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Investing in the Impending E-commerce Future

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Investing in the Impending E-commerce Future

The rise of e-commerce has been a long time coming, but the market’s progressive size and impact has caught many by surprise.

Tied initially to the advent of the internet and the Dot-com boom, online shopping saw companies like Amazon and eBay become well-known billion-dollar names. Digital commerce was a big market, but only for a few players.

Fast forward to today, and more companies than ever are launching their own marketplaces or embracing online retail. The shift was happening before COVID-19, but the pandemic has sped things up dramatically.

Today’s infographic from eToro highlights the increasing relevance of e-commerce in the modern economy and how investors can enter the market.

The Digital Marketplace Footprint

How big is modern e-commerce? While multiple sectors are experiencing their own online revolutions, retail is leading the way.

Total global retail e-commerce sales already numbered $3 trillion in 2018, and are expected to more than double to $6.5 trillion in 2023.

The increasing ease and security of online payments have encouraged many businesses to embrace B2C sales, especially in light of a pandemic that forced many brick and mortar stores to close. But less documented is the boom of digital marketplaces, which accounted for 57% of global online retail sales in 2019.

The biggest marketplaces are well-known leaders like Amazon and China’s Taobao and Tmall, but more and more companies are capturing a slice of the online distribution market.

Largest U.S. MarketplacesGross Merchandise Value
Amazon$339B
Ebay$90B
Walmart$49B
Wish$10B
Houzz$9B

Source: DigitalCommerce360

Walmart and Best Buy have both launched marketplaces for third-party product sales, with Walmart recently seeing a 79% increase of e-commerce sales alone.

The E-commerce Transformation

The growth of e-commerce in retail by itself is staggering, but its growing availability in other sectors is the bigger story.

Groceries and restaurants are a key marker, with home-delivery of takeout, groceries, and ready-to-prepare meal-kits all ordered digitally. Companies like Doordash, Just Eat, and Uber Eats have experienced massive growth, with Doordash positioning for a 2020 IPO, while grocery retailers including Walmart and Safeway are embracing delivery sales.

Online services are likewise rising in popularity, including everything from streaming services to virtual meetings, healthcare and assistance. Just as with the retail sector, e-commerce is making its way into sectors previously thought to be “un-digitizable.”

That type of transformation is usually slow, but the result of COVID-19 restrictions forcing thousands of businesses to go digital sped up the schedule. U.S. e-commerce penetration experienced 10 years of growth in the first quarter of 2020 alone.

YearU.S. E-commerce Penetration
201611.8%
201713.2%
201814.4%
201916.0%
2020 (Q1)33.0%

Source: McKinsey

A Widening Landscape for Future Growth

It might be hard to believe, but even with the headway made by e-commerce over the past year, the industry is slated for massive future growth.

One big reason is the rising demand for digital goods and services. As the global pandemic has reimagined virtual business, many companies have also come face-to-face with the decreased costs of operating remotely, while retailers are seeing higher margins by cutting out the distributor (or the lease).

At the same time, another massive shift is the increase in technological capabilities. Alongside the rollout of 5G, blockchain, and improved AI, companies are looking for tech to streamline their processes and keep customers online where possible.

That includes the use of drones for delivery by Amazon, augmented and virtual reality for product testing by Ikea and Wayfair, and improved payment platforms by Shopify.

While 100% online shopping is still a ways away from becoming a reality, the wave of e-commerce is set to continue rising.

How can investors take part?

eToro’s ShoppingCart CopyPortfolio* gives investors direct access to the e-commerce ecosystem.

Curated by experienced and proven investment teams, the thematic portfolio offers exposure to a broad range of online retailers and shopping stocks, with no management fees.

*Your capital is at risk.
CopyPortfolios is a portfolio management product, provided by eToro Europe Ltd., which is authorised and regulated by the Cyprus Securities and Exchange Commission.

CopyPortfolios should not be considered as exchange traded funds, nor as hedge funds.

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Decarbonization 101: What Carbon Emissions Are Part Of Your Footprint?

What types of carbon emissions do companies need to be aware of to effectively decarbonize? Here are the 3 scopes of carbon emissions.

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Scopes of Carbon Emissions Share

What Carbon Emissions Are Part Of Your Footprint?

With many countries and companies formalizing commitments to meeting the Paris Agreement carbon emissions reduction goals, the pressure to decarbonize is on.

A common commitment from organizations is a “net-zero” pledge to both reduce and balance carbon emissions with carbon offsets. Germany, France and the UK have already signed net-zero emissions laws targeting 2050, and the U.S. and Canada recently committed to synchronize efforts towards the same net-zero goal by 2050.

As organizations face mounting pressure from governments and consumers to decarbonize, they need to define the carbon emissions that make up their carbon footprints in order to measure and minimize them.

This infographic from the National Public Utility Council highlights the three scopes of carbon emissions that make up a company’s carbon footprint.

The 3 Scopes of Carbon Emissions To Know

The most commonly used breakdown of a company’s carbon emissions are the three scopes defined by the Greenhouse Gas Protocol, a partnership between the World Resources Institute and Business Council for Sustainable Development.

The GHG Protocol separates carbon emissions into three buckets: emissions caused directly by the company, emissions caused by the company’s consumption of electricity, and emissions caused by activities in a company’s value chain.

Scope 1: Direct emissions

These emissions are direct GHG emissions that occur from sources owned or controlled by the company, and are generally the easiest to track and change. Scope 1 emissions include:

  • Factories
  • Facilities
  • Boilers
  • Furnaces
  • Company vehicles
  • Chemical production (not including biomass combustion)

Scope 2: Indirect electricity emissions

These emissions are indirect GHG emissions from the generation of purchased electricity consumed by the company, which requires tracking both your company’s energy consumption and the relevant electrical output type and emissions from the supplying utility. Scope 2 emissions include:

  • Electricity use (e.g. lights, computers, machinery, heating, steam, cooling)
  • Emissions occur at the facility where electricity is generated (fossil fuel combustion, etc.)

