Banking on a Low-Carbon Future: Are the
World’s Largest Banks Stepping Up to the Risks &
Opportunities of Climate Change? "Banks
are exposed to climate-related risks through their
lending and financial service activities, including
project finance, equity and debt underwriting. These
risks are real and wide-ranging. A recent study
estimates that the value at risk for investors from
climate change, under a business-as-usual scenario,
may be equivalent to a permanent reduction of up to
20% in portfolio value in just over a decade."
analysis of the state of global banking with respect
to their financial risks and opportunities
concerning fossil fuels.
Banking on a Low-Carbon Future: Are the World’s
Largest Banks Stepping Up to the Risks &
Opportunities of Climate Change? February 2018,
Boston Common Asset Management, USA.
Carbon Clean 200--2018 Q1.
"We are happy to present the 2018 Q1 Clean200™ list
of publicly traded companies that are leading the
way with solutions for the transition to a clean
is a terrific list by two of the most respected
organizations in the ESG space. And unlike most
other ESG related rated rankings, this list is
Carbon Clean 200--2018 Q1, February 16, 2018, As
You Sow and Corporate Knights, Canada.
Ethisphere Institute Announces 135
Companies Honored as World’s Most Ethical Companies.
"Ethisphere’s notion that financial value and
ethics are inexorably tied together has been borne
out through long-term tracking of how the stock
prices of publicly traded honorees compare to the
U.S. Large Cap Index. The research found that listed
World’s Most Ethical Companies outperformed the
large cap sector over five years by 10.72 percent
and over three years by 4.88 percent. Ethisphere
refers to this as the Ethics Premium."
report is the absolute opposite of ReRisk's report
below! Here we have the most ethical companies --
according to their methodology. It's a good idea to
read Ethisphere's and RepRisk's reports together.
Ethisphere Institute Announces 135 Companies Honored
as World’s Most Ethical Companies, press
release, February 12, 2018, Ethisphere, USA.
RepRisk Releases the Most Controversial
Companies 2017 Report. "Eight of Ten
Companies Included Were Exposed to Severe Governance
Issues, in Particular Bribery and Corruption."
RepRisk believes 2017 could be a landmark year when
'when the tide started to turn against corporate
corruption.' This RepRisk report is useful reading
for ethical investors. See it
RepRisk Releases the Most Controversial Companies
2017 Report, press release, February 13, 2018,
Ethics in the markets. Some real
(1) Insider trading has been rife
on Wall Street, academics conclude--The Economist,
"INSIDER-TRADING prosecutions have
netted plenty of small fry. But many grumble that
the big fish swim off unharmed. That nagging fear
has some new academic backing, from three studies.
One argues that well-connected insiders profited
even from the financial crisis. The others go
further still, suggesting the entire share-trading
system is rigged."
Insider trading has been rife on Wall Street,
academics conclude--The Economist, February 10,
2018, The Economist, UK.
(2) Does CEO Pay Structure Incentivize
Actions that Destroy Long-Term Value?
"The research finds that a high amount of equity
vesting will increase the likelihood that a company
will revise guidance upward; reduce research and
development and capital expenditures; buy-back
shares or increase the amount of its share buy-back;
and even enter into merger and acquisition activity.
It paints a clear and bold portrait of short-termism
with concern for long-term value creation faded into
Does CEO Pay Structure Incentivize Actions that
Destroy Long-Term Value? Press release, February
12, 2018, IRRC Institute, USA. (They're offering a
webinar on this subject on February 14. Sign up on
the web page.)
above studies should alarm most investors. Why
haven’t the regulators -- including the US SEC and
numerous other watchdog agencies -- conducted their
own research on these issues as they pertain to
their activities? Are they told to look the other
way? I believe we're heading for a mammoth crisis of
confidence if such issues aren't properly addressed.
One-third of [UK] investors deem social
impact just as important as returns.
