September 2023 Newsletter
News & Commentaries by Ron Robins
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New Podcasts:
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The Performance of Socially Responsible Investing: A Review. “Our research indicates that SRI do not result in worse returns and seem to perform similarly to standard assets, but with less volatility, particularly during times of crisis.”
The Performance of Socially Responsible Investing: A Review, by Lisa Gianmoena & Luca Spataro, First Online: , Part of the Palgrave Studies in Impact Finance book series (SIF).
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ESG ETFs fail to shine over past 10 years. “Exchange traded funds investing on the basis of environmental, social and governance criteria have not beaten the market over the past decade, analysis has shown.”
[COMMENTARY] The paper titled, “Sustainability Alpha in the Real World: Evidence from Exchange Traded Funds,” has yet to be peer-reviewed and published. What is clear is that you can slice and dice the data in many different ways as well as choose periods favorable or unfavorable to your biases!
Incidentally, my guess is that the big gains in tech stocks this year might enhance the picture for sustainable funds! This analysis by UK-based Scientific Beta — the paper’s author — should be done annually.
ESG ETFs fail to shine over past 10 years, by Steve Johnson, September 26, 2023, Financial Times, UK.
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The EU’s New ESG Disclosure Rules Could Spark Securities Litigation in the US. “The granular information required by the EU could feed litigation in the U.S. if the disclosures appear false or misleading, or are inconsistent with disclosures in other jurisdictions.”
[COMMENTARY] Those companies engaged in greenwashing could be caught out! It’s going to make evaluating the investment credentials of many companies easier for ethical and sustainable investors.
The EU’s New ESG Disclosure Rules Could Spark Securities Litigation in the US, by Raquel Fox, Simon Toms, and Jeongu Gim, September 23, 2023, Harvard Law School Forum on Corporate Governance, USA.
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Is there ever a case for defence stocks in sustainable funds? “City minister Andrew Griffith and defence minister James Cartlidge recently said it is perverse that the defensive sector is being shunned on environmental, social and governance (ESG) grounds. Faith Glasgow examines this debate.”
[COMMENTARY] I believe it’s a personal decision whether any investor should include defense investments in their portfolio. It is certainly an important debate to have though.
Is there ever a case for defence stocks in sustainable funds? By Faith Glasgow, September 19, 2023, Interactive Investor, UK.
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SEC Says ESG Funds Must Invest ’80 Percent Rule’ in Fight Against Greenwashing. “On Wednesday, the U.S. Securities and Exchange Commission published new rules to prevent greenwashing in mutual fund names… The latest SEC amendments modernize the Investment Company Act ‘Names Rule’ to ensure that funds match their purpose. It is the latest of the SEC’s efforts to fight greenwashing in the sustainable investment industry.”
[COMMENTARY] This is a good step forward and is causing many fund managers to rename or delete funds.
SEC Says ESG Funds Must Invest ’80 Percent Rule’ in Fight Against Greenwashing, by Kaley Roshitsh, September 21, 2023, Yahoo Life, USA.
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Insider trading from top corporate executives spikes after audits, per U. of Minnesota study. “Insider selling on the part of top executives and directors at some public companies spikes in the weeks after they receive negative audit reports and before that information becomes public, per the study.”
[COMMENTARY] Studies show that most people are susceptible to unethical behavior for personal profit if they think they can easily get away with it. Company executives and directors are no different — even if their companies have ‘ethical codes!’ If these individuals perform so unethically, what else might they be doing in the course of company business?
Insider trading from top corporate executives spikes after audits, per U. of Minnesota study, by Todd Nelson, September 18, 2023, Star Tribune, USA.
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A Sustainable Future: Professor Kelly Shue, Yale University School of Management, on Counterproductive Sustainable Investing. “When can sustainable investing be counterproductive? Listen to Jason Mitchell discuss with Professor Kelly Shue, Yale University School of Management, why brown firms—not green firms—will drive the greatest emissions savings, how the cost of capital can be a powerful lever for behaviour change, and why it’s vital that sustainable investors move more towards energy transition-type strategies.”
[COMMENTARY] Professor Shue touches on some pertinent themes concerning sustainable investing in this podcast.
