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Shareholder Values

 
"Forty-five percent of U.S. households prefer an environmental, social and governance (ESG) approach to investing… Among those between the ages of 30 and 39, this increases to 64%, and for those younger than 30, it is 67%."
-- Cerulli Associates
 
 (USA)
    October 2018

"While 77% of respondents said they want their financial services provider to inform them about responsible investments that are aligned with their values, only 27% said they had ever been asked if they were interested."
-- Responsible
    Investment
    Association (RIA)
 
  (Canada)
    December 2021

"70% of people [in UK] want to invest ethically but the financial services industry is failing to respond." Referencing research by Abundance.
-- Acquisition
    International
   
(UK) June 2015

 

Events

 

Global Ethical Investing News & Commentary

Commentaries by Ron Robins  E-mail us your feedback

Links may only be valid for a limited time    January 17, 2022

***List your event on our Events Page***

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Latest Podcast: Best ESG Stocks and Funds for 2022. "This podcast has 19 articles with dozens of terrific reviews! Companies include Enphase Energy, First Solar, Netflix, Canadian Solar, ChargePoint Holdings, Brookfield Renewable Corporation, NextEra Energy Partners LP. Funds include iShares MSCI KLD 400 Social ETF, SPDR S&P 500 Fossil Fuel Reserves Free ETF, Fidelity Select Biotechnology Portfolio, and VegTech Plant-based Innovation & Climate ETF."
-- By Ron Robins

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Can Global Regulators Save the ESG Movement From Itself? "Without state intervention and global standards, the environmental, social, and governance movement is a recipe for greenwashing and corporate deception."

[COMMENTARY] Yes, I favor increased government regulation concerning corporate ESG reporting standards, how they're measured, and who gets to audit them. We're certainly not there yet.
Can Global Regulators Save the ESG Movement From Itself? By Michael Moran, January 10, 2022, Foreign Policy, USA.

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The Non-Performance Benefits of ESG Investing. "The above findings should not lead to questioning whether ESG strategies can offer substantial value to investors.

Instead, they suggest that investors who look for value-added through outperformance are looking in the wrong place -- ESG strategies should be considered for the unique benefits they can provide, such as hedging climate or litigation risk, aligning investments with norms and making a positive impact for society.

In addition, ESG investors get an added benefit by employing strategies that tilt toward factors with higher expected returns -- a strategy employed by the sustainable investment funds of Dimensional."

[COMMENTARY] Two particularly interesting studies are reviewed here. What has always concerned me in most ESG portfolios is the overweight of tech and financials in them. Now, if in the years ahead we are to fulfill our renewable energy ambitions, massive increases in mining for lithium, copper, cobalt, silver, etc., will be needed. Will ESG investors and funds turn to miners that mine in a 'most' sustainable way?
The Non-Performance Benefits of ESG Investing, by Larry Swedroe, January 3, 3022, Advisor Perspectives, USA.

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4 Best ESG Stock Screeners. "While this list is a great starting point for any potential ESG investors, it's essential to supplement it with your own research as well."

[COMMENTARY] I'm biased towards Sustainalystics since I've been aware of their sincerity and quality of ESG research since their beginning days over two decades ago!
4 Best ESG Stock Screeners, by The Impact Investor, January 1, 2022, USA.

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ESG shares underperform oil and gas in 2021. "As of December 29, US giants Exxon and Chevron had added 48 per cent and 40 per cent respectively in 2021. The duo have helped power global energy equity funds past many of the hundreds of US and European sustainable funds as defined by Morningstar, a data provider."

[COMMENTARY] In my view, there are two reasons this is happening. First, still relatively high fossil-fuel demand yet with low investment in new replacement production that is forcing higher fossil-fuel prices. Secondly, it could be that divestment helped forced down the price of many fossil-fuel producer stocks to a point that higher fossil-fuel prices gave way to higher profits. Thus, their shares became attractive to many investors and sent their stock prices higher.
ESG shares underperform oil and gas in 2021, by Patrick Temple-West and Kristen Talman, December 30, 2021, Financial Times, UK.

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Today's widely adopted ESG ratings and net-zero pledges are mostly worthless, two pioneers of sustainable investing say. "Scores of new funds are claiming to practice environmental, social and governance investing, but their managers are failing to put in the work of determining whether companies they own adhere to those standards. And that's leading to style over substance, two long-time ESG portfolio managers said in an interview."

[COMMENTARY] There are some useful insights in this article concerning ESG ratings. However, I stand by my contention that just as investors have differing views about a stock, so should ESG raters have different opinions too. However, I do believe that ESG raters need to be transparent about their methodologies and market performance integrated into their data.
Today's widely adopted ESG ratings and net-zero pledges are mostly worthless, two pioneers of sustainable investing say, by Debbie Carlson, December 28, 2021, MarketWatch, USA.

