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The Ethical Investor: SPAC-listed ESG stocks get more scrutiny, and Giles Gunesekera talks about his new fund

The Ethical Investor is Stockhead’s weekly look at ESG moves on the ASX. This week’s special guest is CEO of … Read More
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The Ethical Investor is Stockhead’s weekly look at ESG moves on the ASX. This week’s special guest is CEO of Global Impact Initiative, Giles Gunesekera.

More and more ESG-focused companies in the US are going public via the SPAC route.

A SPAC, or special purpose acquisition company, is essentially a shell corporation listed on a stock exchange with the purpose of raising funds to acquire a private company.

Also called a “blank cheque company”, a SPAC is created specifically to finance an acquisition within a set timeframe.

Voltus Inc, an ESG-focused electricity market startup, is going public via a merger with a SPAC called Broadscale Acquisition, valuing the startup at US$1.3 billion.

Securus Technologies, a prison services company that brands itself as ‘socially responsible’ will also be going public via merging with a SPAC called Atlantic Avenue Acquisition.

The startup company, which charges families for the phone calls made by the incarcerated, has caused controversy because it makes profits out of the tax-funded prison system.

The two listings highlight the recent focus of the US Securities and Exchange Commission (SEC) to clamp down on ESG companies that manage to go public without the normal scrutiny of an IPO listing.

For now, the SEC focus on ESG seems to be on scrutinising whether companies are making misleading statements to the public (greenwashing).

But looking forward, SEC chairman Gary Gensler indicated that the commission was considering rule amendments to expand disclosure requirements for companies going public via SPACs.

 

 

ESG interview with CEO of Global Impact Initiative, Giles Gunesekera

Gunesekera sits on two UN Advisory Boards and also on the CFO Taskforce, advising the UN on mobilising capital for the Sustainable Development Goals (SDG).

He’s about to launch the Global Impact Initiative (GII) Global Gender Equality Fund, a portfolio of carefully selected global companies which recognise and promote gender equality.

The fund’s goal, according to Gunesekera, is to achieve the UN’s SDGs, which is the blueprint to achieving a better and more sustainable future.

 

Giles Gunesekera

 

Give us a brief background about yourself and GII

“I formed GII in 2015 after spending 20-plus years in funds management.”

“Simultaneously, I spent 30-plus years in the non-profit sector as a director on a number of different boards, including eight years with Amnesty International.”

“Impact investing really soared 10 years ago as a way of bringing these two worlds (corporate and non-profit) together, with a dual focus of financial return and social impact.”

“GII is divided into five main pillars – gender equality, indigenous communities, health, affordable housing, and climate.”

“In each of those pillars, we play two very distinct roles. One is where we set up a fund under our name, and the other is where a fund manager brings us in to help them set up an impact fund on their behalf.”

“Gender equality goes right across all those pillars, and it’s taken us four years of research to get the Global Gender Equality Fund off the ground.”

“An important part of our model is that when we set up the funds, we engage investors around the world, ensuring that it’s got investor input and support.

“Everything that we do however, has to have that dual purpose of both financial return and social impact.”

What social impact does Global Gender Equality Fund have?

“There’s a number of women-focused ETFs out there, but there are no solutions that actually look at creating more opportunities for girls.”

“What we’ve found throughout our research was that in order to progress from girls to women, what’s needed were better health, better education, nutrition and socio economic empowerment.”

“So we’ve packed the fund with experts in those four areas, and appointed Robeco to manage the portfolio.””

What stocks are in the portfolio?

“Firstly, we don’t invest in businesses that are involved in alcohol, gaming, tobacco, weapons, and fossil fuels, and Robeco applies those same screens.

“We basically screen for companies that have a high percentage of women on the board, women in senior management, with pay parity and family friendly policies.”

“The universe is the MSCI World Index, and when you apply those negative screens and a gender lens, the investable pot is about 3,000 companies.”

“Out of those 3000, Robeco  invests in roughly 60 stocks.”

“At the moment our portfolio includes well known stocks such as Estee Lauder, Unilever, Thermo Fisher, Schneider Electric, Mastercard and Accenture.”

“And this is where it gets interesting and what sets us apart from other funds.”

