July 2021 Newsletter
News & Commentaries by Ron Robins
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Latest Podcasts:
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Latest Podcast: Great ESG Stocks for Your Portfolio “Great ESG Stocks for Your Portfolio. Stocks include Procter & Gamble, Texas Instruments, C.H. Robinson Worldwide, Teladoc, Nvidia, Adobe, Microsoft Inc., ChargePoint Holdings Inc., Li Auto Inc., FuelCell Energy Inc., Ford Inc., Facedrive, Shopify Inc., Polaris Infrastructure, Telus Corporation, Shaw Communications Inc., Magna International, Enphase Energy Inc., Canadian Solar, First Solar, Proterra, Vestas Wind Systems. ”
— By Ron Robins
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Regulators to unlock ‘black box’ of ESG corporate ratings. “Global regulators took a first step on Monday to unlock the ‘black box’ of corporate environmental, social and governance (ESG) ratings, suggesting formal oversight of a sector which helps channel trillions of dollars into climate-friendly investment funds.
Despite growing influence, ESG raters and data providers are largely unregulated, lack transparency in their methods, offer uneven coverage and harbour potential conflicts of interest, said the International Organization of Securities Commissions (IOSCO), which groups market regulators from the United States, Europe and Asia.”
[COMMENTARY]I just hope that should the ESG raters be regulated that there is room for differences of opinions between them on any given stock. I do agree, however, that the structure of the ESG data needs more uniformity. That would provide for better cross-rater comparisons on companies.
Regulators to unlock ‘black box’ of ESG corporate ratings, by Kim Kyung-Hoon, July 26, 2021, Reuters, UK.
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Blog: Acting Enforcement Director warns of ESG enforcement actions. “According toLaw 360reporting on awebcast panel last week, Acting Director of Enforcement Melissa Hodgman, warned that, in addition to ‘increased scrutiny’ of ‘funds touting green investments,’ we may well see more ESG disclosure-related enforcement actions in general.”
[COMMENTARY]I believe it’s a good idea that funds and fund managers, etc., live up to what they profess. If not, there should be penalties.
Blog: Acting Enforcement Director warns of ESG enforcement actions, by Cooley LLP, July 21, 2021, JD Supra, USA.
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ESG Assets in Europe Shrink after Regulatory Consolidation Efforts. “While assets in sustainable investments declined to $12 trillion in Europe over 2020 from $14 trillion in 2018, the falling assets in attributed to falling investment demand for the ESG theme, Bloomberg reports. The drop in ESG assets in Europe is a result of policy changes that tightened the requirements for what can be considered a responsible investment, according to Simon O’Connor, chair of the Global Sustainable Investment Alliance.”
[COMMENTARY]With 36% of assets under management globally now termed ‘responsible’ by the GSIA, I wonder if there’s been a weakening as to what are considered ethical-ESG-sustainable investments? I think these numbers from Europe provide the answer. Probably ‘yes’.
ESG Assets in Europe Shrink after Regulatory Consolidation Efforts, July 21, 2021, ETF Trends, USA.
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What you should know about potential new international reporting standards. “The International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB) havemergedinto the Value Reporting Foundation. They and three other sustainability reporting bodies — CDP, Climate Disclosure Standards Board (CDSB) and Global Reporting Initiative (GRI), known as the Group of Five — have called for closer coordinationand launched aprototype climate-related financial disclosure standard.”
[COMMENTARY]It’s great to see this finally coming together. When it does, analyzing ESG performance between companies should be easier.
What you should know about potential new international reporting standards, by Adam Fishman, July 19, 2021, GreenBiz, USA.
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The GSIA Releases its Global Sustainable Investment Review 2020. “Responsible investment assets under management make up a total of 36% of total assets under management.”
[COMMENTARY]This is a staggering amount! I can’t help but feel as per the article below (“This World May Be Better Off Without ESG Investing”) that the guidelines of what is sustainable, responsible, etc., are becoming ever weaker. This is not to say that numerous companies are now being encouraged to be more sustainable though!
The GSIA Releases its Global Sustainable Investment Review 2020, by Responsible Investment Association Canada, July 18, 2021, Canada.
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The World May Be Better Off Without ESG Investing. “The bar for what constitutes a good corporate citizen is abysmally low…This could explain whyExxonandBP, which pose existential threats to the planet, get an average (‘BBB’) aggregate score from MSCI…”
[COMMENTARY]In some quarters ethical and sustainable investors invest in companies they consider ‘light,’ ‘medium’ or ‘deep’ green. I think the ESG rating companies need to do a similar thing!
The World May Be Better Off Without ESG Investing, by Hans Taparia, July 14, 2021, Stanford Social Innovation Review, USA.
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Can ESG disclosures get you sued? “Everyone expects the SEC to make climate change and other ESG reporting mandatory, and those tech giants– Amazon, Alphabet, Autodesk, eBay, Facebook, Intel and Salesforce — said in ajoint letterthey support this. What they don’t support is including the information in filings such as annual 10-Ks and quarterly 10-Qs because, they say, it could open them up to costly lawsuits.”
[COMMENTARY]I think it’s right that the SEC should make ESG reporting mandatory in company filings. Furthermore, that interested parties should have the ability to challenge such reporting. And in the courts if necessary. However, clearly, limits of some kind would have to be placed on legal challenges.
Can ESG disclosures get you sued? By CJ Clouse, July 15, 2021, GreenBiz, USA.
