Ethical Investing News/Commentaries
Commentaries by Ron
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S&P Global COP 22 Report - Aligning 2016
Green Finance Expectations with Green Bond Indices.
"Over the past 18 months, a number of industry-
and policy-led initiatives have been launched that
support the mainstreaming of private-sector capital
to address sustainable investment, green finance
challenges, and long-term value creation, to mention
just a few: the G-20
Green Finance Study Group under the Chinese G-20
presidency, the Task
Force on Climate-Related Financial Disclosures established
by the Financial Stability Board, the EU
Markets Union program of 33 actions to mobilize
capital and the Sustainable Stock Exchange's Green
Finance Working Group."
The following are a great overview by S&P of the
green bond markets!
S&P Global COP 22 Report - Aligning 2016 Green
Finance Expectations with Green Bond Indices,
by Martina Macpherson, November 16, 2016, S&P Dow
Jones Indices, SRI Connect, UK, and (2)
Green Finance: Scaling Up to Meet the Climate
S&P Dow Jones Indices, November 2016, UK.
Raising The Bar For ESG Investing
Expectations. "Nearly 70% of
institutional investors we surveyed said they expect
similar returns from ESG portfolios as from
traditional portfolios. These were professionals
from retirement plans, endowments and foundations
and other gatekeepers who collectively handle
roughly $500 billion in assets. Even more surprising
was that quite a few investors have raised the bar
for ESG: among the other 30% of respondents, almost
one quarter expected returns to improve."
I'm not sure whether to continue posting such
surveys since the majority of them find similar
results. That is widespread acceptance of ESG and
the understanding that there's likely no performance
penalty when accounting for it in stock
selections. Nonetheless, it's always satisfying to
see these surveys!
Raising The Bar For ESG Investing Expectations,
by Linda Giuliano, November 22, 2016, ValueWalk,
New Developments in Social Investing by
Public Pensions. "Public pension funds
continue to engage in social investing, most
recently divesting from Iran and fossil
fuels. However, social investing is often not
effective, as other investors step in to buy
divested stocks. Social investing can also produce
lower investment returns, conflict with the views of
beneficiaries and taxpayers, and interfere with
federal policy. In short, public pension funds
should not engage in social investing."
For ethical investors, this is a provocative report.
The concerns expressed in it are the views of many
stakeholders and need to be addressed by the
responsible-ethical investing community. Also,
analysts need to review and critique the report's
findings that SRI funds have lower returns and that
an SRI orientation in public pension funds could be
a breach of fiduciary responsibility.
Would this report have shown a different outcome if
SRI was replaced with an ESG analysis?
New Developments in Social Investing by Public
Pensions, November 18, 2016, Boston College,
Center for Retirement Research, USA.
Morningstar’s Sustainability Indexes:
Portfolio Tilts and Performance Implications.
"In his study Unintended Biases in ESG Index
Funds, Morningstar analyst Alex Bryan found that
methodological differences between ESG indexes cause
divergent portfolio exposures across sector, style,
region, and market capitalization. These biases
impact risk and return. Now that Morningstar has
created its own suite of sustainability indexes, we
can compare them to their non-ESG counterparts on a
portfolio and performance basis."
Anyone interested in Morningstar's sustainability
indexes should read this. Investors have always
known that ethical funds -- as compared to the
general fund universe -- usually have different
holdings. Thus, they outperform and
underperform the general fund universe depending on
what is happening in the economy. This article adds
detail to that story.
Morningstar’s Sustainability Indexes: Portfolio
Tilts and Performance Implications, by Dan
Lefkovitz, November 17, 2016, Morningstar, UK.
Morgan Stanley and Bloomberg Survey Finds
Sustainable Investing Has Entered the Mainstream.
"Two-thirds of asset managers polled pursue
sustainable investing, with 64% believing its
adoption will continue to grow."
It seems like a never-ending stream of the largest
financial institutions on the planet touting the
importance and relevance of sustainable/ESG
investing. Wow, what a difference a few years can
Morgan Stanley and Bloomberg Survey Finds
Sustainable Investing Has Entered the Mainstream,
press release, November 17, 2016, Morgan
Barclays: Sustainable Investing and Bond
Returns. "In the first report in
Barclays’ Impact Series, our study shows the
positive effect that environmental, social and
governance investing can have on bond portfolio
This is an important study, one of the first to
review the impact of ESG on bonds. Most other
similar studies concerned ESG and sovereign debt,
whereas, Barclays focused on US corporate bonds.