“As an investor in the Class B of the GII Global Gender Equality Fund, you’ll obviously be getting a financial return from the capital appreciation of the portfolio.”

“But on top of that, you will also agree to sacrifice the dividend income, and that income will go to girls’ charities.”

“Before that money goes there, we sit down and map out the social impact of that donation.”

“So to give you an example, before we would make a donation on behalf of investors to the Malala Fund, we would sit down with them and discuss specific outcomes like: how many girls are going to be educated, in which countries, and at what year levels?”

“And then we obviously monitor that and measure it back to the UN SDGs.”

How could retail investors invest in the fund?

“Retail investors could participate in the fund through the Macquarie Wrap platform, which is used by more than 7,000 financial advisers in Australia.”

“People can also come directly to us; it’s a wholesale fund so you need to be classified as a sophisticated investor.”

“The minimum investment is only $5,000, so it’s effectively a retail minimum, but within a wholesale investment memorandum.”
 

ESG related news in Australia

Australia needs 10 gigawatts of home batteries by 2030 to soak up excess solar, according to a report from RenewEconomy.

We’ve now passed over 3 million rooftop solar panels, and the capacity those panels generate will far exceed the highest of demand in any given day.

What’s important now therefore, is that a further rollout in solar panels must be coupled with an equivalent mass rollout of batteries, the report concludes.

As reported by Stockheader Jessica Cummins earlier this week, the Western Australian Government has launched a two-year pilot project to discover ways to make the most of household solar and battery assets.

Named ‘Project Symphony’, the project will help understand how rooftop solar and batteries could be centrally orchestrated to balance broad-scale electricity supply.

“In the future, houses will become the power station through their rooftop solar,” said Minister for Industry, Energy and Emissions Reduction, Angus Taylor.

“Project Symphony will test how increased access to renewables can benefit communities and is a major deliverable of the Distributed Energy Resources Roadmap.”

Some Australian companies are already getting into this action with novel ideas.

Earlier this year, Carlton and United Breweries (CUB) launched the Solar Exchange program, giving out VB beers to households who have rooftop solar power to spare.

CUB said it was looking to buy excess solar power from households and would pay in cans of beer instead of cash, all in the name of getting to net carbon zero by 2025.

 

VB beers for solar

 

Notable ASX ESG stock news in the week

Lendlease (ASX:LLC) global CEO Tony Lombardo told the Australian Financial Review Property Summit that property companies that have not developed a focus on green buildings will be left out by investors.

“If you haven’t gone on to developing sustainable buildings, you’re in trouble,” he told the AFR.

For the second year in a row, Evolution Mining (ASX:EVN) has been included in the Dow Jones Sustainability Indices Australia Index.

The company has retained its ranking in the top performing Australian mining companies for corporate sustainability, as judged by the DJSI annual assessment.

Meanwhile, a new ESG-focused recycling company has just hit the bourse on Thursday after raising $12m at 20c.

By the day’s close, the Close the Loop (ASX:CLG) stock price has hit 30c, a huge 50% premium that valued the company at around $65m.

“Sustainable packaging has been number one target for a long time, and we’re happy with the regulatory tailwinds in Australia and around the world which has helped us put the message out and all get involved in the circular economy,” Close the Loop CEO Joe Foster told Stockhead.

 

The post The Ethical Investor: SPAC-listed ESG stocks get more scrutiny, and Giles Gunesekera talks about his new fund appeared first on Stockhead.

Author: Eddy Sunarto

Energy & Critical Metals

Rivian Stock Alert: RIVN Shares Just Lost Out on Market Cap to LCID Stock

Step aside, Rivian (NASDAQ:RIVN)! There’s a new electric vehicle (EV) startup leader based on market capitalization, and its name is Lucid (NASDAQ:LCID)….

Step aside, Rivian (NASDAQ:RIVN)! There’s a new electric vehicle (EV) startup leader based on market capitalization, and its name is Lucid (NASDAQ:LCID). Recently, Lucid’s market cap of $62 billion surpassed Rivian’s market cap of $58 billion. After Rivian ballooned to as high as $179 following its initial public offering (IPO), shares have slumped lower to the mid-$60 range. Furthermore, shares of RIVN stock are down more than 35% year-to-date (YTD). While LCID stock is down roughly 7% YTD, Lucid’s superior YTD performance has allowed Lucid to surpass Rivian in terms of market cap.

