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What's New(s) in ESG: August 13, 2018

Dmitriy Ioselevich

Here are the top stories in ESG from the U.S., the EU and around the world.


Pensions & Investments: ESG Adoption Gaining Among U.S. Asset Owners - Callan Survey

More than 40% of U.S. asset owners have incorporated environmental, social and governance factors into their investment decisions, up from 37% in 2017 and 22% in 2013, said Callan's annual ESG survey report, released Wednesday. The 43% of respondents reporting they have incorporated ESG factors is the highest level in the survey's six-year history. (Read more: FundFire)

Financial Times: Investors Turn to Academia to Navigate Green Investing Boom

Growing interest in companies’ environmental and social performance is fuelling a push by academics to boost research on the subject, amid fears that investors are allocating capital using unsophisticated data. The proliferation of funds with responsible investing strategies has spurred a push by investors for greater disclosure from companies alongside a burgeoning field of academic research. Although it is still a niche part of the wider financial world, the market for environmentally friendly investment products is growing rapidly. For example, $77bn of green bonds were sold globally in the first half of 2018, according to recent research by credit rating agency Moody’s. That is up 7 per cent from a year ago.

Barron's: Impact Investing Don’t Call It Charity

Three years after Amit Bouri’s birth in Northern California, his parents divorced. His mother returned to school to study accounting. She and her son would be on public assistance for the next six years, until she finished her degree and started her career. Bouri’s social conscience, and his awareness of the value of a social safety net, date back to those days. Now, the former strategic consultant runs the Global Impact Investing Network, an organization of investors seeking to achieve social and environmental impact as well as competitive returns. It’s a fast-growing segment: TPG, the big private-equity firm, recently raised $2 billion for an impact fund. We chatted with Bouri, 40, about the landscape for impact investing. Here are some excerpts from our conversation.

Ignites: DWS Launching ESG Money Market Fund

DWS is converting its $307 million Variable NAV Money Fund into what appears to be the industry’s first money fund screening for environmental, social and governance, or ESG, criteria. Around Oct. 1, the fund will be renamed the DWS ESG Liquidity Fund and adapt its mandate, according to a regulatory filing last month.

Responsible Investor: ESG Country Snapshot – US

The election of Donald Trump made writing about US sustainable finance policy, regulation and government activity, and the country’s approach to its Nationally Determined Contribution (NDC) a very simple matter, because now there is no policy; regulations have been eliminated or reduced; the Paris Agreement was dropped and the World Bank’s assessment of the US NDC is laughable. Initially, there was panic in the sustainability world at his election, but as the months have passed it has become clear that Trump’s policies are spurring investors and corporations to greater efforts in sustainability – particularly climate change – than might otherwise have been likely under a president that did not find it politically expedient to deny climate change.


Medium: Opportunity Zones - Moving Toward a Shared Impact Framework

By U.S. Impact Investing Alliance, Federal Reserve Bank of New York, Beeck Center for Social Impact & Innovation

Participants discussed the potential for a shared framework to evaluate the impact of investments in Opportunity Zones. Dr. Rajiv Shah, President of the Rockefeller Foundation, and Dr. Eric Belsky, Director of the Division of Consumer and Community Affairs for the Federal Reserve Board of Governors, provided opening remarks signaling support for ensuring that resulting investments benefit low-income communities. Several critical takeaways emerged from the day’s discussion and informed potential next steps, which include developing a shared understanding of how to measure impact in Opportunity Zones and helping shape the market for Opportunity Funds. Other key aspects include encouraging community engagement, market transparency around baseline transactional data, and coordination across a wide range of stakeholders.

The Financial Times: New Agency Will Boost US Investment in Emerging Markets

By Aubrey Hruby, Africa Expert Network

In both the House and Senate versions (co-introduced by Senators Bob Corker and Chris Coons, and Congressmen Ted Yoho and Adam Smith, the Build Act calls for the establishment of an International Development Finance Corporation that will have new, streamlined investment capabilities. This new IDFC will subsume the current US government development finance institution, the Overseas Private Investment Corporation (Opic), as well as several USAID credit facilities and the agency that provides financing for feasibility studies in emerging markets. The proposed IDFC will be Opic on steroids. It will advance American interests in three critical ways: 1) it will enhance global competitiveness relative to US trading partners; 2) it will support US firms seeking opportunities in frontier markets and 3) it will eliminate institutional inefficiencies.

Reuters Breakingviews: ESG Ratings Arents Reliable Enough

By Shiva Rajgopal & Richard Foster, Columbia Business School

Investors rarely have the expertise or the resources to invest in measuring the ESG attributes of a company. Therefore, they and most of their fund managers rely on commercial intermediaries to supply information about ESG ratings, such as MSCI and ASSET4. The problem is, measuring the environmental (the “E”) and social impact (the “S”) of a firm is extremely difficult. It’s also complicated to measure corporate governance (the “G”) because outsiders can only observe the composition of the board, but not what the board actually does. So what data do these agencies use in their analysis and how do they arrive at a rating?

The Chronicle of Philanthropy: Impact Investing Can Fight Racism and Wealth Gaps — if Conducted in New Ways

By Rodney Foxworthy, Invested Impact

"It is not a risk to invest in black and brown people fighting for liberation. It’s the surest bet. When we have the resources to lead our own struggles, the world is transformed." These words were spoken by Charlene Carruthers, an activist and and national director of the Black Youth Project, at a keynote panel at this year’s PolicyLink Equity Summit. They reverberated across an audience of organizers, leaders, and donors from around the country who are fighting for economic and racial justice.

Investment Europe: As ESG Data Sources Grow, So Do the Number of Pitfalls – RAM AI

By Nicolas Jamet, RAM Active Investments

The struggle for many investors is incorporating those ESG factors which can enhance a portfolio’s risk-adjusted performance. Countless academic papers which study the relationship between corporate & social responsibility and a stocks’ performance reach contradictory conclusions on this point. Below we examine the common pitfalls that befall investors in this space, below we’ve outlined the primary reasons that these can occur

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