News & Commentaries by Ron Robins
Eurex Hails Success of ESG Futures. “Eurex said environmental social and government futures have reached 235,000 traded contracts and peaked at …782m ($871m) in open interest since launching six months ago.”
[COMMENTARY] This article illustrates the maturity of ESG today. I find the ESG Eurex futures market intriguing.
Eurex Hails Success of ESG Futures, by Michael Peters, August 23, 2019, Markets Media, USA.
ESG data getting better as the market matures. “As demand for investment products that integrate ESG data grows, securities regulators around the globe are pressing publicly owned companies to provide more robust reporting.”
[COMMENTARY] It’s worth mentioning that the Sustainable Stock Exchanges Initiative and includes almost every major stock exchange in the world! The investment industry itself is pushing for these changes as well as many regulators.
ESG data getting better as the market matures, by Blain F. Aiken, August 21, 2019, Investment News, USA.
Faith-based funds attract loyal investors. “Unlike strategies that invest based on environmental, social and governance issues, which are taking increasingly proactive stances to try and change corporate behaviors, faith-based strategies traditionally have relied on negative screens, and largely continue to do so.”
[COMMENTARY] These investment funds continue to attract assets though are still quite small relative to the ethical and sustainable fund universe.
Faith-based funds attract loyal investors, by Jeff Benjamin, August 20, 2019, Investment News, USA.
Green bond market fights to save its reputation. “Are tighter rules required for issuers and those guilty of greenwashing?”
[COMMENTARY] With its rapid global growth and lacking generally accepted standards in the creation and issuance of green bonds, many investors are concerned about greenwashing in this new burgeoning market. And so they should be!
Green bond market fights to save its reputation, by Joe MacGrath, August 20, 2019, Portfolio Advisor, UK.
Investors Want ESG, but Advisors Are the Missing Link: Study. “While 75% of advisor clients view ESG investing positively, only 30% have discussed it with an advisor, Allianz Life finds.”
[COMMENTARY] This is such an old, old, story, I even wonder if it’s worth highlighting. Again, a big reason retail investors haven’t significantly invested in ethical, sustainable, ESG stocks and funds, is because most advisors don’t really want to know what their clients think!
Investors Want ESG, but Advisors Are the Missing Link: Study, Ginger Szala, August 16, 2019, ThinkAdvisor, USA.
Fitch Ratings ESG heat map shows relevance to credit ratings. “The ESG heat map covers 51 different industry sectors and displays which individual entities are being impacted by the ESG topic identified within the sector.
The heat map includes an infographic and a downloadable Excel table, which lets users toggle between different relevance thresholds to see whether an ESG topic is relevant to an individual issuer, or whether it applies more generally as a trend affecting many issuers in a given sector.”
[COMMENTARY] A great idea that helps investors determine what issues and the severity of them apply to different industries. The infographic is clear but it seems you have to register to get the Excel data.
Fitch Ratings ESG heat map shows relevance to credit ratings, by Hazel Bradford, August 8, 2019, Pensions & Investments, USA.
Hedge funds to increase ESG-linked investments, survey finds. “Fifty-eight percent of hedge fund assets will be tied to ESG criteria in 2020, up from 42 percent last year and the current 52 percent, BarclayHedge finds in a survey of global hedge fund managers and commodity trading advisers.”
[COMMENTARY] Taken at face value this survey data is astonishing. Can it really be that most hedge fund assets are managed according to ESG criteria?
Hedge funds to increase ESG-linked investments, survey finds, by Andrew Holt, August 9, 2019, Corporate Secretary, USA.
ESG overlay ‘boosts outcomes for corporate bond investors’: report. “[JP Morgan Asset Management] found that ESG scores could enhance portfolio outcomes via lower drawdowns, reduced portfolio volatility and, in some cases, marginally increased risk-adjusted returns.
Although its study showed that using ESG scores improved gross portfolio returns for all categories of corporate bonds, this only held true for investment grade corporate debt once transaction costs were accounted for.”
[COMMENTARY] These are important new findings by JP Morgan. It had been found that screening sovereign bonds using ESG criteria provided better risk-adjusted returns — but corporate issues hadn’t been explored yet.
