June 2023 Newsletter
News & Commentaries by Ron Robins
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New Podcasts:
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Latest Podcast: Socially Responsible Companies Investors Like. Articles include: “22 Socially Responsible Companies to Know,” by Jeff Rumage; “These are Canada’s 50 fastest-growing green companies of 2023,” by Rick Spence; and “Buy The Dip – 2 ‘Strong Buy’ Renewable Energy Stocks,” by High Yield Investor…
— By Ron Robins
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Where Is the Line Between Ethical and Unethical Investing? “Professional investors have ample opportunity to sin—and face ample rules that aim to prevent them from doing so. Without doubt, their investment practices can be unethical. Retail investors face far fewer potential perils. One possibility, though, might be the internet-enabled practice of collaborating to damage a stock’s price. Permitting short-selling appears to be a public good, by improving market efficiency. But, to my knowledge, there is no evidence that society benefits from times when the activity is conducted collectively. It may even be harmful.”
[COMMENTARY] What are the ethics of selling short a stock and then gaining massive publicity on the web to encourage others to similarly sell short the same stock? Is that ethical? What about the opposite? Do you buy a stock and promote that stock as a buy all over the web? So is that ethical? The point is that markets are full of both buyers and sellers and all are promoting their particular views. Hence, I would say neither promoting a buy or sell is unethical. However, doing so when you do not believe in your action, that, I would define as unethical.
Where Is the Line Between Ethical and Unethical Investing? By , June 1, 2023, Morningstar, USA.
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Canada’s 50 fastest-growing green companies of 2023. “Topping the ‘public’ list is Li-Cycle, which provides end-of-life recycling and resource recovery for lithium-ion batteries. Between 2020 and 2021, the Toronto-based company grew its sales from $1.05 million to $9.1 million – a gain of 766%.
Possibly even more remarkable are the three giant companies on the public list that achieved 2021 revenue numbers in the nine figures: Vancouver healthcare-services provider CloudMD Software ($102 million); Toronto plant-protein producer Global Food and Ingredients ($124 million); and Delta, B.C., greenhouse growers Village Farms International ($339 million). (While greenhouses aren’t usually considered energy-efficient, Village Farms heats its Delta facilities with methane from local landfills.)”
[COMMENTARY] Many ethical and sustainable investors will want to review this list for companies that might interest them! From experience, the company rankings by Corporate Knights are terrific.
Canada’s 50 fastest-growing green companies of 2023, by Rick Spence, June 1, 2023, Corporate Knights, Canada.
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The Anti-ESG Fad Might Be Over Before It Got Going. “In the United States, criticism of sustainable investing has become incredibly politicized over the past year. To understand the timeline and their magnitude, in a recent study we took a look at the funds—Morningstar counts 26—that have picked up the anti-ESG banner. Although there’s been a lot of talk about anti-ESG funds, it’s not clear that they have staying power.”
[COMMENTARY] This is a great article by Morningstar concerning the anti-ESG funds that have appeared. The article makes clear that these anti-ESG funds aren’t amounting to much and seem to be quickly losing momentum. I’ve maintained that the anti-ESG protagonists are venting their anger from a purely political and self-interested financial viewpoint (fossil-fuel investments) and that it was doomed to fail. I think we’re now seeing evidence of this.
The Anti-ESG Fad Might Be Over Before It Got Going, by
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How Tobacco Companies Are Crushing ESG Ratings. “Companies like Altria have gone out of their way to emphasize the diversity of their corporate boards and the breadth of their social justice initiatives, from funding minority businesses to promoting transgender women in sports. But Tesla, whose executives are overwhelmingly white men, has resisted that bandwagon, going so far as to fire its top LGBT diversity officer last year.
The ‘S’ in ESG typically includes diversity programs. Philip Morris International, which in 2021 advertised a partnership with ‘African data scientists,’ got a social score of 84 from S&P Global. Tesla got a measly 20.”
[COMMENTARY] The biggest failure of many ESG raters is a failure to rate the ESG impacts of the products and services produced by companies! Hence tobacco companies can outscore Tesla. Fortunately, Corporate Knights and a few other ESG/sustainability rankings will account for such factors.
