October 2021 Newsletter
News & Commentaries by Ron Robins
————————————————————-
Latest Podcasts:
————————————————————-
Latest Podcast: Best Solar Energy Stocks PLUS Much More… “Includes. Shoals Technologies Group, Inc., Brookfield Renewable Partners L.P., Clearway Energy, Inc. Sunnova Energy International Inc., First Solar, Inc., SolarEdge Technologies, Inc., Enphase Energy, Inc., Sunrun Inc., NextEra Energy, Inc., Tesla, Inc., Fidelity Select Technology Portfolio, New Alternatives Fund Class A, and Rize Environmental Impact 100 UCITS ETF.”
— By Ron Robins
————————————————————-
Why Divestment Doesn’t Hurt “Dirty” Companies. “A new analysis finds that selling off stocks in corporations that don’t meet your values has minimal impact on their behavior.”
[COMMENTARY]This research agrees with the activist funds that say you need to invest in ‘dirty’ companies to change them. When enough investors seeking corporate change invest in companies performing poorly in ESG metrics, they can influence or change the boards of these companies and effect change that way. Hence, investment, rather than divestment, is the key to moving companies in the direction of ESG.
Why Divestment Doesn’t Hurt “Dirty” Companies, by Alexander Gelfand, October 27, 2021, Stanford Business, USA.
————————————————————-
Does Divestment From Fossil Fuels Really Work? “Private equity funds are very keen to grab the available stocks, bonds, and assets, as the margins in oil and gas, and even coal, are very impressive and will remain so for longer.
National oil companies and non-Western oil and gas giants will be happy to produce every last drop of oil, gas, and even coal they can.
Private equity funds, with a much shorter investment horizon than funds, will be pushing for higher production sooner, which will not only produce higher emission levels but will constrain the price competitiveness of renewables.”
[COMMENTARY]As many experts have said, fossil fuels have to be made increasingly expensive to drive consumption to renewables. However, cheap fossil fuels create cheap mass food, cheap transportation, etc. Hence, the political reticence to properly tax fossil fuels.
Does Divestment From Fossil Fuels Really Work? By Editor OilPrice.com, October 27, 2021, Yahoo! News, USA.
————————————————————-
100 Best ESG Stocks Combine Performance And Value With Values. “IBD’s third annual Best ESG Companies special report, featuring our table of top ESG companies with both high Dow Jones ESG scores and superior IBDComposite Ratings, can help investors pick the best ESG investments.”
[COMMENTARY]Worth reviewing, particularly by ethical and sustainable investors.
100 Best ESG Stocks Combine Performance And Value With Values, by Alexis Garcia, October 25, 2021, Investor’s Business Daily, USA.
————————————————————-
New Research: Ethical and unethical investments under extreme market conditions. “This study examines the time-varying volatility and risk measures of ethical and unethical investments.
We compute the value-at-risk and expected shortfall using the MS-GARCH model based on the Bayesian estimation framework.
Ethical investments are less affected than unethical investments during global financial crises.
Investors consider ethical investments as a hedging asset for their portfolios in the downside risk.”
[COMMENTARY]This research confirms the findings of previous studies that show ethical investments outperform during market downtowns.
Ethical and unethical investments under extreme market conditions, by Petter Olofssona, Anna R…holm, and Gazi Salah Uddin at Link…ping University, Sweden; Victor Troster, Universitat de les Illes Balears, Palma, Spain; and Sang Hoon Kang, Pusan National University, Republic of Korea. October 2021, International Review of Financial Analysis.
————————————————————-
Navigating the thicket of ESG metrics. “Sustainable investing may be gratifying for wealthy individuals and families, but it is far from simple. A lack of standards in the measurement and reporting of ESG (environmental, social and governance) products and funds can leave investors confused. And when it comes to impact investments, capturing the right data takes time, effort and, often, a hands-on approach.”
[COMMENTARY]This FT article is a good review of some of the approaches dealing with this important subject.
Navigating the thicket of ESG metrics, by Sarah Murray, October 24, 2021, Financial Times, UK.
————————————————————-
Is Mandatory Fossil-Fuel Divestment Coming For Your 401(k) And IRA? And How Much Will It Cost You? “Over the past several years, pension funds in Scandinavia have announced divestment from oil and gas companies, and the NEST retirement savings fund in the UK, that is, the government-managed IRA-like fund into which workers are defaulted if their employers don’t otherwise provide benefits, has said it will likewise pull its assets from coal mining, tar sand oil production, or arctic drilling.
In the United States, in 2020, a pair of representatives proposed legislation that the Thrift Savings Plan, the 401(k)-like plan for government employees, likewise ‘decarbonize.'”
[COMMENTARY]As much as I believe that it’s right for pension funds to go fossil-fuel-free, I think it inappropriate for governments to mandate them.
Is Mandatory Fossil-Fuel Divestment Coming For Your 401(k) And IRA? And How Much Will It Cost You? By Elizabeth Bauer, October 24, 2021, Forbes, USA.
————————————————————-
Analysis: Investors face myriad green investing rules. “More than 30 taxonomies outlining what is and isn’t a green investment are being compiled by governments across Asia, Europe and Latin America, each one reflecting national economic idiosyncrasies that can jar with a global capital market which has seen trillions pour into sustainable funds.”
[COMMENTARY]Let’s hope there’s a lot of commonality between them or it’ll get mighty messy for everyone!
Analysis: Investors face myriad green investing rules, by Huw Jones and Kate Abnett, Simon Jessop, October 19, 2021, Reuters, UK.
