E-newsletter of Investing for the Soul  
                             
November 29, 2018

 

Ron Robins, Editor. E-mail /289-271-0873            Latest news at http://investingforthesoul.com/

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Lack of international standards holding back ESG investing, finds BNY Mellon study. "Non-financial performance measurement and a lack of international standards have been identified as the biggest hurdle for environmental, social and governance (ESG) investing."

[COMMENTARY] BNY Mellon have hit on an old and familiar theme with their study. However, as addressed in their findings, there's a great deal of work by regulators and others behind the scenes attempting to remedy the situation. I believe in future years we'll see such remedies.
Lack of international standards holding back ESG investing, finds BNY Mellon study, by Joe Parsons, November 22, 2018, Global Custodian, UK.

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Companies Leading on Disability Inclusion Outperform Peers. "Accenture, in partnership with Disability:IN and the American Association of People with Disabilities (AAPD), has released 'Getting to Equal: The Disability Inclusion Advantage.' This report looks at both the disability practices and financial performance of 140 companies over the past four years... Companies that 'embrace best practices for employing and supporting more people with disabilities in their workforces' are several times more likely to outperform their peers financially."

[COMMENTARY] This is a pioneering and worthy study. It might also be true that employees with disabilities feel they have to prove themselves and so are more productive. Hence, forward-looking companies know this and so increasingly employ individuals with disabilities? Thus, such employment is not out of charity.
Companies Leading on Disability Inclusion Outperform Peers, by Megan Amrich, November 20, 2018, TriplePundit, USA.

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Are ESG Ratings the New Credit Rating for Stock Prices? "A new MSCI study of ESG ratings finds they have a similar impact on share prices as do credit ratings."

[COMMENTARY] Though to me the findings are unsurprising, this is the first study to demonstrate that ESG ratings have a similar impact to credit ratings on a company's stock price. This finding will no doubt be challenged, but comes at a time when investors everywhere are looking at the inclusion of ESG criteria in their investment research. It bodes well for the mainstreaming of ESG!
Are ESG Ratings the New Credit Rating for Stock Prices? By Ginger Szala, November 19, 2018, ThinkAdvisor, USA.

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From upstream to mainstream: ESG at a tipping point. "In a year's time, the percentage of Millennials expressing a high level of interest in ESG investing jumped from 26% to 35%, advisers say, while the percentage of Gen Xers embracing ESG spiked from 16% to 25%. This is more than a generational story, however... Twenty-six percent of ultra-high-net-worth investors now show a high level of interest in ESG investing, advisers say, up from only 10% in 2017. Similarly, interest among very-high net worth investors shot from 13% to 19% in a year's time."

[COMMENTARY] These results are from a US survey of 300 advisors. The jump in numbers over just one-year is impressive. Somewhat interesting is that its regular advisors reporting the rapid growth. Calvert was involved too.
From upstream to mainstream: ESG at a tipping point, November 15, 2018, by IN Research and Calvert, Investment News, USA.

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Green finance: a contrarian take. "Renaissance’s argument thereafter is that, even if emerging markets have far lower ESG scores, directing capital their way allows for the highest overall rate of improvement, and so the greatest ethical utility. This is, unsurprisingly, an argument for more investment in EM."

[COMMENTARY] The argument presented here is like the idea of investing in companies who are just beginning to engage in ESG seriously to take advantage of their possible rapid stock price as they're identified as a potential 'high' ESG company. It's recognized by many investors that high ESG scoring companies also now have a premium to their stock prices.
Green finance: a contrarian take, by Thomas Hale, November 15, 2018, FT Advisor, UK.

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S&P 500 Firms Expand Sustainability Data in Financial Filings, But Slow to Adopt Fully Integrated Reporting. "78 percent of S&P 500 companies issue a sustainability report... Among companies that issue sustainability reports, 95 percent offer quantified, annually comparable environmental performance metrics; two-thirds set quantified and time-bound environmental goals. Some 86 percent offer social performance metrics, but only 40 percent set quantified social goals."

[COMMENTARY] Many companies may not acknowledge climate change, but they know that demonstrating an interest in it and providing some metrics is good for their stock prices. There's still the issue that most companies issuing sustainability reports don't have that data independently verified and audited. That being said, we're seeing great progress in such reporting!
S&P 500 Firms Expand Sustainability Data in Financial Filings, But Slow to Adopt Fully Integrated Reporting, press release, November 14, 2018, IRRC Institute, USA.