Rivian sign outside the company's HQ in Silicon ValleySource: Michael Vi / Shutterstock

Both Rivian and Lucid offer investors an opportunity to invest in an early stage EV startup. However, the valuation of these two names is what is holding some investors back. Furthermore, competition from legacy automakers like Ford (NYSE:F) and General Motors (NYSE:GM) is also heating up. On top of that, investors should be aware of the elephant in the room, namely Tesla (NASDAQ:TSLA).

Last quarter, Rivian reported revenue of $1 million on top of a $1.23 billion loss. On the other hand, Lucid reported revenue of $232,000 with a $524.4 million loss. While these two EV makers remain unprofitable, investors should be reminded that it took Tesla 18 years to become profitable. Tesla achieved this accomplishment in 2020 and delivered 500,000 vehicles that year.

What’s Next As Lucid Overtakes Rivian Stock

An investor should also factor potential growth into their investment thesis. Rivian currently has 71,000 reservations for the R1T and R1S models. Meanwhile, Lucid has 17,000 reservations for its Air sedan, representing a book value of $1.3 billion. Lucid has also confirmed its goal of producing 20,000 vehicles in 2022. Furthermore, CEO Peter Rawlinson is “confident in our ability” to achieve the goal.

Rivian has not yet released a 2022 production goal, although the EV maker stated that it expects its 2021 target of 1,200 vehicles produced to fall “a few hundred vehicles short.” Rivian is also working on a new $5 billion EV plant in Georgia. Construction for the plant will start this year, with a finalization date set for 2024. The new plant is expected to be able to produce 400,000 vehicles per year. However, building new plants isn’t cheap, and Rivian is expected to report $8 billion of capital expenditures through 2023.

Both companies are currently spending billions of dollars to power future growth. Investors will want to keep up to date with reservation reports and company updates as these two EV producers try to make a name for themselves.

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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The post Rivian Stock Alert: RIVN Shares Just Lost Out on Market Cap to LCID Stock appeared first on InvestorPlace.

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Author: Eddie Pan

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Energy & Critical Metals

What Will Be China’s Impact On Uranium Markets?

Coming back to the Daily Dive is Joe Kelly, CEO of Uranium Markets. He joins us to talk about the
The post What Will Be China’s Impact On Uranium Markets?…

Coming back to the Daily Dive is Joe Kelly, CEO of Uranium Markets. He joins us to talk about the impact of Kazahkstan on the uranium market (0:54), Japan’s play for the nuclear power (4:41), and the prospect of US giving tax credit to nuclear firms (5:53). Joe also discusses China’s shift from coal to nuclear on the uranium space (7:29), the effect of Belgium shutting its nuclear plants (9:28), and his outlook for uranium in 2022 (10:48).

Uranium Markets has a full-service nuclear fuels brokerage desk assisting its customers to optimize their positions in the uranium market. The firm takes pride in combining its strong financial brokerage experience and a deep understanding of the uranium marketplace.

 

The author has no securities or affiliations related to any organization mentioned. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post What Will Be China’s Impact On Uranium Markets? – The Daily Dive appeared first on the deep dive.

Author: Jay Lutz

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Energy & Critical Metals

Without a Doubt, Lithium’s “White Gold” Label is Merited

2022.01.21
Electrification and decarbonization are anticipated to be one of the biggest investment trends of 2022.
Just two weeks into the new year, we’re…

2022.01.21

Electrification and decarbonization are anticipated to be one of the biggest investment trends of 2022.

Just two weeks into the new year, we’re already witnessing a big rally in EV battery minerals, perhaps a precursor to what could be a historic year for metals considered vital to the energy transition.

Nickel prices last week surged to its highest in a decade, with investors betting on a global scramble for supplies of the EV battery material.

Another key battery mineral that has seen its prices soar is lithium, which started 2022 on a record high, continuing its strong form from last year. Data from S&P Global Platts last week showed that lithium carbonate prices in China have now risen 35% on month and are up 531% on the year.

And this uptrend in lithium (and other EV battery metals) is only going to continue, according to those within the battery metals industry.

