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Only 20% of rich Britons hold ethical assets, study
finds.
"UBS says Britons were second-least likely to buy
into sustainable investments after Americans... Just
12% of wealthy people in the US had more than 1% of
their fortunes held in sustainable investments – a
broad term which includes renewable energy and
companies which have committed to pay employees
fairly.
... 60% of Chinese HNWIs had at least 1% of their
assets held in sustainable funds, followed by
Brazilians and people from the United Arab
Emirates."
[COMMENTARY] The
divide between institutional and retail investors
concerning sustainable assets is still wide,
especially in the developed world. I believe this
problem rests mostly with the investment
advisor/broker community. Most still
don't or want
to understand, the potential impacts of climate
change on their client portfolios. In the USA
particularly, it’s probable that advisors/brokers
are largely
'climate change deniers.'
Only 20% of rich Britons hold ethical assets, study
finds, by Rupert Neate, September 19, 2018, The
Guardian, UK.
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Most Investors Are Going Green to Make
Money, HSBC Says. "Financial returns
were cited as the biggest reason to have a strategy
focused on the environment, social issues and
governance, known as ESG, according to a survey of
868 institutional investors by the U.K.’s largest
bank. Nearly three quarters of companies with this
focus said that this was their number one driver,
followed by tax incentives."
[COMMENTARY] 'Financial
returns' could also be code for using ESG criteria
to screen for potential material issues. As such, it
reflects what other surveys of this nature report.
It's encouraging to see such huge numbers of
institutional investors so engaged.
Most Investors Are Going Green to Make Money, HSBC
Says, by Anna Hirtenstein, September 12, 2018,
Bloomberg, USA.
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Two-thirds of institutional investors
utilize ESG policy – report.
"Two-thirds of institutional investors and almost
half of companies globally have an environmental,
social and governance policy in place, according to
survey of 1,731 companies and institutional
investors, sponsored by HSBC Holdings and conducted
by East & Partners."
[COMMENTARY] The
numbers here are somewhat higher than most recent
similar surveys. Of course, survey questions may
differ significantly, thus skewing the results. If
true, this ESG survey would mean ESG has become
truly mainstream.
Two-thirds of institutional investors utilize ESG
policy – report, by Paulina Pielichata,
September 12, 2018, Pensions & Investments, USA.
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Sustainalytics Launches its ESG Risk
Ratings. "Materiality-Driven ESG
Ratings Framework Enables Investors to Better
Understand the Unmanaged ESG Risks Facing
Companies."
[COMMENTARY] Sustainalytics
may well be launching a new ESG ratings' platform
that could become an industry standard in the years
to come. It'll be fascinating to see how it is
received and to track its results.
Sustainalytics Launches its ESG Risk Ratings,
press release, September 12, 2018, Sustainalytics,
The Netherlands.
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[UK] Government to demand greater
transparency on pension investments.
"Savers will be able to see at a glance if their
pension money is held in ethical and socially
responsible investments under measures to be
unveiled today by the government."
[COMMENTARY] This
is terrific news. It sets an example for governments
and regulators globally to follow. However, one
suspects it might be a while before such action
occurs in the USA.
[UK] Government to demand greater transparency on
pension investments, by Josephine Cumbo,
September 11, 2018, FT, UK.
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ESG outperforms in European large caps and
U.S. small caps. "Data compiled by
Arabesque S-Ray show companies that score high in
Arabesque's proprietary ESG rating algorithm
outperform lower scoring peers, particularly among
large-cap European firms and small-cap U.S. firms."
[COMMENTARY] The
unique aspect of this study is the segregation of
ESG performance according to a company's market size
and geographical orientation.
ESG outperforms in European large caps and U.S.
small caps, Charles McGrath, September 11, 2018,
Pensions & Investments, USA.
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Deutsche Bank Subsidiary Launches ESG Money
Market Fund. "The launch of the fund is
a credit positive event because DWS is the first to
bring ESG selection criteria into the $531 billion
prime money market fund industry."
[COMMENTARY] With
the launch of this fund,
possibly all major asset classes now have ESG
options. This is really good news and DWS will
probably be followed by many more such funds.
Deutsche Bank Subsidiary Launches ESG Money Market
Fund, by Ben Hernandez, September 10, 2018, ETF
Trends, USA.
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Fossil fuel divestment funds rise to $6tn.
"Insurance companies lead the sell-off of coal,
oil and gas stocks over climate change and financial
fears – oil majors now cite divestment as a risk to
them."
[COMMENTARY] Yes,
the oil majors should be worried and that's why
many of them are actively pursuing alternative
energy. Despite President Trump's attempts, these
majors will continue to grow such energy sources.
Fossil fuel divestment funds rise to $6tn., by
Damian Carrington, September 10, 2018, The Guardian,
UK.
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Sustainable investment not core investment
consideration for institutional investors.
"Investing sustainably remains a minor factor in
the investment decision-making process despite
institutional investors’ expectations it will grow
in importance, according to Schroders' Institutional
Investor Study 2018."
[COMMENTARY] Sustainability
wasn't even a minor consideration for investors not
so long ago! Now, increasingly, it's on the radar
for most of them.
Sustainable investment not core investment
consideration for institutional investors,
September 3, 2018,
Institutional Asset Manager, UK.
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ESG Investing Rarely Underperforms the
Market, Study Finds. "The report also
found that investment portfolios with high-scoring
ESG companies outperformed their benchmarks by
between 81 to 243 basis points over a four-year
period (between 2014-2018)."
[COMMENTARY] More
news supportive of ESG based investing.
ESG Investing Rarely Underperforms the Market, Study
Finds, by Paul Davies and Michael D. Green,
Latham & Watkins, September 3, 2018, Lexology, USA.
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PRI develops guide to identifying
‘mainstream’ impact investments. "The
goal was to help asset owners and fund managers
better assess opportunities in this market, the
United Nations-backed investor organisation said."
[COMMENTARY] This
guide is useful for all asset managers.
PRI, Principles for Responsible Investment, has been
working for many years developing this guide. For
the guide, click
here.
PRI develops guide to identifying ‘mainstream’
impact investments, by Susanna Rust, August 30,
2018, IPE, UK.
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3 Challenges for Getting ESG Funds Into
Retirement Plans. "CalSavers recently
announced the selection of State Street Global
Advisors to manage the investment lineup using
existing SSGA funds or combinations thereof but said
there won't be an ESG fund in the plan, at least not
initially. The reason? The ESG options were too
expensive."
[COMMENTARY] Jon
Hale, at Morningstar, outlines the steps that
could've been taken by CalSavers to get inexpensive
ESG options included in its lineup. The points Jon
makes are important for all fund managers to be
aware of.
3 Challenges for Getting ESG Funds Into Retirement
Plans, by Jon Hale, August 30, 2018,
Morningstar, USA.
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Should impact investors aim for market
returns? "Impact investing launches are
increasingly shedding the caveat that deep social
impact results in a sacrifice of financial returns."
[COMMENTARY] Though
this article discusses impact investing in the UK
environment, the arguments presented are universally
applicable.
Should impact investors aim for market returns?
By Nicola Brittain, August 23, 2018, Portfolio
Adviser, UK.
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US SIF Foundation Releases 2018 Money
Manager Roadmap: "Moving Forward with Sustainable,
Responsible and Impact Investing: A Roadmap for
Money Managers." "The report provides
best practices and practical steps asset managers
can take to develop and enhance sustainable
investing strategies."
[COMMENTARY] The
US SIF always produces excellent guides and
information.
US SIF Foundation Releases 2018 Money Manager
Roadmap: "Moving Forward with Sustainable,
Responsible and Impact Investing: A Roadmap for
Money Managers, August 15, 2018, US SIF, USA.
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New: The Big Book of SI by Robeco.
"In our new, 102-page, The Big Book of SI, we
analyze the present status of sustainability
investing and the big trends that are shaping its
future. The book also zooms in on sustainability
reporting and the link between ESG and performance."
[COMMENTARY] Netherlands-based
Robeco has long been a pioneer in sustainable
investing. The information and reports they produce
have a great reputation.
New: The Big Book of SI by Robeco, August 13,
2018, Robeco, The Netherlands.
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Report: time to rethink ESG index
construction. "Traditional index
construction not effective because it makes it
difficult for investors to assess source of
outperformance."
[COMMENTARY] This
interesting article discusses a study which
highlights the difficulty in pointing to ESG factors
as a standalone factor in ESG fund alpha. The report
suggests ESG funds need improved construction to
isolate all causes of outperformance.
Report: time to rethink ESG index construction,
by Joe McGrath, August 14, 2018, Expert Investor,
UK.
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Companies with strong ESG scores outperform,
study finds. "Portfolios in large and
medium-sized groups in developed markets, excluding
the US, record best results."
[COMMENTARY] Actually,
the US portfolios did well too. Just not as well as
those in Europe, most particularly. Incidentally,
it's interesting to see how the EU and US
governments seem to be diverging on encouraging ESG
in funds' management.
The US Department of Labor recently issued a sort of
warning about pension funds using ESG analysis, while the EU
is going full steam encouraging ESG integration in
funds' management! I think the US
administration has too much of a rear view mirror
when it comes to understanding the present and
future economy.
Companies with strong ESG scores outperform, study
finds, by Jennifer Thompson, August 12, 2018,
FT, UK.
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Majority of impact investors satisfied with
investment performance: survey. "The
majority of impact investors said their investments
have met their expectations for both impact (82 per
cent) and financial (76 per cent) performance since
inception, according to a report by the Global
Impact Investment Network."
[COMMENTARY] It's
great news that most impact investors are really
happy with their investment results. Such data will
inspire many more to invest similarly.
Majority of impact investors satisfied with
investment performance: survey, August 10, 2018,
Benefits Canada, Canada.
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ESG adoption gaining among U.S. asset owners
– Callan survey. "More than 40% of U.S.
asset owners have incorporated environmental, social
and governance factors into their investment
decisions, up from 37% in 2017 and 22% in 2013, said
Callan's annual ESG survey report, released
Wednesday."
[COMMENTARY] Of
course, when a respondent says they've incorporated'
ESG into their investment decisions, it's difficult
to know if that's really the case.
For instance, for a fund manager evaluating
governance decisions of a company's management,
could suggest to them that they're already
incorporating ESG into their investment decisions!
However, the fact that this survey shows increasing
acceptance of ESG on a yearly basis perhaps argues
against this simplistic read of the survey results.
ESG adoption gaining among U.S. asset owners –
Callan survey, by Meaghan Kilroy, August 8,
2018, Pensions & Investments, USA.
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Investors ask 500 companies to come clean on
treatment of workers. "More than 100
institutional investors, which together manage
$12trn in assets, have sent a survey to 500
companies demanding that they disclose detailed
information on how they manage their global
workforces."
[COMMENTARY] Finally,
this issue is receiving the attention of some of the
biggest investors on the planet. It'll be quite
interesting to see who responds and what the data
says.
Investors ask 500 companies to come clean on
treatment of workers, by Katie Burton, August 7,
2018, Ethical Corporation, UK.
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Poll shows low adoption of smart beta ESG
funds. "Research among 85 clients of
Aberdeen Standard Investments and Sustainalytics
found that only 24% of the sample group were
actively using a dedicated smart beta ESG strategy
in their portfolio at present."
[COMMENTARY] At
24%, I don't think the adoption rate is too bad at
all. As Doug Morrow at Sustainalytics says, these
are relatively early days yet.
Poll shows low adoption of smart beta ESG funds,
by Joe McGrath, August 1, 2018, Expert Investor, UK.
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Lack of market ‘plumbing’ holds back
sustainable investing. "We need
standards, benchmarks and derivatives to make this
sector take off."
[COMMENTARY] A
thoughtful article by the chairman of UBS on how
sustainable investing can become fully mainstream.
Also, it's terrific to see a leader such as Mr.
Weber participating in the process of advancing
sustainable investing.
Lack of market ‘plumbing’ holds back sustainable
investing, by Axel Weber (chairman of UBS), July
29, 2018, FT, UK.
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Market Momentum: Impact Investing & High Net
Worth Canadians. "There is a high
potential market for impact investing amongst high
net worth individuals in Canada. One in three HNWIs
responded as a current impact investor, with almost
90% expressing interest of investors surveyed, over
52% are investing or intending to invest for impact
over the course of the upcoming year. There are some
key characteristics of current and prospective
impact investors."
[COMMENTARY] BMO,
Scotiabank, and Tides Canada are among the major
backers of this study. The study is of particular
interest to Canadian advisors with HNWI clients. In
general, it shows considerable and growing interest
among Canadian HNWIs in impact investing.
Market Momentum: Impact Investing & High Net Worth
Canadians, July 2018, MaRS and SVX, Canada.
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Using ESG Ratings to Build a Sustainability
Investing Strategy. "Sustainability
investing continues to grow in popularity, but the
lack of standardization in sustainability reporting
poses a challenge for investors wishing to maximize
the social responsibility, and minimize the social
damage, of their investments. The authors, who
previously studied sustainability ratings issued by
the mass media, now turn their attention on rankings
used by the investing community itself.
The findings indicate that they may be a more
reliable barometer of a company’s commitment to
environmental, social, and governance impact;
nevertheless, further research into the long-term
link between sustainable practices and value
creation is needed."
[COMMENTARY] To
some extent, this research counters the impression
offered by the ACCF (see below, "Think tank takes
ESG rating agencies to task") that since ESG
ratings' methodologies are different among the
ratings' agencies that they'll offer widely
disparate outcomes. This CPA journal article throws
more light on that and comes to some interesting,
important, conclusions for ESG oriented investors.
Using ESG Ratings to Build a Sustainability
Investing Strategy, by Silvia Romero, Agatha E.
Jeffers, Beixin (Betsy) Lin, Frank Aquilino,
and Laurence DeGaetano, July 2018, The CPA Journal, USA.
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For all the Hype, Almost No U.S. Plans
Factor in ESG. "Just 12 percent of U.S.
corporate and health care retirement plan
representatives said they had incorporated ESG
criteria into their manager selection processes.
When defined contribution plans were excluded, only
6 percent considered ESG. The survey included 69
plan sponsors overseeing 119 defined benefit and
defined contribution plans."
[COMMENTARY] Is
it laziness, being uninformed, disinterest or what,
that is preventing US corporate health and
retirement plans from including ESG criteria? It
seems to me a similar situation as with numerous
advisors who don't understand -- or even -- want to
understand, ESG options. Habits and remuneration
arrangements are often hard to change.
For all the Hype, Almost No U.S. Plans Factor in
ESG, by Amy Whyte, July 23, 2018, Institutional
Investor, USA.
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Think tank takes ESG rating agencies to
task. "In
a report released Thursday, the Washington-based,
business-backed think tank argued individual
companies 'can carry vastly divergent (ESG) ratings
from different (ESG rating) agencies simultaneously,
due to differences in methodology, subjective
interpretation or an individual agency's agenda.'
...The major ESG ratings agencies analyzed in
the report are MSCI, Sustainalytics, RepRisk and
ISS...
Concerns raised by the ACCF over the agencies'
ESG rating methodologies included variances in
scoring systems among the agencies and the agencies'
not fully disclosing the indicators they evaluate or
the material impact of the indicators."
[COMMENTARY] Just
like there's often wide variability in analyst
opinions in the interpretation of financial
statements, so there should also be variability in
ESG opinions. However, setting competitive issues
aside, I do agree the rating
agencies could be more forthcoming in "disclosing
the indicators they evaluate or the material impact
of the indicators."
Think tank takes ESG rating agencies to task, by
Meaghan Kilroy, July 19, 2018, Pensions &
Investments, USA.
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3 takeaways on trends in advisor investing.
"Advisors this year, for instance, were asked
about their use or recommendation of environmental,
social and governance funds. Replies indicate that
26 percent of respondent advisors currently use
and/or recommend ESG funds, and 20 percent plan to
increase their use/recommendation of them over the
next 12 months."
[COMMENTARY] Finally,
a significant number of US advisors are using and
recommending ESG investments to their clients!
(Research cited:
2018 Trends in Investing Survey, Journal of
Financial Planning and the FPA Research and Practice
Institute.)
3 takeaways on trends in advisor investing, by
Marlene Satter, July 16, 2018, Benefits Pro, USA.
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When will “socially responsible investing”
become just “investing”? "It may be
hard to imagine, thinking back to the freewheeling
pre-crisis days, but one legacy of the crisis could
be a permanent shift in the finance industry’s moral
compass. Yes, really."
[COMMENTARY] Good
perspective on how the investment industry has
changed -- and adopted socially responsible and ethical investing --
since the financial crises ten years ago.
When will “socially responsible investing” become
just “investing”? By Eshe Nelson, July 9, 2018,
Quartz, USA.
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