February 2023 Newsletter
News & Commentaries by Ron Robins
Latest Podcast: The Most Sustainable Banks. Plus… Includes these articles: “The top 10 most sustainable banks in the world in 2023,” by Joanna England; “Best Renewable Energy Stocks to Buy for February 2023,” by Vandita Jadeja; “ESG Penny Stocks Every Investor Should Know About (VKIN, SPI, SAENF, HYSR),” by CapitalGainsReport; and links to nine more articles…
— By Ron Robins
The E.S.G. Fight Has Come to This: Bankers Suing Lawyers. “In October, Kentucky’s attorney generalorderedsome of the nation’s biggest banks and investment firms to turn over piles of documents that had the word ‘climate’ or ‘environmental’ in them. The bankers went to court to fight him.”
[COMMENTARY] I suspect that when US ‘red’ states promoted anti-ESG regulations, they never suspected that teams of bank lawyers in their states would take them on! And in Kentucky, the banking association lawyers described such anti-ESG regulations as “creating an ongoing state surveillance system.” Also, they said, “The bankers further claimed that the attorney general was violating their right to free speech and freedom to associate.” Those anti-ESG states are getting more than they bargained for!
The E.S.G. Fight Has Come to This: Bankers Suing Lawyers, by Ron Lieber. February 24, 2023, The New York Times, USA.
First global sustainability standards approach the finish line. “Last week at the inaugural IFRS Sustainability Symposium in Montreal, the International Sustainability Standards Board (ISSB) wrapped up deliberations on its first two sustainability standards aimed at creating a global baseline,announcing plansto release IFRS S1 and IFRS S2 in June with an effective date of January 2024.”
[COMMENTARY] This is exciting news. It’s taken decades to get here. Finally, a set of sustainable accounting standards that can be widely implemented.
First global sustainability standards approach the finish line, by Bryan Strickland, February 23, 2023, Journal of Accountancy, USA.
Penn State Research Shows Results Mixed on Whether Corporate Social Efforts Help Improve Company Finances. “In a new publication in the journal Tourism Economics, Lee and his collaborators reviewed the research literature on how CSR related to financial performance for hotels, restaurants, casinos and other businesses in the hospitality and tourism industry.
Overall, many researchers have found evidence that CSR provided financial benefits, but that was not the case in every situation.”
[COMMENTARY] The headline of this article is a little misleading as it doesn’t mention that the study was confined to the hospitality and tourism industry. Also, defining CSR has always been an issue. Though I haven’t read this paper, I doubt it’s the last word on this subject.
Penn State Research Shows Results Mixed on Whether Corporate Social Efforts Help Improve Company Finances, by Penn State School of Hospitality Management, February 16, 2023, hospitality.net, USA.
These 200 companies are leading the clean economy in 2023. “The Clean200 lists the 200 major corporate players from 35 countries around the world that are at the forefront of the energy transition and put sustainability at the heart of their products, services, business models and investments, helping to move the world onto a more sustainable trajectory.”
[COMMENTARY] The Clean 200 is one of my favorite ESG/sustainability company rankings. You can rely on the integrity of Corporate Knights and As You Sow to produce a really high-quality ranking.
These 200 companies are leading the clean economy in 2023, by Corporate Knights and As You Sow, February 23, 2023, Canada.
The Complex Materiality of ESG Ratings: Evidence from Actively Managed ESG Funds. “Our results from studying actively managed mutual funds support the hypothesis that ESG information is financially material, but complex. Specialized fund managers can incorporate such information into their investment process to the benefit of their investors, especially when investing in stocks with a high level of disagreement in ESG ratings. Thus, regardless of an investor’s nonpecuniary beliefs, ESG information should not be ignored.”
[COMMENTARY] This deep study into the link between the materiality of ESG and financial performance makes clear a direct link exists! The criticism that ESG is mandating a left-wing social-government policy conspiracy, totally misunderstands what ESG is. Furthermore, behind these ‘woke’ accusations are frequently fossil fuel interests and investors, combined with political posturing.
The Complex Materiality of ESG Ratings: Evidence from Actively Managed ESG Funds, by Martijn Cremers, Timothy B. Riley, and Rafael Zambrana, February 14, 2023, Harvard Law School Forum on Corporate Governance, USA.
Tidal wave of ESG disclosure rules will trigger flight to quality. “The impending wave of disclosure rules foreshadows a new era of transparency that will transform the market by enabling investors to see ESG risks and evaluate sustainability leadership like never before.”