Scope 3: Value chain emissions

These emissions include all other indirect GHG emissions occurring as a consequence of a company’s activities both upstream and downstream. They aren’t controlled or owned by the company, and many reporting bodies consider them optional to track, but they are often the largest source of a company’s carbon footprint and can be impacted in many different ways. Scope 3 emissions include:

  • Purchased goods and services
  • Transportation and distribution
  • Investments
  • Employee commute
  • Business travel
  • Use and waste of products
  • Company waste disposal

The Carbon Emissions Not Measured

Most uses of the GHG Protocol by companies includes many of the most common and impactful greenhouse gases that were covered by the UN’s 1997 Kyoto Protocol. These include carbon dioxide, methane, and nitrous oxide, as well as other gases and carbon-based compounds.

But the standard doesn’t include other emissions that either act as minor greenhouse gases or are harmful to other aspects of life, such as general pollutants or ozone depletion.

These are emissions that companies aren’t required to track in the pressure to decarbonize, but are still impactful and helpful to reduce:

  • Chlorofluorocarbons (CFCs) and Hydrochlorofluorocarbons (HCFCS): These are greenhouse gases used mainly in refrigeration systems and in fire suppression systems (alongside halons) that are regulated by the Montreal Protocol due to their contribution to ozone depletion.
  • Nitrogen oxides (NOx): These gases include nitric oxide (NO) and nitrogen dioxide (NO2) and are caused by the combustion of fuels and act as a source of air pollution, contributing to the formation of smog and acid rain.
  • Halocarbons: These carbon-halogen compounds have been used historically as solvents, pesticides, refrigerants, adhesives, and plastics, and have been deemed a direct cause of global warming for their role in the depletion of the stratospheric ozone.

There are many different types of carbon emissions for companies (and governments) to consider, measure, and reduce on the path to decarbonization. But that means there are also many places to start.

National Public Utilities Council is the go-to resource for all things decarbonization in the utilities industry. Learn more.

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The Paris Agreement: Is The World’s Climate Action Plan on Track?

This graphic shows how close we are to achieving the Paris Agreement’s climate action plan, and what happens if we fail to reach its goal.

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Climate Action Plan

Keeping Tabs on the World’s Climate Action Plan

When the Paris Agreement came into force in 2016, it was considered by many to be a step forward in the world’s climate action plan. In the five years that have followed, more and more countries have established carbon neutrality targets.

Has it been enough to keep us on track? This graphic from MSCI shows where we are in relation to the Paris Agreement goal, and what may happen if we fail to reach it.

What is the Paris Agreement?

The Paris Agreement is a legally binding international treaty that lays out a climate action plan. Its goal is to limit global warming to well below 2 degrees Celsius (3.6 degrees Fahrenheit), and preferably to 1.5 degrees Celsius (2.7 degrees Fahrenheit), compared to pre-industrial levels.

A total of 191 countries have solidified their support with formal approval.

Tracking Our Progress

To date, signing nations are not close to hitting the goal set five years ago.

ScenarioGlobal Mean Temperature Increase by 2100
Pre-industrial baseline0℃ (0℉)
Paris Agreement goal range1.5-2.0℃ (2.7-3.6℉)
Government pledges3.0-3.2℃ (5.4-5.8℉)
Current policies3.5℃ (6.3℉)

Source: UN Environment Programme

Based on policies currently in effect, we are on track for 3.5 degrees Celsius global warming by 2100—far beyond the maximum warming goal of 2 degrees. Even if we take government pledges into account, which is the amount by which countries intend to reduce their emissions, we are still far from achieving the Paris Agreement goal.

What about the impact of reduced emissions due to COVID-19 lockdowns? The temporary dip is expected to translate into an insignificant 0.01 degree Celsius reduction of global warming by 2050. Without significant policy action that pursues a more sustainable recovery, the UN Environment Programme projects that we will continue on a dangerous trajectory.

“The pandemic is a warning that we must urgently shift from our destructive development path, which is driving the three planetary crises of climate change, nature loss and pollution.”
—Inger Andersen, Executive Director, United Nations Environment Programme

The World Economic Forum agrees with this viewpoint, and identified climate action failure as one of the most likely and impactful risks of 2021.

The Potential Consequences

If we fall short of the climate action plan, our planet may see numerous negative effects.

  • Reduced livable land area: Due to rising sea levels and increased heat stress, low-lying areas and equatorial regions could become uninhabitable.
  • Scarce food and water: Global warming may increase water and food scarcity. In particular, fisheries and aquafarming face increasing risks from ocean warming and acidification.
  • Loss of life: The World Health Organization projects that climate change will cause 250,000 additional deaths per year between 2030 and 2050.
  • Less biodiversity: About 30% of plant and animal species could be extinct by 2070, primarily due to increases in maximum annual temperature.
  • Economic losses: At 4 degree celsius warming by 2080-2099, the U.S. could suffer annual losses amounting to 2% of GDP (about $100B). If global warming is limited to 2 degrees, losses would likely drop to 0.5% of GDP.

What steps can we take to reduce these risks?

Advancing Our Climate Action Plan

Everyone, including investors, can support green initiatives to help avoid these consequences. For example, investors may consider company ESG ratings when building a portfolio, and invest in businesses that are contributing to a more sustainable future.

In Part 2 of our Paris Agreement series, we’ll explain how investors can align their portfolio with the Paris Agreement goals.

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