Posts

Posted on

Sustainability: Who Gets to Decide? (Texas CEO)

Sustainability: Who Gets to Decide?

https://texasceomagazine.com/sustainability-who-gets-to-decide/

In September of 2020, the Big Four accounting firms announced a new reporting framework for environmental, social, and governance (ESG) standards. The announcement captured attention because it marked a joint initiative between the four largest accounting firms, which is not an everyday occurrence. 

When the World Economic Forum’s International Business Council (IBC) championed this reporting framework—in hopes that the more than 100 global companies populating the IBC would adopt the standards for 2021—the reporting framework gained momentum. However fast (or slow) this new ESG reporting framework is ultimately adopted, it will most likely impact how companies report their sustainability performance and could be a key component of the World Economic Forum’s “Great Reset” initiative.

Reporting standards like ESG and others raise important and fundamental questions about the nature of sustainability. Do reporting standards help achieve improved sustainability and increased innovation, or do they thwart sustainability and stifle innovation by creating uniformity and ease for those reporting and reviewing? How do we know what “good” sustainability performance is? Is it possible for a company or a nation to effectively measure progress toward sustainability? Are the best intentions of companies moving us toward a more sustainable world, or could they be a catalyst moving us further away from such a world? How will we know?

Posted on

Ethics, Earnings, ERISA and the Biden Administration (Albert Feuer)

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3773879

Abstract

Ethical-factor investing shall be defined as using ethics, such as an enterprise’s policies regarding social/economic/health/environmental justice, sustainability, climate change, or corporate governance, as a factor to determine whether to acquire, dispose of, or how to exercise ownership rights in an equity or debt interest in a business enterprise. 

Ethical-factor investing includes, but is not limited to the ESG, sustainable, socially responsible, impact, and faith-based investing. Ethical-factor investing may. but need not, be intended to enhance the investor’s financial performance. Ethical-factor investing also may, but need not, be intended to enhance an enterprise’s ethical behavior, i.e., to be socially beneficial.

The Trump administration discouraged ethical-factor investing. Nevertheless, such investing is becoming increasingly popular among Americans, American mutual funds, and American retirement plans.

The article introduces the current types of ethical investing, their history, their financial and ethical performance, and their pre-Biblical progenitors. All those issues are discussed more extensively in a longer referenced article. 

This article suggests how the Biden Administration may encourage ethical-factor investing by ERISA retirement plan fiduciaries. This may be done with revised ERISA regulations and other interpretative documents. No ERISA amendments would be needed. ERISA permits such investing if it does not adversely affect the expected financial performance of such plans’ investment portfolios or investment choices. Finally, such plans investors, including plan participants and beneficiaries, may thereby generate their preferred benefits for society. Such benefits are, like desired financial benefits, most likely to be achieved if such investors are explicit about their preferred benefits and they regularly monitor the performance of their investments.

Posted on

The Global Risks Report 2021 (World Economic Forum)

Synopsis: In 2006, the Global Risks Report sounded the alarm on pandemics and other health-related risks. That year, the report warned that a “lethal flu, its spread facilitated by global travel patterns and uncontained by insufficient warning mechanisms, would present an acute threat.” Impacts would include “severe impairment of travel, tourism and other service industries, as well as manufacturing and retail supply chains” while “global trade, investor risk appetites and consumption demand” could see longer-term harms. A year later, the report presented a pandemic scenario that illustrated, among other effects, the amplifying role of “infodemics” in exacerbating the core risk. Subsequent editions have stressed the need for global collaboration in the face of antimicrobial resistance (8th edition, 2013), the Ebola crisis (11th edition, 2016), biological threats (14thedition, 2019), and overstretched health systems (15thedition, 2020), among other topics.

The immediate human and economic cost of COVID-19 is severe. It threatens to scale back years of progress on reducing poverty and inequality and to further weaken social cohesion and global cooperation. Job losses, a widening digital divide, disrupted social interactions, and abrupt shifts in markets could lead to dire consequences and lost opportunities for large parts of the global population. The ramifications—in the form of social unrest, political fragmentation and geopolitical tensions—will shape the effectiveness of our responses to the other key threats of the next decade: cyberattacks, weapons of mass destruction and, most notably, climate change.In the Global Risks Report 2021, we share the results of the latest Global Risks Perception Survey (GRPS), followed by analysis of growing social, economic and industrial divisions, their interconnections, and their implications on our ability to resolve major global risks requiring societal cohesion and global cooperation. We conclude the report with proposals for enhancing resilience, drawing from the lessons of the pandemic as well as historical risk analysis. The key findings of the survey and the analysis are included below.

http://sustainablefinanceblog.com/wp-admin/post-new.php

Posted on

During Biden Administration, SEC will require Climate Change Risk and ESG Disclosure (Mintz)

Public companies will be required to disclose climate risks and greenhouse gas emissions under President-elect Biden’s administration. The Securities and Exchange Commission (SEC) will institute rulemaking and guidance on the federal monitoring of environmental, social and governance (ESG) issues. The Biden administration’s decision to require climate report disclosures follows complaints from investor advocacy groups about inconsistent disclosure practices due to voluntary reporting frameworks.

https://www.mintz.com/insights-center/viewpoints/2151/2020-12-29-during-biden-administration-sec-will-require-climate?utm_source=Mondaq&utm_medium=syndication&utm_campaign=LinkedIn-integration

Posted on

Net Zero Gaining Momentum Like Never Before Among Investor And Business Community (Forbes)

2020 can’t get behind us fast enough. But the shocking realization we’ve all faced about how vulnerable our society and global economy is also one of the reasons we’ve seen the remarkable embrace of ‘net zero’ by the business community this year.