————————————————————-
Are Stranded Assets an Unexploded Bomb? “Many assets will be uneconomic in a low carbon world, but sectors as diverse as commercial property and tobacco may be seriously unprepared for the financial impact.”
[COMMENTARY]Stranded assets aren’t just fossil fuels as this article makes clear.
Are Stranded Assets an Unexploded Bomb? By Cherry Reynard, October 19, 2021, Morningstar, UK.
————————————————————-
Exotic World Of ESG Derivatives Triggers Warning From Regulator. “The European Securities and Markets Authority (ESMA) says it’s hard to verify the positive impact of derivatives sold under environmental, social and governance labels. The watchdog says standardized criteria should be met before firms can add ESG tags to products such as forwards, options and swaps…
ESMA told Bloomberg News in a written response. ‘The absence of disclosure requirements or recognized labels with minimum sustainability criteria implies that claims as to the impact of these instruments cannot be substantiated.'”
[COMMENTARY]It seems to be presently a ‘wild west’ when it comes to ESG derivatives.
Exotic World Of ESG Derivatives Triggers Warning From Regulator, by John Ainger and Greg Ritchie, October 18, 2021, FA-Magazine, USA.
————————————————————-
Transition Finance Week, Canada, November 29 – December 3, 2021. “Industry Dialogues on Financing Canada’s Transition to Net-Zero… Join 10+ key sessions on Transition Finance in live webcast format. Learn from thought leaders in ESG and sustainable finance. Interact with panelists through live-polling and in-session chat features. Network with fellow attendees and speakers via peer-to-peer chat options. Earn CE credits and PDUs from several accreditors.”
————————————————————-
ESG 2.0 Is in the Making. “While some may expect the repudiation of ESG as an investment fad, our view is that the current debate on the validity of ESG heralds not the end of ESG investing but instead a transition toward major improvement.”
[COMMENTARY]Some interesting insights into the future of ESG based investing by two highly reputable individuals with significant ESG backgrounds.
ESG 2.0 Is in the Making, by Georg Kell and Todd Cort, October 11, 2021, Barron’s, USA.
————————————————————-
Dumping stocks to punish bad corporate behavior has tiny impact. “Even as billions of dollars diverts toward firms scoring higher on environmental, social and governance measures, the funding costs for bad actors has hardly budged, a study has found.”
[COMMENTARY]The better way according to this study is for asset owners to directly engage with the companies.
Dumping stocks to punish bad corporate behavior has tiny impact, by Tasneem Hanfi Br…gger and Sam Potter, October 9, 2021, Bloomberg on Business Standard, India.
————————————————————-
BlackRock’s Landmark Move on Proxy Votes Fuels a Big ESG Debate. “The world’s largest asset manager revealed on Thursday that from next year, some institutional clients will be able to play a bigger role in shareholder votes. The move will apply to about 40% of $4.8 trillion in index equity assets that BlackRock manages.”
[COMMENTARY]This freedom is long overdue. Each institutional client needs to decide what its objectives are regarding its holdings and consequent relationship with them. Then, their assets may perform even better!
BlackRock’s Landmark Move on Proxy Votes Fuels a Big ESG Debate, by Tasneem Hanfi Br…gger and Sam Potter, October 8, 2021, Bloomberg on Yahoo! Finance, USA.
————————————————————-
Sovereign bonds are not exempt from ESG consideration. “Just as bondholders engage around fiscal and monetary policies, they should broaden conversations around ESG topics.”
[COMMENTARY]This article has great information on how ESG impacts stock, corporate and sovereign bond prices and other related data.
Sovereign bonds are not exempt from ESG consideration, by Carmen Nuzzo, October 6, 2021, ETFStream.com, UK.
————————————————————-
What can corporate actors learn from climate change litigation? “In May of this year, climate change litigation made global headlines in the wake of an unprecedented judgment issued by the Hague District Court in the case ofMilieudefensie v Shell. The court ordered Shell to enhance the ambition of its greenhouse gas emissions reduction efforts, requiring the company to set — and meet — companywide emissions reduction targets of 45% below 1990 levels by 2030.
While this case was the first of its kind, it is also part of a growing global body of climate change litigation, which is playing an increasingly critical role in the domestic implementation and enforcement of the Paris Agreement.”
[COMMENTARY]Many companies could be faced with this type of court challenge in the years ahead. Naturally, stock valuations could be affected too. So it’s something to become familiar with. This is an excellent article from the London School of Economics on the subject.
What can corporate actors learn from climate change litigation? By Catherine Higham and Joana Setzer, October 4, 2021, London School of Economics, UK.
————————————————————-
Harvard cracks on fossil fuels and a dam breaks. “Academic endowments are entering a new normal after the richest school in the worldfollowed the leadof other colleges and universities to divest from fossil fuels.
Now a cascade of similar announcements has followed, withBoston University, theUniversity of Minnesotaand the $8 billionMacArthur Foundationpulling the plug on fossil fuels.”
[COMMENTARY]Most of their faculty is in some way connected academically to some facet of global warming and/or climate change. Hence, it’s unsurprising that these institutions give up on fossil fuel investments.
Harvard cracks on fossil fuels and a dam breaks, by Jordan Wolman, September 28, 2021, Politico, USA.
————————————————————-.
Featured Book
Net Positive: How Courageous Companies Thrive by Giving More Than They Take, by Paul Polman and Andrew Winston, Harvard Business Review Press, October 2021.
“A wonderful rallying call to business leaders all over the world to step up to the greatest opportunity, and responsibility, of our time.” … Sir Richard Branson, founder, Virgin Group.
