To the dismay of many energy experts, the World Bank recently rather capriciously decided to stop funding virtually all new fossil-fuel plants. But phasing out readily available coal is a move that most major developing countries simply cannot afford without adequate incentives.
The Trustee Governance Guide is now out!
Our new book, The Trustee Governance Guide: The Five Imperatives of 21st Century Investing is now available!
- Focuses on both structural and process factors of governance
- Covers related investment topics in each chapter, including fiduciary duty, financial literacy, asset allocation, and socially responsible and impact investing
- Draws from the annual U.S. Public Pension Governance Survey and other leading industry and academic research
- Includes special “practitioner sections” in each chapter geared to the more technical reader
More than 80% of the financial assets in the United States fall under the purview of a trustee. That’s a big responsibility for an estimated 1% (around 1.5 million people) of the U.S. working population charged with overseeing investments for millions and millions of beneficiaries, public sector, and non-profit organizations. In a world proliferated by investment products, increasingly dominated by indexes, faced—particularly in the pension world—with increasing liabilities, more regulation, and a growing number of social and sustainability objectives, what’s a trustee to do?
The Trustee Governance Guide is here to help guide today’s board trustee through the brave new world of 21st century investing. The book focuses on the critical aspects of the Five Imperatives: Governance, Knowledge, Diversification, Discipline, and Impact. Based on more than a decade of research, practice, and discussions with many key decision makers and influencers across the industry, this book addresses the many topics related to better governance, greater mission-driven financial performance, and impact. The questions the book addresses include:
- What is good governance, how do we know it when we see it, and why does it matter?·
- How much knowledge is necessary to be a competent board member?
- How big should my endowment be?
- What are the key elements of a diversified portfolio?
- How much does cost matter?
- What’s the difference between socially responsible and ESG investing?
- Can I focus on sustainability and still be a good fiduciary?
This book provides a way for boards to improve and benchmark their own governance performance alongside their peers, and uniquely covers related investment topics in each chapter.
ESG and the Commons: From Tragedy to Governance? (CFA Enterprising Investor)
https://blogs.cfainstitute.org/investor/2019/06/12/esg-and-the-commons-from-tragedy-to-governance/
Sustainable investing will become the rule and no longer the exception. But this transition comes amid a disquieting change in how we must view capital, production, and their attendant effects.
The world’s largest investor says a $3.8 trillion market faces growing climate-change risk (Market Insider)
Link to report: https://www.blackrock.com/us/individual/insights/blackrock-investment-institute/physical-climate-risks
BlackRock, the world’s largest asset manager, is doubling down on its view that investors in the US don’t yet fully appreciate the just how disastrous an economic impact climate change could have at a time when environmental, social, and corporate governance investing is garnering mainstream attention.
“Climate-related risks already threaten portfolios today, and are set to grow, we find,” strategists at the BlackRock Investment Institute wrote in a report this week, homing in on threats the massive US municipal bond market could face as the planet warms.
New UN Report – Humans ‘threaten 1m species with extinction’ (BBC)
https://www.bbc.com/news/science-environment-48169783
Interesting to note it’s not climate change that is top of the list this time: 1) Changes in land / sea use; 2) direct exploitation of resources.
Other highlights:
Species extinction risk: Approximately 25% of species are already threatened with extinction in most animal and plant groups studied.
Natural ecosystems: Natural ecosystems have declined by 47% on average, relative to their earliest estimated states.
Biomass and species abundance: The global biomass of wild mammals has fallen by 82%. Indicators of vertebrate abundance have declined rapidly since 1970.
Nature for indigenous people: 72% of indicators developed by local communities show ongoing deterioration of elements of nature important to them.
Live coral cover on reefs has nearly halved over the past 150 years.
Link to the Global Assessment website: https://www.ipbes.net/news/Media-Release-Global-Assessment
Climate Change Has U.S. Fund Managers Adjusting Agriculture Investments (U.S. News & World Report)
My friend, Mike Underhill, was quoted in this article. He runs Capital Innovations, a real assets and infrastructure investment firm. A quick and interesting read!
Global sustainable investments hit over $30 trillion in 2018 (GSIA Report)
http://www.gsi-alliance.org/wp-content/uploads/2019/03/GSIR_Review2018.3.28.pdf
Globally, sustainable investing assets in the five major markets stood at $30.7 trillion at the start of 2018, a 34percent increase in two years. In all the regions except Europe, sustainable investing’s market share has also grown. Responsible investment now commands a sizable share of professionally managed assets in each region, ranging from 18 percent in Japan to 63 percent in Australia and New Zealand. Clearly, sustainable investing constitutes amajor force across global financial markets.
From 2016 to 2018, the fastest growing region has been Japan, followed by Australia/New Zealand and Canada. These were also the three fastest growing regions in the previous two-year period. The largest three regions— based on the value of their sustainable investing assets—were Europe, the United States and Japan.
Happy Earth Week! Sustainable Investing Goes Mainstream (Oppenheimer)
In a few short decades, sustainable investing has grown from a niche corner of the financial world to a phenomenon large enough that the primary challenge for investors may come in understanding its true scope, the changes it represents for businesses and financial markets, and how to position their personal finances for the future.
By early 2018, funds guided by environmental, social and governance (ESG) issues totaled $98 billion in the United States, a 58% increase over the previous year, according to a 2018 Morningstar report.
It’s National Financial Literacy Month, Take the Financial Literacy Test (FINRA)
http://www.usfinancialcapability.org/quiz.php
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.
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.