Category: Sustainability

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Honor and Responsibility: The Five Stewardship Imperatives (Trusteeship)

https://agb.org/trusteeship-article/honor-and-responsibility-the-five-stewardship-imperatives/

It should come as no surprise to trustees that boards have come under increased pressure in recent years to be more purposeful in the how they govern, specifically when it comes to mission and overall governance. There are several possible reasons for this increased attention on mission and governance but a pioneer in the field of governance and investment research, Keith Ambachtsheer, identifies three most likely explanations. In his foreword in The Trustee Governance Guide: Five Imperatives of 21st Century Investing, he reflected on the three main reasons nonprofit organizations have become increasingly focused on their mission and governance in recent years.¹

■ Governance as a process is finally receiving the bright spot it deserves;
■ The time has come to recognize the rise of behavioral economics and its lessons for trustee decision making; and
■ Sustainable investing is increasingly displacing “quarterly capitalism” as the philosophical foundation for long-term wealth creation.

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Last Chance for the Climate Transition (FT)

Achieving zero emissions by 2050 would require unprecedented global co-operation

https://www.ft.com/content/3090b1fe-51a6-11ea-8841-482eed0038b1

At the World Economic Forum in Davos this year, two people stood out: Greta Thunberg, the 17-year-old Swedish climate activist, and Donald Trump, the US president. In their messages on climate change, these two could not have been more opposed: panic, confronted with indifference. But one thing they share is that they are not hypocrites: Ms Thunberg does not pretend we are doing anything relevant; Mr Trump does not pretend he cares. Most participants in the climate debate, however, pretend to care, pretend to act, or both. If anything is to be done, this must change.

Ours remains what it has been since the early 19th century: a fossil-fuel civilisation. There have been two energy revolutions in human history: the agricultural revolution, which exploited far more incident sunlight; and the industrial revolution, which exploited fossilised sunlight. Now we must return to incident sunlight — solar energy and wind — along with nuclear power, while maintaining our high standards of living.

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How passive investment dulls the green wave (FT)

https://on.ft.com/2Sqcjbn

Passive index trackers help to keep money flowing to high-carbon industries

With such a strong financial case against fossil fuels coming into focus, and starting to convince holdouts, activists’ plans to starve oil, gas and coal companies of capital should get a boost as investors abandon the sector for non-ideological reasons. Yet even with this tailwind, the impact of their campaign will be limited as long as people continue ploughing money into market-tracking passive funds.

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The ESG Debate Heats Up: Four More Challenges (CFA Enterprising Investor)

https://blogs.cfainstitute.org/investor/2020/02/04/the-esg-debate-heats-up-four-more-challenges/

Investors and Managers: Now Join Hands.

As fires continue to ravage Australia, debates among environmental, social, and governance (ESG) investment professionals have been blazing as well.

One LinkedIn commentator, Dr. Raj Thamotheram, observed:

“There is so much ‘sdg washing’ and ‘impact washing’ going on at the moment, it drives me mad. We shouldn’t pretend that buying a share of XXX in the secondary market is changing the world. Change is slow and incremental. [My employer] isn’t perfect, we try to put our best foot forward, that inevitably leads us to be optimistic in describing what we do on ESG. But I try to be as brutally honest as I can. I’m amazed at how many peers say in the PRI reports that they do ESG integration across all asset classes 100%. Really? And if so, what does that actually mean?

“The answers aren’t easy but the challenge is urgent and CEOs of member firms need to mandate corrective action in 2020.

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Why Invest? A 22-Year-Old’s Tough Questions About Capitalism (WSJ)

https://www.wsj.com/articles/why-invest-a-22-year-olds-tough-questions-about-capitalism-11579882164?emailToken=1f6f40da21c2a67f4c5d3cefc394a4ef321sWZm7l91akMf29D3jectUr4s5BbuodUHQ15r53k/VLpRgJBHlM22HDkmaMULdEvcS+gzG9uVohhM7aK9jCLO6LA0M+fnOjtCyjC04thC/WhtPLrayQCYOxOlP4FsD&reflink=article_email_share

A few days ago, a smart 22-year-old asked me how to invest some savings from her first job. I advised her to open an individual retirement account. When she found out she couldn’t withdraw it without penalty until she turns 59 1/2, she shot back: “By then the planet will be a rotating cinder!”

The many young people who seem to share her gloomy view of the future should read the new book by Laurence B. Siegel, “Fewer, Richer, Greener.” In it, he proclaims, “We are on the verge of the greatest democratization of wealth and well-being that the world has ever known.”

