Ethical Investing News/Commentaries
Commentaries by Ron
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Just released: new surveys related to ESG
It's clear that the mainstream investment industry is
adopting ESG criteria as important to investment
analysis and attracting millennials to investing.
However, I remain skeptical about much of the surveys'
findings due to the definition of ESG and what people
say and do being two quite different things. Also, some
surveys seem to contradict each other in their results.
The following surveys have just been released
on the subject.
Responsible Investing: the Evolution of Ownership,
October 30, 2017, RBC Global Asset Management (GAM),
Money Meets Morals Study, press release, October 30,
2017, Harris Poll for Swell Investing, USA.
Responsible Investing & the Persistent Myth of Investor
Sacrifice, October 31, 2017, Hermes Investment
New Equity Perspectives – Emerging markets, ESG and the
active/passive debate, October 30, 2017, bfinance,
Over one third of [UK] charities do not have an ethical
investment policy, survey finds, October 30, 2017,
Gabriel Research and Management, UK.
Commentary: What’s behind asset owners’ slow adoption of
responsible investment, October 30, 2017, Pensions &
McKinsey: ESG No Longer Niche as Assets Soar
Globally. "More than a quarter of the $88
trillion assets under management globally are now
invested according to environmental, social and
governance principles known as ESG, a McKinsey & Co.
McKinsey doesn't seem to be referring to original work
as the figures they're quoting appear largely from
published works such as the 2016 Global Sustainable
Investment Review. Perhaps they should state their
sources. Anyhow, it's terrific they're engaged in
McKinsey: ESG No Longer Niche as Assets Soar Globally,
by Amy Whyte, October 27, 2017, Institutional Investor,
Companies That Lead on Societal Impact Reap
Financial Benefits. "Companies that
outperform in industry-relevant environmental, social,
and governance (ESG) areas boast higher valuation
multiples and margins, all other factors being equal,
than those with weaker performance in those areas,
according to a new report by The Boston Consulting Group
BCG's research shows that companies excelling in ESG
outperform others in their respective industries in
profit margins and stock prices, all else being equal!
What more confirmation do companies need to optimally
perform on ESG criteria? Likewise, investors who’ve been
ignoring the importance of ESG should rethink their
Companies That Lead on Societal Impact Reap Financial
Benefits, press release, October 25, 2017, Boston
Consulting Group, USA.
Climate risk exposure falls as companies
boost green action. "Almost a quarter (23%)
of companies have targets to move away from fossil fuels
in energy consumption, while almost all (98%) have
designated climate risk as a board or senior-management
responsibility. The Carbon Disclosure Project's (CDP)
annual analysis for 2017 further found another one in
seven have agreed to set science-based targets to reduce
emissions, while a separate three in ten plan to do so
within two years."
Despite the views of the Trump administration, it's
apparent that numerous American businesses increasingly
view climate change as serious!
Climate risk exposure falls as companies boost green
action, by James Phillips, October 24, 2017,
Professional Pensions, UK.
Three-quarters of companies don't acknowledge
climate risks. "That is the stark
conclusion of a new report from consultancy giant KPMG,
which reveals that 72 percent of large and mid-cap
companies worldwide do not acknowledge the financial
risks of climate change in their annual financial
One reason for this is that companies don't yet see the
investor/analyst/regulatory demands for it. Also,
companies don't want to add to their potential
liabilities by acknowledging possible associated costs
that could hurt long-term profits, stock prices, and
executive compensation from stock options!
Three-quarters of companies don't acknowledge climate
risks, by James Murray, October 19, 2017, GreenBiz,
Seniors 65 and Older Are More Interested in
ESG Strategies Than Younger Generations, Finds AllianzGI
ESG Clarity Survey. "AllianzGI found that
68% respondents in the 65+ age demographic had a
favorable view of ESG investing compared to only 59% of
those 25-44. In addition, 65% of seniors called it a
sound investment strategy compared to only 54% of those
Seniors are also incredibly engaged in practicing
personal ESG in their daily lives with 81% of those 65+
engaging actively in the issues they care about by
staying up to date, deciding which products to buy and
contributing their time and money to causes important to
them. This compares with only 66% of investors aged
25-44 who practice personal ESG."
