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ESG News Update: August 19, 2020

General ESG News:

FT Adviser: Campaign launched to nurture interest in ESG investing

  • The recent launch of the Make My Money Matter campaign aims to encourage the public and the finance sector to work together towards realizing the green agenda of investing in sustainable companies.

  • Headed up by Comic Relief co-founder Richard Curtis and UN special envoy for climate action and finance Mark Carney, the campaign is a drive to inspire the public to be part of a more ethical global future through pensions investment.

  • Mr. Curtis and Mr. Carney, together with other business and third-sector leaders backing the campaign, see the £3tn of pension investments held nationally in the UK as a huge opportunity for a collective push to save the environment and create better social conditions for people around the world.

NASDAQ: Why ESG Funds Crossed the $1 Trillion Mark

  • In this episode of the Market Foolery, Chris Hill chats with Motley Fool analyst Jason Moser about the latest news and earnings reports from Wall Street. They discuss the resiliency of tech stocks and how corporations are embracing ESG investing. Finally, they take a listener's question about seeing any post pandemic pent-up demand in a very niche industry and much more.

CNBC: 40% of companies discussed diversity on earnings calls, up from 4% in prior quarter, new data shows

  • RBC found that 40% of S&P 500 companies discussed diversity, equality and inclusion during second quarter earnings calls, up from 4% in the first quarter, and 6% during the same quarter a year ago.

  • According to the firm’s analysis, 38% of S&P 500 companies announced initiatives and action plans since George Floyd was killed by Minneapolis police officers in May.

  • The move comes amid pressure for companies to overhaul things like hiring and promotion practices.

Stanford Social Innovation Review: Making a Better Business Case for ESG

  • Scholars and finance professionals need to create a much clearer understanding of the business case for ESG (also referred to as sustainability), as we at the Center for Sustainable Business have begun to do with our Return on Sustainability Investment (ROSI) methodology.

  • Without this insight, corporations will not scale up their investments in sustainability in the face of climate change, COVID-19, inequality, and many other perceived or real challenges to their bottom lines. And investors need more and better information to feel confident that a corporation focusing on its ESG performance can also meet its fiduciary duties.

The Asset: Governance moves from 'poor relation' into ESG spotlight

  • It has become perhaps a bland – and ill-considered – trope to suggest that when it comes to ESG, the G loses out to its acronymic predecessors in terms of investor focus. Governance is the least sexy of the trio and gets the least attention within the ESG universe.

  • “There is already substantial empirical evidence to suggest that the G aspect of ESG ultimately yields better corporate returns,” wrote S&P Global’s Kelly Tang last year in a research piece on governance in ESG. “Governance data, unlike environmental or social data, has been compiled for a longer period of time and the criteria for what comprises good governance and its classification has been more widely discussed and accepted.”

Harvard Law School Forum on Corporate Governance: The Other “S” in ESG: Building a Sustainable and Resilient Supply Chain

  • The current pandemic, blind spots in information flows through supply lines, the shutdowns in meat processing plants around the world, the ongoing shortages in personal protective equipment and, most recently, the scandal involving British retailer Boohoo, have all underscored the importance of resilient, sustainable, legally compliant and ethical supply chains.

  • For many companies, the pandemic has provided new insights into their supply networks, revealed an unsettling lack of full visibility into their supply chains, and exposed weaknesses and gaps between first-tier and lower-tier suppliers.

ESG Disclosures, Standards and Rankings:

Financial Times: Calpers, Schroders call for mandatory inclusion of climate risks in accounts

  • A growing chorus of investors, including Calpers, Schroders and DWS, are piling pressure on companies and auditors to include material climate risks in accounts, after a similar move by oil company BP this summer.

  • Investors are worried that financial statements do not reflect the longer-term outlook for many businesses, with few companies properly incorporation climate change risk despite many groups proclaiming support for the Paris Agreement to tackle global warming.

Benefits Pro: ESG disclosures: What is the current state of play?

  • The topic of environmental, social, and governance (ESG) criteria has garnered increased attention by investors in recent years and has emerged as an increasingly important and popular metric by which potential investors evaluate investment opportunities. While ESG has increasingly risen to the forefront of investor considerations, public companies demonstrate significant discrepancies in their approach to ESG disclosures.

Wealth Professional: Bridging the social gap in ESG investing

  • “I’ve been working in social development for over 20 years, which has given me a unique perspective observing operations from the other side of any investment at the ground level,” said the founder and CEO of The S. Factor Co., a firm that endeavors to quantify the social impact of company’s decisions and activities. “I saw that paying attention to social factors really produced predictive patterns that uncovered risks of distrust and, in some cases, disruption.”

  • The S Factor Co. has developed a taxonomy of ESG factors that includes four key categories – employee relationships, ethics, supply chain, and the community – each of which encompasses several themes measured by an intimidating array of approximately 1,200 indicators and metrics.

Investment Trends:

Oil and Gas 360: Investments into environmental, social, and governance jumped by 72% this year, says Morningstar

  • Despite the COVID-19 pandemic and an economic downturn, investments into environmental, social, and governance assets surged by 72% this year, says Morningstar.

