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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
    October 2018

"The vast majority of Canadian investors are interested in responsible investments (RI) that incorporate environmental, social and governance (ESG) issues, and they would be more likely to choose responsible investments if their financial advisor suggested suitable RI options for them."
-- Responsible
    Association (RIA)
    June 2017

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


Ethical Investing News/Commentaries
October 2017


Commentaries by Ron Robins

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Just released: new surveys related to ESG investing.

[COMMENTARY] It’s clear that the mainstream investment industry is adopting ESG criteria as important to investment analysis and attracting millennials to investing. However, I remain skeptical about much of the surveys’ findings due to the definition of ESG and what people say and do being two quite different things. Also, some surveys seem to contradict each other in their results.

The following surveys have just been released on the subject.
Responsible Investing: the Evolution of Ownership, October 30, 2017, RBC Global Asset Management (GAM), Canada.
Money Meets Morals Study, press release, October 30, 2017, Harris Poll for Swell Investing, USA.
Responsible Investing & the Persistent Myth of Investor Sacrifice, October 31, 2017, Hermes Investment Management, UK.
New Equity Perspectives – Emerging markets, ESG and the active/passive debate, October 30, 2017, bfinance, UK.
Over one third of [UK] charities do not have an ethical investment policy, survey finds, October 30, 2017, Gabriel Research and Management, UK.
Commentary: What′s behind asset owners′ slow adoption of responsible investment, October 30, 2017, Pensions & Investments, UK.

McKinsey: ESG No Longer Niche as Assets Soar Globally. "More than a quarter of the $88 trillion assets under management globally are now invested according to environmental, social and governance principles known as ESG, a McKinsey & Co. study found."

[COMMENTARY] McKinsey doesn’t seem to be referring to original work as the figures they’re quoting appear largely from published works such as the 2016 Global Sustainable Investment Review. Perhaps they should state their sources. Anyhow, it’s terrific they’re engaged in promoting ESG!
McKinsey: ESG No Longer Niche as Assets Soar Globally, by Amy Whyte, October 27, 2017, Institutional Investor, USA.

Companies That Lead on Societal Impact Reap Financial Benefits. "Companies that outperform in industry-relevant environmental, social, and governance (ESG) areas boast higher valuation multiples and margins, all other factors being equal, than those with weaker performance in those areas, according to a new report by The Boston Consulting Group (BCG)."

[COMMENTARY] BCG’s research shows that companies excelling in ESG outperform others in their respective industries in profit margins and stock prices, all else being equal! What more confirmation do companies need to optimally perform on ESG criteria? Likewise, investors who′ve been ignoring the importance of ESG should rethink their stance.
Companies That Lead on Societal Impact Reap Financial Benefits, press release, October 25, 2017, Boston Consulting Group, USA.

Climate risk exposure falls as companies boost green action. "Almost a quarter (23%) of companies have targets to move away from fossil fuels in energy consumption, while almost all (98%) have designated climate risk as a board or senior-management responsibility. The Carbon Disclosure Project’s (CDP) annual analysis for 2017 further found another one in seven have agreed to set science-based targets to reduce emissions, while a separate three in ten plan to do so within two years."

[COMMENTARY] Despite the views of the Trump administration, it’s apparent that numerous American businesses increasingly view climate change as serious!
Climate risk exposure falls as companies boost green action, by James Phillips, October 24, 2017, Professional Pensions, UK.

Three-quarters of companies don’t acknowledge climate risks. "That is the stark conclusion of a new report from consultancy giant KPMG, which reveals that 72 percent of large and mid-cap companies worldwide do not acknowledge the financial risks of climate change in their annual financial reports."

[COMMENTARY] One reason for this is that companies don’t yet see the investor/analyst/regulatory demands for it. Also, companies don’t want to add to their potential liabilities by acknowledging possible associated costs that could hurt long-term profits, stock prices, and executive compensation from stock options!
Three-quarters of companies don’t acknowledge climate risks, by James Murray, October 19, 2017, GreenBiz, USA.

