The scoop BlackRock’s Larry Fink warns CEOs that the risks associated with climate change will compromise returns without reallocation of capitol, calling for potentially the biggest divestment in finance history.
Why it matters BlackRock, the world’s largest asset manager, pledges to divest from fossil fuels and coal, increase investment transparency, and promote firm accountability throughout their sustainable transition.
Bottom line Though his letter is a step in the right direction, it merely foreshadows the significant changes yet to come. Executives will either embrace innovation today or be overshadowed by forward-thinking leaders.
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The scoop The price of crude oil plummeted following the outbreak of the novel COVID-19. As 2020 began, Brent crude oil - the global oil benchmark - cost $64/barrel. By April 21st, 2020, the price had dropped to $17/barrel. What happened?
Future of Oil
- The volatility and steep decline in oil prices may lead some producers to shut down operations. Shale oil extraction pioneer Chesapeake Energy recently declared bankruptcy. Many oil giants are delaying expansion projects.
- Investors are now less inclined to invest in oil & gas -- lower prices = greater risk, less profit. Energy was the worst performing sector in the S&P 500 index for four out of the last six years.
Environmental impact Climate awareness already poses a threat to Big Oil. With this economic crisis, investors might turn to renewable energy. Renewables are more price stable, cheap, and cost-competitive, even during low prices of oil.
Bottom Line It’s impossible to predict the future. Big Oil will certainly survive the pandemic, but its century-long domination of energy may soon end. One thing’s for sure -- clean technology has a strong outlook, and can certainly give oil and gas companies a run for their money. Not only from its greenness, but also in its economics.
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What to know Sustainable investing allows you to implement your core values while increasing your profits. ETFs, Index Funds, and Roboadvisors are a good place to start.
Four main approaches
- Exclusionary screening - avoiding investment in companies or sectors that do not align with investor values.
- ESG integration - rating companies based on their implementation of Environmental, Social and Governance principles.
- Thematic investing - focusing investments according to interest in specific themes, for example clean energy.
- Impact investing - investing in companies or funds with the intention of generating impact alongside a financial return.
Bottom line -- Sustainable investing not only offers you a way to invest according to your values, but it also provides good financial performance and potential risk mitigation.
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Why it matters
- The program failed to exclude big businesses and smaller firms in good standings from receiving the low-interest loans as part of the PPP.
- Small businesses received little to no help through the program.
- A large number of big businesses and small firms that received funding through PPP experienced financial hardship long before the COVID-19 crisis, according to an Associated Press Investigation.
Corporations facing backlash
- Several large beneficiaries have decided to return the loans received through the PPP.
- The LA Lakers, Kura Sushi USA and Sweetgreen have returned loans they received through PPP.
Between the lines
- Small business owners and executives found the PPP process of application ambiguous and confusing.
- The Small Business Administration and Treasury Department had given businesses that wrongfully received loans till May 7th to return funds.
- Corporations and small businesses that received over $2 million in loans will be audited and criminally prosecuted if found guilty of financial wrongdoing.
- Publix announced that it will purchase excess milk and food produce from farmers and donate it to Feeding America food banks.
- Eateries such as Ho Foods and Roku have been feeding healthcare workers through fundraisers, while using their own resources too.
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Big picture In the age of corporate social justice, sustainability risk management can help firms make better choices for the planet while staying competitive.
Why it matters
- Identify the effects of sustainability issues on internal and external stakeholder value.
- Actively include sustainability in objective setting and cascading objectives across the levels of the organizational hierarchy.
- Develop concrete support for identifying, assessing, and managing economic sustainability risks.
Bottom line Sustainable risk management is the most effective and realistic strategy for creating a sustainable economy, as it allows companies to achieve the best of both worlds: financial success and climate risk mitigation.
The scoop: Amsterdam has adopted the Doughnut Model as a tool for transformative action in the city’s post COVID-19 economy
What to know: Kate Raworth’s Doughnut Model combines social and ecological perspectives to achieve sustainable economic growth beneficial for both society and the planet
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