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CFA Institute Publishes First Global ESG Disclosure Standards. "The Standards are intended to address current issues with ESG investing, such as inaccurate disclosure practices, and aim to support investors with complete, reliable, consistent, clear and accessible information. The Standards have been designed to accommodate the full range of investment vehicles, asset classes and ESG approaches offered in markets around the world."

[COMMENTARY] Frankly, the CFA Institute should've been out with these years ago. But, better late than never. We'll have to see how they work in practice.
CFA Institute Publishes First Global ESG Disclosure Standards, by Bennett Jones LLP, December 17, 2021, USA.

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An ESG analysis on the Covid-19 crisis. "Our framework highlights how Social and Governance performance have a close correlation with the outcome of the COVID-19 pandemic in the various economies of our selected universe.

Additionally, this study should serve as a driving force for continuous investment in a sustainable and responsible array of public policies. Economies that suffered the most from the COVID-19 pandemic were also those whose sovereign spreads widened during the pandemic, putting further financial pressure on their economies."

[COMMENTARY] This is a fascinating study on which countries -- and why certain countries -- outperformed economically during one phase of the Covid-19 pandemic.
An ESG analysis on the Covid-19 crisis, by FTSE Russell, November 23, 2021, UK.

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2021 RIA (Canada) Investor Opinion Survey. "While 77% of respondents said they want their financial services provider to inform them about responsible investments that are aligned with their values, only 27% said they had ever been asked if they were interested. About one-third of respondents said they currently own responsible investments, similar to last year."

[COMMENTARY] This is a problem I've been concerned with since I began in the investment industry over 50 years ago. It goes back to how the 'know-your-client' rule is legally interpreted.

I believe it's the major financial institutions that have never wanted to include the understanding of a client's personal values applied in this rule. Canada's RIA is lobbying to get this changed. They now have the backing of many Canadian financial heavyweights, so perhaps it'll finally be changed!
2021 RIA (Canada) Investor Opinion Survey, December 8, 2021, RIA (Canada).

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Why sustainable business needs better ESG ratings. "Environmental, social, and governance data is noisy -- and may not help firms protect the planet. Here's what to keep in mind as you measure and invest."

[COMMENTARY] Beth Stackpole provides good insight into the state of ESG corporate reporting and how ESG rating agencies rate companies on ESG measures. Also, the writer asks tough questions about the relevance of what's being reported and potential outcomes concerning sustainability.
Why sustainable business needs better ESG ratings, by Beth Stackpole, December 5, 2021, MIT, USA.

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Rating Muni Bonds on ESG and Impact. "Across muni-bond sectors, there are more than 200 data-driven metrics and 5 million annual data points to measure performance. VanEck and HIP Investor have partnered to track the overall impact and sustainability of 122,000 entities that could benefit from muni bonds."

[COMMENTARY] This article presents a good analysis of how US muni bonds can be ESG rated. This will be of interest to many investors.
Rating Muni Bonds on ESG and Impact, by Paul Herman, December 5, 2021, ETF Trends, USA.

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Investor Guide To Natural Capital by HSBC Asset Management. November 2021

[COMMENTARY] Though for institutions, this guide is also incredibly useful and informative reading for all ethical and sustainable investors.

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Is your 'green' fund really any different to one without the trendy label? Top experts warn they can be almost identical - and demand a crackdown. "Leading investment experts are calling for the country's [UK] financial regulator to act swiftly to stop the mis-labelling of green investment funds by some of the world's biggest asset managers."

[COMMENTARY] This is probably the same situation in most western countries. With the enormous growth in green funds, it's, frankly, expected that many funds would jump on the bandwagon that aren't really green or sustainable.
Is your 'green' fund really any different to one without the trendy label? Top experts warn they can be almost identical - and demand a crackdown, by Jeff Prestridge, November 27, 2021, Financial Mail on Sunday, UK.

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Oil Nations Are Selling Billions In Green Bonds. "Saudi Arabia, the world's biggest oil producer, has announced plans to boost oil production further, from the current 12 million barrels a day to 13 million barrels a day by 2027. The UAE has an even more aggressive growth plan, with state-controlled oil company ADNOC saying it will increase oil output by 25% to produce 5 billion barrels a day by 2030. Meanwhile, Qatar continues to invest heavily in African oilfields and is building the world's largest liquified natural gas (LNG) terminal."

