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Latest Podcast:
ESG Funds, Stocks, to Buy Now.
"Reviewed include iShares Global Clean Energy ETF,
Thornburg Better World International Fund, Natixis
Sustainable Future 2030 Fund, iShares ESG MSCI EAFE ETF,
Vanguard ESG U.S. Stock ETF, iShares MSCI USA ESG Select
ETF,1919 Socially Responsive Balanced Fund, Vestas Wind
Systems, Orsted, First Solar, Enphase Energy, SolarEdge
Technologies and SunPower."
-- By Ron
Robins
-------------------------------------------------------------
Analysis: Investors face
myriad green investing rules. "More than 30
taxonomies outlining what is and isn't a green
investment are being compiled by governments across
Asia, Europe and Latin America, each one reflecting
national economic idiosyncrasies that can jar with a
global capital market which has seen trillions pour into
sustainable funds."
[COMMENTARY] Let's
hope there's a lot of commonality between them or it'll
get mighty messy for everyone!
Analysis: Investors face myriad green investing rules,
by Huw Jones and Kate Abnett, Simon Jessop, October 19,
2021, Reuters, UK.
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Are Stranded Assets an
Unexploded Bomb? "Many assets will be
uneconomic in a low carbon world, but sectors as diverse
as commercial property and tobacco may be seriously
unprepared for the financial impact."
[COMMENTARY] Stranded
assets aren't just fossil fuels as this article makes
clear.
Are Stranded Assets an Unexploded Bomb?
By Cherry Reynard, October 19, 2021, Morningstar, UK.
-------------------------------------------------------------
Exotic World Of ESG
Derivatives Triggers Warning From Regulator.
"The European Securities and Markets Authority
(ESMA) says it's hard to verify the positive impact of
derivatives sold under environmental, social and
governance labels. The watchdog says standardized
criteria should be met before firms can add ESG tags to
products such as forwards, options and swaps...
ESMA told Bloomberg News in
a written response. 'The absence of disclosure
requirements or recognized labels with minimum
sustainability criteria implies that claims as to the
impact of these instruments cannot be substantiated.'"
[COMMENTARY] It
seems to be presently a 'wild west' when it comes to ESG
derivatives.
Exotic World Of ESG Derivatives Triggers Warning From
Regulator, by John Ainger and Greg Ritchie, October
18, 2021, FA-Magazine, USA.
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Transition
Finance Week, Canada, November 29 - December 3,
2021. "Industry Dialogues on Financing
Canada's Transition to Net-Zero... Join 10+ key sessions
on Transition Finance in live webcast format. Learn from
thought leaders in ESG and sustainable finance. Interact
with panelists through live-polling and in-session chat
features. Network with fellow attendees and speakers via
peer-to-peer chat options. Earn CE credits and PDUs from
several accreditors."
-------------------------------------------------------------
2.0 Is in the
Making. "While some may expect the
repudiation of ESG as an investment fad, our view is
that the current debate on the validity of ESG heralds
not the end of ESG investing but instead a transition
toward major improvement."
[COMMENTARY] Some
interesting insights into the future of ESG based
investing by two highly reputable individuals with
significant ESG backgrounds.
ESG 2.0 Is in the Making, by Georg Kell and Todd
Cort, October 11, 2021, Barron's, USA.
-------------------------------------------------------------
Dumping stocks to punish
bad corporate behavior has tiny impact.
"Even as billions of dollars diverts toward firms
scoring higher on environmental, social and governance
measures, the funding costs for bad actors has hardly
budged, a study has found."
[COMMENTARY] The
better way according to this study is for asset owners
to directly engage with the companies.
Dumping stocks to punish bad corporate behavior has tiny
impact, by Tasneem Hanfi Brögger and Sam Potter,
October 9, 2021, Bloomberg on Business Standard, India.
-------------------------------------------------------------
BlackRock's Landmark
Move on Proxy Votes Fuels a Big ESG Debate.
"The world's largest asset manager revealed on Thursday
that from next year, some institutional clients will be
able to play a bigger role in shareholder votes. The
move will apply to about 40% of $4.8 trillion in index
equity assets that BlackRock manages."
[COMMENTARY] This
freedom is long overdue. Each institutional client needs
to decide what its objectives are regarding its holdings
and consequent relationship with them. Then, their
assets may
perform even better!
BlackRock's Landmark Move on Proxy Votes Fuels a Big ESG
Debate, by Tasneem Hanfi Brögger and Sam Potter,
October 8, 2021, Bloomberg on Yahoo! Finance, USA.
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Sovereign bonds are not
exempt from ESG consideration. "Just as
bondholders engage around fiscal and monetary policies,
they should broaden conversations around ESG topics."
[COMMENTARY] This
article has great information on how ESG impacts stock,
corporate and sovereign bond prices and other related
data.
Sovereign bonds are not exempt from ESG consideration,
by Carmen Nuzzo, October 6, 2021, ETFStream.com, UK.
-------------------------------------------------------------
What can corporate
actors learn from climate change litigation?
"In May of this year, climate change litigation made
global headlines in the wake of an unprecedented
judgment issued by the Hague District Court in the case
of Milieudefensie
v Shell. The court ordered Shell to enhance
the ambition of its greenhouse gas emissions reduction
efforts, requiring the company to set -- and meet --
companywide emissions reduction targets of 45% below
1990 levels by 2030.
While this case was the
first of its kind, it is also part of a growing global
body of climate change litigation, which is playing an
increasingly critical role in the domestic
implementation and enforcement of the Paris Agreement."
[COMMENTARY] Many
companies could be faced with this type of court
challenge in the years ahead. Naturally, stock
valuations could be affected too. So it's something to
become familiar with. This is an excellent article from
the London School of Economics on the
subject.
What can corporate actors learn from climate change
litigation? By Catherine Higham and Joana Setzer,
October 4, 2021, London School of Economics, UK.
-------------------------------------------------------------
Harvard cracks on fossil
fuels and a dam breaks. "Academic
endowments are entering a new normal after the richest
school in the world followed
the lead of other colleges and universities
to divest from fossil fuels.
Now a cascade of similar
announcements has followed, with Boston
University, the University
of Minnesota and the $8 billion MacArthur
Foundation pulling the plug on fossil
fuels."
[COMMENTARY] Most
of their faculty is in some way connected academically
to some facet of global warming and/or climate change.
Hence, it's unsurprising that these institutions give up
on fossil fuel investments.
Harvard cracks on fossil fuels and a dam breaks, by
Jordan Wolman, September 28, 2021, Politico, USA.
-------------------------------------------------------------
Deep Dive: Do not
neglect the G in ESG. "Likewise, according
to a 2016 study from Barclays, a divergence in priority
appears between some asset managers and their clients
regarding the relative importance of the three ESG
components. Clients regard environmental factors as the
most important, while governance is top of the list for
bond managers.
Moreover, the same study
showed that bonds with higher governance scores tended
to have fewer downgrades and better outperformance,
during the period from August 2009 until April 2016,
than those with lower scores, validating the emphasis
bond managers have historically placed upon effective
governance."
[COMMENTARY] I
think it's fair to say that most individual investors
regard the 'E'--environment -- as the most important of
ESG investing. However, among investment managers, the
'G' -- governance -- is the most important. And for good
reason, since I've seen studies that demonstrate that
the governance characteristics and activities of
companies positively influence profits more than any
other factor.
Deep Dive: Do not neglect the G in ESG, by Chris
Bowie, Investment Week, UK.
-------------------------------------------------------------
Blog: How do companies
address governance issues for corporate political
activity? "Deloitte and the Society for
Corporate Governance report on a survey they conducted
in July 2021 about companies' approaches to publicly
addressing controversial social and political issues."
[COMMENTARY] This
is an area that could have significant effects on a
company's image and therefore, stock price.
Blog: How do companies address governance issues for
corporate political activity? By PubCo@Cooley,
September 22, 2021, JD Supra, USA.
-------------------------------------------------------------
NYSE working with IEG to
develop new asset class, Natural Asset Companies.
"'This new asset class on the NYSE will
create a virtuous cycle of investment in nature that
will help finance sustainable development for
communities, companies and countries,' Douglas Eger, CEO
of IEG, said. 'Together, IEG and the NYSE will enable
investors to access nature'' store of wealth and
transform our industrial economy into one that is more
equitable.'"
[COMMENTARY] This
could be either the most exciting new development in
finance this century -- or its biggest disaster. The
idea is terrific. Only time will tell if the
environmental community and the public at large view it
as an important step to dealing with today's climate
crises.
NYSE working with IEG to develop new asset class,
Natural Asset Companies, by Dave Kovaleski,
September 16, 2021, Financial Regulation News, USA.
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Sustainable investments
could make up majority of global private wealth
portfolios in coming years, finds report.
"The world's wealthiest individuals, family offices, and
foundations, are preparing to plough billions of dollars
into sustainable investments over the coming years, as
they increasingly view addressing climate change as both
a social responsibility and an attractive investment
opportunity."
[COMMENTARY] I
suspect that with companies realizing that going sustainable
has great payback, the number of sustainable
companies could grow to a point that the majority of
one's portfolio would naturally be sustainable! No effort
is needed! Wow--what a dream--or is it?
Sustainable investments could make up majority of global
private wealth portfolios in coming years, finds report,
by staff, September 15, 2021, Institutional Asset
Manager, USA.
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Sustainable or sellout?
Four revealing questions in a company's environmental
disclosure. "How can we sift through
greenwashing to spot genuine climate action?"
[COMMENTARY] This
article is written by Simon Fischweicher, head of
corporations and supply chains, CDP North America. So
he's an expert on this subject. I'm sure that many
ethical and sustainable investors will benefit from Mr.
Fischweicher's insights.
Sustainable or sellout? Four revealing questions in a
company's environmental disclosure,
Simon Fischweicher, September 9, 2021, Corporate
Knights, Canada.
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China to create first
green stock index in fresh push to curb carbon emission.
"China will set up a green stock index and
develop futures trading for carbon emission rights --
both of which will be the first such instruments,
according to a new sweeping guideline issued on Sunday,
marking an important step in expanding China's
market-oriented securitization and financing mechanisms
to accelerate the country's long-term carbon trading and
achieve its carbon neutrality goal."
[COMMENTARY] We'll
have to see whether this amounts to anything or is
mainly a 'PR' exercise. After all, China is still
building and planning to build a huge number of coal
power plants.
China to create first green stock index in fresh push to
curb carbon emission, by GT staff reporters,
September 12, 2021, Global Times, China.
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Why Sustainable
Investment Means Investing in Advocacy.
"Combining traditional impact investment approaches with
investment in advocacy is the only way businesses and
investors can fuel meaningful social and environmental
progress."
[COMMENTARY] These
knowledgeable authors make a compelling case that
without advocacy the sustainable and ESG causes will be
limited.
Why Sustainable Investment Means Investing in Advocacy,
by Alan Schwartz and Reuben Finighan, September 9, 2021,
Stanford Social Innovation Review, USA.
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Ten ways to be sure your
'green' fund really does help save the planet... and can
make you money at the same time. "Green
investing is more popular than ever with inflows into
ethical, sustainable or responsible-badged investment
funds running at record levels. But how do you know that
the fund you are buying -- for an Isa or a pension -- is
really green and in line with your ethics? Not easily,
according to Mary Stevens, innovation manager at
environmental pressure group Friends of the Earth."
[COMMENTARY] Here's
some good advice for the new ethical and sustainable
investor.
Ten ways to be sure your 'green' fund really does help
save the planet... and can make you money at the same
time, by Jasmine Birtles, September 11, 2021, This
is Money, UK.
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US SIF Releases Tips to
Implement Sustainable Funds. "As more
participants express an interest in ESG investing, US
SIF recommends steps plan sponsors can take to add the
investments to retirement plans."
[COMMENTARY] Some
useful information for all pension plan sponsors.
US SIF Releases Tips to Implement Sustainable Funds,
by Amanda Umpierrez, September 7, 2021,
PLANSPONSOR, USA.
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Deutsche Bank's ESG
Probe Triggers Review at Asset Managers.
"Anxiety around greenwashing -- mis-stating how climate
friendly assets are -- is palpable across the industry as
fund managers react to German and U.S. investigations of
DWS Group.
Though the Deutsche Bank
unit says it did nothing wrong, the development has led
to a moment of reckoning as fund managers wake up to a
new regulatory era in which once fluffy environmental,
social and governance definitions are no longer
tolerated."
[COMMENTARY] It's
about time that funds proclaiming their green
credentials were duly evaluated for them. Such
investigations, and perhaps prosecutions, will create
greater confidence for investors that they're getting
what's advertised.
Deutsche Bank's ESG Probe Triggers Review at Asset
Managers, by Christine Watkins, September 5, 2021,
Bloomberg via Sports Grind Entertainment, USA.
-------------------------------------------------------------
Investors care more
about fair wages for workers than environmental issues,
ESG survey shows. "When broken down by
topic, preference for investing in a company that pays
workers fair wages edged out a preference for
environmentally friendly companies, with 65% of total
respondents flagging wages and 53% citing environment."
[COMMENTARY] The
predominant thinking has been that it's the 'E' in ESG
that attracts investors. Do we see evidence that the 'S'
side is gaining momentum? Or is this survey skewed in
some way? I'm not convinced that many
professional investors in this space would agree with
this survey's findings.
Investors care more about fair wages for workers than
environmental issues, ESG survey shows, by Debbie
Carlson, September 4, 2021, MarketWatch, USA.
-------------------------------------------------------------
Most Green Investment
Funds Missing Paris Goals. "The report from
InfluenceMap -- 'Climate Funds: Are they Paris Aligned?'
-- analysed 723 listed-equity funds with total assets
under management of over US$330 billion, dividing funds
which used one of 30 descriptions into two categories:
broad ESG and climate-themed.
In the broad ESG category,
Influence Map identified 593 equity funds with over
US$265 billion in total net assets of which 71%, had a
negative Portfolio Paris Alignment score.
Of the 130 climate-themed
funds, with titles such as 'low carbon', 'fossil fuel
free' and 'green energy', and over US$67 billion in
total net assets, 55% had a negative Paris Agreement
alignment score. The lowest score was -- 42% with the
best scoring fund hitting +90%."
[COMMENTARY] Big
players such as State Street, UBS, and even Blackrock,
did particularly badly. I think that the report's
researchers are also somewhat off-base by not accounting
for the highly differentiated objectives of these funds
by exclusively focusing on whether or not they
specifically align with the Paris Agreement.
For instance, if a fund's objective is to purposely buy
stocks in fossil fuel-related companies to encourage
engagement with them to promote greater carbon reduction
through new reduction methodologies or renewables, that
would seem to put such funds at the low end of this
analysis.
Most Green Investment Funds Missing Paris Goals, by
ESG Investor, September 2, 2021, Regulation Asia,
Singapore/Hong Kong.
