November 2023 Newsletter
News & Commentaries by Ron Robins
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New Podcasts:
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Can I invest sustainably across my portfolio? “The sustainability transition is not just driven by policy, as investors and corporations alike are integrating SI into their portfolios and businesses.”
[COMMENTARY] There’s a full paper on this subject with a link to it in the article.
Can I invest sustainably across my portfolio? Main contributors – Jon Gordon, Stephanie Choi, UBS Wealth Management, USA.
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ESG and Passive Investing Do Not Mix. “The complex, long-term nature of sustainable investing makes it inherently an active management discipline.”
[COMMENTARY] I like what this writer says. Incidentally, for anyone interested in creating their own ESG and sustainable portfolio, see my DIY Ethical-Sustainable Investing Pays Tutorial!
ESG and Passive Investing Do Not Mix, by Daniel Hanson, November 27, 2023, Wealth Management, USA.
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Asset Managers Quietly Add ‘ESG’ to Portfolios of Defense Stocks. “At the end of the third quarter, 1,238 funds claiming to “promote” environmental, social and good governance goals held stocks in the industry classification code Aerospace & Defense, according to Morningstar Inc. data. That’s roughly 25% more than in March last year, right after Russia invaded Ukraine. A large portion of those funds converted to “ESG” during the period, Morningstar said.”
[COMMENTARY] Nothing like rising stock prices in a sector to attract fund managers. ESG and sustainable funds have taken big hits recently, so these funds are looking for performance enhancers and some have been attracted to defense stocks. As I’ve previously said, investments in defense-related stocks should be an individual decision and funds investing in defense stocks might require some investors to rethink their holdings.
Asset Managers Quietly Add ‘ESG’ to Portfolios of Defense Stocks, by Frances Schwartzkopff, Natasha White and Natalia Drozdiak, November 24, 2023, Bloomberg News, USA.
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What to look for when investing in green, social, and sustainability bonds. “The emergence of sustainable bonds as an asset class has been relatively rapid, and the spectrum of different classifications of investments can naturally be confusing for investors. To navigate this landscape, investors should look out for certain key criteria when investing in green, social and sustainability bonds (GSS).”
[COMMENTARY] This article is a good guide on how to pick green bonds for optimal returns. However, country ESG grades and purposes that are near and dear to you might also be factors in your decision-making concerning investing in green bonds.
What to look for when investing in green, social, and sustainability bonds, by Andre Severino, November 23, 2023, FT Advisor, UK.
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Competitive Pressure and ESG. “A firm’s exposure to competition is negatively associated with its ESG performance. We measure domestic competitive pressure by product market fluidity, based on product text descriptions, and find that higher fluidity – indicating higher product market threats – is associated with lower ESG scores. Fluidity matters more for financially constrained firms, capital-intensive industries, and costly activities, as well as firms with shorter-term shareholders. Increasing exposure to Chinese import competition is associated with a reduction in ESG scores. This effect of import competition is stronger for firms less exposed to domestic competition. Local climate attitudes moderate the effect of competitive pressure.”
Competitive Pressure and ESG. By Vesa Pursiainen, University of St. Gallen and Swiss Finance Institute; Hanwen Sun, University of Bath, School of Management; Yue Xiang, University of Bath, School of Management. September 23, 2023, Swiss Finance Institute Research Paper No. 23-69, Switzerland.
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Making ESG Real: A Return to Values-Driven Investing. “As environmental, social, and governance strategies continue to face ill-informed attacks by conservative politicians, Making ESG Real assesses sincere critiques of responsible investment, and proposes how to achieve its original goals.”
[COMMMENTARY] This is an informed and well-thought-out proposal for the future of the ESG cause. Making ESG Real: A Return to Values-Driven Investing, by Michael D. Goldhaber, November 2023, NYU Stern, USA.
