Why ESG Investing Might Never Recover
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    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,603,134 (+0.55%)       elbourne $989,193 (-0.36%)       Brisbane $963,516 (+0.83%)       Adelaide $873,972 (+1.09%)       Perth $833,820 (+0.12%)       Hobart $754,479 (+3.18%)       Darwin $668,319 (-0.54%)       Canberra $993,398 (-1.72%)       National $1,033,710 (+0.29%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $748,302 (+0.18%)       Melbourne $497,833 (-0.44%)       Brisbane $540,964 (-1.56%)       Adelaide $441,967 (-0.38%)       Perth $442,262 (+1.33%)       Hobart $525,313 (+0.38%)       Darwin $347,105 (-0.72%)       Canberra $496,490 (+0.93%)       National $528,262 (-0.02%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 10,189 (-104)       Melbourne 14,713 (+210)       Brisbane 7,971 (+283)       Adelaide 2,420 (+58)       Perth 6,383 (+298)       Hobart 1,336 (+6)       Darwin 228 (-12)       Canberra 1,029 (+8)       National 44,269 (+747)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 8,795 (-1)       Melbourne 8,207 (+293)       Brisbane 1,636 (+1)       Adelaide 421 (-4)       Perth 1,664 (+15)       Hobart 204 (-1)       Darwin 404 (-2)       Canberra 988 (+12)       National 22,319 (+313)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $800 (+$5)       Melbourne $600 ($0)       Brisbane $640 (+$10)       Adelaide $600 ($0)       Perth $660 ($0)       Hobart $550 ($0)       Darwin $700 ($0)       Canberra $690 ($0)       National $663 (+$2)                UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $750 ($0)       Melbourne $590 (+$10)       Brisbane $630 ($0)       Adelaide $490 (+$10)       Perth $600 ($0)       Hobart $475 (+$23)       Darwin $550 ($0)       Canberra $570 (+$5)       National $593 (+$4)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 5,364 (+80)       Melbourne 5,428 (+4)       Brisbane 4,002 (+12)       Adelaide 1,329 (+16)       Perth 2,113 (+91)       Hobart 398 (0)       Darwin 99 (-5)       Canberra 574 (+39)       National 19,307 (+237)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 7,687 (+257)       Melbourne 4,793 (+88)       Brisbane 2,098 (+33)       Adelaide 354 (-11)       Perth 650 (+5)       Hobart 135 (-1)       Darwin 176 (-9)       Canberra 569 (+14)       National 16,462 (+376)                HOUSE ANNUAL GROSS YIELDS AND TREND       Sydney 2.59% (↑)      Melbourne 3.15% (↑)      Brisbane 3.45% (↑)        Adelaide 3.57% (↓)       Perth 4.12% (↓)       Hobart 3.79% (↓)     Darwin 5.45% (↑)      Canberra 3.61% (↑)      National 3.33% (↑)             UNIT ANNUAL GROSS YIELDS AND TREND         Sydney 5.21% (↓)     Melbourne 6.16% (↑)      Brisbane 6.06% (↑)      Adelaide 5.77% (↑)        Perth 7.05% (↓)     Hobart 4.70% (↑)      Darwin 8.24% (↑)        Canberra 5.97% (↓)     National 5.84% (↑)             HOUSE RENTAL VACANCY RATES AND TREND       Sydney 0.8% (↑)      Melbourne 0.7% (↑)      Brisbane 0.7% (↑)      Adelaide 0.4% (↑)      Perth 0.4% (↑)      Hobart 0.9% (↑)      Darwin 0.8% (↑)      Canberra 1.0% (↑)      National 0.7% (↑)             UNIT RENTAL VACANCY RATES AND TREND       Sydney 0.9% (↑)      Melbourne 1.1% (↑)      Brisbane 1.0% (↑)      Adelaide 0.5% (↑)      Perth 0.5% (↑)        Hobart 1.4% (↓)     Darwin 1.7% (↑)      Canberra 1.4% (↑)      National 1.1% (↑)             AVERAGE DAYS TO SELL HOUSES AND TREND       Sydney 29.7 (↑)      Melbourne 30.9 (↑)      Brisbane 31.2 (↑)      Adelaide 25.1 (↑)      Perth 34.4 (↑)      Hobart 35.8 (↑)      Darwin 35.9 (↑)      Canberra 30.4 (↑)      National 31.7 (↑)             AVERAGE DAYS TO SELL UNITS AND TREND       Sydney 30.0 (↑)      Melbourne 30.5 (↑)      Brisbane 28.8 (↑)        Adelaide 25.2 (↓)       Perth 38.3 (↓)       Hobart 27.8 (↓)     Darwin 45.8 (↑)      Canberra 38.1 (↑)      National 33.1 (↑)            
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Why ESG Investing Might Never Recover