It's heartwarming to see this data. I'm concerned about
a lot of these surveys though. Who doesn't want to
respond positively when asked, "Do you invest in
'responsible' companies?" Most people would be afraid of
saying 'no' to the interviewer. It'll be interesting to
get feedback from the pollsters on this. Of course, what
people say and do are very different things.
Seniors 65 and Older Are More Interested in ESG
Strategies Than Younger Generations, Finds AllianzGI ESG
Clarity Survey, press release, October 17, 2017,
Allianz Global Investors, USA.
ESG analysis grows in all regions for CFA
Institute members; EMEA takes biggest leap.
"Although environmental, social and governance
consideration was up for all regions from the CFA
Institute's 2015 survey, Europe, the Middle East and
Africa replaced Asia-Pacific as the region where
investors are most likely to take ESG issues into
account at 85%, up from 74% in 2015. Meanwhile, some 81%
and 68% of investors in the Asia-Pacific and Americas,
respectively, said they take ESG factors into account,
up from 78% and 59% in 2015."
The CFA is a highly reputable organization. However, the
percentages of investors saying they're taking ESG into
account look overblown to me. ESG analysis is no doubt
gaining in credibility but if these responses are to be
believed it would be dominant in financial analysis
today. Yet, it doesn't seem to be the situation from any
objective analysis of the industry.
ESG analysis grows in all regions for CFA Institute
members; EMEA takes biggest leap, by Meaghan Kilroy,
October 18, 2017, Pensions & Investments, USA.
PRI threatens to strip members of signatory
status in 'greenwashing' purge. "The PRI
argued that many of the 200 or so asset managers and
schemes that have signed up to the United Nations-backed
principles on tackling environmental, social and
governance (ESG) issues pay little more than lip service
to them. Now they will be faced with a new set of
standards to prove they are making active efforts to
effect change, or they risk being removed from the PRI's
official list of signatories."
The UN Principles for Responsible Investment (PRI) have
been talking about doing this for some time. I'm
delighted to see it happening.
PRI threatens to strip members of signatory status in
'greenwashing' purge, by James Phillips, October 16,
2017, Professional Pensions, UK.
'True Bearing' Financial Planners Unveil
Consumer Attitudes Towards Sustainable Investment.
"With 32.9% wanting to invest in ESG/sustainable
investments, why do actual investments total only 3%?
Using the survey results, the 3% of total UK assets
managed should increase many times over. These figures
suggest that IFA's are missing out on a large market
share, of those keen to take up ESG investments."
This is something I've been talking and writing about
for decades! Most financial advisors and planners -- so
many different nomenclatures -- are reluctant (or not
required) to spend the time to really know their
clients. They make a mockery of what should be their
'know thy client' mandate. Also, the time to gain
knowledge concerning ethical/ESG investments, commission
arrangements, and other impediments, thus lead numerous
advisors to offer inappropriate advice to their clients.
'True Bearing' Financial Planners Unveil Consumer
Attitudes Towards Sustainable Investment, press
release, October 11, 2017, True Bearing Chartered
Financial Planners, UK.
Investors fear ESG investment will hurt
returns. "Almost half of big European
investors fear they will lose out on returns if they
invest sustainably, despite the majority believing
environmental, social and governance issues will become
increasingly important over the next five years."
Schroders definitely sees the future in ESG investing
and is taking it seriously. The research they're
compiling -- and its results -- is spurring increasing
attention throughout the investment industry. Investment
industry professionals should note the results of the
study below that just won this year's Moskowitz Prize!
Investors fear ESG investment will hurt returns, by
Attracta Mooney, October 11, 2017, Financial Times, UK.
Announcing the 2017 Moskowitz Prize Winner
for Sustainable and Responsible Investing.
