April 2024 Newsletter
News & Commentaries by Ron Robins
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New Podcasts:
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FDIC bid to strip BlackRock and Vanguard of superpower ‘has legs’ and reckoning may start with curbs on self-certification of passive index funds. “The bank deposit insurer could make the $17-trillion ETF power bloc lose the ability to self-certify as ‘passive’ funds because their sheer scale could make them an active menace to the banking regulator, at least in this political climate.”
[COMMENTARY] Anyone with US passive fund investments might want to watch the developments in this space!
FDIC bid to strip BlackRock and Vanguard of superpower ‘has legs’ and reckoning may start with curbs on self-certification of passive index funds, by Oisin Breen, April 24, 2024, RIABiz, USA.
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How important is the G in ESG? Latest sustainable investment analysis from Robeco. “Robeco have reminded us that governance can seem neglected compared with the E and S in ESG, although it is actually everywhere and a necessary foundation for sustainable investment (SI) strategies.”
[COMMENTARY] Surely, governance is primary when it comes to running a company. The ‘E’ and ‘S’ in ESG are dependent upon the governance policies of a company. It’s good that Robeco reminds us of that.
How important is the G in ESG? Latest sustainable investment analysis from Robeco, by
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Quantifying the Returns of ESG Investing: An Empirical Analysis with Six ESG Metrics. “We find that aggregating individual ESG ratings improves portfolio performance. In addition, we find that a portfolio based on Treynor-Black weights further improves the performance of ESG portfolios.”
By Florian Berg, Andrew W. Lo, Roberto Rigobon, Manish Singh. All are associated with the Massachusetts Institute of Technology (MIT), and Ruixun Zhang, is affiliated with Peking University. April 8, 2024. MIT Sloan Research Paper No. 6930-23, USA.
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ESG in 2024: Traps for the Unwary. “ESG continues to be a hot topic for 2024 for investors and regulators alike. The specific concerns investors and regulators have – and what they expect to develop over the coming months – differ, however, across jurisdictions, including because of the different maturity of existing regulation between the EU/UK and the US.”
[COMMENTARY] This is another good article explaining the landscape for ESG and sustainability-oriented investors in 2024.
ESG in 2024: Traps for the Unwary, by Margaret A Dale, Michael R. Hackett, Stephen Hibbard, William C. Komaroff, Timothy W. Mungovan and Dorothy Murray Of Proskauer Rose LLP – The Capital Commitment, April 1, 2024, The National Law Review, USA.
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Renewable energy projects can cost more than fossil fuels: DBS’ Piyush. “THE energy-transition journey in South-east Asia is hampered by the high costs involved in developing renewable-energy power plants, which can be ‘substantially higher’ than fossil fuel-based ones, said DBS chief executive officer Piyush Gupta on Monday.
The high costs of production come partly from the lower levels of solar efficiency in the equatorial region, which is where most of South-east Asia lies.”
[COMMENTARY] Those of us concerned about climate change often underappreciate why the developing world continues to massively invest in the production of energy utilizing fossil fuels. This article is a good explainer of why this is happening.
Renewable energy projects can cost more than fossil fuels: DBS’ Piyush, by Janice Lim, April 15, 2024, The Business Times, Singapore.
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Europe stands firm against US-driven ESG backlash. “Europe has so far largely resisted the anti-ESG tide, due to greater political and consumer support for greener products and a swathe of regulations that underpin the operations of the finance industry and companies in the real economy.”
[COMMENTARY] One explanation as to the difference between Europe and the USA concerning the anti-ESG sentiment could be that oil and gas production is a smaller player in Europe than in the USA. It’s that industry and various US states semi-reliant on the revenues from those industries that largely finance the anti-ESG sentiment.
Europe stands firm against US-driven ESG backlash, by Simon Jessop, Ross Kerber, and Isla Binnie, April 12, 2024, Reuters.
