Sustainable, Responsible, Impact & ESG Investing
Bloomberg Briefs l Sustainable Finance
- This week's Bloomberg Brief highlights how evidence is mounting that green bonds can outperform conventional ones; Reinsurers are bearing the brunt of hurricane season; and Reginald Stanley, CEO of ImpactUs Marketplace, discusses breaking down barriers in impact investing.
Expanding Our Outreach to Increase Mission-Aligned Investing Dollars l Rockefeller Brothers Fund
- The Rockefeller Brothers Fund is proud to join other institutions re-imagining ways of better deploying their investment assets, not only to create financial returns but also to generate measurable social impact. The Fund has been an active partner with several like-minded organizations, supporting the advancement of mission aligned investing, including Confluence Philanthropy, The ImPact, and Divest-Invest Philanthropy. We are pleased now to further our outreach by joining the newly expanded U.S. Impact Investing Alliance, as well as to partner with Mission Investors Exchange as a member of its inaugural class of sustaining members. RBF President Stephen Heintz and Vice President for Finance and Operations Geraldine Watson are participants on the Alliance’s Presidents’ Council on Impact Investing, which comprises the CEOs and senior staff of 20 of the largest U.S. foundations with a combined $60 billion in endowed assets which are deeply committed to practicing and promoting impact investing.
ESG ETFs: Too Young…Too Small…Too Expensive? l Barron's
'Our Responsibility for the Long Game': An Excerpt from ‘The Clean Money Revolution’ l Sustainable BrandsFossil Fuel Divestment
- Sustainable investing remains on the rise in the ETF universe. In a report out today, Morningstar’s John Hale noted that the number of diversified equity offerings that use environmental, social, and corporate governance issues when making investment decisions has jumped from 20 to 30 over the past year. As of July, assets under management totaled more than $3 billion. But Hale notes that sustainable investing ETFs do face several challenges that could give investors pause, outlined in this article.
- As responsible investing becomes a more widespread investment practice, it may continue to face criticism from skeptics. In response to this, proponents must work harder to show that an ESG-integrated approach is a financially competitive strategy and that the pursuit of both financial and social impact are not at odds with one another. Furthermore, they must continue to work towards propagating standards that allow for a company’s ESG impact to be assessed with greater clarity and cohesion. These objectives are very achievable, and there is good reason to believe that the momentum behind responsible investing shall only continue to grow.
- ESG research and ratings continue to gain momentum among mainstream asset owners and managers. The big investment research and index providers, such as Morningstar and S&P, have taken stakes in ESG companies or acquired them outright. More investors, both individual and institutional, demand that their investments achieve both financial and ethical returns. To cater to this increasing demand, managers are touting the fact that ESG and other sustainability criteria are, at the very least, considered in the investment process. But solely relying on ESG data and ratings is incomplete. Investors that have used ESG long before it became a buzzword in the investment industry know that ESG analysis is a complement to — not a substitute for — fundamental analysis. ESG is a discipline rooted in the fact that making an investment decision is about more than analyzing numbers; it is about understanding how non-financial factors hinder or help company performance.
- We see a growing number of institutional investors seeking to avoid financial risks associated with environmental, social and governance (ESG) factors, or even to enhance returns by investing in companies that have strong ESG track records. As we wrote in an earlier blog post, these investors are typically looking to limit the number of companies excluded from their portfolios, both to avoid sacrificing diversification and to be active owners able to engage with corporate management. The challenge raises several questions. How can a rules-based index represent the performance of a strategy with these goals? And how does construction of such an index affect its performance? Which is more important in driving performance — excluding companies with low ESG scores or picking those with strong ESG characteristics? Using the MSCI ACWI ESG Universal Index as an illustration, we find that it was possible to strike a balance between maintaining a large, diversified universe of companies with strong ESG characteristics while excluding only those companies that allegedly are the worst corporate wrongdoers.
- The US SIF Foundation's Center for Sustainable Investment Education has launched an updated version of its online course, the Fundamentals of Sustainable and Impact Investment. This course provides financial advisors and other financial professionals with a unique blend of instruction and scenario learning that explains how to talk about sustainable, responsible and impact investing (SRI) with clients, incorporate SRI into investment portfolios and understand the latest trends and research. Now through the end of September, the course will be offered at a promotional rate of $100 for US SIF members and $150 for non-members by following the prompts at www.ussif.org/courses.
- Vanguard Chairman and Chief Executive Bill McNabb has joined the board of the CEO Force for Good (CECP), the US corporate sustainability project. McNabb, whose company has $4.5trn in assets and which has been upping its game in terms of climate change and governance recently, will also serve as co-chair of the organization’s new Strategic Investor Initiative (SII). The CECP – which was founded in 1999 by Hollywood legend Paul Newman — is in the process of appointing McNabb’s co-chair to help lead SII. CECP is a CEO-led coalition that “believes that a company’s social strategy – how it engages with key stakeholders including employees, communities, investors, and customers – determines company success”.
