This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla‘s (NASDAQ: TSLA) shareholders have endured some stomach-turning volatility in recent months. After surging to new all-time highs above $1,200 in early November, the electric vehicle (EV) company’s stock price plunged below $900 by late December. 

Tesla’s shares have clawed back most of those losses in recent weeks. Yet after seeing its stock whipsaw, many investors are still struggling to find the answer to an important question: Is the stock a buy today?

Two analysts put forth that it is. Here’s why.

Goldman Sachs analyst Mark Delaney is bullish on Tesla’s shares. On Monday, he reiterated his buy recommendation on the EV giant’s stock and boosted his price forecast from $1,125 to $1,200, or roughly 8% above its current price near $1,106.

Delaney believes Tesla’s stock represents the best way for investors to profit from the long-term growth of the electric vehicle market. He points to the EV titan’s strong fourth-quarter deliveries of over 308,000 vehicles as a sign that Tesla will continue to enjoy strong demand for its cars in the coming years. He also expects the company’s profit margins to improve as it scales its production.

Morgan Stanley analyst Adam Jonas is another Tesla bull. He sees the EV maker’s shares rising roughly 18%, to $1,300.

Like Delaney, Jonas cautioned investors to not overlook Tesla’s impressive fourth-quarter delivery figures. Instead, he believes two powerful takeaways can be gleaned from the report: Tesla is the undisputed EV leader, and it’s widening its lead over its rivals.

So, is Tesla a buy?

If Delaney and Jonas are correct, Tesla stands to benefit from the global shift to electric vehicles more than any other company. That would make its stock an attractive buy, and one that could reward investors handsomely in the coming decade. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Tesla stock is back above $1,100. Is the EV leader a buy? appeared first on The Motley Fool Australia.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and recommends Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Afterpay Ltd (ASX: APT) share price has failed to build on Wednesday’s gains.

In afternoon trade, the buy now pay later (BNPL) provider’s shares are down 1.5% to $75.80.

Why is the Afterpay share price falling?

The Afterpay share price is under pressure today following a pullback in the Block (previously named Square) share price overnight.

Yesterday Block received the final approval required to implement its takeover of Afterpay. This means that in a matter of days the Afterpay share price will no longer exist and will instead be absorbed into the payment giant.

The combined company will then have a secondary listing on the Australian share market under the SQ2 ticker code. It is due to commence trade on the ASX on 20 January on a deferred settlement basis before trading normally from 2 February.

Should you buy Afterpay shares before they convert to SQ2 shares?

One leading broker that appears to believe that investors should buy Afterpay shares now is Macquarie Group Ltd (ASX: MQG).

The note, courtesy of the Australian, reveals that its analysts feel there’s a buying opportunity here for investors. This is due to their belief that the Square share price is undervalued at the current level.

Macquarie commented: “APT’s share price should trade in line with SQ going forward and whilst the story is a bit more complicated now vs when the proposed acquisition was initially announced in terms of the BNPL operating environment, the potential impact to Cash App from waning government payments, and tech multiples coming in on higher rate expectations, SQ shares are still quite undervalued in our view.”

US growth slows

Though, it is also worth highlighting that Morgan Stanley estimates that the company’s growth in the key US market is slowing.

Yesterday’s note reveals that the broker estimates that Afterpay’s app downloads grew 10% year on year in December in the US. This was notably lower than its rivals. The broker estimates that Affirm’s app downloads grew 90% and Klarna’s grew 70%.

However, if Block integrates the Afterpay BNPL service into its Cash App in 2022, which has over 40 million active users, these lagging download rates won’t be much of a problem.

The post Are Afterpay (ASX:APT) shares a buy before they convert into SQ2 shares? appeared first on The Motley Fool Australia.

More reading

• Here’s why ASX 200 tech shares (ASX:XTX) outperformed today
• Why Afterpay, Appen, Liontown, and Nickel Mines shares are surging higher
• ASX 200 (ASX:XJO) midday update: Afterpay-Block deal approved, Fortescue downgraded
• Afterpay-Block takeover approved: Here’s what happens to your shares
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Afterpay Limited and Block, Inc. The Motley Fool Australia owns and has recommended Afterpay Limited. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Shares in Australia and New Zealand Banking Group Ltd (ASX: ANZ) are inching higher and now trade less than 1% in the green at $28.29.