There's a link at the bottom of the press release to
a much more detailed discussion of their findings.
Barclays: Sustainable Investing and Bond Returns,
press release, November 17, 2016, Barclays, UK.
Report: Over 70% of Investors See Risk,
Investment Opportunities in Climate Change Impact.
"This week at COP22, the Global Adaptation &
Resilience Investment Working Group (GARI) released
its discussion paper, 'Bridging the Adaptation Gap,'
reporting that 70 percent of private investors
surveyed see both risk and investment opportunity
from the impact of climate change. According to
GARI, 78 percent of 101 surveyed investors and other
stakeholders thought evaluating the physical risk
from climate change was 'very important,' while 70
percent would consider making investments that
supported adaptation to climate change or climate
change resilience now."
Though Donald Trump doesn't believe in climate
change, it's clear from this and other reports that
most of corporate America does. And corporate
America wants to profit from it!
Report: Over 70% of Investors See Risk, Investment
Opportunities in Climate Change Impact, by Talia
Rudee, November 16, 2015, Sustainable Brands, USA.
RBC Global Asset Management survey
reveals opportunities and obstacles in ESG
investing. "According to a new survey
released by RBC Global Asset Management (RBC GAM),
most investors lack an understanding of how ESG
factors impact their portfolio. Many investors
remain unconvinced about ESG as a source of alpha or
risk mitigation – creating a perception gap that
smart, active investors and managers can exploit in
order to gain a competitive edge."
Congratulations to RBC GAM for conducting this
research. Some of its findings are illuminating. For
instance, "Only 17 percent of respondents said
they were somewhat or completely satisfied with the
quality and quantity of ESG-related data from
companies, which may contribute to their belief that
ESG investing is not a source of alpha."
I believe this shows some ignorance on the part of
the respondents as to what ESG data is available
and, also, the need for standardized corporate ESG
reporting. There are many more interesting findings
in this report.
RBC Global Asset Management survey reveals
opportunities and obstacles in ESG investing,
press release, November 15, 2016, RBC Global Asset
Sustainable Investments Surged by Third
to $8.7 Trillion in 2016. "Sustainable
investments surged by more than $2 trillion in the
last two years as money managers worked to
accommodate U.S. institutions’ demand for assets
that meet environmental, social and
The sustainable, responsible and
impact-investing category totaled $8.72 trillion at
the start of 2016, representing about one fifth of
all managed investments, according to a biennial
report published by Washington-based US SIF
Foundation, the Forum for Sustainable and
Responsible Investment. More than 1,000 investment
funds totaling about $2.6 trillion include ESG
criteria, the group said."
Again, terrific growth in responsible investing over
the past two years in the US. The results are
unsurprising when we see that most asset managers
now include ESG factors in their criteria for stock
Sustainable Investments Surged by Third to $8.7
Trillion in 2016, by Laura Colby, November 14,
2016, Bloomberg, USA.
New Report: Investors Finding Innovative
Paths to Address Systemic Environmental, Social,
Financial Issues. "The new study, Tipping
Points 2016: Summary of 50 Asset Owners and
Managers’ Approaches to Investing in Global Systems, examines
how 28 asset owners and 22 asset managers are
beginning to think about the impact of their
investments and, in turn, how those investments are
affected by global environmental, social and
financial systems. This new systems-level thinking
is additive to traditional investment scrutiny at
the security and portfolio levels."
This is a fascinating report that most ethical
investors will want to scrutinize. IRRC is also
webinar on November 15 to review the reports
New Report: Investors Finding Innovative Paths to
Address Systemic Environmental, Social, Financial
Issues, press release, November 7, 2016,
Investor Responsibility Research Center
Institute/Investment Integration Project, USA.
Sustainability Reporting Standards: Time
to Trade Competition for Collaboration.
"Even though SASB, GRI, and IIRC, cater to the same
market, sustainability information providers, each
company’s biggest end users are different.
Nevertheless some, particularly SASB and GRI, behave
as if in competition with each other, which does not
help either of them, nor the providers nor the final
users. Time would be better invested in
I completely concur with Antonio Vives. After 20-30
years of developing CSR/ESG/sustainability reports,
I now believe we're close to understanding exactly
what investors and other stakeholders need from
these reports. The time is now to develop uniform
standards for corporate ESG reporting!