Caspar Rawles, chief data officer at Benchmark Mineral Intelligence, the world’s leading lithium price reporting agency and EV supply chain data provider, notes that the early transactions from 2022 suggest that “lots of legs” are left in this rally.

Gavin Montgomery, research director for battery raw materials at Wood Mackenzie, recently said in a Financial Times article that lithium prices are unlikely to crash, as they did in previous cycles.

“We’re entering a sort of new era in terms of lithium pricing over the next few years because the growth will be so strong,” he added.

According to a December report from S&P Global, further demand growth in 2022 will mean a lithium deficit this year as use of the material outstrips production and depletes stockpiles.

Supply is forecast to jump to 636,000 tonnes of lithium carbonate equivalent in 2022, up from an estimated 497,000 in 2021 — but demand will jump even higher to 641,000 tonnes, from an estimated 504,000, the report said.

Lithium Supply Problem

Driving the latest lithium rally are near-term risks that are threatening deeper shortages in the metal’s supply, from plant maintenance and Winter Olympics curbs in China to pandemic-related labor shortages in Australia.

“The lithium market is extremely tight at present, so spot prices are very sensitive to any supply disruptions,“ Alice Yu, analyst at S&P Global Market Intelligence, recently wrote in a note to Bloomberg.

As we speak, lithium prices are still rising in China as consumers look to restock ahead of the Chinese New Year festivities at the end of the month and early February. The high level of buying in the world’s biggest EV economy also pushed prices higher in other regions such as Europe and the US, according to Fastmarkets.

Beyond the short-term issues, there are challenges for lithium supply to expand fast enough to avoid a prolonged market squeeze over the coming years.

Skeptics point to Rio Tinto’s controversial lithium project in Serbia, which is now on hold due to environmental protests, and the growing concerns around the sustainability credentials of South America’s brine-based production, as long-term threats to global supply.

“Customers are realizing that new supplies are very difficult to bring on,” said Tony Ottaviano, CEO at Australian lithium miner Liontown Resources, in the Bloomberg report. His company recently signed an agreement to ship lithium to South Korean battery giant LG Energy Solution from 2024, when its project is scheduled to start.

Last week, BlackRock’s Evy Hambro, global head of thematic and sector-based investing, told Bloomberg TV that commodity prices may stay high for decades as mining companies struggle to keep up with demand from the energy transition.

“We’ve got decades worth of high rates of investment into infrastructure as the world seeks to decarbonize. That’s a widely held consensual view,” he said.

Among the key raw materials listed was lithium, which is set to face fresh demand from the creation of a “greener world”.  Bloomberg New Energy Finance (NEF) estimates that, by 2030, consumption of lithium (and nickel) will be at least five times current levels.

Hambro still sees the mining sector as remaining undervalued, given its importance in providing the materials like lithium needed to decarbonize the global economy.

“It seems as though this core element of the transition has been completely ignored by many investors,” he said. “At some point people will realize how essential these businesses are for the transition and capital will flow into them, and that should change the valuations.”

More Expensive EVs

The tightening supply of metals is happening just as EV uptake around the world is about to explode, which is exerting serious cost pressure on battery production.

In fact, we could see the first rise in battery prices since 2010 this year, potentially undermining global efforts to speed up the adoption of EVs and clean energy technologies, analysts say.

Between 2010-2021, battery pack prices had dropped a staggering 89%, from above $1,200/kWh to $132/kWh in real terms, BloombergNEF’s annual battery price survey showed in November.

Li-ion battery prices dropped by 6% from $140/kWh in 2020 to $132/kWh in 2021, but could now rise to $135/kWh in 2022 in nominal terms due to higher raw material prices, BloombergNEF estimated.

According to the research provider, even low-cost chemistries like lithium iron phosphate (LFP), which have been used more in 2021 and are particularly exposed to lithium carbonate prices, have felt rising costs throughout the supply chain in recent months.

Since September, Chinese producers have raised LFP prices by between 10-20%, according to BloombergNEF estimates. Indeed, the average price of these cells is now the same as the average price of high-performing nickel-based cells in the first half, at around $100/kWh.

If other technology improvements cannot mitigate the higher cost of raw materials, the point of breaking below the critical threshold of $100/kWh battery pack price could be pushed back by two years from BloombergNEF’s current expectation of 2024.

