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The Ethical Investor: 8 trends in ESG investing in 2022, and expert comments from Pendal’s Murray Ackman

The year 2021 was the breakout year for ESG investing, with a record US$650 billion going into ESG-focused funds globally, accounting … Read More
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This article was originally published by Stockhead

The year 2021 was the breakout year for ESG investing, with a record US$650 billion going into ESG-focused funds globally, accounting for 10% of worldwide fund assets.

Companies that are rated highly for their sustainability efforts have delivered record gains, boosted by growing awareness in investments focused on ESG issues.

But many predict the ESG boom has just started, and will continue its rapid momentum well into 2022 and beyond.

Here are eight trends in ESG investing that experts have predicted for 2022.

1.   Investor interest in ESG investments will accelerate further

ESG issues are set to become even more important in the years ahead.

According to a survey by fund manager Schroders, 94% of global investors (91% in Australia) said they were conscious of sustainable investing and ESG-aligned investment opportunities.

Around 57% of global fund managers said they would be willing to move to a sustainable portfolio with the same risk and diversification characteristics as their current investments.

Europe, which is considered to be the most advanced market for ESG investing, is seeing a preference for active management.

Australia is still behind Europe, but 2021 saw a record US$3 billion of inflows to ESG funds into the country.

2.   Social issues will become more prominent

Schroders also believe that investors will be increasingly aware of the ‘S’ in ESG, with social inequality and fostering resilient communities top of investors’ mind.

More than half of global asset managers said that social issues had become more important to them during the pandemic.

Events that highlighted social justice issues such as the George Floyd incident are expected to bring more funds into the ESG sector.

3. Scrutiny over ‘greenwashing’ will ramp up

Greenwashing refers to the potential for funds to overrepresent the extent to which their practices are environmentally friendly, sustainable or ethical.

Regulation is expected to get tighter, with the US SEC and ASIC pushing for ever greater ESG disclosures from companies and funds.

Shareholder activism will play a big part in ensuring companies abide by their ESG statements.

We’ve already seen Australian activists and environmental groups like Market Forces voicing their demands at AGMs, requesting the big four banks to abide by their 2050 commitments and stop funding fossil fuel projects.

4. Bifurcation of the market

Experts are also anticipating a bifurcation of the market where the rigorous process to eliminate greenwashing would lead to certain companies standing out from others.

2022 will see funds accelerate toward companies that genuinely engage in ESG issues, and out from those that are just window dressing.

5. Growth in Biotechs

The life science industry has experienced massive growth over the last two years, and that’s expected to continue in 2022 and beyond.

The industry is gradually moving toward a model of customised therapies for specific patient populations, and away from the R&D efforts of big pharma.

According to Dr Anita Gupta from the Johns Hopkins School of Medicine, it will be increasingly difficult for big pharma and biotech companies to manage the execution of these programs in-house.

Going forward, biotech companies will need to tap into partners that could provide them with a streamlined production process, and socially responsible products.

6. Biodiversity and food

Biodiversity and food availability on Earth is under threat, and in a 2019 UN report, scientists warned that 1 million species – of an estimated total of 8m – face extinction.

But awareness is on the rise, and the desire to do more with the resources we have will drive investments into companies that operate in this space.

Water tech, green metals, and agricultural companies are some of the stocks that could see investment inflow in 2022.

7. Consolidation in the energy sector

Experts are betting that agreements arising from last month’s COP26 summit will drive more investments into the global warming space.

The push for renewable power and the phasing out of old energy sources like coal are going to be a persistent theme in 2022.

Experts predict further consolidation within the fossil fuel sector, with M&A activities expected to surpass record levels seen in 2021.

8. Green bonds to explode

Another major trend for 2022 will be the explosion in green bond issuance, according to experts.

Greece, Denmark, and France are just some of the countries that will ramp up national borrowing through the issuance of sustainability linked bonds.

The streamlining of reporting and regulations across Europe and Asia as a result of COP26 will only support the market dynamics and the flow of funds into this investment category.

 

ESG interview with Murray Ackman, Credit Analyst at Pendal Group

Ackman has previously worked within the NGO sector, where he gained first-hand experience in many social projects which include training women in Bangladesh and rural India.

