E-newsletter of Investing for the Soul  
                             
July 30, 2018

 

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

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News & Commentaries

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Using ESG Ratings to Build a Sustainability Investing Strategy. "Sustainability investing continues to grow in popularity, but the lack of standardization in sustainability reporting poses a challenge for investors wishing to maximize the social responsibility, and minimize the social damage, of their investments. The authors, who previously studied sustainability ratings issued by the mass media, now turn their attention on rankings used by the investing community itself.

The findings indicate that they may be a more reliable barometer of a company’s commitment to environmental, social, and governance impact; nevertheless, further research into the long-term link between sustainable practices and value creation is needed."

[COMMENTARY] To some extent, this research counters the impression offered by the ACCF (see below, "Think tank takes ESG rating agencies to task") that since ESG ratings' methodologies are different among the ratings' agencies that they'll offer widely disparate outcomes. This CPA journal article throws more light on that and comes to some interesting, important, conclusions for ESG oriented investors.
Using ESG Ratings to Build a Sustainability Investing Strategy, by Silvia Romero, Agatha E. Jeffers, Beixin (Betsy) Lin, Frank Aquilino,  and Laurence DeGaetano, July 2018, The CPA Journal, USA.

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For all the Hype, Almost No U.S. Plans Factor in ESG. "Just 12 percent of U.S. corporate and health care retirement plan representatives said they had incorporated ESG criteria into their manager selection processes. When defined contribution plans were excluded, only 6 percent considered ESG. The survey included 69 plan sponsors overseeing 119 defined benefit and defined contribution plans."

[COMMENTARY] Is it laziness, being uninformed, disinterest or what, that is preventing US corporate health and retirement plans from including ESG criteria? It seems to me a similar situation as with numerous advisors who don't understand -- or even -- want to understand, ESG options. Habits and remuneration arrangements are often hard to change.
For all the Hype, Almost No U.S. Plans Factor in ESG, by Amy Whyte, July 23, 2018, Institutional Investor, USA.

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Think tank takes ESG rating agencies to task. "In a report released Thursday, the Washington-based, business-backed think tank argued individual companies 'can carry vastly divergent (ESG) ratings from different (ESG rating) agencies simultaneously, due to differences in methodology, subjective interpretation or an individual agency's agenda.'

...The major ESG ratings agencies analyzed in the report are MSCI, Sustainalytics, RepRisk and ISS...

Concerns raised by the ACCF over the agencies' ESG rating methodologies included variances in scoring systems among the agencies and the agencies' not fully disclosing the indicators they evaluate or the material impact of the indicators."

[COMMENTARY] Just like there's often wide variability in analyst opinions in the interpretation of financial statements, so there should also be variability in ESG opinions. However, setting competitive issues aside, I do agree the rating agencies could be more forthcoming in "disclosing the indicators they evaluate or the material impact of the indicators."
Think tank takes ESG rating agencies to task, by Meaghan Kilroy, July 19, 2018, Pensions & Investments, USA.

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3 takeaways on trends in advisor investing. "Advisors this year, for instance, were asked about their use or recommendation of environmental, social and governance funds. Replies indicate that 26 percent of respondent advisors currently use and/or recommend ESG funds, and 20 percent plan to increase their use/recommendation of them over the next 12 months."

[COMMENTARY] Finally, a significant number of US advisors are using and recommending ESG investments to their clients! (Research cited: 2018 Trends in Investing Survey, Journal of Financial Planning and the FPA Research and Practice Institute.)
3 takeaways on trends in advisor investing, by Marlene Satter, July 16, 2018, Benefits Pro, USA.

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When will “socially responsible investing” become just “investing”? "It may be hard to imagine, thinking back to the freewheeling pre-crisis days, but one legacy of the crisis could be a permanent shift in the finance industry’s moral compass. Yes, really."

[COMMENTARY] Good perspective on how the investment industry has changed -- and adopted socially responsible and ethical investing -- since the financial crises ten years ago.
When will “socially responsible investing” become just “investing”? By Eshe Nelson, July 9, 2018, Quartz, USA.

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Asset management roundup: Survey predicts ESG-related ETF boom. "More than four-fifths of professional investors expect investment into environmental, social and corporate governance (ESG) related exchange-traded funds (ETFs) to grow over the next five years, research from State Street Global Advisors (SSGA) has found."

[COMMENTARY] So far, ESG screened ETFs have attracted a tiny amount of assets. However, this could all soon change as Vanguard, Fidelity, and other major players enter and promote this space! Supporting this view are the findings of the SSGA survey.
Asset management roundup: Survey predicts ESG-related ETF boom, by Hugo Greenhalgh, June 29, 2018, IPE, UK.

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Note: Articles are linked to the original source. Some sites might require registration, and may, or may not, archive stories. All links were active at the time of publication.

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.

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