Category: Sustainability

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New ESG Reporting Standards Framework (World Economic Forum and the “Big Four” accounting firms)

WEF_IBC_Measuring_Stakeholder_Capitalism_Report_2020Download

The recommended metrics are organized under four pillars that are aligned with the SDGs and principal ESG domains: Principles of Governance, Planet, People and Prosperity. They are drawn wherever possible from existing standards and disclosures, with the aim of amplifying the rigorous work already done by standard-setters rather than reinventing the wheel. The metrics have been selected for their universality across industries and business models, but the intention is not to replace relevant sector- and company-specific indicators. Companies are encouraged to report against as many of the core and expanded metrics as they find material and appropriate, on the basis of a “disclose or explain” approach.

The result of this process is 21 core and 34 expanded metrics and disclosures, which the project commends to both IBC members and non‐IBC companies for adoption.

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5th Annual Quad Packaging Sustainability Symposium

Free Virtual Event October 7th & October 14th

Join leaders in packaging and branding for discussions on what’s possible in sustainability today. There’s strength in numbers – part- ners are ready at every step of the journey to make environmental initiatives easier and more effective than ever.

Topics for 2020 include implications from the COVID-19 pandemic on sustainable packaging initiatives, advancements in the use of post-consumer waste in packaging, consumer perception of sus- tainable messaging, and much more!

We hope you can join us for lively, informative virtual discussions with like-minded peers from across the industries that Quad serves.

Featured speakers; National Geographic, Clearwater Paper, Fashion For Good, Greenblue, Annies

https://event.on24.com/eventRegistration/EventLobbyServlet?target=reg20.jsp&referrer=&eventid=2613747&sessionid=1&key=6AF4AE93DA3A711B2C1056D95AEA1559&regTag=1544468&sourcepage=register

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Climate Week NYC – September 24, 2020

Amazing agenda for our upcoming 3rd event – in addition to recapping the barrage of recent reports, we will be featuring our friends Mark Lewis of BNP Paribas on the future of hydrogen and carbon pricing, Sophie Purdom on her excellent Climate Tech VC, Gerard Barron on the critical importance of ethical deep sea mining, Stewart Investors on Why Climate Measures Don’t Make Sense and How to Fix them, Christopher K. Merker, Ph.D., CFA and Matt Orsagh of the CFA Institute on “Shortermism,” Jyoti Banerjee on placing a regenerative lens on investment and my own call for working with China on climate change Modern China: Financial Cooperation for Solving Sustainability Challenges

https://www.climateweeknyc.org/event/you-missed-tldr-best-new-ideas-sustainable-finance

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Short-termism Revisited (CFA Institute and Fund Governance Analytics)

Improvements made and challenges in investing for the long-term

In 2020 CFA Institute convened a panel revisiting the topic of short-termism and commissioned Fund Governance Analytics to quantitatively analyze the issue as we found many companies reluctant to step away from the short-term earnings guidance game.

https://www.cfainstitute.org/en/advocacy/policy-positions/short-termism-revisited

Overview

Issuers and investors have begun to understand the importance of issuer–investor communications in getting both sides on the same page on many long-term strategic issues. In the years since our 2006 report was published, investors and issuers have increasingly invested in resources dedicated to fostering engagement. Both parties realize that building a trusting relationship can increase understanding and avoid the adversarial relationships that often existed between the two groups in the past.

These improvements in the short-termism and long-termism landscape should indeed be celebrated, but more work remains to be done. Many companies have traded in short-term earnings guidance for either long-term guidance or a more diverse set of metrics that better informs investors. 

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Toward a Global ESG Standard (CFA ESG Working Group)

Delighted to share the following announcement as we work toward a global standard on ESG investing. I’m proud of the effort our working group has put into this much needed area over the past eight months. Public comments from across the industry are welcome and encouraged. #ESG #standards#sustainability https://lnkd.in/eATPWYE

– Christopher K. Merker, CFA, Ph.D.

https://www.cfainstitute.org/en/ethics-standards/codes/esg-standards?s_cid=smo_ESGConsultCFA_LI#__prclt=UW13XK6I

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Climate change: asset managers join forces with the eco-warriors (FT)

The pandemic has persuaded some investors of the potential financial damage from global warming

As 2020 kicked off, Dan Gocher at the Australasian Centre for Corporate Responsibility, a shareholder advocacy organisation, was feeling “pretty optimistic” about its plans to force big Australian energy companies to tackle climate change.

BlackRock, the $6.8tn asset manager, and other large investors had proclaimed an urgent need to arrest global warming. With the renewed focus on climate change following the devastating bushfires in Australia, the ACCR was hopeful several climate-related resolutions filed at oil and gas producers Santos and Woodside would gain strong shareholder support at their annual meetings in April.

https://amp.ft.com/content/78167e0b-fdc5-461b-9d95-d8e068971364#

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Enhancing Stewardship with Fund Governance Analytics (Commonfund Institute)

https://www.commonfund.org/news-research/video/enhancing-investment-stewardship-with-fund-governance-analytics/

Strong board performance is critical for every organization dedicated to achieving its mission, which is why Commonfund Institute makes it our mission to advance best investment stewardship practices. We were delighted to present Christopher Merker, co-Founder and Executive Director of Fund Governance Analytics and co-Author of The Trustee Governance Guide: The Five Imperatives of 21st Century Investing. Chris’ research demonstrates that the best run organizations outperform their peers nearly 2 to 1. Watch this video to learn more.

