Biden win boosts potential ESG boom

The ESG rhetoric of President-elect Biden is a marked improvement on his predecessor, but what will an American boom in ESG mean for New Zealand investors? John Berry and Steffan Berridge weigh in.

Wednesday, November 11th 2020, 6:00AM

by Daniel Smith

While the whole world has their eye on America, New Zealand investors are wondering what the global impact of President-elect Biden’s campaign promises for ESG investment will be.

Somebody at the forefront of New Zealand ESG investment is Pathfinder’s CEO, John Berry. Berry says that the biggest difference the Biden presidency will bring is “a change in climate change policy, especially with the US re-joining the Paris accord”.

In saying that Berry is uncertain that the change in leadership will have too much impact on local markets, saying that “New Zealand is affected by global trends anyway. The global trend is a bigger focus on ESG and driving down carbon emissions, and New Zealand is already a part of that trend. But what has happened in the US will certainly accelerate that.

“China as well has set some ambitious targets of carbon neutrality by 2050. What has happened in the US is not necessarily a game changer, but from a NZ perspective it is just going to keep pushing us in that direction.”

However, Nigel Green, chief executive and founder of UK-based deVere Group (which has an office in Auckland), says Biden’s administration will usher in an unprecedented boom for ESG.

“Joe Biden’s administration will usher in an unprecedented boom for Environmental, Social and Governance (ESG) investments for two key reasons.

“First, the next U.S. President – the CEO of the world’s largest economy – and his Vice-President Kamala Harris, actively championed on the election trail and before, values that have an inherent synergy with ESG-orientated investments.

“They campaigned on issues including climate change, social justice, equality, diversity, human rights and corporate transparency and accountability.

“On many issues, particularly those relating to the environment, the Biden administration is aiming to reverse policies established by Trump.

“Second, it is probable that US rules surrounding ESG investing and corporate disclosures will now come into line with those of Europe – something Trump fiercely opposed.

“If the rules on ESG investing are matched and agreed upon, and an international standard and framework brought in, we can expect further institutional investment piling into the ESG sector.”

Steffan Berridge, quantitative strategist at Kiwi Wealth thinks that a US ESG focus has gotten off to “an extremely bad start”, pointing to the recently announced Pfizer coronavirus vaccine which has meant a large profit boom for some non-ESG focused companies.

“While Biden has the White House and the republicans have the Senate, there’s a severe speed limit on what Biden can do. He is going to re-sign Paris, which is a major ESG item meaning there will be continued pressure on the oil and gas industry.”

But Berridge says that the changes Biden brings may not be severe, as they weren’t doing too badly under Trump. “Trump was a man of words but not of action. He promised to bring back coal, but he didn’t. He spoke out against renewable energy every chance he could, but for all that talk that isn’t really what has happened. Trump hasn’t been particularly bad for ESG investments, ESG has actually done really well under his presidency.

“I don’t expect things to change very much. While it is true that ESG could do a little better under a Biden presidency, I wouldn’t expect it to be a blowout.”

Berridge says that the main item of interest for New Zealand, if America prioritises ESG, is to work hard to keep their status as a world leader in responsible investment. “The NZ equity market for ESG investment is a full notch above the global average. But if US companies begin driving higher ESG outcomes, then we could see some impact happening at the margins of New Zealand investments.”

Tags: Kiwibank Pathfinder Steffan Berridge