The anti-ESG brigade, the financial industry and Africa’s green potential

We are entering an interesting period in the debate on ESG and climate change.

Africa has the potential to help drive the green industrial revolution

On one side are the Holocaust deniers and the Anti-Awakening Brigade. Some of these people are high-ranking political leaders who can pass laws to “protect oil and gas interests.” On the other side are those who see the ESG opportunity, which include some of the largest financial services companies in the world.

Texas Governor Greg Abbott recently passed legislation that limits or prohibits state investments using ESG criteria when seeking to generate the highest returns. For example, Texas introduced two laws in 2021 that prohibit banks from “boycotting” oil and gas companies or “discriminating” against firearms in government contracts, according to one. Bloomberg report. Florida’s Ron De Santis has taken on the role of America’s “anti-awakening warrior,” wanting to make it illegal for Florida pension fund managers to even think about ESG.

Seems like a classic case of cutting off your nose to spite your face!

However, the financial industry is backing down, pointing out that in addition to being anti-capitalist, anti-public opinion and anti-positive for humanity, keeping ESG funds out of people’s pensions and investments could cost them a lot of money. According Bloombergreturns on ESG stocks have beaten those on fossil fuel stocks since 2014.

The financial industry is starting to tell politicians where to go.

According to Fed economist Ivan Ivanov and finance professor Daniel Garrett in their article Gas, weapons and governments, financial costs of anti-ESG policiesTexas’ anti-ESG legislation resulted in the “cold exit” of five of the state’s largest bond underwriters – Citigroup, JPMorgan Chase, Goldman Sachs, Bank of America and Fidelity Capital Markets – at a cost to taxpayers numbering in the hundreds of millions due to reduced competition and lack of access to “national bond distribution networks”.

I hope the finance industry is driven by people and planet goals rather than just profit, but once again it demonstrates why the finance industry really matters when it comes to driving a ESG program and, in particular, its importance in the climate change debate.

I wanted to explore potential ESG investments. I wondered what real money-making potential the anti-ESG and anti-awakening community might be missing through their legislation. That turns out to be a lot… which brings me to a conversation I had with Hubert Danso, CEO and Chairman of Africa Investor (AI), an Africa-focused institutional infrastructure investment platform.

According to Hubert, more than 30 countries have made net zero commitments and aspirations. This means that many in the investment community, particularly pension funds, sovereign wealth funds and institutional investors, view the climate agenda as possibly one of the best investment opportunities of a lifetime.

Ultimately, they want to invest in projects that can generate growth and good returns and therefore can have a very positive impact on the environment.

Hubert focuses on Africa. He explained that African climate-focused projects are now referred to as Nationally Determined Contribution (NDC) projects. These projects to which governments have committed as part of the COP process. Africa has $3 trillion in NDC projects to deliver by 2030.

To put this into perspective, the world has only been able to mobilize $2.8 trillion over the past 20 years for investments related to renewable and renewable energy from the year 2000 to the year 2020.

Africa has the Herculean task of mobilizing more in the next eight years than the world has been able to mobilize in the last 20 years, especially considering that of that $2.8 trillion, Africa only got 2%.

Africa has vast potential with lots of sun and wind. In February, I stood on the shores of the Red Sea in Egypt, facing west, knowing that I could walk 4,000 miles through the desert before reaching the Atlantic. That’s a lot of solar potential.

According to Hubert, Africa has 180,000 terawatt hours of technical wind capacity per year, enough to electrify the continent 250 times.

Marry that with the energy needs of the rest of the world. It is possible to see Africa as a net exporter of this natural capital. “It’s time for innovation, private sector thinking and mobilizing private capital,” says Hubert.

Hubert also talked about the African Green Infrastructure Investment Bank (based on a model borrowed from the UK, which created the UK Green Investment Bank when the government realized it did not have enough capital to to be able to finance the offshore wind market).

Work has begun with African governments to create this legal and regulatory framework to accomplish two essential things:

  • The ability to raise capital at scale.
  • The ability to deploy that capital quickly.

Africa has the potential to help drive the green industrial revolution, offering incredible investment opportunities. Structures are emerging that will provide the framework to ensure quality and control.

The belligerence of the anti-revival community could really mean missing out on this – a real world of opportunity!


About the Author

Dave Wallace is a user experience and marketing professional who has spent the past 25 years helping financial services companies design, launch and scale digital customer experiences.

He is a passionate customer advocate and champion and a successful entrepreneur.

Follow him on Twitter at @davejvwallace and connect with him on LinkedIn.

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