[COMMENTARY] One major concern is that these states become huge green bond issuers while also greatly expanding their fossil-fuel production--which becomes increasingly difficult to finance! Hence, is the green bond issuance 'subsidizing' fossil-fuel investment?
Oil Nations Are Selling Billions In Green Bonds, by Alex Kimani, November 27, 2021, Oilprice.com, UK.

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Institutional investors wary of companies' ESG promises. "92% of investors are concerned that companies aren't effectively executing on their net zero promises."

[COMMENTARY] It's easy for companies to make promises that are many, many, years into the future! Particularly when it promotes your stock price. However, presenting detailed plans for achieving those promises is still rare. And that's what creates investor skepticism of such 'promises.'
Institutional investors wary of companies' ESG promises, by Lynn Pollack, November 25, 20221, Benefits Pro, USA.

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Company valuations and climate strategies are poles apart. "Analyses of companies globally by management consultancy Kearney in November seen exclusively by Reuters, as well as data by Credit Suisse Group AG published in April, found that companies that lowered their emissions in sectors where doing so was expensive and government regulation was limited were valued less, on average, than more emitting peers."

[COMMENTARY] There's a vicious or virtuous circle that's happening -- depending on your viewpoint -- as regard to fossil-fuel prices. High prices please many investors! Hence, companies fully engaged in fossil fuel production are reaping big profits. Environmentalists love it too as it dampens fossil-fuel demand. However, consumers are mad about it.

For many investors and fund managers, it's a bit like why not invest in tobacco companies? They usually make huge profits, often have great ESG ratings, and are included in many ESG indices and ESG funds? You see my point!

Also, its increasingly difficult to find funding for fossil-fuel developments thus limiting potential future supply. So, many investors see investing in 'purer' fossil-fuel plays as a win-win-win! Similarly, in many industry sectors.
Company valuations and climate strategies are poles apart, by Elizabeth Howcroft and Simon Jessop, November 24, 2021, Yahoo! Finance, USA.

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Green Bond Impact Ratings: Turning Brown into Green. "This special report examines how ESG factors are changing the landscape in fixed income investing, and how institutional investors and security issuers are navigating the new terrain."

[COMMENTARY] A great article on this timely subject.
Green Bond Impact Ratings: Turning Brown into Green, from the Nov 2021 PGIM Fixed Income ESG Special Report, November 23, 2021, Institutional Investor, USA.

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Bob Eccles and Jean Rogers on ISSB and the future of ESG reporting. "So what does the formation of the ISSB mean for the evolution and efficacy of ESG reporting? To answer that, I checked in with those who I thought would know better than most: Jean Rogers, founder of the Sustainability Accounting Standards Board (SASB) and, as of this month, global head of ESG at Blackstone; and Robert Eccles, founding chairman of SASB, professor of management practice at Oxford and a founder of the International Integrated Reporting Council (IIRC)."

[COMMENTARY] This is a good insightful discussion of the newly formed International Sustainability Standards Board (ISSB) and what it might mean for all ethical and sustainable investors.
Bob Eccles and Jean Rogers on ISSB and the future of ESG reporting, by Grant Harrison, November 17, 2021, GreenBiz, USA.

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Advisers must be careful not to create 'inherent bias' towards ESG - P1. "Advisers could soon have to ask clients about their sustainability preferences in a similar way to attitude to risk, as ESG becomes ingrained in the investment process, according to Quinitin Rayer, head of research and ethical investing at P1 Investment Services."

[COMMENTARY] I've been waiting over forty years for investment advisory professionals to realize what has been obvious since the beginnings of their profession! To properly serve a client the 'Know-thy-client' rule should also mean 'know-their-values'. Otherwise, how can you properly advise a client financially!

However, this article seems to also warn that advisors need to caution their clients about overly favoring ESG. To me, that arises from a mindset that doesn't properly understand ESG.
Advisers must be careful not to create 'inherent bias' towards ESG - P1, by Julia Bahr, November 17, 2021, Professional Advisor, USA.

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Majority of investors see gap between ESG preferences and current portfolio. "The study set out to examine the client side of ESG investing and establish investors' attitudes in the UK, the US and Singapore towards ESG investing, their true ESG preferences, the strengths and weaknesses of their existing financial adviser on the subject and what would constitute for them the ideal ESG investment experience. Investors' ESG preferences were shown to vary widely and be distributed right across the spectrum of available forms of sustainable investment."

[COMMENTARY] This study suggests that the 'know-thy-client' rule is not properly applied by advisors and that investors aren't doing enough research themselves. It's laziness by both groups. Blaming each other is at least a start in hopefully correcting the situation!
Majority of investors see gap between ESG preferences and current portfolio, press release, November 15, 2021, Capital Preferences, USA.

