New S&P ESG 500 products will promote sustainable investing and offer needed diversification for most ethical investors. Sustainable assets leap 34% to $30.7 trillion in 2 years globally. Green bond awards help ethical and sustainable investors find green fixed income products. Ethical investors avoid Lyft IPO and suspicious of social media companies with regulatory issues.
Transcript & Links April 12, 2019
Hello, Ron Robins here. Welcome to my podcast Ethical & Sustainable Investing News to Profit By! Presented by Investing for the Soul, April 12, 2019.
Now again, if any terms are unfamiliar to you, simply Google them!
Also, you can find a full transcript, live links and sometimes bonus material at my podcast page located at investingforthesoul.com/podcasts
Now for the exciting news to profit by for ethical and sustainable investors!
The first item I want to talk about is that with all the news concerning Facebook and Google regarding the regulatory pressures they’re facing around the world, it means that somehow, investors have to take into account the potential for severe disruption in their business models and possible negative impacts on their profitability and stock prices. So this post, titled, A regulatory lens when assessing ESG risks, by Sudhir Roc-Sennet, of Vontobel Asset Management, writing in Investment Europe, is truly pertinent.
Sudhir says that and I quote, “Internally we look at sustainability through an ESG-R lens, which includes regulation alongside environmental, social and governance factors. Many of our investment companies have held leading industry positions and, as a result, regulation is one of the greatest risks they face.” Close quote.
You might be aware that your ESG portfolio is probably top heavy with tech and social media companies. So, a review of your holdings in light of regulatory risk might be warranted. Financial stocks too are often overweighted in our ESG portfolios. So, come the next recession – which two-thirds of American economists predict in the next two years – financial stocks could again become the subject of significant regulatory and financial risk. So be careful about overweighting in sectors that have potential regulatory risks.
This next piece of news excites me. It’s title, S&P unveils ESG version of ‘iconic’ 500 index, by Chris Sloley at CityWire Selector.
I quote, “S&P Dow Jones Indices has launched an ESG-centric version of its long-running S&P 500 index as part of plans to launch a wider family of responsibility-focused indices… The index has been developed to serve not only as a performance tracking tool but also as a building block for creating new ESG index-based investment products such as ETFs.” Close quote.
This is exciting news for ethical and sustainable investors. The S&P 500 index and financial products based on it, are among the most popular financial products to have ever been conceived. RobecoSAM will be creating the index. They also are responsible for the FTSE4Good index. I believe many large financial institutions and pension funds have been awaiting this development to make even greater investments in ESG related investment vehicles.
For yourself as well, financial products arising from this could help resolve the problem I just mentioned. That is, not being overly invested in one market segment such as tech or social media. An S&P 500 ESG product will likely be quite diversified.
However, I do say that though the components of this new index will be screened for ESG characteristics – you will inevitably be investing in some industries you don’t like. Thus, if this is a concern for you, take my quick and easy DIY Ethical-Sustainable Investing Pays Tutorial to learn how to create a diversified portfolio that truly reflects your values.
Now the following is information that many of you will want to know about! What are the best green bonds around! Environmental Finance in London assembled a team of 24 top green bond experts to come up with the…
Winners of Environmental Finance Bond Awards for 2019. These awards aren’t about which green bonds made investors the most money, but, rather, included characteristics such as quality, innovativeness, best practices, etc. Nonetheless, if you’re wanting to invest in, or add to your present green bond holdings, you might find some ideas among the winning green bonds here.
Don’t forget, go to my podcast page at investingforthesoul.com/podcasts and go to this show date for links I’m mentioning today.
Speaking about investing with your personal values, I know many ethical and sustainable investors wouldn’t touch oil fracking stocks. And a lot of it is because of the environmental costs posed by fracking. Unfortunately, as a Canadian report makes clear on David Suzuki’s site – the famed Canadian biologist-environmentalist – the impacts of fracking are still largely unknown and it’s the next generation who’ll feel these impacts! See the post, As fracking booms, report finds we know little about impacts.
