The goal is to achieve a more sustainable global economy, but the recovery machinery still runs on oil.

The goal is to achieve a more sustainable global economy, but the recovery machinery still runs on oil.

The goal is to achieve a more sustainable global economy, but the recovery machinery still runs on oil.

Sunrise over a field of poppies.

As in so many circumstances of life, When it comes to investing, colors also matter.. And, although the administrations of almost the entire world -and more especially in Europe- insist on the importance of green, on screens red dominates. a luck of colour blindness which has more to do with the sensitivity of the pocket than of the eye.

The sights of the European institutions are set on the very long term. Specifically, in the Sustainable Development Goals (SDG) whose horizon extends to the year 2030. Meanwhile, that of the market participants does not seem to go that far in the calendar. Rather, it remains in the most immediate years in which the countries should strive to consolidate their economic recovery post pandemic

Although the plans for a greener and decarbonized economy are endowed with large sums of capital in all the main powers of the world, and more especially in Europe, the truth is that the machines that will build this change today run on fossil fuels. And investors, even if they design their portfolios for the long term, they also look for green on their quote screens every day.

Factories are running flat out to make up for time lost during pandemic-imposed shutdowns

One of the clearest examples of this color blindness can be seen in the recent evolution of these fossil fuels on which countries and corporations – including oil and gas companies – seek to rely less and less. Despite the boost given to renewables in recent years, economic reconstruction demand for oil and natural gas has skyrocketedso that any stagnation in supply has translated into sharp price increases for both raw materials.

Currently, the barrel of brent oil -the reference in the Europe of clean energies- has reached maximums of the last eight years above 96 dollars. So far this year, the increase is 23%, while if its behavior is analyzed one year ahead, the jump is no less than 50%.

With such a comeback, it is not surprising that the Stoxx Europe 600 Oil & Gas index, which brings together the main ‘dirty’ energy companies in the Old Continent, accumulate a rise of more than 9% in the 49 days that go into this 2022. A behavior that has nothing to do with that of the ‘clean’ energies that Brussels wants to boost exponentially.

The comparison is more than evident if the European Renewable Energy Index (Erix) is taken as a reference, one of the most recognized indices in monitoring the stock market performance of renewable energy listed companies. In this case, the trajectory since the beginning of the year leaves a variation of 14%. But down. A blow that doubles -and more- the setback that the pan-European EuroStoxx 50 indicator accumulates at this point.

This progress between red numbers of the greenest sector of the market is also seen in the Spanish stock market. While Repsol has achieved advances of almost 10% since the beginning of the year in the heat of the rise in the price of its main raw material, the manufacturer of wind turbines Siemens Gamesa accumulates decreases of more than 22% in the same period. A gap of more than 300 basis points.

Not even the rumors that point to the possibility of an exclusion bid by Siemens Energy, the parent of the renewable energy, have managed to generate more enthusiasm in the market than a demand for oil that the producing countries are not being able to meet. This is demonstrated by the data of several OPEC+ member countries, which month after month fall short of the well pumping targets set by the international cartel.

That a company acts in accordance with the best governance standards is increasingly presented as a guarantee

However, it is not a problem of lack of growth forecasts for the turbine manufacturer. It should be remembered that the Government of Spain approved in the final stretch of last year the expected PERTE of the energy sector. A plan endowed with 6,900 million euros for the development of renewables, green hydrogen and energy storage in the country.

The objective of the administration with this roadmap is none other than mobilize investments for 16,300 million euros. To put the figure in context, it is almost as much as what Repsol is currently worth on the stock market. An item that, among other infrastructures, ensures the development of new wind farms with their corresponding turbines. Perhaps manufactured in many cases in one of the factories that Siemens Gamesa maintains operating in Spain.

The thing is, even though Brussels has rushed to transfer the first batches of the Next Generation reconstruction funds to the countries Once all the many obstacles of its enormous bureaucratic and control apparatus have been overcome, the countries are not rushing so much in bidding and executing the amounts received. A slowdown that, according to some experts, already threatens to compromise the objectives of green growth in the reconstruction of the European economy.

These bad omens would only be that if it had not happened that other times the funds from Brussels they have remained in an accounting note that was never executed due to a lack of ability to bid for projects that really created value. And that is precisely what any saver who comes with his money in search of shares or funds in which to invest his capital is looking for.

More, if possible, if it is a professional investor who has a much more comfortable investment portfolio than the average retiree who goes to his bank to see where he can scratch an extra return for his pension. Here may be the key to some figures that a recent study prepared by the National Securities Market Commission (CNMV) has just brought to light.

At the end of last year, investment in funds labeled as sustainable in Spain reached 60.8 billion euros. a stud 66% attributable to products marketed by national banking groups. The same ones that in recent years have placed these funds at the forefront of their promotion and marketing campaigns.

Retailers are responsible for the overwhelming 86.8% of the investment deposited in sustainable funds in Spain

In any case, this data could lose significance if it is taken into account that the banking it continues to have a 74.6% share of the national fund market. This is indicated by the latest data provided by the specialized consultant VDOS, corresponding to the end of January this year.

What is striking when analyzing how open-minded the strong hands of the market move their portfolios is that only 13.2% of the volume of sustainable investment identified by the supervisor corresponds to products designed for institutional. Retailers are therefore responsible for the overwhelming 86.8% remaining in the total.

The publication of these numbers has practically coincided in time with the arrival of a study carried out by Spainsifthe Spanish Forum for Sustainable and Responsible Investment, which highlights that “the issues of good governance and transparency that investors take into account when selecting or excluding companies from their portfolios […] are equal to or more relevant than the environmental ones or social”.

In other words, a company acting according to the best governance standards is increasingly presented as guarantee of a green behavior in terms of profitability. And increasingly regardless of whether it operates in a greener or browner sector of the economy in terms of ecology.

To return to the Siemens Gamesa case, its management has recognized in the midst of the stock market storm that is falling about its actions that some of its latest technological launches were premature and were covered by too high business expectations. In the company’s own words: “Lack of risk versus benefit analysis”.

The machines that will build the shift to a green economy today run on fossil fuels

Without forgetting that the SDGs come to be an extension and reformulation of the many times failed Millennium Development Goals (MDGs)Investors seem to send a clear message that their trust goes first to those companies that work without stains on their file than to those that without harming the environment are more questionable in their day to day.

The search for the greenest fruits on the screens is, at the moment, paths alien to the purest ecology now that factories, trucks and power plants are running flat out to make up for time lost during pandemic-imposed shutdowns. The thermometer of global investor sentiment that is the Bank of America Managers Survey demonstrates this in its latest edition.

The famous painter Van Gogh, who he began his career in art as a dealer at the service of wealthy investors, he already said in a letter he addressed to his brother Theo in 1888: “I have tried to express the terrible human passions with red and green.” That’s what stock price screens around the world continue to do 134 years later.


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