A Sustainable Future: Professor Kelly Shue, Yale University School of Management, on Counterproductive Sustainable Investing, podcast, Jason Mitchell interviews Professor Kelly Shue, August 22, 2023, Man Institute, USA.
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Governance tops global investors’ sustainable investment priority lists. “The ‘G’ of ESG has become the top priority for investors in 2023, although there has been an overall drop in the implementation of sustainable investment generally, FTSE Russell has found.”
[COMMENTARY] It’s unsurprising that ‘governance’ tops sustainable investment priority lists. Governance is the foundation upon which a business thrives — or collapses. Environmental and social concerns — the ‘E’ and ‘S’ of ESG — are important too. However, governance is foundational.
Governance tops global investors’ sustainable investment priority lists, by Eve Maddock-Jones, September 14, 2023, Investment Week, UK.
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A More Impactful Strategy for Sustainable Investing. “The effectiveness of sustainable investing has been challenged, with critics like Tariq Fancy describing it as a mere placebo. Amidst rising skepticism and stricter disclosure requirements, a deeper dive reveals that traditional methods of influencing companies, namely ‘voice’ (shareholder engagement) and ‘exit’ (portfolio screening), are not exhaustive. Through a comprehensive review of over 3,500 research papers, a new approach — ‘field building’ — emerges.”
[COMMENTARY] This is a fascinating new concept on an important subject for ethical and sustainable investors.
A More Impactful Strategy for Sustainable Investing, by Emilio Marti, Martin Fuchs, Mark DesJardine, Rieneke Slager, Jean-Pascal Gond, September 15, 2023, Harvard Business Review, USA.
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Nature, our most precious asset. “The ECB’s recent research estimated that approximately 72% of companies in the euro area are highly dependent on nature, while almost 75% of bank loans to companies in the euro area are granted to those with a high dependency on ecosystem services provided by nature.”
[COMMENTARY] Corporate financial statements will — in the not-so-distant future — show large sums attributable to nature’s various assets. No longer will nature be consumed at little or ‘no cost.’ Natural capital is becoming substantially more valuable.
Nature, our most precious asset, by Bank Lombard Odier & Co Ltd., September 4, 2023, UK.
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Surveys show continued ESG support among investors globally. “ESG investing remains strong globally among institutional investors, according to separate surveys released Wednesday by BNP Paribas and Barclays.”
[COMMENTARY] The US anti-ESG movement is mostly a failure outside the US. And so it should be as it’s irresponsible to not take notice of ESG issues that may blind investors to risks and opportunities that can be substantially material to investor returns!
Surveys show continued ESG support among investors globally, by Hazel Bradford, September 6, 2023, Pensions & Investments, USA.
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Barclays Warns of Bond Risk Few Creditors Are Pricing Right. “The risk in question is the failure of countries to adequately protect their natural capital, putting water, air and soil resources in jeopardy and impacting key sectors such as agriculture, a team of analysts led by Maggie O’Neal, Barclays’ global head of ESG research, wrote in the report published on Monday.”
[COMMENTARY] The loss of natural capital potentially jeopardizes both corporate and sovereign bond returns. For instance, climate change and resultant fires, floods, droughts, etc., can mean reduced returns on all affected investments. Rarely do bond issuers, investors, and rating agencies account for the possibility of such losses! This is where some green bonds might have an advantage.
Barclays Warns of Bond Risk Few Creditors Are Pricing Right, by Frances Schwartzkopff, September 4, 2023, Yahoo! Finance, USA.
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Featured Book
Global Handbook of Impact Investing Solving Global Problems Via Smarter Capital Markets Towards A More Sustainable Society. “If we truly want a more sustainable, more inclusive world, we must change the way we invest our money. This book helps move us toward a future in which every investment decision considers impact alongside profit. Money can do so much more than just make more money, and the problems of our world are far too urgent for our capital to underperform.” — Amit Bouri, MBA, MPA, Co-founder and CEO, Global Impact Investing Network.
For more information, visit Global Handbook of Impact Investing Solving Global Problems Via Smarter Capital Markets Towards A More Sustainable Society, by Elsa De Morais Sarmento and R. Paul Herman, Wiley 2020.
