How sustainable is space travel?

15 Jul 2021 | Util partners with BNP's Manaos; ESG asset allocation concerns mount; net zero reaches tipping point (in more ways than one). Plus, space tourism has liftoff, forcing investors to ask difficult questions.

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🛁 The rising popularity of sustainable investments has led to rising valuations in large-cap growth (mostly tech) businesses. Diversification is key to avoiding bubbles, say guests on the latest FTAdviser podcast. We say the same.

💸 Don't expect ongoing ESG outperformance, echoes Wharton. "Conventional green stocks are expensive; dirty stocks, cheap” thanks to booming interest in environmental issues. And the more expensive a stock, the less price appreciation.

⚠️ How many warnings doth an indicator make? GPIF's Eiji Hirano and Robert Armstrong repeat: ESG is a bubble. Money has poured into few green assets and quality companies. No bad thing—but don't expect alpha without diversification.

💚 The EU has proposed a green bond framework to help it meet its 2050 net-zero goal. The news comes as countries hit nearly £100bn in green bond sales and the UK ramps up plans for its first green gilt and retail green savings bond.

🏭 Willis Towers Watson finds the investment industry is at tipping point, as $43tn, or half of global AuM, commits to net zero. But pledges are a lot of hot air without the right investments and divestments. They haven't moved the needle so far.

🚩 Investors, companies and governments have made ambitious commitments to reduce negative environmental impacts. But there’s a problem: Solutions will trigger bottlenecks for the resources and infrastructures on which they depend.

👥 Finance is on an ESG hiring spree. Senior roles in financial services have jumped 50% in a year, says the New Street Consulting Group, reflecting regulatory, customer and investor pressure to provide sustainable products.

📝 The UK’s FCA is preparing to tighten rules for sustainable funds, reports Responsible Investor. Working in partnership with the Treasury, the regulator plans to issue an announcement this month on a set of principles for fund labelling.

Util in the news

🚀 It's official: We're delighted to announce our partnership with BNP Paribas Securities Services’ ESG marketplace, Manaos: a platform designed for institutional investors to manage post-trade investment data. Read more about the partnership in Institutional Asset Manager, Finextra, ESG Today, and Global Custodian.

✍️ Writing for Investment Week, Patrick Wood Uribe explores the elephant in the (sustainable investing) room: asset allocation. Cheering outperformance sets a dangerous precedent when sustainable capital is focused in a concentrated basket of large-cap growth stocks.

📣 Do the Association of Investment Companies's new 'free-form' ESG disclosures solve the problem they were created to address? Speaking to Investment Week, Patrick Wood Uribe argues that three critical disclosure features continue to elude investors.

Virgin Galactic: Awesome. But not so sustainable.

On Sunday morning, Virgin Galactic (NYSE:SPCE, profiled above) CEO Richard Branson touched the edge of space, beating Blue Origin CEO Jeff Bezos's own escapade into suborbital space by nine days.

The journeys cap a race between billionaires Branson and Bezos to prove their companies are safe for commercial travel, paving the way for daily passenger trips by 2022. Amid the pandemic- and climate-related negative news of the last few months, finally a bright spot: space tourism has liftoff.

But is it a bright spot? The view from the mesosphere must be serene—assuming it's hard to see the raging wildfires and diminishing icecaps. Soaring 86km above a drought-hit New Mexico, it's unclear whether Branson had any of the epiphanies about the Earth's fragility and unity so often relayed by astronauts.

Aerospace technology is exciting. Burning the required fossil fuels to launch rockets 86km above the earth every single day: not so much. Rockets individually produce up to 150 times more CO2 per launch per passenger than aircraft.

That seems unlikely to bring investor excitement back down to earth. In a note, Morgan Stanley today observed that "investor interest in space, which just two years ago was as vacuous as space itself, today seems to be on a path to become as crowded as an orbital debris field."

Our analytics show the price of that enthusiasm. Virgin Galactic says emissions will be offset, but it's still an enormous negative climate impact for a few minutes in zero gravity.

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