The appeal of the moniker is waning, probably because it is trying to serve too many interests at once

By JON SINDREU
Tue, Mar 26, 2024 7:00amGrey Clock 4 min

The ESG brand probably has its best days behind it.

Following a three-year craze for investment products focused on environmental, social and corporate-governance concerns, the percentage of newly created funds in the U.S. and Europe with ESG in their name has fallen from a peak of 8.3% to just 3.3%, according to an analysis of quarterly data by Morningstar Direct.

Likewise, online searches for “ESG investing” have plummeted back to mid-2019 levels, according to Google Trends. Mentions of the term in company analyst calls have dropped 59% from their quarterly peak in 2022, FactSet data suggest.

One explanation is the collapse of the clean-energy stocks most readily associated with the ESG movement. Flagging growth in electric-vehicle sales has hit sector behemoth Tesla . The S&P Global Clean Energy index, which lists solar-panel maker First Solar and Danish wind-turbine giant Vestas among its top constituents, has lost 31% since the start of 2023 as renewable-energy projects have been shelved. That compares with returns of 27% for global stocks.

The rise of ESG investing between 2019 and 2022 coincided with a surge in clean-tech valuations, and now the reverse is happening. Investors have pulled $2.2 billion from funds dedicated to decarbonisation since the start of the year, according to EPFR, and the outflows are getting larger every week.

There is a risk that ESG was an investment fad rather than a financial revolution extending across all industries.

The term was the product of an uneasy three-way alliance. On one side were ethically driven investors, who are particularly widespread in Scandinavia and include pension funds, universities and religious organisations united in wanting to shun contentious firms. On another were institutions such as the United Nations that aimed to channel money to industries that benefit society. Finally, there were investors who wanted to profit from the green revolution.

Asset managers jumped at the chance to cater to all three simultaneously. ESG allowed them to differentiate their products, revitalise the case for active management and, at a time of declining fees, charge more for stock screens that often lead to only small changes in allocations . Among U.S. equity funds, ESG strategies have an asset-weighted average fee of 0.52%, compared with 0.33% overall, Morningstar Direct data shows.

But the confusion of motivations made for contradictions and a lot of doublespeak. Neither ethical objectives nor bets on decarbonisation square logically with fund managers’ claims that ESG is a broad path to higher, safer returns.

Yes, an ESG focus can help active managers account for risks such as a regulatory backlash or governance blow up, which in some cases might be highlighted by new company disclosures. This month the European Union cleared the way toward requiring firms to better report and address sustainability impacts.

However, the assumption that integrating ESG criteria into their screening will lead to better stock picking seems flawed . The very popularity of ESG makes it unlikely that the market is under appreciating the risks. The rush of money into firms like Vestas, whose stock hit a price-to-earnings ratio of 534 in 2022, illustrates the risk that shares with high sustainability scores can get too expensive, leading to lower returns.

Ethical investors might be fine with this, but that just shifts the focus to what counts as ethical. Tellingly, interest in ESG has dropped more in the U.S., where the politicisation of EVs and culture wars surrounding Bud Light beer show how easily corporations can become ideological battlegrounds.

