ESG and Sustainability
The rise of ESG factors in investment decision making will have a dramatic impact on returns and opportunities in the 21st century. A recent survey by LGT Capital Partners and Mercer showed that 57% of respondents believe that incorporating ESG standards into investment decisions will raise returns. Just 9% argued they reduce returns on investment.
Waratah Capital Advisors Ltd, a Canadian alternative investment manager, announced Monday its launch of the Waratah Alternative ESG Fund. The mutual fund is Waratah’s second liquid alternative offering, and is powered by the firm’s alternative ESG strategy.
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More Stories on ESG and Sustainability
Coral reefs, one of the most precious of Earth’s ecosystems are in grave danger. Globally, half have already died. The other half could vanish by the end of this century, according to Tom Moore, coral reef restoration program manager for the National Oceanic And Atmospheric Administration (NOAA). Efforts by human divers are inadequate to restore coral reefs. We need AI and robotics to reverse coral damage, says the NOAA.
Northern Trust (NASDAQ: NTRS) will now provide institutional investors with added insights, analysis, and transparency into their ESG exposures. Northern Trust will combine its substantial database of global custody asset information with data from information services provider IdealRatings and issue the ESG Analytics Summary.
Morningstar, (Nasdaq: MORN) announced an agreement to acquire Sustainalytics, a globally recognized leader in environmental, social, and governance (ESG) ratings and research.
Morningstar currently owns an approximate 40% ownership stake in Sustainalytics, first acquired in 2017. Under the terms of the deal, Morningstar will buy the remaining approximate 60% of Sustainalytics.
BlackRock will place greater emphasis on climate issues moving forward. The alternative assets manager worries that firms will stop prioritizing climate and sustainability issues in the face of COVID-19. A new stewardship document expands on the firm’s push on companies to disclose reports on their impact on water pollution and emissions.
A new report by MSCI said that bonds with higher ESG ratings outperformed the full bond market in Q1. The report suggests that highly rated ESG bonds can weather difficult economic challenges like the one we face today.
Rating agency Moody’s is stepping up its assessment of companies’ performance on ESG counts. An analysis of Moody’s (NYSE: MCO) private sector rating actions last year revealed that ESG risks were cited as material in a third of the cases.
The coronavirus pandemic throws up ESG in a new light.
Far from spelling doom for ESG investing, the pandemic may have given it fresh, positive potential. An article by Marlene Satter in benefitsPRO outlines nine ways the pandemic could affect ESG, yet launch it as the new normal in investing. And ESG ETFs could benefit from a fresh tailwind.
French asset manager Lyxor is the first ETF manager to launch a suite of ETFs that focus on the objectives of the European Union’s Climate Transition Benchmarks. These benchmarks target an immediate 30% reduction in carbon intensity and a 7% annual emission reduction trajectory.
The usage of solar batteries varies widely from home to home. That’s because each home is different – from the roof’s orientation and pitch to nearby trees that cast a shadow on the panels, even weather conditions. Optimizing solar battery usage to adjust for such variables, amidst real-time and in changing weather conditions, is a challenge. IBM (NYSE: IBM) is combining weather data and AI to solve this.
ESG investment funds with long track records are beating new competitors as the markets continue to unravel. Roughly 400 of the 2,800 ESG funds were in positive territory for the year as of last Thursday evening. Just 45 of the funds had gains of 10% since January 1.
The data, compiled by Bloomberg, says that 70% of those ESG funds opened before 2015.
Standard Life ESG investment will be a major trend in the year ahead. Standard Life Aberdeen has announced plans for 25 new funds centered around sustainability. According to Citywire, the firm is looking to bolster its brand and incorprate ESG into almost every investment decision. Keith Skeoch announced the plan during the publication of the company’s full-year financial performance this week.
A new report from Opimas states that the value of ESG data could top $1 billion by next year. The firm’s newest report ESG Data Market: No Stopping Its Rise Now, says that the market topped $617 million in 2019. The research group projects annual growth of 20%, and 35% growth for ESG indexes.
Brown University has divested 90% of its holdings in companies that extract fossil fuels. In a letter to the campus Wednesday, President Christina Paxson announced the decision. The school’s endowment will eventually liquidate the rest of its holdings.
WisdomTree has launched a battery solutions-themed ETF that trades on the London Stock Exchange.