He joined the Pendal Group as a fixed income credit analyst, and explains to Stockhead about the rapid growth in green bonds investing.

 

What trends will we see in green bonds investments in 2022?

“We’re seeing two big changes in fixed income.

“The first is impact bonds. Impact bonds have a social or environmental outcome, while still paying coupons, like a vanilla bond, and the credit risk is with the issuer rather than any underlying projects.”

They’ve just grown and have gone gangbusters as we had a record year last year, around US$9 billion, and it’s more than doubled in 2021.”

“This is just going to keep growing. We’re finding such demand for these types of bonds that perform really well on the secondary market, because everyone wants to get a slice of it.”

“The second trend we’ll see in 2022 will be a new class of bonds called sustainability linked bonds.”

“They’ve been around in Australia for maybe six to nine months, in Europe for maybe four years.”

Explain what a sustainability linked bond is

“These are bonds which are tied to a particular target. Let’s say a corporate says it wants to reduce its emissions by X per cent by a particular time.”

“And if they don’t make that KPI, they have to provide an extra coupon payment to the investor.”

“For impact bonds you need underlying projects, but a sustainability linked bond is open to everyone who wants to improve their environmental footprint or social outcomes.”

How do retail investors get involved?

“The main way for retail investors to get involved is to invest into funds like the ones Pendal manages.”

“We manage two bond funds, and one of them has around 60% of its holdings in these types of impact bonds at any given time.”

“Without investing in such a fund, it’s very difficult for a retail investor to try and hold to the 40-50 bonds generally required to have that diversification.”

 

The post The Ethical Investor: 8 trends in ESG investing in 2022, and expert comments from Pendal’s Murray Ackman appeared first on Stockhead.

Author: Eddy Sunarto

Energy & Critical Metals

Nio Has Big Plans for 2022, But the Nio Stock Recovery Might Take Longer

Investors in the Chinese electric vehicle (EV) group Nio (NYSE:NIO) stock have been scratching their heads amidst the year-long decline. On Feb. 10, 2021,…

Investors in the Chinese electric vehicle (EV) group Nio (NYSE:NIO) stock have been scratching their heads amidst the year-long decline. On Feb. 10, 2021, NIO stock hit a peak of $64.60 — a price that is now in the rearview mirror.

Source: Robert Way / Shutterstock.com

Then, Nio shares saw a 52-week low of $27.52 in late December and closed at $29.12 on Jan. 20, down 48% in the last 12 months and 4.5% year-to-date (YTD). By comparison, the S&P Kensho Electric Vehicles Index has dropped 21.6% in the past 52 weeks and 6.8% YTD.

Despite the decline in shares of many EV names, the industry is growing. For instance, new-energy vehicles (NEV) sales in China, the largest EV market in the world, is expected to exceed 5 million units in 2022. And EV sales should comprise over 30% of the nation’s auto market, reaching at least 7 million units, by 2025.

Meanwhile, Chinese authorities are reducing EV subsidies for 2022 and will withdraw them completely in 2023. Moreover, the government has recently removed a long-standing mandate and now allows for “full foreign ownership of passenger car manufacturing” in China.

Puzzled by the extended downtrend, investors of NIO stock wonder what could be in store for the company in 2022. Despite the positive industry outlook, fierce competition and stringent regulations could create further headwinds for NIO. Thus, investors might want to wait on the sidelines for the short-term.

Nio’s Q3 Performance

Founded in 2014, the China-based EV group Nio aims to differentiate itself through its battery swapping solutions, Battery as a Service (BaaS) and Autonomous Driving as a Service (ADaaS).

Management issued Q3 financial results in early November. Revenue soared 116.6% year-over-year (YoY) to 9,805.3 million RMB, or $1.5 billion. Total EV deliveries reached 24,439 vehicles, up 100.2% compared to year-ago quarter.

Net loss attributable to NIO’s ordinary shareholders came in at 2.86 billion RMB (or $443.7 million). It went up by over 140%, mainly due to the increase in operating expenses. Cash and equivalents were 47 billion RMB, or $7.3 billion at quarter end.

On these metrics, CEO William Bin Li said, “Despite the continued supply chain volatilities, our teams and partners are working closely together to secure the supply and production for the fourth quarter of 2021.”

