May 2024 Newsletter
News & Commentaries by Ron Robins
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New Podcasts:
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The top 5 renewable energy trends shaping the sector. “Energy transition investment is on the rise, with $303 billion invested in the U.S. in 2023, according to BloombergNEF, up 22% from the prior year. Still, that is a fraction of the $1.77 trillion that was invested globally.”
[COMMENTARY] This is a useful article to read to gain a more detailed understanding of where renewable energy investment is heading. Thus, what renewable sectors might benefit most.
The top 5 renewable energy trends shaping the sector, by David Carter, May 28, 2024, RSM, USA.
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Sovereign Environmental, Social, and Governance (ESG) Investing: Chasing Elusive Sustainability. “This paper evaluates the progression of the sovereign ESG landscape since the initial comprehensive assessment of the sector in 2021 in ‘Demystifying Sovereign ESG’ by conducting a comparative analysis of the current sovereign ESG methodologies of commercial ESG providers.”
[COMMENTARY] Assets of sovereign wealth funds continue to increase significantly. Many of them use ESG parameters in asset selection. This paper provides fascinating insight as to how they incorporate ESG analysis.
Sovereign Environmental, Social, and Governance (ESG) Investing: Chasing Elusive Sustainability, by Ekaterina Gratcheva and Bryan Gurhy, May 17, 2024, IMF Working Papers.
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2 Major Changes to the SEC Climate Rule, and What They Mean for Investors. “Investors and companies must navigate major differences in US and international reporting frameworks.”
[COMMENTARY] A few years ago I was hopeful that the major US, EU, and other securities regulators could arrive at common corporate ESG-sustainable reporting frameworks. However, this appears less likely now. The result could be significantly added burdens for investors and all stakeholders in arriving at satisfying conclusions to their company ESG-sustainability questions.
2 Major Changes to the SEC Climate Rule, and What They Mean for Investors, by
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Understanding ESG Ratings: Legal Insights & Perspectives. “This article analyzes the salience of ESG ratings and considers certain methodologies underlying their calculation for professionals. The article also discusses various issues concerning ESG ratings and provides key takeaways about the prudent deployment of ESG ratings products.”
[COMMENTARY] This article provides great insight into the ESG rating regime.
Understanding ESG Ratings: Legal Insights & Perspectives, by Jacob H. Hupart, David G. Adams, and Will G. McKitterick. May 20, 2024, Mintz, USA.
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Taking a Strategic Approach to the ‘S’ in ESG: Creating a Social Impact Strategy. “While the ‘E’ in ESG has received significant attention, effort, and investment from regulators and organizations alike, the ‘S’ pillar, which pertains to social sustainability and social impact, is equally essential for organizations to address.”
[COMMENTARY] I largely agree with the ideas contained in this KPMG article. However, many companies might feel the ideas go a bit too far.
Taking a Strategic Approach to the ‘S’ in ESG: Creating a Social Impact Strategy, by Corinne McNally, Ramsha Ahmed, Oriana Vaccarino, and Silvia Gonzalez-Zamora. May 17, 2024, Morningstar/accesswire, Canada.
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The Payoffs and Pitfalls of ESG Due Diligence. “Although Europe has spearheaded more stringent ESG regulations, dealmakers in all surveyed countries, including those in the US, recognize the importance of performing such assessments before closing a deal.”
[COMMENTARY] Due diligence — whether in mergers and acquisitions (M&A) or for regular investment purposes — now recognizes the essential nature of ESG analysis.
The Payoffs and Pitfalls of ESG Due Diligence, by Ferdinand Fromholzer, Dirk Oberbracht, and Jan Schubert, May 15, 2024, Harvard Law School Forum on Corporate Governance, USA.
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The Missing “T” in ESG. “In a recent paper, we argue that amidst the enthusiasm about ESG, a critical parameter has gone virtually unnoticed: corporate tax behavior. The payment of corporate taxes is a powerful indicator of how a company views its role in society and supports the communities in which it operates and the stakeholders with whom it engages.”
[COMMENTARY] This is the first time I’ve seen a coherent argument as to why the tax-paying characteristics of a company should be considered in the same way we consider a company’s ESG credentials. That is, they might only be considered good corporate citizens if they pay their fair share of taxes! Many ‘responsible investors’ are unaware that many of their favorite tech companies pay little or no corporate taxes!
The Missing “T” in ESG, by Danielle Chaim (Bar-Ilan University), and Gideon Parchomovsky (Hebrew University of Jerusalem). May 8, 2024, Harvard Law School Forum on Corporate Governance, USA.
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How consultants have taken over sustainability reporting – and not for the better. “Companies are hiring external consultants to help report on ESG, but there aren’t enough checks to guard against greenwash.”
[COMMENTARY] I suggest the best ESG consultants form an industry standards group so that companies can rely on their advice. For now, investors and companies need to be somewhat wary of external consultants and their reports from jurisdictions that don’t require ‘external assurance.’
How consultants have taken over sustainability reporting – and not for the better, by Hendri Yulius Wuaya and Kate MacDonald, May 8, 2024, Corporate Knights, Canada.
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Active or Passive? Seeking Solutions to ESG Confusion. “Investors with an environmental, social and governance (ESG) focus are increasingly leaning toward passive portfolios, which may seem to offer the simplicity they crave in a complex market landscape. But the path to passive is fraught with risks, particularly when it comes to sustainable strategies.”
[COMMENTARY] Passive portfolios — where the portfolio manager largely follows a stock or bond index — are dominant in most ethical and sustainable investment portfolios. However, as this article demonstrates, actively managed portfolios and funds are important to consider too.
Active or Passive? Seeking Solutions to ESG Confusion, by Kate Mead and Amelia Sexton, May 8, 2024, AllianceBernstein, USA.
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CEOs Invest Less in Corporate Social Responsibility When Their Own Money Is At Stake. “In a new paper written with Ing-Haw Cheng of the University of Toronto and Harrison Hong of Columbia University and NBER, Shue shows that when corporate do-gooding starts to affect the managers’ own personal income, or their standing with shareholders, their CSR efforts slow down considerably.”
[COMMENTARY] This article describes a study that shows when CEOs’ financial incentives do not incorporate CSR objectives, then CSR is de-emphasized.
CEOs Invest Less in Corporate Social Responsibility When Their Own Money Is At Stake, by Aimee Levitt, May 6, 2024, Yale Insights, USA.
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Catalyzing Sustainable Investment: Revealing ESG Power in Predicting Fund Performance with Machine Learning. “Our findings substantiate the positive correlation between ESG ratings and fund performance. In fact, our investigation identifies ESG score as one of the dominant variables, ranking among the top five with the highest predictive capacity for mutual fund performance.”
By Alexandre Momparler, Pedro Carmona and Francisco Climent. May 2024, Computational Economics.
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Featured Book
Note: Ron Robins is an Amazon Associate. He thus earns fees from qualifying book or merchandise purchases referred from this website.
The Social Justice Investor: Advance Your Values While Building Wealth, Whether a Few Dollars or Millions. “Money is a lever with which you can change the world. The Social Justice Investor is a treasure chest of valuable insights for readers who want to finance a more just society.” — Joanne Gan, head of Impact Investing & ESG, Treasury, PayPal”
For more information, visit The Social Justice Investor: Advance Your Values While Building Wealth, Whether a Few Dollars or Millions, by
