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Moral Reality

Published on 30/03/2022

The decision to move towards green energy is a noble and good one. The decision to sanction Russia, too, a proportional one (perhaps). However, for years we have grown used to decisions without consequence. But there is always a price to be paid.

The question we will face in the coming weeks and months is what is our personal and moral cost? It's Environmental, Social and Governance (ESG) at its core.

So, what will the cost be - should it be environmental, social or governance? Or maybe a mix of all.

Environmental

If you can afford £2 a litre for petrol, great. Prices are now higher than those estimated by the producers of the apocalyptic Will Smith film I am Legend.

But what about your neighbour, a taxi driver. Maybe they can’t. What then? Or what about your uncle who lives in the middle of nowhere and heats his house with oil? That’s now a four-week wait, and double the cost of a year ago. Will he have to go cold?

Russia is the third biggest producer of oil in the world, behind the US and Saudi Arabia, with Russian imports accounting for 8% of total UK oil demand.

Of approximately five million barrels of crude oil Russia exports each day, more than half of that goes to Europe.

Will we allow coal to burn for a few more years while we build solar and wind? Will we push ahead with nuclear as the single most efficient provider of power today? Will governments press for resolution in Ukraine, face-saving for Putin, and re-open energy and food supplies? This last question remains to be seen.

But as for solar and wind, renewable energy has the potential to be a good long-term investment as development continues to accelerate. Companies in the renewables field are growing rapidly, despite higher raw material and transport costs hampering prices, leading Denmark's Vestas (VWS) and Siemens Gamesa (SGREN) to both recently cut their outlooks.

And as for nuclear energy, CNBC’s Jim Cramer recently marked Constellation Energy (CEG) as a safety pick among nuclear energy stocks "whose time to shine on Wall Street has finally come" as the US aims to ramp up its nuclear energy production.

Social

Under the social banner, we think of people, communities and rights. There are those further from home, those who have already been through so much. Those of a certain age will have the images of the Bosnian war, the AIDS crisis and Live Aid burned into our psyche. Can we allow that again?

More and more innocent lives are being torn apart in Ukraine and the situation getting more desperate by the day. And there are Russians who when opposing an unjust war are losing their jobs, homes and freedom.

Russia's propaganda machine, at times, seems like it is breaking down, but there is still a war being waged on phone screens.

Then there are the countries welcoming refugees from Ukraine. Since the Russian invasion, 4 million people have fled, with more than 2.3 million of them crossing the border into Poland, a country where recognised refugees have many rights, including temporary visas, a right to work, social welfare and education.

How many of those 4 million will decide to remain in the country that welcomed them as refugees? And if they stay, how will this affect labour markets? Could unemployment rise, or could we see it fall with the creation of millions of opportunities for companies and businesses to expand?

Governance

In governance, we think of how a company is run, and since the start of the invasion of Ukraine McDonald's, Starbucks, Coca-Cola, Apple, Netflix and many more have pulled trading in Russia. But there are still many listed Western companies that continue to trade.

Hacktivists Anonymous have waged their own war on the companies still trading, hacking their systems to leak sensitive information. In the case of Nestlé, they leaked a sample of data containing more than 50K business customers.

Should we be pulling our investments in these companies that chose to remain?

Choices to be made

In front of us all, there are choices. The choice for a cheap holiday to Spain, the choice for a supermarket jammed with food, the choice to continue investing in companies who are doing what they can to fight injustice.

As with everything ESG, there is a choice, and it's a personal one. What sits right with one investor may not sit well with another.

The cost — that’s different, and one we will face in the coming weeks and months. Personal and collective, moral and real.

A note to end on: Sometimes the best investments are ones you may never personally see a return on. There are a number of ways we can help support those caught up in the unfolding humanitarian crisis - both financially by donating money, as well as donating clothing and bedding or writing to your local MP. This article from the BBC highlights some of the organisations offering help.

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