-------------------------------------------------------------
Yale climate professor:
'Divestment is a waste of time and energy.'
"PODCAST: Cary Krosinsky explains why the divestment
movement doesn't help solve climate change and what fund
managers can do instead."
[COMMENTARY] I
haven't had a chance to listen to this podcast yet. but
Cary Krosinsky is someone with terrific credentials and
whom I greatly respect. From my perspective, there's an
argument that can be made that divestment affects
secondary financial markets and has little direct
influence on new issuers of say, funding new coal
projects.
Also, note that starving funding for new fossil fuel-related projects can make their stocks more profitable
than they might otherwise be. The reason is that
continuing or rising high prices for their products
(note oil!) with dwindling supply enables much higher
margins and profits. Thus benefiting shareholder
returns.
Furthermore, it possibly
detracts from the possibility of funding fossil fuel-related projects to reduce carbon emissions.
Yale climate professor: 'Divestment is a waste of time
and energy,' by Loukta Gyftoppoulou, September 2,
2021, Wealth Manager, USA.
-------------------------------------------------------------
SEC Wants Sustainable
Funds to Disclose More About Their Criteria.
"In
a videoconference, Chairman Gary Gensler
told members of the European Parliament that the SEC is
considering whether to require fund managers to disclose
more information about the labeling of their
environmental, social and governance, or ESG, investing
products. Gensler said he has asked SEC employees to
make recommendations for disclosure requirements.
Calls for public comment are
expected to start by year's end or early 2022."
[COMMENTARY] There's
little doubt that some 'sustainable' funds are barely
that at all, hardly differing in their stock components
to 'conventional' counterparts. They can argue that
their aim is to 1) engage with climate 'laggards' to
encourage them to do better. And, or, 2) purposely
invest in climate laggards that propose to do much
better on ESG as these companies have often shown to
have greater stock price appreciation than established
high-performance ESG companies.
SEC Wants Sustainable Funds to Disclose More About Their
Criteria, by Evie Liu, September 1, 2021, Barron's,
USA.
-------------------------------------------------------------
Exchange for ethical
investments gets off the ground with two listings.
"A stock exchange hatched out of Silicon
Valley that's taking on established rivals in New York
and Chicago is listing its first two companies."
[COMMENTARY] This
new exchange will be fascinating to watch! Will it
attract listings? Will it attract investors? I hope that it receives rapid success.
Exchange for ethical investments gets off the ground
with two listings, by Katherine Doherty, August 27,
2021, Independent.ie, Ireland.
-------------------------------------------------------------
Investor Familiarity
With Sustainable Investing Remains Low.
"Despite its growing importance in the capital markets,
news about sustainable investing or ESG funds has not
trickled down to average U.S. investors. And with the
pandemic perhaps shifting investors' economic
priorities, they are expressing less interest in such
funds for themselves.
Still, the future of
sustainable investing looks promising, with younger
investors paying closer attention to it and expressing
greater interest than older working-age investors and
retirees."
[COMMENTARY] I
find it amazing that the investment industry's interest
in ESG and sustainability has gained tremendous
momentum. Yet, interest in this space by individual US
investors has not changed since before the pandemic.
Though this survey does indicate, as numerous others
show, that younger investors are much more interested in
ESG and sustainable investing.
Investor Familiarity With Sustainable Investing Remains
Low, by Lydia Saad, August 23, 2021, Gallup, USA.
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There's $35 Trillion
Invested in Sustainability, but $25 Trillion of That
Isn't Doing Much. "Since ESG lacks
definitions, it can often mean different things to
different people, said Lisa Sachs, who heads Columbia
University's Center on Sustainable Investment.
And because ESG integration
is often conflated with other responsible investment
strategies such as impact investing and negative and
positive screening, it's helping to create a false
impression that the world of money management is
directing capital towards helping solve societal ills."
[COMMENTARY] As
I've said previously both ESG reporting standards and
funds touting ESG credentials need to have more
stringent standards. However, there is a caveat to this.
Funds that explicitly invest in companies beginning
their ESG journeys. Studies have shown that such
companies can see more rapid stock appreciation than
companies with established ESG credentials.
I believe that the Global Sustainable Investment
Alliance who collates the data needs to have categories
varying from 'deep' green to 'light' green in terms of
assets under management!
There's $35 Trillion Invested in Sustainability, but $25
Trillion of That Isn't Doing Much, by Saijel Kishan,
August 18, 2021, Bloomberg Green, Australia.
-------------------------------------------------------------
'More emissions than
Exxon': Is meat the next target for divestment?
"The finance sector is increasingly reluctant to
finance fossil fuel expansion, and 'Big Ag' could be
next in the divestment campaign firing line, argues
Charlotte Moore from SIGWATCH."
[COMMENTARY] On
an individual basis, it's happening already. I know many
individual investors who won't touch meat stocks. Look
at the success of Beyond Meat. Only institutions are
holding back. It's just a matter of time before many of
them join the numerous individual investors in this
endeavor.
'More
emissions than Exxon': Is meat the next target for
divestment? By
Charlotte Moore, August 17, 2021, Investment Week, USA.
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ESG Investing: Does It
Distort the Market? "Bottom line on ESG:
Overall, it must be a force for good to measure company
externalities and hold investors accountable in some
way. It just seems we got into a weird phase of its
evolution with the concentration in mega-cap tech
stocks. I look forward to reading about the movement at
the end of this decade and if created the changes we
wanted, or more unintended consequences."
[COMMENTARY] It
can be argued that ESG investing does distort the
markets. However, isn't that the point! Now, one could
argue that passive index investing means possible
carelessness with ESG criteria of companies in the index
which over time lowers ESG standards... and returns!
ESG Investing: Does It Distort the Market? By Kevin
Cook of Zacks, August 13, 2021, Nasdaq.com, USA.
-------------------------------------------------------------
US issuers still split
on ESG standards, study finds. "As the SEC
considers imposing climate-related reporting rules, US
companies are divided on what they should look like."
[COMMENTARY] It's
to be expected that issuers will have differing opinions
on ESG standards. I expect that there'll be many common
standards but others will be industry-specific.
US issuers still split on ESG standards, study finds,
by Maria Ward Brennan, August 11, 2021, Corporate
Secretary, USA.
-------------------------------------------------------------
Bond investors need to
step up on human rights. "Too many fund
firms use strong rhetoric on abuses while lending money
to oppressive regimes."
[COMMENTARY] With
many ESG rating firms providing sovereign ESG ratings,
it seems not much of a step to incorporate more scrutiny
of human rights issues. I believe some rating
organizations already do this.
Bond investors need to step up on human rights, by
Laurence Fletcher, August 7, 2021, Financial Times, UK.
-------------------------------------------------------------
ESG: EU Green Bond
Standard. "The European
Green Bond Standard proposal will create a
high-quality voluntary standard for bonds financing
sustainable investment. Issuers will have a recognised
way of demonstrating that they are funding green
projects aligned with the EU Taxonomy. Investors will be
better able to ascertain that their investments are
sustainable, thereby reducing the risk of greenwashing."
[COMMENTARY] This
new standard sounds great. We'll have to see in practice
how it works out. If successful, it could, in short
order, become the global standard for green bonds.
ESG: EU Green Bond Standard, by Richard Kelly, July
27, 2021, Ireland.
-------------------------------------------------------------
Amory Lovins:
Decarbonizing industry isn't just about costs, it's
about profits. "This week Amory
Lovins, co-founder of RMI and clean energy BAMF,
released a paper, 'Decarbonizing
our toughest sectors -- profitably,' encouraging a
fresh perspective on the costs of decarbonizing heavy
transport and industrial heating. The paper makes the
case that deep decarbonization isn't a cost: It's an
investment that will make communities and companies
money."
[COMMENTARY] Amory
Lovins is one of the great pioneers of ethical and
sustainable investing. In his new article, he makes a
great case demonstrating that de-carbonizing the biggest
polluters can be profitable for all stakeholders. It
pays to listen to him.
Amory Lovins: Decarbonizing industry isn't just about
costs, it's about profits, by Sarah Golden, August
6, 2021, GreenBiz, USA.
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5 ways to separate real
ESG leadership from greenwashing. "How can
people better identify greenwashing and help reinforce
the growing sense of accountability for ESG standards?
Look for these factors."
[COMMENTARY] Some
good points in how to identify 'greenwashing' in
companies are made in this article.
5 ways to separate real ESG leadership from
greenwashing, by Marjella Lecourt-Alma, August 4,
2021, Fast Company, USA.
-------------------------------------------------------------
Where's All That Green
Bond Money Really Going? "Overall issuance
is skyrocketing, but transparency is hard to come by."
[COMMENTARY] There's
a clear need for a universal mechanism for tracing the
flow of funds raised via green bonds. Otherwise,
confidence in this market could falter, and dealing with
climate change negatively affected. This is beside the
potential detrimental impact on the stock and bond
prices of the corporation for misbehavior. That alone
might be a sufficient deterrent. Who knows?
Where's All That Green Bond Money Really Going? By
Tim Quinson, August 4, 2021, Bloomberg Green, USA.
-------------------------------------------------------------
More than $3T of
companies outside the EU could be on the hook for SFDR.
"Until recently, European legislation may
not have been at the top of the agenda for financial
services firms in the U.S., or anywhere outside the
European Union.
But two factors might have
you suddenly realizing that it's worth paying attention
to EU sustainable investment regulation, regardless of
where you’re based. This is, especially true since some
of this regulation is already in effect.
First, in order to market
investment funds in the EU, firms often set up a local
legal entity that could potentially expose the parent
company to EU regulation. Second, the EU put new
regulation in place mandating sustainability disclosure
from certain types of financial firms."
[COMMENTARY] For
those readers engaged in financial services with European
operations this is something you must investigate!
More than $3T of companies outside the EU could be on
the hook for SFDR, by Divya Mankikar, July 30, S&P
Global, UK.
-------------------------------------------------------------
Regulators to unlock
'black box' of ESG corporate ratings.
"Global regulators took a first step on Monday to unlock
the 'black box' of corporate environmental, social and
governance (ESG) ratings, suggesting formal oversight of
a sector which helps channel trillions of dollars into
climate-friendly investment funds.
Despite growing influence,
ESG raters and data providers are largely unregulated,
lack transparency in their methods, offer uneven
coverage and harbour potential conflicts of interest,
said the International Organization of Securities
Commissions (IOSCO), which groups market regulators from
the United States, Europe and Asia."
[COMMENTARY] I
just hope that should the ESG raters be regulated that
there is room for differences of opinions between them
on any given stock. I do agree, however, that the
structure of the ESG data needs more uniformity. That
would provide for better cross-rater comparisons on
companies.
Regulators to unlock 'black box' of ESG corporate
ratings, by Kim Kyung-Hoon, July 26, 2021, Reuters,
UK.
-------------------------------------------------------------
Blog: Acting Enforcement
Director warns of ESG enforcement actions.
"According to Law
360 reporting on a webcast panel last week,
Acting Director of Enforcement Melissa Hodgman, warned
that, in addition to 'increased scrutiny' of 'funds
touting green investments,' we may well see more ESG
disclosure-related enforcement actions in general."
[COMMENTARY] I
believe it's a good idea that funds and fund managers,
etc., live up to what they profess. If not, there should
be penalties.
Blog: Acting Enforcement Director warns of ESG
enforcement actions, by Cooley LLP, July 21, 2021, JD
Supra, USA.
-------------------------------------------------------------
ESG Assets in Europe
Shrink after Regulatory Consolidation Efforts.
"While assets in sustainable investments declined to
$12 trillion in Europe over 2020 from $14 trillion in
2018, the falling assets in attributed to falling
investment demand for the ESG theme, Bloomberg reports.
The drop in ESG assets in Europe is a result of policy
changes that tightened the requirements for what can be
considered a responsible investment, according to Simon
O'Connor, chair of the Global Sustainable Investment
Alliance."
[COMMENTARY] With
36% of assets under management globally now termed
'responsible' by the GSIA, I wonder if there's been a
weakening as to what are considered
ethical-ESG-sustainable investments? I think these
numbers from Europe provide the answer. Probably 'yes'.
ESG Assets in Europe Shrink after Regulatory
Consolidation Efforts, July 21, 2021, ETF Trends,
USA.
-------------------------------------------------------------
What you should know
about potential new international reporting standards.
"The International Integrated Reporting
Council (IIRC) and Sustainability Accounting Standards
Board (SASB) have merged into
the Value Reporting Foundation. They and three other
sustainability reporting bodies -- CDP, Climate
Disclosure Standards Board (CDSB) and Global Reporting
Initiative (GRI), known as the Group of Five -- have
called for closer coordination and launched a prototype
climate-related financial disclosure standard."
[COMMENTARY] It's
great to see this finally coming together. When it does,
analyzing ESG performance between companies should be
easier.
What you should know about potential new international
reporting standards, by Adam Fishman, July 19, 2021,
GreenBiz, USA.
-------------------------------------------------------------
The GSIA Releases its
Global Sustainable Investment Review 2020.
"Responsible investment assets under management make up
a total of 36% of total assets under management."
[COMMENTARY] This
is a staggering amount! I can't help but feel as per the
article below ("This World May Be Better Off Without
ESG Investing") that the guidelines of what is
sustainable, responsible, etc., are becoming ever
weaker. This is not to say that numerous companies are
now being encouraged to be more sustainable though!
The GSIA Releases its Global Sustainable Investment
Review 2020, by Responsible Investment Association
Canada, July 18, 2021, Canada.
-------------------------------------------------------------
The World May Be Better
Off Without ESG Investing. "The bar for
what constitutes a good corporate citizen is abysmally
low... This could explain why Exxon and BP,
which pose existential threats to the planet, get an
average ('BBB') aggregate score from MSCI..."
[COMMENTARY] In
some quarters ethical and sustainable investors invest
in companies they consider 'light,' 'medium' or 'deep'
green. I think the ESG rating companies need to do a
similar thing!
The World May Be Better Off Without ESG Investing,
by Hans Taparia, July 14, 2021, Stanford Social
Innovation Review, USA.
-------------------------------------------------------------
Can ESG disclosures get
you sued? "Everyone expects the SEC to make
climate change and other ESG reporting mandatory, and
those tech giants -- Amazon, Alphabet, Autodesk, eBay,
Facebook, Intel and Salesforce -- said in a joint
letter they support this. What they don't
support is including the information in filings such as
annual 10-Ks and quarterly 10-Qs because, they say, it
could open them up to costly lawsuits."
[COMMENTARY] I
think it's right that the SEC should make ESG reporting
mandatory in company filings. Furthermore, that
interested parties should have the ability to challenge
such reporting. And in the courts if necessary. However,
clearly, limits of some kind would have to be placed on
legal challenges.
Can ESG disclosures get you sued? By CJ Clouse, July
15, 2021, GreenBiz, USA.