[COMMENTARY] I agree with Mr. Lanz’s assessment. It’ll open up a new era in investment analysis and recommendations. I’ve been desiring this for a long time and am thrilled that it’s now happening.
Tidal wave of ESG disclosure rules will trigger flight to quality, by Dustyn Lanz, February 13, 2023, Investment Executive, Canada.
ESG investing’s dark side threatens to undermine clean-tech strategies amid ravenous demand for metals: ‘We should be under no illusion.’ “Adam Matthews, chief responsible investment officer at the Church of England Pensions Board, said the risks posed to the renewables boom via the mining industry aren’t getting nearly enough attention.”
[COMMENTARY] This article is about a major concern I’ve had for decades. To fulfill the metals and material requirements for the clean energy future we want will require a massive increase in the mining of minerals and metals that might not be accomplished.
Firstly, most of these potential mines lie in native, aboriginal, and frequently ‘unfriendly’ jurisdictions. Secondly, the increasing clout of environmental organizations negating mining projects. Thirdly, a typical mine takes 10-15 years from discovery to production.
This all means that our clean energy future could be a lot more costly and take much longer to unfold than most people realize!
ESG investing’s dark side threatens to undermine clean-tech strategies amid ravenous demand for metals: ‘We should be under no illusion,‘ by Alastair Marsh, February 12, 2023, Bloomberg, USA.
US Investors Want ESG Approaches, Survey Finds. “Asset management group Nuveen — part of TIAA —polled 573 US investorsand found that more than three quarters (76%) felt that responsible investment should always be factored into investment processes. In addition, 80% said responsible investment should be viewed as a long-term strategy.
Two thirds (67%) agreed that responsible investing strategies could lessen the impact of climate risks on businesses.”
[COMMENTARY] Another example of why the anti-ESG crowd will lose comes from the understanding that most investors are committed to ESG in their investments.
US Investors Want ESG Approaches, Survey Finds, by Banking Exchange staff, February 7, 2023, Banking Exchange, USA.
ESG in 2023: Politics and Polemics. “ESG is poised to become a major element of nonfinancial reporting at the very moment that it is becoming highly controversial andpoliticized. New European Union rules regarding mandatory ESG reporting will affect public and private U.S. companies that meet certain EU-presence thresholds or–significantly–are part of the value chain of an entity that is required to make the mandatory disclosures.
This development represents a significant departure from past practices and will reach much farther than many companies may have anticipated. In the United States, the Securities and Exchange Commission is on the verge of adopting climate-related disclosure rules, possibly heralding the start of increasingly onerous ESG reporting obligations. These regulatory developments are supported by many, though not all, institutional investors, and the extent of such support going forward is likely to influence the future direction of ESG disclosure.”
[COMMENTARY] At the moment when there is an ESG backlash by some in the USA, particularly, the financial world, generally, is adopting ESG regulatory and reporting measures. I believe those in this ESG backlash will be the losers in this fight. However, corporate boards are going to have to manage an exceedingly fraught governance environment.
ESG in 2023: Politics and Polemics, by David Katz and Laura McIntosh, February 8, 2023, Harvard Law School Forum on Corporate Governance, USA.
EU Finalizes ESG Reporting Rules with International Impacts. “The European Union hasfinalizedthe Corporate Sustainability Reporting Directive (‘CSRD’) that will introduce more detailed sustainability reporting requirements for EU companies, non-EU companies meeting certain thresholds for net turnover in the EU and companies with securities listed on a regulated EU market.”
[COMMENTARY] This legislation will likely apply to numerous companies based outside of Europe as well. A global ESG reporting standard could be coming into play here. Few companies outside of Europe realize the far-reaching implications of this legislation!
EU Finalizes ESG Reporting Rules with International Impacts, by Matthew Triggs, Sarah Mishkin, and Thibault Meynier, January 30, 2023, Harvard Law School Forum on Corporate Governance, USA.
Your Essential Guide to Sustainable Investing: How to live your values and achieve your financial goals with ESG, SRI, and Impact Investing, by Larry E. Swedroe and Samuel C. Adams, Harriman House 2022.
“How can you find investments that truly reflect your principles? This excellent book will tell you. You’ll learn the nuances of social investing as well as discover your likely investment returns. Highly recommended!” –Jane Bryant Quinn, Author, How to Make Your Money Last: The Indispensable Retirement Guide.