Top 1000 Funds: Standards and expectations have moved quickly on ESG and sustainability reporting over the past four years, and the Hong Kong Exchange (HKEx) through its “Consultation Paper on Review of the ESG Reporting Guide and Related Listing Rules” has made an attempt to participate in this evolutionary process. This paper is an update to the exchange’s previous 2015 ESG guide, and while this step seems outwardly positive, we don’t believe it warrants an epaulette on HKEx’s shoulders?
Reuters: Top mutual fund manager Vanguard Group Inc will ask companies about the gender, age and race of their directors, adding pressure on U.S. companies to diversify their leadership.
Think Advisor: A puzzlingly common misconception in the investing world holds that investments that take into account environmental, social and governance considerations entail a certain trade-off: doing good for people/communities versus turning a profit.
Funds Europe: Global index provider MSCI has warned that plastic could become a stranded asset amid the shift toward electric vehicles and international efforts to cut down on fossil fuel emissions.
Investment Executive: The group, which includes 50 organizations representing over US$2.9 trillion in assets under management, said that the Equator Principles (EPs) — a voluntary, global environmental and social risk management framework — doesn’t provide an adequate mechanism for avoiding reputational, financial and litigation risks involving Indigenous rights when banks finance controversial projects, such as pipelines.
Mondo Visione: In its history, humanity produced 7.8 billion tonnes of plastic until 2015, roughly one tonne per person alive today. After its usage, plastic partly gets “revived” as a PET bottle or even in a T-Shirt. While this process remains the best-case scenario, large amounts of plastic are flushed into the ocean where it may become eaten by aquatic animals, eventually ending up in humans’ stomachs.
IPE: Sweden’s third state pension buffer fund, AP3, has announced new sustainability targets in its interim report. The fund pledged to double its investments in sustainability and green bonds by 2025, and also to halve its carbon footprint within the same timeframe.
Citywire: Fires in the Amazon came to the fore last week and continue to generate attention after the Brazilian government rejected the G7's offer of $22 million aid.
Financial Times: Investment managers within the environmental, social and governance sector are looking to gain an edge by using artificial intelligence, a computer-driven discipline already employed by some of the world’s most successful hedge funds.
Mistra, the Swedish foundation for strategic environmental research, seeks to promote the development of research for a good living environment and sustainable development. Every year, the foundation invests around US$ 20 million in research initiatives from both the public and the private sector. To fund its grants, MISTRA manages an endowment of about US$ 335 million as at June 30th, 2019.
In its asset management activities, Mistra has the ambition of being a model for other asset owners wishing to further sustainable development. As such, the research foundation only invests for the long term in securities whose issuers' operations relate to the UN SDGs, operate in accordance to the Paris Agreement, do not violate international conventions signed by Sweden, and seek to boost their positive and minimize their negative impacts. All of their assets are managed by external managers which are annually assessed. Furthermore, Mistra has joined investor initiatives such as the Montreal Pledge, the UN PRI, and Climate Action 100+ among others.
Norm and Sector-based Screening in 2018
GreenBiz: For public companies, it’s critical to engage investors on ESG performance with effective communication and storytelling around their sustainability initiatives. And with so many high-profile companies going public this year, including Levi’s, Beyond Meat, Lyft, Uber, Airbnb and The We Company, it’s a good time to ask the question: does ESG also matter for companies looking to go public?
Bloomberg: Managers overseeing trillions in exchange-traded funds have been quietly meeting around Wall Street this week to check the quality controls on their funds, rattled after Vanguard Group Inc. mistakenly added shares of 11 companies, including a gun manufacturer and a private prison operator, to its $578 million socially responsible ETF.
Investment Europe: NN Investment Partners (NN IP) has strengthened its Responsible Investing (RI) framework to include a stringent definition of ESG integration which sharpens focus and increases positive results for investors.
Eco-Business: Banks in the 10 countries comprising the Association of Southeast Asian Nations (Asean) are not responding fast enough to threats posed by climate catastrophe and environmental degradation, risking financial instability and social unrest in the region, a new assessment by non-governmental organisation (NGO) World Wildlife Fund (WWF) has found.
Investor Ideas: Users of commodities increasingly demand greater oversight and understanding of the supply chain, to ensure the commodities they use (e.g. agricultural commodities, energy and precious/non-precious metals) accord with some definition of sustainability. This demand will impact not only commodity spot markets, but potentially the corresponding derivative markets.
IPE: Two leaders of Norway’s domestically focused sovereign wealth fund have called for more work into the effects of environmental, social and corporate governance (ESG) factors in fixed income management.
