Robot Bias, Clean Coal, & TCFD - Weekly Roundup #6
Retail investors will push institutional investors towards more activist shareholding over time. Their preferences could force an end to the "engage or divest" debate.
Hi there,
I hope you had a great week. Every Sunday I’m putting together this brief roundup of what I’ve been reading, watching and listening to. I'll write longer pieces on weekdays. The next edition of my ESG Alphabet Soup Series exploring the Greenhouse Gas Protocol will land in your inbox on Wednesday. I look forward to getting your feedback in the comments or on Twitter.
Regards,
Brennan
Reading Time: 10 minutes
Chart Of The Week
Source: Refinitiv 2020 ESG Playbook
Quote Of The Week
While the ideals are noble, the labour screens that ETFs use are more likely to exclude big employers, the study found. This is because companies with more employees are more likely to have labour issues and pay gaps. As such, the net result of ESG screening can be that job-rich companies are removed from ESG ETFs. Meanwhile, companies that create no jobs at all – and by extension, no jobs for women, and no trade unions – make the cut, because there are no labour issues.
…
Deluard explained: “Companies with no employees do not have strikes or problems with their unions. There is no gender pay gap when production is completed by robots and algorithms. Biotech labs where a handful of PhDs strive to find the next blockbuster molecule have no carbon footprint.”
Source: ESG ETFs promote unemployment and winner takes all capitalism, study finds
What I’ve Been Reading
China excludes clean coal projects from list eligible for green bonds:
China has sought to use green financing to pay for its transition to cleaner modes of growth, but the previous catalogue allowed it to be raised for the “clean use of coal”, including coal washing plants that remove impurities, and technologies that cut pollution during combustion.
The inclusion of “clean coal” in the 2015 list had put China at odds with global standards, a point of contention for some international investors and many environmental groups.
ESG funds – the real deal or pretenders?:
“When they [the institutional investors] are talking about ESG they are thinking about looking at it through an investment prism – i.e. what will the ESG risk do to the value of this company?”
“However when the mum and dads are looking at this they are looking at it through the prism of what are the ESG risks as they pertain to me and what does this mean for my community, my planet and my grandchildren,” Adams said.
“The bottom line is that the perspective the institutional fund managers and the mum and dad investors are coming from is different,” he said.
Renovation firms' stock rises on EU 'green recovery' boost:
A pledge from European policy-makers to pour funds into energy-saving refurbishments of old, draughty buildings has boosted the outlook for the green construction sector as it seeks to shake off the impact of the coronavirus, fund managers said.
‘With renewables increasingly being held to ransom, ESG needs a risk lens’:
Whilst it is important to keep our ESG hat on, we also need to view ESG investment opportunities with a risk lens. The increasing focus of cyber-related risks stems from the interconnectedness of new enabling technologies such as smart-meters, renewable energy generation, and battery storage solutions. The Energy Futures Lab at Imperial College recently released a report on the digitalisation of energy for the UK, which highlighted both the benefits of innovation (AI, IoT, blockchain) and the need for flexibility in energy regulation.
Now More Than Ever, Facebook Is a ‘Mark Zuckerberg Production’:
“Not a democracy” could also describe Facebook’s nine-person board of directors. Mr. Zuckerberg chairs the group, holds a majority of voting shares and controls its dynamics.
The board isn’t exactly a check on his power. Last year, Kenneth Chenault, the former chief executive of American Express, suggested creating an independent committee to scrutinize the company’s challenges and pose the sort of probing questions the board wasn’t used to being asked. The idea, previously reported by The Journal, was swiftly voted down by Mr. Zuckerberg and others.
ESG in the Mainstream: Sell-Side Analysts Addressing ESG Concerns:
As a further indication of ESG’s entry into mainstream investing, equity research analysts are also increasingly incorporating ESG considerations into their reports, which may have significant implications for integrating ESG considerations into views on valuation, quarterly earnings calls and investor dialogues. By way of example, Bank of America Merrill Lynch stressed the importance of integrating ESG factors into investment decisions, and late last year issued a research report that noted that “Environmental, Social and Governance considerations are not optional for investors.”
Adidas and Allbirds are teaming up to create a shoe with a zero-carbon footprint:
The sportswear company and sustainability-focused Silicon Valley-based shoemaker are joining forces to create a high performance sneaker with the lowest possible carbon emissions. It's an unusual partnership of two competitors in the fast-growing eco-friendly footwear space, with the aim of setting a new industry standard for sustainable sneakers.
What I’ve Been Watching
On Thursday evening I watched a great webinar on climate-related financial disclosures. It featured Mark Carney, Reserve Bank of New Zealand Governor Adrian Orr and New Zealand Climate Change Minister James Shaw. It sounds like mandatory climate-related financial disclosures will be legislated in New Zealand soon.
A different take on ESG investing as marketing from billionaire Chamath - “all sizzle, no steak”:
The ESG Alphabet Soup Series
Is ESG Investing Just Marketing Spin? [definitions]
Is ESG Investing Just About Climate Change? [environmental factors]
Social Risks, Modern Slavery, And ESG Investing [social factors]
Governance, The Keystone Of ESG Investing [governance factors]