Why the Longest U.S. Bull Market Has Failed to Fix the Nation’s Public Pensions (WSJ)


Maine’s public pension fund earned double-digit returns in six of the past nine years. Yet the Maine Public Employees Retirement System is still $2.9 billion short of what it needs to afford all future benefits to all retirees.

There is a simple reason why pensions are in such rough shape: The amount owed to retirees is accelerating faster than assets on hand to pay those future obligations. Liabilities of major U.S. public pensions are up 64% since 2007 while assets are up 30%, according to the most recent data from Boston College’s Center for Retirement Research.

It’s National Financial Literacy Month, Take the Financial Literacy Test (FINRA)


See how you compare to the national and state averages.

The Bad

-49% of Americans don’t know what an index fund is

-44% can’t cover $400 out-of-pocket expense

-52% have no retirement savings

-Median household retirement acct bal is $2,500

-66% thought market was flat or down over past 10yrs

The Better

Those with greater financial literacy are more likely to save and plan for retirement, according to TIAA and the Global Financial Literacy Excellence Center at the George Washington University School of Business.

88% of those who answered between 76% and 100% of the questions on the Personal Finance Index (P-Fin Index) correctly save for retirement on a regular basis. By comparison, only 37% of those who answered less than 26% of the questions correctly regularly save for retirement.

86% of those in the first group have additional savings outside of their retirement plan, compared to 34% of the second group, and 63% of the first group usually track their spending, compared to 54% of the second group.

Furthermore, those with greater financial literacy are less likely to be financially fragile; 85% of the first group could come up with $2,000 if an unexpected need arose in the next month, compared to 25% of the second group.

Borrowing and debt management are the areas where knowledge is the highest, but comprehending risk is where it is the lowest.

“The P-Fin Index is the preeminent annual barometer of Americans’ personal finance knowledge,” says Stephanie Bell-Rose, head of the TIAA Institute. “Understanding the connection between financial literacy and financial wellness was a particular focus this year, to help us create a better roadmap for improving the financial well-being of Americans.”

On average, U.S. adults answered only 51% of the P-Fin Index questions correctly. The survey asked a total of 28 questions on the following topics: earnings, consuming, saving, investing, borrowing and managing debt, insuring, risk and where to find financial advice.


Six Trends in College and University Endowments (CFA Enterprising Investor)


What trends are influencing endowment investing in today’s market?

Among larger institutions, college endowments have been at the forefront of SRI and ESG investing…more than one in four colleges engages in some form of SRI. This could take the form of traditional negative screens or restrictions among faith-based organizations, ESG, shareholder activism, or impact investing. Parsing the data by assets, we find nearly 60% of these institutions apply some form of ESG criteria. 

Global Sustainable Investments Rise 34 Percent to $30.7 Trillion (Bloomberg)


Global socially responsible investments grew by 34 percent to $30.7 trillion over the past two years, lifted by Japanese pension funds, retail investors everywhere and broad, growing concern about climate change.

Money managers around the globe said clients were increasingly asking for sustainable strategies and that climate change became a leading issue for investors this year. Retail investors bought up more ethical funds, according to the report, and now account for about 25 percent of assets, up from 20 percent in 2016.

ESG investing in 401(k)s faces fiduciary, regulatory questions (BenefitsPro)


Sustainable investing is on a tear.

According to Morningstar research, sustainable investment funds, which the research firms defines as those that use environmental, social and corporate governances (ESG) criteria as measurements for scoring the societal impact of investing in a public company, saw record flows of $5.5 billion in 2018.

Last year marked the third consecutive year of record flows to ESG-premised mutual funds, which increased 50% to 351 offerings in 2018.

Painstaking Progress for Funds That Aim to Do Good (WSJ)


DWS Group Inc., the asset-management business of Deutsche Bank AG , recently raised $843 million in a single day for a new fund that tries to invest in the best corporate citizens in the U.S.

It was one of the most successful exchange-traded-fund debuts of all time, and especially noteworthy in the slow-growing corner of the market devoted to responsible investing.

