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Shareholder Values

 
"Forty-five percent of U.S. households prefer an environmental, social and governance (ESG) approach to investing… Among those between the ages of 30 and 39, this increases to 64%, and for those younger than 30, it is 67%."
-- Cerulli Associates
 
 (USA)
    October 2018

"The vast majority of Canadian investors are interested in responsible investments (RI) that incorporate environmental, social and governance (ESG) issues, and they would be more likely to choose responsible investments if their financial advisor suggested suitable RI options for them."
-- Responsible
    Investment
    Association (RIA)
 
  (Canada)
    June 2017

"70% of people [in UK] want to invest ethically but the financial services industry is failing to respond." Referencing research by Abundance.
-- Acquisition
    International
   
(UK) June 2015

 

Events

 

Global Ethical Investing News & Commentary

Commentaries by Ron Robins  E-mail us your feedback

Links may only be valid for a limited time   August 19, 2019

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Fitch Ratings ESG heat map shows relevance to credit ratings. "The ESG heat map covers 51 different industry sectors and displays which individual entities are being impacted by the ESG topic identified within the sector.

The heat map includes an infographic and a downloadable Excel table, which lets users toggle between different relevance thresholds to see whether an ESG topic is relevant to an individual issuer, or whether it applies more generally as a trend affecting many issuers in a given sector."

[COMMENTARY] A great idea that helps investors determine what issues and the severity of them apply to different industries. The infographic is clear but it seems you have to register to get the Excel data.
Fitch Ratings ESG heat map shows relevance to credit ratings, by Hazel Bradford, August 8, 2019, Pensions & Investments, USA.

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Hedge funds to increase ESG-linked investments, survey finds. "Fifty-eight percent of hedge fund assets will be tied to ESG criteria in 2020, up from 42 percent last year and the current 52 percent, BarclayHedge finds in a survey of global hedge fund managers and commodity trading advisers."

[COMMENTARY] Taken at face value this survey data is astonishing. Can it really be that most hedge fund assets are managed according to ESG criteria?
Hedge funds to increase ESG-linked investments, survey finds, by Andrew Holt, August 9, 2019, Corporate Secretary, USA.

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ESG overlay 'boosts outcomes for corporate bond investors': report. "[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."

[COMMENTARY] 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 yet.

Of course, what I'd really like to see is this and similar investment industry research published in appropriate peer-reviewed journals. This to ensure such research can be relied upon and not an investment firm 'pushing a product.'
ESG overlay 'boosts outcomes for corporate bond investors': report, by Susanna Rust, August 5, 2019, IPE, UK.

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10% of EM equity in 'severe risk' territory on ESG, research claims. "According to an 'ESG spotlight' report from Sustainalytics, which compared the FTSE Emerging and Developed indices on ESG criteria, there are a wide array of 'unmanaged risks' in the developing world."

[COMMENTARY] Although most of us would intuitively believe the above headline, it's good to see the data that Sustainalytics has digested to arrive at its conclusion.
10% of EM equity in 'severe risk' territory on ESG, research claims, by Chris Sloley, August 7, 2019, Citywire Selector, UK.

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Is ethical investing doomed? "If we look at fewer stocks we can do so in greater depth and so have a better chance of spotting winners. And we’ve less chance of missing good stocks simply because our attention is elsewhere. If so, the thinking which tells us to expect constrained funds to underperform is plain wrong. Constraints can actually help."

[COMMENTARY] The title is provocative, yet, as the quote implies, ethical investing can outperform. And it is generally outperforming as the writer acknowledges. The article is a good read.
Is ethical investing doomed? By Chris Dillow, August 5, 2019, Investors Chronicle, UK.

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PRI launches consultation into ESG and active ownership in passive investing. "The report [How can a passive investor be a responsible investor?] explains because passives track an index, divestment is largely not an option for investors if engagement fails or standards fall below a certain level."