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Bonds are an ESG blind spot in investing. "BBVA Global Markets Research has estimated that in late 2020 the stock of green, social and sustainable bonds had yet to reach $1tn out of a market total of $128tn. While this green exposure is rising fast from a low base, it is indisputably minuscule."

[COMMENTARY] The writer seems to believe that ESG is partly a 'marketing ploy' among equity asset managers. He's probably right to some extent. But he gives the impression that the bond markets are more sophisticated. Hence, the reason for green bonds being such a small proportion of total bond issuance.
Bonds are an ESG blind spot in investing, by John Plender, November 10, 2021, Financial Times, UK.

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ESG investing has a blind spot that puts the $35 trillion industry's sustainability promises in doubt: Supply chains. "Investors' trust in ESG funds may be misplaced. As scholars in the field of supply chain management and sustainable operations, we see a major flaw in how rating agencies, such as Bloomberg, MSCI and Sustainalytics, are measuring companies' ESG risk: the performance of their supply chains."

[COMMENTARY] The issue of supply chains is coming to the fore! The reason why ESG rating companies have largely ignored it is because it's complex, difficult -- and costly to evaluate. My guess is until a way is found to cover such increased costs, fully including supply chain issues into ESG scores will be mixed at best.
ESG investing has a blind spot that puts the $35 trillion industry's sustainability promises in doubt: Supply chains, by Tinglong Dai and Christopher S. Tang, November 9, 2021, The Conversation, Canada.

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Why Investor Engagement with 'Dirty' Companies Is Better Than Divestment. "Investors who espouse environmental, social and governance (ESG) principles will achieve little by selling their shares in ESG-unfriendly companies, according to a new research paper titled 'The Impact of Impact Investing' by finance professors Jonathan B. Berk at Stanford University and Jules H. van Binsbergen at Wharton.

Instead, investors could have more success if they buy those so-called 'dirty' stocks and then engage with those companies' managements to adopt ESG-friendly policies, the paper contended."

[COMMENTARY] This theme of engagement rather than divestment for poorly performing companies concerning fossil fuels and ESG performance, has become commonplace among academics and some ethical investors too. Yet, student groups continue to press for divestment in university endowments.
Why Investor Engagement with 'Dirty' Companies Is Better Than Divestment, by Knowledge@Wharton, November 8, 2021, USA.

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A Sign of the Times: The ESG Buyback. "In an ESG buyback, the company commits part of the buyback profits to finance a socially responsible or green initiative. Early adopters include BIC, Campari and Enel."

[COMMENTARY] I'm not sure how to view this. It is a good way to use 'excess profits.' However, when companies can't see a way to utilize profits to enhance their own business I think they need new management!
A Sign of the Times: The ESG Buyback, by Theo Vermaelen, November 8, 2021, INSEAD Knowledge, France.

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IFRS announces global sustainability standards board. "Efforts to establish a global consensus for climate and sustainability disclosures took a major step as the International Financial Reporting Standards Foundation (IFRS) announced a series of 'significant developments' including its new International Sustainability Standards Board (ISSB)."

[COMMENTARY] This development is great news and timely. I and many others associated with ethical and sustainable investing have decades called for this development.

UPDATE: Canadians are happy too, that one of the three main offices of the new Board will be in Montreal.

IFRS announces global sustainability standards board, by Sam Alberti, November 3, 2021, Accountancy Age, USA.

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Most Automotive Leaders Back Hydrogen over BEV, Study Claims. "The study run by automotive technology management consultants, Expleo, is based on the views of 225 senior executives from the automotive industry, split equally between the UK, France and Germany. It 71% of respondents believe hydrogen has significant ecological advantages of battery powertrains but there remains uncertainty around infrastructure and green hydrogen which is holding investment back."

[COMMENTARY] This survey covered European car maker directors. Would American directors also favor hydrogen- fueled vehicles over BEV's? It's interesting that governments continually push BEV's and the general public aren't aware that the directors of most European automakers prefer hydrogen-fueled vehicles!

Anyway, I recall reading that the latest research on 'green hydrogen' suggests that it's not so clean after all!
Most Automotive Leaders Back Hydrogen over BEV, Study Claims, by Paul Myles, October 28, 2021, TU Automotive, UK.

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US holds back on support for global sustainability standards. "Objections to new international outfit aiming to bring clarity to ESG investment hinge on its broad approach."

[COMMENTARY] Such standards should have existed for many years already. As usual, regulators are behind the curve and by the time they get basic standards together, markets will be ahead on phases 2 and 3 of standards.
US holds back on support for global sustainability standards, by
Alan Livsey, October 31, 2021, Financial Times, UK.