After trading sideways for the best part of a year, the ANZ share price gathered support in December in line with broad sector strengths and fund flows into ASX financial shares.

Despite this, analysts covering the ASX financials universe at JP Morgan reckon that ANZ will deliver the weakest credit growth amongst all the banking majors in 2022.

In its report covering the outlook of the ASX financials sector in 2022, the broker highlighted that ANZ might be in for some challenges with this key growth metric. Here are the details.

Will ANZ lag its peers in credit growth?

Firstly, in its assessment of the market mechanics for 2022, JP Morgan expects that overall Australian housing credit growth should slow in 2022, given “building headwinds” and a shifting interest rates regime.

The broker notes that most banks have already begun increasing their fixed lending rates. Not only that, but the firm says that APRA is likely to apply more macro-prudential authority, which it thinks “will likely target highly indebted borrowers (i.e. debt-to-income > 6x)”.

Not only that, but housing affordability seems “increasingly stretched” given the level of house price growth in 2021, placing further stress on first-home-buyer demand.

Yet, despite these challenges to the sector, JP Morgan anticipates the majors will “grow their housing books at 5.5% in FY22 (based on system growth of ~7%), while non-housing will be slightly weaker at ~4%”.

Yet, it also notes that credit growth rates between the banking majors are unlikely to be even in FY22. The firm reckons that Commonwealth Bank of Australia (ASX: CBA) will lead the pack in terms of credit growth, forecasting circa 7-8% in housing and non-housing credit growth for FY22, followed by National Australia Bank Ltd. (ASX: NAB) at around 5–6%.

However, the firm expects that ANZ is poised to deliver the weakest credit growth in FY22 across both divisions, “particularly given its issues in Australian housing”.

The firm forecasts around 3% housing credit growth in FY22 for the bank and around 2% non-housing credit growth for the same period.

But it’s not all doom and gloom for the banking giant, says JP Morgan. The broker reckons the compressed growth should shift and then “build towards improved growth in FY23 as it focuses on turnaround times”.

It notes ANZ’s language from 2021 on relevant guidance for the upcoming year, where the bank says “at some point in the second-half, we should be growing in line with our major bank peers”.

Looking out to FY23 and FY24, the broker sees a mild recovery in ANZ’s credit growth, but still lagging most of its peers in that regard.

JP Morgan remains neutral on the direction of the ANZ share price but values the company at $30 per share.

ANZ share price snapshot

In the last 12 months, ANZ has gained 17% after climbing another 3% in the past month alone.

Shares have started the year well and have pushed 3% higher since January 1.

The post ANZ (ASX:ANZ) will lag other majors on this key growth metric in 2022 says top broker appeared first on The Motley Fool Australia.

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• Is Westpac (ASX:WBC) going to be the best big 4 bank for dividends in 2022?
• Could this impact the performance of ASX 200 banks more than interest rates in 2022?
• These were the top 5 ASX 200 bank shares in 2021
• Why is the ANZ (ASX:ANZ) share price having such a fab Friday?
• Here’s why CBA (ASX:CBA) shares have the lowest big four bank dividend right now

The author has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Fortescue Metals Group Limited (ASX: FMG) share price is continuing its rebound on Thursday.

At the time of writing, shares in the iron ore behemoth are swapping hands for $21.40, up 2.47%. For context, the S&P/ASX 200 Index (ASX: XJO) is 0.34% higher in afternoon trade.

The Fortescue share price is still a long way off its 52-week high of $26.58. The share price reached this level in late July when iron ore prices were touching record highs of US$220 per tonne.

Let’s take a closer look at what could be behind the optimism for ASX-listed Fortescue today.

Bad weather constrains Brazil’s iron ore supply

Like any other commodity, the price of iron ore is the product of a supply and demand equation. To the delight of Fortescue shareholders, the output of that equation is looking more favourable for suppliers today.