- UBS soon plans to push further into sustainable investing with a series of indexes that can be used to create ETFs and other investment products for retail investors, annuities and retirement funds. The indexes will include a global sustainability index and indexes aligned with the UN’s Sustainable Development Goals, like eliminating hunger. The global bank, which has more than $1 trillion in assets invested in sustainable strategies — a third of global assets under management — plans to amplify the impact of the indexes by channeling a yet-to-be-determined percentage of revenues that they generate to the Optimus Foundation, UBS’s philanthropy arm, according to Michael Nelskyla, head of investor solutions Americas, UBS Investment Bank.
General Higher Education Sustainability & Investment News
When Greenies Go to Business School l Sierra Club
- In recent decades, businesses have come to wield more power than ever before—the income of many multinational corporations now exceeds that of several countries. According to the Governance and Accountability Research Institute, 81 percent of Fortune 500 companies published a corporate sustainability report in 2015 (up from 20 percent in 2011). These reports track company progress on environmental performance—such as energy, water usage, and greenhouse gas emissions—and social performance—including workforce and supply chain working conditions, and workforce diversity. As business management styles have evolved, so too, naturally, has business management education. Pioneered by Harvard University in 1908, the Masters in Business Administration (MBA) degree is designed to prepare graduates for senior business management roles. But now, focused MBA offerings are teaching students how to take into consideration multiple stakeholders. Such programs, often referred to as “Green MBAs” or “Sustainable MBAs,” address the triple bottom line of sustainability in their curriculum. This article profiles a few leading MBA programs and how their graduates are making a difference and making a living.
- Rice University currently has no mechanism for leveraging its endowment's investment to influence corporate policy, but the Student Association will vote at its Tuesday meeting on a resolution calling to change that. The resolution expresses SA support for the creation of a Committee on Investor Responsibility, through which Rice would vote on shareholder resolutions for the companies it invests in. The Rice Management Company, which could not be reached for comment at the time of publication, decides where to invest the endowment, which provides for about 40 percent of the university’s operating cost. But they have neither the time nor the resources to monitor shareholder votes and decide how to act on them, according to Taylor Morin, author of the CIR bill and Brown College senator.
Climate Risk, Science & Regulation
- In this Joel Solomon excerpt, he discusses how we need a financial plan for achieving a safe world in the next thirty years. This period will be crucial as social and ecological externalities come home to roost. We need a rapid reinvention of capitalism, finance, and wealth management. We need to rethink power and purpose. Otherwise, this revolutionary moment where “the 20 percent could consciously shift trillions of dollars” will be replaced with “global meltdown, all bets are off, retreat to your bunkers, hope the military can protect you.”
Another Large Equity Fund Sharpens its Focus on Climate Risk Disclosures l The National Law Review
- This week, The Vanguard Group, the Nation’s second largest fund group with over $4 trillion in assets under management, issued three publications — a press release, an open letter by Vanguard’s CEO, and its 2017 Investment Stewardship Annual Report — highlighting Vanguard’s evolving view that responsible disclosure and management of climate risk is an essential governance responsibility for corporate boards and managements to drive long-term shareholder value. With these announcements Vanguard has joined the Nation’s first and third largest funds groups, BlackRock and State Street, that previously announced policies demanding greater boardroom attention to climate risks.
Trump Picks Climate Change Denier to Lead NASA l Inside Higher Ed
- President Trump on Saturday said he would nominate U.S. Representative James Bridenstine to become administrator of the National Aeronautics and Space Administration. NASA is an important agency for academic science, both for the research it sponsors and for the data and information collected by NASA missions, about space as well as the Earth. The nomination is already setting off a controversy because it breaks with a tradition (in Democratic and Republican administrations) of nominating NASA administrators who have extensive experience in the agency, advanced degrees in science or both. (See biographies of recent NASA leaders here, here, here and here.) Bridenstine's status as a politician and not a scientist is already attracting bipartisan criticism.
- The transition from a fossil fuel-based energy mix to one that is renewable is not going to happen overnight, said the head of DBS Bank’s sustainability council this week. The bank’s exposure to oil and gas projects amounts to US$17 billion.
- After various protests and a highly publicized sit-in last semester, Fossil Free Penn is gearing up for another year of advocating for environmental justice at Penn.Last semester, the group continued with its three-year effort to urge Penn to divest from fossil fuels, but saw little success. The group staged a multi-day sit-in at College Hall in March, which ended with roughly 130 students amassing on the final day of the protest.Sixty-nine students signed a form stating that they had stayed at the venue after the building had closed and approximately 13 of them were cited by the Office of Student Conduct.
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