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Global Survey of ESG Regulations for Asset Managers – ESG and the Sustainable Economy Handbook. “In the latest chapter of the ESG and the Sustainable Economy Handbook, our lawyers—located in the Americas (the United States), Asia (Hong Kong, Japan, and Singapore), Australia, and Europe (European Union including Ireland and Luxembourg and the United Kingdom)—provide an overview of their regional regulation by responding to the same eight questions regarding the existing ESG-related rules and other ESG developments impacting the investment management industry.”
[COMMENTARY] This appears to be a useful handbook to have for anyone managing funds. Global Survey of ESG Regulations for Asset Managers – ESG and the Sustainable Economy Handbook, by K&L Gates LLP, November 10, 23, JD Supra, USA.
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CFA Institute-Led Group Publishes New Definitions for Responsible Investment. “The new definitions aim to provide language for investors that allows them to communicate their responsible investment practices accurately and consistently, according to the CFA.”
[COMMENTARY] It’s a good step forward to attempt the clarification of these terms. It remains to be seen how widely they’ll be adopted. CFA Institute-Led Group Publishes New Definitions for Responsible Investment, by Remy Samuels, November 6, 2023, PLANSPONSOR, USA.
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Return ESG to ‘common-sense’ values investing. “While an ill-informed ESG backlash continues to dominate some corners of the globe, in other parts another debate is taking place: should E, S and G themes be siloed and the bundling of ESG disbanded?”
[COMMENTARY] I wholeheartedly agree with the unbundling of E, S, and G grading! Also added should be — though somewhat subjective — some valuation of a company’s product or service about its value to society and the environment. Return ESG to ‘common-sense’ values investing, by Natasha Turner, November 7, 2023, ESG Clarity, UK.
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Clean energy is the future, but stocks aren’t acting like it. Here’s why. “Despite growing calls for an accelerated global shift to clean energy, stocks in the sector vastly underperforming the broader market. In fact, they’re some of the worst performers this year.”
[COMMENTARY] Higher interest rates have pummeled clean energy projects. Thus, their future earnings are jeopardized and lower stock prices are occurring. Should central banks and governments create mechanisms for the funding of clean energy projects at low rates?
Clean energy is the future, but stocks aren’t acting like it. Here’s why. By Aruni Soni, November 5, 2023, Markets Insider, USA.
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Bankers Seek Legal Cover After Backing $1.5 Trillion of ESG Debt. “Bankers servicing one of the world’s biggest ESG debt markets are now actively seeking legal protections to guard against the potential greenwashing allegations that may be ahead.”
[COMMENTARY] It seems that some sustainability-linked loans are backed by sustainability metrics that were often unavailable to the public. Note: were sloppy bank practices in play so that some bankers could get hefty commissions and bonuses? Bankers Seek Legal Cover After Backing $1.5 Trillion of ESG Debt, by Greg Ritchie and Alastair Marsh, November 5, 2023, Bloomberg, USA.
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Faith-based investing on the rise as world grows more chaotic. “ESG may have dominated the headlines, but faith-based investing has steadily – and quietly — been on the rise.”
[COMMENTARY] In difficult times people tend to become more religious. Hence, in these increasingly troubling times, it could be expected that faith-based investing would grow. Furthermore — and this is a point I made early in the launching of Investing for the Soul — one’s personal investment actions may ultimately reflect positively or negatively on one’s own spiritual and personal growth. Thus, the importance of investing in ways congruent with your spiritual beliefs. Faith-based investing on the rise as world grows more chaotic, by Gregg Greenberg, November 3, 2023, Investment News, USA.
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Featured Book
Global Handbook of Impact Investing Solving Global Problems Via Smarter Capital Markets Towards A More Sustainable Society, “If we truly want a more sustainable, more inclusive world, we must change the way we invest our money. This book helps move us toward a future in which every investment decision considers impact alongside profit. Money can do so much more than just make more money, and the problems of our world are far too urgent for our capital to underperform.” — Amit Bouri, MBA, MPA, Co-founder and CEO, Global Impact Investing Network.
For more information, visit Global Handbook of Impact Investing Solving Global Problems Via Smarter Capital Markets Towards A More Sustainable Society, by Elsa De Morais Sarmento and R. Paul Herman, Wiley 2020.
