The future of inflation has a green hue

'Greenflation' is a recently coined term that has gained currency in the last quarter to denote the surprisingly powerful and potentially persistent knock-on effect of ESG in its widest societal sense, and especially of one of its key tenets, the energy transition.

Each of the 'ESG' constituents has the potential to be inflationary, at least in the short to medium term, in many cases due to temporal mismatches between the desire and ability to transition quickly. Examples of the S might include increased aggregate wage costs associated with closing the gender pay gap, increasing workplace diversity and ensuring fair pay and conditions for supply chains. Meanwhile, under G the costs associated with increased reporting and oversight have potentially inflationary consequences. Some of these additional costs will lead to an initial price adjustment, which...