This year, the number of the world’s largest companies committing to net-zero emissions targets, meaning they will eliminate as much of the greenhouse gases as they produce, tripled to 1,500 from the start of the year. 

When the pandemic hit in the spring, those of us leading the fight against the climate crisis thought that business momentum towards net zero would slow down. But, the opposite happened. The lessons of the pandemic—which scientists had been warning about for years—made major institutional investors and corporations realize they had to increase their own climate ambitions. 

https://www.forbes.com/sites/mindylubber/2021/01/05/net-zero-gaining-momentum-like-never-before-among-investor-and-business-community/?sh=2268178c8bf0

Posted on

ESG Under the Microscope (Baird)

Why Now and What You Should Know

One of the buzziest acronyms in the investing world is “ESG.” These three letters are a tidy summary of a big-picture idea: That it’s possible to “do good and do well” by investing in your values. While ESG focuses on environmental, social and governance themes, there are several other schools of thought on values-driven investing. These approaches, arguably led by ESG, have become more mainstream over the past few years. Many people and institutions are eager to incorporate “responsible” investing into their portfolios.

https://bairdwealth.com/insights/ESG-Under-the-Microscope

Posted on

The Future Turns 50 This Year (WSJ)

From computers and money to relations with China, 1971 changed the world in many ways.

Fifty years ago, Amer­ica en­tered a mag­i­cal year. Any year could hold mo­ments of great sig­nif­i­cance, but 1971 stands out. Af­ter a decade of up­heaval, the coun­try was seek­ing a new start. These events launched it.

https://www.wsj.com/articles/the-future-turns-50-this-year-11609537573?st=p8qa8vab3w7nwft&reflink=article_email_share

Posted on

Sustainable Finance is “Tops” in Sustainable Finance

In 2017 we launched Sustainable Finance with one mission: to curate the best in research and reporting on sustainability. Founded at Marquette University in Milwaukee, Wisconsin, we were the first university to offer programs in Sustainable Finance starting in 2005.

Since launching the blog, we have seen visits to our site double every year, and this year has seen our best year yet, with thousands of visitors from over 65 countries. As we close out 2020, we want to thank our readers for their support in making Sustainable Finance the number one sustainable finance blog in the world.

– Christopher K. Merker, CFA, Ph.D.

Editor, Sustainable Finance

Posted on

Gross Domestic Wellbeing (CarnegieUK)

https://www.carnegieuktrust.org.uk/publications/gross-domestic-wellbeing-gdwe-an-alternative-measure-of-social-progress/

Gross Domestic Wellbeing (GDWe)™ offers a holistic alternative to GDP as a measure of social progress. Using the framework and data in the Office for National Statistics Measures of National Wellbeing Dashboard, the Trust has developed a tool that provides a single figure for GDWe in England and mapped this against GDP for the past six years.

In this report, we provide both an analysis of overall Gross Domestic Wellbeing (GDWe) for the past six years, and an individual GDWe score for each of the 10 domains of wellbeing in the ONS dashboard, to highlight areas requiring attention. We have supplemented this analysis with a thematic review of over 800 recommendations from nearly 50 commissions and inquiries since 2010 – from Marmot to Grimsey, Dilnot to Taylor – to highlight the many areas of mutual focus, challenge, and concern. The recommendations show that though the data currently being collected by the ONS offers a useful starting point and a framework for measuring wellbeing, there are significant gaps.

This is a subject also discussed in:

https://blogs.cfainstitute.org/investor/2019/06/12/esg-and-the-commons-from-tragedy-to-governance/

Posted on

Private Inequity Report (17 Communications)

A research report published by 17 Communications, with contributed content from the Predistribution Initiative, about how the private equity industry is responding to systemic and systematic risks like climate change, COVID-19 and racial injustice.

The Private Inequity report found that manager responses tilted most toward easier moves that foster limited systemic change – 28% making statements and 15% donations – and least to the more substantive internal and external changes to policies and practices, which each saw action from less than 10% of managers. Climate change fostered the fewest manager actions overall, while the pandemic got the most. 

The report also has 11 recommendations for managers to improve their ability to respond and help address systemic crises, including guidance on transparency and compensation policy changes, audits of current practices, new accountability mechanisms, and integration of diversity, equity, and inclusion principles, Rothenberg says.

“While we recognize the private equity industry is responding to calls for stronger ESG integration, and many have taken steps in a positive direction, systemic crises demand timely action and less of a piecemeal approach,” said Delilah Rothenberg, Executive Director of the Predistribution Initiative and a contributing author for the report. “Despite limited action to date, private equity firms are well-positioned to drive positive change given their ability to influence portfolio company governance, priorities, and even capital structures. To step up to the plate and demonstrate leadership, private equity investors need to conduct holistic assessments of their internal and external business practices to identify exposure and contributions to such risks, develop action plans with clear targets and timelines to close gaps, and communicate publicly about their ongoing progress.”

Private Inequity
Link to the full report.