Seniors 65 and Older Are More Interested in ESG Strategies Than Younger Generations, Finds AllianzGI ESG Clarity Survey. "AllianzGI found that 68% respondents in the 65+ age demographic had a favorable view of ESG investing compared to only 59% of those 25-44. In addition, 65% of seniors called it a sound investment strategy compared to only 54% of those 25-44.

Seniors are also incredibly engaged in practicing personal ESG in their daily lives with 81% of those 65+ engaging actively in the issues they care about by staying up to date, deciding which products to buy and contributing their time and money to causes important to them. This compares with only 66% of investors aged 25-44 who practice personal ESG."

[COMMENTARY] It’s heartwarming to see this data. I’m concerned about a lot of these surveys though. Who doesn’t want to respond positively when asked, "Do you invest in ’responsible’ companies?" Most people would be afraid of saying ’no’ to the interviewer. It’ll be interesting to get feedback from the pollsters on this. Of course, what people say and do are very different things.
Seniors 65 and Older Are More Interested in ESG Strategies Than Younger Generations, Finds AllianzGI ESG Clarity Survey, press release, October 17, 2017, Allianz Global Investors, USA.

ESG analysis grows in all regions for CFA Institute members; EMEA takes biggest leap. "Although environmental, social and governance consideration was up for all regions from the CFA Institute’s 2015 survey, Europe, the Middle East and Africa replaced Asia-Pacific as the region where investors are most likely to take ESG issues into account at 85%, up from 74% in 2015. Meanwhile, some 81% and 68% of investors in the Asia-Pacific and Americas, respectively, said they take ESG factors into account, up from 78% and 59% in 2015."

[COMMENTARY] The CFA is a highly reputable organization. However, the percentages of investors saying they’re taking ESG into account look overblown to me. ESG analysis is no doubt gaining in credibility but if these responses are to be believed it would be dominant in financial analysis today. Yet, it doesn’t seem to be the situation from any objective analysis of the industry.
ESG analysis grows in all regions for CFA Institute members; EMEA takes biggest leap, by Meaghan Kilroy, October 18, 2017, Pensions & Investments, USA.

PRI threatens to strip members of signatory status in ’greenwashing’ purge. "The PRI argued that many of the 200 or so asset managers and schemes that have signed up to the United Nations-backed principles on tackling environmental, social and governance (ESG) issues pay little more than lip service to them. Now they will be faced with a new set of standards to prove they are making active efforts to effect change, or they risk being removed from the PRI’s official list of signatories."

[COMMENTARY] The UN Principles for Responsible Investment (PRI) have been talking about doing this for some time. I’m delighted to see it happening.
PRI threatens to strip members of signatory status in ’greenwashing’ purge, by James Phillips, October 16, 2017, Professional Pensions, UK.

’True Bearing’ Financial Planners Unveil Consumer Attitudes Towards Sustainable Investment. "With 32.9% wanting to invest in ESG/sustainable investments, why do actual investments total only 3%? Using the survey results, the 3% of total UK assets managed should increase many times over. These figures suggest that IFA’s are missing out on a large market share, of those keen to take up ESG investments."

[COMMENTARY] This is something I’ve been talking and writing about for decades! Most financial advisors and planners -- so many different nomenclatures -- are reluctant (or not required) to spend the time to really know their clients. They make a mockery of what should be their ’know thy client’ mandate. Also, the time to gain knowledge concerning ethical/ESG investments, commission arrangements, and other impediments, thus lead numerous advisors to offer inappropriate advice to their clients.
’True Bearing’ Financial Planners Unveil Consumer Attitudes Towards Sustainable Investment, press release, October 11, 2017, True Bearing Chartered Financial Planners, UK.

Investors fear ESG investment will hurt returns. "Almost half of big European investors fear they will lose out on returns if they invest sustainably, despite the majority believing environmental, social and governance issues will become increasingly important over the next five years."

[COMMENTARY] Schroders definitely sees the future in ESG investing and is taking it seriously. The research they’re compiling -- and its results -- is spurring increasing attention throughout the investment industry. Investment industry professionals should note the results of the study below that just won this year’s Moskowitz Prize!
Investors fear ESG investment will hurt returns, by Attracta Mooney, October 11, 2017, Financial Times, UK.