  • Investors showed increased interest in ESG-related products before the outbreak and the trend continues.

  • Assets under management in sustainable investment funds reached a record high of over $1 trillion at the end of June.

Environment + Energy Leader: Report: Momentum Builds for ESG Investment Among Global Public Investors

  • Over 90% of global public investors have specific environmental, social, and governance (ESG) investment policies in place or are in the process of developing them. This is according to a new survey from BNY Mellon and OMFIF.

  • However, they still face significant barriers in scaling up these efforts, including insufficient data and the difficulty of measuring the impact and non-financial performance of their ESG investment strategies.

Investment News: ESG funds outperformed through pandemic, S&P finds

  • Because of their heavy weighting in technology stocks, many large exchange-traded and mutual funds that use environmental, social and governance criteria outperformed the broader market during the COVID-19 pandemic, according to S&P Global Market Intelligence.

  • Information technology stocks comprise at least 20% of the holdings for each of the funds reviewed, according to S&P Capital IQ data.

Forbes: The Surprising Truth About The Values-Driven Investor

  • Despite the surging interest in sustainable investing, financial advisors are slow to keep up with the trend. Part of the problem is the myth that values-driven investors are primarily Millennials.

  • To be fair, younger investors are twice as likely to invest in companies that prioritize social good, says Jennifer Tarsney, head of practice management for New York Life Investments. But research by New York Life Investments reveals that the median age of the “values-driven investor” is 48.5 years old. Additional data shows that more than half of Americans are “values-driven.”

Karma Impact: Writing the Future: Investors Pushing ESG Values Into Boardrooms

  • Sixteen investor petitions concerning ESG matters have gotten more than half of shareholder votes at various companies’ annual meetings in 2020, up from 14 last year, says Morningstar.

  • Financial institutions are already warning corporate clients that investors — many inspired by problems exacerbated by the COVID-19 pandemic — are even more likely to use shareholder proposals to battle climate change, inequities and social justice matters.

  • Still, American investors say they are fighting an uphill battle in a regulatory climate that has turned increasingly hostile toward shareholder actions.

Government Policy:

Financial Advisor: DOL's Proposed ESG Rules Would Create Compliance Burdens, Report Says

  • The U.S. Department of Labor’s proposal on the use of environmental, sustainable and governance (ESG) funds in defined contribution plans wouldn’t prohibit ESG options, but would encumber the selection and monitoring process and require vast levels of documentation, according to a new white paper.

  • The paper from Alliance Bernstein (AB), a global investment management and research firm that manages $600 billion in assets, entitled “DOL New Rules Don’t Have to Slow DC Plan ESG Adoption,” suggests the use of ESG funds would still be allowable under the rule, but that plan sponsors and fiduciaries “would need to do a lot more documenting to validate any ESG considerations on top of the current ‘all else being equal’ test.’”

National Association of Plan Advisors: Labor Department Extends ESG Inquiries… to RIAs

  • It seems that the Labor Department is doubling down on its ESG information request campaign, now looking to the practices behind investments in, and monitoring of, ESG-themed ERISA plan investments by Registered Investment Advisory firms.

  • First reported by Financial Advisor and now independently confirmed by us, the information requests—not enforcement letters as has been reported—appear quite similar in tone and focus to those sent to plan sponsors in May. The letters—dated in late July—contain about a dozen specific, detailed requests for information that goes back a number of years—and indicate—as did the plan sponsor letters—a relatively short deadline for response. 

Columbia Law School: The Politics of Institutional Shareholder Voting: Transparency Before Reform

  • On July 22, the SEC finalized a sweeping rule change to enhance the transparency around the role of proxy advisers. This follows an earlier proposal to reform the process for including shareholder proposals in a company’s proxy statement.[1] These developments may give companies more ammunition against shareholder activism, while also highlighting the lack of transparency in the relationship between shareholders and companies. Even though the new rules address proxy advisers, it sets the stage for a closer look at how asset managers handle their relationship with corporations.

Companies and Industries:

Green Biz: The many faces of energy resilience

  • Thinking about the idea of resilience as it relates to equity and energy systems merely as the ability to keep the lights on, however, is missing a powerful opportunity to right the scales of justice. Large corporate energy buyers and utilities, in particular, hold the opportunity to build better and make things right.Our energy systems, like most legacy systems, are infused with racial injustices that do particular harm to Black communities, families and individuals because many of our laws and institutions were designed for that purpose.

Benefits Canada: Bloomberg launching proprietary ESG scores

  • Bloomberg is launching its own set of ESG scores, available to its terminal users. Initially, 252 companies in the oil and gas sector will receive environmental and social scores and more than 4,300 companies across several industries will be scored on their board composition.

  • Bloomberg is launching with scores on environmental and social issues for the oil and gas sector because it typically has stronger disclosure data and generates a substantial portion of global green-house gas emissions, noted the release. The scores evaluate company performance on a number of financially material issues including climate change, health and safety and companies’ activities relative to industry peers.

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