June 2019 Newsletter
News & Commentaries by Ron Robins
How To Read The European Union’s New Guidelines On Sustainable Investing. “Under the proposed taxonomy regulation, institutional investors marketing environmentally sustainable investment products would be required to explain whether, and how, they used the taxonomy criteria.
Alternatively, investors could disclose their own preferred approach to determine that their investment is environmentally sustainable. These proposed rules would apply to a range of products, from European mutual funds (UCITS funds) to alternative investment funds and from securitization funds to index funds.”
COMMENTARY] For fund managers engaged in the European markets these could be important rules that’ll govern their activities in those markets.
How To Read The European Union’s New Guidelines On Sustainable Investing, by Bhakti Mirchandani, June 20, 2019, Forbes, USA.
How to Build Your Own ESG Portfolio. “By putting your savings in funds that assess how a company is addressing (or worsening) environmental, social, and governance, or ESG, factors, you hitch your investments to good corporate citizens, and may earn above-average returns. But turning the concept into a practical investment portfolio without compromising on investing mandates such as diversification and due diligence comes with a unique set of challenges.”
COMMENTARY] Some great points are made in this post but looking at their portfolio looks overly diversified. Also, no-doubt it’ll include sectors that won’t please many ethical and sustainable investors. I suggest those DIY investors first take my one-hour DIY Ethical-Sustainable Investing Pays Tutorial and then review what said in this article.
How to Build Your Own ESG Portfolio, by Karen Hube, June 21, 2019, Barron’s, USA.
ESG: green bonds have a chicken and egg problem. “Everyone wants to buy green bonds but many issuers, concerned about cost and complexity, don’t want to sell them. Non-green issuers could be all too ready to fill the void.”
COMMENTARY] A comprehensive article on the subject. Worthwhile reading for all ethical and sustainable investors.
ESG: green bonds have a chicken and egg problem, by Louise Bowman, June 19, 2019, Euromoney, UK.
Impact investing doesn’t require sacrificing returns, GIIN survey shows. “More than 90% of impact investors — those that seek to combine financial returns with positive social and environmental outcomes — said their deals have met or exceeded their expected financial and impact performance so far, according to the 2019 survey of data and insights collected by the Global Impact Investing Network and released on Wednesday.”
[COMMENTARY] Great news — and will help power impact investing to new heights.
Impact investing doesn’t require sacrificing returns, GIIN survey shows, by Luis Garcia, June 19, 2019, Private Equity News, UK.
Pot Firms Seek to Transition From Sin Stocks to Ethical Darlings. “A group of 45 companies operating in the cannabis industry has crafted a set of standards that they hope could one day transform them from sin stocks into ESG darlings.”
[COMMENTARY] This will be fascinating to watch! Can pot companies be sold as health producing ESG focused entities to institutional investors?
Pot Firms Seek to Transition From Sin Stocks to Ethical Darlings, Kristine Owram, June 18, 2019, Bloomberg, USA.
Fund Managers Are More Moral Than You’d Think. “A new survey of ESG adoption rates, from UBS Group AG’s asset management unit and Responsible Investor Research, covers more than 600 asset owners in 46 countries, responsible for more than 19 trillion euros ($21 trillion) of assets.”
[COMMENTARY] The survey shows impressive numbers of asset managers incorporating ESG. Some say that the numbers in the US lag the rest of the world due to fiduciary regulations there that ESG can’t be a major criterion for investing.
Fund Managers Are More Moral Than You’d Think, by Mark Gilbert, June 17, 2019, Bloomberg Opinion, USA.
[UK] Savers favour ethical investments in pensions. “Seven in ten (72 per cent) defined contribution pension members want their scheme to include ethical investments in its default fund.”
[COMMENTARY] They also asked if savers would still invest ethically if their returns were lower. 42% said yes. This question always annoys me as it suggests to the savers that ethical investing implies lower returns — which is generally not the case of course.
Savers favour ethical investments in pensions, by Amy Austin, June 10, 2019, FT Advisor, UK.
ESG integration delivers returns with lower volatility. “Integrating environmental, social and governance (ESG) factors into the investment process can significantly lower volatility without sacrificing the desired returns, leading to a better overall result for long-term investors such as insurers, said Pascal Zbinden, co-head of SAA & market at Swiss Re.”
[COMMENTARY] Such findings have been found before, but it’s great to see Swiss Re — one of the world’s biggest reinsurers and insurers — come to this conclusion in their own ESG research.
ESG integration delivers returns with lower volatility, by Adam Leach, June 6, 2019, Insurance Asset Risk, UK.
The 2019 proxy season: How investors are stepping up on ESG. “While 2018 was a record year for investor support of environmental and social shareholder proposals, 2019 promises to become the year environmental and social issues take center stage.”
[COMMENTARY] At last ESG issues are not only coming to the fore but also getting real action.
The 2019 proxy season: How investors are stepping up on ESG, by Sara Dal Lago and Sara Dal Lago, June 3, 2019, GreenBiz, USA.
Corporate Knights’ 2019 list of Canada’s best 50 and 50 best non-Canadian corporate citizens.
[COMMENTARY]Always a good list to review — especially for Canadians. However, non-Canadians might find some useful investment ideas among the winners too.
Corporate Knights’ 2019 list of Canada’s best 50 corporate citizens and Top non-Canadian foreign corporate citizens of 2019, June 4, 2019, Corporate Knights, Canada.
Britain aims high with launch of Impact Investing Institute. “The government-backed Impact Investing Institute will be steered by Elizabeth Corley, former chief executive and vice-chair at Allianz Global Investors, and Harvey McGrath, former chairman of Man Group, the alternative asset manager. ‘We see an enormous opportunity to collect money and direct it to some of the biggest social challenges we have,’ Ms Corley told the Financial Times.”
[COMMENTARY]Governments are realizing that they might be able to employ significant private funds to advance public and social development. Expect to see such government- backed institutes in numerous countries in the years ahead.
Britain aims high with launch of Impact Investing Institute, by Jennifer Thompson, June 3, 2019, Financial Times, UK.
Unintended Consequences of Investing According to Environmental, Social and Governance Principles. “The implementation of ESG criteria should be undertaken with care, however, as their use can have unintended consequences depending on the specific criteria that underlie an institution’s approach to ESG investing.
For example, U.S. institutions and even non-U.S. institutions that have U.S. public clients (e.g., state pension funds) that are considering leveraging well-known ESG criteria used by European institutions should be aware of potential issues under U.S. federal and state antiboycott measures that penalize entities that refuse to transact with or invest in Israel and Israeli companies.”
[COMMENTARY]This is a further elaboration of something I’ve previously discussed that for fiduciary reasons, particularly in the US, fiduciaries cannot simply make investment decisions based on SRI without possibly incurring legal problems. This article illustrates two cases where issues became problematic.
Unintended Consequences of Investing According to Environmental, Social and Governance Principles, by staff, June 3, 2019, Dechert LLP, USA.
Investing for Good: Increasing your personal well-being while changing the world, by Mark Mobius, Carlos von Hardenberg, and Greg Konieczny. Bloomsbury Business 2019.
“But how do individuals–rather than institutional investors–invest using ESG criteria? And just how complex are the procedures? This new book, written by investment guru Mark Mobius and his expert team, is full of entertaining and informative anecdotes from the authors… day-to-day experiences in the world of sustainable investment.”