ESG ratings aren’t much help in navigating these issues. Different providers give wildly different scores to the same companies, even within the specific “E,” “S” and “G” factors, according to a February paper by the Leibniz Institute SAFE. Researchers also found that environmental concerns tend to explain most of the overall score.

This is another hint that the ultimate driver of the pandemic-era ESG craze might have been a hunger for thematic investment. It has since found better sources of sustenance, as demonstrated by the breakneck growth of firms such as Global X, which is delivering increasingly granular offerings such as tracker funds for electric batteries, cloud computing and ageing populations.

Buyers of these products can be fickle and jump to the next theme—often too quickly for their own good, a Morningstar analysis showed last November. It is possible that the overly generic ESG brand will never recover its appeal, with the different parts of it eventually rebranded to suit their specific client bases. BlackRock , the world’s largest asset manager, has already dropped it and is now emphasising transition themes over ethical stewardship of companies.

Sustainable investing isn’t going anywhere. But a broad tent covering too many interests serves none of them well.



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New research suggests spending 40 percent of household income on loan repayments is the new normal

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Requiring more than 30 percent of household income to service a home loan has long been considered the benchmark for ‘housing stress’. Yet research shows it is becoming the new normal. The 2024 ANZ CoreLogic Housing Affordability Report reveals home loans on only 17 percent of homes are ‘serviceable’ if serviceability is limited to 30 percent of the median national household income.

Based on 40 percent of household income, just 37 percent of properties would be serviceable on a mortgage covering 80 percent of the purchase price. ANZ CoreLogic suggest 40 may be the new 30 when it comes to home loan serviceability. “Looking ahead, there is little prospect for the mortgage serviceability indicator to move back into the 30 percent range any time soon,” says the report.

“This is because the cash rate is not expected to be cut until late 2024, and home values have continued to rise, even amid relatively high interest rate settings.” ANZ CoreLogic estimate that home loan rates would have to fall to about 4.7 percent to bring serviceability under 40 percent.

CoreLogic has broken down the actual household income required to service a home loan on a 6.27 percent interest rate for an 80 percent loan based on current median house and unit values in each capital city. As expected, affordability is worst in the most expensive property market, Sydney.

Sydney

Sydney’s median house price is $1,414,229 and the median unit price is $839,344.

Based on 40 percent serviceability, households need a total income of $211,456 to afford a home loan for a house and $125,499 for a unit. The city’s actual median household income is $120,554.

Melbourne

Melbourne’s median house price is $935,049 and the median apartment price is $612,906.

Based on 40 percent serviceability, households need a total income of $139,809 to afford a home loan for a house and $91,642 for a unit. The city’s actual median household income is $110,324.

Brisbane

Brisbane’s median house price is $909,988 and the median unit price is $587,793.

Based on 40 percent serviceability, households need a total income of $136,062 to afford a home loan for a house and $87,887 for a unit. The city’s actual median household income is $107,243.

Adelaide

Adelaide’s median house price is $785,971 and the median apartment price is $504,799.

Based on 40 percent serviceability, households need a total income of $117,519 to afford a home loan for a house and $75,478 for a unit. The city’s actual median household income is $89,806.

Perth

Perth’s median house price is $735,276 and the median unit price is $495,360.

Based on 40 percent serviceability, households need a total income of $109,939 to afford a home loan for a house and $74,066 for a unit. The city’s actual median household income is $108,057.

Hobart

Hobart’s median house price is $692,951 and the median apartment price is $522,258.

Based on 40 percent serviceability, households need a total income of $103,610 to afford a home loan for a house and $78,088 for a unit. The city’s actual median household income is $89,515.

Darwin

Darwin’s median house price is $573,498 and the median unit price is $367,716.

Based on 40 percent serviceability, households need a total income of $85,750 to afford a home loan for a house and $54,981 for a unit. The city’s actual median household income is $126,193.

Canberra

Canberra’s median house price is $964,136 and the median apartment price is $585,057.

Based on 40 percent serviceability, households need a total income of $144,158 to afford a home loan for a house and $87,478 for a unit. The city’s actual median household income is $137,760.

 

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