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Global Ethical
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Commentaries
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Companies Leading on Disability Inclusion
Outperform Peers. "Accenture, in
partnership with Disability:IN and the American
Association of People with Disabilities (AAPD), has
released 'Getting to Equal: The Disability Inclusion
Advantage.' This report looks at both the disability
practices and financial performance of 140 companies
over the past four years... Companies that 'embrace best
practices for employing and supporting more people with
disabilities in their workforces' are several times more
likely to outperform their peers financially."
[COMMENTARY] This
is a pioneering and worthy study. It might also be true
that employees with disabilities feel they have to prove
themselves and so are more productive. Hence,
forward-looking companies know this and so increasingly
employ individuals with disabilities? Thus, such
employment is not out of charity.
Companies Leading on Disability Inclusion Outperform
Peers, by Megan Amrich, November 20, 2018,
TriplePundit, USA.
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Are ESG Ratings the New Credit Rating for
Stock Prices? "A new MSCI study of ESG
ratings finds they have a similar impact on share prices
as do credit ratings."
[COMMENTARY] Though
to me the findings are unsurprising, this is the first
study to demonstrate that ESG ratings have a similar
impact to credit ratings on a company's stock price.
This finding will no doubt be challenged, but comes at a
time when investors everywhere are looking at the
inclusion of ESG criteria in their investment research.
It bodes well for the mainstreaming of ESG!
Are ESG Ratings the New Credit Rating for Stock Prices?
By Ginger Szala, November 19, 2018, ThinkAdvisor, USA.
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From upstream to mainstream: ESG at a tipping
point. "In a year's time, the percentage of
Millennials expressing a high level of interest in ESG
investing jumped from 26% to 35%, advisers say, while
the percentage of Gen Xers embracing ESG spiked from 16%
to 25%. This is more than a generational story,
however... Twenty-six percent of ultra-high-net-worth
investors now show a high level of interest in ESG
investing, advisers say, up from only 10% in 2017.
Similarly, interest among very-high net worth investors
shot from 13% to 19% in a year's time."
[COMMENTARY] These
results are from a US survey of 300 advisors. The jump
in numbers over just one-year is impressive. Somewhat
interesting is that its regular advisors reporting the
rapid growth. Calvert was involved too.
From upstream to mainstream: ESG at a tipping point,
November 15, 2018, by IN Research and Calvert,
Investment News, USA.
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Green finance: a contrarian take.
"Renaissance’s argument thereafter is that, even if
emerging markets have far lower ESG scores, directing
capital their way allows for the highest overall rate of
improvement, and so the greatest ethical utility. This
is, unsurprisingly, an argument for more investment in
EM."
[COMMENTARY] The
argument presented here is like the idea of investing in
companies who are just beginning to engage in ESG
seriously to take advantage of their possible rapid
stock price as they're identified as a potential 'high'
ESG company. It's recognized by many investors that high
ESG scoring companies also now have a premium to their
stock prices.
Green finance: a contrarian take, by Thomas Hale,
November 15, 2018, FT Advisor, UK.
-------------------------------------------------------------
S&P 500 Firms Expand Sustainability Data in
Financial Filings, But Slow to Adopt Fully Integrated
Reporting. "78 percent of S&P 500 companies
issue a sustainability report... Among companies that
issue sustainability reports, 95 percent offer
quantified, annually comparable environmental
performance metrics; two-thirds set quantified and
time-bound environmental goals. Some 86 percent offer
social performance metrics, but only 40 percent set
quantified social goals."
[COMMENTARY] Many
companies may not acknowledge climate change, but they
know that demonstrating an interest in it and providing
some metrics is good for their stock prices. There's
still the issue that most companies issuing
sustainability reports don't have that data
independently verified and audited. That being said,
we're seeing great progress in such reporting!
S&P 500 Firms Expand Sustainability Data in Financial
Filings, But Slow to Adopt Fully Integrated Reporting,
press release, November 14, 2018, IRRC Institute, USA.
-------------------------------------------------------------
Research Links Financial and Corporate
Sustainability (ESG) Performance. "Based on
642 North American sustainability reports for the 2017
reporting period, CSE created a unique analysis
framework. It identifies correlations between
Sustainability (ESG) performance and Financial results."
[COMMENTARY] The
press release gives little information on their
findings. However, you can
download for free the report by providing your
contact information. What quickly stood out for me in
the report is the abysmal use of external auditors for
ESG data in GRI reports.
Research Links Financial and Corporate Sustainability
(ESG) Performance, press release, November 6, 2018,
Center for Sustainability and Excellence, USA.
