The year 2022 will be forever marked as the time deglobalization really started. With the war waging between Ukraine and Russia, nations started to look at their dependency on other countries, primarily in the technology and energy areas. Nations starting to pick sides. This movement is making it necessary for the government to invest in their energy infrastructures, which means they will be preferring cheaper alternatives. Unfortunately, environment-friendly energy is not the cheapest option.
Europe is facing an energy crisis given it is facing a dilemma on whether to pay money to Russia with fears of it fueling the war against Ukraine or importing more natural gas to prepare for the coming winter. It is not a pretty place to be in, stuck between those two options. In situations like this, it is not important but necessary for the government to kick start their energy sources that were deemed not best for the environment previously, in the short term at least.
When nations start competing with each other in the race to energy independence, it is not in their budget’s best interest to spend large sums of money on emission-free energy sources given their large initial requirement of infrastructure to support it. Rather, it will be best to be spent on the military and their domestic production. These actions will be especially attractive to their voters. But the grim reality is still there, our impact on the ecosystem will be increasingly negative. It will truly test the government’s resolve to balance their short-term security needs and the long-term solution to climate problems. I hope I am wrong about all of this but it is not looking too bright for ESG investing in the upcoming decade.
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