July 2022 Newsletter
News & Commentaries by Ron Robins
————————————————————-
Latest Podcasts:
————————————————————-
Latest Podcast: ESG Energy Stocks for 3Q 2022… Articles covered include: “Top Alternative Energy Stocks for Q3 2022”; “Ameresco: Alternative Energy’s Best Near-Term Capital Gain Prospect”; “Alternative Energy Stock Quietly Having a Great Year”; “3 Most Undervalued Renewable Energy Stocks to Buy”; “2 Unstoppable Renewable Energy Stocks to Buy for the Next Decade”; and “3 High-Yield Infrastructure Stocks to Buy Now.” And more!
— By Ron Robins
————————————————————-
Investors Are Embracing ESG But Avoiding Impact. What They’re Missing. “The belief that achieving positive social impact automatically means sacrificing attractive return on investment–drives many investors to avoid ‘impact’ but embrace ‘ESG.'”
[COMMENTARY]The article quotes the Ford Foundation with achieving significant impact investment financial returns and is an encouragement for others to get into the impact space.
Investors Are Embracing ESG But Avoiding Impact. What They’re Missing, by Roy Swan, July 27, 2022, Barron’s, USA.
————————————————————-
They helped create ESG. Two decades later, some see a mess. “The goal of ESG investing was ‘to try and create a positive virus that we could plant in mainstream finance and investment to start a different conversation that these issues are real, they’re material, and they affect your long-term investments,’ said Paul Clements-Hunt, the former head of the U.N. Environment Programme Finance Initiative, or UNEP FI, which played a crucial role in popularizing the idea.”
[COMMENTARY]Yes, it is a mess. Nonetheless, ESG is seen by most investors as something that is proving itself of value! Can you imagine a world without it now?
They helped create ESG. Two decades later, some see a mess, Avery Ellfeldt, July 26, 2002, E&E News Climate Wire, USA.
————————————————————-
Put short selling on the ESG investing table, say hedge fund managers. “The study of how short sales affect ESG objectives has gained a lot of attention. According to a recent white paper by the Managed Funds Association and Harvard Management Company, short bets can lower capital investment in the most polluting industries by 3 to 8%. The white paper also states thatshort sellingcan raise the cost of capital and exert downward pressure on equity prices.”
[COMMENTARY]Should short selling be considered a legitimate ESG practice? I think the answer is yes, provided certain well-known and historic safeguards are employed.
Put short selling on the ESG investing table, say hedge fund managers, by Jean Dondo, July 26, 2022, Wealth Professional, Canada.
————————————————————-
Amidst Criticism, ESG Reporting Should Be Reformed, Not Abandoned. “In response to the growing criticism of the rating system, EY released anew reporton the state of ESG and recommended five actions to strengthen the credibility of the metric.”
[COMMENTARY]It’s good that one of the big accounting firms has issued such a report.
Amidst Criticism, ESG Reporting Should Be Reformed, Not Abandoned, by Andrew Kaminsky, July 21, 2022, Triple Pundit, USA.
————————————————————-
Have the merits of ESG investment been overstated? “How times change. A year ago, asset managers were trumpeting the qualities of environmental, social and governance (ESG) funds, as a slew of data showed that these had beaten their conventional equivalents over several periods.
Today, they have toned down their message after months of disappointing performance; negative stories about firms exaggerating the benefits of ESG; and the emergence of influential and increasingly vocal sceptics.”
[COMMENTARY]There are two knowledgeable commentaries in this article about the merits — or lack of them — concerning the relevance of ESG based investing. I believe each side makes valid points.
Have the merits of ESG investment been overstated? By Tim Cooper, July 14, 2022, Raconteur, UK.
————————————————————-
The End of the ‘Technological Era’ of Oil, Gas & Coal. “The enaction of climate policies over the next decade will lead to lost profits of at least $1.4 trillion in the global oil and gas industry, finds a peer-reviewed analysis published in Nature Climate Change, much of which will impact private investors in Western Europe, while generating financial volatility larger in scale to the 2008 subprime mortgage crisis.”
[COMMENTARY]After the EU agreed to include gas and nuclear power in their new ‘green’ taxonomy and Germany restarting coal-powered electricity generation, I wonder exactly when the big hit to fossil fuel assets will take place?