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Clean finance needs to include traditionally
‘dirty’ industries. "We need mechanisms
that finance climate-friendly projects, not only for
solar panels and transit tracks, but also for a massive
transition in carbon-intensive industries. The federal
[Canadian] government’s expert panel on sustainable
finance shares that view, and in October endorsed
“transition-linked financial products” to help channel
green investment to high-emitting industries."
[COMMENTARY] The
transition to a zero carbon future must include ways in
which carbon-intensive industries can finance their
transition to becoming 'greener.' With carbon-intensive
industries forming so much of the Canadian economy, it's
timely and necessary that Canada is a leader in this
endeavour. This is a very promising development.
Congratulations to all those involved.
Clean finance needs to include traditionally ‘dirty’
industries, by Toby Heaps and Annette Verschuren,
November 4, 2018, The Globe and Mail, Canada.
-------------------------------------------------------------
Big data, ESG ratings help find alpha.
"This has fundamental implications for how chief
sustainability officers and business leaders work with
the broader ecosystem. The higher price of corporate
sustainability poses a challenge for ESG investors: they
need to ask if they are getting good value for money. It
is not only a matter of the value of corporate
sustainability anymore, it is also a function of the
price you are paying for it. Value for price is key."
[COMMENTARY] Harvard
Business School professor George Serafeim continues his
outstanding research on ESG investing. As we see in the
above quote, in his latest paper,
"Public sentiment and the price of corporate
sustainability,” Professor Serafeim shows that the
stock prices of companies with higher ESG scores
frequently trade at premium
prices--and therefore ESG-ethically oriented investors
need to tread carefully to obtain alpha.
Big data, ESG ratings help find alpha, by George
Serafeim, November 2, 2018, Top 1000 Funds, USA.
-------------------------------------------------------------
US SIF Foundation Releases 2018 Biennial
Report On US Sustainable, Responsible And Impact
Investing Trends. "The US SIF Foundation's
2018 biennial Report on US Sustainable, Responsible and
Impact Investing Trends, released today, found that
sustainable, responsible and impact investing (SRI)
assets now account for $12.0 trillion—or one in four
dollars—of the $46.6 trillion in total assets under
professional management in the United States. This
represents a 38 percent increase over 2016...
... Assets in mutual funds reached $2.6 trillion,
up 34 percent over 2016, and the number of ETFs more
than doubled from 25 to 69."
[COMMENTARY] Continued,
extraordinary growth seen in US institutional assets
screened with assorted ESG criteria. Interestingly, the
growth in retail ESG funds roughly parallel’s that of the
equivalent Canadian sector.
US SIF Foundation Releases 2018 Biennial Report On US
Sustainable, Responsible And Impact Investing Trends,
press release, October 31, 2018, US SIF Foundation, USA.
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Does ethical investment withhold capital from
those that most need it? Charlie
Robertson of Renaissance Capital, an investment bank,
reckons ESG risks becoming code for something else: an
excuse for investors to put all of their money in
Scandinavia. Prosperous havens rate highly on the
criteria ESG investors employ. By contrast, the emerging
economies that interest Mr Robertson do badly."
[COMMENTARY] This
is an interesting argument, particularly regarding
government debt. However, the case could be made that
poorly performing governments would be encouraged to
perform increasingly better on ESG related parameters to
gain lower cost funding. It would also help to improve
the quality of life for such countries' citizens.
Does ethical investment withhold capital from those that
most need it? October 25, 2018, The Economist, UK.
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Canadian RI Assets Surpass $2 Trillion:
Canadian RI Trends Report. "$2.13 trillion
in RI assets under management (AUM); 41.6% growth in RI
AUM over a two-year period; RI represents 50.6% of
Canada’s investment industry, up from 37.8% two years
ago; Retail RI mutual fund assets increased from $8.26
billion to $11.07 billion, or 34% over two years."
[COMMENTARY] Canadian
responsible investing continues momentous growth with
institutions. Retail sales growth at 34% is good and
growing significantly faster than the 20% in mutual fund
assets in those two years between 2015 and 2017.
Canadian RI Assets Surpass $2 Trillion: Canadian RI
Trends Report, press release, October 24, 2018,
Responsible Investment Association, Canada.
-------------------------------------------------------------
BlackRock stakes claim on ‘sustainable
investing’ revolution. "Fink forecasts such
ETF assets will rise from $25bn to over $400bn in a
decade... 'We are going to see evidence over the
long term that sustainable investing is going to be at
least equivalent to core investments. I believe
personally it will be higher,' Larry Fink."
[COMMENTARY] Larry
Fink is restating what was obvious to me some forty
years ago--that ESG, ethical, sustainable investing,
no matter how you describe this 'values' approach to
investing, would inevitably become
mainstream. It's great news to see the chairman and CEO
of the world's largest asset manager arriving at this
conclusion too.
