PODCAST: Water and Veggie Investing, Cruise Line Greenwashing

Transcript & Links August 2, 2019

Hello, Ron Robins here. Welcome to my podcast Ethical & Sustainable Investing News to Profit By! for August 2, 2019 – presented by Investing for the Soul. investingforthesoul.com is your site for vital global ethical and sustainable investing information and resources.

If you hear any terms in this podcast that are unfamiliar to you, just Google them.

Also, you can find a full transcript, live links and often bonus material to these podcasts at their editions’ podcast page located at investingforthesoul.com/podcasts

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Now many sustainable investors are getting excited about investing in water — that is companies and funds engaged with water in some way.

Writing in the New York Times in an article titled, As Fresh Water Grows Scarcer, It Could Become a Good Investment, Tim Gray says, and I quote, “The prospect of shortages in the years ahead could make water a precious commodity… The United Nations Environment Program has predicted that half the globe’s population could face severe water stress by 2030. Annual expenditures of $200 billion, up from a historical average of about $40 billion to $45 billion, are needed now to keep spigots running, the U.N. said in a 2016 report.” End quote.

In his article, Mr. Gray discusses several leading funds in this sector. The first is the AllianzGI Global Water Fund (AWTAX: Nasdaq) which is an actively managed fund that holds companies – and quoting the article – “[that provide] products or services to help overcome water scarcity and remedy infrastructure shortcomings… Created in 2008, the AllianzGI fund returned an annual average of 9.83 percent over the 10 years that ended in June, compared with 5.37 percent for its average Morningstar peer.” End quote.

The second fund he writes about is the Calvert Global Water Fund (FWAX: Nasdaq), which is a passively managed index fund that, and I quote, “[is] divided into four subgroups — utilities, infrastructure outfits, technology providers and efficient users like Taiwan Semiconductor… The fund returned an annual average of 8.56 percent over the 10 years that ended in June.” Close quote.

The third series of funds are under the umbrella of Invesco. They have three ETFs: Invesco Water Resources ETF (PHO: Nasdaq) which holds US companies, and for global holdings Invesco Global Water ETF (PIO: American Stock Exchange). Both are based on Nasdaq indexes.

The third fund is the S&P Global Water Index ETF (CGW: NYSE Arca). The Water Resources and Global Water funds, and quoting the article, “[have] ‘more focus on companies developing technology around delivering clean water,’ while the S&P index fund leans more toward utilities, which make up about half of its assets, said J. Jason Bloom, senior director of Global Macro E.T.F. Strategy at Invesco… The S&P Global Water Index fund returned an annual average of 11.05 percent for the decade that ended in June.” Close quote.

Mr. Gray mentions two funds other funds First Trust Water ETF (FIW: NYSE Arca) and the Tortoise Global Water ESG Fund (TBLU: BATS Stock Exchange).

Points to consider when investing in water include the possibility of regulatory controls and ethical considerations regarding its pricing – especially for poor people. So, though water investing looks attractive, you need to weigh your own ethical values.

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Continuing the water investment theme – and this being vacation time for many – some listeners might be thinking about cruise lines as an investment. Well, as far as cruise lines go, Tim Nash writing for Corporate Knights throws cold water on two of the leading global cruise line companies.

Mr. Nash’s article is titled, Tim Nash’s Sustainable Stock Showdown: Can plastic pledges save troubled cruise lines? In it he reviews Carnival Corporation (CCL: NYSE) and Royal Caribbean Cruises (RCL: NYSE).

Mr. Nash writes that Carnival was in the news recently as it pledged to end the use of all single-use plastics by 2021 and that this came a month after the company was fined $20 million for dumping overboard plastic waste near the Bahamas and prior to that was forced to pay a $40 million fine for illegally dumping oil. So, is Carnival becoming environmentally conscious or is this new gesture just a token event? One wonders…

Concerning Royal Caribbean, Mr. Nash comments that and I quote, “Royal Caribbean has a dashboard of environmental goals for 2020 such as emissions reductions, sustainable sourcing and destination stewardship, but it doesn’t disclose targets or indicators.” End quote. My perspective is that without targets and authoritative independent review of them it’s just greenwashing.

In conclusion, Mr. Nash says, quoting him, that, “The reality is both of these companies have leaky sustainability strategies, which could end up costing investors. Carnival Corporation has somewhat better transparency in its reporting but with a high carbon intensity, a poor CEO-to-worker pay ratio and a low tax responsibility, I wouldn’t blame sustainable investors for jumping ship.” End quote.

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Most cruise lines are noted for the terrific meals; however, I wonder if any of them are yet offering the Beyond Meat burger! Its stock has been on a tear. It’s been one of the most amazing IPOs in history with its recent stock price over $200 – over eight times its IPO price of May 2! Presently though, it’s run into some headwinds as company insiders and executives plan to sell stock in a significant secondary stock issue. Some additional treasury stock will be sold too.

Again, the conclusion drawn from Beyond Meat’s success is the massive interest in meat alternatives which correspond, generally, to the significant rise in veganism and vegetarianism globally. This trend and investments related to it could become a core holding for ethical and sustainable investors.

Among the global food companies best positioned for plant-based food product sales are Unilever (ULVR: London Stock Exchange) and Nestlé (NESN: Swiss Stock Exchange) this according to UK-based FAIRR, a US$5.3tn-backed investor coalition, says Andy Coyne in an article titled, Unilever, Nestle among best prepared for plant-based future.

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Many of you no doubt visit the Morningstar site for investment and sustainability information. You’ll be happy to know that Morningstar is improving its sustainability rankings.

Quoting from an article titled, Morningstar Updates Sustainability Ratings, Gabriel Presler writes on their UK site, that, “The goal is to provide investors with a greater understanding of how the companies in their portfolios are managing their environmental, social, and governance (ESG) impact compared to their peers. This rating change will allow investors to directly compare companies across industries.” End quote.

A criticism of mine has long been the need to be able to compare sustainable investing, ESG attributes, etc., across companies in the same or similar industries. So, this change is truly welcome.

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Two other quick bits of potentially useful information.

For Canadian ethical and sustainable investors, Canada’s revamped Responsible Investing Association website offers some terrific new resources. For instance, not only is it easy to find Canadian licensed responsible investing advisors, but investors can find Canadian mutual funds, ETFs, etc., that reflect their values by using the site’s new questionnaire feature. Simply go to https://www.riacanada.ca/ri-marketplace/

The second item is yet another warning about the proceeds of green bonds not going where you think they should be going.

In a Financial Times article, titled, Clearer metrics are needed to assess green bond authenticity, Joshua Kendall, a senior ESG analyst at Insight Investment, writes that “Imagine lending money to a company to invest in green projects – and that group then using the proceeds to pay off other debt. That money has no discernible environmental impact and there is nothing you can do: it is all in the contract… Only a third of green bonds issued in the past three years met our three-stage criteria for sustainable issuance. This leads us to question the ‘green bond’ label and, more generally, it could undermine the authenticity of dedicated green bond funds.” Close quote.

The conclusion? Before investing in green bonds or green bond funds be very clear about what they’re investing in really does meet with your expectations!

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So, these are my top recent news stories and tips for ethical and sustainable investors.

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Now, a big thank you for listening.

Come again! My next podcast is August 16. So, bye for now.

© 2019 Ron Robins, Investing for the Soul.