"The survey findings also show that 65% of Londoners
are looking to make more environmental investments,
and that they are twice as likely to prefer
investing in SMEs, rather than stocks and shares,
than people from other regions."
we have another survey showing UK investors becoming
more interested in socially and environmentally
One-third of [UK] investors deem social impact just
as important as returns, by Chris Seekings,
February 9, 2-018, The Actuary, UK.
When ethical investment desires equal a
demand for returns. "There has been a
significant shift in UK investor behaviour, with 60
per cent of investors looking to make more social
investments in 2018, according IW Capital's latest
nationally representative data, which surveyed 2,004
[COMMENTARY] Another good survey showing how investors are
increasingly interested in ethical investing. Given
the recent huge increase in market volatility, it'll
be fascinating to see at the end of 2018 how real
were the survey's predictions.
When ethical investment desires equal a demand for
return, by Ingrid Smith, February 7, 2018, What
Yahoo Finance Expands Offerings as Only
Free Provider of Sustainability Scores, across
Desktop and Mobile Web. "Conscientious
investors will be able to track the Environment,
Social and Governance (ESG) scores of more than
2,000 publicly traded companies, only on Yahoo
More wonderful news for the retail investor
interesting in obtaining free corporate ESG ratings!
Sustainalytics is demonstrating that it wants its
quality ESG research freely available to all
investors. Thank you Sustainalytics!
Yahoo Finance Expands Offerings as Only Free
Provider of Sustainability Scores, across Desktop
and Mobile Web, press release, February 1, 2018,
Barron’s 100 Most Sustainable
Companies. "Barron’s offers our first
ranking of the most sustainable companies in the
U.S. We have always aimed to provide information
about what keenly interests investors—and what
affects investment risk and performance.
The term 'sustainability' doesn’t have a
single definition, but for years now, European
investors have looked at environmental, social, and
governance factors—qualitative measures that people
believe promote a company’s long-term health and
Now we know that sustainability and ESG have arrived
in America! One of the founders of ESG investing in
the US, Calvert Research and Management, did the
research. As such, it's methodology looks good.
However, surprisingly, their list differs from many
others in not including Google, Facebook or Amazon!
Barron’s 100 Most Sustainable Companies, by
Leslie P. Norton, February 3, 2018, Barron's, USA.
Strong ESG policies are no protection
against scandal. "Companies that aim to
do good for society by adhering to environmental,
social and governance policies are more likely to
encounter lawsuits and regulatory actions, says
At first glance this is a surprising finding.
However, high performing ESG companies are held to
high standards, so when they don't meet those
standards there's perhaps greater disappointment and
backlash against them. Nonetheless, it's important
to know the facts!
Strong ESG policies are no protection against
scandal, by Chris Flood, February 2, 2018,
Financial Times, UK.
CUNY, Harvard scientists team with UBS
Asset Management on sustainable investing framework.
"The team leveraged recent advances in several
scientific disciplines, including earth observation
and modeling, epidemiology, and public health, and
linked these data to corporate operational and
financial data to show how products and services can
contribute to more sustainable environmental and
The research suggests a new way to assess the
sustainability of corporations for investors, who
are increasingly interested in this investment
approach. A key is to provide systematic,
transparent, and verifiable metrics of success based
on well-accepted scientific approaches, in contrast
to the self-disclosure of beneficial actions that
are claimed typically by companies themselves."
This is truly ground-breaking work and particularly
important for ethical investors. I just wonder if
their research will be proprietary or available
freely to all investors? This project has the
potential to significantly enhance corporate ESG and
CUNY, Harvard scientists team with UBS Asset
Management on sustainable investing framework,
press release, February 1, 2018, Advanced Science
Research Center, GC/CUNY, USA.
Utilities may suffer 'significant losses'
from carbon taxes. "A new paper from
Trucost, part of S&P Dow Jones Indices, suggests
major companies across the electric utility,
chemicals and automaker industries could suffer
'significant losses' from new carbon pricing
policies or carbon taxes introduced as part of
nations' climate efforts."
