ESG in the Biden Era

There are a number of trends to follow during the Biden Presidency that will affect long-term investment strategy.

As we turn the page on a tumultuous presidential term and look towards Biden’s time in office there is sure to be a contrast in governing. There are many issues the new administration plans to address that are outside the purview of UnifyImpact. But there are also changes that will cause the stock market to behave differently and alter the investing world at large.  In this piece we’ll look at how Biden’s policy plans and increased awareness of sustainability related issues might play out in the markets.

Traditionally the stock market has gone up following the first 100 days of a new presidency. Already we have seen certain stocks rise and others, including gun makers and prison operators, fall. If your primary focus is ESG investing however, these statistics are not all that meaningful; sustainable means thinking long-term.  That said, there are a number of trends to follow during the Biden Presidency that will affect long-term sustainable investing strategy.

Biden’s First Moves

From the outset there is a clear change in purpose from the previous administration. In an interview in Forbes, Peter Krull, CEO and Founder of Earth Equity Advisers, explains about the strong prospects of sustainable investing as Biden comes into office: “the reality is we’ve had more growth over the last four years than we did over the previous twelve years. After the 2016 election, people said we’re going to have to do it for ourselves. If the last four years of growth were the headwinds, I’m really excited about seeing the tailwinds.”

The first evidence of Biden’s commitment to sustainability is in the list of people he has hired. Biden has made it a priority to surround himself with cabinet members and top aides with a history in sustainability. Most notably, he has appointed Brian Deese as his top economic advisor. Deese formerly served under former-President Obama and was most recently Global Head of Sustainable Investing at BlackRock, the world’s largest asset management firm and a leader in the ESG space

The many reports on Biden’s plans for his first 100 days in office also suggest a focus on sustainability. The agenda includes comprehensive clean energy initiatives including rejoining the Paris Climate Agreement on day one, mending our relationship with the World Health Organization, providing increased paths to citizenship, laws and initiatives focused on equality, diversity, and social justice in the workforce and communities, and increased worker safety and minimum wage levels.

Biden’s Ambitious Plans

Biden’s clean energy plans include methane pollution limits, developing fuel economy standards while promoting electric vehicle adoption, protecting wildlife and natural resources, an investment in clean energy and technology, making environmental justice a priority at the community level, and requiring companies to disclose climate-related financial risks and greenhouse-gas emissions. All of this will be pursued to help with the goal of reaching economy-wide net-zero emissions by 2050. 

When we take a step back and look at the concerns these initiatives address, we see they closely mirror Our Impact Values at UnifyImpact. There are clear correlations to Climate Change, Natural Resources, Wildlife & Animal Welfare, Labor, Community, Diversity, Leadership, Transparency, and Collaboration. Some of these plans, like the clean energy bill, directly impact businesses and the markets, through tax credits and funding for clean energy sources. Others are more focused on civic life. 

When we peel back the covers on most of these policies, we start to see some emerging trends that will not only shape American sentiment regarding these issues, over the coming years, but will also have tangible effects on individual companies, the stock market, and investor expectations. 

Green Stocks are Obvious Winners

The first step in thinking through how Biden’s Presidency will affect ESG investing and how you can start to personalize your investing strategy leveraging the tools on the UnifyImpact app is to address the obvious. With increased focus on climate action, companies that have sustainability as a fundamental part of their business model are certain beneficiaries.

Regardless of whether lawmakers are able to turn Biden’s vision into legislative action, major initiatives coming from the top drive consumer awareness and investor trust, thus positively impacting business. Two sectors that saw growth as a result of Biden’s progressive mindset, even before his inauguration, are the electric vehicle and solar energy sectors. Initiatives and future laws incentivize consumers and fellow companies to shift towards renewable energy sources whether it be in their daily consumption or operations and supply chain.

Electric Vehicles

Tesla (Overall Impact 4.9), with its charismatic leader, meteoric rise, and lofty goals has garnered the attention of many investors already.  Their 800% share price rise over the last two years and current valuation that is more than the next seven biggest automakers combined is largely attributed to the belief in the future prevalence and importance of electric vehicles in our society. With Biden’s plans for new fuel economy standards and increased spending on charging stations, electric vehicle makers like Tesla are well positioned heading into the future.

Clean Energy

Looking at the energy sector, there are other obvious winners and losers on the horizon.  For one, clean energy is expected to surge even further. Recently much has been made of the fall of traditional oil powers like Exxon Mobil (Overall Impact 3.9) and the rise of solar energy companies like First Solar (Overall Impact 6.2). This is unsurprising as climate change has become a larger priority for investors in recent years, and that will only be buoyed as progressive government mandates push for lower carbon emissions, and business and society follow suit. 