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CFA Institute’s draft ESG standards could facilitate ‘greenwashing,’ IFIC says. “Without establishing standards for labelling environmental, social and governance (ESG) products, the CFA Institute’s proposed disclosure standards could lead to more ‘greenwashing’ of investment funds, Canada’s fund industry lobby group says.”
[COMMENTARY]I wonder if other affected organizations, funds, etc., have come to the same conclusion?
CFA Institute’s draft ESG standards could facilitate ‘greenwashing,’ IFIC says, by Mark Burgess, July 14, 2021, Investment Executive, Canada.
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What you need to know about the European Green Deal – and what comes next. “The European Green Deal has the potential to play a key role not only in ensuring this recovery in the short term but also in addressing long-term climate change threats. The launch of the ‘Fit for 55’ package this week is expected to mark an important step in overhauling climate policies and enabling the EU to deliver on its commitment to reduce emissions by 55% by 2030.”
[COMMENTARY]This is a big deal. It will influence and affect numerous industries, governments, and probably billions of consumers, globally. Everyone needs to pay attention to this!
What you need to know about the European Green Deal – and what comes next, by Teresa Belardo, July 13, 2021, World Economic Forum, Switzerland.
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Study: Financial Markets Ignore Environmental Damage. “Credit-rating agencies say they can discipline companies that behave badly, and they have in some cases, but research reveals negligible progress.”
[COMMENTARY]Although most investors profess a concern for the environment while investing, this study might suggest they really don’t. I’d like to see other studies of this kind to see if the findings from the study are true.
Study: Financial Markets Ignore Environmental Damage, by Lilah Burke, July 12, 2021, The Revelator, USA.
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AMG Acquires Control of Parnassus, the Last Big ESG Firm. What This Means for ESG Investors. “Sustainable investing is red-hot. For the most recent evidence, look at last week’s acquisition news: Affiliated Managers Group paid $600 million for a majority stake in privately held Parnassus Investments, which sent Affiliated’s stock (ticker: AMG) up as much as 7% on the day the deal was announced.”
[COMMENTARY]Many of the ethical and SRI pioneer firms are falling into the hands of huge establishment players. I suppose it was inevitable that this happens. However, there are some nimble and niche players also entering the space!
AMG Acquires Control of Parnassus, the Last Big ESG Firm. What This Means for ESG Investors, by Leslie P. Norton, July 9, 2021, Barron’s, USA.
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Schroders Institutional Investor Study 2021: On ESG, US Investors Focus on Data, Social Impact. “US institutional investors focus more on ESG data and social factors than their global counterparts, according to a new study by global asset manager Schroders.”
[COMMENTARY] The survey results support the findings of other similar studies.
Schroders Institutional Investor Study 2021: On ESG, US Investors Focus on Data, Social Impact, press release, July 6, 2021, Schroders/Business Wire, USA.
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Will Mandated ESG Disclosures Lead to Increased Litigation Risk? “With the Securities and Exchange Commission resolute in its efforts to establish new disclosure requirements related to environmental, social and governance (ESG) risks, companies appear increasingly resigned to some measure of mandatory reporting.
But these companies haven’t yet given up: in an effort to contain litigation risk, they continue to press the SEC to show some flexibility in the means by which ESG risks are reported.
The distinction between furnishing and filing climate change disclosures is not purely semantic, as filed disclosures are held to a higher regulatory standard than those that are merely furnished.”
[COMMENTARY] One can see why companies are concerned — as should their shareholders. Such a distinction ‘between furnishing and filing climate change disclosures’ might well be the case in many other jurisdictions too.
Will Mandated ESG Disclosures Lead to Increased Litigation Risk? By Bracewell LLP, July 2, 2021, JD Supra, USA.
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2021’s Best 50 Canadian corporate citizens. “Every year since 2002, Corporate Knights has evaluated Canadian companies with annual revenue of over $1 billion on a growing number of key performance indicators. This year’s Best 50 Corporate Citizens were evaluated against 24 key performance indicators, including the clean revenue result for each company, which is percentile-ranked against industry peers and weighted at 50% toward the overall score.”
[COMMENTARY] Many of the companies on this list will be of interest to ethical and sustainable investors from around the world.
2021’s Best 50 Canadian corporate citizens, by staff, June 30, 2021, Corporate Knights, Canada.
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Why Green Assets May Not Continue to Outperform. “Many investors are attracted to ESG securities on promises of high returns, but they are ‘misguided, Wharton finance professorLuke Taylorsaid on theWharton Business Daily radio show on SiriusXM. (Listen to the podcast here.)
The past performance of ESG securities is not a reliable indicator of returns in the future, especially when past returns were largely driven by ‘shocks’ such as bad news about climate change, he noted. ‘Absent more unexpected shocks in the future, we don’t see those green stocks outperforming [‘brown’ or environmentally unfriendly stocks] in the future.'”
[COMMENTARY] The research paper appears to rest on a common thesis: that high-priced stocks usually provide lower future returns. Time will tell.
Why Green Assets May Not Continue to Outperform, June 29, 2021, Wharton Business Daily, USA.
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Featured Book
Making Money Moral: How a New Wave of Visionaries Is Linking Purpose and Profit, by Judith Rodin and Saadia Madsbjerg, Wharton School Press 2021.
“Anyone who wants to understand the link between capital markets and progress towards a more sustainable, peaceful, and prosperous world should put this book at the top of their reading list. Through real-life examples and in-depth conversations with experts, Making Money Moral demonstrates the power of bringing together the world of finance and the world of impact.”–Jeff Skoll, Founder and Chairman, Skoll Foundation, Co-Founder, The Rise Fund.
