January 2017 Newsletter
News & Commentaries by Ron Robins
Steps remain to fully integrate ESG. (Article also reviews important new ESG study.)
“Across all 12 industries, the positive effect on equity return is 6.12 percentage points higher for ESG companies on average. And, if one looks at only the eight industries with clearly higher ESG returns, this difference jumps to an average 14.08 percentage points for ESG companies compared with their peers…
Adding ESG to fundamental analysis is akin to presenting magnetic resonance imaging to medical practitioners used to X-rays. It is likely a game-changer in the way we operate in capital markets. But we have to be careful and creative in order to capture its full potential.”
[COMMENTARY] Terrific new research and great observations about the use and issues around implementing ESG in portfolio construction. Download study referred to in the article.
Steps remain to fully integrate ESG, by Rodrigo Tavares and Daniela Barone Soares, January 25, 2017, Pensions&Investments, USA.
Why green bonds are reaching record highs. “According to a recent report by Moody’s Investors Service, the rise of green bonds issuances in 2016 is projected to carry over into 2017 as well. The report projects that green bond issuances will increase to over $200 billion in 2017 from $93.4 billion in 2016 if green bonds grow at their 2016 rate.”
[COMMENTARY] This post mentions that corporations are far behind governments in issuing green bonds as corporations presently see no financial upside in issuing them. Hopefully, that’ll change soon.
Why green bonds are reaching record highs, by Keith Larsen, January 25, 2017, GreenBiz, USA.
RepRisk Releases the Most Controversial Companies 2016 Report. “RepRisk′s MCC 2016 Report spotlights ESG issues faced by globally-active companies, and was developed as part of RepRisk′s commitment to providing transparency into ESG risks and encouraging companies to systematically take into account such risks in their strategies and processes.”
[COMMENTARY] Most of the companies at greatest reputation risk are Asian. Volkswagen is the only western company in the top ten.
RepRisk Releases the Most Controversial Companies 2016 Report, press release, January 25, 2016, Switzerland.
Green Bond Giant Awakened by Countries Spending to Save Climate. “Sovereign debt pool of $44.5 trillion starts going green.”
[COMMENTARY] It appears that sovereign debt issuance of green bonds is about to take-off! Many responsible-ethical investors will be happy about this. Nonetheless, it’ll be worthwhile to review the country’s ESG rankings before investing. Helpful in this regard are RobeccoSam’s Country Sustainability Ranking, and the EIRIS Country Sustainability Ratings.
Green Bond Giant Awakened by Countries Spending to Save Climate, by Anna Hirtenstein, January 19, 2017, Bloomberg Markets, USA.
2017 Global 100 (Corporate Knights). “An index of the Global 100 most sustainable corporations in the world.”
[COMMENTARY] This annual index is one of the best around in its sphere. To obtain a complete download you need to register name and email address.
2017 Global 100, January 19, 20-17, Corporate Knights, Canada.
Major banks ’still not doing enough’ to embed climate risk in decisions. “Major banks are largely failing to align their business practices with international climate targets and are still not doing enough to effectively manage climate risk. That is the stark conclusion of a new survey [by Boston Common Assets Management] of 28 of the world’s largest banks, which found more than 80 per cent of those polled are not integrating the results of environmental stress testing into their business decisions.”
[COMMENTARY] This is probably a case where the banks announce their concerns about climate change, sustainability, etc., but don’t quite believe it enough to engage in it internally. It’s likely just a question of time before they do.
Major banks ’still not doing enough’ to embed climate risk in decisions, by Michael Holder, January 17, 2017, BusinessGreen, UK.
’Inflection point’ approaching for long-term investors, says MSCI. “In 2017, the MSCI researchers predicted the emergence of two approaches to long-termism: new benchmarks that ’explicitly incorporate views of the future’, and a shift towards high-conviction, low-turnover portfolios.”