BlackRock stakes claim on ‘sustainable investing’
revolution, by Peter Smith, October 22, 2018, FT,
UK.
-------------------------------------------------------------
Only 6% of Older
Investors Are Familiar With ESG Investing: Survey.
"Only 40% of investors older than 60 were familiar with
values-based investing, compared with 84% of
millennials, and a mere 6% of senior investors knew what
environmental, social and governance investing involved,
versus 80% of millennials."
[COMMENTARY] These
are unsurprising results. There are more interesting
findings in this survey of particular interest to
advisors.
Only 6% of Older Investors Are Familiar With ESG
Investing: Survey, by Michael Fischer, October 19,
2018, ThinkAdvisor, USA.
-------------------------------------------------------------
2018 Disruptive ETF
Virtual Summit Live Update: ESG Investing Poll [among
financial advisors] Shows Mixed Results.
"ESG investing is still looking to gain more broad
acceptance from investors as the space continues to
expand with a greater outreach... Very interested and
want ESG compliant portfolios--23.6%; Want ESG compliant
portfolios but only if there is no extra cost--33%."
[COMMENTARY] Nothing
new here, but further confirmation that interest in ESG
is gaining among financial advisors.
ESG Investing Poll Shows Mixed Results, by Ben
Hernandez, October 18, 2018, ETF Trends, USA.
-------------------------------------------------------------
Ethics & Trust in
Finance Prize. "It aims to encourage
high-quality management of banking, insurance and
financial services based on trust and integrity.
Launched in 2006 and now in its 7th Edition, the global
competition for the Prize for Innovative Ideas for
Ethics & Trust in Finance is open to young people, aged
35 years or younger, from throughout the world.
The Prize has won
recognition from the International Monetary Fund [IMF],
which co-hosted the award ceremony for the 5th edition
of the global Ethics in Finance Prize... CFA, Euroclear
and Swift/Swift Institute are actively supporting the
Prize and promote it to their staff and members and the
wider financial services industry.
Ideas for Ethics & Trust in
Finance [Prize] is open to young people, aged 35 years
or younger, from throughout the world... The deadline
for handling in the final paper is set to 31 of May
2019."
[COMMENTARY] I
have supported this prize since its inception and highly
encourage anyone eligible to participate!
Ethics & Trust in Finance Prize.
-------------------------------------------------------------
[UK] Investors unwilling
to sacrifice profit for ethics. "The VCT
provider surveyed 250 individual investors aged between
40 and 80 with household earnings of £125,000. Albion's
research found just 30 per cent of those surveyed would
be willing to sacrifice some investment return in
exchange for pursuing a more socially responsible
investment strategy. A total of 43 per cent said they
would consider using SRI Investment products."
[COMMENTARY] Note
the age and income with respect to the surveyed group.
This demographic generally appears less interested in
SRI than younger cohorts.
Investors unwilling to sacrifice profit for ethics,
by David Thorpe, October 15, 2018, FT Advisor, UK.
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Canada's Responsible
Investment Week, October 22-26. I encourage all
Canadian investors to participate. For all events, click
here!
-------------------------------------------------------------
Regulators are Taking a
Tougher Stance on ESG Disclosure a New Study Reveals.
"In the last three years alone Environmental, Social
and Governance (ESG)-related regulations - grew by more
than 100 percent across the United Kingdom (UK), The
United States of America (US), and Canada, indicating
that ESG regulatory landscape is evolving fast... ESG
issues require mainstream attention."
[COMMENTARY] ESG
issues have become mainstream in the investment world
and in most industries. Regulators are playing catch-up.
Regulators are Taking a Tougher Stance on ESG Disclosure
a New Study Reveals, press release, October 11,
2018, Datamaran, UK.
-------------------------------------------------------------
Half of [UK] advisers
talk about SRI with millennials. "More than
half of advisers are very likely to recommend a
sustainable and responsible investing (SRI) fund to
millennials, according to the latest FTAdviser Talking
Point poll."
[COMMENTARY] This
is promising. These advisors might just find many of
their older clients are interested too!
Half of [UK] advisers talk about SRI with millennials,
by Saloni Sardana, October 10, 2018, FT Advisor, UK.
-------------------------------------------------------------
Which Countries Have the
Most Sustainability-Focused Companies?
"Morningstar's sustainability atlas rates the stock
indexes of 46 countries for sustainability, ESG and
carbon risks."
[COMMENTARY] This
fascinating new approach to finding companies with a
sustainable orientation could interest many investors.
Which Countries Have the Most Sustainability-Focused
Companies? By Bernice Napach, October 8, 2018,
ThinkAdvisor, USA.
