ESG will create bubbles and the next Amazon or Tesla: IIF

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Financial bubbles will form as investors scramble to strike deals in the area of ​​sustainability, according to Tim Adams, president and CEO of the Institute of International Finance.

Speaking at a panel at CNBC’s Sustainable Futures Forum on Thursday, Adams said it was inevitable that the current trend towards ESG (environment, social and governance) creates assets that exceed their core value. .

“There are always bubbles, it’s a history lesson. Anyone who thinks we won’t get one is naive,” he said.

“In times of great technological or economic transformation, there are disruptions, there are bubbles, now we see it in the crypto markets. We saw on the internet throughout the 90s that it all erupted in March. 2000. And weak businesses were swept away and new businesses rose like a phoenix. Yes, there are going to be bubbles – there is too much money for too few transactions. “

Putting in place the right policies and a resilient financial system when the bubble bursts, Adams added, would allow continued investment in promising companies in the space.

“We’re going to be a middleman across the spectrum in terms of continuing to channel capital into these new technologies,” he said. “Some will prove to be unsustainable and some will prove to be extremely viable – the companies we haven’t even heard of yet will be the next Amazon or Tesla.”

The global green technology and sustainability market, valued at $ 9.57 billion last year, is expected to reach $ 41.6 billion by 2028, according to a July report from the market research firm. Fortune Business Insights. At the same time, a report released in April by consulting firm Roland Berger estimated that global revenues from environmental technologies and resource efficiency are expected to reach 9.4 trillion euros by 2030.

Fiona Frick, CEO of asset manager Unigestion, told the same panel that investors looking to capitalize on a green revolution shouldn’t look to the biggest names in the space today.

“It’s not [about] invest in the 10 or 20 companies that are the leaders in renewable energy today, but expand the scope of your investment to companies that may not be trading at a higher price today because the market does has not yet realized that they are traveling, and it will show maybe in three or four years, ”she said.

“The beauty of the climate revolution is [it will be a] disruption that will influence each sector, but each sector differently, ”added Frick.

“So on the automobile, it will be the emergence of electric cars, on energy it will be a change in the way they produce energy, on [construction] this will be how they will produce a new type of cement. For every industry, there is a way to do business in a more sustainable way, so there are plenty of opportunities to play this theme. It shouldn’t be concentrated around 20 names. “

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