April 2023 Newsletter
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News & Commentaries by Ron Robins ————————————————————- New Podcasts: ————————————————————- Latest Podcast: Buy These Renewable Energy Stocks Say Analysts. Includes these articles: “Power Your Portfolio with Renewable Energy,” by Tony Sagami; “Top Solar Stocks for Q2 2023,” by Nathan Reiff; “Time to Buy These Alternative Energy Stocks?” By Shaun Pruitt; “How Faith-based Funds Are Evolving to Address Climate Change,” by Lewis Braham; “More Investors Turn to ESG Bond Funds,” by James Comtois — By Ron Robins ————————————————————- Taking the Long View of ESG Investing. “The 2022 slump experienced by environmental, social, and governance (ESG) exchange traded funds has a silver lining in that it serves as a reminder that ESG is a style best deployed over long holding periods. Last year provided strong support for that notion, as many of the factors that previously propelled ESG funds fell by the wayside.” [COMMENTARY] Ever since I became fascinated with ethical, sustainable, and ESG investing, I’ve had the view that the best returns are made over the long term. The reason is that many of the systems and investments needed for it do take time to take full effect. Whether it be finding new energy sources or implementing new ethical management philosophies, it takes time before such benefits can mature. ————————————————————- The Impracticality of Standardizing ESG Reporting (ESG: Myths and Realities). “Verifying ESG information for internationally diversified companies with large and dispersed supply chains would be extremely costly, if not impossible, because companies might not have ready access to the ESG information they are expected to report, particularly as the requisite information resides outside their legal jurisdictions.” [COMMENTARY] The authors have a strong argument. However, ESG standardized reporting frameworks are moving ahead. We’ll have to see how they work in practice! ————————————————————- Research on What Returns to Expect from Green Investments Wins Kellogg’s Moskowitz Prize. “From a field of over 160 submitted papers, Dissecting Green Returns was selected as the winner of the 2022 Moskowitz Prize at Northwestern University. The award, which recognizes high-impact research in sustainable finance, was presented to Lubos Pastor (University of Chicago Booth School of Business), Robert Stambaugh (The Wharton School), and Lucian Taylor (The Wharton School). The Moskowitz Prize, now in its 27th year, is awarded annually to a research paper that demonstrates both impeccable empirical methods and strong potential to influence real-world business and investment practices related to sustainability.” [COMMENTARY] This is probably the pre-eminent prize in academic sustainable-ESG research globally. Congratulations to this year’s winners: Lubos Pastor, Robert Stambaugh, and Lucian Taylor! ————————————————————- How U.S. pension funds could lose their right to consider ESG in upcoming court battle. “The right of pension administrators in the United States to consider environmental, social and governance (ESG) factors in their investment decisions could be thrown into jeopardy by the same Trump-appointed judge who ordered a hold on the abortion drug mifepristone last week.” [COMMENTARY] Just as a US court banned an abortion drug, so the same judge is being potentially approached to restrict the new ESG pension rules recently passed by the Biden Administration. ————————————————————- The Global Underperformance Facing ESG Investors. “Their findings led Cakici and Zaremba to conclude: ‘Investors’ hopes of the superior performance of responsible companies are futile. By buying ESG companies, investors typically take substantial exposure to big companies. Therefore, they sacrifice the small-cap premium that otherwise could be earned. To implement successful ESG strategies, investors should control the size structure and exposure of their portfolios. Isolating the firm size influence would potentially allow incorporating the ESG criteria in portfolio construction without harming its profitability. Doing well (or at least decently) while doing good would still be possible.’ They did add, however, that once they isolated the role of firm size, they did not observe any detrimental impact of corporate social responsibility. Offering words of hope, they concluded: ‘Being good, in this case, does not prove to be costly.’ Even better, the high-scoring stocks are less risky.” [COMMENTARY] This is a thoughtful and informative article. There’s much more to this article than its title infers! ————————————————————- The Rising Chorus of Renewable Energy Skeptics. “‘Sometime during this century, it is highly likely that worldwide depletion of natural resources will force an entire reorganization of social and economic structures, perhaps violently.'” — Walter Youngquist, ‘Our Plundered Planet‘” [COMMENTARY] The quote says it all. From what I observe, few people understand the amount of natural resources that will be needed by 2050 for the world to go all-electric. I fear that mining the seabed will become unavoidable. How we manage that resource could become a major issue in the decades ahead. ————————————————————- What boards should know about balancing ESG critics and key stakeholders. “Companies may not be able to mute all of their critics, but being proactive on ESG reporting can help them distinguish themselves from peers and potentially take advantage of the ESG asset flows.” [COMMENTARY] This is a great informative piece for boards concerning the handling of ESG matters for both internal and external purposes. ————————————————————- How Faith-based Funds Are Evolving to Address Climate Change. “‘Most [faith-based fund companies] are trying to screen out things like [companies involved with] abortion and pornography,’ says Chris McMahon of Aquinas Wealth Advisors, a Catholic advisory firm in Pittsburgh. ‘It’s an enormous lift for these firms to pivot and then add this kind of environmental stuff.’ Part of the problem is that the intense politicization of both religion and environmentalism in the U.S. today makes it hard to find investment firms that consider both, he says. [COMMENTARY] In the US, particularly, the ‘deep right’ politically, are largely ‘anti-woke’ and disbelievers in the climate change problem. Yet, it’s clear many phrases in the bible are about how we need to care for the environment and our fellow humankind. This places a real conundrum for many Christian funds. ————————————————————- Is There Such a Thing as Too Much ESG Disclosure? “As regulators around the world push businesses for more disclosures related to their performance on environmental, social and governance matters, they naturally run the risk of flooding the public marketplace with too much information. In fact, we’ve already reached that point, according to the head official for corporate governance in the UK.” [COMMENTARY] Hopefully, the new corporate ESG-sustainable reporting frameworks and standards that are coming to be agreed upon will not cause undue administrative overkill! However, this article is a good reminder that the demands we make on companies for reporting must not be so onerous that it negatively impacts their ability to be effective and most profitable. ————————————————————- Companies that invest the most in green growth earn triple the returns. “Corporate Knights newly launched Sustainable Economy Intelligence (SEI) Database* ranks more than 2,800 public companies primarily by the percentage of revenues and spending derived from the green economy (as defined by Corporate Knights’ Sustainability Economy Taxonomy). In the most recent three-year period, the companies in the top 20% of the SEI outperform the most prominent index of global companies, the MSCI All-World Index, by a factor of three to one.” [COMMENTARY] It should be clear that the anti-green crowd are real Luddites. They need to know that it’s companies focusing on green products and services that are making well-above-average profits! Keeping them out of portfolios will only harm their returns.
————————————————————- Featured BookYour Essential Guide to Sustainable Investing: How to live your values and achieve your financial goals with ESG, SRI, and Impact Investing, by Larry E. Swedroe and Samuel C. Adams, Harriman House 2022. | ||
| Note: Articles are linked to the original source. Some sites might require registration, and may, or may not, archive stories. All links were active at the time of publication. Disclaimer: Neither The Soul Investor nor Ron Robins makes investment recommendations. Nothing in this newsletter should be interpreted as a recommendation or solicitation to buy/sell any securities or investments. The Soul Investor is a source of general information and resources for spiritual investing, ethical investing, and socially responsible investing (SRI). Investors should consider their actions thoroughly and consult their professional advisers prior to taking any investment action. The Soul Investor does not necessarily agree with the opinions expressed in articles in its newsletter or offered on the web pages to which it might be linked. Such opinions are the responsibility of the writers themselves. Furthermore, The Soul Investor does not offer or provide any warranties, representations, guarantees, implied or otherwise, as to the accuracy, legality, copyright compliance, timeliness or usefulness of the information, materials or services in this e-newsletter, or other sites, to which it might be linked. Also, Mr. Ron Robins is not an investment advisor, nor is he licensed with any professional investment related body, and thus is not able to, nor does he make, any investment recommendations. The Soul Investor is a publication of Investing for the Soul, a registered business name in Ontario, Canada. Copyright © 2023 Ron Robins. All rights reserved. | ||