After retreating to nearly US$90 per tonne in November 2021, iron ore prices have sprung back to life. At present, the price of the steel-making commodity is fetching about US$131.60 per tonne. This places iron ore at a 3-month high — but what’s behind this new momentum?

According to S&P Global, torrential rainfall across Minas Gerais in southeastern Brazil has disrupted iron ore mining operations. Moreover, miners — including iron ore giant Vale — have announced halts across their sites.

Considering Brazil is China’s second-largest iron ore supplier, its production can have significant implications for the iron ore price.

The potential benefit to Fortescue has ASX investors bidding up the iron ore juggernaut today.

Notably, Fortescue’s Pilbara-based mines are continuing their operations, which means the company can capture the higher commodity pricing.

However, commodity analysts are closely monitoring the other side of the pricing equation — demand. The Omicron COVID-19 variant could still impact demand for iron ore in China. Although, Mysteel Research & Consulting is forecasting China’s demand to hold firmly.

Broker’s take on Fortescue share price on the ASX

Recently, analysts over at Citi downgraded Fortescue based on its valuation. In a note, the broker placed a sell rating on Fortescue with a share price target of $17.20. This would suggest a potential downside of nearly 20%.

The Fortescue share price has performed strongly already this year. Fortescue shares are up 7.8% on a year-to-date basis.

The post Fortescue (ASX:FMG) share price up amid rainy days for Brazilian iron ore appeared first on The Motley Fool Australia.

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• Why this top broker says the Fortescue (ASX:FMG) share price is overinflated

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Liontown Resources Limited (ASX: LTR) share price is again on the rise today. This comes after the company’s CEO weighed in on the future supply of lithium in the market.

At the time of writing, the lithium developer’s shares are 3.68% higher at $1.69 apiece, having earlier reached as high as $1.75. They also gained 5.16% yesterday.

What did Liontown’s CEO say?

Investors are continuing to drive up the Liontown share price amid comments from the CEO this week.

In the Australian Financial Review on Wednesday, Liontown CEO Tony Ottaviano played down concerns over a lithium supply glut. Some analysts are forecasting an oversupply of spodumene concentrate which could put pressure on the future spot price of lithium.

However, Mr Ottaviano dismissed the outlook by analysts and noted the difficulties for smaller companies entering the lithium space. He said while many lithium players are promising spodumene concentrate production by next year, this is not possible if they have not significantly progressed in their operations.

On average, it takes a company between five to seven years to bring a mine from the exploration phase to production.

In addition, acquiring exploration permits and managing supply chains takes time which can further delay unlocking lithium deposits.

Liontown, on the other hand, has been advancing its wholly-owned Kathleen Valley project located in Western Australia’s north-eastern Goldfields region.

A binding offtake agreement with premier global battery maker, LG Energy Solution was announced yesterday, which resulted in a surge in the Liontown share price. The deal will see the supply of up to 150,000 dry metric tonnes (DMT) per annum of spodumene concentrate from 2024.

To put this into perspective, the Kathleen Valley project is anticipated to have a start-up production capacity of 500,000 DMT. The deal represents almost one-third of the entire initial output. The Liontown share price soared on the announcement.

Construction at the mine is set to commence in the second quarter of 2022. Once completed, it would be one of Western Australia’s largest lithium mines.

Liontown share price snapshot

It has been a sound 12 months for the Liontown share price, rising by more than 330% during that period.

The company’s shares reached an all-time high of $1.995 in November, and have since moved in a sideways channel.

Liontown commands a market capitalisation of roughly $3.72 billion, with approximately 2.18 billion shares on issue.

The post Liontown (ASX:LTR) share price leaps again as boss dismisses lithium supply glut concerns appeared first on The Motley Fool Australia.