Meanwhile, recent delivery figures point to a record delivery of 25,034 vehicles in Q4, up 44.3% YOY. Total deliveries ended 2021 with 91,429 vehicles, up 109.1% YOY. Nio is expected to report Q4 earnings in late February.

Adding NIO Stock to Portfolios

Among 26 analysts polled, NIO stock has a consensus buy rating. Also, the consensus of 25 analysts for a 12-month median price target stands around $58.43, implying an upside potential of 95% from current levels. The 12-month price estimates for the stock range between $37.74 and $87.64.

Its trailing price-to-book (P/B) and price-to-sales (P/S) ratios stand at 11.9 and 8.5, respectively. By comparison, these metrics for Tesla (NASDAQ:TSLA) are a P/B of 37.8 and a P/S of 24.7.

Put another way, despite the recent decline, NIO shares still look frothy by traditional valuation metrics. The same holds true for TSLA stock as well.

Yet the company gets significant attention due to its growth potential. Thus, despite the ongoing negative market sentiment, investors might want to keep the stock on their radars with a view to buy around $29, or even below.

Meanwhile, interested readers could also consider investing in an exchange-traded fund (ETF) that also holds NIO stock. Examples include the First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ:QCLN), the Invesco PureBeta FTSE Emerging Markets ETF (BATS:PBEE), the KraneShares MSCI China Clean Technology ETF (NYSEARCA:KGRN) or the VanEck Vectors Low Carbon Energy ETF (NYSEARCA:SMOG).

Bottom Line on NIO Stock

Currently, NIO is one of the top-selling EV manufacturers in China. It sells a number of car models including a coupe sports car and three SUV models. Since last September, Nio has been selling its ES8 model in Norway as well. The company plans to expand into five more countries in Europe in 2022 and more than 25 countries worldwide by 2025.

Also, this year management is launching two new models. The luxury sedan ET7, will be available for orders as of Jan. 20. Deliveries are expected to start by late-March. The other new model, the ET5, is a midsize premium smart electric sedan. Deliveries are anticipated to commence in September 2022.

As part of these expansion plans, a second manufacturing plant is being built at NeoPark in Hefei. The facility, which will help meet the growing demand, is expected to become operational around September 2022.

In summary, Nio has a solid product line and offers tangible growth strategies. However, NIO shares could continue to come under pressure in 2022, in part due to tougher competition, higher operational costs and regulatory risks. Given the upcoming tightening moves by the Federal Reserve, investors are also taking money off the table. Therefore, NIO stock could easily continue to slip further below $30. Long-term investors might still need to be patient.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.

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Energy & Critical Metals

DATS Stock Alert: The Latest Acquisition News Sending DatChat Soaring Today

It’s been a busy week for DatChat (NASDAQ:DATS), and it isn’t even over. Yesterday, the alternative social media platform announced it was venturing…

It’s been a busy week for DatChat (NASDAQ:DATS), and it isn’t even over. Yesterday, the alternative social media platform announced it was venturing into the non-fungible token (NFT) security space. Today, it took this mission a step further. DatChat has signed a letter of intent to acquire Avila Security Corporation. This move will mean significantly expanding its holdings in the blockchain and user data security spaces. DATS stock didn’t react well to the news yesterday, but the tides have shifted. Both companies have cause to celebrate today.

Source: Shutterstock

What’s Happening With DATS Stock

Yesterday began with the news of DatChat’s Web 3.0 platform initiative. While this sounded like good news, DATS stock did not initially react to it, slipping into the red. Today’s news has clued Wall Street into the fact that DatChat is making big plans to gain share of a rapidly expanding market. As of this writing, DATS stock is up 23% on the day. It shot up early and hasn’t slipped.

This morning’s gains have pushed DATS into the green by more than 40% for the week and 23% for the month. Investors saw the stock spend the final month of 2021 in decline, falling by as much as 22%. This type of growth should be reassuring.

While the deal is not yet finalized, it includes “$1 million in cash and the greater of 739,650 shares of restricted common stock.”

Why It Matters

These back-to-back announcements make one thing undeniably clear — DatChat is serious about blockchain security. The company made a name for itself by offering secure social media and messaging options. Now it has recognized that its technology can be applied to a new market, one that is ripe with potential. According to a statement released two days ago, the company is focused on building a “decentralized advertising network for Web 3.0 and Metaverse applications.”