-------------------------------------------------------------
CFA Institute's draft
ESG standards could facilitate 'greenwashing,' IFIC
says. "Without establishing standards for
labelling environmental, social and governance (ESG)
products, the CFA Institute's proposed disclosure
standards could lead to more 'greenwashing' of
investment funds, Canada's fund industry lobby group
says."
[COMMENTARY] I
wonder if other affected organizations, funds, etc.,
have come to the same conclusion?
CFA Institute's draft ESG standards could facilitate
'greenwashing,' IFIC says, by Mark Burgess, July 14,
2021, Investment Executive, Canada.
-------------------------------------------------------------
What you need to know
about the European Green Deal - and what comes next.
"The European Green Deal has the potential
to play a key role not only in ensuring this recovery in
the short term but also in addressing long-term climate
change threats. The launch of the 'Fit for 55' package
this week is expected to mark an important step in
overhauling climate policies and enabling the EU to
deliver on its commitment to reduce emissions by 55% by
2030."
[COMMENTARY] This
is a big deal. It will influence and affect numerous
industries, governments, and probably billions of
consumers, globally. Everyone needs to pay attention to
this!
What you need to know about the European Green Deal -
and what comes next, by Teresa Belardo, July 13,
2021, World Economic Forum, Switzerland.
-------------------------------------------------------------
Study: Financial Markets
Ignore Environmental Damage. "Credit-rating
agencies say they can discipline companies that behave
badly, and they have in some cases, but research reveals
negligible progress."
[COMMENTARY] Although
most investors profess a concern for the environment
while investing, this study might suggest they really
don't. I'd like to see other studies of this kind to see
if the findings from the study are true.
Study: Financial Markets Ignore Environmental Damage,
by Lilah Burke, July 12, 2021, The Revelator, USA.
-------------------------------------------------------------
AMG Acquires Control of
Parnassus, the Last Big ESG Firm. What This Means for
ESG Investors. "Sustainable investing is
red-hot. For the most recent evidence, look at last
week's acquisition news: Affiliated Managers Group paid
$600 million for a majority stake in privately held
Parnassus Investments, which sent Affiliated's stock
(ticker: AMG) up as much as 7% on the day the deal was
announced."
[COMMENTARY] Many of the ethical and SRI pioneer firms are falling
into the hands of huge establishment players. I suppose
it was inevitable that this happens. However, there are
some nimble and niche players also entering the space!
AMG Acquires Control of Parnassus, the Last Big ESG
Firm. What This Means for ESG Investors, by Leslie
P. Norton, July 9, 2021, Barron's, USA.
-------------------------------------------------------------
Schroders Institutional
Investor Study 2021: On ESG, US Investors Focus on Data,
Social Impact. "US institutional investors
focus more on ESG data and social factors than their
global counterparts, according to a new study by global
asset manager Schroders."
[COMMENTARY]
The survey results support the findings of other similar
studies.
Schroders Institutional Investor Study 2021: On ESG, US
Investors Focus on Data, Social Impact, press
release, July 6, 2021, Schroders/Business Wire, USA.
-------------------------------------------------------------
Will Mandated ESG
Disclosures Lead to Increased Litigation Risk?
"With the Securities and Exchange Commission
resolute in its efforts to establish new disclosure
requirements related to environmental, social and
governance (ESG) risks, companies appear increasingly
resigned to some measure of mandatory reporting.
But these companies haven't
yet given up: in an effort to contain litigation risk,
they continue to press the SEC to show some flexibility
in the means by which ESG risks are reported.
The distinction between
furnishing and filing climate change disclosures is not
purely semantic, as filed disclosures are held to a
higher regulatory standard than those that are merely
furnished."
[COMMENTARY]
One can see why companies are concerned -- as should
their shareholders. Such a distinction 'between
furnishing and filing climate change disclosures'
might well be the case in many other jurisdictions too.
Will Mandated ESG Disclosures Lead to Increased
Litigation Risk? By Bracewell LLP, July 2, 2021, JD
Supra, USA.
-------------------------------------------------------------
2021's Best 50 Canadian
corporate citizens. "Every year since 2002,
Corporate Knights has evaluated Canadian companies with
annual revenue of over $1 billion on a growing number of
key performance indicators. This year's Best 50
Corporate Citizens were evaluated against 24 key
performance indicators, including the clean revenue
result for each company, which is percentile-ranked
against industry peers and weighted at 50% toward the
overall score."
[COMMENTARY]
Many of the companies on this list will be of interest
to ethical and sustainable investors from around the
world.
2021's Best 50 Canadian corporate citizens, by
staff, June 30, 2021, Corporate Knights, Canada.
-------------------------------------------------------------
Why Green Assets May Not
Continue to Outperform. "Many investors are
attracted to ESG securities on promises of high returns,
but they are 'misguided, Wharton finance professor Luke
Taylor said on the Wharton
Business Daily radio show on SiriusXM.
(Listen to the podcast here.)
The past performance of ESG
securities is not a reliable indicator of returns in the
future, especially when past returns were largely driven
by 'shocks' such as bad news about climate change, he
noted. 'Absent more unexpected shocks in the future, we
don't see those green stocks outperforming ['brown' or
environmentally unfriendly stocks] in the future.'"
[COMMENTARY]
The research paper appears to rest on a common thesis:
that high-priced stocks usually provide lower future
returns. Time will tell.
Why Green Assets May Not Continue to Outperform,
June 29, 2021, Wharton Business Daily, USA.
-------------------------------------------------------------
Low-quality assurance of
ESG reports pose stability risk: IFAC.
"Only 51% of companies back up their reports on
sustainability with assurance, a study of 1,400
companies by the International Federation of Accountants
(IFAC) found, warning that low-quality assurance is an
'emerging investor protection and financial stability
risk.'"
[COMMENTARY]
I've had a big concern for over four decades. It's that
when ethical investing finally gets its day in the sun
that there will be not only be agreed reporting standards
but also a regulated independent class of specialized
auditors to audit and assure the numbers and facts.
Low-quality assurance of ESG reports pose stability
risk: IFAC, by Jim Tyson, June 24, 2021, CFO Dive,
USA.
-------------------------------------------------------------
Is ESG harmonization and
convergence finally coming? "Last week, the
U.S. House of Representatives passed legislation that
would require public companies to report environmental,
social and governance (ESG) metrics...
The bill, simply titled the
ESG Disclosure Simplification Act of 2021, comes on the
heels of the U.S. Securities and Exchange Commission's
(SEC) decision to open public comments on climate change
disclosures to inform its impending guidance -- and gets
us one more step closer to mandatory ESG disclosure."
[COMMENTARY]
Finally, the U.S. government and regulatory authorities
look like they're getting the message from the markets.
Is ESG harmonization and convergence finally coming,
by Aman Singh, June 24, 2021, GreenBiz, USA.
-------------------------------------------------------------
Professionals see
evolving ESG links to executive compensation.
"Boards and investors may not always see eye to eye
on metrics and weights."
[COMMENTARY]
This is all part of the evolution of corporate ESG. It
will certainly be messy for a while.
Professionals see evolving ESG links to executive
compensation, by Ben Maiden, June 24, 2021,
Corporate Secretary, USA.
-------------------------------------------------------------
House (US) Passes ESG
Disclosure Simplification Act of 2021. "By
a razor thin vote of 215 to 214, the House of
Representatives passed the
ESG Disclosure Simplification Act of 2021.
The Act would require public companies to disclose in
any proxy or consent solicitation material for an annual
meeting of the shareholders... "
[COMMENTARY]
This is good news, though I believe it still has to pass
the US Senate. Many think it might not make it through
there. Let's hope it will.
House (US) Passes ESG Disclosure Simplification Act of
2021, by Dodd-Frank, June 21, 2021, Lexology, USA.
-------------------------------------------------------------
The Dark Side of Solar
Power. "Solar
energy is a rapidly growing market, which should be good
news for the environment. Unfortunately there's a
catch. The replacement rate of solar panels is faster
than expected and given the current very high recycling
costs, there's a real danger that all used panels will
go straight to landfill (along with equally
hard-to-recycle..."
[COMMENTARY]
Recycling solar panels has long been a major concern of
mine regarding solar power. The firms in the business
have to get behind solutions or see their business
potentially 'dwindle.'
The Dark Side of Solar Power, by Atalay Atasu,
Serasu Duran, and Luk N. Van Wassenhove, June 18, 2021,
Harvard Business Review, USA.
-------------------------------------------------------------
Green Bonds Were a
Better Safe Haven Than Gold During the Pandemic.
"Climate-friendly debt served as a better
protection against large market fluctuations than gold,
as well as performing better than other environmental,
social, and governance investments, according to new
research from Imran Yousaf of Pakistan's Air University,
Muhammed Tahir Suleman of the University of Otago in New
Zealand, and Riza Demirer of Southern Illinois
University Edwardsville."
[COMMENTARY]
This is not a surprising finding. Green bonds have
become the new investment favourite. How many people
want gold today?
Green Bonds Were a Better Safe Haven Than Gold During
the Pandemic, by Jessica Hamlin, June 8, 2021,
Institutional Investor, USA.
-------------------------------------------------------------
Mandatory ESG
disclosures are a political inevitability.
"The SEC is
gathering public input about corporate
climate reporting. The comment request is
one of several actions the agency has
taken over the past several months to elevate ESG
oversight, including establishing a
climate and ESG enforcement task force...
In a
June 3 speech, Roisman said the thrust
of climate disclosure seems to be on assessing the
damage a company does to the environment, not the havoc
climate change can wreak on a company. That led him to
question the SEC's role."
[COMMENTARY]
It seems to me that investors need to know both sides:
the effects of climate change on the company and how the
company contributes to climate change.
Mandatory ESG disclosures are a political inevitability,
by Mark Schoeff Jr., June 9, 2021, Investment News, USA.
-------------------------------------------------------------
Banning Investment
Managers Who Shun Fossil Fuels Is a Bad Idea.
"Texas has joined a group of states proposing
legislation that would ban private investment management
companies that focus on sustainable investing, to the
ire of the oil and gas industry. Attorney J. Carl Cecere
argues politicizing state-pension investment strategy is
bad for pensioners and violates the First Amendment."
[COMMENTARY]
I agree with the writer. Not only because I'm biased
towards renewable energy, but also on the basis that
asset managers need to have the freedom to invest
according to their client's wishes, and so forth.
Banning Investment Managers Who Shun Fossil Fuels Is a
Bad Idea, by J. Carl Cecere, June 4, 2021, Bloomberg
Law, USA.
-------------------------------------------------------------
Rating the ESG raters:
Why Sustainable Investing Needs More Independent
Verifiers. "With an array of data providers
and indices to choose from, third party ESG verifiers
have stepped into the market to help screen information
available and offer some clarity. In Switzerland, one
such company is Geneva-based sustainable investment
advisory firm Conser. Founded by Angela de Wolff (also
one of the co-founders of Sustainable Finance Geneva),
the firm has developed its own proprietary methodology
to capture a variety of different ESG opinions."
[COMMENTARY]
I guess this type of service had to happen. And I think
it's good. It'll be a while to see if it takes off.
Rating the ESG raters: Why Sustainable Investing Needs
More Independent Verifiers, by Kasmira Jefford, June
2, 2021,
Geneva solutions, Switzerland.
-------------------------------------------------------------
Auditors may see
increased demand for ESG attestation.
"During a virtual session Monday, Kristen Sullivan, CPA,
CGMA, a partner with Deloitte & Touche LLP and the
firm's Americas region sustainability services leader,
gave an overview of the concerns public companies,
directors, and auditors have about the new regulatory
focus on ESG disclosures.
To date, ESG disclosures
have tended to be separate from regulatory filings. But
the CAQ's road map is meant to help guide capital market
participants through the frequency and consistency of
the disclosures and whether the information is
comparable from company to company, Sullivan said."
[COMMENTARY]
I've long believed that CSR/ESG disclosures need to be
audited and attested to by a regulated and licensed
auditing entity. Only in this way can investors and
stakeholders have confidence in the facts, data, and
material being presented. Furthermore, there must be, as
is now occurring, some standardization of such facts,
data, and material. It should also be shown in what way
it might be material to the activities and financial
performance of a company.
Auditors may see increased demand for ESG attestation,
by Joseph Radigan, May 28, 2021, Journal of Accountancy,
USA.
-------------------------------------------------------------
The Theory at the Heart
of Modern Portfolios Is Leading Investors Astray.
"These
activities (ESG, SRI, and impact investing) form a coherent challenge to the limitations
of modern portfolio theory. MPT, the dominant investment
paradigm in the world, focuses on diversification to
minimize risk."
[COMMENTARY]
Yes, MPT is upended by our emphasis on ESG,
sustainability, and ethics!
The Theory at the Heart of Modern Portfolios Is Leading
Investors Astray, by Jon Lukomnik and James P.
Hawley, May 28, 2021, Barron's, USA.
-------------------------------------------------------------
Does corporate social
responsibility affect shareholder value? Evidence from
the COVID-19 crisis. "We observe that firms
engaged in more CSR activities outperform other firms.
This suggests that CSR plays a positive role in
determining shareholder value, particularly for an
emerging market where minority shareholder rights are
weak. Collaborating with our main finding, we further
find that governance metrics play a significant role."
[COMMENTARY]
This study was done in India on companies whose main
revenues and activities were also in India. It's good to
note that CSR was found to be positive for shareholder
value.
Does corporate social responsibility affect shareholder
value? Evidence from the COVID-19 crisis, by Somya
Arora, Jagan Kumar Sur, Yogesh Chauhan, at the Indian
Institute of Management Raipur, Raipur, India, May 26,
2021. International Review of Finance.
-------------------------------------------------------------
Indexing Giants 'Should
Prepare for Disruption' Says New Report.
"MSCI, FTSE Russell, S&P Dow Jones and Bloomberg could
see their dominance of the indexing industry threatened
by sustainability specialists, according to a new
report."
[COMMENTARY]
When a new industry takes shape, there are always new
entrants and winners. It'll likely be the same as ESG
investing matures. Who will be the winners?
Indexing Giants 'Should Prepare for Disruption' Says New
Report, by staff, May 25, 2021, Banking Exchange,
USA.
-------------------------------------------------------------
Keeping Promises? Carbon
Risk (CR) Disclosure and Mutual Fund Portfolios.
"Indeed, fund managers are sensitive to
disclosures only in the presence of binding commitments
to environment sustainability. Sustainable funds lower
their CR score by reducing exposure to fossil fuels, not
by increasing exposure to renewables."
[COMMENTARY]
This is a highly insightful paper that illuminates the
carbon risk of conventional and sustainable US mutual
funds.
Keeping Promises? Carbon Risk (CR) Disclosure and Mutual
Fund Portfolios, by John R. Nofsinger, University of
Alaska Anchorage and Abhishek Varma, Illinois State
University. April 27, 2021.
