August 2021 Newsletter
News & Commentaries by Ron Robins
Latest Podcast: Great Renewable Energy and EV Stocks “Great Renewable Energy and EV Stocks. Stocks covered include Sumitomo Metal Mining, Wuxi Lead Intelligent Equipment, Aptiv plc., Infineon, Brookfield Renewable Partners, Atlantica Sustainable Infrastructure, and NextEra Energy. Excerpts from: ‘The investment opportunity offered by electric vehicles,’ ‘3 Alternative Energy Stocks to Buy Amid Investment Concerns,’ ‘3 High-Yield Renewable Energy Stocks to Buy Right Now,'”
— By Ron Robins
Exchange for ethical investments gets off the ground with two listings. “A stock exchange hatched out of Silicon Valley that’s taking on established rivals in New York and Chicago is listing its first two companies.”
[COMMENTARY]This new exchange will be fascinating to watch! Will it attract listings? Will it attract investors? I hope that it receives rapid success.
Exchange for ethical investments gets off the ground with two listings, by Katherine Doherty, August 27, 2021, Independent.ie, Ireland.
Investor Familiarity With Sustainable Investing Remains Low. “Despite its growing importance in the capital markets, news about sustainable investing or ESG funds has not trickled down to average U.S. investors. And with the pandemic perhaps shifting investors’ economic priorities, they are expressing less interest in such funds for themselves.
Still, the future of sustainable investing looks promising, with younger investors paying closer attention to it and expressing greater interest than older working-age investors and retirees.”
[COMMENTARY]I find it amazing that the investment industry’s interest in ESG and sustainability has gained tremendous momentum. Yet, interest in this space by individual US investors has not changed since before the pandemic.
Though this survey does indicate, as numerous others show, that younger investors are much more interested in ESG and sustainable investing.
Investor Familiarity With Sustainable Investing Remains Low, by Lydia Saad, August 23, 2021, Gallup, USA.
There’s $35 Trillion Invested in Sustainability, but $25 Trillion of That Isn’t Doing Much. “Since ESG lacks definitions, it can often mean different things to different people, said Lisa Sachs, who heads Columbia University’s Center on Sustainable Investment.
And because ESG integration is often conflated with other responsible investment strategies such as impact investing and negative and positive screening, it’s helping to create a false impression that the world of money management is directing capital towards helping solve societal ills.”
[COMMENTARY]As I’ve said previously both ESG reporting standards and funds touting ESG credentials need to have more stringent standards. However, there is a caveat to this. Funds that explicitly invest in companies beginning their ESG journeys. Studies have shown that such companies can see more rapid stock appreciation than companies with established ESG credentials.
I believe that the Global Sustainable Investment Alliance who collates the data needs to have categories varying from ‘deep’ green to ‘light’ green in terms of assets under management!
There’s $35 Trillion Invested in Sustainability, but $25 Trillion of That Isn’t Doing Much, by Saijel Kishan, August 18, 2021, Bloomberg Green, Australia.
‘More emissions than Exxon’: Is meat the next target for divestment? “The finance sector is increasingly reluctant to finance fossil fuel expansion, and ‘Big Ag’ could be next in the divestment campaign firing line, argues Charlotte Moore from SIGWATCH.”
[COMMENTARY]On an individual basis, it’s happening already. I know many individual investors who won’t touch meat stocks. Look at the success of Beyond Meat. Only institutions are holding back. It’s just a matter of time before many of them join the numerous individual investors in this endeavor.
‘More emissions than Exxon’: Is meat the next target for divestment? By Charlotte Moore, August 17, 2021, Investment Week, USA.
ESG Investing: Does It Distort the Market? “Bottom line on ESG: Overall, it must be a force for good to measure company externalities and hold investors accountable in some way. It just seems we got into a weird phase of its evolution with the concentration in mega-cap tech stocks. I look forward to reading about the movement at the end of this decade and if created the changes we wanted, or more unintended consequences.”
[COMMENTARY]It can be argued that ESG investing does distort the markets. However, isn’t that the point! Now, one could argue that passive index investing means possible carelessness with ESG criteria of companies in the index which over time lowers ESG standards… and returns!
ESG Investing: Does It Distort the Market? By Kevin Cook of Zacks, August 13, 2021, Nasdaq.com, USA.