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Sustainable investing is set to surge in the wake of the coronavirus pandemic (CNBC)

KEY POINTS 

  • The outbreak of Covid-19 could prove to be a major turning point for ESG investing, or strategies that consider a company’s environmental, social and governance ratings alongside traditional financial metrics.
  • Sustainable funds attracted record inflows in the first quarter amid the market turmoil, according to data from Morningstar, and many of these funds are outperforming the broader market for the year.
  • Critics have said that ESG investing is merely a bull-market phenomenon, while others argue it represents a fundamental shift in investing.
  • “Prior to this crisis there was a meaningful and increasing focus on ESG investing and it is likely that this focus will only increase following the coronavirus,” Goldman Sachs said in a recent note to clients.

https://www.cnbc.com/amp/2020/06/07/sustainable-investing-is-set-to-surge-in-the-wake-of-the-coronavirus-pandemic.html

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Covid-19 Crisis: Protests and a Strong Jobs Number (Chris Merker)

 In almost a tale of two cities, protests and looting have emerged in over 100 cities across America over the past week for George Floyd, a man who tragically died in Minneapolis police custody, on May 21. And yet despite the widespread civil unrest, this morning’s job market surprise of 2.5 million jobs created in May has capped a week with markets ticking higher throughout. This 50-day rally on the S&P 500 has outpaced any such prior period for the last 50 years. We are no doubt witnessing strong resilience of the U.S. economy. While this is proving to be a very painful period of adjustment in American history, and may yet drive an extended period of policy reform, Barron’s provided a succinct analysis this week as to why civil unrest has not been a detractor to market performance.[1] 

That lack of reaction isn’t surprising in one regard: Wall Street filters most news through the lens of share prices. It’s a voting machine on the future of corporate profits…The first thing Wall Street does when something new and unexpected happens is look to history for precedents. In this instance, that exercise sends analysts back to painful periods including President John F. Kennedy’s 1963 assassination, the 1965 civil rights march in Selma, Ala., the large 1967 Vietnam War protests in Washington, D.C., the 1968 assassination of Dr. King and the 1992 L.A. riots which broke out in the aftermath of the acquittal of several police officers put on trial for beating Rodney King. What does the reaction to these events show? Historically, the market looks past most civil unrest. Stocks aren’t significantly more volatile in the months following any of the events listed. What’s more, the S&P rose in each year under study. Annual gains, excluding dividends, ranged from about 4% to 20%.
 
At the same time what started as a rally concentrated in a few technology and health care names, more recently has achieved broad-based participation, with 96.8% of S&P 500 companies now outperforming their 50-day moving average; and the equal weight S&P 500 index, which significantly lagged early on, is now since the beginning of the quarter in-line with the more widely-recognized, market cap weighted S&P 500 index. In addition, we are seeing small cap stocks outperform large cap stocks, with the Russell 2000 index up 26.2% versus the S&P 500, up 21.3% through the quarter. Finally, we are seeing a shift in leadership from growth to value companies, with the large cap value index (Russell 1000 Value) outperforming the large cap growth index (Russell 1000 Growth) nearly 2 to 1 for the month, led by the financial sector. As we noted last week, an earlier shift to small cap companies in client portfolios has added value. Maintaining a neutral weight between value and growth is similarly starting to add value within the portfolio.  

Fixed Income ReviewThe short end of the yield curve continues to remain fairly range bound set by the Fed Funds rate of about 5 basis points (0.05%), but further out on the curve you are starting to see steepening. There are a few factors that play into this. The curve is steepening as optimism builds as states reopen and public health concerns continue at a rate the health care system can handle. As the yield curve continues to build in future economic growth, it is also building in some additional inflation. Although inflation expectations continue to remain muted, the long end of the curve is starting to price in some drift upwards. Long-dated treasury bonds have also become slightly less desirable as the U.S. continues to borrow to fund the massive economic stimulus. 

The Federal Reserve recently began to openly discuss the concept of yield curve control, which it last used during World War II.  This policy calls for the Fed to set targets for the treasury yields and buy as many bonds as necessary to maintain those levels. From initial Fed comments, it appears they will target the shorter end of the curve but leave the long end to float freely. The Fed has been pulling back as an active buyer of treasuries reducing their net purchases, which is also putting additional pressure on long treasuries.   In the end, we believe a steeper yield curve is a healthy sign, if done in a gradual manner. If rates on the long end rise too quickly, it will tighten financial conditions, and we would expect the Fed to step back in. The Fed has various tools and has shown they are not afraid to adjust policy when market conditions warrant.  In the meantime, we remain duration neutral to the benchmark, and continue to emphasize quality in the portfolio.

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A Framework for Sovereign ESG Risk Assessment (SAGE Advisory)

https://www.sageadvisory.com/media-assets/a-framework-for-sovereign-esg-risk-assessment/

Even though government debt represents approximately 41% of the $255 trillion global bond market, the level of vigor in Environmental, Social, and Governance (ESG) analysis that is applied to the issuer is not always the same as it is in the corporate space. Sovereign debt, which is issued by central governments, is particular- ly vulnerable to a lack of adequate ESG assessment. It is often passed off as a risk-free asset meant for capital preservation and stability, especially in the case of developed countries’ debt issuance, but events of the past two decades have showcased the need to rethink this notion. Greece struggled mightily after the 2008 fi- nancial crisis, requiring bailouts from the International Monetary Fund, European Central Bank, and the Euro- group, and lenders still took a huge hit on defaulted loans. And possibly even worse, Argentina (on the cusp of being classified as a developed country) has been engulfed in a debt crisis for the past 20 years, and creditors continue to get punished for holding its debt, with no real viable solutions moving forward.