[COMMENTARY] A discussion long needed is brought to the fore by the PRI! It's true that many of the ESG indices the ESG funds are based on do their own periodic reviews. But there are other questions too as this article discusses and hence the concern of the PRI.
PRI launches consultation into ESG and active ownership in passive investing by Tom Eckett, August 5, 2019, ETF Stream, UK.

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How The S&P Dow Jones 500 ESG Index Is Changing Corporate Behavior. "In the sustainable investment world, the launch of the S&P 500 ESG Index in April was a major event and a serious indication that investor demand for ESG products is too big to ignore. Early this summer, I interviewed Mona Naqvi, senior director, ESG Indices at S&P Dow Jones Indices, about the launch and the future plans for S&P Dow Jones ESG Indices."

[COMMENTARY] The revelations in this article as to why and how S&P created the S&P 500 ESG Index are revealing.
How The S&P Dow Jones 500 ESG Index Is Changing Corporate Behavior, by Paul Ellis, August 5, 2019, Financial Advisor Magazine, USA.

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The Best [mostly UK-based] Performing ESG Funds - and the Worst. "Ethical investing has become very trendy in recent years, being the perfect combination for investors to put morals and profits on the same page. "

[COMMENTARY] This is a good review of ESG funds by Morningstar UK.
The Best [mostly UK-based] Performing ESG Funds - and the Worst, by Annalisa Esposito, August 5, 2019, Morningstar, UK.

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Hundreds of conventional funds add 'ESG' to prospectus just in case. "According to Morningstar, the prospectuses of more than 100 'conventional funds' have added ESG criteria since the start of the year, nearly doubling the total number of non-ESG fund prospectuses that now sport such language."

[COMMENTARY] This is a clear indication that ESG credentials are positive for fund sales. Our 'fight' for ESG and sustainability becoming institutionalized in the investment industry seems almost over.
Hundreds of conventional funds add 'ESG' to prospectus just in case, by Jeff Benjamin, August 1, 2019, Investment News, USA.

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Good news for Canadian ethical and sustainable investors--the new RI Marketplace. "The RI Marketplace makes it easy to find responsible investment products, services, and advice."

[COMMENTARY] Wonderful new site where -- among many options -- investors can find Canadian mutual funds, ETFs, etc., that reflect their values.
RI Marketplace, July 25, 2019, Responsible Investment Association, Canada.

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Demand for green bonds crimped by lack of supply. "Issuance of green bonds is much exceeded by demand for them. And investors' growing expectations over how issuers should invest the proceeds has discouraged some companies from issuing green bonds."

[COMMENTARY] The latter point in the above quote is important. It's also necessary that there' some form of external verification of use of proceeds to avoid greenwashing. This is a good article for ethical and sustainable investors to review.
Demand for green bonds crimped by lack of supply, by Paulina Pielichata, July 22, 2019, Pensions & Investments, USA.

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Study -- Foundations of ESG Investing: How ESG Affects Equity Valuation, Risk, and Performance. "The research suggests that changes in a company’s ESG characteristics may be a useful financial indicator. ESG ratings may also be suitable for integration into policy benchmarks and financial analyses."

[COMMENTARY] The study shows how certain ESG characteristics matter or don't matter with respect to financial performance.
Foundations of ESG Investing: How ESG Affects Equity Valuation, Risk, and Performance, by Guido Giese, Linda-Eling Lee, Dimitris Melas, Zoltán Nagy, and Laura Nishikawa, July 2019, The Journal of Portfolio Management, USA.

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ESG ETFs Are Beginning to Turn Heads. "According to Morningstar data, U.S. funds that consider ESG factors attracted a net $8.4 billion in net inflows over the first half of the year, the Wall Street Journal reports. The inflows over the first six months already beat out the previous annual record of $5.4 billion."

