IEN in the News
U.S. Impact Investing Alliance Launches to Scale the Practice of Impact Investing l U.S. Impact Investing Alliance
- The U.S. Impact Investing Alliance (“Alliance”) this week announced the launch of its expanded network of impact investing leaders dedicated to advancing this growing market. The Alliance was founded last year by representatives from philanthropy, business and finance to champion the potential of impact investing by increasing awareness of impact investing in the U.S., fostering deployment of and demand for impact capital across asset classes globally, and by partnering with policymakers and other stakeholders to build the impact investing ecosystem. The Alliance is also launching an Industry Advisory Council of leading impact investing network organizations. The Intentional Endowments Network is one of the organizations leading this Council.
- Michael T. Cappucci is Senior Vice President at Harvard Management Company. This post is based on a recent paper by Mr. Cappucci. If investment managers followed the old saying “whatever is worth doing is worth doing well,” then more would have best‐in‐class ESG programs. It used to be that asset owners could identify which investment managers “got” ESG investing principles simply by asking whether they had a written ESG policy. Today, most investment managers have something to say about ESG issues, and written ESG policies are becoming ubiquitous. Yet, as anyone who has ever looked at investment managers’ ESG policies can attest, the existence of a written document is not a reliable indicator of a firm’s commitment to or performance on sustainable long‐term goals.
- On July 13, 2017, PRI launched guidance on incorporating ESG provisions in private equity fund terms. The publication, Incorporating Responsible Investment Requirements into Private Equity Fund Terms (the Guidance), followed a year-long consultation period with PRI signatories, expert counsel, and industry associations. The Guidance aims to demystify the concept of ESG provisions, outline the terms of these provisions and work towards a consistent industry approach on this aspect of responsible investment. The Guidance identifies current and emerging best practices, as well as possible limitations. In particular, the Guidance offers practical solutions to LPs and GPs that are considering how they may integrate responsible investment into fund terms.
- We are looking for an enthusiastic candidate with 3-5 years work experience to join our small team to support FAIRR’s collaborative investor engagement work with global food companies. The role will provide support and coordination for FAIRR’s existing engagements and assist in the development of new work-streams. This is an exciting opportunity to join an innovative and growing organization with huge ambition.
- This role is an exciting opportunity for an enthusiastic senior communications professional to lead the global expansion of a fast-growing initiative that is reshaping the views of the investment risks and opportunities within both the global food system and the intensive livestock production sector. Experience of business/ financial communications and issues management will be essential as will previous experience international media activity. An interest in sustainable food or animal welfare issues is an advantage.
Endowment Sustainable Investing News
Loyola Marymount University Signs on to United Nations-Supported Principles for Responsible Investment l LMU News
- Reaffirming its commitment to social justice and environmental sustainability, Loyola Marymount University announced it has signed onto the United Nations-supported Principles for Responsible Investment. The action places LMU among just a handful of university signatories across the country, and more than 1,700 investors, financial firms, and other institutions, who have agreed to the global network’s guidelines for incorporating environmental, social, and governance factors into investment decisions.
Northland College Divests From Fossil Fuels l Northland College
- The Northland College Board of Trustees voted Friday to fully divest Northland College’s endowment funds from fossil fuels in the next five years. Approximately 2.9 percent of the College’s $28 million endowment—about $823,000—is currently invested in fossil fuels, according to the Carbon Underground 200, an annually updated global listing of the top 100 public coal, and the top 100 natural gas and oil companies. These investments will be replaced with more socially responsible investments with no new endowment funds invested in fossil fuel companies.
Sustainable, Responsible, Impact & ESG Investing
Bloomberg Brief l Sustainable Finance
- This week's Bloomberg Brief highlights how State Street Corp. followed through on its Fearless Girl pledge to vote against directors at companies that don’t have women on their boards; Snap and Blue Apron excluded from indexes for no-vote shares; Morningstar acquires 40 percent ownership stake in Sustainalytics; International Brotherhood of Teamsters gets a say-on-pay win at McKesson Corp.; and Darrin Williams, CEO of Southern Bancorp, sees growing Wall Street interest in community development financial institutions.