The End of the ‘Technological Era’ of Oil, Gas & Coal, by Nafeez Ahmed, July 11, 2022, Byline Times, UK.
————————————————————-
ESG questionnaires: why you shouldn’t use them with clients. “Offering a questionnaire focused on ESG, and which doesn’t cover Responsible, Ethical, Impact, Transition, UN’s Sustainable Development Goals (SDGs) etc. is building up future compliance problems… I suggest you provide a document explaining how your firm arrived at its definition of ESG and what it covers. It will then be harder for the client to come back 3 years later and say ‘I thought they meant X or Y for ESG.'”
[COMMENTARY]The title is misleading. What the author of this article is saying is that you must define terms such as ESG, so your client is clear about what they’re agreeing to.
ESG questionnaires: why you shouldn’t use them with clients, by Annie Gomes, July 11, 2022, ifamagazine.com, USA.
————————————————————-
New litigation fears driving expanded responsibilities for in-house lawyers to prevent ESG risks. “Vincent Walden, CEO of Kona AI and FRAUD Magazine columnist, says the expanding ESG risk environment, including potential concerns of fraud, is very real. ‘When company executives act in a different way that is counter to the company’s code of conduct or social norms, it can cause significant financial harm to the company and thus significantly increase pressure to cover up or misstate certain facts,’ Walden says, adding that while this may not be outright fraud, the critical role of governance comes into play.”
[COMMENTARY]Many countries have, or are likely to, adopt legislation that either directly or indirectly allows individuals or groups to sue for damages concerning a company’s ESG activities. This should promote greater corporate ESG engagement while possibly enhancing shareholder value.
New litigation fears driving expanded responsibilities for in-house lawyers to prevent ESG risks, by Thomson Reuters Regulatory Intelligence and Compliance Learning, July 8, 2022, JDSupra.com, USA.
————————————————————-
Canada’s Best 50 corporate citizens of 2022 continue to conquer the markets. “The pay gap between Best 50 CEOs and their average worker is less than half that of run-of-the-mill big businesses. And their carbon productivity (which measures how much revenue a company generates per tonne of emissions) is double their peers. This approach has stood the test of time, proving that better corporate citizens can beat the market year over year.
The Best Corporate Citizens’ stock market performance has outperformed its peers earning 499% gross return since it was first launched in June 2002, versus 366% for S&P/TSX Composite.”
[COMMENTARY]Corporate Knights perform a great and honest assessment of Canada’s best companies and the role they and all Canadian businesses play in furthering our quality of life.
Canada’s Best 50 corporate citizens of 2022 continue to conquer the markets, by Toby Heaps, July 2022, Corporate Knights, Canada.
————————————————————-
Don’t Count on ESG Outperformance. “New research shows that the significant outperformance of environmental, sustainable and governance – (ESG) – driven investing over the last decade was due to a sharp increase in concern among investors for climate-related issues. Whether that outperformance continues will depend on even more heightened concerns over the environment.”
[COMMENTARY]Mr. Swedroe provides insight into the conclusions of several recent papers focusing on ESG returns.
Don’t Count on ESG Outperformance, by Larry Swedroe, July 4, 2022, Advisor Perspectives, USA.
————————————————————-
ESG That’s Risk Managed. “Whether ESG equity investors are motivated by the desire to do good or the expectation of superior performance, they face the prospect of potential selloffs merely by virtue of their exposure to risk. We therefore propose that ESG equity investors consider adding a dynamic component to their portfolios that cuts risk when market conditions are fragile and accepts risk when conditions are resilient.”
[COMMENTARY]The authors’ proposal to consider some active management in portfolios and the addition of risk measures could interest many investors and portfolio managers.
ESG That’s Risk Managed, by Mark Kritzman and Cel Kulasekaran, June 27, 2022, etfdb.com, USA.
————————————————————-
Featured Book
ESG Investing For Dummies, by Brendan Bradley, For Dummies 2021.
“Even if you’re new to investing, you can use your money to make a difference. This book explains today’s ESG landscape so you can create a socially and environmentally responsible portfolio. You can consider stocks and bonds, and you can get an introduction to derivative and alternative instruments. Let ESG Investing For Dummies be among your advisors as you research investments; craft your portfolio, assess performance, and — most importantly — help make this world a more equitable and sustainable place.”
