New IEN Members
ESG Factors and Risk-Adjusted Performance: A New Quantitative Model l Granito & Partners, September 2016
- Just published by the Journal of Sustainable Finance & Investment and available on Granito's website, the study relied on the Dow Jones Sustainability index to identify 157 companies that have good ESG performance. To contrast, and in order to bring statistical significance to the results, it randomly selected a greater number of companies — 809 — that are not listed on the DJSI. As the materiality of the ESG factors is highly related to the industry in which the firm operates, the study grouped equity stocks into 12 industries. In all 12 industries studied, the group of ESG companies listed in the DJSI, shows lower stock return volatility in comparison to the reference companies — on average by 28.67 percentage points less.
Better Business, Better World l Business and Sustainable Development Coalition
- Over the past 30 years, the world has seen huge social improvements and technological progress. We have experienced unprecedented economic growth and lifted hundreds of millions of people out of poverty. We’re benefiting from a life-changing digital revolution that could help solve our most pressing social and environmental challenges. Yet despite these successes, our current model of development is deeply flawed. This report offers a positive alternative: setting business strategy and transforming markets in line with the UN Sustainable Development Goals.
Climate Investing in 2017 l Cornerstone Capital Group
- The imperative for an effective response to climate change only grows following the hottest year on record. This commentary discusses the risks climate investing faces in 2017, particularly from the incoming US administration, and looks to nuanced opportunities that exist for positive environmental and social impact coupled with attractive potential returns.
Sustainable / ESG Investing
Bloomberg Brief l Sustainable Finance
- This week's Bloomberg Brief highlights how State Street Global Advisors, which oversees $2.47 trillion, is pressing companies to disclose much more about how they are preparing for the impact of climate change on their businesses, as well as Pimco betting it can turn the bond market onto sustainable investing; Sarona Asset Management raising a new fund-of-funds to invest in ESG vehicles; annual isurance of green bonds reaching a record $95.1 billion; and the opportunity that is arising from growing consumer demand for plant-based protein.
- In this Q&A, Erika Karp discusses what it takes, besides imagination, to operationalize a regenerative and inclusive form of capitalism.
- The Department of Labor issued an Interpretive Bulletin that reversed an Interpretive Bulletin from 2008 and it is good for some ESG investors. In 2017, we will see more shareholder activism related to issues such as the appropriateness of executive compensation, corporate governance reforms, and climate change. Fiduciaries may now consider voting on proxies introduced by activist shareholders or initiated by themselves, many of which will connect to environmental, social, and governance issues. Broadly, the Bulletin makes way for shareholder engagement on “non-financial measures of corporate performance.”
- A flurry of ESG fund announcements from major asset managers last week underscores the mainstreaming of responsible investment, including through its integration in asset classes beyond equities. US fixed-income investment manager PIMCO announced that it had launched an environmental, social, and governance (ESG) investment platform that aimed to offer “a range of fixed income solutions to investors seeking attractive returns while making a positive social impact”.
How Will ESG Investing Change Under Trump? l Think Advisor
- In this article, an Inside ETFs panel discusses whether ESG is out of step with government.
Archdiocese of Toronto Among Growing Number Making Move to Ethical Investing l The Catholic Register
- Beginning in 2015, the Archdiocese of Toronto instructed its investment managers to consider environmental, social and governance factors (ESG) before making investment decisions with its master trust fund worth $528 million. Canada’s largest and richest archdiocese has also joined the Shareholder Association for Research and Education — SHARE. The organization consists of more than 30 institutional investors across Canada with combined assets under management of more than $14 billion, including the United Church of Canada and Canadian Labour Congress.
- Seattle City Employees' Retirement System placed BlackRock (BLK), which runs a $339 million passive international equity portfolio for the pension fund, on watch, said Jason Malinowski, chief investment officer, in an email. The $2.3 billion pension fund put BlackRock on watch at its Dec. 8 board meeting due to concerns about what they term as BlackRock's “reticence to oppose management, limited focus on environmental and social issues, inconsistency between their proxy voting record with their policies and public pronouncements and limited transparency on investment stewardship activities.”
Impact Investing“Impact investing” Inches From Niche to Mainstream l The Economist
- In the past two years BlackRock, the world’s biggest asset manager, launched a new division called “Impact”; Goldman Sachs, an investment bank, acquired an impact-investment firm, Imprint Capital; and two American private-equity firms, Bain Capital and TPG, launched impact funds. The main driver of all this activity is investor demand. Deborah Winshel, boss of BlackRock Impact, points to the transfer of wealth to women and the young, whose investment goals, she says, transcend mere financial returns. Among institutions, sources of demand have moved beyond charitable foundations to hard-bitten pension funds and insurers.