It seems that some defensive stock plays might not
be so reliably defensive after all. Many investors
and fund managers might want to re-evaluate their
premises and holdings after reading Trucost's
Utilities may suffer 'significant losses' from
carbon taxes, by Madeleine Cuff, January 26,
2018, BusinessGreen, USA.
Just out, Corporate Knight's 2018 Global
100. "Companies from 22 different
countries made the 2018 list, with the U.S., France
and U.K. leading the pack. European companies
dominated the rankings, accounting for 69 per cent
of listed companies, while North America and Asia
accounted for 22 and 12 per cent respectively."
This is a ranking I always look forward to. And
European companies continue to lead in a
considerable fashion. Register to download the full
Corporate Knight's 2018 Global 100, January
2018, Corporate Knights, Canada.
Sustainable Fund Assets Under Management
Achieved Limited Gains in 2017 But Poised to
Increase Traction. "During a year when
a number of high profile environmental, social and
governance (ESG) related events unfolded,
sustainable fund assets under management in the US,
including mutual funds, exchange-traded funds (ETFs)
and exchange-traded notes (ETNs) achieved limited
gains. Estimated net inflows, including new 2017
fund launches, were $2.9 billion or 1.5%."
It's an old story. Despite retail investors saying
they're making ESG investments, the numbers continue
to show only modest growth in these assets.
According to many surveys, there seems to be much
better ESG take-up in pension, endowment, and other
Sustainable Fund Assets Under Management Achieved
Limited Gains in 2017 But Poised to Increase
Traction, press release, January 22, 2018,
Sustainable Research and Analysis, USA.
Chinese index ranking companies by social
value commitment aims to help ethical investors.
"China Alliance of Social Value Investment says
its Social Value 99 index outperformed traditional
benchmark stock indices in a simulation."
demonstrates that ESG investing is gaining ground
Actual index information can be found
Hopefully, an English version of the page will be up
at some point.
Chinese index ranking companies by social value
commitment aims to help ethical investors, by
Karen Yeung, January 19, 2018, South China Morning
Millennial Investors Want Perks and ESG
Investing. "The latest Spectrem Group
report, 'Millennial and Generation X Investors,'
suggests these two generations are significantly
more attuned to socially responsible investing than
their older counterparts.
In fact, survey results show more than half
of Millennial investors (52%) see the social
responsibility of their investments as an important
selection criteria, compared with less than 30% of
WWII-era investors and 42% of Gen X investors.
The study also reveals that almost a third of
Millennial investors (29%) expect their financial
adviser to reward them with gifts or other favors in
exchange for their recurring business."
It's fascinating the degree to which millennial
investors want perks from their advisors! The rest
of the survey's findings continue to reinforce the
fact that millennials are much more interested in
ESG investing than other generations.
Millennial Investors Want Perks and ESG Investing,
by John Manganaro, January 18, 2018, Plan Advisor,
Larger Plans Continue to Outpace Smaller
Plans in Incorporating ESG Factors.
"While the top-line percentage was unchanged, plans
with more than $20 billion in assets increased
incorporation of ESG factors by 136% from 2013 to
2017, according to the findings. The authors note
that these plans now have the highest rate of
incorporation at 78%, compared to only 30% for the
smallest funds. ESG adoption across all plan sizes
has increased 68% since the firm’s first such survey
I wonder if one reason larger plans outpace smaller
plans in utilizing ESG criteria has to do with
staffing and resources of the plan managers?
Larger Plans Continue to Outpace Smaller Plans in
Incorporating ESG Factors, by Ted Godbout, NAPA,
State of Green Business Report 2018, by
GreenBiz/Trucost. "The report looks at
10 key trends and dozens of metrics assessing how,
and how much, companies are moving the needle on the
world’s most pressing environmental challenges. The
report is produced in partnership with Trucost, part
of S&P Global, a world leader in helping companies,
investors, governments, academics and thought
leaders to understand the economic consequences of
natural capital dependency."