-------------------------------------------------------------
Danger of being
corrupted? ESG ratings increase risks of greenwashing. "The
European Commission (EC) asked 650 individuals and
organisations last year for their views on the
concentration of providers in the ESG ratings market and
on the quality of the ESG ratings' analyses. 74% of
respondents called for action.
The European Securities and
Markets Authority (ESMA), noting that 'climate and
environmental risks constitute a key source of potential
financial instability', claimed the 'clear mandate to
prevent threats to financial stability and ensure
investor protection.'
Consequently, ESMA demands
that the regulatory regime should be adapted to tackle
not only an increased risk of greenwashing but also
risks of 'capital misallocation and product
mis-selling'.
Should the EC adopt this
proposal, which seems likely, this will not just mean an
end to unethical selling practices of ethical ratings,
it will also help forward-thinking investors allocate
resources and capital to truly eco-friendly projects and
to companies that take their ecological and social
responsibility seriously. Our children will thank us."
[COMMENTARY]
I thought to include the above-extended quote to give
importance to the fact that the EU is strongly
considering regulating ESG raters.
Danger of being corrupted? ESG ratings increase risks of
greenwashing, by Alpay Soyturk. May 19, 2021,
Investment Week, USA.
-------------------------------------------------------------
The Impact Of Sin Stock
Exclusion On Portfolio Performance. "'As
about 10% of the market can be classified as sin, this
would imply an additional 0.10% return loss if sin
stocks are excluded. Combined with the 0.27% estimated
loss due to the adverse effect on factor exposures ...
this brings the total loss in expected return to 0.37%
per annum.
Although this might seem
small, a pension fund which generates 0.37% lower
returns on its equity portfolio than peers may end up
providing 5% lower pensions in the long run.' That is
not an insignificant loss."
[COMMENTARY]
This article reports on a study saying that excluding 11
particular industries in a portfolio results in a
0.37% annual loss in returns. I'm sure many will debate
the methodology and conclusions of this study.
The Impact Of Sin Stock Exclusion On Portfolio
Performance, by Larry Swedroe, May 19, 2021, Seeking
Alpha, USA.
-------------------------------------------------------------
The rise of the climate
economy is upon us. "What was once a narrow
purview around clean tech recently has morphed into the
all-encompassing term of climate tech, and unlike the
boom and bust cycle that accompanied the clean energy
frenzy of the late 2000s, climate tech appears to have a
sustainable presence in the minds of long-term
investors."
[COMMENTARY]
I thought it was interesting that the term climate tech
appears to be replacing clean tech. Also, what that
means for ethical and sustainable investing.
The rise of the climate economy is upon us, by
Michael Ferrari, May 17, 2021, GreenBiz, USA.
-------------------------------------------------------------
The 100 Best Corporate
Citizens of 2021. "As companies
decarbonize, align with the Sustainable Development
Goals and rebuild an equitable economy post-pandemic,
they must be open about their efforts. Each year, 3BL
Media evaluates the largest public U.S. companies on ESG
transparency and performance."
[COMMENTARY]
This is always a good list to review, particularly for
ethical and sustainable investors.
The 100 Best
Corporate Citizens of 2021, May 17, 2021, 3BL Media,
USA.
-------------------------------------------------------------
ESG Investors Turn to
Emerging Markets, Defying Skeptics.
"There's a growing number of money managers in green
finance turning to markets not usually associated with
sustainability. Fund bosses in Europe's North, where
climate-friendly investing has gone mainstream, have
started looking much further afield to find cheap assets
they say will eventually meet their environmental,
social and governance goals."
[COMMENTARY]
I remember seeing research that says that stock
outperformance is superior in companies who are just
beginning to grow in their ESG performance. That is when
compared to companies already mature in their ESG
development. This might be something that many ethical
and sustainable investors might consider.
ESG Investors Turn to Emerging Markets, Defying
Skeptics, by Leo Laikola, Hanna Hoikkala, and
assistance from Filipe Pacheco, May 17, 2021, Bloomberg,
USA.
-------------------------------------------------------------
Faith-Based Investing
Makes Up Ground in Gains and Convenience.
"Investing according to theological beliefs 'is much
easier to do now,' a wealth adviser said. It's also as
profitable as investing without a religious screen, and
no more risky."
[COMMENTARY]
This is a simple overview of US faith-based investing.
Faith-Based Investing Makes Up Ground in Gains and
Convenience, by Paul Sullivan, May 14, 2021, The New
York Times, USA.
-------------------------------------------------------------
Investors May Turn to
Proxy Voting to Convey ESG Preferences. "As
ESG becomes increasingly relevant to investing,
investors are realizing the power of active ownership as
an investing strategy and are turning their attention to
how ESG issues are represented on corporate proxy
ballots and how funds vote on these issues, Morningstar
reports in 'The
Power of the Proxy in Retirement Plans: Empowering
workers saving for retirement with a voice on ESG issues.'"
[COMMENTARY]
Many corporate boards that have shown a reticence to
adopting significant ESG adaptations to their activities
might well be forced to do so. As ESG funds grow they
will likely become ever more active in pushing their
shareholder agendas on corporate boards.
Investors May Turn to Proxy Voting to Convey ESG
Preferences, by Ted Godbout, May 11, 2021, National
Association of Plan Advisors (NAPA), USA.
-------------------------------------------------------------
Demand for minerals
threatens clean energy rollout, IEA warns.
"'Looming mismatch' between world's climate ambitions
and availability of necessary critical minerals,
according to a new report."
[COMMENTARY]
Most ethical and sustainable investors avoid mining
stocks. Yet, without massive growth in mining, there
will be no growth in the green economy! It's high time
that sustainable investors considered investing in
mining stocks with the best ESG performance.
Not only
will they be supporting a green climate change-friendly
economy -- but they will find a new sector that'll
likely provide potentially good stock returns.
Demand for minerals threatens clean energy rollout, IEA
warns, by Nadia Weekes, May 5, 2021, Windpower
Monthly, UK.
-------------------------------------------------------------
See Japan in a different
light: How investors get ESG in world's third-largest
economy wrong. "Greenwashing is a
persistent and growing problem in the ESG landscape.
However, many companies in Japan suffer from this issue
in reverse and we believe their ESG ratings are often
significantly worse than they deserve."
[COMMENTARY]
This is important. I've long thought that Japan is
underestimated for its ESG corporate contributions. This
article explains the how and why of this. Managers of
western ESG portfolios need to consider increasing
allocations to Japanese companies.
See Japan in a different light: How investors get ESG in
world's third-largest economy wrong, by Richard
Kaye, May 5, 2021, Investment Week, UK.
-------------------------------------------------------------
ESG does not generate
outperformance, Scientific Beta warns.
"'The results show that the quality factors (high
profitability and low investment) make pronounced
positive return contributions to most types of ESG
strategies,' the report added."
[COMMENTARY]
The headline is misleading. What it boils down to is
that the concentration on tech and financials in ESG
portfolios is largely responsible for their
outperformance. When these portfolios are adjusted for
such concentration, there's no outperformance.
Also,
I don't believe this paper is to be published in a
peer-reviewed journal. Thus, one always has to be
suspect of such study results when they aren't.
ESG does not generate outperformance, Scientific Beta
warns, by Tom Eckett, May 5, 2021, ETF Stream, USA.
-------------------------------------------------------------
ESG metrics rest on
sand, not granite. "The challenge of
identifying metrics that drive 'better' or 'worse' ESG
results."
[COMMENTARY]
This is a good article that describes the situation and
challenges of creating and obtaining the 'right' ESG
metrics for any given company.
ESG metrics rest on sand, not granite, by Ingo
Walter, May 4, 2021, MarketWatch, USA.
-------------------------------------------------------------
Ethical investing
encourages consumers to invest more.
"Latest research shows ESG finance encourages investors
to leave less in cash."
[COMMENTARY]
This shows that investors get excited about ethical,
ESG, and sustainable investing once they see how to do
it--and particularly if it's during a time of gains!
Ethical investing encourages consumers to invest more,
by Mark Shoffman, April 27, 2021, Interactive Investor,
UK.
-------------------------------------------------------------
Sixty-eight of 77
industries significantly affected by climate risk, SASB
says. "SASB released an updated Climate
Risk Technical Bulletin last week to help companies
better understand how they can disclose climate risk in
a manner that provides investors with helpful
information."
[COMMENTARY]
This is not just important reading for the affected
companies, but for investors too!
Sixty-eight of 77 industries significantly affected by
climate risk, SASB says, by Mike Schnitzel, April
27, 2021, CorporateSecretary, USA.
-------------------------------------------------------------
Wall Street's
Trillion-Dollar ESG Club Comes With Huge Tax Perks.
"Four banks pledge $6 trillion in
sustainable finance, and the billions they'll save in
taxes is one of the benefits."
[COMMENTARY]
Hopefully, there's some innate desire to do such
investments too
though!
Wall Street's Trillion-Dollar ESG Club Comes With Huge
Tax Perks, by Max Abelson and Lananh Nguyen, April
23, 2021, Bloomberg Green, USA.
-------------------------------------------------------------
U.S. SEC review of
socially responsible funds finds 'potentially
misleading' claims. "The U.S. Securities
and Exchange Commission on Friday said it has found
'potentially misleading' claims and inadequate controls
around investing environmental, social and governance
(ESG) issues in a review of investment advisors and
funds."
[COMMENTARY]
This is good news. The industry needs some cleaning out
of the greenwashing that exists.
U.S. SEC review of socially responsible funds finds
'potentially misleading' claims, by Reuters staff,
April 12, 2021, Reuters, USA.
-------------------------------------------------------------
BlackRock Is Pushing to
Offer Sustainable Investments to 401k Plans, CEO Says.
"With the Biden Administration friendly to
sustainable investing, BlackRock is making a push to
offer those types of investments to retirement plans,
CEO Larry Fink said in an interview."
[COMMENTARY]
Employees of most firms will welcome this! As you know
the number of such ESG-ethical-sustainable plans has
been pathetic relative to the number of people interested.
BlackRock Is Pushing to Offer Sustainable Investments to
401k Plans, CEO Says, by Leslie P. Norton, April 16,
2021, Barron's, USA.
-------------------------------------------------------------
SEC will not assess
merit of ESG investments: Peirce. "The
agency's role is not to determine whether any particular
strategy is a good one, but to ensure investors know
what they are getting, according to Securities and
Exchange Commission member Hester Peirce."
[COMMENTARY]
This is what I'd expect from the SEC.
SEC will not assess merit of ESG investments: Peirce,
by Mark Schoeff Jr., April 13, 2021, InvestmentNews,
USA.
-------------------------------------------------------------
(US) ESG funds beat out
S&P 500 in 1st year of COVID-19; how 1 fund shot to the
top. "In the first 12
months of the COVID-19 pandemic, many large investment
funds with environmental, social and governance criteria
outperformed the broader market. One fund went from
being among the poorest performers to the top of the
list following tweaks to its portfolio."
[COMMENTARY]
This is a good review of how US ESG funds performed in
2020.
(US) ESG funds beat out S&P 500 in 1st year of COVID-19;
how 1 fund shot to the top, by
Esther Whieldon and Robert Clark, April 6, 2021, S&P
Global, USA.
-------------------------------------------------------------
Op-Ed: Europe's New ESG
Rules Create an Opportunity for US Investors.
"The
regulations will have a tremendous
impact on asset managers and firms operating outside the
bloc. The EU might be the first to move on sustainable
finance regulations, but its objectives are a harbinger
of things to come around the globe."
[COMMENTARY]
This partly answers the issue raised concerning
greenwashing by funds claiming ESG and sustainability
credentials. Regulators -- and with President Biden's
enthusiasm for ESG -- greenwashing and fund integrity
concerning their legitimate ESG claims will come under
greater scrutiny.
Op-Ed: Europe's New ESG Rules Create an Opportunity for
US Investors, by Hari Bhambra, March 31, 2021, Chief
Investment Officer, USA.
-------------------------------------------------------------
Why all funds becoming
ESG may not be a good thing. "The trouble
is that as things stand, it is easy for managers to pay
lip service to a sustainable investment approach in
their marketing material and fund name, while in reality
adopting a pretty light touch in that regard - a
practice known as greenwashing."
[COMMENTARY]
The warnings about greenwashing are valid. However, it
appears that governments and investment industry
regulators are increasingly taking steps to ward off the
problem.
Why all funds becoming ESG may not be a good thing,
by Haydon Waldek, March 30, 2021, Interactive Investor,
UK.
-------------------------------------------------------------
Is harmonization of
reporting standards possible or even desirable?
"If harmonization means consensus on a single
standard, then the answer is most likely no. Why? Let's
consider four major components of the context in which
this ecosystem operates."
[COMMENTARY]
I agree with the writer. For instance, how can you
quantify, as the writer says, "culture; values;
processes; strategies; product responsibility; quality
of management, among others." However, metrics that
can be quantifiable and uniformerly used across and
within industries-- should be. Thus scores by ESG rating
agencies will still differ even with many uniform
metrics.
Is harmonization of reporting standards possible or even
desirable? By
Antonio Vives, March 24, GreenBiz, USA.
-------------------------------------------------------------
Sustainable agriculture
is the next way ESG investors can fight climate change.
"7 ways for ESG investors to profit from sustainable
agriculture."
[COMMENTARY]
There are huge possibilities for sustainable practices
and ESG among agricultural companies. This area is only
now beginning to be addressed in the public markets.
Sustainable agriculture is the next way ESG investors
can fight climate change, by Debbie Carlson, March
24, 2021, MarketWatch, USA.
-------------------------------------------------------------
Financial world
greenwashing the public with deadly distraction in
sustainable investing practices. "The
financial services industry is duping the American
public with its pro-environment, sustainable investing
practices. This multitrillion dollar arena of socially
conscious investing is being presented as something it's
not. In essence, Wall Street is greenwashing the
economic system and, in the process, creating a deadly
distraction. I should know; I was at the heart of it.
As the former chief
investment officer of Sustainable Investing at
BlackRock, the largest asset manager in the world with
$8.7 trillion in assets, I led the charge to incorporate
environmental, social and governance (ESG) into our
global investments."
[COMMENTARY]
This is quite an indictment. However, there's more
detail in the article which expands on the fact that ESG
itself is needed!
Financial world greenwashing the public with deadly
distraction in sustainable investing practices, by
Tariq Fancy, March 16, 2021, USA Today, USA.
-------------------------------------------------------------
CFA Institute Launches
Global Certificate in ESG Investing. "The
CFA Institute has announced that it will market a
certificate in environmental, social and governance
(ESG) investing, created by the CFA Society of the
United Kingdom, in financial hubs across the globe."
[COMMENTARY]
They've been a long time in getting around to this! It's
a great step forward though for the financial
profession.
