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ESG News Update: September 2, 2020

ESG Disclosures, Standards and Rankings:

Bloomberg Quint: ESG Investors Find That Diversity Data Is Hard to Come By

  • Calls for racial diversity at every level of the corporate world have inspired socially conscious investors. It’s a powerful group, with more than $30 trillion in global assets backing companies that prioritize environmental stewardship, social impact, and good governance, known by the shorthand ESG. But when it comes to how integrated companies are—or aren’t—the data are painfully limited. The reason? “Companies don’t want to disclose, because the data we are asking for is unflattering,” especially when it comes to the best-paying jobs, says Natasha Lamb, a managing partner at Arjuna Capital LLC.

  • The collection of racial diversity information can be a particularly big hurdle for companies operating in Europe, which is usually a hotbed for ESG campaigning. Some governments have made it illegal to collect racial and ethnic data for most purposes, in part because of the legacy of the Holocaust and World War II. In Asia there’s only a budding recognition that social factors may be of concern to investors.

  • Investors in U.S. companies don’t face the same obstacles. Most companies are required to provide a breakdown of racial and ethnic data about their workforce to the federal Equal Employment Opportunity Commission. But they don’t have to publicly disclose that data.

S&P Global: ESG data gap 'critical issue' for climate risk management, BBVA exec says

  • In Europe, there is a specific consultation on the non-financial reporting directive. We think that it should apply to more companies and it should integrate better data. This is a critical milestone. We need comparability, we need access to data from our clients, and we need some synchronicity and better coordination among different supervisors.

  • We cannot expect banks [to disclose] information about climate risk of their portfolios if our corporates, our clients, don't report. We have to have a step-by-step approach, focusing on corporates and sectors, and in time amplify the scope. The data gap is a critical issue for risk management.

Investment Magazine: Deciphering the trend: Will the real ESG contenders stand up

  • With corporates scrambling to adjust business models to be more resilient, and the understanding that industry dominance and monopoly may stifle job creation and suffer the ire of antitrust regulators, Parry has cautioned investors against rushing blindly towards the shiny ESG label. “There’s been a tsunami of money into the ESG sector, particularly into passive,” explained Parry, in an interview with Investment Magazine’s Market Narratives.

  • Corporates hoping to ‘optimize’ their ESG scores, without adjusting their business models and purpose, will ultimately lead to poor performance as the market itself adjusts its own measures of success. “The problem with methodologies and labels is that they can be gamed,” said Parry. “Many investors are surprised when they see tobacco companies score well for ESG.”

  • But for money managers wanting to take advantage of the clear global trend towards ESG models, Parry suggests looking at those businesses willing to spend time and resources evolving and re-developing their business models.

Fitch Ratings: Fitch Ratings Launches Corps Interactive ESG Dashboard, Enhances Heatmap for 2Q20

  • Fitch Ratings has updated the interactive ESG dashboard for corporates; a tool that shows the distribution of Fitch's ESG Relevance Scores (ESG.RS) for 1,524 issuers globally. Fitch has also updated and enhanced the interactive ESG Relevance heat map for 2Q20 with added regional and country selection capabilities.

  • The dashboard shows that ESG risks influence rating decisions for 23% of corporates as of 30 June 2020, unchanged from 7 January 2019 when the ESG.RS were first launched, with governance once again the dominant factor (influencing 15% of ratings) compared to environmental (5%) and social factors (7%).

Investment Trends:

Investment News: Reaching the next generation of investors via ESG

  • Today’s generation of investors have a radically different mindset than any that have come before. In the past, investors were mostly concerned about their financial statement’s bottom line. Today, younger investors come with different priorities.

  • More and more are asking not only “what” their investments made, but “how” those profits were generated. For example, a recent Voya Financial survey found that 76% of respondents said the idea of ESG investing was “very” or “somewhat” appealing. Our data also revealed that 76% of individuals said they would be “much more” or “somewhat more” likely to enroll in their workplace benefits if they applied ESG principles, and 60% would be likely contribute more to an ESG-aligned retirement plan if one were available.

Financial Advisor: Gen Z: Taking ESG Investing To The Next Level

  • The continued adoption of investment strategies that incorporate environmental, social and governance (ESG) considerations is undeniable. Positive asset flows, new strategy innovations and growing media coverage all point to the maturation of an investing trend into a more regular fixture of portfolio construction.

