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What's New(s) in ESG: July 2, 2018

Dmitriy Ioselevich

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


Wealthy Millennials Fuel Impact Investing Gains

  • Impact investing continues to gain momentum among high-net-worth Americans in 2018, largely driven by younger investors’ commitment to socially responsible companies, according to a report released Tuesday. Overall, 40% of high-net-worth investors surveyed by U.S. Trust, the private wealth management arm of Bank of America, either own or invest in companies with a strong environmental, social, political, and governance (ESG) track record, compared to 38% two years ago. The company’s annual wealth report surveyed 1,000 high-net-worth individuals—those with investable assets of at least US$3 million, excluding their primary residences—in January through February. The upward swing is led by millennials, 77% of whom either own ESG or include impact investments in their portfolio. (Barron’s: read more, Yahoo! Finance: read more)  

Sign Of The Times: Designation for Financial Planners Underscores Demand for Impact Investing

  • Social enterprises seeking funding—or planning to do so soon: There’s a new development with potentially productive implications for you. An impact-investing oriented professional designation for financial advisors was recently unveiled by the College of Financial Planning, in collaboration with the US SIF: The Forum for Sustainable and Responsible Investment. The move is another indication of an ever-increasing demand among investors for more impact-related options—and a growing pool of funding for impact enterprises. (Forbes: read more)

Fidelity Adds ESG Index Fund to Bond Roster

  • Fidelity Investments unveiled the Fidelity Sustainability Bond Index Fund (FNASX) on June 26 to offer individual and institutional investors additional environmental, social and governance investing options. The NYSE-listed fund seeks to track the Bloomberg Barclays MSCI U.S. Aggregate ESG Choice Bond Index composed of US dollar-denominated, investment-grade fixed-rate debt issues. Its retail share class costs 20 basis points while its premium and institutional shares costs 13bps and 10bps, respectively. (Fund Action: read more, Investopedia: read more, Fidelity: read more)

Vanguard Files for Two ETFs with ESG Focus

  • Vanguard filed a preliminary registration statement with the Securities and Exchange Commission for two exchange-traded funds to complement its existing environmental, social and governance (ESG) mutual fund. The two new funds, the Vanguard ESG U.S. Stock ETF and the Vanguard ESG International Stock ETF, will join Vanguard's FTSE Social Index Fund. The two new funds are expected to begin trading in September. (InvestmentNews: read more, Bloomberg: read more, Barron’s: read more)

Billion-Dollar Babie: Can Big Private Equity Funds Point the Way to Impact-Driven Growth?

  • One of the striking developments in impact investing in recent years is the growth of fund managers that have crossed the billion-dollar mark in assets under management. Some, such as Leapfrog Investments have grown up as impact funds. Others, such as TPG Growth’s Rise Fund (with $2 billion) were hatched inside “conventional” private-equity firms. KKR is out raising for a $1 billion Global Impact Fund. It’s not easy to put a billion dollars to work for impact. So ImpactAlpha is taking a look at where big private equity firms are placing their bets, starting with our own dealflow and other coverage. (ImpactAlpha: read more)

Facebook Should Be Dropped by Sustainable Funds, Nordea Says

  • Facebook Inc. should be excluded from the holdings of money managers serious about ethical investing, says the head of sustainable funds at the biggest Nordic bank. Sasja Beslik, who oversees sustainable finance within Nordea Bank AB’s $370 billion asset management unit, decided this week to divest holdings of the social networking giant. The move was provoked by what he characterized as an “unresponsive” approach by Facebook to Nordea’s queries on how the Cambridge Analytica scandal was being handled. (Bloomberg: read more)

Investors Demand Nestle, Pepsi and Others Cut Plastic Use

  • A group of 25 investors managing more than $1 trillion in assets are demanding that Nestle SA, PepsiCo Inc., Procter & Gamble Co. and Unilever NV reduce their use of plastic packaging, calling it environmentally damaging. The initiative was organized by As You Sow, a nonprofit shareholder advocacy group that pushes companies to act responsibly. It was signed by investment managers including Hermes Investment Management, Impax Asset Management, NEI Investments and Walden Asset Management. (Bloomberg: read more)


If You Want to Do Good, Expect to Do Badly

  • Investors are increasingly convinced that they can buy companies that behave better than the rest and make just as much money. They are wrong. The basic argument is encapsulated in “doing well by doing good,” a slogan flogged by the marketers of funds branded sustainable or socially responsible, or relying on environmental, social and governance metrics to determine their investments. Ethically sound companies, the argument goes, wind up being better investments, and by voting with their dollars, investors can nudge more companies onto a righteous path. It’s a win-win. Alas, in reality investors have to choose between two principles that are fundamentally in conflict: They can vote their beliefs with their dollars, buying more of the stocks of the best behaved and less of the worst. Or they can be profit-minded capitalists, treating environmental, social and governance—”ESG”—scores as measures of risk to help find good investments. They can’t do both. (The Wall Street Journal: read more)

Can An 'Impact ETF' Drive Social Change?

  • But while the scale of socially conscious investing has swelled, an important question remains unanswered today: Does secondary market trading of a large, listed company’s shares actually have any influence on that company’s behavior on social or environmental issues, or how it allocates capital? For example, does buying the SPDR MSCI ACWI Low Carbon Target ETF truly help address climate change? Will investing in the Barclays Women in Leadership ETF actually advance the careers of women in the workplace? For my organization, JUST Capital, this is more than simply a theoretical question, as we recently helped launch an ETF designed to invest in companies that are driving positive change for workers, customers, communities, and the environment – and so we have real skin in the game. (Forbes: read more)

The Social Impact Revolution Is Here

  • It’s been said that revolutions come from bad harvests. What some are calling the “Impact Revolution,” or the pursuit of social impact alongside financial goals, may be no different. Sir Ronald Cohen, a venture capitalist and leader in the social impact space, believes the “bad harvest” that precipitated the Impact Revolution was the crash of the financial markets in 2008. “We began to be aware that the system was actually creating social problems, instead of solving them. And the excesses of what many called greed — and others might call just financial ambition — was something that we had to cope with,” Cohen said. “And impact investment, and impact creation more generally, is the answer to the 2008 crash, in part.” (Forbes: read more)

Why is Impact Investing Particularly Relevant in India?

  • What does impact investment mean to an emerging economy such as ours? Why is it important? Can it help solve a number of social challenges that affect the day to day functioning of millions of Indians? What are the different trends that affect the impact investment market in developed and developing countries? These are some questions that intrigued me as a student of Development Economics at LSE. In the past year, working in the impact investment industry in India, I sought answers to these through my interactions with social enterprises, impact investors and development sector experts across the country. (Medium: read more)

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