How Tobacco Companies Are Crushing ESG Ratings, by Aaron Sibarium, June 13, 2023, The Washington Free Beacon, USA.
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EU proposes to regulate ESG ratings providers. “The European Union is to regulate agencies providing environmental, social and governance (ESG) ratings in an effort to improve standards in an industry that guides trillions of dollars of investments.”
[COMMENTARY] I agree that there need to be standards for the regulators. However, the standards should be such that they do not inhibit differing viewpoints! Should the EU be successful in this endeavor, many other jurisdictions will follow in implementing standards of their own.
EU proposes to regulate ESG ratings providers, reporting by Julia Payne, writing by Tommy Reggiori Wilkes, editing by Sinead Cruise and Mark Potter, June 13, Reuters, Belgium.
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ESG and Fiduciaries: A New Age Dawns. “Corporate directors and fiduciary leaders have long known about ESG, but the discussion has intensified in recent years. And this is just the beginning: ESG is the new frontier in defining fiduciary duties. Being reactive is no longer an option – directors and fiduciary leaders must usher their enterprise into the new era by incorporating ESG into their business and investment strategies. Woolery & Co. and Kaplan Hecker & Fink have outlined a strategy to help directors and fiduciary leaders make the business, investment, and legal case for ESG.”
[COMMENTARY] A case is made here that fund fiduciaries should take ESG into account! Those fund fiduciaries who do not allow any aspect of ESG in their fund management process may find themselves on the wrong side of the law.
ESG and Fiduciaries: A New Age Dawns, by James C. Woolery, June 15, 2023, Harvard Law School Forum on Corporate Governance, USA.
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I don’t own green funds because I want to live. “Nvidia designs the chips of choice for servers that run artificial intelligence software. Demand is booming. The US company also makes 80 per cent of the kit which allows such top-end AI processors to talk to each other. It’s all seen as green, as the virtual world is low on emissions. Well and good except that many experts — from academics to tech insiders — believe AI poses an existential threat to mankind. These are no crack pots. On Wednesday, the European parliament voted to rein in AI technologies due to ‘significant risk of harm to the health and safety of persons’.
[COMMENTARY] Should AI be a major component of a sustainable investment portfolio? Most ESG/green/sustainable funds have tech that includes AI as their largest industry holding. Yet, many leaders in the AI field are warning of potential calamities if AI is not globally, adequately, supervised.
I don’t own green funds because I want to live, by Stuart Kirk, June 16, Financial Times, UK.
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Potential financial losses from a renewable energy transition are concentrated among the wealthy. “3.5 percent of financial losses would affect the poorest half of Americans… However, because their overall net wealth (assets minus liabilities) is significantly lower, researchers estimate that these losses could be compensated for $9 billion in Europe and $12 billion in the United States.”
[COMMENTARY] Estimates concerning the losses on fossil-fuel-stranded assets are of course hypothetical. However, most authoritative fossil-fuel-based energy predictions say that fossil fuels will be around a lot longer than most of us would like. Hence, asset losses due to fossil-fuel-stranded assets might be substantially less than is likely calculated in this study.
Potential financial losses from a renewable energy transition are concentrated among the wealthy, by Gregor Semieniuk et al, June 22, 2023, Joule, USA.
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U.S. public pensions could be $21 billion richer right now. “The study, out of the University of Waterloo in partnership with Stand.earth, analyzed the public equity portfolios of six major U.S. public pension funds, which collectively represent approximately 3.4 million people, to determine the effect divesting from their energy holdings would have had. In total, researchers estimate that the pension funds would have seen a return on their investments that was 13 per cent higher on average.”
[COMMENTARY] No doubt this study will be used, rightfully, by many to encourage those managing pension funds to divest from fossil fuels. However, another argument is that by staying partially invested in fossil-fuel producers pension funds may be able to organize shareholders to encourage these producers in a more climate-friendly direction that encourages greater profitability.
U.S. public pensions could be $21 billion richer right now, by Media Relations, University of Waterloo, Canada.
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Featured Book
Making Money Moral: How a New Wave of Visionaries Is Linking Purpose and Profit. “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.
For more information, visit Making Money Moral: How a New Wave of Visionaries Is Linking Purpose and Profit, by Judith Rodin and Saadia Madsbjerg, Wharton School Press 2021.