Fund Selector Asia: In Western markets, ESG investing is largely spearheaded by institutional investors. But in some Asian markets the driving force has been the regulator, according to Robert Mumford, Hong Kong-based portfolio manager for emerging markets at Gam Investments.
Investment Executive: As women remain vastly underrepresented in corporate leadership, gender diversity has rightly become a major issue for responsible investors. The latest data from the Canadian Securities Administrators (CSA) show that women hold only 15% of board seats and 4% of CEO positions at publicly traded companies in Canada.
Top 1000 Funds: As You Sow, which has worked for more than a decade with activist investors to promote waste reduction and increase recycling of many types of waste, is working with a growing group of 40 investors to educate and engage companies and other investors about risks posed by plastic pollution.
Ethos, the Swiss Foundation for Sustainable Development, was founded in 1997 to promote Socially Responsible Investments as well as a stable and prosperous socio-economic environments. It is composed of more than 200 Swiss pension funds. To achieve its objectives, the Foundation created Ethos Services to offer asset management and advisory services. Ethos had US$ 1.43 billion of assets under management as at December 31st, 2018.
Ethos' approach to socially responsible investments applies a sector-based exclusion criteria (weapons, nuclear energy, tobacco, gambling, adult entertainment, coal and GMO agrochemical activities) and exclusions based on major controversies related to human rights violations or serious harm to the environment. Furthermore, Ethos prioritizes companies and debt issuers with above average ESG assessments and lower carbon intensity. Finally, the organization systematically exercises its shareholding voting rights and seeks to engage in dialogues with companies, notably through collaborative initiatives such as Climate Action 100+.
Socially Responsible Investment Principles
Pensions & Investments: Double- and even triple-digit growth in the amount of U.S. institutional assets in ESG investments shows no sign of slowing down, and public pension funds are leading the way.
Responsible Investor: Climate and food systems are inextricably linked. The way we produce, process, distribute, eat, and dispose of food contributes to climate change, and climate change affects the future sustainability, security, and equity of the food system.
Opalesque: How much sense does it make for a hedge fund to apply ESG criteria in its investments? It does make a lot of sense on two main counts: pressure from asset owners, and positive performance over the long term. Then there's also a moral imperative.
IPE: The debate over climate change is certainly heating up – both metaphorically and literally. Record temperatures were reported across the globe last month and the UK’s Met Office stated that the top 10 warmest years on record in the UK have all occurred since 2002.
Thailand4: In collaboration with 15 commercial banks, the Bank of Thailand will establish guidelines for responsible lending as part of their sustainable business operation. Thai banks are encouraged to lend based on environmental, social and governance (ESG) criteria which will serve as protection against adverse consequences, and thus ease potential problems.
The Asset: Supported by a strong second quarter in 2019, the global green bond market looks set to achieve another milestone as it is predicted to surpass US$200 billion in total issuance for the year.
Financial Times: A private prison operator, a gun manufacturer and Rupert Murdoch’s media groups are among a number of stocks that have been thrown out of Vanguard funds created to invest in companies with strong environmental, social and governance records.
Top 1000 Funds: Pædagogernes Pension is in the process of consolidating and reducing the number of managers in its listed equity portfolio. The decision at the fund which has around 10 large, focused equity mandates is linked to an ambition to reduce the number of companies in the portfolio in the belief that fewer companies in the 42 per cent equity allocation which is all actively managed allows greater ESG oversight.
The Asset: Fitch Ratings has launched what it described as a heat map on environmental, social and governance (ESG) risks covering 51 different industry sectors for corporate issuers to provide further insight on the relevance of ESG factors to credit ratings.
The McKnight Foundation was established in 1953 by William L. McKnight, ex-CEO of 3M. Today, the family foundation seeks to enhance the quality of life for present and future generations in the Minnesota area and beyond. In 2013, the McKnight foundation decided to invest in impact strategies and mission related investments, in addition to its grant-making program. As of Q4 2018, the foundation was investing a third of its $2.3 billion endowment in strategies aligned with its values.
The McKnight foundation's impact investing strategy requires alignment with three of the grant-making program's goals: transition to a low carbon economy, reducing agricultural pollution in the Mississippi River, and contributing to a thriving and sustainable Minnesota. Their investment portfolio is composed of a High-Impact Investments portfolio which includes program-related investments, direct private debt and equity deals, and an aligned investment portfolio which is invested in public equities and bonds.
IPE: The €2bn pension fund of Dutch financial regulator De Nederlandsche Bank (DNB) plans to fine-tune its policy on responsible investment, aiming for an investment portfolio with a 30% outperformance on ESG.