The report is well worth reading for any ethical
State of Green Business Report 2018, January
2018, GreenBiz/Trucost, USA.
Demystifying negative screens: the full
implications of ESG exclusions. "In
this paper we explore the role of screening, the
activities typically targeted, the different ways
that exclusions are defined, and their effects on
investment strategies. Our aim is to help both those
investors with exclusion policies already in place
and those considering them to understand the options
available and the full implications of their
Shroders quantifies the effects of various negative
investment screens in a variety of investment
strategies such as growth, value, and income. It's a
pioneering work in this area and something that
anyone interested in ESG screening might want to
Demystifying negative screens: the full implications
of ESG exclusions, January 10, 2018, Sustainable
Investment Team, Shroders, UK.
MSCI links ESG with stronger asset
growth. "For calendar 2016 the managers
that scored the highest under MSCI's responsible
investment assessment recorded an average compound
annual growth rate of 3.7% in institutional assets
under management, vs. a 1.8% decline for those with
the lowest scores. Over the two years, the CAGR is
2.6% for the leaders vs. 1.6% for the lowest
scorers; and for the three-year period, those with
higher responsible investment scores saw 3.6% growth
in AUM, vs. 0.3% growth."
This is the first study of its kind that I'm aware
of. The results could give an impetus to fund
managers presently minimally or unengaged with ESG
to take it more seriously.
MSCI links ESG with stronger asset growth, by
Sophie Baker, January 8, 2018, Pensions &
Sexual Harassment Screens Making It Into
ETF ESG World. "Impact Shares, is
launching the first ETF focused on women empowerment
that will screen for sexual harassment. The fund
will contain around 200 to 300 stocks and will track
the Equileap North American Women's Empowerment
Index. The index applies 19 screening criteria,
which cover gender balance in leadership and
workforce, equal pay, flexible work options, safety
at work and freedom from violence, abuse and sexual
I suspect this will not be the only fund to advance
the cause. We'll probably hear from many ESG
oriented funds and managers that they'll similarly
screen for sexual harassment issues in their stock
Sexual Harassment Screens Making It Into ETF ESG
World, by Marie Beerens, January 5, 2018,
Investor's Business Daily/Nasdaq, USA.
Why managers need to wake up to ESG
threat. “'It will get to a point where,
if a fund group doesn’t have fully-implemented ESG
integration, and had it in place for sometime, we
won’t be able to use them anymore,' she [Teresa
Platan, who specialises in selecting emerging
markets and Japan equity funds for Aktia, a Finnish
bank] says. 'The shift has been so fast in the past
year with the clients suddenly asking so much about
ESG. It’s difficult to say exactly how long before
we’re there. Maybe only in a year or two.'”
The article's headline seems to imply a backlash
against ESG integration. However, as the quote
implies, it's really cautioning those investment
industry players not already on the ESG train to get
on-board now or lose business!
Why managers need to wake up to ESG threat, by
Dylan Emery, January 5, 2018, Portfolio Advisor, UK.
Why activists are cheerleaders for
corporate social responsibility.
"Profits, not ethics, are behind big-name investors’
interest in ESG issues."
Now we know ESG has 'arrived' and why it's fast
becoming integral to financial analysis. Investors
everywhere are realizing it pays to incorporate ESG
criteria in selecting investments no matter their
moral compass. However, I'd still prefer that the
new ESG oriented investors regard ethics as crucial
to their own decision making and behaviour.
Why activists are cheerleaders for corporate social
responsibility, by Lindsay Fortado, December 26,
2017, FT, UK.
CalPERS’ Ongoing Push Into ESG Drives a
Healthy Debate. "The debate started
when the American Council for Capital Formation
published a sharply written report alleging that, as
the group puts it, 'CalPERS has prioritized
relatively poor performing environmental, social and
governance [ESG] investments at the expense of other
investments more likely to optimize returns.'"
This is an interesting debate--but I believe CalPERS
is right to be ESG focused and they make a good
argument for that.
