What's New(s) in ESG: July 30, 2018
Here are the top stories in ESG from the U.S., the EU and around the world.
The New York Times: What’s Behind a Pitch for the Little-Guy Investor? Big Money Interests
By Andrew Ross Sorkin
The group calls itself the Main Street Investors Coalition. It is a Washington organization that purports to represent the little guy — the retail investor that it says has no voice in corporate America. The group has been not-so-quietly circulating a white paper and various studies in hopes of influencing an examination by the Securities and Exchange Commission of regulations that affect investors. The group has been quoted in the news media and had op-eds published in The Hill, The Washington Examiner and elsewhere. And yet the Main Street Investors Coalition has nothing to do with mom-and-pop investors. (Read more: MSNBC)
Morningstar: Millennials Lead Responsible Investing Movement
By David Brenchley
Sustainable investing could be set to benefit from millennials’ coming inheritance windfall, as younger generations continues to drive the trend. However, wealth manager Barclays notes that the investment industry must engage older investors if the ESG movement - investing with environmental, social and governance impact in mind - is to gain maximum scale. Barclays’ latest Impact Investing Report, which surveys 2,000 investors, shows the number of investors that have made an sustainable investment has increased by two-thirds, to 15%, since 2015. However, this increase has been driven by millennials. (Read more: International Adviser)
Fortune: Shareholder Wants Zuckerberg Out as Chairman After Facebook Loses $146 Billion
By Chris Morris
Investors are holding Mark Zuckerberg’s feet to the fire on the heels of a disappointing earnings report that caused shares to crater in after-hour trading Wednesday, with one drawing up a proposal that the social media site’s founder be removed as chairman. Trillium Asset Management, an activist investor that has tangled with Zuckerberg before, is leading the charge, filing the proposal hours after the earnings report, citing the company’s “mishandling” of several crises, including Cambridge Analytica and Russian interference in the 2016 election.
IPE: UK Government Urged to Develop ‘Responsible Investing Framework’
By Susanna Rust
The UK government should work with the pensions and investment sectors to establish an “agreed responsible investing framework”, a consultancy has suggested. Aon made the recommendation in its response to a consultation by the Department for Work and Pensions (DWP) on regulatory changes aimed at “clarifying and strengthening” trustees’ investment duties, in particular with respect to environmental, social and corporate governance (ESG) matters.
Financial News: Europe's Biggest Pension Funds Dump C02 Polluters
By Mark Cobley
More than half of Europe’s 20 largest pension funds have taken steps to dump investments in companies that produce too much CO2, as investors’ efforts to combat climate change gather pace. Executive Analysis of the continent's biggest funds show that 11 of the 20 pension schemes have sold out of companies that contribute to global warming, with PMT, the €70bn Dutch pension fund, becoming the latest to ditch a top CO2 polluter.
Ai-CIO: CalPERS Begins New ESG Efforts
By Randy Diamond
The California Public Employees’ Retirement System (CalPERS) is conducting new initiatives in efforts to determine how its investment returns will be impacted by climate change, technological innovations that are reshaping the economy, and corporate pay practices that lead to inequities in workers’ pay. The initiatives were disclosed by Beth Richtman, the pension plan’s new managing investment director, sustainable investments, in an interview with CIO. Richtman, formerly a CalPERS portfolio officer in its real assets program, was named to the newly created sustainability position in April. Richtman said the climate change effort will involve climate mapping to determine how rising global temperatures should be assessed relative to CalPERS’s portfolio of stocks and real assets.
Ai-CIO: NY Pension Fund to Divest Private Prison Holdings
By Michael Katz
New York State Controller Thomas DiNapoli has approved a new policy that calls for the $206.9 billion New York State Common Retirement Fund’s to purge its investments in companies that own or operate private prisons. “The updated policy applies to all asset classes of the New York State Common Retirement Fund and will eliminate the fund’s direct holdings in private prison companies,” Jennifer Freeman, director of communications for the Office of the State Comptroller, said in an emailed statement. “Because of the limited size of these holdings, imposing these restrictions will not negatively impact the fund.”
Financial Times: Index Funds Must be Activists to Serve Investors
By Cyrus Taraporevala, State Street
Efforts by large index fund managers to engage with public companies have recently come under attack from some business leaders. They complain that we are misusing our rights as shareholders to enforce arbitrary political or social “values” because we raise environmental, social and governance concerns with the boards of the companies in which we invest. This completely misrepresents the mission of State Street Global Advisors and other large index fund managers. We seek long-term value for millions of ordinary investors in a world that has become increasingly obsessed with short-term results. That goal, not some political agenda, is why we have developed a rigorous, research-based shareholder engagement programme. We raise all kinds of issues with boards that might materially impact their company’s ability to generate sustainable returns over the long haul.
Financial Times: Lack of Market ‘Plumbing’ Holds Back Sustainable Investing
By Alex Weber, UBS
Unlike pure ethical investing, SII assets seek to deliver rates of financial return that are comparable to traditional investments, while also generating positive social and environmental outcomes. Academic research shows that this is more than a pipe dream. A 2015 review of more than 2,000 studies found that integrating sustainability measures improves, rather than harms, operating performance. Yet SII funds remain niche within total global wealth, which reached $280tn last year. Why should that be? The answer lies in a lack of financial “plumbing”. Three crucial pieces of market infrastructure are incomplete for the sector. If we can find ways to construct and strengthen them, we can propel sustainable investing into the mainstream.
Stanford Social Innovation Review: The Next Step in Impact Investing: Breaking the Shackles of Extractive Thinking
By Stu Fram, RSF Social Finance
Through a triple-bottom-line approach, businesses and investors have broadened the definition of “return” to encompass results beyond profit. In practice, however, investors rarely pursue social and environmental benefit in a return-agnostic or even capital preservation-agnostic way. We typically conceive of risk—an important factor considered in the course of due diligence—as risk to principal. Even for impact investments, financial gains and losses remain our primary evaluative prism. The marriage of “doing good” and “doing well” remains a servant-master relationship. My intention here is not to point fingers. As an impact-driven capital intermediary, RSF Social Finance faces these same questions and challenges. We’ve taken some important steps by shifting to a community model for setting interest rates and by innovating the shared gifting model. And yet, we realize that other elements of our work—such as our social enterprise loan fund’s collateral requirements, risk-based pricing model, and requirement for personal guarantees—may be at odds with our intention to create long-term social, economic, and ecological benefits.
The Hill: Rural America is Ripe with Potential, Starving for Capital
By Matthew McKenna, Georgetown University
Investment in venture-backed companies in the United States reached $57 billion in almost 4,000 deals in the first half of 2018. Yet, only a fraction of those dollars found their way to funds and companies based in rural America. Last year’s tax bill and the Opportunity Zones provisions are also a source of great potential for incremental equity investments. About 23 percent of the state-designated investment zones are located in rural America. Now it is imperative to align potential opportunity funds with opportunities to invest in rural communities. The Senate version of the 2018 Farm Bill also includes language that would expand the opportunities for RBICs, as well as create Rural Innovation Centers, focused on spurring innovation in rural areas. Both RBICs and Rural Innovation Centers are included in the bipartisan Rural Jobs and Investment Act of 2018, a crucial step to addressing these issues within the Farm Bill.