The Phnom Penh Post: Financial institutions in Cambodia are joining in efforts to strengthen sustainable and responsible finance, according to Oxfam in Cambodia. The goal is to achieve the UN Sustainable Development Goals (SDGs) and inclusive economic development.
Bloomberg: KKR & Co. exceeded the $1 billion fundraising goal for its first Global Impact Fund, according to a person with knowledge of the matter.
Investment Europe: A study by Witold J. Henisz and James McGlinch of the University of Pennsylvania's Wharton School, published in the spring issue of Applied Corporate Finance, has suggested a connection between ESG performance and credit risk.
Bloomberg: Earlier this year, one of Meryam Omi’s deputies at Legal & General Investment Management sat down with board members and managers from Exxon Mobil Corp. to discuss how the oil giant could address climate change. LGIM, which manages about $1.3 trillion, is one of Exxon’s top 20 shareholders.
Institutional Investor: Limited partners are increasingly putting pressure on alternatives managers to improve the diversity of their firms. But recent hiring for marketing and fundraising roles, at least, suggests that these firms still have a long way to go.
Top 1000 Funds: For more than 50 years, intensively reared animals have been the main source of protein for consumers worldwide, and a major ingredient for multi-billion-dollar brands like Burger King, McDonald’s and KFC.
Reuters: Asset managers are increasingly making sustainable investment decisions that reflect their own corporate values and those of their investors, but are still under pressure to deliver competitive returns as the market continues to develop and implement environmentally friendly principles.
Investment News: If the evolving language inside mutual fund prospectuses is a guide, financial advisers should brace for an expanding selection of funds focused on environmental, social and corporate governance issues.
The Ford Foundation was established in 1936 by Edsel Ford, son of the founder of the Ford Motor Company. Since its formation, the organization has been seeking to reduce poverty and injustice, strengthen democratic values, promote international cooperation, and advance human achievement through Grant-making, Program-Related Investments and Mission-Related Investments. Today, the Ford Foundation manages a $12 billion endowment.
To further contribute to its mission, the Ford Foundation has been seeking to promote Impact Investing through their grant-making program. For example, the Ford Foundation helps the U.S. Impact Investing Alliance raise awareness of impact investing in the United States and foster deployment of impact capital. Furthermore, in 2017, the Ford Foundation announced it is committing $ 1 Billion of its endowment to Mission-Related Investments by 2027. This process will be gradual, carving out funds from its current investment portfolio. The Foundation established a Mission-Related Investment Committee to assist the Board of Trustees in this process.
Top 1000 Funds: On June 18, 2019 the EU expert group for sustainable finance (TEG) published a proposal for a European definition of environmentally sustainable activities. The taxonomy is best compared to a green encyclopedia for financial market participants.
The Guardian: BlackRock, the world’s biggest investor, has lost an estimated $90bn over the last decade by ignoring the serious financial risk of investing in fossil fuel companies, according to economists.
City University of London: Impact investing is a specific approach of “investing for the common good” alongside ethical investing, sustainable investing, socially responsible investing (SRI), and environmental, social and governance (ESG) investing.
World Bank Blogs: The rising importance of environment, social and governance (ESG) factors in infrastructure investment decisions isn’t new. Our 2019 Global Infrastructure Investor Survey of institutional infrastructure investors with the EDHEC Infrastructure Institute showed that around 36 percent of institutional investors now consider ESG to be a “first order question, possibly at the expense of performance.”
Businesswire: The Low Income Investment Fund (LIIF) just completed its inaugural public debt offering with a $100 million Sustainability Bond issuance, drawing significant interest from leading institutional investors. The offering was ten times oversubscribed, allowing LIIF to obtain attractive pricing, demonstrating the growing demand for quality investments that support social and environmental impact.
The Asset: Interest in environmental, social, and governance (ESG) investing among Asian real estate investors is fast catching up with the level of interest in the US and Europe as a result of increasing awareness and level of knowledge.
Bloomberg: The world’s second-largest beef supplier is tapping the market for bonds aimed at protecting the environment as meat companies face growing criticism for contributing to climate change.
Trade Arabia: The launch of this set of 31 key performance indicators (KPIs) is aligned with ADX strategy which is designed to support economic growth, while providing a sustainable trading environment and encouraging the business community to adopt societal sustainability practices, said a statement from ADX.
Brink News: Wednesday July 10th marked the first ever congressional hearing on environmental, social and governance (ESG) issues in the United States. Entitled Building a Sustainable and Competitive Economy: An Examination of Proposals to Improve Environmental, Social and Governance Disclosures, the hearing was held by the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets.