Some ESG Talk.
Back in 2004, the United Nations invited the world to rethink how it invested. Its thesis was that a healthy business could only exist on a healthy, sustainably managed planet. A company’s commitment to environmental and social issues could tell you how it would perform. It termed this investing model “ESG”—Environmental, Social, and Governance.
ESG investing has gained popularity over the last decade. For some, it represents social responsibility, but for many, it is pure business.
Many critics globally have labelled ESG as part of a “woke capitalist agenda.” Elon Musk even claimed it was a scam when Tesla was removed from a significant index for not meeting social and governance standards. But always take what Elon or anyone else says with a grain of salt.
Debates about ESG have also intensified recently, with anti-ESG movements gaining traction. Some of this is because of ‘green-washing’.Instead of transforming their core processes to reduce their environmental impact—a difficult task—companies simply create an illusion of being green. This gives them a positive public image and helps them attract eco-conscious consumers and investors without any real hit to their bottom line.
Coca-Cola, for instance, is seen as faring well on ESG standards. Its bottling business Coca-Cola HBC, which bottles and sells drinks in 29 countries, has supposedly embedded sustainability into its business strategy since 2011. This definitely has helped the company’s image and attract investors and attain market differentiation by being sustainable. Yet, Coca-Cola increased its use of plastic packaging by over 6% in 2022, amounting to 3.43 million metric tons of plastic waste.
China halted hoarding gold!
Who doesn’t love gold? From home-makers to entire countries like China, everyone is keen on buying some. A homemaker might buy gold to flaunt or as a safe investment for a rainy day. China, on the other hand, has been aggressively buying gold for the past 18 months to hedge against economic uncertainties.
So, what are these uncertainties?
China is pushing for ‘monetary multi-polarization’, which means reducing reliance on the US dollar and decreasing the economic influence of Western powers like the USA.
China is trying to increase the worldwide use of the Renminbi (another term for Yuan). And it’s working; there has been a significant rise in the use of the RMB for international settlements. In March 2024, over half of China’s international payments were settled in RMB, surpassing the USD for the first time. This lets it reduce its US dollar reserves and strengthen its economic sovereignty and influence in global markets.
These efforts by China are also influenced by geopolitical tensions and their desire to reduce the risk of US financial sanctions. They could also be strategising to position the RMB as a major global currency.
Mind you, the US dollar is still the main global currency, but who knows? Change is inevitable.
Buying large amounts of gold is probably one of the ways China is preparing for its long-term plans.
Except now, China seems to have halted buying more gold.
Gold imports fell in April
Based on ordinary trades under HS code 7108 reported by China Customs, excluding exports.
Source: China Customs, World Gold Council
Data shows that China did not buy any gold in the last month. The reason for this halt could be the soaring gold prices. For all we know, it may resume buying as soon as the prices drop.
Nonetheless, it looks like bears reign over this metal for now.