Author: Christopher K. Merker, Ph.D., CFA

Christopher K. Merker, PhD, CFA, is a director with Private Asset Management at Robert W. Baird & Co. He holds a PhD in investment governance and fiduciary effectiveness from Marquette University, where he has taught the course “Sustainable Finance” since 2009. Executive director of Fund Governance Analytics (FGA), an ESG research partnership with Marquette University, he is a member of the CFA Institute ESG Working Group, an international committee currently exploring ESG standards, publishes the blog, Sustainable Finance, which covers current topics around governance and sustainability in investing, and is co-author of the book, The Trustee Governance Guide: The Five Imperatives of 21st Century Investing.
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SEC’s Lee looks to boards’ role in ESG (IR Magazine)

Commissioner eyes diversity and expertise to make the most of opportunities

Boards are central to companies addressing ESG issues and should look to enhanced diversity and expertise to fulfill this role in a positive way, according to SEC member Allison Herren Lee.

Lee explained that despite some progress, evidence suggests directors have been slow to understand the need to integrate climate and other ESG issues into governance practices. She cited a 2019 report as finding that only 6 percent of US director respondents picked climate change as a focus for the coming year and that 56 percent thought investor attention on sustainability issues was overblown.

‘The world’s largest asset managers and other institutional investors have been direct and vocal in conveying that they consider ESG material to their decision-making,’ Lee said in a speech earlier this week to the Society for Corporate Governance. ‘No matter the view of regulatory involvement in climate and ESG disclosures, directors must reckon with this growing consensus and growing demand from the shareholders who elect them.’

https://www.irmagazine.com/esg/secs-lee-looks-boards-role-esg

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IPCC steps up warning on climate tipping points (Guardian)

https://www.theguardian.com/environment/2021/jun/23/climate-change-dangerous-thresholds-un-report

Climate scientists are increasingly concerned that global heating will trigger tipping points in Earth’s natural systems, which will lead to widespread and possibly irrevocable disaster, unless action is taken urgently.

The impacts are likely to be much closer than most people realise, a a draft report from the world’s leading climate scientists suggests, and will fundamentally reshape life in the coming decades even if greenhouse gas emissions are brought under some control.

The Intergovernmental Panel on Climate Change is preparing a landmark report to be published in stages this summer and next year. Most of the report will not be published in time for consideration by policymakers at Cop26, the UN climate talks taking place in November in Glasgow.

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Here Are America’s Top Methane Emitters. Some Will Surprise You. (NYT)

This article demonstrates the urgency to expand a regime of disclosure beyond public companies. In the absence of such measures, we are in effect “pushing the problem around” instead of addressing it.

Oil and gas giants are selling off their most-polluting operations to small private companies. Most manage to escape public scrutiny.

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Johan Rockström: ‘We need bankers as well as activists… we have 10 years to cut emissions by half’ (The Guardian)

The eminent Earth scientist argues that we cannot just wait for the world order to change when it comes to tackling the climate crisis – we all have a duty to act now.

What makes a person like me most enthusiastic is that we are finally understanding that landing the Paris agreement is not just about eradicating fossil fuels, but about remaining within planetary boundaries. We need to keep carbon sinks in nature intact. We need to take care of the nitrogen, water and phosphorus cycles. Cop26 in Glasgow should be the first major climate conference where the climate agenda and the nature agenda come together. Let’s see if that succeeds but many forces are trying to push it to that point.

https://amp-theguardian-com.cdn.ampproject.org/c/s/amp.theguardian.com/environment/2021/may/29/johan-rockstrom-interview-breaking-boundaries-attenborough-biden

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Interesting developments this week around Climate Change (NYT and BBC)

Global Warming vs. Climate Change | Resources – Climate Change: Vital Signs of the Planet

First, an activist hedge fund has successfully waged a proxy contest to elect climate activists to Exxon’s board. We have long said that despite hedge funds’ typically “short-termist” orientation, that skills in investor activism could be applied in a constructive way to sustainability.

https://www-nytimes-com.cdn.ampproject.org/c/s/www.nytimes.com/2021/05/26/business/exxon-mobil-climate-change.amp.html

For the first time a court of justice has ordered emissions reductions; a Dutch court ordered Royal Dutch Shell to reduce emissions by 2030, 45% below 2019 levels.

https://www.bbc.com/news/world-europe-57257982

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Does Good Governance Lead to Better Investment Performance? (Commonfund)

The governance framework of an institution plays a significant role in its overall success. Based on our work with hundreds of higher education institutions over the past 50 years, we believe that good governance is critical to the health of the institution and the positive performance of the endowment. Most people intuitively agree that “good” governance is imperative but currently there is a dearth of quantitative research available that defines and measures the difference that it can make. To rectify this and help to move the industry forward, Commonfund Institute is embarking on a new research project titled, The Commonfund-FGA Benchmarking Study of Governance in Higher Education. 

The Study is the first of its kind and is being done in conjunction with Chris Merker and Fund Governance Analytics (FGA). FGA is a pioneer in the field of empirical governance research and evaluation of asset owners and operates in partnership with Marquette University. Their governance diagnostics are derived from decades of research and evaluation and have been used extensively to analyze the governance practices of public pension funds. This is the first time that these tools will be applied to higher education endowments.

https://www.commonfund.org/blog/does-good-governance-lead-to-better-investment-performance-in-higher-education-institutions