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Research Links Financial and Corporate Sustainability (ESG) Performance. "Based on 642 North American sustainability reports for the 2017 reporting period, CSE created a unique analysis framework. It identifies correlations between Sustainability (ESG) performance and Financial results."

[COMMENTARY] The press release gives little information on their findings. However, you can download for free the report by providing your contact information. What quickly stood out for me in the report is the abysmal use of external auditors for ESG data in GRI reports.
Research Links Financial and Corporate Sustainability (ESG) Performance, press release, November 6, 2018, Center for Sustainability and Excellence, USA.

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Clean finance needs to include traditionally ‘dirty’ industries. "We need mechanisms that finance climate-friendly projects, not only for solar panels and transit tracks, but also for a massive transition in carbon-intensive industries. The federal [Canadian] government’s expert panel on sustainable finance shares that view, and in October endorsed “transition-linked financial products” to help channel green investment to high-emitting industries."

[COMMENTARY] The transition to a zero carbon future must include ways in which carbon-intensive industries can finance their transition to becoming 'greener.' With carbon-intensive industries forming so much of the Canadian economy, it's timely and necessary that Canada is a leader in this endeavour. This is a very promising development. Congratulations to all those involved.
Clean finance needs to include traditionally ‘dirty’ industries, by Toby Heaps and Annette Verschuren, November 4, 2018, The Globe and Mail, Canada.

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Big data, ESG ratings help find alpha. "This has fundamental implications for how chief sustainability officers and business leaders work with the broader ecosystem. The higher price of corporate sustainability poses a challenge for ESG investors: they need to ask if they are getting good value for money. It is not only a matter of the value of corporate sustainability anymore, it is also a function of the price you are paying for it. Value for price is key."

[COMMENTARY] Harvard Business School professor George Serafeim continues his outstanding research on ESG investing. As we see in the above quote, in his latest paper, "Public sentiment and the price of corporate sustainability,” Professor Serafeim shows that the stock prices of companies with higher ESG scores frequently trade at premium prices--and therefore ESG-ethically oriented investors need to tread carefully to obtain alpha.
Big data, ESG ratings help find alpha, by George Serafeim, November 2, 2018, Top 1000 Funds, USA.

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US SIF Foundation Releases 2018 Biennial Report On US Sustainable, Responsible And Impact Investing Trends. "The US SIF Foundation's 2018 biennial Report on US Sustainable, Responsible and Impact Investing Trends, released today, found that sustainable, responsible and impact investing (SRI) assets now account for $12.0 trillion—or one in four dollars—of the $46.6 trillion in total assets under professional management in the United States. This represents a 38 percent increase over 2016...

... Assets in mutual funds reached $2.6 trillion, up 34 percent over 2016, and the number of ETFs more than doubled from 25 to 69."

[COMMENTARY] Continued, extraordinary growth seen in US institutional assets screened with assorted ESG criteria. Interestingly, the growth in retail ESG funds roughly parallel’s that of the equivalent Canadian sector.
US SIF Foundation Releases 2018 Biennial Report On US Sustainable, Responsible And Impact Investing Trends, press release, October 31, 2018, US SIF Foundation, USA.
 

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Disclaimer: Neither The Soul Investor nor Ron Robins makes investment recommendations. Nothing in this newsletter should be interpreted as a recommendation or solicitation to buy/sell any securities or investments. The Soul Investor is a source of general information and resources for spiritual investing, ethical investing, and socially responsible investing (SRI). Investors should consider their actions thoroughly and consult their professional advisers prior to taking any investment action. The Soul Investor does not necessarily agree with the opinions expressed in articles in its newsletter or offered on the web pages to which it might be linked. Such opinions are the responsibility of the writers themselves. Furthermore, The Soul Investor does not offer or provide any warranties, representations, guarantees, implied or otherwise, as to the accuracy, legality, copyright compliance, timeliness or usefulness of the information, materials or services in this e-newsletter, or other sites, to which it might be linked. Also, Mr. Ron Robins is not an investment advisor, nor is he licensed with any professional investment related body, and thus is not able to, nor does he make, any investment recommendations.

The Soul Investor is a publication of Investing for the Soul, a registered business name in Ontario, Canada. Copyright © 2018 Ron Robins. All rights reserved.