Arms and oil triumph in the year in which sustainability falters |  markets

Arms and oil triumph in the year in which sustainability falters | markets

The war in Ukraine has been the great event in Europe in 2022 and it has burned the economy and financial markets. The catastrophe has had an unexpected consequence. In the midst of the booming era of socially responsible investing (SRI), oil and weapons have clearly emerged stronger from the conflict and this year its benefits and its value on the Stock Market skyrocket.

A good sample is offered by the figures of Aramco, the largest oil company on the planet. In the first nine months of 2022, its income was 474,455 million dollars (447,599 million euros), compared to 281,464 million in 2021. Its benefits, of 130,342 million dollars (almost 123,000 million euros), practically double those of the same period of the previous year. On the other hand, Aramco’s evolution on the stock market has not been as buoyant, although oil companies such as Exxon do show investor interest in this sector. There is an increase of 72% this year.

In reference to weapons, the Stockholm International Peace Research Institute (Sipri) recently published the evolution of the 100 largest manufacturers in the world in 2021. Already at that time, their sales had a value of 592,000 million dollars, 1.9% more than in 2020, its fifth consecutive year of rebounds. The center’s experts detail that a considerable increase in this business can be expected for years.

“As of the end of October 2022, the United States had supplied Ukraine with more than 900,000 standard artillery shells and 4,000 precision-guided. At the current rate of production (14,400 cartridges per month), it would take five to six years to replenish US stocks to previous levels. Due, The US has agreed with the manufacturers to increase the production rate to 36,000 cartridges per month.

European arms manufacturers also anticipate a substantial increase in the demand for military equipment due to the war. The German group Rheinmetall, which is up 140% on the stock market this year, has seen its orders double this year and he expects them to increase another 30% or 40% in 2023. The American giant of the aerospace and military industry Lockheed Martin appreciates another 35% this year.

The year has gone better for sectors considered politically incorrect from the point of view of responsible investment, sectors that had been reviled by many managers until now. Marijuana-related companies, which in the past enjoyed their particular rally, have been a great exception within the sectors of controversy. And firms linked to crypto assets, generally off the radar of ESG investing, are suffering a real hit this year. Way of the Cross.

Although there has been a setback before the progress of other sectors, to leave sustainable investing for dead and buried would be unrealistic. This is indicated by Fernando Ibáñez, general director of Ethics, a financial advisory firm. “Indeed, it has been a year in which the most polluting assets have performed well, but it is a temporary and mainly geopolitical issue. I don’t think it can be extrapolated to the long term. The whole trend is towards the reduction of fossil fuels. At a time of energy shock, undoubtedly, what is possible is reached and the priorities of companies change. If I have a ceramics factory and the price of electricity skyrockets and you have to choose between being sustainable or laying off employees, then surely that desire for sustainability will take a backseat”, reasons Ibáñez.

Sophie del Campo, head of Natixis IM in southern Europe and Latin America, agrees that Responsible investment is a phenomenon that will stay for the long term. “The war has forced the implementation of an emergency plan using non-clean energy, but I think that, beyond that, it has highlighted how fundamental it is for Europe to become autonomous in energy matters, to continue betting on clean energy ”, distinguishes.

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