- Earlier this year, Reuters laid out the top 10 reasons Wealth Advisers and Managers are following investor demand to ESG. The next question: how do ESG, or environment, social, and governance investments, perform? When do these strategies work, and why? Here’s a look at the circumstances under which ESG-related investing works the best, across different asset classes such as stocks and bonds.
- Fund managers trying to woo younger investors are backing firms that do good in the world. Ethical funds are undergoing a major overhaul as asset managers try to work out what is important to the next generation of investors. Catherine Howarth, chief executive at Share Action, a charity which promotes responsible investment, says: ‘There is a generational shift taking place in investing. Ethical funds in the 1980s were focused on avoiding arms, pornography and tobacco, but millennials are more interested in labour rights and the environment. ‘Funds need to reflect the priorities of a new generation.’
- Donald Trump's election gave a sharp boost to demand for socially responsible investment funds, just as several large asset managers moved into the field. “The political climate has buttressed interest in sustainable investing in a way we would not have imagined prior to the election,” says Joe Keefe, president and CEO of Pax World Management, which launched the first socially responsible mutual fund in the U.S. in 1971, a year after the first Earth Day. It remains to be seen if the new money flowing into these funds can continue at the same pace.
- Short sellers are less active in companies that perform strongly on ESG factors as ESG ETFs attract record inflows. North American companies that rank in the top 10 per cent based on ESG ratings have 1.8 per cent shares on loan, less than half of that seen worldwide, IHS Markit analysis shows. Research analyst Simon Colvin says there are still plenty of short targets among firms ranked highly for ESG, but that this is likely company specific.
- The US withdrawal from the Paris Climate Agreement has initiated a debate about whether the reversal in US policy will halt momentum within the sustainable economy. Although undoubtedly a disappointing development and one that will impact a number of industries, we argue that it will not derail the structural shift to a low carbon world. In our view, there are four powerful factors that will continue to drive innovation and development: policy and regulatory pressure; investment flows; technology; and demographic trends.
- Passive managers are no longer treating stewardship responsibilities as a ‘box-ticking’ exercise, but are actively looking to influence investee companies and help improve environmental, social and governance (ESG) standards across the board. They vote and engage directly with firms on prominent issues such as executive pay, board diversity and climate change. As a result there has been a clear shift in recent years, primarily driven by large asset owners. Institutional investors are increasingly aware of the positive impact that ESG integration and active ownership practices can have on investment performance. Regulators have contributed further with the adoption of stewardship codes in several countries, including the UK, Switzerland and most recently Japan.
- During the past few years, data collection and monitoring of developed market companies have become significantly more prudent and accurate, while emerging market corporates have been left behind. In terms of ESG, emerging markets are suffering from a perception deficit compared with their developed market peers. The most obvious reasons they score poorly are limited data availability and lack of disclosure, resulting in artificially low ESG rankings.
- In this interview, Durreen Shahnaz, who set up Impact Investment Exchange (IIX), discusses impact investing and the recent $8 million Women’s Livelihood Bond.
- A recent survey of 320-plus institutional investors found broad support for ESG-related themes, with 80% of respondents stating that companies have not considered environmental and social issues as core to their business and that generating sustainable returns over time requires a sharper focus on ESG issues. Expect hedge funds and other activist investors to get in the ESG game as well as they look for new measures to improve corporate performance and rally support for campaigns. The bottom line is that the market is demanding more attention to these issues, primarily because shareholders believe they play an integral part in a company’s overall performance.