Of course, what I’d really like to see is this and similar investment industry research published in appropriate peer-reviewed journals. This to ensure such research can be relied upon and not an investment firm ‘pushing a product.’
ESG overlay ‘boosts outcomes for corporate bond investors’: report, by Susanna Rust, August 5, 2019, IPE, UK.
10% of EM equity in ‘severe risk’ territory on ESG, research claims. “According to an ‘ESG spotlight’ report from Sustainalytics, which compared the FTSE Emerging and Developed indices on ESG criteria, there are a wide array of ‘unmanaged risks’ in the developing world.”
[COMMENTARY] Although most of us would intuitively believe the above headline, it’s good to see the data that Sustainalytics has digested to arrive at its conclusion.
10% of EM equity in ‘severe risk’ territory on ESG, research claims, by Chris Sloley, August 7, 2019, Citywire Selector, UK.
Is ethical investing doomed? “If we look at fewer stocks we can do so in greater depth and so have a better chance of spotting winners. And we…ve less chance of missing good stocks simply because our attention is elsewhere. If so, the thinking which tells us to expect constrained funds to underperform is plain wrong. Constraints can actually help.”
[COMMENTARY] The title is provocative, yet, as the quote implies, ethical investing can outperform. And it is generally outperforming as the writer acknowledges. The article is a good read.
Is ethical investing doomed? By Chris Dillow, August 5, 2019, Investors Chronicle, UK.
PRI launches consultation into ESG and active ownership in passive investing. “The report [How can a passive investor be a responsible investor?] explains because passives track an index, divestment is largely not an option for investors if engagement fails or standards fall below a certain level.”
[COMMENTARY] A discussion long needed is brought to the fore by the PRI! It’s true that many of the ESG indices the ESG funds are based on do their own periodic reviews. But there are other questions too as this article discusses and hence the concern of the PRI.
PRI launches consultation into ESG and active ownership in passive investing by Tom Eckett, August 5, 2019, ETF Stream, UK.
How The S&P Dow Jones 500 ESG Index Is Changing Corporate Behavior. “In the sustainable investment world, the launch of the S&P 500 ESG Index in April was a major event and a serious indication that investor demand for ESG products is too big to ignore. Early this summer, I interviewed Mona Naqvi, senior director, ESG Indices at S&P Dow Jones Indices, about the launch and the future plans for S&P Dow Jones ESG Indices.”
[COMMENTARY] The revelations in this article as to why and how S&P created the S&P 500 ESG Index are revealing.
How The S&P Dow Jones 500 ESG Index Is Changing Corporate Behavior, by Paul Ellis, August 5, 2019, Financial Advisor Magazine, USA.
The Best [mostly UK-based] Performing ESG Funds – and the Worst. “Ethical investing has become very trendy in recent years, being the perfect combination for investors to put morals and profits on the same page. “
[COMMENTARY] This is a good review of ESG funds by Morningstar UK.
The Best [mostly UK-based] Performing ESG Funds – and the Worst, by Annalisa Esposito, August 5, 2019, Morningstar, UK.
Hundreds of conventional funds add ‘ESG’ to prospectus just in case. “According to Morningstar, the prospectuses of more than 100 ‘conventional funds’ have added ESG criteria since the start of the year, nearly doubling the total number of non-ESG fund prospectuses that now sport such language.”
[COMMENTARY] This is a clear indication that ESG credentials are positive for fund sales. Our ‘fight’ for ESG and sustainability becoming institutionalized in the investment industry seems almost over.
Hundreds of conventional funds add ‘ESG’ to prospectus just in case, by Jeff Benjamin, August 1, 2019, Investment News, USA.
The Ethical Investor…s Handbook: How to Grow Your Money Without Wrecking the Earth, by Morten Strange, Marshall Cavendish International (Asia) Pte Ltd., 2019.
…Strange is articulate, has a great sense of understanding of the subject and a good turn of phrase, combined with the financial rigour, to tackle one of the key challenges facing investors who are not convinced by climate change … I would thoroughly recommend this book!…… Lawrence Gosling Editor-in-chief, WhatInvestment (UK).