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How a Biden administration could boost ESG investing

Jefferies ESG Equity Strategist Lauren Puffer joins Yahoo Finance Live to discuss how a Biden administration could boost ESG investing.

Video Transcript

AKIKO FUJITA: Well, sustainable funds have attracted record inflows so far this year. Global inflows were up 14% in the third quarter alone. That's according to data from Morningstar. And those funds are expected to gain momentum under a Biden administration, with his focus on policies around systemic change.

Let's bring in Lauren Puffer. She is a Jefferies ESG equity strategist. And Lauren, it's good to talk to you.

When we talk about ESG, though, there are so many different portfolios that we allude to. So when we're talking about the potential for momentum to pick up as a result of the Biden policies, what specifically are you looking at right now? Is that really about renewable energy, solar, electric vehicles? What are you focused on?

LAUREN PUFFER: Hi, Akiko. Thank you for having me. I think, from our perspective, it runs the gamut. There are lots of different opportunities under a Biden administration for investment, not only in solar or wind but also in the entire infrastructure. And so there are lots of different plays that investors can have, when it comes to climate change, that aren't necessarily specifically tied to solar or wind.

So we think that there is a huge opportunity for lots of investors to get involved under a Biden administration.

- Yeah, I mean, you talk about solar, that's clearly one that's caught the attention of a lot of investors out there, just because-- you know, you can look at First Solar, up some 35% in the last two months. It's one of the ones that we've been seeing move on all this, as his odds have grown here to become the next president.

But when you look at some of the other issues out there, I think it's obvious he has already been talking about recommitting to the Paris Agreement as soon as he's in, proposing that zero emissions by 2050. There's reasons to be bullish on solar. But when you look at the flip side, and what some of these changes are going to do to weigh on some of the other sectors out there that might be a little bit more hesitant to embrace the change, how likely are some of those things to get pushed back? Think about adding up the costs of carbon emissions and other things that companies are now going to need to disclose.

LAUREN PUFFER: I think from a disclosure perspective, there is a little bit of a burden on companies to put that data together. And the data right now isn't great. So there is going to be a push, I think, for companies to have to disclose more information. And that might go across the board. So we might see the SEC actually put together material disclosure parameters that will enforce that disclosure across all different companies within the United States that trade.

And so we think that that will actually help to push forward an ESG agenda, because then companies of all types will have to be held to certain accountability standards for that disclosure.

AKIKO FUJITA: We have seen, to that point, a lot of larger companies increasingly disclose their footprints and impacts from climate change. But how should investors be looking at the regulatory risk? As we see governments increasingly sort of dip their toe, and really crack down on what specifically companies need to do in order to be in compliance?

LAUREN PUFFER: I think that we're in a really big moment of transition right now. And I think that the Biden administration will help to align what the United States is doing, especially from a disclosure perspective, and what companies are responsible in disclosing. And it will align a little bit more with what, you know, the European Union is doing, for example. And I think once we get that transition sorted, hopefully, then I think we'll be in a better place to look at what companies are able to disclose and the specificity of the data that will be presented to investors.

I think right now there is a big opportunity for certain investors that have been in ESG analysis for a number of years to really capture some alpha in that disconnect of disclosure, because they understand where those holes might be. But for the rest of the investment community who's still ramping up on the disclosure perspective, I think there is a little bit of a wait and see as to who wins out on that disclosure-- on those disclosure metrics.

And I think the companies are in the same place. Right now, there is a huge burden on the companies to follow multiple different standards. And so once that gets organized into one formal set of standards, I think that it will be a little bit easier for companies, even though there'll be a huge potential cost to figuring out what those disclosures are from a company by company perspective. I think it will actually help companies in the longer term.

I mean, it's a huge transition right now, and it's something that's a little bit unprecedented in the past few years, right? But I think it's something that will actually benefit the market as a whole.

- Yeah, when you're trying to unpack the "who wins out," obviously, we already talked about solar here. But when you talk about the changes that this administration might be able to put in place, you know, electric vehicles obviously caught a boost because there were vouchers out there for people that obviously made it cheaper for people to turn to some of those vehicles. So when you look at some of the actions that might come through here other than solar, I mean, are there other sectors you're watching that could catch a material boost here as, again, Joe Biden's been stressing jobs and really investing into some of these key ESG sectors.

LAUREN PUFFER: Yeah, I mean, $2 trillion is a lot of money to invest into a greener economy. So I think that it plays out in a number of different ways. I think, you know, as I mentioned before, there is the infrastructure side. There's transmission. There's storage. There is wind. There's offshore wind, which we don't really have yet, but it's a huge potential that's going forward as well.

And that's, you know, on top of what we might see in terms of hydrogen technologies across all different types of transportation, including, you know, commercial airlines, long-haul trucking, and then, as you mentioned, the electric vehicles as well. So-- and building a network for that is something that really needs to be in place before we can actually have a really firm structure in EV.

AKIKO FUJITA: Lauren Puffer, ESG equity strategist at Jefferies. It's good to talk to you today.

LAUREN PUFFER: Thank you so much for having me.