Now some great news about the growth of sustainable investing. There are two posts I want to talk about. The first, Global Sustainable Investments Rise 34 Percent to $30.7 Trillion, by Emily Chasan, Bloomberg, and the second Greenwashing purge sees sustainable funds lose share in Europe, by Siobhan Riding, of the Financial Times.
Both stories reveal data from the same Global Sustainable Investment Alliance study released on April 1. On the one hand, we see a massive and continuing rise in sustainable investing globally. That’s terrific!
However, on the other hand, in Europe, the actual rise in sustainable investment assets has been slower than the growth of the whole market. Now, Europe has for many years been the leader in sustainable assets under management, so it’s not a surprise to see it slowing down there. Here’s a quote from the latter article on this point, quote, “Holdings in sustainable funds made up 49 per cent of professionally managed assets in Europe at the start of 2018, compared with 53 per cent in 2016.” Close quote. So, why is it going down, again, quoting the same article, it says, “Sustainable investment funds have lost market share in Europe as a clampdown on greenwashing forces asset managers to reduce their assets in such strategies.” Close quote. And I say that’s a good thing!
Hey, were you excited by Lyft’s IPO on March 29?
Numerous ethical and sustainable investors weren’t. Why, because early evidence is that they’re putting more cars on the road and pulling people off public transit! Thus, adding to congestion. Also, people are tending to use these services instead of biking or walking. In short, Uber and Lyft seem to be adding to congestion, pollution, and a less healthy lifestyle. Furthermore, they are presently losing money on a grand scale. Annually, Lyft at around $900 million and Uber around $1.8 billion with little prospect of any profits from either of them soon! Lyft’s IPO stock price on March 29 was $72 and as of the time of recording this post, is in the $60 range.
For a good read on them go to Environmental investors are calling Uber and Lyft’s bluff when it comes to going green, by Ross Kerber & Heather Somerville of Reuters.
Now, many of you listening to this podcast in the US have retirement savings accounts through your employer known as 401(k)s. But I bet you’ve wondered why there aren’t ethical/ESG options? Well, a recent survey by Natixis found that though, I quote, “61% of workers would increase their retirement savings if they could put their money in socially conscious investments… just 13% of workers have access to those kinds of impact investments.” End quote.
There appear to be several reasons why employers are reluctant to offer ethical/ESG investments in US 401(k) plans. Chief among them, according to the Natixis survey, is that employers don’t feel it’s right for them to “impose their morals on their employees’ investment choices.” Personally, I think that answer is absurd since they’re also offering many other options too, which when considered, are also ‘moral choices!’ In fact, I’d argue that every investment has a moral component!
The second principal reason is due to the US Department of Labor making it clear that ESG couldn’t be used as the main criteria for selecting investments. This, of course, reflects President’s Trump’s campaign to promote old and dirty industries – which usually score low on ESG measures.
If you are in a situation where your employer isn’t offering the type of 401(k) investments you want to chat with your fellow employees, see how they feel too. If they’re with you, then go to your employer and make it known to them what you want in your investments. You might be surprised that they probably agree with you and just might take the actions necessary to get those ethical/ESG investment options you want!
The information on this 401(k) situation is gleaned from an article titled, Workers want those hard-to-find socially responsible investments in their 401(k) plans: Survey, by Lorie Konish of CNBC.
In my podcast of March 15, I discussed how some new ETFs were focusing on gender issues because more women in management seem to improve corporate financial performance. However, it seems that some of these funds don’t seriously advocate for women when it comes to stockholder resolutions concerning equal pay and pay equity disclosure, for instance. And that is rather odd.
Therefore, if you invest in these funds and care about these issues, read the data gathered by Morningstar in the post Investing with equal pay in mind may be more difficult than you think, by Lorie Konish at CNBC.
So, there we have it for this podcast!
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© 2019 Ron Robins, Investing for the Soul. All rights reserved.