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ESG will create financial bubbles just like the crypto banking body CEO says

ESG will create financial bubbles just like the crypto banking body

October 27, 2021:-Financial bubbles forming investors scramble to make deals in the sustainability space, according to Tim Adams, the president and CEO of the Institute of International Finance.

On Thursday, Speaking in a panel at CNBC’s Sustainable Future Forum, Adams said it was inevitable that the current drive toward ESG (environmental, social, government) would create assets that exceeded their fundamental value.

“There’s always bubbles, and it’s a lesson of history. The one who thinks we won’t have it is naïve,” he said.

“In times of great technological or economic transformation, there’s disruption; there are bubbles, we see it in the crypto markets now. We saw on the internet throughout the 1990s that all popped in March of 2000. And the weak firms were washed out, and new firms rose like a phoenix. Yes, there’s going to be bubbles; there’s too much money chasing too few deals.”

To have appropriate policies and a resilient financial system in place when the bubble comes out, Adams further said, would allow investment into promising firms in the space to keep going.

“We are going to intermediate all over the spectrum in terms of continuing to channel capital into these new technologies,” he said. “Some proved not to be viable, and some will prove to be viable firms we haven’t even heard of yet will be the coming Amazon or Tesla.”

According to a July report from the market research firm Fortune Business Insights, the global green technology and sustainability market, valued at $9.57 billion in the previous year, is expected to be worth $41.6 billion by 2028. Although, a report published in April by consultancy Roland Berger estimated that global environmental technology and resource efficiency revenues are set to reach 9.4 trillion euros by 2030.

Fiona Frick, CEO of asset manager Unigestion, told the panel that investors who look to capitalize on a green revolution should not be looking at the biggest names in the space today.

“It is not investing in the 10 or 20 companies that the leaders in renewable energy today, but it enlarges the scope of your investment to companies which are not trading at a premium because the market hasn’t yet realized that they are on a journey, and that can be visible perhaps in three to four years,” she said.

“The beauty of the climate revolution is the disruption that will influence every sector, but on every sector differently,” Frick added.

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