CFA Institute Launches Global Certificate in ESG
Investing, by Amanda Umpierrez, March 17, 2021,
planadvisor, USA.
-------------------------------------------------------------
Ratings Agencies Punish
Companies That Try To Do Good. "In their
study, Lioui and his co-authors compared the data of
several ratings agencies: Asset4 (Refinitiv), MSCI KLD,
MSCI IVA, Bloomberg, Sustainalytics (Morningstar) and
RobecoSam. Fitch, Moody' MCO +0.2% and S&P also provide
thousands of ESG data scores...
How do the ratings agencies
decide how good or bad a company is at ESG? Mostly their
assessment is based on a company's own reporting with
some other metrics thrown in from trade journals, news
articles or other sources."
[COMMENTARY]
This situation continues to describe the need for
standardized ESG reporting formats AND formal
independent auditing of those reports by qualified
professionals akin to chartered accountants or CPAs.
Ratings Agencies Punish Companies That Try To Do Good,
by Ollie Williams, March 7, 2021, Forbes, USA.
-------------------------------------------------------------
Bank of England given
new mandate to buy 'green' bonds. "The Bank
of England will change its approach to buying corporate
bonds after the government said environmental and
climate goals should now be explicitly considered part
of monetary policy. In Wednesday's Budget, Rishi Sunak,
the chancellor, said the BoE should support the
government's efforts to make the UK economy greener and
achieve zero greenhouse gas emissions by 2050, and
updated its mandate."
[COMMENTARY]
Will US Treasury Secretary Janet Yellen issue the same
order to the US Fed? It's possible. Though the Fed says
it's 'independent.' Nonetheless, in recent statements,
the chair of the US Federal Reserve Jerome Powell has
said that central banks need to take a much more active
role in assisting green financing! And what about the
ECB?
Should such things happen, it could give a massive
impetus to green bond issuance and the green bond market
generally!
Bank of England given new mandate to buy 'green' bonds,
by Camilla Hodgson and Valentina Romei in London and
Nathalie Thomas in Edinburgh, March 3, 2021, Financial Times, UK.
-------------------------------------------------------------
ESG investment favours
tax-avoiding tech companies. "The huge rise
in environmental, social and governance-based investing
is funnelling money into companies that pay less tax and
provide fewer jobs than many counterparts with lower ESG
ratings, analysis shows."
[COMMENTARY]
ironically, a high percentage of most ESG portfolios
consist of companies who pay the least in taxes and are
the most expert in tax avoidance. Most ESG investors are
likely ignorant of this situation as well. Will it
change their portfolio holdings if they knew the true
tax situation of the companies they invest in? Probably
not for most of them.
ESG investment favours tax-avoiding tech companies,
by Steve Johnson, February 22, 2021, Financial Times,
UK.
-------------------------------------------------------------
Global Survey Finds
Businesses Increasing ESG Commitments, Spending.
"ESG has become a hot topic in recent
years, but despite increased investment, fewer than half
of employees believe their own companies' ESG
performance is effective. The majority of respondents
(81%) said their company has
a formal ESG program in place. But
there is
not a high level of confidence that
companies are effectively performing against all of
their stated ESG metrics."
[COMMENTARY]
It seems that companies still have a difficult time
meeting their ESG goals. Does this mean that there's
still a great deal of 'greenwashing' in corporate ESG
reports?
Global Survey Finds Businesses Increasing ESG
Commitments, Spending, February 23, 2021, JDSupra,
USA.
-------------------------------------------------------------
Introducing the 2021
Carbon Clean200: Investing in a Clean Energy Future.
"Corporate Knights and As You Sow have
released the annual Clean200 list of publicly traded
companies that are leading the way with solutions for
the transition to a clean-energy future."
[COMMENTARY]
Always an eagerly sought-after list by a very competent
team.
Introducing the 2021 Carbon Clean200: Investing in a
Clean Energy Future, by Andy Behar and Toby A.A.
Heaps, February 18, 2021, Corporate Knights and As You
Sow, Canada.
-------------------------------------------------------------
Meta-study underlines
ties between ESG and corporate success.
"Researchers from the NYU Stern Center for Sustainable
Business and Rockefeller Asset Management looked at
1,141 peer-reviewed papers and 27 meta-reviews --
themselves based on roughly 1,400 studies -- published
between 2015 and 2020...
The meta-study finds a
positive link between ESG and financial performance in
58 percent of the corporate studies, with 13 percent
showing a neutral impact, 21 percent mixed results and
only 8 percent showing a negative relationship. Among
investment studies, 59 percent find similar or better
performance relative to conventional investment
approaches while only 14 percent show negative results."
[COMMENTARY]
More clear research on why companies adopt ESG and why ESG
is gradually gaining dominance in the investment
industry.
Meta-study underlines ties between ESG and corporate
success, by Ben Maiden, February 19, 2021, Corporate
Secretary, USA.
-------------------------------------------------------------
S&P Global makes over
9,000 ESG Scores publicly available to help increase
transparency of corporate sustainability performance.
"S&P Global (NYSE:
SPGI) launched a
new public webpage highlighting S&P
Global's full suite of environment, social and
governance (ESG) solutions, and for the very first time,
access to S&P Global ESG Scores on 9,200 companies. S&P
Global ESG Scores are the key factor for selecting
companies for the
Dow Jones Sustainability Indices (DJSI)."
[COMMENTARY]
The range of research options for individual ethical and
sustainable investors continues to expand. This is a
welcome addition to those options.
S&P Global makes over 9,000 ESG Scores publicly
available to help increase transparency of corporate
sustainability performance, press release, February
16, 2021, S&P Global.
-------------------------------------------------------------
A Little-Known Green
Fund Soared 114% in 2020. We Caught Up With Its Manager.
"Thanks to its investments in disruptive
technologies, the little-known Shelton Green Alpha Fund
(ticker: NEXTX) soared 114% in 2020, winning a coveted
five-star Morningstar rating."
[COMMENTARY]
Of course the real test is how the fund performs
long-term! Now, was the fund into a few lucky segments
and companies? Time will tell.
A Little-Known Green Fund Soared 114% in 2020. We Caught
Up With Its Manager, by Leslie P. Norton, February
14, 2021, Barron's, USA.
-------------------------------------------------------------
S&P Global annual report
finds record ESG disclosure. "The
yearbook, published since 2004, covers
a record 7,032 companies, compared with 4,700 in 2020,
across 40 countries and 61 industries, and is now
publicly available."
[COMMENTARY]
These numbers confirm the rapid adoption of ESG and
sustainability reporting by the world's largest
corporations. I've waited over forty years for these
days!
S&P Global annual report finds record ESG disclosure,
by Hazel Bradford, Pensions&Investments, USA.
-------------------------------------------------------------
$1 trillion in oil and
gas pipelines worldwide could become stranded assets,
new report warns. "The pipeline industry
faces growing questions about whether it’s wise to build
a massive network of pipelines that could become
obsolete well within their projected 50-year-plus
lifespans."
[COMMENTARY]
I suspect most of those connected with the
development of new pipelines are concerned for the next
5-15 years. Beyond that is too far into the future to
consider. They want their incomes and returns 'now'.
$1 trillion in oil and gas pipelines worldwide could
become stranded assets, new report warns, by
Sharon Kelly, February 8, 2021, Nation of Change, USA.
-------------------------------------------------------------
What Happens When a
Company Gets an A From One ESG Rater and an F From
Another? "With the explosion of ESG data
and ratings, there's little agreement on what makes a
company good or bad."
[COMMENTARY]
I agree that ESG reporting metrics and information
should be standardized. However, what particular metrics
and information are favored by raters should be up to
them. Hence, there should still be lots of room for
independent opinions concerning ESG 'grading.'
What Happens When a Company Gets an A From One ESG Rater
and an F From Another? By Judy Segal, February 2,
2021, Institutional Investor, USA.
-------------------------------------------------------------
Advisers expect half
recommended assets will be ESG within five years.
"Financial advisers expect demand to rise sharply for
ESG assets according to new research from the lang cat.
They estimate that the proportion of ESG investments
recommended in five years will be 48%, compared to just
19% today.
The findings form part of Crossing
the ESG Event Horizon--an adviser's guide, a new
report from the lang cat, supported by Schroders, which
seeks to understand the issues around considering
environmental, social and governance factors alongside
financial factors in the investment decision-making
process."
[COMMENTARY]
I don't think there's anything to add to this story.
It's obvious to all in the investment industry that this
is the way it's going to work out.
Advisers expect half recommended assets will be ESG
within five years, by Peter Wilson, January 28,
2021, IFA Magazine, UK.
-------------------------------------------------------------
2021 Global 100 ranking
by Corporate Knights. "The 17th annual
cohort of the world's most sustainable corporations
continue to soar above their peers."
[COMMENTARY]
This is one of the best lists of its kind for ethical
and sustainable investors.
2021 Global 100 ranking by Corporate Knights,
January 25, 2021, Canada.
-------------------------------------------------------------
IIRC revises integrated
reporting framework. "The International
Integrated Reporting Council has published its
revised Integrated Reporting Framework,
incorporating some major changes since the IR Framework
was first published in 2013."
[COMMENTARY]
Some form of standardization of corporate ESG and
sustainability reporting continues to gain momentum.
We'll soon see even the US SEC on board!
IIRC revises integrated reporting framework, by
Michael Cohn, January 21, 2021, Accounting Today, USA.
-------------------------------------------------------------
Why ESG Funds Fail to
Scale. "Many investment professionals might
read these and believe that launching a new ESG
investment firm or ESG offering will be an automatic
success. Our analysis of the data shows that this is far
from the truth: Most of these efforts fail."
[COMMENTARY]
This analysis suggests that starting a fund small, not
quickly gaining significant assets, and an intensely
competitive environment, are the main reasons why ESG
funds remain small.
Why ESG Funds Fail to Scale, by Gabriel Karageorgiou
and George Serafeim, January 11, 20121, Institutional
Investor, USA.
-------------------------------------------------------------
The ESG investment
industry is broken. "Yet over time, I've
come to realize that the ESG investment industry is by
and large little more than a marketing mechanism, and
will not lead to productive change...
In 2015-16, for instance, I
noticed that one of the largest positions held by
Generation Investment Management - co-founded by former
U.S. vice-president Al Gore and Goldman Sachs' Asset
Management head David Blood - was in Facebook. This is a
company whose business is to collect every possible byte
of their users' data and resell the information to the
highest bidder, regardless of the privacy violations
that crop up along the way, which is a systematic
(though legal?) violation of their users' privacy."
[COMMENTARY]
I can see the point being made here. Nonetheless, a turn
has been made in the financial markets that does promise
change for the better concerning ethics and the
sustainability of our world.
The ESG investment industry is broken, by James
Rastehm January 1, 2021, The Globe & Mail, Canada.
-------------------------------------------------------------
During Biden
Administration, SEC will require Climate Change Risk and
ESG Disclosure. "Public companies will be
required to disclose climate risks and greenhouse gas
emissions under President-elect Biden's administration.
The Securities and Exchange Commission (SEC) will
institute rulemaking and guidance on the federal
monitoring of environmental, social and governance (ESG)
issues."
[COMMENTARY]
What a 180-degree turn this will be for the SEC and many
public companies! See that DOL ruling restricting
pensions investing according to ESG principles also
eliminated soon!
During Biden Administration, SEC will require Climate
Change Risk and ESG Disclosure, by Benjamin D.
Stone, December 29, 2020, The National Law Review, USA.
-------------------------------------------------------------
Doing Good: Where
Sustainable Investing Gets It Wrong. "But
does a higher ESG score for an investment product
necessarily translate into doing more good?"
[COMMENTARY]
Though not specifically addressed in this article --
though I concur with its thesis -- is that the services
or products of a company are often left out of ESG
sustainable performance ratings. So a few tobacco
companies can still score highly on ESG according to
some raters!
Doing Good: Where Sustainable Investing Gets It Wrong,
by Lucie Teplá, December 16, 2020, INSEAD, Singapore.
-------------------------------------------------------------
ESG Standards
Convergence Could Happen in Next 12 to 24 Months,
Accounting Body Chief Says. "Reporting
standards in the world of environmental, social and
governance investing, long a thicket of competing
frameworks, could converge within 12 to 24 months, said
Janine Guillot, head of the Sustainability Accounting
Standards Board."
[COMMENTARY]
I believe such news of convergence in standards would be
almost universally welcomed.
ESG Standards Convergence Could Happen in Next 12 to 24
Months, Accounting Body Chief Says, by Leslie P.
Norton, December 14, 2020, Barron's, USA.
-------------------------------------------------------------
Dramatic increase in
sustainability reporting due to generational attitudes,
ESG investing. "Eighty percent of companies
now report on sustainability, compared with only 12
percent in 1993."
[COMMENTARY]
This read provides a good appreciation of reasons for
the growth and acceptance of sustainability reporting.
Dramatic increase in sustainability reporting due to
generational attitudes, ESG investing, by Kristen
Beckman, December 9, 2020, Benefits Pro, USA.
-------------------------------------------------------------
5 Drivers Behind the
Sustainable Investing Shift. "What is
driving the shift to sustainable investing? This visual
dashboard from Raconteur explains five key drivers, from
generational shifts to investors' preferred strategies."
[COMMENTARY]
This is a useful read for advisors and brokers to
understand and grow their client base.
5 Drivers Behind the Sustainable Investing Shift, by
Iman Ghosh, December 9, 2020, Visual Capitalist, Canada.
-------------------------------------------------------------
The Future of ESG Is ...
Accounting? "That revolution is being led
by the IFRS Foundation, the body that oversees the work
of the International Accounting Standards Board (IASB)
in setting financial reporting requirements for most
companies in the world, across more than 140
jurisdictions. (In the U.S., these requirements are set
by the Financial Accounting Standards Board, or FASB).
This past September, the
IFRS Foundation proposed the creation of a parallel
Sustainability Standards Board (SSB)."
[COMMENTARY]
Now that ESG is mainstream, it's about time that the
accountancy organizations got involved in creating
universal accounting standards for companies' ESG
reporting.
The Future of ESG Is ... Accounting? By Richard
Barker, University of Oxford,
December 3, 2020, Harvard Business Review, USA.
-------------------------------------------------------------
Asset managers complain
over CFA's proposed ESG standards. "CFA
Institute' plan to create a global ESG standard has
triggered concern among some US and European asset
managers already juggling overlapping regulations and
rising costs in a crowded space."
[COMMENTARY]
These concerns are valid. It seems to me that perhaps
the UN's PRI should get involved with all the
standards-setting organizations to coordinate the
standards. A UN body just might be the best vehicle for
doing that.
Asset managers complain over CFA's proposed ESG
standards, by Caroline Byrne, December 2, 2020,
Corporate Secretary, USA.
