Investing In The Future

Investing in future wealth generating assets has always been the target of every intelligent investor.

But finding these assets is easier said than done. Especially small individual investors face this problem form the very beginning.

There are uncountable recommendations from brokers, experts, or advisors out there and, you can find them everywhere. Statements like “this is the next Tesla” or “that will be the next Amazon” are mainstream today. Or you might follow the recommendation of your barber to put your money into Bitcoin or Dogecoin or Pandacoin or Sushicoin, et cetera.

You might have already realized, taking control of your own money is not that simple as it looks. In fact, most individual investors underperform the market and tend to overestimate returns[1].

All this leads us to the most significant question for every individual investor: Where should I put my money? Simple answer: In the future!

So, let’s get down to the facts.

The G7 and guests are meeting in Cornwall this year to discuss how to build back the damages from the Coronavirus and how to create a greener and better future. Two big points on the agenda, “Economic Recovery” and “Climate and Nature”[2]. Economic recovery and saving the environment have something big in common. Both need a huge amount of money to realize.

The Biden administration already introduced a $2 trillion dollar plan to upgrade the U.S. infrastructure over the next decade. This contains spending on housing, electric vehicles, roads, bridges, high-speed broadband, electric grid, green energy, water systems, and so on. But this is only the first half of a massive plan which could cost $4 trillion in the end. President Biden calls this plan the “American Rescue Plan” and “It is a once-in-a-generation investment in America”.[3] If this plan is approved, it will release a massive amount of money.

But not only the U.S. is going to make massive investments in the future. The EU plans to mobilize €500 billion to speed up economic growth[4]. All of these infrastructure plans contain to make the world a greener, fairer and better place. And that’s where ESG comes into the game.

ESG (environmental, social, and governance) became already a major concern for governments, businesses, investors, and consumers around the globe. Cutting greenhouse gases is a big point on the agenda. Many businesses already made commitments to cut greenhouse gases drastically.[5] A study by the Bank of America showed “that those companies ranking highest in ESG criteria tended to have consistently lower future stock price volatility and higher average subsequent returns on total equity compared to their lower-ranked counterparts”[6]. Over 80% of the business leaders and professional investors believe that ESG programs will create more shareholder value in the next five years. In addition, they would pay an average 10% premium to acquire businesses with a positive ESG ranking.[7]

All this data, facts, and commitments are all pointing in the same direction. Governments, businesses, and investors are all lining up to turn on the massive wealth generating machinery. A lot of money is going to move. To realize all these plans, a huge amount of natural resources will be needed. And all this with high ESG focus.

Article Sources

[1] Businessinsider, 7 Investing Facts Your Broker Doesn’t Want You To Know, https://www.businessinsider.com/essential-investing-facts-2013-1

[2] G7 Cornwall Summit, https://www.g7uk.org/g7-cornwall-summit-summit-meeting-agenda/

[3] The New York Times, Biden Details $2 Trillion Plan to Rebuild Infrastructure and Reshape the Economy, https://www.nytimes.com/2021/03/31/business/economy/biden-infrastructure-plan.html

[4] European Investment Bank, Investment Plan for Europe, https://www.eib.org/attachments/thematic/investment_plan_for_europe_en.pdf

[5] McKinsey & Company, Net zero or bust: Beating the abatement cost curve for growth, https://www.mckinsey.com/~/media/mckinsey/business%20functions/operations/our%20insights/net%20zero%20or%20bust%20beating%20the%20abatement%20cost%20curve%20for%20growth/net-zero-or-bust-beating-the-abatement-cost-curve-for-growth.pdf?shouldIndex=false

[6] Bank of America, Environmental, Social and Governance Update 2018

[7] McKinsey & Company, The ESG premium: New perspectives on value and performance, https://www.mckinsey.com/business-functions/sustainability/our-insights/the-esg-premium-new-perspectives-on-value-and-performance

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