The successful acquisition of Avila will expand DatChat’s intellectual property assets to include both blockchain-based digital rights management and object-sharing technology. The move also makes sense for the company’s communications aspect. Avila’s assets also include encrypted WebRTC real-time video and audio-streaming communications. In acquiring this little-known company, DatChat is strengthening both the old and new components of its business.

The markets for enhanced digital security in both communications and digital asset storage is booming. NFT sales are rising, but as they do, so do theft and fraud within the space. Additionally, Web 3.0 and metaverse applications are only going to help drive stock prices up as both markets heat up in 2022. InvestorPlace’s Luke Lango predicts that in 2022, metaverse stocks will see the type of growth that the electric vehicle (EV) sector did in 2021. If DatChat continues this type of progress, it could be among the metaverse stocks that are destined for growth in the year ahead.

What It Means

When a company announces two major deals in the same space within the same week, investors should pay attention. The second deal isn’t finalized, but DatChat has proven it means business when it comes to these digital expansions. It sees multiple red-hot markets, and it is strategically planning ways to secure shares of both.

NFT security, encrypted social media and metaverse technology are going to be three of the hottest sectors in 2022. If you’re bullish on any, or all three, DATS stock should be on your radar.

On the publication date, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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Energy & Critical Metals

Rivian Stock Price Predictions: Where Will RIVN Go After Hitting New Lows?

So far, 2022 continues to be a difficult year for Rivian (NASDAQ:RIVN). The electric vehicle (EV) producer recently hit an all-time low of $67.40, with…

So far, 2022 continues to be a difficult year for Rivian (NASDAQ:RIVN). The electric vehicle (EV) producer recently hit an all-time low of $67.40, with prices currently hovering slightly above that level. It seems like reasonable valuations are finally catching up to RIVN stock. As a result, investors are seeking out Rivian price predictions for 2022.

A Rivian (RIVN) sign out front of an Illinois manufacturing plant.Source: James Yarbrough / Shutterstock.com

After debuting on the Nasdaq exchange last year as the largest initial public offering (IPO) of 2021, shares of RIVN stock climbed to as high as $179. Ford (NYSE:F) was an early backer of Rivian, investing $500 million into the EV maker in 2019. In addition, Ford invested an additional $902 million during Q1 of last year. Now, these investments are paying off. The legacy automaker reported that it had earned a staggering $8.2 billion from its Rivian stake during Q4 alone.

Ford’s investment in Rivian is interesting because the two companies compete on the truck front. Ford’s flagship EV truck is the F-150 Lightning, while Rivian boasts the R1T. The competition was heightened after Ford announced last year that it would not be moving forward with plans to build an EV on Rivian’s Skateboard platform. This announcement came shortly after Ford revealed that it would be doubling its planned EV production to 600,000 vehicles per year by 2024.

Is Ford coming after Rivian’s market share after helping fund the EV startup? It certainly seems like it. With the heightened competition in mind, let’s take a look at Rivian price predictions.

RIVN Price Predictions: What’s Next for This EV Producer?

  • Bank of America has a price target of $170. Analyst John Murphy believes that Rivian is one of the most legitimate EV competitors with a business model that addresses all stages of the vehicle lifecycle. Murphy also noted that Rivian ranks “fairly well” in his AutoTech entrant analysis, meeting six of the 10 criteria.
  • Tigress Financial Partners has a price target of $147. Analyst Ivan Feinseth believes that Rivian is well-positioned to take advantage of the $9 trillion global automotive market. Furthermore, Feinseth noted that Rivian’s modular design platform provides an opportunity for the company to expand its product line and create reoccurring revenue streams.
  • Deutsche Bank has a price target of $130. Analyst Emmanuel Rosner is impressed with both Rivian’s hardware and software. On software, Rosner views “Rivian’s plan to generate lifetime recurring high-margin revenue from selling services to its installed base of vehicles as one of the most credible among automakers.” On hardware, Rosner believes that Rivian’s “flexible EV architecture supports a rapid cadence of vehicle launches” that will allow the EV maker to achieve economies of scale.
  • Finally, Rivian has an average price target of $134.36 among 14 firms with coverage of stock.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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