More reading

• Here are the 3 most heavily traded ASX 200 shares on Thursday
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• Why Afterpay, Appen, Liontown, and Nickel Mines shares are surging higher
• ASX 200 (ASX:XJO) midday update: Afterpay-Block deal approved, Fortescue downgraded
• Here’s why the Liontown (ASX:LTR) share price is rocketing 13% higher

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) is on course to record a decent gain. In afternoon trade, the benchmark index is up 0.35% to 7,464.4 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are dropping:

BWX Ltd (ASX: BWX)

The BWX share price has crashed 16% to $3.65. This follows the surprise announcement of the exit of the personal care products company’s CEO, Dave Fenlon. According to the release, Mr Fenlon will be replaced by the company’s COO, Rory Gration, from 1 March. Mr Fenlon will remain on the board as a non-executive director.

PolyNovo Ltd (ASX: PNV)

The PolyNovo share price is down almost 10% to $1.66. This appears to have been driven by profit taking after a very strong gain on Wednesday. The medical device company’s shares jumped 28% yesterday following the release of a trading update.

Sandfire Resources Ltd (ASX: SFR)

The Sandfire share price is down 1.5% to $6.92 after being downgraded by analysts at Goldman Sachs. According to the note, the broker has downgraded the copper producer’s shares to a sell rating with a $6.10 price target. Goldman made the move on valuation grounds and execution risks with the Botswana/Motheo copper mine.

Sonic Healthcare Limited (ASX: SHL)

The Sonic share price is down 5% to $41.42. This may be a delayed reaction to Credit Suisse downgrading the healthcare company’s shares to a neutral rating with a $46.50 price target on Wednesday. The broker suspects Sonic’s earnings may have peaked in the first half as COVID testing now gives way to rapid antigen testing. In addition, Credit Suisse notes that the company is battling staff shortages due to the rapid spread of Omicron.

The post Why BWX, PolyNovo, Sandfire, and Sonic shares are tumbling today appeared first on The Motley Fool Australia.

More reading

• BWX (ASX:BWX) share price sinks 14% on leadership news
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• Here’s why the PolyNovo (ASX:PNV) share price is jumping 13% today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended POLYNOVO FPO. The Motley Fool Australia has recommended BWX Limited and Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) is having another pleasant day so far on the ASX boards this Thursday. At the time of writing, the ASX 200 is up a healthy 0.34% at 7,464 points.

But let’s take a closer look at what the markets are up to today by checking out the ASX 200 shares currently topping the share market’s volume charts, according to investing.com.

3 most traded ASX 200 shares by volume this Thursday

Liontown Resources Limited (ASX: LTR)

Our first ASX 200 share up today is miner Liontown. This lithium explorer has had a significant 16.08 million of its shares change hands thus far this Thursday. Liontown has seen a pleasing jump in its valuation today, having risen 3.37% at the time of writing to $1.68 a share after going as high as $1.75 (up more than 6%) earlier this morning. Additionally, we also got a notice out of the company this morning that its ongoing share purchase plan will be extended until 28 January. It’s this combination of events that has likely resulted in this elevated trading volume.

Telstra Corporaiton Ltd (ASX: TLS)

ASX 200 telco Telstra is our next share up today. So far, a hefty 16.71 million Telstra shares have found their way into a new pocket. The Telstra share price has done a bit of bouncing around thus far this Thursday. It’s currently sitting at $4.20 a share after rising as high as $4.32 and as low as $4.16 during today’s session. Further, we also got an update regarding Telstra’s upcoming half-year earnings results this morning. These two factors are probably the smoking gun behind so many shares shifting places thus far.

Pilbara Minerals Ltd (ASX: PLS)

Our final and most traded ASX 200 share this Thursday goes to Pilbara Minerals. This lithium producer has watched as a notable 21.21 million of its shares have been bought and sold so far today. With no news or announcements out of this ASX share today, we can probably assume this high trading volume is the result of the healthy share price appreciation Pilbara has enjoyed this Thursday. The company is presently up by 3.21% at $3.70 a share after hitting a new record high of $3.81 earlier today.

