August 2022 Newsletter
News & Commentaries by Ron Robins
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Latest Podcasts:
There were no podcasts in August. Next podcast September 9.
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Latest Podcast: ESG Energy Stocks for 3Q 2022… Articles covered include: “Top Alternative Energy Stocks for Q3 2022”; “Ameresco: Alternative Energy’s Best Near-Term Capital Gain Prospect”; “Alternative Energy Stock Quietly Having a Great Year”; “3 Most Undervalued Renewable Energy Stocks to Buy”; “2 Unstoppable Renewable Energy Stocks to Buy for the Next Decade”; and “3 High-Yield Infrastructure Stocks to Buy Now.” And more!
— By Ron Robins
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Report Calls for “Unbundling” ESG Metrics for Impactful Investment for SDGs. “Util — a financial technology company with a focus on sustainability — has published a report ranking the top ten positive — and negative — contributing investment funds for each of the 17 SDGs.”
[COMMENTARY]Two of the most interesting points are that firstly, the report finds that markets favor big companies as they can provide more SDG-relevant data than smaller companies. Secondly, fulfilling SDG goals requires a massive expansion of the mining industry, an industry that SDG-ESG investors mostly disdain!
Report Calls for “Unbundling” ESG Metrics for Impactful Investment for SDGs, August 24, 2022, International Institute for Sustainable Development.
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ESG — A Defense, A Critique, And A Way Forward: An Evidence-Driven Pragmatic Perspective. “The evidence against claims related to ‘woke’ capitalism is thin. Both sides of the ESG debate make valid points while being simultaneously guilty of overstating their case relative to the observed data.”
[COMMENTARY]The author is a professor at the Columbia School of Business. He seeks in this and future articles to examine all aspects of the debate surrounding ESG.
ESG — A Defense, A Critique, And A Way Forward: An Evidence-Driven Pragmatic Perspective, by Shivaram Rajgopal, August 23, 2022, Forbes, USA.
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Can High ESG Ratings Help Sustain Dividend Growth? “To summarize, the analysis found that companies with higher initial ESG ratings experience greater subsequent stability of dividends and a lower likelihood of cutting or eliminating their dividends.
Low ESG ratings do not necessarily mean poor dividend growth, but companies with high ESG ratings appear to consistently deliver higher dividend growth. Finally, equity ESG indices integrating the ISS ESG Corporate Rating may potentially offer better dividend growth over time.”
[COMMENTARY]This is a case where initial higher ESG ratings appear to have some predictive value! It gives comfort to those who may some reliance on ESG ratings.
Can High ESG Ratings Help Sustain Dividend Growth? By Subodh Mishra, August 18, 2022, Harvard Law School Forum on Corporate Governance, USA.
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On ESG Investing, The Economist Offers The Right Diagnosis But A Faulty Prescription. “Rather than proposing improved definitions and metrics based on better data, The Economist argues that ‘it is better to focus simply on the E,’ for environmentally sound investments.”
[COMMENTARY]I agree with the writer of this article that The Economist’s proposal to focus on the environment at the expense of the social and governance aspects of ESG is too narrow. I’m not surprised by ‘establishment’ publications arriving at such a conclusion, however.
ESG is all about looking at all aspects of a company that relate to its activities and that promote its financial well-being over the short, medium, and long-term.
On ESG Investing, The Economist Offers The Right Diagnosis But A Faulty Prescription, by Michael Posner, August 17, 2022, Forbes, USA.
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Doing Good: Where Sustainable Investing Gets It Wrong. “A high sustainability rating does not necessarily equate to real sustainability impact (and profit).”
[COMMENTARY]The article’s authors suggest that “investors should pay more attention to funds’ policies and track records around voting and engagement on sustainability issues than to their sustainability ratings.”
Doing Good: Where Sustainable Investing Gets It Wrong, by Lucie Tepla, August 16, 2022, INSEAD, Singapore.
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What’s wrong with ESG ratings? “‘Is it possible for companies to effectively report on the vast number of potential stakeholder-related metrics that would be required (carbon emissions, pollution and waste, human capital management, supply chain practices, product use and safety, etc.)?’ Similarly, should ESG ratings be subject to regulatory requirements similar to those applicable to major credit rating agencies?”
[COMMENTARY]This is a great review of the state of ESG ratings.
What’s wrong with ESG ratings? By Cooley LLP, August 8, 2022, J D Supra, USA.
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How regulations are moving ESG into the risk and compliance field. “New regulatory rule-making around disclosure could push companies and financial services firms to move their ESG activities under the oversight of risk and compliance teams”
[COMMENTARY]It’s easy to see that as ESG reporting becomes increasingly regulated that it’ll require compliance oversight.
How regulations are moving ESG into the risk and compliance field, by Thomson Reuters Regulatory Intelligence and Compliance Learning, August 5, 2022, J D Supra, USA.
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Could ESG Options Undermine Participant Outcomes? “Overall, the researchers comment that their analysis paints a ‘mixed picture about the actual participant interest, and drivers of demand, for ESG funds in DC plans and suggests that plan sponsors should take a thoughtful approach when considering adding ESG funds to an existing core menu.'”
[COMMENTARY]It seems that employees investing in DC plans weren’t motivated to invest in ESG funds. However, this could be because of the number of funds plan holders invested in, among other factors.
Could ESG Options Undermine Participant Outcomes? By Nevin E. Adams, August 2, 2022, National Association of Plan Advisors, USA.
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ESG is having a hard time but look to the long-term. “The future of green investing still seems secure–performance has been hit by a unique set of economic circumstances, younger investors are at the forefront of the ESG push, and managers are taking a second look at former no-go energy stocks as decarbonisation plans march forward.”
[COMMENTARY]Yes, a unique set of circumstances has created a situation where ESG funds are underperforming. However, should global warming continue to pan out as per IPCC forecasts, quality ESG funds should perform well over the long-term as increasing efforts are made to reduce the effects of climate change.
ESG is having a hard time but look to the long-term, by Christopher Akers, July 28, 2022, Investors Chronicle, UK.
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ESG Underperformance Will Be Its Undoing. “While ESG investing gets promoted as a way for individuals to’invest with their principals,’such has been a windfall marketing scheme by Wall Street firms.”
[COMMENTARY]The writer, Mr. Roberts, completely misses the whole idea of ESG: that is for investors to invest in companies that not only reflect high personal values but to invest in companies that are dutifully applying ESG principles to their operations for long-term shareholder returns.
Over time, companies that pay attention to the environment, have good relations with all stakeholders, and are exceptionally well governed, are likely to have higher profits.
Yes, many financial firms have engaged in greenwashing and this is now being addressed by various regulatory authorities. But ESG investing will survive because over the long-term it’ll simply make more money for investors.
ESG Underperformance Will Be Its Undoing, by Lance Roberts, July 28, 2022, Advisor Perspectives, USA.
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Featured Book
Values: Building a Better World for All, by Mark Carney, Signal 2021.
“Writing with the benefit of almost two decades at the heart of global financial policymaking higher circles, Mark Carney’s indispensable new book asks how we can go from knowing the price of everything to understanding its true value. From the Great Financial Crisis to climate change and the coronavirus pandemic, this is the essential handbook for 21st century leaders, policymakers and everyone who wants to build a fair and sustainable world.”–Christine Lagarde, former chair and managing director of the IMF and president of the European Central Bank.