Canadian ESG Assets
Surge to $3.2 Trillion. "According to the
latest available data, RI assets grew from $2.1 trillion
at the end of 2017 to $3.2 trillion as at December 31st,
2019. This represents a 48% increase in RI assets under
management (AUM) over two years. These figures reflect
assets that fall into seven different RI strategies or
categories including ESG integration, shareholder
engagement, negative screening, norms-based screening,
positive screening, thematic ESG investing, and impact
investing."
[COMMENTARY]
In Canada, as in the US and around the world, ESG assets
are surging! ESG is mainstream now.
Canadian ESG Assets Surge to $3.2 Trillion, press
release, November 25, 2020, Responsible Investment
Association (RIA), Canada.
-------------------------------------------------------------
Brave new world of ESG
bonds can sometimes leave investors cold.
"A new type of bond that penalizes issuers for failing
to meet social and environmental goals is raising
concern among some investors that buying the debt may
not be all that ethical."
[COMMENTARY]
These are early days for green bonds. No doubt there'll
be a lot of marketplace learning to be had. However,
their future, in general, is assured.
Brave new world of ESG bonds can sometimes leave
investors cold, by Ayai Tomisawa, November 26, 2020,
The Japan Times, Japan,
-------------------------------------------------------------
Fidelity, Vanguard Rank
Lowest in Morningstar's New ESG Rating.
"Some of the country's largest asset managers, including
Vanguard, Fidelity and American Century, received low
marks in Morningstar's first assessment of asset
managers' commitment to incorporating ESG factors in
their investment processes and strategies.
Others, like BlackRock,
which has stressed sustainability as its 'new standard
for investing,' and Pimco, received the second-to-lowest
rating of 'Basic.'"
[COMMENTARY]
This analysis demonstrates that the big conventional
firms may say a lot about their ESG prowess but still
lag the real ESG asset managers!
Fidelity, Vanguard Rank Lowest in Morningstar's New ESG
Rating, by Bernice Napach, November 19, 2020,
ThinkAdvisor, USA.
-------------------------------------------------------------
Companies that pay fair
wages weather downturn better. "Just
Capital's researchers found that the top 20% of firms
enjoyed a 6.5% higher average annual return versus their
industry peers. Companies whose miserly pay packets
landed them in the bottom quintile were found to earn 3%
less than their industry peers."
[COMMENTARY]
The data looks convincing. Questions I have and not sure
they're answered are: 1) Were the firms paying the
higher wages in an oligopoly/monopoly type situation
where barriers to entry to their markets were almost
impossibly high, and 2) Which comes first? Do high
profits allow for higher wages or higher wages create
greater productivity and profits?
Companies that pay fair wages weather downturn better,
by Rick Spence, November 18, 2020, Corporate Knights,
Canada.
-------------------------------------------------------------
The US SIF Foundation's
Biennial "Trends Report" Finds That Sustainable
Investing Assets Reach $17.1 Trillion. "The
total US-domiciled assets under management using
sustainable investing strategies grew from $12.0
trillion at the start of 2018 to $17.1 trillion at the
start of 2020, an increase of 42 percent. This is 33
percent - or 1 in 3 dollars - of the total US assets
under professional management."
[COMMENTARY]
The value of sustainable investing assets in the US has
reached levels unimaginable just a few years ago. It's
difficult to believe that they will grow yet more in the
years ahead. But they will!
The US SIF Foundation's Biennial "Trends Report" Finds
That Sustainable Investing Assets Reach $17.1 Trillion,
press release, November 16, 2020, US SIF, USA.
-------------------------------------------------------------
Why ESG Investors Are
Happy to Settle for Lower Returns.
"However, they do outperform the rest of the market when
there are unexpected shifts in customers' tastes for
green products and investors' tastes for green holdings,
the authors added."
[COMMENTARY]
I'm unsure with the conclusion that ESG investors
settle for lower returns. That might've been the case --
until fairly recently. I suspect that many new ESG
investors are seeing the outperformance of ESG stocks and
are buying them for that reason only.
Why ESG Investors Are Happy to Settle for Lower Returns,
by Wharton Business School,
November 9, 2020, University of Pennsylvania,
USA.
-------------------------------------------------------------
A Paris Exit Creates
Climate Liability for U.S. Businesses. "If
the U.S. stays out of the Paris agreement, there will be
consequences for American businesses with a global
footprint, and even for some without... The lack of a
plan to substantially (or entirely) eliminate net carbon
emissions creates an unfunded liability for companies...
[and] access to global capital, which might be choked
off if investors go beyond merely encouraging companies
to stick to environmental commitments and start
demanding it."
[COMMENTARY]
I suspect the above issues were never considered by
the Trump administration. Yet, they could be severe and
negatively affect US corporate profits.
A Paris Exit Creates Climate Liability for U.S.
Businesses, by Nathaniel Bullard, November 5, 2020,
Bloomberg, USA.
-------------------------------------------------------------
The World's Courtrooms
Could Unleash the Next Wave of Green Investing.
"The legal risk for pension funds that fail to
account for climate change in portfolio investments is
about to become a little clearer."
[COMMENTARY]
In light of the US DOL's ruling (see below) a successful
similar case in the US would be a great challenge to
that ruling!
The World's Courtrooms Could Unleash the Next Wave of
Green Investing, Bloomberg, November 1, 2020, USA.
-------------------------------------------------------------
DOL's Final ESG Rule
Appears Slightly Softer Than Proposal. "The
final version of the regulation emphasizes the
importance of using only 'pecuniary' factors in the
assessment of investment options within tax-qualified
retirement plans, rather than expressly limiting the use
of environmental, social and governance themed
investments."
[COMMENTARY]
It's unfortunate for US retirement account investors
that the current US administration is so centered on
19th century thinking concerning energy. Even with the
slight weakening of the language the regulation is still
a significant impediment for many asset managers to deal
with. Will there be a new administration and a changed
ruling?
DOL's Final ESG Rule Appears Slightly Softer Than
Proposal, John Manganaro, October 30, 2020,
Planadvisor, USA.
-------------------------------------------------------------
Does selling 'stranded
assets' lower global carbon levels? "The
likely outcome is that less climate-conscious firms will
buy these carbon-intensive assets at cheap prices,
motivated by the ability to secure above-average
returns. So while offloading assets reduces an
individual company's carbon footprint and potentially
enables it to reach net-zero by 2050, it is likely that
this will not provide a net benefit to global
emissions."
[COMMENTARY]
The article also says that the acquirer of the assets
might have higher costs of capital and other factors
that in the end make the acquired asset much less
valuable. It'll be fascinating to see how this plays
out. Now, what does this mean for valuing companies with
significant potential stranded assets?
Does selling 'stranded assets' lower global carbon
levels? by Stephanie Baxter, October 30, 2020,
Petroleum Economist, UK.
-------------------------------------------------------------
How gold can be a major
player for socially responsible investing.
"It is both possible and practical to own gold that is
responsibly sourced: science, technology, and public and
regulatory focus are improving the industry and
standards of sourcing and production are recognised as
paramount when buying any form of gold asset in seeking
to ensure adherence to socially and environmentally
responsible values."
[COMMENTARY]
Investing in gold is an absolute 'no' for many ethical
and sustainable investors. However, this article might
give them something to think about...
How gold can be a major player for socially responsible
investing, by Rumi Mahmood, October 28, 2020,
Goldhub.
-------------------------------------------------------------
Sustainability
Initiative: Bank for International Settlements.
"Worldwide, central banks and regulators have slowly
implemented new policies and initiatives to reduce their
exposure to climate risk. Leading the way is the Bank
for International Settlements (BIS), which, in 2017,
took up the challenge of introducing a corporate bond
investment pool that screens investments according to
environmental, social and governance (ESG) principles."
[COMMENTARY]
If the BIS is fully behind ESG investing, how far behind
can the whole investment world be?
Sustainability Initiative: Bank for International
Settlements, by Rachael King, October 28, 2020,
Central Banking, UK.
-------------------------------------------------------------
It's time we added a
letter to ESG. Here's why. "While the
recognition of all things ESG is finally happening,
there is no time to waste to add a 'T' for technology --
making ESGT -- to include the vast and growing array of
technology and digital issues, risks and opportunities."
[COMMENTARY]
The case is compelling when you see the list of reasons
for this in the article. I guess 'governance' could
cover the 'T'. But that doesn't cover the scope
of the issues mentioned.
It's time we added a letter to ESG. Here's why,
Andrea Bonime-Blanc, October 14, 2020, World Economic
Forum, Switzerland.
-------------------------------------------------------------
ESG Investing Will Not
Grow Successfully Without Global Data Standards And
Regulations, Says OECD. "Last week, the
OECD released its 2020 business and finance outlook
report, Sustainable and Resilient Finance. The reports
delivers a consequential and timely conclusion: ESG
scoring and reporting has the potential to unlock a
significant amount of information on the management and
resilience of companies, but will require agreed global
data standards and regulations."
[COMMENTARY]
I agree with the OECD that global ESG data standards
would be good. However, even if standards aren't reached
the case for ESG has been made.
ESG Investing Will Not Grow Successfully Without Global
Data Standards And Regulations, Says OECD, by
Lawrence Wintermeyer, October 8, 2020, Forbes, USA.
-------------------------------------------------------------
ESG Investing Looks Like
Just Another Stock Bubble. "In recent
years, ESG-related investments have consistently
outperformed their counterparts. That, however, could be
an accident -- many ESG funds invest heavily in tech
companies, and tech most likely is rallying for reasons
that have nothing to do with ESG. Many ESG funds exclude
fossil fuel investments, but fossil fuel investments
could also be doing poorly for reasons that have nothing
to do with ESG. Look closely, and it appears that ESG is
just another old-fashioned stock market bubble."
[COMMENTARY]
The writer makes a few valid points--though
overemphasized in my view. Yes, tech is doing well --
partly because of the lock-downs. And fossil fuels doing
badly as a result of them. However, one can't escape the
fact that many industries are simply preferred by the
50%-80% of investors who want to invest ethically and
sustainably!
ESG Investing Looks Like Just Another Stock Bubble,
by Jared Dillian, October 5, 2020, Financial Advisor,
USA.
-------------------------------------------------------------
Report: Asset managers
must explain how sustainability measures benefit
stakeholders. "Asset managers need to do
more to explain how sustainability measures actually
benefit stakeholders, according to the Thinking Ahead
Institute. In its new report, Sustainability:
Understanding impact and value creation, the institute
warns that investment organisations need to be wary of
the gap between their positive intentions for a more
sustainable economy and their ability to deliver it."
[COMMENTARY]
This report is a reminder of how important it is for
companies and the investment community to understand
what is material and relevant for a company's
sustainability and profitability.
Report: Asset managers must explain how sustainability
measures benefit stakeholders, by Stephen Little,
October 6, 2020, Investment Week, UK.
-------------------------------------------------------------
Americans believe
sustainable funds can offer higher returns.
"The Schroders survey found only 4% of respondents
wouldn't invest because they fear worse performance."
[COMMENTARY]
What a turnaround! When Americans were asked in all
previous years a similar question the answers would've
been completely the reverse! It was the widespread
belief among investors that ethical-sustainable--ESG
investing would underperform. This change of
understanding among investors is terrific news!
Americans believe sustainable funds can offer higher
returns, by staff, September 28, 2020, Investment
News, USA.
-------------------------------------------------------------
Canada's Responsible
Investment Week October 26-30. Theme: Diversity and
Inclusion in the Investment Industry. "D&I
Week is a week of education and insights for investment
professionals to advance diversity and inclusion in
their organizations and their portfolios. Join us for 10
live, interactive webcasts with industry leaders and
virtual networking."
[COMMENTARY]
Canada has a week every year devoted to the promotion of
ethical, sustainable, and responsible investing. This
year's theme is logical given what is happening in
society. In particular,
on a proportional basis, Canada is home to
probably the world's most diverse population. I
encourage everyone in Canada's investment industry to
participate if at all possible.
Canada's Responsible
Investment Week October 26-30. Responsible
Investment Association, Canada.
-------------------------------------------------------------
The Performance of
Stocks with the Worst ESG Scores.
"Investors underestimate the negative consequences of
high environmental, social and governance (ESG) risks,
and underreact to prior negative ESG events. High ESG
risks destroy shareholder value."
[COMMENTARY]
The research described in this article is worth
reviewing and understanding for all investors.
The Performance of Stocks with the Worst ESG Scores,
by Larry Swedroe, September 21, 2020, Advisor
Perspectives, USA.
-------------------------------------------------------------
BlackRock Reaffirms
Commitment to ESG Investment Standards. "At
the annual Morningstar Investment Conference in Chicago,
BlackRock CEO Larry Fink said that by the end of this
year, 100% of its portfolios will integrate ESG metrics,
up from 70% at the end of April,
Financial Planning reports."
[COMMENTARY]
As the world's largest asset manager with $7.4 trillion
in assets, BlackRock is setting the example for all fund
managers.
BlackRock Reaffirms Commitment to ESG Investment
Standards, by Max Chen, September 18, 2020, ETF
Trends, USA.
-------------------------------------------------------------
European ESG Disclosure
Requirements for Asset Managers. "A new
European regime on sustainability-related disclosures in
the financial sector will come into force from March
2021, after first being announced in 2018 during the
European Commission's Action Plan on Sustainable
Finance."
[COMMENTARY]
As covered previously, these new requirements will make
it easier for investors to understand individual fund
strategies and goals.
European ESG Disclosure Requirements for Asset Managers,
by Kirsten Lapham, John Verwey, Amar Unadkat, and
Michael Singh, September 18, 2020, The National Law
Review, USA.
-------------------------------------------------------------
Morgan Stanley
Sustainable Reality Report Reveals Sustainable Funds
Outperformed Traditional Funds and Reduced Investment
Risk Despite Global Pandemic. "In
January-June 2020: U.S.-based sustainable equity funds
outperformed their traditional peers by a median of
3.9%. U.S.-based sustainable taxable bond funds
outperformed their traditional peers by a median of
2.3%."
[COMMENTARY]
This is the first such data I've seen on green bond
funds for the first half of 2020. It's good to know that
they too outperformed their benchmarks.
Morgan Stanley Sustainable Reality Report Reveals
Sustainable Funds Outperformed Traditional Funds and
Reduced Investment Risk Despite Global Pandemic,
press release,
Morgan Stanley Institute for Sustainable Investing,
September 17, 2020, USA.
-------------------------------------------------------------
New Journal On Impact
And ESG Investing. "At a pivotal time of
increasing client interest and adoption of social
investing that is still confronting ongoing
misconceptions and push back from some corners of
government oversight and advisor skepticism, the
Institute is happy to announce a new, much needed,
professional research and thought leadership based
resource covering the full social landscape of ESG,
impact, and sustainable investing.