CalPERS’ Ongoing Push Into ESG Drives a Healthy
Debate, by John Manganaro, December 21, 2017,
2017 Engaged Tracking Carbon Rankings.
"A transparent, public and standardised ranking
of the world's largest companies and their carbon
Engaged Tracking created its carbon tracking
methodology with the help of the prestigious UK
university, Imperial College. So, it has a great
pedigree. Registration--which is free--is advised.
2017 Engaged Tracking Carbon Rankings, December
2017, Engaged Tracking, UK.
Influential investors urge 100
carbon-intensive companies to step up climate
action. "Today, as many as 225
influential global investors with more than $26.3
trillion in assets under management pledged to
engage with 100 corporates estimated to be
responsible for around 85 percent of total global
greenhouse gas emissions, so as to step up their
ambition on climate action."
This could greatly influence the direction of
numerous companies responsible for global greenhouse
gas emissions towards environmental sustainability.
It came out in parallel with this week's Emmanuel
Macron's One Planet Summit.
Influential investors urge 100 carbon-intensive
companies to step up climate action, by Michael
Holder, December 13, 2017, GreenBiz, USA.
Rediscovering our Moral Compass: JUST
Capital’s 2017 List of America’s Most JUST
Companies. "Today, JUST Capital, in
partnership with Forbes, has released the 2017 list
of America’s Most JUST Companies, our annual ranking
of the largest publicly-traded U.S. corporations."
With Forbes behind it, JUST Capital is getting much
attention--and justifiably so. The 2017 'just'
American companies' list is undoubtedly a key
ESG-ethical investors to review. My concern with the
list is its leaders are absolutely dominated by tech
companies. Hence, it makes me a little leery as to
Rediscovering our Moral Compass: JUST Capital’s 2017
List of America’s Most JUST Companies, December
2017, JUST Capital, USA.
Index Managers Taking Note as ESG Surges:
Morningstar. "Morningstar finds biggest
index managers have expanded their stewardship or
Morningstar's research findings are consistent with
other similar research.
Index Managers Taking Note as ESG Surges:
Morningstar, by Michael S. Fischer, December 8,
2017, ThinkAdvisor, USA.
More Advisers Expect Increased ESG
Demand. "More than one-third, 35%, of
asset managers have made the introduction of
environmental, social and governance (ESG) investing
a high priority, and another 57% say they are
placing a moderate level of priority on the task.
Together, this makes for a full 92% of asset
managers on the path to or considering offering ESG
investing options, according to the December issue
of The Cerulli Edge – U.S. Edition."
Finally, advisors are getting the message. Although
I haven't seen other surveys suggesting this level of
interest among advisors in ESG that Cerulli has
found. We'll just have to wait for that.
Nonetheless, this survey is good news for
responsible-ethical investors and investments.
More Advisers Expect Increased ESG Demand, by
Lee Barney, December 8, 2017, Plan Advisor, USA.
Can Index Funds Be a Force for
Sustainable Capitalism? "According to
my estimates for every dollar actively managed,
either through high turnover diversified portfolios
or through low turnover concentrated portfolios,
there are three dollars in indexing or
quasi-indexing. In such a market there will be
tremendous rewards for market participants that can
provide a differentiated service."
This is a great piece by Harvard's Professor
Serafeim on the way forward for ethical-ESG
Can Index Funds Be a Force for Sustainable
Capitalism? By George Serafeim, Harvard Business
Review, December 7, 2017, USA.
DB advisers could be sued over climate
change risk. "A report by environmental
law firm ClientEarth states that trustees are
legally required to respond to climate change risk
that may have a material impact on the scheme."
This will come as a shocker to the many pension fund
trustees who've argued against the inclusion of ESG
criteria in pension fund management. It appears that
both the EU and UK are seriously desiring to include
it in some way in their pension fund management
directives. It will not be long before much of the rest
of the world does the same.
DB advisers could be sued over climate change risk,
by Alex Warnakulasuriya, December 1, 2017, Pensions
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