[COMMENTARY] It seems that finally, retail investors are buying ESG funds! Only time will tell if this is a blip or represents a serious positive change in investors attitudes.
ESG ETFs Are Beginning to Turn Heads, by Max Chen, July 13, 2019, ETF Trends, USA.

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US bonds present ESG problem. "Schroders global head of stewardship Jessica Ground told a media briefing in Sydney recently that US corporate bonds present challenges to responsible investors... Using the example of the opioid epidemic, Ground explained that some of the companies with the worst exposures to these issues were included in US corporate bonds."

[COMMENTARY] This is a perspective I hadn't seen before and does make sense for ethical investors.
US bonds present ESG problem, by Elizabeth Mcarthur, July 15, 2019, Financial Standard, Australia.

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Climate change lawsuits expand to at least 28 countries around the world. "Joana Setzer, research fellow at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science, and co-author of the report, said:

'Holding government and businesses to account for failing to combat climate change has become a global phenomenon.'"

[COMMENTARY] All investors, not just ethical and sustainable investors, will soon judge companies on their climate change impact and adaptation reports -- or lack thereof! No doubt it'll eventually be reflected in a company's stock price as well -- just as stranded assets are now likely negatively affecting the stock prices of fossil fuel companies.
Climate change lawsuits expand to at least 28 countries around the world, press release, July 4, 2019, London School of Economics, UK.

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European individual investors show growing SRI interest but little investment so far - BNPP AM research. "In particular, some 64% of the respondents expressed to be interested in investing part of their savings in SRI funds. Italy emerged as the country where individual investors had the highest interest in SRI (80%). Italy was followed by Germany (65%), Belgium (63%), France (57%) and the Netherlands (52%).

However, despite the survey indicated a 5% year-on-year increase in SRI appetite, it found that just between 5% to 7% had actually invested in this type of investment products."

[COMMENTARY] This data replicates findings in the US, Canada, and the UK. It's the institutions that are adopting ESG-ethical-sustainable investing and the general investing public is far behind, though there are promising signs that the retail investor is coming on board.
European individual investors show growing SRI interest but little investment so far - BNPP AM research, by Eugenia Jimenéz, July 5, 2019, Investment Europe, UK.

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U.K. Business, Politicians Back Environment-Risk Reporting Push. "U.K. businesses, accountants, and politicians broadly endorsed the government’s plan to require public companies to detail climate-related risks in their financial reports. But the accounting profession also said standard measurement practices for climate risks still need to be developed."

[COMMENTARY] Will such regulations include foreign companies operating in the UK? Or, those foreign companies interlisted on UK and non-UK stock exchanges? This could get most interesting if US fossil fuel companies are included! What will President Trump say?
U.K. Business, Politicians Back Environment-Risk Reporting Push, July 5, 2019, Bloomberg Tax, UK.

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Rating agencies ratchet up pressure on insurers over ESG risk. "Insurers face increasing pressure to address environmental, social and governance risk as Moody’s and other credit rating agencies warn of looming vulnerabilities for the sector. Earlier this week, Moody’s published a report that highlighted multiple ESG problems at insurers, and warned that some companies would struggle to meet their financial obligations without swift action."

[COMMENTARY] It seems inevitable that insurers would fall behind the curve on this. And that anyone invested in them needs to be very careful.
Rating agencies ratchet up pressure on insurers over ESG risk, by Billy Nauman, July 4, 2019, Financial Times, UK.

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Are ESG factors correlated with sovereign spreads? Yes and no... "Separate research from BlueBay Asset Management and Hermes Investment Management has shown that countries with the lowest ESG scores tend to have the widest credit spreads... governance was the best indicator of credit spreads, showing that lower governance scores had a positive correlation with a high credit spread. "

[COMMENTARY] Helpful research in understanding how ESG ratings affect sovereign debt spreads.
Are ESG factors correlated with sovereign spreads? Yes and no... by Sam Benstead, July 2, 2019, CityWire Selector, UK.