- Recently, the CEOs of the largest global asset management firms put portfolio company executives on notice that their current short-term focus can be a barrier to long-term growth. This isn’t just a philosophical discourse, the “Big 3” asset managers — Vanguard, BlackRock, and State Street — with combined assets under management of more than $11 trillion, mean business. They are encouraging publicly traded companies to adopt and regularly disclose long-term strategic plans and governance practices. This alignment and congruence among leading investment managers, and their leaders’ public communications in support of long-termism, is thought by many to be unprecedented. How should forward-looking CEOs and boards respond?
Investment Manager News
- If Morningstar wasn’t quite a member of the sustainable investment fraternity before, it definitely is now with its acquisition of a 40% stake in Sustainalytics. In fact, at a stroke the NASDAQ-listed household name positions itself at the heart of the sector and the deal consolidates the partnership between the two firms on ESG fund ratings. As RI has reported, the methodology for these ratings has caused alarm in the sustainable investment sector – but the inconvenient truth (for some) is that Morningstar has now demonstrated beyond any doubt that it is here for the long haul.
- The Inspire Corporate Bond Impact Equal Weight Index – consists of about “250 investment grade, intermediate term corporate bonds issued by some of the most inspiring large cap “blue chip” companies in the U.S., as determined by Inspire’s revolutionary Inspire Impact Score methodology.” The constituents of the fund are expected to leave a positive impact on the investment world, giving the portfolio a socially responsible angle. The index is equally weighted, rebalanced quarterly and calculated on a total return basis in U.S. dollars.
Thomson Reuters And S-Network Introduce ESG Best Practices Ratings & Indices-Rebranding And Methodology Changes To Existing Indices Reflect Market Evolution And Growth Of ESG Investing Strategies l MondovisioneThe Market Will Kill Oil Before the Government Does l BloombergToyota Eyes Mass EV Output in China as Early as 2019: Report l Reuters
- Responding to changes in the way Thomson Reuters collects ESG data and the growth of socially responsible investing (SRI), Thomson Reuters in partnership with global indices provider S-Network has announced changes to the methodology for the Thomson Reuters Corporate Responsibility Ratings and Indexes, which effective immediately have been rebranded Thomson Reuters/S-Network ESG Best Practices Ratings & Indices.
- The Danish pension fund PKA has acquired a taste for socially minded investments, and is now pushing for more investments to be made more available for investors. Among the investments is DKK 400 million focused on bank loans to women in third-world countries which Maj Invest is behind.
- An independent broker-dealer with roots dating back 52 years, Vanderbilt Financial Group is growing a new reputation for itself by committing to the socially responsible investing space. Its dedication to the investing strategy and a focus on prioritizing impact within the firm culture has helped it expand its adviser headcount at a time when many independent broker-dealers are exiting the business. Of the $3 billion in client assets, about $1.5 billion is in sustainable investing.
General Higher Education Sustainability & Endowment News
- The MIT Office of Sustainability (MITOS) has announced the recipients of the first-ever Campus Sustainability Incubator Fund, with $200,000 awarded between four multi-departmental projects, all of which use the MIT campus as a test bed for research in sustainable operations, management, and design. The four project teams are lead by Kripa Varanasi of the Department of Mechanical Engineering, Randy Kirchain and Jeremy Gregory of the Concrete Sustainability Hub, Lisa Anderson of the Department of Chemical Engineering, and Danielle Dahan of the Center for Energy and Environmental Policy Research.
- In a recent article for The Journal of Investment Consulting, John Mulvey and Margaret Holen look at the practice of asset allocation among large U.S. university endowments. They focus on asset category definitions in the hope of throwing some light on “the movement to define asset categories with reference to their target performance or underlying return drivers rather than traditional investment vehicle-types.” In the introduction to their paper, Mulvey and Holen observe that college and university endowments have led the way ahead of other institutions in the move into hedge funds and private equity funds. In 2000, the average endowment portfolio was 23% in alternative assets; in 2014, the corresponding number was 51%. Among endowments with more than $1 billion in assets under management, that number was 57%.
