Amazon dissed as a sustainable investment compared to eBay. Livent, Brookfield Asset Management, and Sunpower, as renewable stock investments suggested by analysts. US Vegan Climate Exchange Traded ETF appears to finally arrive. Not what it seems though. ESG overlay for corporate bonds enhances portfolio performance says J P Morgan study. Unique ESG Factor ETF. More
PODCAST: Amazon vs. eBay, First Vegan Fund, and more…
Transcript & Links August 16, 2019
Hello, Ron Robins here. Welcome to my podcast Ethical & Sustainable Investing News to Profit By! for August 16, 2019—presented by Investing for the Soul. investingforthesoul.com is your site for vital global ethical and sustainable investing news, commentary, information, and resources.
Investment ideas in these podcasts are generally gleaned from market participants in the US, Canadian, UK, European, Asian and Australasian investment markets.
And, Google any terms that are unfamiliar to you.
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.
Now to this podcast!
Tim Nash at Corporate Knights has another insightful Sustainable Stock Showdown. This time comparing Amazon (AMZN.OQ) vs. eBay (EBAY.OQ)! He begins his analysis with the following critical statement, saying that, “Amazon may be primed for growth but amidst worker protests, climate concerns and military links, is eBay a better bet?” End quote. Additionally, Mr. Nash writes about Amazon’s poor sustainability record.
You probably know that Amazon is a top holding in many ESG and sustainable funds. But should it be, given the previously mentioned issues! Do you feel comfortable investing in Amazon when it is heavily criticized on such issues?
Writing about some of these concerns Mr. Nash says, again quoting him that, “A petition with 270,000 signatures was delivered to Amazon CEO Jeff Bezos calling for better worker rights and for the company to cut ties with U.S. Immigration and Customs Enforcement (ICE), the federal agency responsible for rounding up and deporting undocumented immigrants. Although these protests didn’t amount to much action, they certainly shone a light on Amazon’s many problems.” End quote.
By contrast, on eBay, Mr. Nash writes that, and I quote, “eBay is the next largest online retail company and is a much better performer when it comes to sustainability metrics. With a focus on selling pre-owned products, about 16% of eBay’s revenues are estimated as green…eBay publishes a detailed Impact Progress Report that charts its progress on sustainability goals such as growth of sellers in ‘less-advantaged communities’ and a 50% absolute reduction in Scope 1 and 2 greenhouse gas emissions by 2025.” Close quote.
In summary, Mr. Nash concludes, that, “Sustainable investors will want to consider the financial trade-offs involved in walking away from a stock with Amazonian growth, but they’ll sleep better at night owning eBay and knowing its carbon footprint won’t swallow the planet at the click of a button.” Close quote.
Next item is about a unique new ESG ETF called the IQS ESG Global Equity Multi-Factor UCITS ETF – now that’s a mouthful! We have this information from an article titled, Invesco launches multi-factor ETF with strict ESG criteria written by Gary Buxton in IFA Magazine.
Talking about his new ESG ETF, fund manager Gary Buxton, Head of EMEA ETFs at Invesco, says, ‘Three of the biggest trends we have seen over the past decade are growing demand for multi-factor strategies, ESG investments and ETFs more generally. Proven expertise in all these areas has enabled us to respond to investor demand by delivering a multi-factor solution that adheres to strict ESG criteria and has all the benefits you would expect from our ETF structure.’” End quote.
Additionally, Mr. Buxton says, again quoting him, that, “Eligible stocks are screened for compliance with the fund’s ESG Criteria, and then scored based on their attractiveness with respect to three investment factors: Quality, Value and Momentum.” End quote.
Most ESG ETFs simply hold a group of stocks screened for only their ESG characteristics according to that ETFs objective – such as only renewable energy stocks, for instance. Whereas a multi-factor approach also includes further screens that might include the stocks perceived quality, value – say its relatively low price-earnings ratio, and momentum, that is the rate of acceleration of a stock’s price or volume of trading.
Anyhow, it’s a unique approach and it’ll be interesting to see how well it works.
Now, The Motley Fool ran a story that I thought I’d like to pass on. The story title is 3 Top Renewable Energy Stocks to Buy Right Now. There are three contributors, and each recommends one stock.
