Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

ESG Flows Drive Clean Energy To Fresh Highs

By Chris VermeulenStock MarketsJan 04, 2021 06:55PM ET
www.investing.com/analysis/esg-flows-drive-clean-energy-to-fresh-highs-200549524
ESG Flows Drive Clean Energy To Fresh Highs
By Chris Vermeulen   |  Jan 04, 2021 06:55PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
SBUX
-2.67%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
XLE
-0.80%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

The Environmental Social Governance theme has taken the capital markets by storm in 2020. Fund flows into this space have been relentless, helping to drive the clean energy sector to fresh highs. In the first half of 2020, 23 new exchange-traded funds were launched under the ESG umbrella. By the end of the Q3, ESG index funds hit $250 billion in value. The ESG umbrella focuses on many different areas and has flourished during the pandemic. With a vaccine on the horizon, the question for investors is whether this sector will remain sustainable.

What is ESG and ESG Investing

The term brings to mind concepts like climate change, diversity and inclusion, and resource scarcity. While these are forms of ESG, it also covers social practices, including labor and talent management and data security and product safety. It includes employee experience, executive pay and ethics. There is a wide divide among stakeholders on what the term means and how to communicate and manage the concept.

ESG investing appears to be a derivative of socially responsible investing (SRI), which has been in existence for decades. While profits have always been considered the "mothers milk" of stocks, modern investors have realized that short-changing stakeholders is a high price for society to pay. A company's stakeholders include its employees, customers, suppliers, as well as the environment, which play a crucial role in the functioning of the corporation.

There is a fine line between ESG investing and SRI. ESG investors actively look for companies that show robust environmental, social or governance attributes. SRI focuses on excluding industries that have failed to demonstrate compliance in socially responsible areas. ESG provides broader flexibility into specific companies' practices and the different management attributes that make up a corporate initiative.

Inflows Into ESG Have Been Impressive

Inflows to ESG have been robust. ESG ETFs surged to $22 billion in the first half of 2020, which was more than three times the 2019 total, according to Bloomberg. One of the issues that regulators face is that there is no clear definition of what constitutes ESG.

The Concept Is Here To Stay

Some corporate actions show that ESG is here to stay. Stakeholders at public companies are getting assurances from management that their contributions will remain an essential aspect of management's focus. In 2020, Starbucks Corp (NASDAQ:SBUX) announced that the company would mandate anti-bias training for executives and tie their compensation to increasing minority representation in its workforce. Their diversity and inclusion mandate's target is to have 30% of corporate employees be minorities by 2025. While profits at any level are key, it's hard to imagine that an executive will allow their bonus to be eroded by failing to meet a corporate ESG mandate.

The Best Asset Now Process

I have mentioned this before and I have not wavered. I like to use a BAN strategy (Best Asset Now) to find leading sectors. Two ETFs have largely outperformed the rest that conforms to the ESG concept. These ETFs represent sectors that have shown leadership and are currently two of the top 5 best performing ETFs in 2020. These ETFs have generated bullish chart patterns that point to much higher prices following their recent breakouts.

There is a reason to be bullish. President-elect Joe Biden named former Secretary of State John Kerry to lead his administration's climate change efforts. Kerry will be the "climate czar" and will be in charge of coordinating programs that are expected to stretch across multiple agencies. This could include executive orders issued by the new President-Elect to provide avenues beyond Congress to advance climate priorities. This is positive news for clean energy ETFs. If you are a stock trader, these are the BAN ETFs to look at which will outperform.

TAN Hits Fresh Highs

The Invesco Exchange-Traded Fund Solar ETF accelerated to multi-year highs in November and is poised to test resistance near the 2011 highs at $91.70. This would add another 11% to its already robust 162% return in 2020. While prices could temporarily consolidate near this $92, a close above this level would lead to a test of the 2010 highs at $115. A close above $115 could lead to a test of the all-time highs near $307. Momentum is positive as the MACD (moving average convergence divergence) histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

Invesco Solar ETF.
Invesco Solar ETF.

PBW Invesco Exchange-Traded Wilderhill Clean Energy ETF (NYSE:XLE)

Has broken out and is poised to test the 2008 highs near $119.50. Support is seen near the 10-week moving average of $71.70. Momentum is positive as the MACD (moving average convergence divergence) histogram is printing in positive territory with an upward sloping trajectory, which points to higher prices.

XLE ETF
XLE ETF

ESG Flows Drive Clean Energy To Fresh Highs
 

Related Articles

ESG Flows Drive Clean Energy To Fresh Highs

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Notvery Goodathis
Peteymcletey Jan 04, 2021 11:05PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
"Clean"
Fabio falec
falec Jan 04, 2021 7:57PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
C'mon year and years they were trading peanuts as we were (and still we are) moving slowly away from non renewable sources. And, now, suddendly, in Pandemic, everybody is rushing to get a piece of cake in clean energy before that it,s too late? That's ridicolous!
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email