Announcing the 2017 Moskowitz Prize Winner for Sustainable and Responsible Investing. "This year, the Moskowitz Prize acknowledged the superior quality of the paper Corporate Governance and the Rise of Integrating Corporate Social Responsibility (CSR) Criteria in Executive Compensation: Effectiveness and Implications for Firm Outcomes released in September 2017. The study examined the integration of CSR contracting – that is the linking of executive compensation to social and environmental performance – and how it affects firm-level outcomes.

This study provides practitioners of sustainable, responsible and impact (SRI) investing with data that shows how companies that do good also perform well,’ said Steve Schueth, producer of The SRI Conference and president of First Affirmative Financial Network. ’The authors’ findings add to the mounting evidence that investing in companies that integrate sustainability best practices into their operations does not hinder financial performance, but can improve it – especially for their long-term investors.’"

[COMMENTARY] I’ve given a lot of space to this study because it’s important for many reasons. Firstly, the Moskowitz Prize offered by the Center for Responsible Business at the Haas School of Business, University of California, Berkeley, has become THE prize for SRI/CSR researchers globally. Secondly, the winner of this year’s prize uniquely demonstrates the advantages of CSR for company executives and stockholders!
Announcing the 2017 Moskowitz Prize Winner for Sustainable and Responsible Investing, press release, October 10, 2017, SRI Conference and The Center for Responsible Business at the Haas School of Business, UC Berkeley, USA.

UK Good Money Week October 8-13, 2017. "Letting people know they have sustainable and ethical options when it comes to their banks, pensions, savings and investments so we can protect the environment and support society when we deposit and grow our money."

[COMMENTARY] The UK also has its yearly ethical-responsible money/investing week too. Again, I encourage all UK investors and investment professionals to take this opportunity to help grow UK ethical-responsible finance and investment. These ’weeks’ garner greatly increased media attention to these endeavors as well.
UK Good Money Week October 8-13, 2017, Good Money Week, UK.

Responsible Investment Week Canada Events October 23-27, 2017. "The Responsible Investment Association (RIA) is coordinating a week of events across Canada to promote learning about environmental, social, and corporate governance (ESG) issues that affect investments."

[COMMENTARY] I encourage Canadian investors and investment professionals to take part in these events! It’s a terrific opportunity to encourage the adoption of ethical, sustainable, responsible investing. For a listing of events see Responsible Investment Week, Make Money, Responsibly, Canada.

Major asset managers moving slowly but surely toward impact investing. "Nine out of the top 10 largest U.S. asset managers are now active in impact investing, according to new Tideline analysis. All but Vanguard, the second largest US asset manager, have stood up or are actively testing impact investing strategies."

[COMMENTARY] impact investing continues to grow, largely due to the demands of high net worth investors says this survey. Also, this survey found that institutional investors are laggards in this area.
Major asset managers moving slowly but surely toward impact investing, by ImpactAlpha/Kim Wright-Violich,  October 3, 2017, Tideline & ImpactAlpha, USA.

100 Women: Do women on boards increase company profits? "More sophisticated pieces of analysis carried out by academics have shown very small positive correlations between female board members and financial success. But this is an average - in some companies the relationship was neutral and in some it was negative. And proving causation is far harder."

[COMMENTARY] Ethical investors are convinced that having women on boards improve corporate financial performance. Studies support that thesis. However, this article cites some research contradicting that finding. So, who’s right? As in most social science research, results can differ greatly between studies.
100 Women: Do women on boards increase company profits? October 2, 2017, BBC News, UK.

Research preoccupied with short-term financial metrics. "Excluding environmental, social and governance issues leads to misallocation of capital... A global survey of 342 financial analysts by Aviva Investors found that 42 per cent of respondents thought research published by banks and brokers was preoccupied with short-term financial metrics."

[COMMENTARY] Interesting, aren’t these the analysts that publish the research? Yet, they’re the ones criticising themselves of a short-term preoccupation and avoidance of ESG measures they know are important for understanding the long-term financial prospects of companies! At least they know their issues. Perhaps it’s their managers that need to get with it!
Research preoccupied with short-term financial metrics, by Chris Flood, October 1, 2017, Financial Times, UK.

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