The WisdomTree Battery Solutions UCITS ETF (LON: CHRG) comes with a total expense ratio (TER) of 0.40%.
The fund tracks the price and net dividend performance, before fees and expenses, of the WisdomTree Battery Solutions Index. This index was designed in collaboration with energy experts Wood Mackenzie.
Sarah Riopelle is a senior portfolio manager at RBC Global Management and oversees a $107 billion portfolio. She’s effectively responsible for the asset-management division at the Royal Bank of Canada, which is the fifth-largest lender in North America. In an interview with Bloomberg this week, Riopelle discussed her sentiment on the markets in 2020. She also provided a forecast of expected returns and chatted about ESG criteria.
Mankind’s emission-generating activities have loaded the atmosphere with carbon dioxide (CO2), thus triggering climate changes. However, promising technology that recovers the CO2 from the atmosphere is under development. This CO2 may either be resold or converted into blocks that can be used for construction. These blocks may also be stored permanently underground. The problem is to locate the ‘silos’ or natural structures below the surface where the carbon blocks can be parked. AI may help locate these structures from earthquake data.
Invesco, the fund manager with $1.23 trillion in assets under management as of December 31, 2019, has launched in Europe a new, first-of-its-kind, sterling-denominated, corporate bond ETF with an ESG tilt. The Invesco GBP Corporate Bond ESG UCITS ETF (IGBE) is listed on the London Stock Exchange with a total expense ratio (TER) of 0.10%.
RWC Partners fund manager Graham Clapp warned that sustainable investing trends are poised to form a possible bubble in the markets. He compared it to the tech boom of the 1990s.
“You can liken it to the tech bubble where people wanted to have exposure to the new economy stocks, so a lot of money poured into certain kind of business models and valuations were pumped up and incredibly stretched. When such large influxes occur – as we’re currently seeing with ESG – then supply and demand mean the price is going to change,’ Clapp said.
Andrew Chung, of 1955 Capital, says climate change is the perfect storm.
A huge market is shaping up around ClimateTech, a category of solutions that enable governments, companies, and individuals to combat climate change. There is a sudden shift in investors’ preference for sustainable and climate-friendly companies and products. The once uncared for and given-up-for-dead moniker, “CleanTech,” could become a $4.3 trillion market by 2030 in its new avatar as “ClimateTech.”
Investors are cracking the whip to ensure that their demands for ESG (environment-social-governance) options are met. Money is flowing to ESG-focused ETFs and mutual funds, while hedge funds that are slow on the uptake are being cold-shouldered. BlackRock CEO last month told investee company CEOs that “we are on the edge of a fundamental reshaping of finance,” with reference to climate change and climate risk. He further warned that BlackRock will be disposed to vote against non-compliant management and board directors. Clearly, the tide has turned decisively in favor of ESG investing.
Lyxor launches three new ETFs for investors looking to invest in high yield bonds with a sustainability angle.
Lyxor’s new ETFs have a total expense ratio (TER) of 0.25%, the lowest among ETFs tracking High Yield indices with ESG filters.
BlackRock ESG ETFs have emerged as a popular draw among institutional investors. This week, the alternative investment manager announced a $600 million investment from Finland’s largest pension insurance firm. Ilmarinen invested the capital in the iShares ESG MSCI EM Leaders ETF (NASDAQ: LDEM). This was the firms’ second investment in iShares ESG strategies.
Credit Suisse announced the addition of three new, “ultra-efficient” ETFs to its range of funds. These funds will supplement the existing Credit Suisse index Funds.
Credit Suisse Asset Management had an AUM of CHF 132 billion as of end-December 2019. It has a core business of index funds and has been replicating indices for a wide array of asset classes, regions and currencies since 1994. Currently, it has a range of more than 90 index funds on offer. It has extended this capability to ESG sustainability indices.
Two of the new funds have a focus on environmental, social and governance (ESG) aspects.
Curtis Sneden, president of the Greater Topeka Chamber of Commerce is concerned about repercussions from activist hedge fund Elliott Management’s broadside against regional utility Evergy, Inc. (NYSE: EVRG). Feared activist hedge fund Elliott wrote to Evergy on January 21 requesting changes that would create value for shareholders. New York-based Elliott is owned by billionaire Paul Singer.
It owned an “economic interest” in Evergy worth $760 million as of the date of the letter.