- Policy makers and experts often hotly debate the reasons behind rising college costs. New research indicates that state disinvestment in higher education may be at least partly to blame. For every $1,000 in funding per student that states cut from public universities, students paid about $257 more a year on average between 1987 and the present, according to a forthcoming study in the journal, Economics of Education Review. But students attending college more recently are even more likely to shoulder a larger burden of cuts to state funding. Before 2000, students paid about $103 more a year on average for every $1,000 per student cut by states. After 2000 that number increased to about $318 more a year, the study found.
Climate Risk, Science and Regulation
- European governments are making a big splash, pledging an assault on traditional cars to help clean up polluted air in cities. The latest strike came Wednesday in the U.K., which says it will ban the sale of diesel- and gasoline-powered cars by 2040. Those plans might not be quite as ambitious as they first seem. Consumers, automakers, and even some oil companies are already preparing for a battery-powered future.The U.K. government’s plan to tackle record levels of air pollution was announced two weeks after French President Emmanuel Macron announced a similar plan to cut smog and become a carbon neutral nation.
Just How Far Can California Possibly Go on Climate? l New York Times
- Over the past decade, California has passed a sweeping set of climate laws to test a contentious theory: that it’s possible to cut greenhouse gas emissions far beyond what any other state has done and still enjoy robust economic growth. Now that theory faces its biggest test yet. Last August, the State Legislature set a goal of slashing emissions more than 40 percent below today’s levels by 2030, a far deeper cut than President Barack Obama proposed for the entire United States and deeper than most other countries have contemplated.
- The weather has always been an unpredictable element of agriculture, but climate change is expected to make matters significantly worse. Determining how much worse has historically been a challenge. A new study, however, says climate-induced drought could hit several of the world's major corn producing regions all at once. The Met Office, the U.K.'s national weather service, used a novel approach to determine the probability of severe water stress in three major corn-producing regions that are responsible for 40 percent of global production . Instead of relying on observed historical data—which the researchers found to seriously underestimate the impact of climate change—the new study used a model focusing on water stress. The authors noted the limitations of the study, including its reliance on a single climate model, and they advise researchers to utilize multiple models in the future.
- Toyota Motor Corp is likely to begin mass production of electric vehicles (EVs) in China as early as 2019, the Asahi daily reported on Saturday. The model will be based on the C-HR sport utility vehicle and manufactured for Chinese market only, the report said without citing sources. The pace of production is to be decided after taking into account the regulations and the subsidies, the report said, adding that annual output could start with more than several thousand units.
- The U.K. became the latest European country to mark the end of the line for diesel and gasoline fueled cars as automakers such as Volvo race to build electric vehicles or face the consequences of getting left behind. In London, the government said it will ban sales of the vehicles by 2040, two weeks after France announced a similar plan to reduce air pollution and become a carbon-neutral nation. For some in the auto industry, the plans are too much too soon while environmental campaigners say exactly the opposite.
University of Virginia, Dominion Energy and Coronal Energy Announce Ambitious Solar Energy Project l UVA Today
- The University of Virginia continues to expand its portfolio of carbon-free power-generation sources and achieve key sustainability targets with another partnership announced today with Dominion Energy. Under a 25-year agreement, the University will purchase the entire output of a proposed 120-acre solar facility in Middlesex County. The solar facility, developed by Coronal Energy, will be constructed and owned by Dominion Energy. It will produce an estimated 15 megawatts of alternating current, or about 9 percent of the University’s electric demand.
Fossil Fuel Divestment
Signs are the Climate is Right for Divesting From the Fossil Fuel Industry (Opinion) l Business Day
- According to this article, divestment is the right thing to do and, given the accelerating renewable energy revolution and regulation of greenhouse gases, the smart thing to do.The author argues it’s time to tell your financial services provider and company pension fund trustees you no longer want to be invested in destroying your future.
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