September 2021 Newsletter
News & Commentaries by Ron Robins
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Latest Podcasts:
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Latest Podcast: Top Water, Environmental, and Renewable Energy Investments “Includes First Trust Water ETF, Global Water Fund A Shares, Invesco Water Resources ETF, Invesco S&P Global Water Index ETF, Fidelity Water Sustainability Fund, Hewlett Packard Enterprise, Dexus Property Group, Unilever, Diageo, Stockland, Abbott Laboratories, Stanley Black & Decker, US VEGAN ETF, American Water Works, Pool Corp., Generac.”
— By Ron Robins
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Deep Dive: Do not neglect the G in ESG. “Likewise, according to a 2016 study from Barclays, a divergence in priority appears between some asset managers and their clients regarding the relative importance of the three ESG components. Clients regard environmental factors as the most important, while governance is top of the list for bond managers.
Moreover, the same study showed that bonds with higher governance scores tended to have fewer downgrades and better outperformance, during the period from August 2009 until April 2016, than those with lower scores, validating the emphasis bond managers have historically placed upon effective governance.”
[COMMENTARY]I think it’s fair to say that most individual investors regard the ‘E’–environment — as the most important of ESG investing. However, among investment managers, the ‘G’ — governance — is the most important. And for good reason, since I’ve seen studies that demonstrate that the governance characteristics and activities of companies positively influence profits more than any other factor.
Deep Dive: Do not neglect the G in ESG, by Chris Bowie, Investment Week, UK.
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Blog: How do companies address governance issues for corporate political activity? “Deloitte and the Society for Corporate Governance report on a survey they conducted in July 2021 about companies’ approaches to publicly addressing controversial social and political issues.”
[COMMENTARY]This is an area that could have significant effects on a company’s image and therefore, stock price.
Blog: How do companies address governance issues for corporate political activity? By PubCo@Cooley, September 22, 2021, JD Supra, USA.
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NYSE working with IEG to develop new asset class, Natural Asset Companies. “‘This new asset class on the NYSE will create a virtuous cycle of investment in nature that will help finance sustainable development for communities, companies and countries,’ Douglas Eger, CEO of IEG, said. ‘Together, IEG and the NYSE will enable investors to access nature” store of wealth and transform our industrial economy into one that is more equitable.‘”
[COMMENTARY]This could be either the most exciting new development in finance this century — or its biggest disaster. The idea is terrific. Only time will tell if the environmental community and the public at large view it as an important step to dealing with today’s climate crises.
NYSE working with IEG to develop new asset class, Natural Asset Companies, by Dave Kovaleski, September 16, 2021, Financial Regulation News, USA.
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Sustainable investments could make up majority of global private wealth portfolios in coming years, finds report. “The world’s wealthiest individuals, family offices, and foundations, are preparing to plough billions of dollars into sustainable investments over the coming years, as they increasingly view addressing climate change as both a social responsibility and an attractive investment opportunity.”
[COMMENTARY]I suspect that with companies realizing that going sustainable has great payback, the number of sustainable companies could grow to a point that the majority of one’s portfolio would naturally be sustainable! No effort is needed! Wow–what a dream–or is it?
Sustainable investments could make up majority of global private wealth portfolios in coming years, finds report, by staff, September 15, 2021, Institutional Asset Manager, USA.
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Sustainable or sellout? Four revealing questions in a company’s environmental disclosure. “How can we sift through greenwashing to spot genuine climate action?”
[COMMENTARY]This article is written by Simon Fischweicher, head of corporations and supply chains, CDP North America. So he’s an expert on this subject. I’m sure that many ethical and sustainable investors will benefit from Mr. Fischweicher’s insights.
Sustainable or sellout? Four revealing questions in a company’s environmental disclosure, Simon Fischweicher, September 9, 2021, Corporate Knights, Canada.
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China to create first green stock index in fresh push to curb carbon emission. “China will set up a green stock index and develop futures trading for carbon emission rights — both of which will be the first such instruments, according to a new sweeping guideline issued on Sunday, marking an important step in expanding China’s market-oriented securitization and financing mechanisms to accelerate the country’s long-term carbon trading and achieve its carbon neutrality goal.”
[COMMENTARY]We’ll have to see whether this amounts to anything or is mainly a ‘PR’ exercise. After all, China is still building and planning to build a huge number of coal power plants.
China to create first green stock index in fresh push to curb carbon emission, by GT staff reporters, September 12, 2021, Global Times, China.
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Why Sustainable Investment Means Investing in Advocacy. “Combining traditional impact investment approaches with investment in advocacy is the only way businesses and investors can fuel meaningful social and environmental progress.”
[COMMENTARY]These knowledgeable authors make a compelling case that without advocacy the sustainable and ESG causes will be limited.
Why Sustainable Investment Means Investing in Advocacy, by Alan Schwartz and Reuben Finighan, September 9, 2021, Stanford Social Innovation Review, USA.
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Ten ways to be sure your ‘green’ fund really does help save the planet… and can make you money at the same time. “Green investing is more popular than ever with inflows into ethical, sustainable or responsible-badged investment funds running at record levels. But how do you know that the fund you are buying — for an Isa or a pension — is really green and in line with your ethics? Not easily, according to Mary Stevens, innovation manager at environmental pressure group Friends of the Earth.”