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How To Read The European Union's New Guidelines On Sustainable Investing. "Under the proposed taxonomy regulation, institutional investors marketing environmentally sustainable investment products would be required to explain whether, and how, they used the taxonomy criteria.

Alternatively, investors could disclose their own preferred approach to determine that their investment is environmentally sustainable. These proposed rules would apply to a range of products, from European mutual funds (UCITS funds) to alternative investment funds and from securitization funds to index funds."

[COMMENTARY] For fund managers engaged in the European markets these could be important rules that'll govern their activities in those markets.
How To Read The European Union's New Guidelines On Sustainable Investing, by Bhakti Mirchandani, June 20, 2019, Forbes, USA.

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How to Build Your Own ESG Portfolio. "By putting your savings in funds that assess how a company is addressing (or worsening) environmental, social, and governance, or ESG, factors, you hitch your investments to good corporate citizens, and may earn above-average returns. But turning the concept into a practical investment portfolio without compromising on investing mandates such as diversification and due diligence comes with a unique set of challenges."

[COMMENTARY] Some great points are made in this post but looking at their portfolio looks overly diversified. Also, no-doubt it'll include sectors that won't please many ethical and sustainable investors. I suggest those DIY investors first take my one-hour DIY Ethical-Sustainable Investing Pays Tutorial and then review what said in this article.
How to Build Your Own ESG Portfolio, by Karen Hube, June 21, 2019, Barron's, USA.

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ESG: green bonds have a chicken and egg problem. "Everyone wants to buy green bonds but many issuers, concerned about cost and complexity, don't want to sell them. Non-green issuers could be all too ready to fill the void."

[COMMENTARY] A comprehensive article on the subject. Worthwhile reading for all ethical and sustainable investors.
ESG: green bonds have a chicken and egg problem, by Louise Bowman, June 19, 2019, Euromoney, UK.

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Impact investing doesn't require sacrificing returns, GIIN survey shows. "More than 90% of impact investors -- those that seek to combine financial returns with positive social and environmental outcomes -- said their deals have met or exceeded their expected financial and impact performance so far, according to the 2019 survey of data and insights collected by the Global Impact Investing Network and released on Wednesday."

[COMMENTARY] Great news -- and will help power impact investing to new heights.
Impact investing doesn't require sacrificing returns, GIIN survey shows, by Luis Garcia, June 19, 2019, Private Equity News, UK.

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Pot Firms Seek to Transition From Sin Stocks to Ethical Darlings. "A group of 45 companies operating in the cannabis industry has crafted a set of standards that they hope could one day transform them from sin stocks into ESG darlings."

[COMMENTARY] This will be fascinating to watch! Can pot companies be sold as health producing ESG focused entities to institutional investors?
Pot Firms Seek to Transition From Sin Stocks to Ethical Darlings, Kristine Owram, June 18, 2019, Bloomberg, USA.

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Fund Managers Are More Moral Than You'd Think. "A new survey of ESG adoption rates, from UBS Group AG's asset management unit and Responsible Investor Research, covers more than 600 asset owners in 46 countries, responsible for more than 19 trillion euros ($21 trillion) of assets."

[COMMENTARY] The survey shows impressive numbers of asset managers incorporating ESG. Some say that the numbers in the US lag the rest of the world due to fiduciary regulations there that ESG can't be a major criterion for investing.
Fund Managers Are More Moral Than You'd Think, by Mark Gilbert, June 17, 2019, Bloomberg Opinion, USA.

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[UK] Savers favour ethical investments in pensions. "Seven in ten (72 per cent) defined contribution pension members want their scheme to include ethical investments in its default fund."

[COMMENTARY] They also asked if savers would still invest ethically if their returns were lower. 42% said yes. This question always annoys me as it suggests to the savers that ethical investing implies lower returns -- which is generally not the case of course.
Savers favour ethical investments in pensions, by Amy Austin, June 10, 2019, FT Advisor, UK.

