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What's New(s) in ESG: June 25, 2018

Dmitriy Ioselevich

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


Social Investing Has a New Message

  • Once a fringe concept, environmental-, social- and governance-based investing has hit the mainstream. A weighty-sounding proclamation by JPMorgan Chase & Co. in a recent report trumpeting the arrival of so-called ESG investing may sound like rhetoric from Occupy Wall Street: “Civil society is calling on the financial-services industry to advance sustainable development goals,” the report said. But the many banks, investment firms and financial-data providers scrambling to roll out new ESG-branded products—particularly in bond markets—are also trying to get out a less-lofty message. Investing by ethical and environmental standards is no longer mainly about making the world a better place, they say. It’s about making more money by avoiding losses. (The Wall Street Journal: read more)

Morgan Stanley: Firms Failing to Demonstrate ESG Performance Benefits to Investors

  • A Morgan Stanley report entitled Sustainable Signals polled 118 public and corporate pensions, endowments, foundations, sovereign wealth entities, insurers and other large asset owners globally, including 67 in Europe. Some 84% of respondents said they were considering or already pursuing ESG integration and nearly half are already implementing it in their investment decisions. However, 24% said proof of financial performance presented a barrier to adopting ESG. A further 23% said the quality of ESG data was a barrier and 20% felt hindered by the quality of available managers. (Read more: Investment Week: read more, Pensions & Investments: read more, Business Wire: read more)

Investors Are Right To Consider ESG Risks, Says New Report By Corporate Governance Association

  • Investors are right to consider environmental, social and governance (ESG) risks because they can impact the worth of intangible assets which make up more than 80 percent of company value, said a new report by the Society for Corporate Governance. The intangible assets that could be subject to ESG concerns include brand names, reputation, top managers, technological know how and a loyal, well-trained and engaged workforce said the study by the professional association for internal corporate governance workers and external consultants. In a highlight, the study pointed to wide-spread worries among companies that ESG research firm (ERF) reports can be prone to errors. (Forbes: read more)

New Study Finds Climate Change Shareholder Resolutions Have No Impact

  • A new study finds that the climate-based shareholder resolutions being so actively pushed by proxy advisory firms and their Environmental, Social and Governance (ESG)-based institutional investors have “no statistically significant impact” on a company’s bottom line, either positive or negative. The study, funded by the National Association of Manufacturers (NAM), was led by the highly-respected PHD economist Joseph Kalt, Senior Economist at Compass Lexecon and is the Ford Foundation Professor (Emeritus) of International Political Economy at the John F. Kennedy School of Government at Harvard University. (Forbes: read more)

Goldman Sachs Pledges $500 Million for Female Founders

  • In an effort to fund more female entrepreneurs and investors, Goldman Sachs Group Inc. said Tuesday it will invest $500 million worth of firm and client capital in businesses and financial products run by women. Called “Launch With GS,” the program will invest capital in businesses run or founded by women. Goldman Sachs will also launch a fund of funds focused on female managers across private equity strategies, which includes helping women build their investment track records. (Bloomberg: read more)

Getting Started in Sustainable Investing

  • Even pinning down what sustainable means is no easy feat. It’s an umbrella term for a variety of investing styles that evaluate companies based on environmental, social, and governance, or ESG, factors, alongside traditional stock-picking metrics. About $23 trillion in pensions, separately managed accounts, and funds are invested in this way, according to industry group US SIF. But just $2.5 trillion is in funds with specific mandates to incorporate ESG analysis throughout their investment process, according to a JPMorgan report published last month. That’s still a good chunk of money—enough to encompass an array of styles and terminology. Before diving in, investors should know a few broad categories and how they differ. (Barron’s: read more)

An Investor Wants Wall Street to Get Serious About Gender Equality

  • Your average hedge fund or venture capital shop might not care if it’s run like a boys’ club. But what if the funds’ biggest clients were to start paying attention? Consider Verger Capital Management, which oversees $1.7 billion for nonprofit investors, most notably Wake Forest University’s endowment. It recently surveyed the 89 outside money managers it hires about their investment policies when it comes to environmental, social, and governance issues, or ESG. Think fracking or guns. Although Verger isn’t necessarily screening all such businesses out of its portfolio, it sees them as a potential source of risk. “We don’t want to be the moral police,” says Chief Executive Officer Jim Dunn. “We just want to understand what’s in the portfolio right now.’’ (Bloomberg: read more)

Are Impact Bonds and Outcome Funds a Solution to the Global Learning Crisis

  • Utilizing outcome-based schemes for education has the potential to encourage spending on what is important, as well as improve execution in delivery. Social and development impact bonds are a form of outcome-based financing which harnesses private capital to leverage donor or public funding to spend on interventions that work. A related and relatively new phenomenon, Outcome Funds for Education, may further help address issues of fragmentation and inequities in funding. Given the nascence of these tools, there is much to be learned and there are some tough challenges to be reckoned with. (Brookings: read more)


Corporate Resolutions On Social Issues Serve Activists, Not Shareholders

  • America’s growing energy dominance is helping transform our economy and revitalize the forgotten parts of our nation. But there is a move afoot by wealthy investment firms and environmental activists to undermine that success and turn back to a time of scarcity by making climate change an issue in the boardrooms of energy producers big and small. Under the guise of socially responsible investing or ESG – environmental, social and governance – they are attempting to “decarbonize” our economy one corporation at a time. (Forbes: read more)

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