The first issue of
The Journal
of Impact and ESG Investing has just been
launched this month by
Portfolio Management Research, which is a
leading provider of independent financial research
within the investment sector."
[COMMENTARY]
The launch of this journal is terrific news for ethical
and sustainable investors.
New Journal On Impact And ESG Investing, by Bill
Hortz, September 17, 2020, Financial Advisor Magazine,
USA.
-------------------------------------------------------------
Sustainability Leaders
to Work on Common Corporate Reporting Standard.
"A group of five global sustainability leaders that
set environmental, social, and governance (ESG)
standards will work together to develop a common
framework for corporate reporting, the firms
said Friday.
The lack of consistent
sustainability disclosures has made assessing companies
confusing and difficult, according to a
joint report released Friday from the
environmental nonprofit CDP (formerly the Carbon
Disclosure Project), the Climate Disclosure Standards
Board (CDSB), the Global Reporting Initiative (GRI), the
International Integrated Reporting Council (IIRC), and
the Sustainability Accounting Standards Board (SASB).
Together, the organizations set the majority of ESG
reporting in the industry."
[COMMENTARY]
This is great news for ethical and sustainable
investors. Such common standards have been sought for
decades! I hope it also includes the independent
auditing of what company's report.
Sustainability Leaders to Work on Common Corporate
Reporting Standard, by Sarah Min, September 14,
2020, Chief Investment Officer, USA.
-------------------------------------------------------------
BIS Sees No Proof Green
Bonds Improved Firms' Carbon Footprints.
"Companies that issue green debt aren't necessarily
reducing their carbon emissions, underscoring the need
for firms to have an environmental rating, according to
a report from the Bank for International Settlements."
[COMMENTARY]
The reasoning behind green bonds is that the proceeds
are used for green projects. Thus, by definition, a
company's green-sustainable activities should be
improved. It's fascinating that the BIS research found
the carbon intensity of companies issuing green bonds
not to be much changed.
BIS Sees No Proof Green Bonds Improved Firms' Carbon
Footprints, by Jill Ward, September 14, 2020,
Bloomberg Green, USA.
-------------------------------------------------------------
Where ESG Ratings Fail:
The Case for New Metrics. "One agency's A+
is another's 'laggard' -- and neither links to financial
performance. Hybrid metrics will change everything,
argue Harvard Business School's Mark Kramer and leaders
in the shared-value movement."
[COMMENTARY]
It'll be interesting to see if this concept proves
itself. It's an appealing idea. I suspect the
mathematics involved could be considerable.
Where ESG Ratings Fail: The Case for New Metrics, by
Mark Kramer, Nina Jais, Erin Sullivan, Carina Wendel,
Kerry Rodriguez, Carlo Papa, Carlo Napoli, and Filippo
Forti, September 7, 2020, Institutional Investor, USA.
-------------------------------------------------------------
ESG Bond Funds Fear
Becoming Too Political. "The development of
'sustainable' government bond funds may be hitting a
road bump as fund managers fear being overly critical of
western government policies, notably those of the United
States."
[COMMENTARY]
This reminds me of the US DOL's missive about trying to
restrict the application of ESG in pension funds. It's
so backward-looking!
ESG Bond Funds Fear Becoming Too Political, by Max
Chen, September 3, 2020, ETF Trends, USA.
-------------------------------------------------------------
New Challenges to the
Merits of ESG Investing. "The data used to
measure a company's compliance with environmental,
social and governance (ESG) guidelines is inconsistent
and leads to misleading results. Moreover, when teams at
the same company manage comparable ESG and non-ESG
funds, the former more often underperforms the latter."
[COMMENTARY]
Do all analysts come to the same conclusions when
reviewing a company's financial statements in light of
the company's prospects? No. I think the diversity of
opinion is what makes financial markets. However, I do
believe that audited common metrics need to be used in
ESG measurements across companies and industries.
New Challenges to the Merits of ESG Investing, Larry
Swedroe, August 31, 2020, Advisor Perspectives, USA.
-------------------------------------------------------------
US Stocks With Higher
ESG Scores Have Lower Returns. "EU stocks
with higher ESG scores significant enhanced returns. "We
observe that, for EU firms, there is a significant
negative relationship between the market value and the
excess return, suggesting that smaller EU companies
generate higher returns on average," added the
study.
In contrast, for US and
other Asian firms there was a significant negative
relationship between the ESG scores and excess returns.
The authors said this could arguably be a result of less
focus on sustainability in the US, leading to lower
demand by investors than in the EU."
[COMMENTARY]
This is fascinating, though unsurprising research. I
would like to see such studies peer-reviewed and
published in reputable journals.
US Stocks With Higher ESG Scores Have Lower Returns,
by Shanny Basar, August 27, 2020, Traders Magazine, USA.
-------------------------------------------------------------
Academics Attack ESG for
Failure to Outperform During Crisis.
"'These results suggest that innovation-related assets
rather that social capital investments offer the greater
immunity to sudden, unanticipated market declines,' the
authors wrote."
(COMMENTARY]
I believe I understand the study's main contention.
However, ESG funds generally are full of
'innovation-related assets.' Such assets frequently have
high ESG ratings too! That's why the ESG funds
outperformed.
Academics Attack ESG for Failure to Outperform During
Crisis, by Amy Whyte, August 20, 2020, Institutional
Investor, USA.
-------------------------------------------------------------
Vast majority of
comments oppose ESG proposal - analysis.
"More than 95% of the firms, groups and individuals who
submitted comment letters or signed petitions in
response to the Department of Labor's proposal on
environmental, social and governance investments in
ERISA plans opposed the initiative, an
analysis published Thursday from
several investor organizations and financial industry
firms found."
[COMMENTARY]
I suspect that despite the overwhelming opposition to
this rule the Department of Labor will not back down.
Trump's base is likely highly supportive of it.
Vast majority of comments oppose ESG proposal -
analysis, by Brian Croce, August 20, 2020, Pensions
& Investments, USA.
-------------------------------------------------------------
Investors continue to
align with SDGs. "Five years on since the
SDGs were launched, an increasing number of investors
are putting capital to work to earn returns alongside
helping solve global scourges like the climate crisis,
poverty and inequality."
[COMMENTARY]
Investments that align with the UN's SDGs that make good
returns are the ideal of ethical and sustainable
investing!
Investors continue to align with SDGs, by Sarah
Rundell, August 18, 2020, Top 1000 Funds, USA.
-------------------------------------------------------------
Barclays Launches
Systematic Study of ESG-Focused US Equity Funds.
"Barclays' Quantitative Portfolio Strategy
('QPS') team finds that ESG-labelled funds do not
necessarily provide more ESG exposure than conventional
funds."
[COMMENTARY]
This is interesting research. Of course, everything is
in the details and I'd love to get some expert ESG
opinion on Barclays' findings.
Barclays Launches Systematic Study of ESG-Focussed US
Equity Funds, August 13, 2020, BusinessWire on
Yahoo! Finance, USA.
-------------------------------------------------------------
Why ESG ratings need an
overhaul. "Under certain ESG standards, the
ratings of fossil-fuel giant Exxon Mobil and electric
car maker Tesla could well be the same."
[COMMENTARY]
Such an anomaly as cited above has to do with ESG
company raters not rating the ESG characteristics of a
company's products or services and issues with
cross-industry scoring. ESG raters typically rate only
the ESG performance of a company's 'operations'.
Why ESG ratings need an overhaul, by Jim McClelland,
August 9, 2020, Raconteur, UK.
-------------------------------------------------------------
Ethical CSR focus
triggers hostile investor activism, study finds.
"This is because some activist investors
view CSR as a sign that a company is wasting money
rather than focusing on shareholder returns, according
to research conducted by Pennsylvania State University's
Mark DesJardine, Erasmus University's Emilio Marti and
HEC Paris business school's Rodolphe Durand."
[COMMENTARY]
Note this study included years as far back as 2000.
Attitudes have changed recently and I wonder if the
propensity for investor activism of this type is still
occurring at the same rate?
Ethical CSR focus triggers hostile investor activism,
study finds, by Laurence Fletcher, August 3, 2020,
Financial Times, UK.
-------------------------------------------------------------
Racial Injustice Will
Have Greater Weight in ESG Scores, S&P Global Says.
"About 217 businesses in the S&P 500 have
publicly supported the Black Lives Matter movement to
show solidarity and protect their reputations. Question:
How sincere are they?"
[COMMENTARY]
Rather than only saying that black lives matter,
companies need to consider their internal functions and
activities to determine how they can address internally
such issues. Afterall, ESG scores are going to
increasingly include corporate diversity issues!
Racial Injustice Will Have Greater Weight in ESG Scores,
S&P Global Says, by Sarah Min, July 24, 2020, Chief
Investment Officer, USA.
-------------------------------------------------------------
Morningstar: DOL's ESG
Proposal 'Out Of Step' With Best Advisor Practices.
"If the DOL passes the rule as proposed 'it
would lead to worse outcomes for plan participants as
plan sponsors shy away from assessing ESG risks in
selecting investments. Indeed, since most participants
use qualified default investment options--and ESG
considerations would be barred in these options--most
participants would not get the benefits that ESG risk
analysis can deliver,' Brock Johnson, president of
Morningstar Retirement Services, said."
[COMMENTARY]
I believe the DOL's proposed rule is about hindering
ESG. It's saying US employee default pension plans
should not exclude fossil fuel companies as most ESG
plans would. So, it's simply an attempt to boost fund
holdings of fossil fuel companies!
Morningstar: DOL's ESG Proposal 'Out Of Step' With Best
Advisor Practices, by Tracy Longo, July 24, 2020,
Financial Advisor, USA.
-------------------------------------------------------------
US SIF Foundation
Launches Sustainable Investing Course for Individual
Investors. "The course, which takes
approximately 30 minutes to complete, provides a brief
overview of the development of sustainable investing and
summarizes the investment options and strategies
available. It also links to additional resources and
offers next steps for interested investors."
[COMMENTARY]
This is a great idea. It could also be a good
adjunct to my
DIY Ethical-Sustainable Investing pays Tutorial!
US SIF Foundation Launches Sustainable Investing Course
for Individual Investors, press release, July 23,
2020, US SIF, USA.
-------------------------------------------------------------
Canada's CPP Investments
[C$409.6 billion pension fund] Sustainable Investing
Policy: Update Reinforces ESG Role in Long-Term Value
Creation. "Integrating ESG factors,
including climate change, into investment analysis and
asset management activities supports the organization's
clear legislative objective: to maximize long-term
investment returns without undue risk of loss."
[COMMENTARY]
I've included this item to contrast this highly
successful -- and one of the world's largest -- pension
funds, with the recent US Department of Labor's ruling
endeavoring to limit the use of ESG in US pension funds!
CPP Investments Sustainable Investing Policy: Update
Reinforces ESG Role in Long-Term Value Creation,
press release, July 23, 2020,
Canada Pension Plan Investment Board, Canada.
-------------------------------------------------------------
BlackRock Heats Up
Climate Change Pressure On Boards.
"BlackRock announced that it voted against management at
53 companies worldwide (primarily in the energy sector)
for 'lack of progress' on climate concerns during the
2020 proxy season, and directed another 191 companies to
take faster action."
[COMMENTARY]
Blackrock, at last, appears to be serious about
getting companies on board with climate change! It's a
great example for all other fund managers.
BlackRock Heats Up Climate Change Pressure On Boards,
by Michael Peregrine, July 19, 2020, Forbes, USA.
-------------------------------------------------------------
ESG Investing Is About
Long-Term Risk Management. "Sustainable
investing isn't just about values, it's about managing
risks that affect all investors."
[COMMENTARY]
Some interesting data about ESG ratings and returns in
this article. Important for all ethical and sustainable
investors to understand.
ESG Investing Is About Long-Term Risk Management, by
Alex Bryan, July 14, 2020, Morningstar, USA.
-------------------------------------------------------------
Most ESG Investing Makes
A Charade Of Fighting Climate Change. "Thus
far, ESG funds have merely divested capital from the
fossil fuel industry. They have put hardly any capital
into new cleantech companies that could help with the
energy transition. Energy efficiency technologies,
hydrogen power, carbon capture and nuclear fusion remain
severely underfunded."
[COMMENTARY]
The writer makes one particularly good point about ESG
funds. That is, only moving around funds between highly
rated ESG companies just doesn't cut it. Could some ESG
funds create venture capital arms?
Most ESG Investing Makes A Charade Of Fighting Climate
Change, by Wal van Lierop, July 14, 2020, Forbes,
USA.
-------------------------------------------------------------
GRI and SASB are
collaborating. Is that good news for companies?
"For years, corporate reporters -- those inside
companies responsible for creating sustainability
reports and reporting environmental, social and
governance data to various other organizations -- have
been frustrated by what many refer to as an alphabet
soup of standards and frameworks: CDP, GRI, IIRC, PRI,
SASB, TCFD, UNGC and more.
And while they grumbled at
how those various organizations' requests weren't
harmonized, they dutifully complied with their requests
and mandates. Finally, help may be on the way."
[COMMENTARY]
It's great to see these groups collaborating. Should
they succeed, it'll be a real boost to ethical and
sustainable investors everywhere in understanding and
comparing corporate CSR/ESG reporting.
GRI and SASB are collaborating. Is that good news for
companies? Bu Joel Makower, July 13, 2020, GreenBiz,
USA.
-------------------------------------------------------------
ESG Scoring Is Failing:
Time For Improvement. "While companies are
developing more comprehensive criteria, the standards
are far from consistent. The
reasons for the inconsistencies are
numerous, but of greatest concern is the bias of ratings
and the lack of public disclosure about the criteria and
standards used in making those ratings."
[COMMENTARY]
I find that many company ESG ratings' firms do provide
considerable information concerning how they score the
companies they rate. I think it's the individual
companies -- and not the ratings' firms -- that need
numerical consistency in their reporting. I see the
ratings' firms more like equity analysts -- who
vary (often greatly) in their analytical methods and
conclusions.
ESG Scoring Is Failing: Time For Improvement, by
George Strobel, July 2, 2020, Forbes, USA.
-------------------------------------------------------------
Corporate Knights 2020
Best 50 Issue. Now out. Always a great source
for ethical and sustainable investing ideas. Cost
Cdn$4.99.
2020 Best 50 Issue, Summer 2020, Co9rporate Knights,
Canada.
-------------------------------------------------------------
How To Read The Proposed New ERISA Rule And What
It Gets Wrong On Sustainable Investing.
"Secretary of Labor Eugene Scalia explained the
rationale for the new rule: 'Private employer-sponsored
retirement plans are not vehicles for furthering social
goals or policy objectives that are not in the financial
interest of the plan. Rather, ERISA plans should be
managed with unwavering focus on a single, very
important social goal: providing for the retirement
security of American workers.'"