The post Here are the 3 most heavily traded ASX 200 shares on Thursday appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy today
• Own Telstra (ASX:TLS) shares? Here’s what you need to know about next month’s earnings report
• ASX 200 (ASX:XJO) midday update: Crown jumps, miners rally, Sonic sinks
• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX shares today

Motley Fool contributor Sebastian Bowen owns Telstra Corporation Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a large number of broker notes this week.

Three ASX shares brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Iluka Resources Limited (ASX: ILU)

According to a note out of Goldman Sachs, its analysts have added this mineral sands producer’s shares to their conviction buy list with a $12.40 price target. Goldman made the move in response to its attractive valuation, compelling Zircon and TiO2 price upside, and rare earth growth potential. The broker also highlights the recent release of a larger-than-expected maiden resource on the Wimmera rare earth and zircon deposits in Victoria. The Iluka share price is trading at $11.15 on Thursday afternoon.

Select Harvests Limited (ASX: SHV)

A note out of Citi reveals that its analysts have retained their buy rating and $9.00 price target on this almond producer’s shares. The broker believes Select Harvests is well-placed to benefit from tough operating conditions for its rivals in the United States. In addition, Citi points out that weather conditions haven’t been favourable in California this month, which could be a positive for almond pricing. The Select Harvests share price is fetching $5.82 today.

Telstra Corporation Ltd (ASX: TLS)

Analysts at Ord Minnett have retained their buy rating and lifted their price target on this telco giant’s shares to $4.85. According to the note, the broker remains very positive on Telstra’s outlook and continues to expect increased profitability and productivity gains from its fixed business. In addition, it sees opportunities for further asset monetisation, which could support increased dividends. The Telstra share price is trading at $4.20 this afternoon.

The post Top brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

More reading

• Own Telstra (ASX:TLS) shares? Here’s what you need to know about next month’s earnings report
• Here are the 3 most heavily traded ASX 200 shares this Wednesday
• Is the Telstra (ASX:TLS) dividend going to grow in 2022?
• Broker names 2 ASX dividend shares to buy in January
• 4 reasons the Telstra (ASX:TLS) share price could be great value

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Today has been an eye-opening day for gas prices, potentially putting question marks around energy producing shares such as Santos Ltd (ASX: STO).

Overnight, U.S natural gas futures soared more than 14%, with CNBC reporting the increase was due to predictions of cold weather in parts of North America.

But that might just be the start of it. Experts from Wood Mackenzie have tabled their predictions for gas prices in 2022, declaring the year could bring “a moment of truth” for supply and demand of the energy source.

As Santos is Australia’s biggest supply of natural gas, those invested in the company’s shares might want to keep an eye on the commodity over the coming months.

Here’s what Wood Mackenzie recommends to look out for.

Could gas prices weigh on shares like Santos?

Demand for gas in 2022 is expected to be “resilient” according to the experts.

However, investments in renewables and batteries might increase, putting a ceiling on demand for the commodity.

Additionally, the team at Wood Mackenzie predict gas’ place in the energy transition might be questioned if prices remain high.

Political tensions, weather, and climate concerns could all see gas prices surge this year. And one of the biggest sources of drama could be the European Commission.

The experts predict that a new proposal outlining if projects can be labelled “transitional investments” in the European Union (EU) could help to boost the finances of gas producers this year.

The proposal is intended to help finance the EU’s carbon reduction objectives. So far, the EU has stated that gas projects can be classed ‘transitional’ if their emissions are below 100 grams per kilowatt hour.

According to Wood Mackenzie, that means only plants with carbon capture and storage capabilities would fit within the framework.

Those who own Santos shares may already know that it’s working to create a carbon capture and storage project, named Moomba, in outback South Australia.

It’s also recently partnered with the CSIRO to work on carbon capture technology.

Though, unabated gas-fired power plants might also be classified as ‘transitional’ if they’re commissioned before 2030. But such classifications are unlikely to be a cure-all. Wood Mackenzie’s report states:

Supporters of this latest version argue this will be necessary to help countries reduce coal capacity and build resilience as power systems shift towards renewables.

