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ESG investment framework, AOU is the stock to watch and … ASX continues to move sideways
8 minute read
A global regulatory framework for environmental, social and governance (ESG) investing is now urgently required, says Nigel Green the CEO of one of the world’s largest independent financial advisory and fintech organisations – deVere Group.
Major financial institutions are handling a massive uptick of inflows into the sector, but at the same time facing accusations of inconsistency in their approach to sustainable impactful investments.
“Environmental, social and governance investing is this decade’s ultimate investment megatrend – and it has been accelerated since the pandemic began,” Green says.
“There’s been a dramatic increase of inflows into the sector from both retail and institutional investors as it has become clearer than ever that human health is reliant upon healthy ecosystems; that we need to ensure the sustainability of supply chains; and that those companies with robust corporate governance and good business practice fare better in difficult times and are ultimately best-positioned for the future.
“The trend is unlikely to slow down in a post-pandemic world. Millennials, who are statistically more likely to seek responsible investment options, are set to become the major beneficiaries of the largest inter-generational transfer of wealth – an estimated $30 trillion over the next few years.
“In addition, recent research reveals that the majority of environmental, social and governance investments have outperformed their non-sustainable counterparts over the last year and have had lower volatility.
“This will only serve to attract more investors.”
Mr Green says that the regulatory landscape must reflect the situation of increasing demand.
“Regulators need to catch-up. Initiatives that began in the EU are now spreading worldwide, but much more needs to be done, at a faster pace and with a joined-up approach. There remains a startling lack of consistency in definitions and data.
“Considering the momentum of the sector, the time is now for the establishment of a global regulatory framework for ESG investing.”
Green says a regulatory framework will provide greater protections for investors looking for profits with purpose. This will in turn help to reduce ‘greenwashing’, which is where an investment or company gives an inaccurate impression over its green, socially responsible or corporate credentials.
“A robust standardised regulatory framework would make the sector even more attractive, which will then help investors reach their financial goals whilst proactively protecting people and the planet.”
ASX stock to watch
Auroch Minerals (ASX:AOU) has three nickel projects in Western Australia, one of the world’s richest regions for nickel sulphide: Nepean, Leinster and Saints.
The Nepean Nickel Project contains the historic high-grade Nepean nickel sulphide mine.
Nepean was the second producing nickel mine in Australia, producing just over 1.1 million tonnes of ore between 1970 and 1987.
This is where all of AOU’s recent action is taking place.
Last week, the company started a ground electromagnetic (EM) survey. EM surveys locate conductive bodies that may represent significant nickel sulphide mineralisation – once located, a company will drill down to where the conductor is modelled, and confirm the presence or otherwise of nickel.
This week, AOU identified a strong EM conductor, only 1km south of the historic Nepean Nickel Mine, and 250m below the surface.
The conductor response is typical of semi-massive to massive sulphides.
AOU has immediately moved to drill test this target, with a rig having just arrived on site.
The hole will be a 350-400m drill hole designed to intercept the modelled conductive plate at a down-hole depth of ~290 – 300m.
We should expect plenty of news to come from this in the near future.
The news was well received by investors, with the $63M capped company starting the week at 21 cents, moving as high as 24 cents before settling at 23 cents.
International stocks to watch
Each week we catch up with eToro analysts to see who’s made waves on the international front. Here’s Josh Gilbert’s take on Square and Moderna.
Square Inc. (NYSE: SQ)
Square announced its Q1 earnings of US$0.41 per share on revenue of US$5.06 billion, compared to analyst expectations of US$0.16 per share on revenue of US$3.33 billion.
Similar to its competitors, Square was truly a benefactor of the pandemic, as people turned to eCommerce platforms to meet and fulfil their shopping needs and desires. Square’s share price climbed more than 240 per cent during this period, as a direct result.
This surge of popularity has allowed Square to expand its offering, announcing in March 2021 that its industrial bank, Square Financial Services, has begun operations after completing the charter approval process. This move will enable Square to essentially become a one-stop-shop for businesses using their platform, and will provide huge growth potential if executed correctly.
We have continued to see significant traction from Square’s Cash App product. Not only has the company allowed users to deposit US stimulus cheques via the platform in March, but it has also granted them the ability to transact in crypto assets, which have soared in popularity over the past few months. Revenues illustrate growth of 266 per cent year-over-year, thanks in part to bitcoin, which produced USD$3.5 billion in revenue.
Square’s challenge moving into the future will be its ability to maintain this momentous growth, especially when trying to keep its competitors like PayPal at an arm's length.
We can also anticipate short-term prospects to be bright for Square, mainly due to consumer spending being on a rise in the US. Square’s seller ecosystem also demonstrates strong growth, with generated gross profit of $468 million, up 32 per cent year-over-year, which is likely to continue throughout 2021.
Moderna (NASDAQ: MRNA)
Moderna announced its Q1 earnings of US$2.84 per share on revenue of US$1.94 billion, compared to analyst expectations of US$2.47 per share on revenue of US$2.06 billion.
Moderna’s share price this year has already jumped 45 per cent, as vaccine sales boom. Its full-year guidance for vaccine sales has been raised to USD$19.2 billion, after sales of USD$1.2 billion this quarter.
The company plans to deliver 300 million doses to the US by July 2021, and if the roll outs are successful, vaccine orders could continue for many years. The European Commission is set to also be lining up a colossal 1.8 billion order, on top of this.
2021 is expected to be a pivotal year for Moderna, in terms of achieving future success. The company has been able to increase its cash flow enormously, now at US$8.2 billion, up 57 per cent from Q4. This will allow Moderna to expand its research operations and manufacturing capabilities. Investments in these areas will be essential for Moderna to keep pace with rival Pfizer.
The best and worst performing sectors this week
Materials is the best performer up over 2 per cent followed by the Financial and Energy sector, as both are up over 1 per cent. The worst performing sectors include Information Technology down over 8 per cent followed by Consumer Discretionary down over 1 per cent and Industrials down just under 1 per cent.
The best performers in the ASX/S&P top 100 stocks include QBE Insurance up over 9 per cent on good news of increased premiums followed by Reliance Worldwide Corporation up over 5 per cent and Insurance Australia Group up over 4 per cent.
The worst performing stocks include Appen, which has fallen over 25 per cent this week on news of a downturn in advertising. This stock is now down over 70 per cent since August of last year resulting in many retail investors suffering heavy losses. Afterpay is also down over 15 per cent while Altium is down over 12 per cent.
What's next for the Australian share market?
According to Wealth Within’s Dale Gillham, “In the 58 weeks since the COVID-19 low in March of last year, the Australian stock market has spent approximately 70 per cent of the time trading sideways combined with brief periods of very bullish upward movements. After breaking up again strongly in early April, the market has moved sideways over the past three weeks to be slightly down on where it closed four weeks ago.
“Normally, it would be reasonable to expect the bull run to continue and, as I have mentioned previously, my expectation was that the market would rise to around 7,600 point over the coming weeks into mid to late May. However, given the large decline in technology stocks this week, I think the only thing we can be certain of right now is that the market is uncertain and we need to be prepared for anything to occur.
“I still expect the All-Ordinaries Index to be mostly bullish throughout 2021 and while we may see it move down in the short term, I don’t expect this to be severe in either time or price. What is unfolding right now is a timely reminder that the market does what it does and we can only control when we get in or out. This is why it is very important to have an exit strategy to protect you