above pre-industrial levels, extreme natural disasters still occur. There will be no escaping the need for projects that will help us adapt to the changing climate. When governments and supranational organizations issue bonds for payment, they can enable large-scale expansion of the green bond market.
The main factors that will affect the ESG theme… There will be pressure among the world's largest companies to reduce greenhouse gas emissions and neutralize their carbon footprint, not only through direct investments or activities, but also on sectors that are not very related to carbon, through channels such as financing and supply. Ethical values will also be important within the framework of transparency in the use of carbon-intensive fossil fuels.
Conclusion? Entry to ESG funds in 2021 has been on a large scale, and we are seeing an increasing demand for it. Soon, both regulations and market forces may support green investments and regulations to create ESG ratings, caring for companies to uphold ethical values. In order to prevent new environmental and health crises, to protect from epidemics that will affect the masses like Covid, and to ensure the continuation of the planet, some habits may need to be changed. In this context, it is inevitable to focus on the theme of green transformation in order for efforts to prevent climate risk to be successful at a systemic level.
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