  • Some say this evolution has been fueled by the prospects for investment returns that are supported by the benefits of adhering to ESG principles. Some say it has been powered by generational shifts. While it may have been started by older generations of investors, it’s been increasingly embraced and elevated by the much-discussed “millennial generation.” But what about the next generation, born in the late 1990s and early 2000s and sometimes referred to as “Gen Z”? Will Gen Z push ESG investing to the next level?

The Street: How Advisers Can Help Clients Integrate ESG Factors

  • Including companies that score high on ESG factors can actually reduce risk. For example, a company that is continually found liable for environmental issues such as pollution or business practices that lead to pollution of the environment could be hit with fines or lawsuits based on these practices at some point in time. These types of violations can be costly to the company in terms of potential fines and can result in lost business.

  • As an adviser you can help those clients interested in ESG investing implement this as part of their portfolio, while keeping them focused on key investing goals like asset allocation and risk control.

Oil & Gas 360: Bezos And Blackrock Are Pouring Billions Into This $30.7 Trillion Trend

  • Hedge fund superpowers like BlackRock and Goldman Sachs have put billions aside to invest in ESG plays, but they’re facing a major supply squeeze: They can’t find enough sustainable stocks to park their billions.

  • Thanks to BlackRock, Wall Street now has an ESG portfolio hedge fund on the throne, but when it comes to companies themselves, there aren’t many that have an entire ESG platform. Until now. Welcome to Facedrive (TSXV:FD; OTC:FDVRF) the full-on “people and planet first” company with 5 ESG divisions indicating a potential growth runway that’s broad enough to have something for everyone in the “impact investing” scene.

Economic Times Retail: Making sustainability a business priority

  • There has been a positive shift towards sustainability in all walks of life, driven primarily by the emergence of global climate consciousness. While businesses have begun moving in the right direction, there is a lot that still needs to be achieved. As organisations strive to have a clear and long-term strategy for their products and consumers, it is equally important for businesses to think about having a long term strategy for value creation, by instilling their business practices with sustainability.

  • While companies are recognizing the need to act on sustainability and it is not to say that businesses do not have the intention, however, including sustainability into long term strategy needs organizational ambition, holistic thinking, ecosystem approach and focused execution.

Government Policy:

Pensions & Investments: Fidelity, BlackRock reject Trump limits on 401(k) ESG investing

  • Fidelity Investments wrote in an 11-page letter to the U.S. Department of Labor that the proposal's assumption that ESG investment strategies sacrifice returns, increase risks and promote goals unrelated to financial performance isn't "well-grounded or supported by much of the emerging data." BlackRock said the recommendation is "overly prescriptive and burdensome." State Street Global Advisors, Putnam Investments and Legal & General Investment Management are among numerous other firms that also oppose the plan.

Food Tank: Climate Change Threatens American Workers’ Health, Report Says

  • A recent report from the National Resources Defense Council (NRDC) reveals the devastating effects of climate change on the health of American workers. It warns that both indoor and outdoor workers will suffer from the increasing frequency and intensity of extreme heat, hurricanes, floods, wildfires, drought, and infectious diseases.

  • To mitigate these effects, the report lays out several recommendations. For one, Congress can update the Occupational Health and Safety Act. A law drafted in the 1970s to protect workers’ health, the Act does not yet address climate change-related risks and does not cover state- and local-level public-sector workers. In addition, the report recommends that Congress expand the budget and staffing of the Occupational Safety and Health Administration to better enforce safety policies.

Companies and Industries:

Sustainable Agriculture Research and Education: Cultivating Climate Resilience on Farms and Ranches

  • By understanding the climate risks to your production system and practices that can reduce those risks, you can identify some management steps that will improve the resilience of your farm or ranch to changing climate conditions while allowing you to achieve your other sustainability goals.

Financial Times: Chief of female-led boutique on the ESG ‘tipping point’

  • Geeta Aiyer first understood the power of investors to push for change back in 1993 when US supermarket executives flew 2,500 miles to speak with her about gender inclusion.

  • It was the start of a vocation for Ms Aiyer, who, as president of responsible investment boutique Boston Common Asset Management, has dedicated her career to using finance as a force for good.

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