[COMMENTARY]
One can sense the US administration's frustration with
the growing importance of ESG by fund managers. How
about the fact that ESG funds are outperforming their
conventional counterparts? Isn't that evidence of
providing the best opportunity of providing for the
retirement security of American workers.?
How To Read The Proposed New ERISA Rule And What It Gets
Wrong On Sustainable Investing, by Bhakti
Mirchandani, June 25, 2020, Forbes, USA.
-------------------------------------------------------------
Regulatory changes see ESG go mainstream.
"A raft of regulatory changes introduced in recent
years are placing environmental social and governance
(ESG) funds at the centre of the advice process,
industry experts have claimed...Ryan Medlock, senior
investment development and technical manager at Royal
London, said: 'There have been a raft of new
regulations, mostly coming from EU level, and they leave
the US and Australia playing catch up.'"
[COMMENTARY]
Despite what's happening in Europe, until there's a
change in the US administration I see little chance of
any new regulatory changes favouring ESG investing
coming anytime soon.
Regulatory changes see ESG go mainstream, by David
Thorpe, June 24, 2020,
FT Advisor, UK.
-------------------------------------------------------------
Canada's Greenest Employers. "This
special designation recognizes the employers that lead
the nation in creating a culture of environmental
awareness in their organizations. These employers have
developed exceptional sustainability initiatives -- and
are attracting people to their organizations because of
their environmental leadership."
[COMMENTARY]
Green employers often correspond to best ESG performers
too. So ethical and sustainable investors might want to
review who's on this list!
Canada's Greenest Employers, June 2020, Canada.
-------------------------------------------------------------
100 Best Corporate Citizens of 2020.
"Now more than ever, corporate leadership on
environmental, social and governance (ESG) issues is
imperative. And so is transparency. As companies
decarbonize, align with the Sustainable Development
Goals and rebuild an equitable economy post-pandemic,
they must be open about their efforts. Each year, 3BL
Media evaluates the largest public U.S. companies on ESG
transparency and performance."
[COMMENTARY]
One of the best of the annual ESG corporate rankings!
100 Best
Corporate Citizens of 2020, June 22, 2020, 3BL
Media, USA.
-------------------------------------------------------------
Top investors publish list of companies that
have failed to disclose climate data. "Last
Friday, the UN and the UK
launched the high profile Race to Zero campaign
with the news that around 1,000 corporates around the
world have pledged to deliver net zero emissions by 2050
at the latest.
Today, investor-backed climate disclosure group CDP
takes on the flip-side of corporate engagement with the
climate crisis with the publication of
a list of just over 1,000 companies
that have declined to provide relevant information on
their environmental impacts to investors."
[COMMENTARY]
This is an important read for all ethical and
sustainable investors as it might influence them in
their investment selections.
Top investors publish list of companies that have failed
to disclose climate data, by James S Murray, June 9,
2020, UK.
-------------------------------------------------------------
Has responsible investment lost its soul?
"When investors have to justify decisions
based on financial materiality, is it truly
responsible?"
[COMMENTARY]
This is a fascinating question. Do a company's ESG
activities that are financially material to it reflect
your values? Would you buy a stock based on financial
materiality at the cost of ignoring your values?
Has responsible investment lost its soul? By Rob
Lake, June 10, 2020, UK.
-------------------------------------------------------------
Where to Find Low-Cost ESG Funds.
"Investing in sustainable funds doesn't have to cost
more than traditional funds, thanks to a raft of newer
funds with lower costs."
[COMMENTARY]
There are many great charts in this article including
one showing the over/under annual costs in various fund
categories of ESG funds compared to their conventional
counterparts.
Where to Find Low-Cost ESG Funds, by Katherine
Lynch, June 6, 2020, Morningstar, USA.
-------------------------------------------------------------
From tyranny to salvation: the credibility of
common metrics for ESG reporting.
"Professor Brendan O'Dwyer and Professor Chris Humphrey
from the Accounting and Finance division at Alliance
Manchester Business School critique the growing calls
for standardised ESG metrics in company reporting."
[COMMENTARY]
Standardization of ESG metrics is important so that
companies can be better compared on them. This article
is a useful read for everyone in the investment
industry.
From tyranny to salvation: the credibility of common
metrics for ESG reporting, by Brendan O'Dwyer and
Chris Humphrey, June 1, 2020, Accountancy Age, UK.
-------------------------------------------------------------
What To Make Of The SEC's Warnings And
Recommendations For ESG Investing. "May has
been a busy month for environmental, social, and
governance (ESG) ratings and disclosure at the US asset
management industry's top regulator, the Securities and
Exchange Commission (SEC) between Chairman Jay Clayton's
warning yesterday on ESG ratings and a recommendation
earlier this month for ESG disclosures. This is due in
part to the growth in sustainable investing."
[COMMENTARY]
I thought the Trump administration was about
de-regulation? Is the SEC (whose head is appointed with
Trump's approval) about to impose significant regulation
of ESG funds and investments?
What To Make Of The SEC's Warnings And Recommendations
For ESG Investing, by Bhakti Mirchandani, May 29,
2020, Forbes, USA.
-------------------------------------------------------------
China Crisis Puts Spotlight on Human Rights Risk
for ESG Investors. "'The E and the G (risk)
might not be changing so much, but the S may be changing
with the Hong Kong demonstrations, and the way China has
suppressed them, and the silencing of people during the
Covid-19 crisis,' says Felix Boudreault, co-founder of
Sustainable Market Strategies, which provides ESG
investing advice."
[COMMENTARY]
It's important that this risk is coming to the fore now.
Before this, I was always concerned about the quality of
Chinese accounting/audited statements and the quality
and reliability of their CSR/ESG reporting!
China Crisis Puts Spotlight on Human Rights Risk for ESG
Investors, by Leslie P. Norton, May 29, 2020,
Barron's, USA.
-------------------------------------------------------------
Man vs. machine: A tale of two sustainability
ratings systems. "Two companies,
Morningstar and Truvalue Labs, represent two distinctly
different ways to assess companies on ESG data."
[COMMENTARY]
I say there's a need for both and even more variety of
opinions. What makes a person a buyer of a stock and the
other a seller? More often than not, it's one's
assessment of future returns. Hence, diversity of
opinion is what stock markets -- and thus ratings -- are all about.
Man vs. machine: A tale of two sustainability ratings
systems, by Mark Tulay, May 25, 2020, GreenBiz, USA.
-------------------------------------------------------------
Just How Good An Investment Is Renewable Energy?
New Study Reveals All. "Renewable
energy investments are delivering massively better
returns than fossil fuels in the U.S., the U.K. and
Europe, but despite this the total volume of investment
is still nowhere near that required to mitigate climate
change.
Those are some of the findings of new research
released today by Imperial College London and the
International Energy Agency, which analyzed stock market
data to determine the rate of return on energy
investments over a five- and 10-year period."
[COMMENTARY]
As the prices of renewable energy continue to fall, many
renewable energy producers could continue to outperform
their fossil fuel competitors.
Just How Good An Investment Is Renewable Energy? New
Study Reveals All, by David Vetter, May 28, 2020,
Forbes, USA.
-------------------------------------------------------------
It's time for our financial statements to reflect the
vital value of nature. "Most companies are
in the dark when it comes to accounting for their
impacts and dependencies on the environment, and
investors struggle to compare what little disclosure
there is in a meaningful way."
[COMMENTARY]
In due course, all companies will have to account for
their use and depletion of natural capital in their
financial statements. How can the costs of natural
capital be agreeably designated if there aren't markets
to determine them?
It's time for our financial statements to reflect the
vital value of nature, May 22, 2020, Corporate
Knights. Canada.
-------------------------------------------------------------
S&P Launches ESG Scores Based on 20 Years of Corporate
Sustainability Data.
"S&P Global has announced the launch of its S&P Global
environmental, social, and governance (ESG) Scores with
coverage of more than 7,300 companies, representing 95%
of global market capitalization."
[COMMENTARY]
The competition in ESG ratings continues to heat up --
thus mirroring the global interest in ESG!
S&P Launches ESG Scores Based on 20 Years of Corporate
Sustainability Data, by Emily Holbrook, May 18,
2020, Environmental Leader, USA.
-------------------------------------------------------------
'Generic
and hugely mismatched': why ESG data remains
insufficient.
"[Peregrine Communications] research, which is
entitled 'Making a Difference, Marketing a Difference',
found a 67% global increase in ESG-related content from
asset managers across top national media in the last 12
months. However, 34% of topics disproportionately focus
on generic topics."
[COMMENTARY]
Company reports need to get to the specifics that are
material to their company when providing investor ESG
information! Too many companies think they can take the
easy route by talking in generalities, which
incidentally, usually adds nothing to their stock
values.
'Generic and hugely mismatched': why ESG data remains
insufficient, by Victoire Barbin Perron, May 12,
2020, Citywire Selector, UK.
-------------------------------------------------------------
Revealed: the top ESG
funds and managers from around the globe.
"Citywire research discovered that ESG mirrors of
existing funds
outperformed their peers during the worst of the
March market downturn and the momentum for
sustainability-minded funds remains strong. Citywire
Selector looked more closely at the strategies of
outperforming funds
considered sustainable by Morningstar last month,
with many offering a tech leaning or an emphasis on
specific sub-sectors of the market."
[COMMENTARY] This is a good review
that most ethical and sustainable investors will want to
read.
Revealed: the top ESG funds and managers from around the
globe, by Citywire, May 12, 2020, UK.
-------------------------------------------------------------
T. Rowe Price Report
Says ESG Disclosure Issues was #1 Topic Among Worldwide
Companies in 2019. "The company said that
the rising risks associated with climate change will
impact virtually its entire universe of portfolio
holdings to varying degrees. Because of this, climate
change alongside other ESG factors is being increasingly
factored into analysts' evaluation of company
fundamentals."
[COMMENTARY] Many analysts also
believe that the COVID-19 pandemic is making companies
even more aware of the climate and environmental issues.
T. Rowe Price Report Says ESG Disclosure Issues was #1
Topic Among Worldwide Companies in 2019, by Emily
Holbrook, May 11, 2020, Environmental Leader, USA.
-------------------------------------------------------------
Few links between ESG
criteria and executive pay -- report. "Few
FTSE All World companies link executive pay to ESG
criteria, according to a report from Sustainalytics. The
report, 'The
State of Pay: Executive Remuneration and ESG Metrics,'
is aimed at helping global equity investors assess how
ESG criteria are factored into executive compensation,
as a topic for corporate engagement."
[COMMENTARY] In an era where the
issue of executive compensation is coming to the fore,
this is a timely report!
Few links between ESG criteria and executive pay --
report, by Hazel Bradford, April 30, 2020,
Pensions&Investments, USA.
-------------------------------------------------------------
SEC Rule Changes Will
Hobble ESG Investors. "The proposed SEC
rule changes would raise proposal resubmission
thresholds from 3%, 6%, and 10% for those voted on once,
twice, or three or more times respectively to 5%, 15%,
and 25%...
back-testing by the Sustainable
Investments Institute contends that under the new rules,
30% of the 614 proposals that went to vote between 2010
and 2019 would not have been eligible for resubmission."
[COMMENTARY] Clearly, this is another
way that the SEC-Trump administration, wants to damp down
rising shareholder advocacy on sustainability and ESG
issues.
SEC Rule Changes Will Hobble ESG Investors, by Mark
Tulay, April 24, 2020, Barron's, USA.
-------------------------------------------------------------
Commentary: Active beats
passive in promoting sustainable development.
"Genuinely active investment managers, with high
active share and more concentrated portfolios, should be
better placed to assess these gray areas and therefore
make more considered and conscious judgments."
[COMMENTARY] This analyst makes a
case for active management for ESG funds.
Commentary: Active beats passive in promoting
sustainable development, by Lorna Logan, April 23,
2020, Pensions&Investments, UK.
-------------------------------------------------------------
Green 50: Top business
moves that helped the planet. "There is a
lot to reflect on from the last 50 years. Amidst the
COVID-19 pandemic, it's worth remembering we have a
pretty good track record of fixing planetary-scale
problems when we set our minds to it."
[COMMENTARY] Corporate Knights have
provided a wonderful offset to our present fears by
compiling this list. It serves to remind us of the
positive developments that businesses can make to
society. Well done Corporate Knights!
Green 50: Top business moves that helped the planet,
by Adria Vasil Laura Väyrynen & Toby Heaps, April 20,
2020, Corporate Knights, Canada.
-------------------------------------------------------------
How Are "Green Bonds"
Coping With COVID-19 Turmoil? "The current
volatile environment does not seem to be impacting the
trend towards sustainable finance -- allocations to green
bonds are not being affected at all... NN IP expects the
sovereign green bond segment to also benefit from the
unprecedented fiscal and monetary policy response."
[COMMENTARY] Enormous amounts of
bonds will be issued by governments coping with the
COVID-19 crises. And green bonds will likely comprise a
major segment of that issuance!
How Are "Green Bonds" Coping With COVID-19 Turmoil?
By editorial staff, April 15, 2020, Wealth Briefing, UK.
-------------------------------------------------------------
Future Returns: Covid-19
Bonds Emerge as a Financing Tool. "'There's
been a flurry of activity in the number of social bond
issues in response to the pandemic,' says Kevin Ranney,
director of sustainable financial solutions at
Sustainalytics, an ESG rating and analytics firm. 'I
expect that we're going to see a surge, based on what
our team is observing and hearing in conversations with
underwriters and prospective issuers. In general, the
market is really looking for innovation in this area.'"
[COMMENTARY] COVID-19 is giving a
tremendous boost to the green bond market and it's
likely to greatly expand interest in them.
Future Returns: Covid-19 Bonds Emerge as a Financing
Tool, by Karen Hube, April 14, 2020, PENTA, USA.
-------------------------------------------------------------
Don't Be Fooled by Most
ESG Rankings. Focus on Materiality Instead.
"The Wall Street Journal recently ran an article
about how big technology stocks dominate ESG funds. Tech
companies are not usually associated with the big ESG
issues like climate change, renewable energy, or
diversity. So, are investors being fooled?"
[COMMENTARY] The writer makes a good
case for materiality. This article is well worth
reading.
Don't Be Fooled by Most ESG Rankings. Focus on
Materiality Instead, by Emily Steinbarth, Advisor
Perspectives, April 8, 2020, USA.
-------------------------------------------------------------
LSE sustainable business
head: ESG is the highest priority for large investors.
"David Harris, group head of sustainable
business of the London Stock Exchange, spoke to Fintra
TV about how he works to integrate sustainable finance
across the capabilities of the group..."
[COMMENTARY] It's good to hear in
these uncertain times that stock exchanges like the
London Stock Exchange believe so confidently that ESG
has the 'highest priority for large investors.'
LSE sustainable business head: ESG is the highest
priority for large investors, by Finextra TV, April
6, 2020, UK.
---------------------------------------------------------------
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