September 2016 Newsletter
News & Commentaries by Ron Robins
New research shows IFAs (UK Independent Financial Advisors) see increase in demand for ethical investments. “Research from Heartwood Investment Management reveals that one in four (25 per cent) IFAs have seen an increase in client demand for ethical investing over the last few years but just two in five (43 per cent) are satisfied with the current range of ethical investment options on offer.
The research, which canvassed the views of UK based IFAs, revealed that more than four in five (81 per cent) would prefer to invest in a globally-diversified ethical portfolio for their clients. Just one in ten prefers investing in a single-strategy ethical fund.”
[COMMENTARY]I wonder if the 57% of IFAs who say they are not satisfied with the current range of ethical investment options truly know what is available. My guess is that most haven’t really researched the field. Nonetheless, it’s great to see that UK IFAs see increasing demand for ethical investments.
New research shows IFAs see increase in demand for ethical investments, by Beverly Chandler, September 26, 2016, WealthAdvisor, UK.
Canada’s Responsible Investment Week Events, October 17-21, 2016. Detailshere. This is the third year for this great event and it grows bigger every year!
AMNT: Climate change scores lowest on biggest risks facing (UK pension) schemes. “Trustees believe climate change is the lowest risk for their schemes, according to this year′s Association of Member Nominated Trustees (AMNT) survey. Only 1% of respondents said climate change is a threat in contrast to the 2015 survey where it was ranked as the second top concern with 16% of MNTs calling it their biggest worry.
Despite climate change coming bottom this year, environmental social governance (ESG) implications was the fifth most important concern for MNTs, with 9% calling it their top concern. Importantly, ESG, which is a broad term for many things including climate change, was not an option in last year’s survey.”
[COMMENTARY]A survey question changed between 2015 and 2016 to include ESG. This might account for some of the differences in responses to the climate change concerns between those years. The number one concern for the funds was market volatility.
AMNT: Climate change scores lowest on biggest risks facing (UK pension) schemes, by Michael Klimes, September 22, 2016, Professional Pensions, UK.
Investors abandon principles as low interest rates put pressure on returns. “A survey of more than 100 institutional investors found that 60pc believe that environmental, social and corporate governance (ESG) risks justify rejecting an otherwise attractive investment … down from 67pc a year ago.”
[COMMENTARY]The responses to such questions should be expected to change — up and down — each year, though trending higher over the long-term, which has been seen over the past several years. Even at 60%, this is a remarkable improvement from responses to similar surveys some years back.
Investors abandon principles as low interest rates put pressure on returns, by Tim Wallace, September 19, 2016, The Telegraph, UK.
S&P lays out plans for green bond and ESG market tools. “Influential ratings agency S&P Global has launched plans for a new tool to examine the environmental impact of projects or initiatives financed by bonds.
Dubbed the Green Bond Evaluation Tool, the market instrument would identify projects that aim to reduce greenhouse gas emissions or mitigate the impact of natural catastrophes.”
[COMMENTARY]This is a welcome initiative and necessary development. Only time will tell if they can get it right.
S&P lays out plans for green bond and ESG market tools, September 13, 2016, Jocelyn Timperley, GreenBiz, USA.
New Study Shows Corporate America Continuing to Invest in Sustainability. “Since its inception, the study, which was first conducted in 2006, 2009, 2012 and now in 2015, has created a five-stage sustainability scale ranging from those companies that do not include sustainability as part of their mission to those who view sustainability as a transformative driver for their business.
The findings demonstrate that the percentage of companies at the high end of the scale has grown from 15% in 2006 to 41% in 2015. However, there has also been a slight increase in those at the lower end of the scale as well, with 21% in 2015 compared to 17% in 2012.”
[COMMENTARY]The corporate march towards an orientation to sustainability continues to grow. Soon, with most of the world’s major stock exchanges demanding more detailed ESG reporting, the present 41% will rise significantly over the coming years.
New Study Shows Corporate America Continuing to Invest in Sustainability, press release, September 8, 2016, Dodge Data & Analytics/Siemens, USA.
Results Announced for 2016 Dow Jones Sustainability Indices Review. “The three largest additions and deletions (by free-float market capitalization) to the DJSI World this year include: Additions: Cisco Systems Inc, Royal Dutch Shell PLC, Adobe Systems Inc.. Deletions: Intel Corp*, Samsung Electronics Co Ltd, British American Tobacco PLC.”
[COMMENTARY]The DJSI is a great list of sustainable companies, focusing on ’best of sector.’ However, the results would be greatly improved if their analysis incorporated the sustainability of the products and services with respect to the revenues of the listed companies. The full 2016 results will be published September 12 on theirRobecoSAM website.
Results Announced for 2016 Dow Jones Sustainability Indices Review, press release, September 8, 2016, RobecoSAM, Switzerland.
What Big Data Says About ESG. “ESG factors can be used to identify signals for higher return and reduced downside risk, so long as investors possess the ’necessary sophistication.’”
[COMMENTARY]This is fascinating research from a whole new perspective, that of ’data science.’ This is, “Large scale, deep data, and advanced statistical analysis — allowing researchers to identify what is happening in the real world as opposed to what should happen according to economic theory.” The study’s author is Andreas Hoepner, a data scientist and professor at UK’s Henley Business School professor.
What Big Data Says About ESG, by Amy Whyte, September 6, 2016, Chief Investment Officer, USA.
PRI launches A practical guide to ESG integration for equity investing. “To guide investors – both asset owners and investment managers – who are implementing ESG integration techniques in their investment process, this report is the most comprehensive description to date of what ESG-integrated analysis is, and how it works in practice.”
[COMMENTARY]This appears to be an invaluable guide to ESG investing. By using case studies, it demonstrates real life practices of ESG integration in investment analysis utilizing a variety of investment approaches.
PRI launches A practical guide to ESG integration for equity investing, September 2016, UN’s Principles for Responsible Investing (PRI), UK.
Does ESG Boost Returns? “And though there is convincing evidence that good performance on selected industry-specific materiality data leads to increased returns, translating those aggregate-level insights into portfolio-appropriate ideas is not a linear process.
With these issues in mind, it seemed natural to ask what readers of CFA Institute Financial NewsBrief thought of how examining these disclosures might yield better returns.”
[COMMENTARY]In their survey question, “Do you think analyzing ESG factors can boost returns?” 37% say they include it in any complete analysis and only 15% said “no way.” Read the article as the results are interesting.
Does ESG Boost Returns? By Will Ortel, September 1, 2016, Enterprising Investor, CFA Institute, USA.
How ETFs Are Incorporating Sustainability. “While the two largest diversified sustainable investment options have been around for a decade, the diversified set now totals 20 funds, with 17 launched in just the past two years, nine of them so far in 2016, reflecting growing demand for sustainable investment products as well as more general investor interest in passive portfolios.”
[COMMENTARY]Another informative article from Jon Hale at Morningstar. It will interest most ethical investors.
How ETFs Are Incorporating Sustainability, by Jon Hale, September 1, 2016, Morningstar, USA.
The Resilient Investor: A Plan for Your Life, Not Just Your Money, by Hal Brill, Michael Kramer, Christopher Peck with Jim Cummings, Berrett-Koehler Publishers 2015
“To survive and thrive in an uncertain future means being resilient—in every sense of the word. That’s easy to say, hard to do. The Resilient Investor [shows] not just what resiliency means to a financial investor but also how it relates to the investments we make every day in our families, our communities, and ourselves.”—Joel Makower, Executive Editor, GreenBiz.com, and author of Strategies for the Green Economy.