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.
Revaia, Europe’s largest female-founded venture capital firm, has successfully raised €150 million ($160 million) for its second fund, Revaia Growth II. The funding was secured from sovereign wealth funds, family offices, and institutional investors across Europe, with support from existing partners like Bpifrance and new backers such as mutual insurer Carac and the European Investment Fund.
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More Stories on ESG and Sustainability
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.
Van Eck will soon launch the VanEck Vectors Sustainable Muni ETF.
The fund manager will meet investors’ growing preference for sustainable investing by offering it inside of a fixed income vehicle. It filed with the SEC for its plans to launch the VanEck Vectors Sustainable Muni ETF
Institutional investors are pushing hedge funds to adopt ESG in their investment decisions. These investors see ESG investing as a way to serve their own long-term interests and wider society. This is the key takeaway of a new report: Sustainable Investing: Fast-Forwarding its Evolution.
Trillium Asset Management CIO John Quealy says that his firm is selling itself to Perpetual. Trillium is a Boston-based ESG equity and fixed-income manager that launched in 1982. Perpetual has been around since 1886 and is one of the oldest financial firms in Australia.
Over the next five years, Melinda Gates’ Pivotal Ventures, an investment and incubation company, will invest $50 million to create more opportunities in the tech sector for women.
Last year, Gates published “The Moment of Lift: How Empowering Women Changes the World.”
Last year, Gates had pledged an amount of $1 billion towards empowering women over the coming ten years. The current investment of $50 million is a part of that pledge and will cover Chicago and two unnamed cities.
Biodiversity is now in the same league as climate change from an ESG perspective. AXA Investment Managers, BNP Paribas Asset Management, and Sycomore Asset Management want investors to focus on biodiversity preservation.
State Street Global Advisors will vote against companies that lag behind on ESG standards. The company stands as one of the largest shareholders in public companies due to its stance as a global index fund provider. The firm will lean on its “responsibility factor” a system that measures the performance of companies on ESG metrics.
Act Analytics announced the launch of a new Environmental, Social and Governance (ESG) portfolio analytics platform. The new platform allows RIAs to compare, contrast, and construct customized ESG portfolios. The new Act Analytics technology combines analytics and more than 200 ESG factors. It allows RIAs to “x-ray” securities, funds and portfolios to assess for ESG levels. They can also construct custom, values-based portfolios for clients.
Miners have accepted that Environmental-Social-Governance (ESG) criteria will measure their commitment to sustainability and the impact of their operations on society.
Going a step further, mining companies have also come to realize that ESG compliance leads to the creation of shareholder value and attendant social benefits such as better working conditions. Further, they recognize that investors, employees and host governments will welcome those miners that have a record of credible ESG performance.
That ESG is causing a sea change in miners’ approach to societal obligations is apparent. But, says EgonZehnder, they should be doing more.
“We’re sounding the alarm bells, “ said MSCI chairman and CEO Henry Fernandez on CNBC’s Squawk on the Street. If you are an investment institution and you’re not embracing this and taking it into account, it’s going to be at your own peril,” said Fernandez. He warned ESG is a “Permanent Change in the Way Capitalism Works.”
It’s the 50th annual World Economic Forum at Davos. Nasdaq President and CEO Adena Friedman wrote in LinkedIn on Monday: “As we look ahead to a new year and a new decade, it’s far from clear that our world can be described right now as either cohesive or sustainable.” However, Friedman is enthused by the progress on ESG during 2019 and the prospects for it in 2020. Therefore, “2020 is increasingly looking like it may be the tipping point year for ESG investing,” said Friedman.