February 2020 Newsletter
News & Commentaries by Ron Robins
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Latest Podcasts:
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SEC Decisions Raise Specter of Bias, McCarthyism National Policy Analysis #681. “Recent decisions and procedural changes by the U.S. Securities and Exchange Commission (‘SEC’) staff, taken together, threaten to make the shareholder proposal review process much less transparent and reliable, and thus much more susceptible to both the appearance and reality of institutional bias.”
[COMMENTARY]Probably at the inspiration of the Trump administration, the SEC wants to mitigate the influence of environmental, social, and other groups, on corporate activities.
SEC Decisions Raise Specter of Bias, McCarthyism, by Scott Shepard, February 21, 2020, National Center for Public Policy Research, USA.
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IIRC plans major revision to integrated reporting framework. “The IIRC opened a call Thursday for market feedback on specific themes to help inform the nature and direction of the revisions. The revision is planned for this year to coincide with the IIRC…s 10th anniversary. The IIRC first published the framework in December 2013 and this will be the first revision.
The IIRC wants to respond to changes in recent years, as demand grows for corporate reporting on issues such as the United Nations… Sustainable Development Goals and climate change, along with stewardship and corporate governance, and inclusive capitalism…
Feedback can be submitted to www.integratedreporting.org/2020revision between Thursday, Feb. 20 and Friday, March 20, 2020.”
[COMMENTARY]The integration of a company’s regular annual report and its ESG/CSR information and data into one integrated report is now an imperative. Also, management discussions need to integrate financials with ESG/CSR information and data and not compartmentalize them into separate silos.
IIRC plans major revision to integrated reporting framework, by Michael Cohn, February 20, 2020, Accounting Today, USA.
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The Carbon Clean200: Leading the transition to a clean energy future. “Who are the largest 200 publicly traded companies ranked by green energy revenues in 2020?”
[COMMENTARY]A great ranking that all ethical and sustainable investors should review.
The Carbon Clean200: Leading the transition to a clean energy future, February 13, 2020, Corporate Knights and As You Sow, Canada.
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EU watchdog says ESG rating firms need rules to stop ‘greenwashing’. “Steven Maijoor, chair of the bloc’s European Securities and Markets Authority (ESMA) said the supervision of ESG ratings was ‘far from optimal’.
‘The lack of clarity on the methodologies underpinning those scoring mechanisms and their diversity does not contribute to enabling investors to effectively compare investments which are marketed as sustainable, thus contributing to the risk of greenwashing,’ Maijoor told a conference in Dublin.”
[COMMENTARY]Rather than be regulated the ESG ratings’ companies should provide full disclosure of their methodologies and let investors decide which they like!
EU watchdog says ESG rating firms need rules to stop ‘greenwashing’, by Hue Jones, February 12, 2020, Reuters, UK.
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Transatlantic Divide On Fixed Income ESG. “Environmental, social and governance investing is a source of outperformance for investment grade bonds from European issuers, but the opposite for American issuers according to research from Amundi Asset Management.”
[COMMENTARY]Amundi reviewed the debt performance between 2010 and 2019 to arrive at their conclusion. This article is worth reading for all fixed-income investors.
Transatlantic Divide On Fixed Income ESG, by Shanny Basar, February 11, 2020, MarketsMedia, USA.
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Who Will Be the Moody’s of ESG Investing? “‘Sustainalytics is probably the premier data provider for ESG,’ Horstmeyer says. A number of firms are jockeying for position in the space or hoping to carve out a niche, including each of the big three credit rating agencies: Fitch Ratings, Moody’s Corp. (ticker: MCO) and S&P.”
[COMMENTARY]The writer of the article cites that the regular credit rating agencies all have similar credit ratings for a given security. However, the ESG rating firms don’t with regard to ESG. Personally, I think that’s a good thing as each rating firm sees various ESG criteria differently.
The uniformity in regular credit ratings I believe is a disservice to investors. It offers the opportunity for the type of crises we had in 2008/9 where credit rating agencies were afraid to downgrade securities they knew might be questionable because of a ‘herd’ mentality.
Who Will Be the Moody’s of ESG Investing? By John Divine, February 7, US News, USA.
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Stock performance study shows companies should take environmental and social factors seriously. “Societe Generale looked at the impact of ‘high ESG controversy’ events on stock performance, and found that two thirds of the time shares underperformed the broader market by an average of 12% over the subsequent 2 years.”
[COMMENTARY]The warning for investors is that they should avoid investing in such companies where possible. Good ESG analysis can frequently alert us to negative controversies that can be so damaging to stock performance.
Stock performance study shows companies should take environmental and social factors seriously, by Pippa Stevens, February 7, 2020, CNBC, USA.
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The sovereign transition to sustainability: Understanding the dependence of sovereign debt on nature. “The transition to sustainability is the strategic challenge sovereign bonds face in the 2020s. Overcoming this challenge requires that the financial system recognises the fundamental economic dependencies on nature, which are currently ignored and mispriced, storing up instabilities for the future.”
[COMMENTARY]The authors of this reportprovide insight into the possible headwinds and opportunities for sovereign debt. They make a strong case that both countries and investors have to be aware that the role of a country’s natural resources and how they’re utilized will play a major role in the pricing of that country’s debt.
The sovereign transition to sustainability: Understanding the dependence of sovereign debt on nature, February 5, 2020, Grantham Research Institute on Climate Change and the Environment, LSE, UK.
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Will electric vehicles really benefit the environment? Only if we can fix the e-waste, social and supply chain issues with those massive batteries. “Environmental and human rights advocates, along with international heavyweights at the World Bank and World Economic Forum, say there’s an elephant in the showroom. The EV revolution has been racking up a whole supply chain of trouble around the globe (including a recent lawsuit) related to an onslaught of often-contentious new mines opening to meet surging battery-metal demand, not to mention the coming tide of e-waste from old batteries.”
[COMMENTARY]Does anyone know of a study that’s been able to ascertain the full lifecycle and consequences of EV use of metals/materials in terms of carbon use? We know that EV batteries use considerable amounts of toxic, carbon polluting materials. Until such a study is done — even though I believe EVs could greatly help achieve our climate goals — the carbon pollution caused in their manufacture and full lifecycle does bother me.
Will electric vehicles really benefit the environment? Only if we can fix the e-waste, social and supply chain issues with those massive batteries, by Adrian Vasil, February 1, 2020, Corporate Knights in the Toronto Star, Canada.
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Featured Book
Grow the Pie: How Great Companies Deliver Both Purpose and Profit. by Alex Edmans, Cambridge University Press 2020. “I do not know whether capitalism is in crisis. But I do know Alex Edmans’ superb book makes the case, compellingly and comprehensively, for a radical rethink of how companies operate and indeed why they exist. It is the definitive account of the analytical case for responsible business, but is at the same time practical and grounded in real business experience. It is a tour de force.'”…Andy Haldane, Chief Economist, Bank of England.