On the face of it, whether unabated gas-fired plants will be defined as “transitional investments” in the EU taxonomy could be a moment of truth for the global gas industry. Financial and non-financial investors would be able to increase their corporate “green scoring” by investing in gas, including outside Europe… But the EU recognition of gas power plants as a transitional investment is no panacea for the gas industry. Gas prices will need to come down to accommodate increased investments in gas use.

What else could move gas prices in 2022?

Fortunately, Wood Mackenzie believes that gas prices could be on a downward trajectory, but only if Russia’s Nord Stream 2 pipeline is commissioned.

It noted that its possible gas storage inventories will have dropped below 15 billion cubic metres by April. While prices might fall at the end of winter, the need to fill the storage deficit will be significant.

The pipeline between Russia and Germany might be the only way to fill storage inventories. But tensions between Russia and Ukraine could stall its commissioning.

Another happening that will likely impact demand for gas is potentially obvious. That is, the weather. The experts commented:

Normal winter weather, including in Asia, and visibility on Nord Stream 2 commissioning would push prices down, although demand for storage (and high carbon prices) will maintain prices above US$15 per metric million British thermal unit. But cold winter weather in Europe and Asia alongside continued uncertainty about commissioning of Nord Stream 2 could see prices increase further throughout 2022.

Finally, Wood Mackenzie predicts that LNG oil-indexated contracts could rise by as much as 12% on a weighted average basis.

Though, it noted that contracts starting before 2025 will likely attract premiums, while those starting after could be priced lower.

The post Is the ‘moment of truth’ coming for gas shares like Santos (ASX:STO)? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Own Santos (ASX:STO) shares? Here’s the outlook for oil prices in 2022
• 5 things to watch on the ASX 200 on Monday
• These were the best performing ASX 200 shares last week
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Ethical investing is a thematic that has been growing in popularity as environmental concerns reach a tipping point. However, as we take our first steps into 2022, there are concerns festering among the ESG investing community.

On one hand, it’s a major positive to see investment banks pouring capital into companies geared towards a sustainable future. Meanwhile, the incentives for bad actors to disingenuously appeal to environmentally conscious investors has never been as high.

This creates a challenge for investors to navigate within the ESG investing landscape.

A wolf in sheep’s clothing

The risk posed to investors has caught the attention of Australia’s corporate regulator. In December, the Australian Securities and Investments Commission’s (ASIC) commissioner Cathie Armour warned that publicly listed companies could encounter ‘enforcement action’ in situations where climate risk details have been fudged.

Moreover, the warning is not the only one of its kind across global markets. In the European Union, a group of investors have been pushing back on the labelling of natural gas investments as ‘sustainable’. This followed the drafting of a climate-friendly investing rule book, of sorts, by the European Commission to define gas and nuclear investments as green.

In a similar fashion, a study conducted by the University of California and nonprofit As You Sow, found a weak correlation between ESG branded exchanged-traded funds (ETFs) and their ESG rating.

As You Sow CEO Andrew Behar commented:

We see funds with ESG in their names getting F’s on our screening tools because they hold dozens of fossil fuel-extraction companies and coal-fired utilities

Importantly, this highlights the risk to hopeful ethical investors. While at face value it may appear an ESG investment, it might really be a case of greenwashing.

The green side of ESG investing in 2022

It’s not all doom and gloom for the green investing niche in 2022. Currently, the issue around potentially deceptive ESG reporting is due in large to the lack of standards. However, that could be set to change with the development of new guidelines by the International Sustainability Standards Board.

In contrast to the current loose framework, the ISSB will be looking to introduce a set of standardised metrics. The hope is this will lessen the grey area where greenwashing and vagueness can take place.

Another positive for ESG investing is the growing adoption among institutional investors. For example, IFM Investors — which is owned by 23 Australian industry super funds — has hit a milestone on its green ambitions. The firm’s private equity segment has become the first in Australia to reach carbon neutrality.

Indeed, 2022 could be an interesting year for ESG investing. Excitement remains high in the likes of lithium, hydrogen, and other ‘green’ alternatives.

The post It’s not easy being green: A look at ESG investing in 2022 appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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