US issuers still split on ESG standards, study finds. “As the SEC considers imposing climate-related reporting rules, US companies are divided on what they should look like.”
[COMMENTARY]It’s to be expected that issuers will have differing opinions on ESG standards. I expect that there’ll be many common standards but others will be industry-specific.
US issuers still split on ESG standards, study finds, by Maria Ward Brennan, August 11, 2021, Corporate Secretary, USA.
Bond investors need to step up on human rights. “Too many fund firms use strong rhetoric on abuses while lending money to oppressive regimes.”
[COMMENTARY]With many ESG rating firms providing sovereign ESG ratings, it seems not much of a step to incorporate more scrutiny of human rights issues. I believe some rating organizations already do this.
Bond investors need to step up on human rights, by Laurence Fletcher, August 7, 2021, Financial Times, UK.
ESG: EU Green Bond Standard. “TheEuropean Green Bond Standardproposal will create a high-quality voluntary standard for bonds financing sustainable investment.Issuers will have a recognised way of demonstrating that they are funding green projects aligned with the EU Taxonomy. Investors will be better able to ascertain that their investments are sustainable, thereby reducing the risk of greenwashing.”
[COMMENTARY]This new standard sounds great. We’ll have to see in practice how it works out. If successful, it could, in short order, become the global standard for green bonds.
ESG: EU Green Bond Standard, by Richard Kelly, July 27, 2021, Ireland.
Amory Lovins: Decarbonizing industry isn’t just about costs, it’s about profits. “This weekAmory Lovins, co-founder of RMI and clean energy BAMF, released a paper, ‘Decarbonizing our toughest sectors — profitably,‘ encouraging a fresh perspective on the costs of decarbonizing heavy transport and industrial heating.The paper makes the case that deep decarbonization isn’t a cost: It’s an investment that will make communities and companies money.”
[COMMENTARY]Amory Lovins is one of the great pioneers of ethical and sustainable investing. In his new article, he makes a great case demonstrating that de-carbonizing the biggest polluters can be profitable for all stakeholders. It pays to listen to him.
Amory Lovins: Decarbonizing industry isn’t just about costs, it’s about profits, by Sarah Golden, August 6, 2021, GreenBiz, USA.
5 ways to separate real ESG leadership from greenwashing. “How can people better identify greenwashing and help reinforce the growing sense of accountability for ESG standards? Look for these factors.”
[COMMENTARY]Some good points in how to identify ‘greenwashing’ in companies are made in this article.
5 ways to separate real ESG leadership from greenwashing, by Marjella Lecourt-Alma, August 4, 2021, Fast Company, USA.
Where’s All That Green Bond Money Really Going? “Overall issuance is skyrocketing, but transparency is hard to come by.”
[COMMENTARY]There’s a clear need for a universal mechanism for tracing the flow of funds raised via green bonds. Otherwise, confidence in this market could falter, and dealing with climate change negatively affected. This is beside the potential detrimental impact on the stock and bond prices of the corporation for misbehavior. That alone might be a sufficient deterrent. Who knows?
Where’s All That Green Bond Money Really Going? By Tim Quinson, August 4, 2021, Bloomberg Green, USA.
More than $3T of companies outside the EU could be on the hook for SFDR. “Until recently, European legislation may not have been at the top of the agenda for financial services firms in the U.S., or anywhere outside the European Union.
But two factors might have you suddenly realizing that it’s worth paying attention to EU sustainable investment regulation, regardless of where you…re based. This is, especially true since some of this regulation is already in effect.
First, in order to market investment funds in the EU, firms often set up a local legal entity that could potentially expose the parent company to EU regulation. Second, the EU put new regulation in place mandating sustainability disclosure from certain types of financial firms.”
[COMMENTARY]For those readers engaged in financial services with European operations this is something you must investigate!
More than $3T of companies outside the EU could be on the hook for SFDR, by Divya Mankikar, July 30, S&P Global, UK.
Values at Work: Sustainable Investing and ESG Reporting, by Daniel C. Esty and Todd Cort, Palgrave Macmillan 2020.
“In an effort to better understand the current status and movement of this dynamic field and to provide a practical reference for the growing pool of investors, financial advisors, companies, and academics seeking information on sustainable investing and ESG reporting, this edited book covers the latest trends, tools, and thinking.”