[COMMENTARY] I welcome MSCI’s prediction for 2017 of asset managers taking a greater long-term, low-turnover portfolio view! Short-termism and rapid turnover of investments are detrimental to long-term economic health as they discourage needed multi-year or even multi-decade corporate investments.
’Inflection point’ approaching for long-term investors, says MSCI, by Nick Reeve, January 16, 2017, IPE, UK.
Church of England equips investors to monitor climate impact. (Tool useful for all ethical investors!) “The Transition Pathway Initiative (TPI), created in partnership with the UK Environment Agency Pension Fund and the London School of Economics (LSE), was launched at the London Stock Exchange on Wednesday. It is supported by 13 international asset-owners, and five asset-managers, with more than …2 trillion under management collectively, including Aviva Investors, BNP Paribas Investment Partners, Hermes Investment Management, PGGM, and Standard Life Investments.
TPI intends to offer accurate data, provided by FTSE Russell and processed by the LSE, to enable investors to scrutinise how companies are managing climate-related risks.”
[COMMENTARY] The new site created for this, The Transition Pathway Initiative, will be a welcome new research site to help ethical investors everywhere assess the progress of public companies towards climate change.
Church of England equips investors to monitor climate impact, by Hattie Williams, January 13, 2017, Church Times, UK.
The Risk And Opportunity For America’s Corporate Pension Plans. “Stated very simply, while more and more companies are proclaiming their commitment to ’sustainability,’ their pension funds are virtually ignoring the topic.”
[COMMENTARY] This is an important article for investors to read and portrays a real conundrum. Pension funds are under tremendous pressure to perform and cannot now legitimately ignore the potential better returns offered them by incorporating ESG criteria into their analytical framework.
The Risk And Opportunity For America’s Corporate Pension Plans, by Dr. Bob Eccles, January 10, 2017, Forbes, USA.
630 Companies And Investors Tell Washington: Continue Accelerating the Low-Carbon Economy. “The company signatories, which include DuPont, Gap Inc., General Mills, Hewlett Packard Enterprise, Hilton, HP Inc., IKEA, Johnson & Johnson, The Kellogg Company, Levi Strauss & Co., L′Oreal USA, NIKE, Mars Incorporated, Pacific Gas and Electric, Schneider Electric, Sealed Air, Starbucks, VF Corporation, Unilever, among others. These signatories collectively take in nearly $1.15 trillion in annual revenue, are headquartered across 44 states, and employ about 1.8 million people.”
[COMMENTARY] Most American CEOs know that a sustainability/ESG focus assists profits, stock prices, and competitiveness. There is no turning back, especially as renewable energy becomes cost competitive with fossil fuels — even without any subsidies!
630 Companies And Investors Tell Washington: Continue Accelerating the Low-Carbon Economy, press release, January 10, 2017, Ceres, USA.
Is Your Mutual Fund Company Taking Climate Change Seriously? “The vast majority of climate scientists (97 percent) believe climate change is real, but what about your mutual fund company? We examined how the nation′s (America’s) largest mutual fund companies voted on climate-related shareholder resolutions in 2015 and 2016. The results are revealing.”
[COMMENTARY] This is an interesting chart for investors in many countries as the same companies often have fund management activities in numerous countries. Also, it might affect your own investing activities. Thank you Ceres for gathering this information.
Is Your Mutual Fund Company Taking Climate Change Seriously? By Rob Berridge, January 6, 2017, Ceres, USA.
The Responsible Investor Handbook: Mobilizing Workers’ Capital for a Sustainable World, by Thomas Croft and Annie Malhotra, Greenleaf, 2016.
“Taking account of environmental, social and governance issues in investment processes is self-evidently an integral part of how investors deliver on their fiduciary duties… The Responsible Investor Handbook is not only a call to action but it provides pension fund trustees with the knowledge and skills they need to deliver on their fiduciary duties in the 21st century.”—Will Martindale, Head of Policy, Principles for Responsible Investment.