November 2020 Newsletter
News & Commentaries by Ron Robins
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Latest Podcasts:
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Latest Podcast: Top Renewable Energy Stocks for 2021. More… “Top Renewable Energy Stocks for 2021. Companies covered include Canadian Solar, Clearway Energy, TPI Composites, Enphase Energy, First Solar Inc., JinkoSolar, NextEra, Tesla, PlugPower, Albemarle, Brookfield Renewable Partners, and Bloom Energy. Some socially responsible ETS are covered too, including, iShares MSCI USA ESG Select ETF, US Vegan Climate ETF, and ALPS Clean Energy ETF. More…”
— By Ron Robins
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Canadian ESG Assets Surge to $3.2 Trillion. “According to the latest available data, RI assets grew from $2.1 trillion at the end of 2017 to $3.2 trillion as at December 31st, 2019. This represents a 48% increase in RI assets under management (AUM) over two years. These figures reflect assets that fall into seven different RI strategies or categories including ESG integration, shareholder engagement, negative screening, norms-based screening, positive screening, thematic ESG investing, and impact investing.”
[COMMENTARY] In Canada, as in the US and around the world, ESG assets are surging! ESG is mainstream now.
Canadian ESG Assets Surge to $3.2 Trillion, press release, November 25, 2020, Responsible Investment Association (RIA), Canada.
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Brave new world of ESG bonds can sometimes leave investors cold. “A new type of bond that penalizes issuers for failing to meet social and environmental goals is raising concern among some investors that buying the debt may not be all that ethical.”
[COMMENTARY] These are early days for green bonds. No doubt there’ll be a lot of marketplace learning to be had. However, their future, in general, is assured.
Brave new world of ESG bonds can sometimes leave investors cold, by Ayai Tomisawa, November 26, 2020, The Japan Times, Japan,
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Fidelity, Vanguard Rank Lowest in Morningstar’s New ESG Rating. “Some of the country’s largest asset managers, including Vanguard, Fidelity and American Century, received low marks in Morningstar’s first assessment of asset managers’ commitment to incorporating ESG factors in their investment processes and strategies.
Others, like BlackRock, which has stressed sustainability as its ‘new standard for investing,’ and Pimco, received the second-to-lowest rating of ‘Basic.'”
[COMMENTARY] This analysis demonstrates that the big conventional firms may say a lot about their ESG prowess but still lag the real ESG asset managers!
Fidelity, Vanguard Rank Lowest in Morningstar’s New ESG Rating, by Bernice Napach, November 19, 2020, ThinkAdvisor, USA.
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Companies that pay fair wages weather downturn better. “Just Capital’s researchers found that the top 20% of firms enjoyed a 6.5% higher average annual return versus their industry peers. Companies whose miserly pay packets landed them in the bottom quintile were found to earn 3% less than their industry peers.”
[COMMENTARY] The data looks convincing. Questions I have and not sure they’re answered are: 1) Were the firms paying the higher wages in an oligopoly/monopoly type situation where barriers to entry to their markets were almost impossibly high, and 2) Which comes first? Do high profits allow for higher wages or higher wages create greater productivity and profits?
Companies that pay fair wages weather downturn better, by Rick Spence, November 18, 2020, Corporate Knights, Canada.
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The US SIF Foundation’s Biennial “Trends Report” Finds That Sustainable Investing Assets Reach $17.1 Trillion. “The total US-domiciled assets under management using sustainable investing strategies grew from $12.0 trillion at the start of 2018 to $17.1 trillion at the start of 2020, an increase of 42 percent. This is 33 percent – or 1 in 3 dollars – of the total US assets under professional management.”
[COMMENTARY] The value of sustainable investing assets in the US has reached levels unimaginable just a few years ago. It’s difficult to believe that they will grow yet more in the years ahead. But they will!
The US SIF Foundation’s Biennial “Trends Report” Finds That Sustainable Investing Assets Reach $17.1 Trillion, press release, November 16, 2020, US SIF, USA.
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Why ESG Investors Are Happy to Settle for Lower Returns. “However, they do outperform the rest of the market when there are unexpected shifts in customers’ tastes for green products and investors’ tastes for green holdings, the authors added.”
[COMMENTARY] I’m unsure with the conclusion that ESG investors settle for lower returns. That might’ve been the case — until fairly recently. I suspect that many new ESG investors are seeing the outperformance of ESG stocks and are buying them for that reason only.
Why ESG Investors Are Happy to Settle for Lower Returns, by Wharton Business School, November 9, 2020, University of Pennsylvania, USA.
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A Paris Exit Creates Climate Liability for U.S. Businesses. “If the U.S. stays out of the Paris agreement, there will be consequences for American businesses with a global footprint, and even for some without… The lack of a plan to substantially (or entirely) eliminate net carbon emissions creates an unfunded liability for companies… [and] access to global capital, which might be choked off if investors go beyond merely encouraging companies to stick to environmental commitments and start demanding it.”
[COMMENTARY] I suspect the the above issues were never considered by the Trump administration. Yet, they could be severe and negatively affect US corporate profits.
A Paris Exit Creates Climate Liability for U.S. Businesses, by Nathaniel Bullard, November 5, 2020, Bloomberg, USA.
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The World’s Courtrooms Could Unleash the Next Wave of Green Investing. “The legal risk for pension funds that fail to account for climate change in portfolio investments is about to become a little clearer.”
[COMMENTARY] In light of the US DOL’s ruling (see below) a successful similar case in the US would be a great challenge to that ruling!
The World’s Courtrooms Could Unleash the Next Wave of Green Investing, Bloomberg, November 1, 2020, USA.
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Featured Book
Accountable: The Rise of Citizen Capitalism, by Michael O’Leary and Warren Valdmanis, Harper Business 2020.
“If we want to save free market, enterprise economics and all the benefits it brings, we have to reform capitalism and the way corporations behave. The authors do a great job in explaining that this is not a wealth-bashing, negative agenda but a positive and exciting one. Business doing good is good business–and this book puts that beyond doubt.”–David Cameron, former prime minister of the United Kingdom.
