“A resource arrangement that works in practice can work in theory.” — Elinor Ostrom
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.
Promoting the Common Good or Promoting Destruction?
In Adam Smith’s The Wealth of Nations, the pursuit of individual goals brings about — on balance — the right outcomes on a broad community scale. Think of the baker baking bread for profit: The act itself — the supplying of bread — clearly promotes the common good, even if the common good wasn’t the original intent. This, of course, underestimates the role of “externalities” in economics, or how self-interest can lead to the eventual and total destruction of certain resources. As Garrett Hardin wrote in his seminal “The Tragedy of the Commons”:
Study finds number of cynics about ESG cut in half since 2017.
The doubters of sustainable investing are rapidly dwindling in numbers, according to a study by asset manager Schroders, which found that cynics of the sector have fallen by nearly 50% in just three years.
According to Schroders’ Institutional Investor Study 2019, the proportion of investors worldwide who do not believe in environmental, social, and governance investing has fallen to 11% this year from 20% in 2017. It also said that the decline was most notable in Latin America, where the percentage of skeptics fell to 12% from 29% in 2017.
Votes on climate-related shareholder resolutions often take center stage at corporate annual meetings, though seldom draw support from the two top U.S. index fund firms, BlackRock and Vanguard Group.
BlackRock and its top rivals have not put forward any proposals of their own since at least 2001, according to research firm FactSet.
The top index fund firms say they prefer to address issues they have with portfolio companies, including those related to climate change, in private talks with executives rather than through shareholder votes.
J.P. Morgan Asset Management is joining a chorus of global financiers saying that protecting the environment will be a key consideration for extending shipping loans.
“There is not an institutional investor today in the Western world that is not thinking about the impact of environmental, social and governance factors,” Andy Dacy, the chief executive of the finance firm’s global transportation group, told a meeting at the International Shipping Week here.
“Anyone looking for [shipping] capital, if you’re not employing such a strategy, it’s going to be increasingly very difficult to get capital.” Mr. Dacy said.
I get to learn about lots of different plans for dealing with climate change. It’s part of my job—climate change is the focus of my work with the investment fund Breakthrough Energy Ventures—but it’s just as likely to come up over dinner with friends or at a backyard barbecue. (In Seattle, we get outside as often as we can during the summer, since we know how often it’ll be raining once fall comes.)
Whenever I hear an idea for what we can do to keep global warming in check—whether it’s over a conference table or a cheeseburger—I always ask this question: “What’s your plan for steel?”
I know it sounds like an odd thing to say, but it opens the door to an important subject that deserves a lot more attention in any conversation about climate change. Making steel and other materials—such as cement, plastic, glass, aluminum, and paper—is the third biggest contributor of greenhouse gases, behind agriculture and making electricity. It’s responsible for a fifth of all emissions. And these emissions will be some of the hardest to get rid of: these materials are everywhere in our lives, and we don’t yet have any proven breakthroughs that will give us affordable zero-carbon versions of them. If we’re going to get to zero carbon emissions overall, we have a lot of inventing to do.
Recent posting from the Commonfund Investment Stewardship Academy…
There are five imperatives for trustees of nonprofit organizations. Although governance has been my area of research for the last decade, I write this not only as an academic but also as a practitioner having hands-on experience with many of the issues that trustees confront today.
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.
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.
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!
