Sustainaweekly - Will labour shortages hamper the transition?
In this edition of the SustainaWeekly, we start off by assessing whether labour shortages in the Netherlands can hamper the government’s ambitious plans to reduce emissions by 60% by 2030. Unfortunately, our analysis suggests that this is a very real risk. While the labour market is very tight across the board (about 20% of vacancies are currently unfilled), this is even more true for climate professions. Between the end of 2021 and March 2022, the percentage of unfilled vacancies rose from 24% to 36%. We go on to look at why renewable energy equities have escaped the downward pull of higher interest rates, in contrast to other growth stocks. Finally, we present a review of ESG bond issuance in Q1, when we saw a break in the upward march of the market.
Economics Theme
We have looked at labour shortages in the Netherlands for professions that are important for the construction of a new energy infrastructure, the insulation of houses and the installation of solar panels. While the labour market is very tight across the board, this is even more true for climate professions, with a much higher proportion of unfilled vacancies. These shortages threaten to hamper the transition without more decisive action to train and retrain at scale.
Strategy Theme
Renewable energy companies keep trading at high P/E multiples. This breaks from the trends in other growth equities, which have been hurt by higher interest rates. This partly reflects that stepped up EU renewable ambitions have boosted the earnings prospects of equipment manufacturers. However, renewable power producers have less to gain from REPowerEU, while they also continue to trade at high multiples.
ESG Bonds
We conducted a review of ESG bond issuance in Q1. The remarkable growth trend of 2021 was not matched in the first quarter of 2022, partly reflecting broader market volatility. The issuance volumes of green bonds led the decline, followed by social bonds. In contrast, sustainability bonds and SLBs experienced a promising growth in issuance volumes in Q1. Issuance volumes of financials remained nearly unchanged, but corporates exhibited robust growth.
ESG in figures
In a regular section of our weekly, we present a chart book on some of the key indicators for ESG financing and the energy transition.