“This would impact EV affordability or manufacturers’ margins and could hurt the economics of energy storage projects,” the research provider warned.

“Higher battery price creates a tough environment for automakers, particularly those in Europe, which have to increase EV sales in order to meet average fleet emissions standards,” said James Frith, BNEF’s head of energy storage research and lead author of the report.

Automakers may now have to make a choice between reducing their margins or passing costs onto consumers. Either way, some carmakers are likely to lose out in the global race to produce affordable EVs after failing to meet their ambitious targets.

In the grand scheme of things, the clean energy transition could be costlier and more distant than initially thought. Fatih Birol, executive director of the International Energy Agency (IEA), said last year:

“Today, the data shows a looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realizing those ambitions.”

US Falling Behind

The United States still lags behind both China and Europe when it comes to the production and domestic uptake of EVs, and the world’s biggest economy has made it loud and clear it wants to challenge its rivals’ dominance.

In an executive order, US President Joe Biden has already set a national goal for 50% of new car sales by 2030 to be electric. Jumpstarting his EV initiative is a proposed $7.5 billion spending package to build a network of 500,000 EV charging stations across the country.

Meanwhile, its EV industry is also making more noise than ever. Nearly every major automaker in the US has announced a transition to electric vehicles; Tesla delivered almost one million cars in 2021, while new electric vehicle companies like Rivian and Lucid are rolling out new models off the line.

However, to power these new EVs requires more batteries — and the materials to build them.

According to Benchmark Mineral Intelligence, EV growth will be responsible for more than 90% of demand for lithium by 2030. The UK-based consultancy forecasts that demand for lithium is set to triple by 2025, rising to 1 million tonnes and outpacing supply by 200,000 tonnes.

So for the US to really become an EV powerhouse, it needs to first solve its lithium supply problem.

Over 80% of the world’s raw lithium is currently mined in Australia, Chile and China. Moreover, China controls more than half of the world’s lithium processing and refining, and has three-fourths of the lithium-ion battery megafactories in the world, according to the IEA.

The US, meanwhile, mines and processes only 1% of the world’s lithium, according to the US Geological Survey (USGS). There is only one lithium mine in operation, Albemarle’s Silver Peak, which extracts lithium from brine outside of Tonopah, Nevada, outputting a paltry 5,000 tonnes of lithium carbonate a year.

However, this is not to say we can rule out the US as a major producer of lithium, dubbed “white gold” for its vital role in rechargeable batteries and high demand.

Next Lithium Hub?

The US had been the leading producer of the metal until the 1990s, so scarcity is not a problem.

Within its borders are almost 8 million tonnes of lithium in reserve, ranking it among the top five countries in the world, according to the USGS.

So, with the right amount of investment, a burgeoning domestic “mine to battery to EV” supply chain is certainly within reach. Several projects are already in the works across the states of Nevada, North Carolina, California and Arkansas.

Nevada looks to be the focal point of the next “white gold rush” given the abundance of lithium-rich brines and clays, plus its history of lithium production dating back to the 1960s. It currently hosts the only US lithium mine, for now.

Conclusion

Lithium prices have already set new records to begin the year; China’s lithium carbonate prices jumped to over $47,500 last week, representing a six-fold increase over January 2021.

The BMI lithium index has already shot up by 280% year-on-year, and nearly 12% over the past month alone.

Some are predicting that this run is far from done. Australian lithium miner Allkem told Reuters this week that lithium carbonate prices could explode in the second half of the year, rising by about 80% to over $20,000/tonne in the six months to December.

“It’s a very, very tight supply market and as a result of this we’re seeing this very rapid increase in pricing,” the company representative said.

Strong demand for lithium-ion batteries for EVs and other applications is expected to put a strain on the global supply of battery raw materials, which will likely invoke a string of new investments.

China’s biggest battery makers and miners are already gobbling up lithium assets left, center and right, with more deals still left to be done. Without a doubt, lithium’s “white gold” label is merited.

With the global race to secure minerals in full throttle, there will be calls made to companies holding lithium projects within the most prolific regions of the world.

Richard (Rick) Mills
aheadoftheherd.com
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Author: Gail Mills

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