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ESG funds — investments that use environmental, social and governance factors to evaluate companies — have just weathered a turbulent 2022. These funds were also able to perform in line with the general market and attract new capital. This bodes well for the future of responsible investing. .
what’s happening: Russia’s war in Ukraine has forced traders to reconsider investing in certain energy and arms stocks. This increased scrutiny has also influenced political differences around ESG investing, opening the door to vocal criticism.
Responsible investment funds also faced strong economic headwinds. These funds’ heavy investment in technology stocks and the lack of energy stocks (which were the only positive sectors last year) led to notable losses across his ESG funds last year.
Energy was the best-performing market sector in 2022, gaining around 66%, while the broader technology sector lost 28%.
Still, sustainable investments produced returns similar to the market. Morningstar’s U.S. Sustainability Index fell 18.9% in 2022. The S&P 500 is down his 19.4%.
According to Refinitiv Lipper data provided exclusively to Before the Bell, ESG funds attracted positive investment flows globally, even as funds were drawn from a wider range of funds.
Hedge funds and other institutional investors sold stocks and held cash instead. Goldman Sachs reported that the fund increased its cash holdings to about 2.5% of its total portfolio last fall. This is one point higher than at the end of last year and the highest level since early 2020.
However, ESG inflows continued to be strong, especially internationally. ESG accounted for his 65% of all flows to European ETFs in 2022, according to Morningstar data.
To the point: “The overall conclusion from 2022 is that while ESG products have delivered more stable inflows and finished the year in positive flow territory, there is a broader range,” said Robert Jenkins, Lipper’s global head of research. The fund market had negative overall flows for the year.” “This is a good sign that, despite some questions and debates about ESG, underlying trends are intact through one of the most challenging investment markets of our generation.”
No free lunches, no trillion dollar platinum coins. But both are fine.
This supercoin idea is popular as a hypothetical solution to the US debt problem as the US hits its self-imposed debt ceiling again and faces the possibility of default.
Here’s an idea some Biden administration officials and Democrats are floating around. There are vague laws that allow the U.S. Treasury Department to mint and distribute platinum coins of any denomination. The Treasury said he could mint $1 trillion worth of coins and deposit it with the Federal Reserve (Fed) so the government could continue to pay its bills.
Sounds easy, right? Experts disagree. Economists say this drastic method of avoiding a default would shake confidence in the dollar and the U.S. Treasury just as much, if not more, than an actual default. Adding $1 trillion to the U.S. economy out of nowhere could also fuel inflation.
This weekend, Treasury Secretary and former Fed Chairman Janet Yellen put kibosh on the $1 trillion coin plan, explaining that the Federal Reserve is unlikely to accept it.
“It’s never taken for granted that the Fed would do that. I think there’s something in particular gimmicky about it,” she said in an interview with The Wall Street Journal on Sunday. We don’t have to accept … it’s up to the Fed to decide what to do.”
The real impact: Yellen on Friday told CNN’s Christiane Amanpour that the impact of a default will be felt by all Americans.
“If that happens, the cost of borrowing in the United States will go up, and all Americans will find that the cost of borrowing goes up, too,” Yellen said. “Besides, failure to make timely payments, whether it’s bondholders, social security recipients, or the military, could undoubtedly cause a recession in the U.S. economy and a global financial crisis. ”
The dire warnings of the debt ceiling are nothing new, reports my colleague Alicia Wallace. Lawmakers have reached agreement in the past, and according to Yellen’s public estimates, Congress now has some time to reach agreement on whether to raise or suspend the debt ceiling.
Brazil and Argentina are preparing for a new common currency, according to an article written by Brazilian President Luis Inacio Lula da Silva and Argentine leader Alberto Fernandez.
“We intend to overcome exchange barriers, simplify and modernize rules, and encourage the use of local currencies,” Argentine website Perfil said in an article published this weekend.
“We also decided to advance discussions on a common South American currency that could be used for both financial and commercial flows, reducing cost operations and external vulnerabilities,” they said.
Lula also mentioned the idea of a common currency during his campaign, and politicians from both countries discussed the idea in 2019, but it was rejected by Brazil’s central bank.
Argentina’s December inflation rate was 94.8%.