- Mission investments are a proven tool that enables us to seize time-sensitive opportunities and grow promising innovations in ways we could not with grants alone. These investments help attract new sources of private capital to the issues we care about and recycle resources to make more dollars available over the long-term.This article focuses on the Packard Foundation and their three new approaches to make an impact on climate change over the next 5-10 years.
- Moody's Investors Service said that global green bond issuance will reach another record in 2017, and could even rise to $206 billion, following an increase of 120% to $93.4 billion in 2016, reflecting strong China-based issuances and momentum from the Paris Climate agreement.
- This article examines how the nation’s largest mutual fund companies voted on climate-related shareholder resolutions in 2015 and 2016. After reviewing results, it goes on to offer possible explanations for the way in which funds voted.
Climate Risk, Science & RegulationWill We Ever Stop Using Fossil Fuels? l MIT News
- In recent years, proponents of clean energy have taken heart in the falling prices of solar and wind power, hoping they will drive an energy revolution. But a new study co-authored by an MIT professor suggests otherwise: Technology-driven cost reductions in fossil fuels will lead us to continue using all the oil, gas, and coal we can, unless governments pass new taxes on carbon emissions. “If we don’t adopt new policies, we’re not going to be leaving fossil fuels in the ground,” says Christopher Knittel, an energy economist at the MIT Sloan School of Management. “We need both a policy like a carbon tax and to put more R&D money into renewables.”
- It’s challenging to predict how corporate interests might address climate change under a new Trump administration, and it’s important to acknowledge the broad diversity of those interests. However, there are signs that key segments of the businesses community may continue down the path toward reducing carbon emissions, notwithstanding strong winds in the opposite direction from the Trump administration.
- U.K. Prime Minister Theresa May plans to try to turn the nation’s early adoption of clean energy into a global business after Brexit, according to a new industrial-strategy paper. May has said she wants a “global Britain” to bolster the U.K.’s ties to other countries as the nation secedes from the European Union. The U.K. is a world leader in wind energy with more offshore wind power installed than any other country. That industry drew a record $29.9 billion of investment last year, up 40 percent from 2015.
General Endowment News
- Harvard University’s endowment fund, which is the largest in the world, is planning to lay off half of its staff and ask outside funds to run its investments. This article explores why Harvard and many of its endowment peers are making similar moves.
Fossil Fuel Divestment
- Responding to calls from students and faculty concerned about global warming, the Oregon State University Board of Trustees voted last week to dump the university’s investments in the fossil fuel industry. Specifically, the board amended the investment policy for the Public University Fund, which manages investment assets for six of Oregon’s seven public universities (the University of Oregon is not a participant). Under an agreement with the other member universities, OSU has authority to set investment policy for the group.
- This week, Divest Appalachian, a student organization, held a march and rally on Appalachian State University to request that the institution divest its fossil fuels investments in its Board of Trustees’ Endowment and Appalachian State University Foundation portfolios. About 50 people, primarily students, gathered on Sanford Mall and marched throughout the campus before ending the peaceful protest by delivering its request in a letter to administrators.
Bay State College and University Students Double Down on Divestment l Public News Service
- As President Trump's Cabinet nominees work their way through the confirmation process, local college students walked out of classes on Monday to protest their positions on key issues including climate change. Students at Boston University, Harvard, Northeastern, took part in walkouts and other actions as part of the nationwide divestment day of action.
- University of Denver trustees have rejected a student-led request to pull investments from oil, natural gas and coal companies from the private school’s $620 million endowment.Instead, the board and administration approved new initiatives to strengthen sustainability efforts at DU, including the creation of a $5 million “green fund” that will pay for solar panels, composting and other projects. Trustees also will begin requiring frequent reports regarding the university’s efforts to combat global warming, ranging from the food ordered by the dining hall to faculty research on alternatives to fossil fuel.
Investment Manager & Strategy News
- Northern Trust Asset Management, collaborating with GRESB, the global sustainability benchmark for real assets, has launched a unique sustainable real estate index. A Dutch-domiciled pooled fund passively managed to this new index has also been launched.The industry-first index is exclusively available to investors using Northern Trust Asset Management vehicles and has been developed in response to demand for a passive approach to real estate investing incorporating environment, social and governance (ESG) factors.
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