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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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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[UK] Ethical funds beat market but struggle
for breakthrough. "UK investors hold
£16.7 billion in funds with an ethical remit, but
that accounts for just 1.3% of Investment
Association (IA) funds... 'Ethical fund sales are
ticking up, albeit from a relatively low base',
[said Laith Khalaf, senior analyst at Hargreaves
Lansdown.]"
[COMMENTARY] The
above data provides further validation of my comment
immediately below. In the USA and Canada, ethical,
SRI, ESG funds are around 3% of total
retail fund assets.
[UK] Ethical funds beat market but struggle for
breakthrough, by Michelle McGagh, September 27,
2018, Citywire Money, UK.
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UK millennials shun sustainable investments.
"A survey has found that just 14 percent of UK
millennial investors who cite an interest in
sustainable investing actually invest in the area."
[COMMENTARY] What
people say and what they do are two very different
things! The survey data cited above provides a good
explanation of why most investors who say
they want to invest in ethical, sustainable,
responsible investments, don't.
The latest Canadian data on responsible investing
will be out in the next few weeks. I'll be watching
closely to see if the percentage of total Canadian
retail fund assets invested in responsible funds
exceeds 4%. If not, it'll be another
disappointment. Though, institutional responsible
assets should still do well.
UK millennials shun sustainable investments,
September 24, 2018, Private Banker, UK.
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Climate Change, Paris Accords Driving ESG
Strategies: Report. "A new report from
Newsweek Media Group’s Vantage Thought Leadership
division says environmental, social and governance
investing has gone mainstream, having gotten a boost
from the Paris Climate Accord and adoption of the UN
Sustainable Development Goals in 2015."
[COMMENTARY] It
seems that ESG based investing has become so popular
that almost every financial institution must do its
own survey concerning who is using it. That's good.
It's what I've been waiting to see since the 1970s!
I was curious to see that in this survey respondents
complained about lack of ESG oriented products. I
can see this is probably true in fixed income and
possibly ETFs. Though the latter is fast being
addressed.
Climate Change, Paris Accords Driving ESG
Strategies: Report, by Michael Fischer,
September 21, 2018, Think Advisor, USA.
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Schroders Global Investor Study 2018:
Minority of people globally concerned investing
sustainably would hinder returns. "Only
a quarter of people globally are concerned that
investing sustainably would hinder investment
outcomes, an indication that investors are
increasingly convinced robust returns and a positive
impact are not mutually exclusive."
[COMMENTARY] Schroders
released the second part of their study which
reviewed investors perception of returns concerning
sustainable investing. It suggests that most
investors globally now see sustainable investing
producing good returns.
Schroders Global Investor Study 2018: Minority of
people globally concerned investing sustainably
would hinder returns, press release, September
17, 2018, Schroders, UK.
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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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