"This year, the Moskowitz Prize acknowledged the
superior quality of the paper Corporate Governance and
the Rise of Integrating Corporate Social Responsibility
(CSR) Criteria in Executive Compensation: Effectiveness
and Implications for Firm Outcomes released in September
2017. The study examined the integration of CSR
contracting – that is the linking of executive
compensation to social and environmental performance –
and how it affects firm-level outcomes.
'This study provides practitioners of
sustainable, responsible and impact (SRI) investing with
data that shows how companies that do good also perform
well,' said Steve Schueth, producer of The SRI
Conference and president of First Affirmative Financial
Network. 'The authors' findings add to the mounting
evidence that investing in companies that integrate
sustainability best practices into their operations does
not hinder financial performance, but can improve it –
especially for their long-term investors.'"
I've given a lot of space to this study because it's
important for many reasons. Firstly, the Moskowitz Prize
offered by the Center for Responsible Business at the
Haas School of Business, University of California,
Berkeley, has become THE prize for SRI/CSR researchers
globally. Secondly, the winner of this year's prize
uniquely demonstrates the advantages of CSR for company
executives and stockholders!
Announcing the 2017 Moskowitz Prize Winner for
Sustainable and Responsible Investing, press
release, October 10, 2017, SRI Conference and The Center
for Responsible Business at the Haas School of Business,
UC Berkeley, USA.
UK Good Money Week October 8-13, 2017.
"Letting people know they have sustainable and
ethical options when it comes to their banks, pensions,
savings and investments so we can protect the
environment and support society when we deposit and grow
The UK also has its yearly ethical-responsible
money/investing week too. Again, I encourage all UK
investors and investment professionals to take this
opportunity to help grow UK ethical-responsible finance
and investment. These 'weeks' garner greatly increased
media attention to these endeavors as well.
UK Good Money Week October 8-13, 2017, Good Money
Responsible Investment Week Canada Events
October 23-27, 2017. "The Responsible
Investment Association (RIA) is coordinating a week of
events across Canada to promote learning about
environmental, social, and corporate governance (ESG)
issues that affect investments."
I encourage Canadian investors and investment
professionals to take part in these events! It's a
terrific opportunity to encourage the adoption of
ethical, sustainable, responsible investing. For a
listing of events see
Investment Week, Make Money, Responsibly, Canada.
Major asset managers moving slowly but surely
toward impact investing. "Nine out of the
top 10 largest U.S. asset managers are now active in
impact investing, according to new Tideline analysis.
All but Vanguard, the second largest US asset manager,
have stood up or are actively testing impact investing
impact investing continues to grow, largely due to the
demands of high net worth investors says this survey.
Also, this survey found that institutional investors are
laggards in this area.
Major asset managers moving slowly but surely toward
impact investing, by ImpactAlpha/Kim Wright-Violich,
October 3, 2017, Tideline & ImpactAlpha, USA.
100 Women: Do women on boards increase
company profits? "More sophisticated pieces
of analysis carried out by academics have shown very
small positive correlations between female board members
and financial success. But this is an average - in some
companies the relationship was neutral and in some it
was negative. And proving causation is far harder."
Ethical investors are convinced that having women on
boards improve corporate financial performance. Studies
support that thesis. However, this article cites some
research contradicting that finding. So, who's right? As
in most social science research, results can differ
greatly between studies.
100 Women: Do women on boards increase company profits?
October 2, 2017, BBC News, UK.
Research preoccupied with short-term
financial metrics. "Excluding
environmental, social and governance issues leads to
misallocation of capital... A global survey of 342
financial analysts by Aviva Investors found that 42 per
cent of respondents thought research published by banks
and brokers was preoccupied with short-term financial
Interesting, aren't these the analysts that publish the
research? Yet, they're the ones criticising themselves
of a short-term preoccupation and avoidance of ESG
measures they know are important for understanding the
long-term financial prospects of companies! At least
they know their issues. Perhaps it's their managers that
need to get with it!
Research preoccupied with short-term financial metrics,
by Chris Flood, October 1, 2017, Financial Times, UK.
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