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New Investments and Research Indicate Multi-Trillion Dollar Market for Climate Restoration Through Carbon-Capture (Thunderbird)

https://thunderbird.asu.edu/knowledge-network/wef

Thunderbird Convenes Global Leaders Across Sectors to Advance Climate Action

Davos, Switzerland – Thunderbird School of Global Management released a new report today projecting that the world can realize at least $1 trillion – $3 trillion dollars in market opportunities and $3 trillion – $5 trillion dollars in broader economic, social and environmental benefits per year by 2030.

Thunderbird’s Director-General and Dean, Dr. Sanjeev Khagram authored the new report and shared it at a cross-sectoral gathering hosted by Thunderbird with the Foundation for Climate Restoration in Davos during the World Economic Forum’s annual meeting. 

“Together, we must rapidly deploy natural and technological solutions to remove gigatons of carbon dioxide from our air, restore ocean ecosystems, and preserve Arctic ice, while dramatically reducing emissions and adapting to climate change impacts,” said Dr. Khagram. “Climate restoration is the critical third pillar of climate action alongside climate mitigation and adaptation.”

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Larry Fink rules on the best global standards for climate risk reporting (FT)

https://www.ft.com/content/fc51227b-9d64-4e5a-b1e2-f6c07f4caa58

BlackRock chief Larry Fink has warned that the world’s largest asset manager will take a “harsh view” of companies that fail to provide hard data on the risks they face from climate change.

In the letter, Mr Fink said that by the end of the year he wanted all companies to “disclose in line with industry-specific” guidelines set out by the SASB — the Sustainability Accounting Standards Board, a non-profit organisation that sets voluntary financial reporting standards.  He also called for businesses to report under the TCFD, or the Task Force on Climate-related Disclosures, a voluntary framework that was spearheaded by Mark Carney, the outgoing governor of the Bank of England

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BlackRock shakes up business to focus on sustainable investing (FT)

Fund manager to double number of sustainability-focused exchange traded funds it offers

https://www.ft.com/content/57db9dc2-3690-11ea-a6d3-9a26f8c3cba4

BlackRock has unveiled sweeping changes in an effort to position itself as a leader in sustainable investing after criticism that the company has failed to use its clout to combat climate change. The world’s largest fund manager, with $7tn in assets, will double the number of sustainability-focused exchange traded funds it offers to 150. It will also cut companies that derive a quarter or more of their revenues from thermal coal from its actively managed portfolios, as it aims to increase its sustainable assets 10-fold from $90bn today to $1tn within a decade.

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Ignoring climate risk is more costly than grappling with it (Huw van Steenis-FT)

Regulators and activists are driving global warming concerns into the mainstream

https://www.ft.com/content/dc2bdac0-316c-11ea-9703-eea0cae3f0de

A trio of recent deals tells us something important about capital markets: that 2020 may be the year when climate-risk analysis of portfolios moves out of a niche into the mainstream. Investors and boards have begun to realise that it can be more costly to ignore these issues, than to try to grapple with them. Last September MSCI, the global index company, bought Carbon Delta, a boutique focusing on climate risk analysis. A few months earlier Moody’s acquired Four Twenty Seven, a similar boutique. Last year ended with S&P making a move for sustainable index player RobecoSAM.

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Part 1 of Ethics, ESG, and ERISA: Ethical-Factor Investing of Savings and Retirement Benefits (Albert Feuer)

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3501203

Abstract

Ethical-factor investing is investment decision-making that takes into account ethical factors. It includes faith-based investing, Environmental, Social or Governance (ESG) investing, and sustainable investing. It is becoming more and more widespread. This has occurred despite a lack of widely accepted definitions, performance metrics, or ethical preferences. There is increasing broad agreement that some ethical factors highlight business risks and opportunities in a predictable fashion, such as the effects of climate change, human capital needs, or corporate governance. Thus, more and more investors and enterprises are seeking to profit (including mitigating risks) from these factors in the same way they do from all business risks and opportunities. There are three prudent approaches to ethical-factor investing. The most widely used is the Incorporation approach. Such investing uses the value of doing the right thing to decide how to improve financial returns. Also, quite common is the Tie-Breaker approach. Such investing does the right thing if there no financial cost to doing so. Least common is the concessionary approach. Such investing does the right thing if it does not cost too much. Each of these approaches can be socially beneficial, i.e., improve the norms and behavior of enterprises in a cost effective manner. Investors can generate such benefits by funding enterprises with thinly traded securities whose preferred ethical-factor activities would not otherwise occur, or by participating in engagement campaigns to change the policies of widely traded securities in which they invest.