[COMMENTARY]Here’s some good advice for the new ethical and sustainable investor.
Ten ways to be sure your ‘green’ fund really does help save the planet… and can make you money at the same time, by Jasmine Birtles, September 11, 2021, This is Money, UK.
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US SIF Releases Tips to Implement Sustainable Funds. “As more participants express an interest in ESG investing, US SIF recommends steps plan sponsors can take to add the investments to retirement plans.”
[COMMENTARY]Some useful information for all pension plan sponsors.
US SIF Releases Tips to Implement Sustainable Funds, by Amanda Umpierrez, September 7, 2021, PLANSPONSOR, USA.
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Deutsche Bank’s ESG Probe Triggers Review at Asset Managers. “Anxiety around greenwashing — mis-stating how climate friendly assets are — is palpable across the industry as fund managers react to German and U.S. investigations of DWS Group.
Though the Deutsche Bank unit says it did nothing wrong, the development has led to a moment of reckoning as fund managers wake up to a new regulatory era in which once fluffy environmental, social and governance definitions are no longer tolerated.”
[COMMENTARY]It’s about time that funds proclaiming their green credentials were duly evaluated for them. Such investigations, and perhaps prosecutions, will create greater confidence for investors that they’re getting what’s advertised.
Deutsche Bank’s ESG Probe Triggers Review at Asset Managers, by Christine Watkins, September 5, 2021, Bloomberg via Sports Grind Entertainment, USA.
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Investors care more about fair wages for workers than environmental issues, ESG survey shows. “When broken down by topic, preference for investing in a company that pays workers fair wages edged out a preference for environmentally friendly companies, with 65% of total respondents flagging wages and 53% citing environment.”
[COMMENTARY]The predominant thinking has been that it’s the ‘E’ in ESG that attracts investors. Do we see evidence that the ‘S’ side is gaining momentum? Or is this survey skewed in some way? I’m not convinced that many professional investors in this space would agree with this survey’s findings.
Investors care more about fair wages for workers than environmental issues, ESG survey shows, by Debbie Carlson, September 4, 2021, MarketWatch, USA.
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Most Green Investment Funds Missing Paris Goals. “Thereportfrom InfluenceMap — ‘Climate Funds: Are they Paris Aligned?’ — analysed 723 listed-equity funds with total assets under management of over US$330 billion, dividing funds which used one of 30 descriptions into two categories: broad ESG and climate-themed.
In the broad ESG category, Influence Map identified 593 equity funds with over US$265 billion in total net assets of which 71%, had a negative Portfolio Paris Alignment score.
Of the 130 climate-themed funds, with titles such as ‘low carbon’, ‘fossil fuel free’ and ‘green energy’, and over US$67 billion in total net assets, 55% had a negative Paris Agreement alignment score. The lowest score was — 42% with the best scoring fund hitting +90%.”
[COMMENTARY]Big players such as State Street, UBS, and even Blackrock, did particularly badly. I think that the report’s researchers are also somewhat off-base by not accounting for the highly differentiated objectives of these funds by exclusively focusing on whether or not they specifically align with the Paris Agreement.
For instance, if a fund’s objective is to purposely buy stocks in fossil fuel-related companies to encourage engagement with them to promote greater carbon reduction through new reduction methodologies or renewables, that would seem to put such funds at the low end of this analysis.
Most Green Investment Funds Missing Paris Goals, by ESG Investor, September 2, 2021, Regulation Asia, Singapore/Hong Kong.
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Yale climate professor: ‘Divestment is a waste of time and energy.’ “PODCAST: Cary Krosinsky explains why the divestment movement doesn’t help solve climate change and what fund managers can do instead.”
[COMMENTARY]I haven’t had a chance to listen to this podcast yet. but Cary Krosinsky is someone with terrific credentials and whom I greatly respect. From my perspective, there’s an argument that can be made that divestment affects secondary financial markets and has little direct influence on new issuers of say, funding new coal projects.
Also, note that starving funding for new fossil fuel-related projects can make their stocks more profitable than they might otherwise be. The reason is that continuing or rising high prices for their products (note oil!) with dwindling supply enables much higher margins and profits. Thus benefiting shareholder returns.
Furthermore, it possibly detracts from the possibility of funding fossil fuel-related projects to reduce carbon emissions.
Yale climate professor: ‘Divestment is a waste of time and energy,‘ by Loukta Gyftoppoulou, September 2, 2021, Wealth Manager, USA.
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SEC Wants Sustainable Funds to Disclose More About Their Criteria. “In a videoconference, Chairman Gary Gensler told members of the European Parliament that the SEC is considering whether to require fund managers to disclose more information about the labeling of their environmental, social and governance, or ESG, investing products. Gensler said he has asked SEC employees to make recommendations for disclosure requirements.
Calls for public comment are expected to start by year’s end or early 2022.”
[COMMENTARY]There’s little doubt that some ‘sustainable’ funds are barely that at all, hardly differing in their stock components to ‘conventional’ counterparts. They can argue that their aim is to 1) engage with climate ‘laggards’ to encourage them to do better. And, or, 2) purposely invest in climate laggards that propose to do much better on ESG as these companies have often shown to have greater stock price appreciation than established high-performance ESG companies.
SEC Wants Sustainable Funds to Disclose More About Their Criteria, by Evie Liu, September 1, 2021, Barron’s, 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.