Sustainability Reporting Standards: Time to Trade
Competition for Collaboration, by Antonio Vives,
November 10, 2016, TriplPundit, USA.
Sustainable Investing Research Suggests
No Performance Penalty. "Review
of academic studies show sustainable/responsible
funds perform on par with conventional funds... the
star-ratings results are consistent with the
research literature: Socially conscious funds have
similar risk-adjusted performance that, if anything,
skews positive relative to conventional funds."
Particularly interesting is the performance review
of the funds Morningstar tracks. They're divided
according to their star ratings over the years 2002
to 2016 and then sub divided between socially
conscious funds and those of the whole fund
Sustainable Investing Research Suggests No
Performance Penalty, by Jon Hale, November 10,
2016, Morningstar, USA.
SRI Research Prize Winner: Impact
Investing "Supply" Failing To Meet Demand.
"The demand for impact investing alternatives is
outstripping the available supply of such choices
for investors, according to a new study awarded the
2016 Moskowitz Prize for Socially Responsible
Investing during a special ceremony last night at
the 27th annual SRI Conference in Denver. The study
found the pinch is most acute in Europe where the
demand for impact investing (versus traditional
investments) is three times higher than in the U.S.
and the rest of North America.
Investing' is a study of 3,500 limited
partners, 5,000 funds, and 25,000 capital
commitments results and was conducted by Brad
Barber, University of California Davis, Adair Morse,
University of California Berkeley and Ayako Yasuda,
University of California Davis."
Congratulations to Brad Barber, Adair Morse, and
Ayako Yasuda, for winning the prestigious and most
important SRI prize in the world: the Moskowitz
Prize! Their research on impact investing is very
timely and the potential for this form of investing
is enormous. As governments become increasingly
stringent in the funds available for social and
environmental programs, impact investing offers a
unique opportunity to fill much of that void.
SRI Research Prize Winner: Impact Investing "Supply"
Failing To Meet Demand, press release, The 2016
Moskowitz Prize sponsors, USA.
Principles for Responsible Investment
launches ESG integration guide. "The
new guide is aimed at assist asset owners—public and
corporate pension funds, superannuation funds,
insurance companies, endowments, foundations, family
wealth offices—in revising their investment policy
and incorporate all long-term factors, including ESG
Many organizations who say they've implemented ESG
into their investment decisions have done so in a
piecemeal way. This guide will help them
professionalize that process. Thank you PRI!
Principles for Responsible Investment launches ESG
integration guide, press release, November 6,
2016, PRI, UK.
Vigeo Eiris 2016 UK & Europe Retail Fund
Estimates Show Strong Responsible Investment.
"In aggregate, RI funds represented 2% of the
overall European retail funds market, a higher
percentage than in 2015 (1.7%)."
As in North America, European retail responsible
investment funds still form
only a tiny share of retail funds assets. But
almost everywhere they are growing faster than the overall funds
market -- and that's what's important.
Vigeo Eiris 2016 UK & Europe Retail Fund Estimates
Show Strong Responsible Investment, November 2,
2016, by Blue & Green Tomorrow, UK.
(UK) Public Call for Financial ‘Kitemark’
to Help Identify Sustainable Financial Products.
"The Good Money Week annual research has
highlighted an overwhelming public demand for the
introduction of ‘kitemark-style’ label to allow
customers to identify which financial products are
sustainable/ethical... 69% want a new law requiring
financial advisors to ask customers if they’d like
to exclude specific sectors or companies. "
The story reveals that UK consumers would like to
see some identification mark on ethical
investments. Other results from this survey are
(UK) Public Call for Financial ‘Kitemark’ to Help
Identify Sustainable Financial Products,
November 1, 2016, Blue & Green Tomorrow, UK.
Failing Scores for ESG Raters.
"Due to different methodologies and different
human bias, disagreement among the scores
illustrates a crucial problem that confronts anyone
who hopes to measure environmental, social, and
corporate governance (ESG) performance by
I believe that just as a company might receive buy,
sell or hold recommendations from different analysts
reviewing the same information, so it's expected
that ESG raters have varying opinions on
investments. However, what this articles delineates
and the research it describes, is useful information
for ethical investors trying to understand the
divergence of ESG/CSR opinion research.
Failing Scores for ESG Raters, November 1,
TruValue Labs, Lipper Alpha Insight, USA.
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