For years, asset managers have been trumpeting a new dawn for strategies that deliver competitive returns along with a clear conscience. In the past year alone, firms including Vanguard Group, Goldman Sachs Group Inc. and BlackRock Inc.’s iShares have introduced more than a dozen ETFs that use environmental, social and governance scores to pick stocks and bonds.

But investors have been slow to buy into so-called ESG funds. The triumphant inaugural run of DWS Group’s Xtrackers MSCI USA ESG Leaders Equity ETF may signal a step change in investor participation.

CFA Institute Announces Position on ESG Integration


CFA Institute consistently monitors key debates and evolving issues concerning the role and application of environmental, social, and governance (ESG) information in the investment management process. More thorough consideration of ESG fac- tors by financial professionals can improve the fundamental analysis they undertake and ultimately the investment choices they make.

CFA Institute is specifically focused on the quality and comparability of the ESG information provided by corporate issuers and how to integrate various ESG factors into the investment selection process.

The positions below reflect the organizational views of CFA Institute and are intended to guide understanding of ESG.

Investors and their managers climb the steep ESG learning curve (FT)


“On the road from the City of Skepticism I had to pass through the Valley of Ambiguity,” said Adam Smith, founding father of modern economics. This sums up the current state of investing in the environmental, social and governance sphere. A survey last November by the Dutch Association of Investors for Sustainable Development, which covered 90 per cent of Dutch pension assets, shows that most investment managers see the UN-sponsored goals as an opportunity.

Despite this, two-thirds have no formal policy to pursue them and only a fifth have brought their activities into alignment. For the rest, a key obstacle is the lack of a robust template, with consistent definitions and reliable data, that permits statistical modelling. Additionally, establishing a line of sight between, say, climate change and investment outcomes remains a complex task and requires expertise that many Dutch pension plans have yet to acquire, despite their reputation as savvy investors.

The good news is that there are positive straws in the wind.

The Truth about Big Oil and Climate Change (Economist)


In America, the world’s largest economy and its second biggest polluter, climate change is becoming hard to ignore. Extreme weather has grown more frequent. In November wildfires scorched California; last week Chicago was colder than parts of Mars. Scientists are sounding the alarm more urgently and people have noticed—73% of Americans polled by Yale University late last year said that climate change is real. The left of the Democratic Party wants to put a “Green New Deal” at the heart of the election in 2020. As expectations shift, the private sector is showing signs of adapting. Last year around 20 coal mines shut. Fund managers are prodding firms to become greener. Warren Buffett, no sucker for fads, is staking $30bn on clean energy and Elon Musk plans to fill America’s highways with electric cars.

Yet amid the clamour is a single, jarring truth. Demand for oil is rising and the energy industry, in America and globally, is planning multi-trillion-dollar investments to satisfy it. No firm embodies this strategy better than ExxonMobil, the giant that rivals admire and green activists love to hate. As our briefing explains, it plans to pump 25% more oil and gas in 2025 than in 2017. If the rest of the industry pursues even modest growth, the consequence for the climate could be disastrous.

IOSCO Statement on Disclosure of ESG Matters by Issuers


The International Organization of Securities Commissions (IOSCO) is this month publishing a statement setting out the importance for issuers of considering the inclusion of environmental, social and governance (ESG) matters when disclosing information material to investors’ decisions.

The statement does not supersede existing laws, regulations, guidance or standards or relevant regulatory or supervisory frameworks in specific jurisdictions, or any IOSCO Principles.

I. Introduction

As underlined by IOSCO in its Objectives and Principles of Securities Regulation, securities regulation has three key objectives: protecting investors, ensuring that markets are fair, efficient, and transparent, and reducing systemic risk. IOSCO Principle 16 states that issuers should provide “full, accurate, and timely disclosure of financial results, risk, and other information which is material to investors’ decisions.” With regard to this Principle, IOSCO emphasizes that ESG matters, though sometimes characterized as non-financial, may have a material short-term and long-term impact on the business operations of the issuers as well as on risks and returns for investors and their investment and voting decisions.

II. Developments in the disclosure of ESG information

Disclosure of ESG information in the market has increased in recent years. Examples of ESG matters that issuers are disclosing include environmental factors related to sustainability and climate change, social factors including labor practices and diversity, and general governance- related factors that have a material impact on the issuer’s business.