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ESG metrics trip up factor investors. "Adding an ethical tilt to a portfolio may not necessarily lead to better returns."

[COMMENTARY] This article provides a good discussion of implementing ESG into factor-based investing.
ESG metrics trip up factor investors, by Emma Boyde, October 31, 2021, Financial Times, UK.

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New Research: Ethical and unethical investments under extreme market conditions. "This study examines the time-varying volatility and risk measures of ethical and unethical investments.

We compute the value-at-risk and expected shortfall using the MS-GARCH model based on the Bayesian estimation framework.

Ethical investments are less affected than unethical investments during global financial crises.

Investors consider ethical investments as a hedging asset for their portfolios in the downside risk."

[COMMENTARY] This research confirms the findings of previous studies that show ethical investments outperform during market downtowns.
Ethical and unethical investments under extreme market conditions, by Petter Olofssona, Anna Råholm, and Gazi Salah Uddin at Linköping University, Sweden; Victor Troster, Universitat de les Illes Balears, Palma, Spain; and Sang Hoon Kang, Pusan National University, Republic of Korea. October 2021, International Review of Financial Analysis.

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Why Divestment Doesn't Hurt "Dirty" Companies. "A new analysis finds that selling off stocks in corporations that don't meet your values has minimal impact on their behavior."

[COMMENTARY] This research agrees with the activist funds that say you need to invest in 'dirty' companies to change them. When enough investors seeking corporate change invest in companies performing poorly in ESG metrics, they can influence or change the boards of these companies and effect change that way. Hence, investment, rather than divestment, is the key to moving companies in the direction of ESG.
Why Divestment Doesn't Hurt "Dirty" Companies, by Alexander Gelfand, October 27, 2021, Stanford Business, USA.

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Does Divestment From Fossil Fuels Really Work? "Private equity funds are very keen to grab the available stocks, bonds, and assets, as the margins in oil and gas, and even coal, are very impressive and will remain so for longer.

National oil companies and non-Western oil and gas giants will be happy to produce every last drop of oil, gas, and even coal they can.

Private equity funds, with a much shorter investment horizon than funds, will be pushing for higher production sooner, which will not only produce higher emission levels but will constrain the price competitiveness of renewables."

[COMMENTARY] As many experts have said, fossil fuels have to be made increasingly expensive to drive consumption to renewables. However, cheap fossil fuels create cheap mass food, cheap transportation, etc. Hence, the political reticence to properly tax fossil fuels.
Does Divestment From Fossil Fuels Really Work? By Editor OilPrice.com, October 27, 2021, Yahoo! News, USA.

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100 Best ESG Stocks Combine Performance And Value With Values. "IBD's third annual Best ESG Companies special report, featuring our table of top ESG companies with both high Dow Jones ESG scores and superior IBD Composite Ratings, can help investors pick the best ESG investments."

[COMMENTARY] Worth reviewing, particularly by ethical and sustainable investors.
100 Best ESG Stocks Combine Performance And Value With Values, by Alexis Garcia, October 25, 2021, Investor's Business Daily, USA.

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Navigating the thicket of ESG metrics. "Sustainable investing may be gratifying for wealthy individuals and families, but it is far from simple. A lack of standards in the measurement and reporting of ESG (environmental, social and governance) products and funds can leave investors confused. And when it comes to impact investments, capturing the right data takes time, effort and, often, a hands-on approach."

[COMMENTARY] This FT article is a good review of some of the approaches dealing with this important subject.
Navigating the thicket of ESG metrics, by Sarah Murray, October 24, 2021, Financial Times, UK.

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Is Mandatory Fossil-Fuel Divestment Coming For Your 401(k) And IRA? And How Much Will It Cost You? "Over the past several years, pension funds in Scandinavia have announced divestment from oil and gas companies, and the NEST retirement savings fund in the UK, that is, the government-managed IRA-like fund into which workers are defaulted if their employers don't otherwise provide benefits, has said it will likewise pull its assets from coal mining, tar sand oil production, or arctic drilling.

In the United States, in 2020, a pair of representatives proposed legislation that the Thrift Savings Plan, the 401(k)-like plan for government employees, likewise 'decarbonize.'"

[COMMENTARY] As much as I believe that it's right for pension funds to go fossil-fuel-free, I think it inappropriate for governments to mandate them.
Is Mandatory Fossil-Fuel Divestment Coming For Your 401(k) And IRA? And How Much Will It Cost You? By Elizabeth Bauer, October 24, 2021, Forbes, USA.

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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.

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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."

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ESG 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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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'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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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(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.

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