As we have seen through the increase in market value of renewable energy companies, and the decrease in value of traditional oil empires, there is both financial and societal value to green investments. With potential governmental policies restricting oil fields, regulating oil consumption, and providing tax credits for clean energy use, companies well positioned to help Biden reach his green goals will continue to increase in value. 

A Market-Wide ESG Approach

All that said, the obvious “Green” industries are not the only ones that will be affected by the policy changes proposed by President Biden.  At UnifyImpact we like to say, “Every company has an ESG story to tell.” There are companies in a variety of industries that will be affected by the new administration’s expansive plans, whether it be due to energy consumption in their supply chain or social and governance factors throughout the entirety of their business. 

In general, increases in corporate taxes and increasing focus on breaking up monopolies could negatively impact the bottom line and dominance of some of the most highly valued corporate giants. In addition, policy and measures in support of the World Health Organization, increasing worker safety and minimum wage for blue collar jobs, and social justice and diversity measures, will increasingly permeate attitudes and expectations in public and private life. These changes, along with the continued focus on the environment, will likely reward companies who have already taken steps to improve their ESG standards via reporting, management and action. Consumers and investors will increasingly demand better sustainability standards from the companies they buy from and invest in. 

Tech Giants

By looking at prominent companies, you can get an idea of how a holistic ESG investing approach can help you align your values with your wealth as the government changes and the ESG space becomes more prominent.  For a start, let’s examine the performance of two major players in the tech industry: Amazon and Facebook, to see how their value could be affected by their ESG performance over the next four years.

Amazon

Much has been said about Amazon and their ESG initiatives, both good and bad.  In our blog “Greening Amazon” you can take a deep dive into the ways that the corporation has advertised its sustainability record even though it has not performed particularly well.  In light of Biden’s increased focus on climate action, equality and diversity, Amazon’s ESG scores (Overall Impact 4.0) could prove problematic over the next four year, particularly if their performance continues trending downwards and they don’t turn their promises, like drastically cutting carbon emissions and improving labor conditions, into verified practices.  Increasingly investors are holding the companies they invest in accountable for their impact on the environment and society, and the shift in public sentiment continues to affect overall company and financial performance

It would be foolhardy to suggest divestment can fully stop the force that is Amazon, but we will have to watch to see if Biden’s progressive shift could slow them down or force them to (re) address environmental, social, and governance issues that have plagued them for the last several years.

Facebook

Facebook has been scrutinized from all directions lately, and the social media giant has a history of ESG related scandal. From the Cambridge Analytica incident and their systemic lack of transparency, to the current antitrust lawsuit, to criticism they have taken from both sides of the political aisle before and after the Capitol attacks regarding Section 230 and their moderation (or lack thereof) of “free speech,” Facebook is far from being an ESG leader.  Much like Amazon, we have seen further dip in Facebook’s sustainability performance since the inauguration.  They are currently scoring low  (Overall Impact 3.0) on the UnifyImpact app.

Under the new administration, Facebook will continue to be under legislative pressure and remain in the public spotlight in regards to both their core business, and issues that pertain to climate change, their workforce, and corporate responsibility in general. Of note Facebook currently has a meager Transparency score (Transparency 2.0). One of the (now seemingly) rare things that both political parties can agree upon is the need for Facebook and other social media companies to provide greater transparency, particularly when it comes to usage rules, what constitutes free speech and open discourse, and how those rules will be enforced. One would think they will have to increase their actions in regards to transparency (along with other initiatives) in order to drive up their ESG score to ensure they continue to thrive under the new administration.

A Personal Investing Strategy

Utilizing our rankings, your beliefs, and financial knowledge you can leverage the data on UnifyImpact to strengthen your knowledge and build more informed opinion on 20,000 public companies. In this article, we have only looked at a couple of major players in the energy and tech spaces, but you can use a similar or personalized approach to interrogate the sustainability performance of the companies you are interested in investing in over the next four years and beyond. 

Whether you are focused on climate change or diversity, natural resources or collaboration, or you want to touch upon all of Our Impact Values, you can see how financial metrics compare to ESG scores in the past and present.  UnifyImpact is a tool to help you form an educated opinion on how trends in the economy and market will materialize moving forward during the Biden Presidency and beyond. Sign Up For Free to get started.

About UnifyImpact

UnifyImpact is a platform designed to help individual investors make sustainable investment decisions. The web-based application rates public companies based on environmental, social and governance (ESG) factors to help investors make informed decisions that align with their personal values. Users can create a profile based on values that are most important to them, track the progress of companies they’ve invested in and read up on news based on their investment portfolio.

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