January 2019

Triple A Scores Became Tougher in Latest CDP [Carbon] Rankings. “For companies vying for the highly prized CDP recognition, ’triple A’ scores became much tougher to attain in 2018. While 140 companies were named to the 2018 list, only two, Firmenich and L′Oreal, received triple A scores in performance against all three areas surveyed: climate change, water security and forests.

CDP, formerly the Carbon Disclosure Project, is widely recognized as one of the world′s leading sustainability reporting frameworks. It represents the interests of over 650 investors with assets of $87 trillion.”

[COMMENTARY] Any investor interested in how companies engage with carbon needs to see CDP’s data.
Triple A Scores Became Tougher in Latest CDP [Carbon] Rankings, by Amy Brown, January 30, 2019, TriplePundit, USA.


Shareholder Activism Report 2018 by Skytop Strategies. “Contents: • New Campaigns Launched & Activity Overview • Campaign Size & Super Campaigns • Sector Weightings • Evolution of Demands.” For the report, click here.


Advisers not sold on ESG fund strategies. “A new report from Cerulli Associates, a Boston-based research and consulting company, shows it’s fund providers that want these products, not financial advisers. While 46% of issuers see unmet demand for products focused on ESG and socially responsible investing, only 17% of advisers share that view, the survey showed.”

[COMMENTARY] Some advisors might have mostly conservative, older clients who they’ve serviced for years and who know nothing of, nor demand, sustainable-ethical investment-related products. However, survey after survey of investors demonstrates that sustainability and ethically-based investing are their preferred investing paradigms. I believe that many advisors should understand that ’know your client’ isn’t only about how much the client needs in retirement!
Advisers not sold on ESG fund strategies, January 25, 2019, Bloomberg News/InvestmentNews, USA.


[UK] Investment Association weighs retail product labels for SRI funds. “The Investment Association (IA) is consulting on proposals which would see retail investors provided with product labels for funds linked to sustainability and responsible investing (SRI) products, in efforts to aid investors in achieving ’both their financial as well as their environmental and social goals’.”

[COMMENTARY] I can see this idea gaining traction. It might simplify sustainable-ethical investing for the retail client, though I’m sure many in the industry would rebel against it. In particular, making portfolio changes that move the fund from one ranking to another could prove problematic, since investors might have been sold the fund with a specific goal.
Investment Association weighs retail product labels for SRI funds, by Mike Sheen, January 25, 2019, Investment Week, UK.


Study sees safe haven in Islamic equities in crises. “Restrictions on debt and the diverse investment goals for Shariah-conscious shareholders could help provide a shelter in a time of crisis, academics including Sohel Azad of Melbourne′s Deakin Business School wrote in the November issue of the Journal of International Financial Markets, Institutions and Money.”

[COMMENTARY] Interestingly, research after the 2008-9 market crash showed ethical investments also held-up better than the general market. Ethics pays.
Study sees safe haven in Islamic equities in crises, January 22, 2019, Bloomberg/Tokyo, Gulf Times, Qater.


Corporate Knights 2019 Global 100 results. “Overview of 2019 Global 100 Most Sustainable Corporations in the World index.”

[COMMENTARY] This is always one of the more interesting rankings of sustainability leaders. You’ll see companies here you won’t find on other such lists and it’s a testament as to how much research Corporate Knights do!
Corporate Knights 2019 Global 100 results, January 22, 2019, Corporate Knights, Canada.


Skeptical About ESG? Don′t Be. Here′s Why. “A new Amundi SA study shows out performance by ESG funds in recent years, and Nuveen, with $20 billion in ESG assets, affirms that finding.”

[COMMENTARY] I’ve covered the Amundi study earlier, see “ESG screening boosts stock market performance, research finds.” However, the Nuveen study is also noteworthy. It’s shown outperformance in its ESG ETFs and has seen a big leap in inquiries from advisors and investors concerning ESG.
Skeptical About ESG? Don′t Be. Here′s Why. By Ginger Szala, January 22, 2019, ThinkAdvisor, USA.


Defective data is a big problem for sustainable investing. “But performance metrics for ESG are in their infancy compared with financial statements. Almost seven in 10 asset managers say the lack of high-quality information is the biggest challenge in adopting ESG principles. Without progress, the momentum in sustainable investing may stall.”

[COMMENTARY] The writer, Huw van Steenis, is a senior adviser to the governor of the Bank of England, and provides a good discussion of the situation. I’ve long argued that not only must there be generally agreed on ESG criteria and reporting standards, but like financial statements, corporate ESG ’statements’ should be independently verified and audited by accredited and regulated auditors.
Defective data is a big problem for sustainable investing, by Huw van Steenis, January 20, 2019, FT, UK.


RepRisk: The Ten Most Controversial Companies of 2018. “The MCC 2018 Report shows how major corporations from different sectors, including airlines, utilities, and banks, had to mitigate reputational and financial impacts resulting from inadequate management of ESG risks. The wide spectrum of ESG issues faced by these companies, and the ripple effects of these issues on the sector as a whole, stresses the global dynamics of ESG incidents.”

[COMMENTARY] Interestingly, most are in Asia. See the list on page 7 of the report.
RepRisk Special Report: Most Controversial Companies 2018, January 16, 2019, Switzerland.


Why it makes sense to invest in companies with a healthy gender balance. “A 2017 sustainable investing study from Swiss bank UBS found that companies in the FTSE Developed World Index where women made up at least 20 per cent of the board and senior management had higher returns than their less gender-diverse peers. In addition, firms that retained more than half of their female managers through to senior management had higher returns than those that lost more than 50 per cent of their women in management.”

[COMMENTARY] So, how is it that more women on boards improve corporate profits? The full answer is still unclear. However, the evidence showing that women on boards help improve corporate profits is clear! Ethical investors have long believed this to be true. Racial and ethnic diversity of boards can also add to improved corporate profitability.
Why it makes sense to invest in companies with a healthy gender balance, by Alice Haine, January 14, 2019, The National, UAE.


ESG screening boosts stock market performance, research finds. “Amundi, which manages more than €1.47tr worth of assets, looked at investment data from 2010-2017 to analyse the performance of 1,700 companies across five MSCI investment index groups using ESG criteria… Overall, the study found ESG screening does not impact all stocks, but tends to impact the best-in-class and worst-in-class assets.”

[COMMENTARY] There are some interesting twists in Amundi’s findings. Read the article. The link is below. As a result of their research, Amundi has decided to use ESG analysis across the board in the firm.
ESG screening boosts stock market performance, research finds, by Michael Holder, January 14, 2019, Business Green, UK.


Fitch Ratings launches ESG Relevance Scores. “The new ESG Relevance Scores, which have been produced by Fitch’s analytical teams, transparently and consistently display both the relevance and materiality of ESG elements to the rating decision. They are sector-based and entity-specific.”

[COMMENTARY] This is an exciting development. What is also noteworthy is that its ESG Relevance Scores will be in the public domain. It’ll be most interesting to compare their scores with ESG ratings from firms like Sustainalytics and MSCI. It seems the ratings will be available soon.
Fitch Ratings launches ESG Relevance Scores, staff, January 8, 2019, Institutional Asset Manager, UK.


Putting Faith In Investing. “Whether it′s public or private, pooled fund or individual portfolio, investors seemingly are opting to trade more and more on faith. For faith-based advisors, things should be looking up.”

[COMMENTARY] This article is a good overview of current faith-based investing from a US standpoint. I’ve known the writer, Tom Kostigen, for many years.
Putting Faith In Investing, by Tom Kostigen, January 2, 2019, Financial Advisor, USA.

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