-------------------------------------------------------------
7 Myths About
Millennials and Investing, Busted. "The
FINRA Investor Education Foundation and the CFA
Institute have just released a new study that should
probably be required reading for any advisor wanting to
attract millennial clients."
[COMMENTARY] The
study finds millennials are overconfident about their
financial affairs and wary of the financial industry,
among many other points of interest to investment
professionals. Full report
here.
7 Myths About Millennials and Investing, Busted, by
Bernice Napach, October 5, 2015, ThinkAdvisor, USA.
-------------------------------------------------------------
Advisers Slow to Respond
to ESG Investing Demand. "'Providing
advisers with materials that can be used to educate
clients about a firm’s approach to ESG investing is
crucial in increasing adviser adoption,' says Ed Louis,
a senior analyst at Cerulli Associates...
Forty-five percent of U.S.
households prefer an environmental, social and
governance (ESG) approach to investing, Cerulli
Associates learned in a survey. Among those between the
ages of 30 and 39, this increases to 64%, and for those
younger than 30, it is 67%."
[COMMENTARY] Another
study citing great interest in ESG investing among
retail clients, yet advisors lagging in advising on ESG
investment products.
Advisers Slow to Respond to ESG Investing Demand, by
Lee Barney, October 5, 2018, PlanAdvisor, USA.
-------------------------------------------------------------
Institutional support
grows for ESG, political spending transparency, report
shows. "Based on the analysis of 4,090
shareholder meetings held in the first half of 2018,
nearly 29% of institutional investors supported such
proposals, a new high compared to 26% in 2017, 21% in
2016, and 18% in 2015. The numbers appear in stark
contrast to the support of retail investors, only 16% of
which supported such proposals in the first half of
2018."
[COMMENTARY] Here
we have another example of
institutional participation in matters concerning ESG
significantly exceeding that of retail investors.
Institutional support grows for ESG, political spending
transparency, report shows, by Rob Kozlowski,
October 3, 2018, Pensions & Investments, USA.
-------------------------------------------------------------
More Than Just Doing
Good, ESG Investments Help Manage Volatility.
"A report by State Street Global Investor’s SPDR
Practice Management Team showed that 69 percent of ESG
investors said the investments helped them manage
volatility. In fact, that was one reason they chose to
invest that way—67 percent said lower volatility and 54
percent said lower downside risk were important reasons
they incorporated ESG into their investment process.
Overall returns haven’t suffered as a result, either."
[COMMENTARY] ESG
investors are echoing what the research is finding on
ESG oriented portfolios.
More Than Just Doing Good, ESG Investments Help Manage
Volatility, by Wealth Management, October 2, 2018,
USA.
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Responsible Investing
Accelerates as Investment Merits Gain Traction, RBC
Global Asset Management Survey Finds.
"Ninety percent of institutional investors believe
environmental, social and governance (ESG) integrated
portfolios are likely to perform as well or better than
non-ESG integrated portfolios, according to a new global
survey by RBC Global Asset Management (RBC GAM)."
[COMMENTARY] Finally,
it seems that most institutional investors now
understand that an ESG orientation doesn't mean poorer
returns. We've come a long way!
Responsible Investing Accelerates as Investment Merits
Gain Traction, RBC Global Asset Management Survey Finds,
press release, RBC GAM, Canada.
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Do companies with bad
ESG scores make better investments. "In the
US, poorly-rated companies that were upgraded generated
the strongest rewards. Those stocks with CCC ESG rating,
but eventually received a two-notch upgrade,
outperformed the S&P 500 Index by more than 5% in the 12
months following the upgrade."
[COMMENTARY] It's
a case of looking for the 'turnaround' ESG situation.
Seems like it a new strategy that can work with the
right analysis. Perhaps more investors will now use it.
Do companies with bad ESG scores make better
investments, by Shannen Wog, October 1, 2018,
Citywire Selector, UK.
-------------------------------------------------------------
The Next Wave of
Socially Responsible Investors Has Arrived.
"Swell Investing’s 2018 'Money Meets Morals' study finds
that the vast majority of Gen Z investors aged 18-24
(84%) are either already invested in socially
responsible or impact investments or plan to invest in
the future. The study was conducted online by Harris
Poll on behalf of Swell Investing and gathered insights
from more than 2,000 US adults aged 18 and up, among
whom over 1,400 have investments."
[COMMENTARY] Even
if one disregards critiquing the questions and how those
questions might be understood by survey participants,
the results still demonstrate the terrific potential for
ethical, sustainable, and ESG oriented investments among
the youngest investors!
The Next Wave of Socially Responsible Investors Has
Arrived, Swell, USA.
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