The first contributor is Rich Smith who favours, Livent (LTHM.N), which is a major lithium producer. Though he admits the immediate future might be difficult for the company, he looks beyond that, saying, and I quote, “If you believe, as I do, that lithium is a sine qua non for storing energy generated from renewable sources like wind and solar, it makes sense to believe that Livent – one of the top three players in lithium – will outlive its present difficulties, and become much more profitable as time goes by.” End quote.
The second recommendation comes from John Bromels who likes Brookfield Asset Management (BAMa.TO). This is a Canadian asset manager that holds a diverse group of renewable power assets. Mr. Bromels says, and I quote, that, “About 75% of Brookfield’s assets are in good-old, reliable hydroelectric power, which helps the company generate steady cash flow and pay a hefty distribution that currently yields 5.6%… [An] MLP ownership isn’t for everyone, but if you’re looking to add a renewable energy company to your portfolio, Brookfield Renewable Partners is about as solid a bet as you’ll find in this sector.” End quote. Now on this editions podcast page, I have a link to a good article describing MLPs for US investors. (See understanding MLPs.)
Finally, Travis Hoium suggests Sunpower (SPWR.OQ). Mr. Hoium likes Sunpower because he says, “Not only are high-efficiency solar panels improving in cost-effectiveness, SunPower is adding energy storage to more projects. One-third of its commercial solar power systems now include energy storage, and the company says it will introduce a residential solar solution later this year. These new products combined with improving market conditions in the residential solar industry may make SunPower one of the biggest winners in energy in 2019.” End quote.
So, check them out and see what you think.
For a few podcasts now, I’ve been writing about investments relating to veganism or vegetarianism. Well, finally it appears that the first vegan-friendly ETF called the US Vegan Climate Exchange Traded ETF (VGN ETF) is planned for listing on the NYSE on September 10. However, I would deem it quite controversial – even for vegans – as it’s not what it might appear.
Garry White in The Telegraph newspaper in the UK writes that “The fund is not currently investing in vegan food producers, but aims to avoid companies whose activities directly contribute to animal exploitation or environmental damage… Its largest holdings will include companies such as Microsoft, Apple, Facebook and Mastercard. This means the ETF will look pretty similar to other, lower-cost alternatives… although Facebook is included in the vegan ETF because it meets its criteria, the company’s shares were thrown out of the S&P ESG Index in June because of weak oversight in the sale of its user data to advertisers.” End quote.
So, see what I mean about it not being what ethical and sustainable investors might infer from its title!
Garry White’s article is titled, Is vegan investing a marketing fad or a real investment trend? It’s a good read for anyone interested in the rapidly growing market of plant-based food investing.
Another useful write-up on the Vegan Climate Fund can be found under the title, World’s First Vegan-Friendly Fund Opens for Trading, appearing on the VegWorld Magazine website.
And, further insight can be found in this post Ethical Stock Investment To Launch On New York Stock Exchange by Liam Gilliver writing in Plant Based News.
Incidentally, Beyond Meat Inc. (BYND.O) (Nasdaq) was still trading at multiples of its initial public offering price as of compiling this podcast. However, given current market dynamics and the history of stocks that go ballistic, it wouldn’t be surprising to see its share price retreat somewhat in the near future.
Now for some wonderful news concerning ESG corporate bonds. For the first time, a study finds that adding ESG criterion to selecting corporate bonds boosts outcomes for investors.
In an article titled, ESG overlay ‘boosts outcomes for corporate bond investors’: report, Susanna Rust, in IPE, writes that “[JP Morgan Asset Management] found that ESG scores could enhance portfolio outcomes via lower drawdowns, reduced portfolio volatility and, in some cases, marginally increased risk-adjusted returns. Although its study showed that using ESG scores improved gross portfolio returns for all categories of corporate bonds, this only held true for investment grade corporate debt once transaction costs were accounted for.” Close quote.
These are important new findings by JP Morgan. It had been found that screening sovereign bonds using ESG criteria provided better risk-adjusted returns – but corporate issues hadn’t been explored much.
Of course, though I trust JP Morgan to do excellent research, I’d really like to see this, and similar investment industry research, published in appropriate peer-reviewed journals. That would help ensure such research can be relied upon and is not just some investment firm ‘pushing a product.’
So, these are my top news stories and tips for ethical and sustainable investors over the past two weeks.
Again, to get all the links or to read the transcript of this podcast and sometimes get additional information too, please go to investingforthesoul.com/podcasts and scroll down for this edition.
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Come again! And my next podcast is scheduled for August 30. See you then. Bye for now.
© 2019 Ron Robins, Investing for the Soul.