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ESG integration delivers returns with lower volatility. "Integrating environmental, social and governance (ESG) factors into the investment process can significantly lower volatility without sacrificing the desired returns, leading to a better overall result for long-term investors such as insurers, said Pascal Zbinden, co-head of SAA & market at Swiss Re."

[COMMENTARY] Such findings have been found before, but it's great to see Swiss Re -- one of the world's biggest reinsurers and insurers -- come to this conclusion in their own ESG research.
ESG integration delivers returns with lower volatility, by Adam Leach, June 6, 2019, Insurance Asset Risk, UK.

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The 2019 proxy season: How investors are stepping up on ESG. "While 2018 was a record year for investor support of environmental and social shareholder proposals, 2019 promises to become the year environmental and social issues take center stage."

[COMMENTARY] At last ESG issues are not only coming to the fore but also getting real action.
The 2019 proxy season: How investors are stepping up on ESG, by Sara Dal Lago and Sara Dal Lago, June 3, 2019, GreenBiz, USA.

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Corporate Knights' 2019 list of Canada's best 50 and 50 best non-Canadian corporate citizens.

[COMMENTARY] Always a good list to review -- especially for Canadians. However, non-Canadians might find some useful investment ideas among the winners too.
Corporate Knights' 2019 list of Canada's best 50 corporate citizens and Top non-Canadian foreign corporate citizens of 2019, June 4, 2019, Corporate Knights, Canada.

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Britain aims high with launch of Impact Investing Institute. "The government-backed Impact Investing Institute will be steered by Elizabeth Corley, former chief executive and vice-chair at Allianz Global Investors, and Harvey McGrath, former chairman of Man Group, the alternative asset manager. 'We see an enormous opportunity to collect money and direct it to some of the biggest social challenges we have,' Ms Corley told the Financial Times."

[COMMENTARY] Governments are realizing that they might be able to employ significant private funds to advance public and social development. Expect to see such government- backed institutes in numerous countries in the years ahead.
Britain aims high with launch of Impact Investing Institute, by Jennifer Thompson, June 3, 2019, Financial Times, UK.

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Unintended Consequences of Investing According to Environmental, Social and Governance Principles. "The implementation of ESG criteria should be undertaken with care, however, as their use can have unintended consequences depending on the specific criteria that underlie an institution's approach to ESG investing.

For example, U.S. institutions and even non-U.S. institutions that have U.S. public clients (e.g., state pension funds) that are considering leveraging well-known ESG criteria used by European institutions should be aware of potential issues under U.S. federal and state antiboycott measures that penalize entities that refuse to transact with or invest in Israel and Israeli companies."

[COMMENTARY] This is a further elaboration of something I've previously discussed that for fiduciary reasons, particularly in the US, fiduciaries cannot simply make investment decisions based on SRI without possibly incurring legal problems. This article illustrates two cases where issues became problematic.
Unintended Consequences of Investing According to Environmental, Social and Governance Principles, by staff, June 3, 2019, Dechert LLP, USA.

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Disclaimer: This website does not make investment recommendations. Nothing in this site should be interpreted as a recommendation or solicitation to buy/sell any securities or investments. Investing for the Soul is a source of general information and resources for ethical investing and socially responsible investing (SRI). Investors should consider their actions thoroughly and consult their financial advisers and other professionals, prior to taking any investment action. This website does not necessarily agree with the opinions expressed in articles on its pages or offered on the web pages to which it might be linked. Such opinions are the responsibility of the writers themselves. Furthermore, this site does not offer or provide any warranties, representations, guarantees, implied or otherwise, as to the accuracy, legality, copyright compliance, timeliness or usefulness of the information, materials or services on this, or other sites, to which it is linked. Also, Mr. Ron Robins is not an investment advisor, nor is he licensed with any professional investment related body, and thus is not able to, nor does he make, any investment recommendations.

 

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