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What drives sustainable investing? Adoption determinants of sustainable investing exchange-traded funds in Europe. “Our results confirm the positive effects of the development of insurance companies and pension funds for the assets of the ESG ETFs.”
By Adam Marszkand and Ewa Lechman. Both are associated with Gdansk University of Technology, Narutowicza 11/12, Gdańsk 80-233, Poland. Structural Change and Economic Dynamics, Volume 69, June 2024, Pages 63-82.
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Walk well and talk well: Impact of the consistency of ESG performance and disclosure on firms’ stock price crash risk. “ESG consistency contributes to lower stock price crash risk through the mechanisms of alleviating agency problems and increasing information transparency.”
By Jun Huang, Yun Li, and Feifei Han. Authors affiliated with Hunan University, Changsha, 410082, China. International Review of Economics & Finance, Volume 93, Part A, June 2024, Pages 1154-1174.
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80% of Global Investors Now Have Sustainable Investment Policies in Place: Deloitte/Tufts Survey. “Deloitte and The Fletcher School surveyed more than 1,000 asset owners, asset managers, and investment advisers, including CEOs, CIOs, Heads of Strategy and other senior investment executives across regions including North America, Europe, and Asia, and also conducted interviews with sustainability and investment leaders, between January and December 2023.”
[COMMENTARY] The anti-ESG/sustainability crowd in the US could learn a lot about the role sustainability plays in investment performance from the global investment industry!
80% of Global Investors Now Have Sustainable Investment Policies in Place: Deloitte/Tufts Survey, March 2024, USA.
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Do Green Bonds Actually Lead to Rosy Returns? “Skeptics argue these instruments amount to little more than greenwashing. New research supports this critical view, revealing that stock prices, ESG scores, and emissions do not improve following green-bond issuance.” Based on the research of Aaron Yoon, and Sanjai Bhagat, April 1, 2024, Kellogg School of Management, Northwestern University, Illinois, USA.
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How does greenness translate into greenium? Evidence from China’s green bonds. “The empirical findings show that green labeling bonds have a greenium compared to conventional bonds.” By Xin Hu, Bo Zhu, Renda Lin, Xiru Li, Lidan Zeng, and Sitong Zhou. All associated with the School of Finance and Institute of Chinese Financial Studies, Southwestern University of Finance and Economics, Chengdu 611130, China. Published in Energy Economics. Volume 133, May 2024, 107511.
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On the superior performance of SRI funds. “We compare the performance of 1126 US mutual funds deemed socially responsible to that of a matching sample of conventional funds over the three-decade period January 1980–December 2019… Our results indicate that SRI funds outperform their peers over the entire sample period.”
By Ali Fatemi, Greenleaf Advisors and DePaul University, Chicago, USA; Iraj Fooladi, Dalhousie University, Halifax, NS, Canada; Yonggan Zhao, Dalhousie University, Halifax, Canada; and Zongming Ma, Dalhousie University, Halifax, NS, Canada. June 2024, International Review of Economics & Finance.
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More female, better corporate performance? Evidence from Chinese listed companies. “Our analysis indicates no significant impact of gender diversity on financial performance.”
By Zhen Zhang, School of Finance and Business, Shanghai Normal University, China; Yifan Wu, School of Economics and Management, East China Normal University, Shanghai, China; and Dongwei He, School of Finance and Business, Shanghai Normal University, Shanghai, China. 30 March 2024.
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Featured Book
Beyond the ESG Portfolio: How Wall Street Can Help Democracies Survive. “It is easy to unintentionally finance autocrats by using benchmark indices, which often include bonds and stocks of countries slipping down the democracy rankings. Despite best intentions, an investor may be investing in Russia’s invasion of Ukraine or supporting a leader like Hugo Chavez without realizing it. This is the kind of situation Beyond the ESG Portfolio sheds clear light on.”
For more information, visit Beyond the ESG Portfolio: How Wall Street Can Help Democracies Survive, by
