Showing posts with label ESG. Show all posts
Showing posts with label ESG. Show all posts

Friday, June 18, 2021

A Focus on the Future - Bloomberg’s Latest ESG Webinar - Alice Gabidoulline, Impact Investing Intern, University of Michigan

A recent webinar titled ESG Integration Across Asset Classes displayed Bloomberg’s focus on recognizing the need for data centered, environmental, social and governance (ESG) metrics within every investor’s portfolio. Bloomberg is a privately held financial, software, data, and media company headquartered in Midtown Manhattan, New York City.

As a part of Bloomberg’s Portfolio & Index Research Conference, the webinar provided technical details on the firm's efforts to measure ESG. (Creative Investment Research has been measuring ESG impacts since 1989.) A three-pronged approach—analyzing the carbon transition, power sector transition, and climate policies—underlies Bloomberg’s climate scores. 

With a focus on climate impact and commodities, Bloomberg presented two approaches to measuring carbon emissions—the number one priority of the Paris Climate Agreement benchmarks. 

First, Bloomberg experts used company level data and Bloomberg Industry Classification Standard (BICS). Second, they used a life cycle analysis, which sources data from academic studies, industry reports, production models, and government agencies. Within the life cycle analysis, the “cradle-to-grave” concept shows the part of the life cycle that corresponds to the underlying futures contract of the asset. 

Modern futures trading dates to 1730 in Japan. During the 16th century, Western commodity futures also began trading in England. (Investopedia). Society created futures contracts as a means for farmers (sellers) and dealers (buyers) to finance the equipment, wages, and other factors needed to raise crops, thus ensuring food security in the future.

By integrating carbon pricing factors into futures, Bloomberg attempts to ensure climate security. This new, yet historically warranted approach to financial markets and ESG integration emphasizes the importance of re-analyzing the financial tools available to investors today to solve our modern issues in society.

Bloomberg’s ESG reports outline in greater detail the statistical scores-based tilts and mathematical methodologies of this research. This event used a global context by assessing different countries’ scores; Denmark, Sweden, and Ireland received the top three climate scores. 

A comprehensive framework to measure ESG and incorporate it into many asset classes is a strong indicator of leadership in the impact investing space by Bloomberg. The knowledge that this project has highlighted, however, should continue to be explored beyond assigning scores. The same critical thinking that ties the long history of risk-aversion in financing agricultural futures contracts with the need to create risk-aversion frameworks in futures for carbon emissions will lead to greater, structural positive change for all of society.

Thus, ESG integration has applications both in frameworks and indices, and in the larger context of how society should look at financing for a better future, today. 

The speakers at this event were Kartik Ghia, Steve Hou, Casey C. Clark, Aj Lindeman, Robert Huber, Brian Colantropo, Patricia Torres, and Antonio Lazanas. 

This event took place on June 17, 2021 at 9am. 

Sunday, August 30, 2020

Response to Proposed Department of Labor ESG Rule


On June 23, 2020, "the U.S. Department of Labor proposed a rule that would 'update and clarify' the Department of Labor's investment duties regulation. According to the news release issued announcing this proposed rule,

"Private employer-sponsored retirement plans are not vehicles for furthering social goals or policy objectives that are not in the financial interest of the plan," said Secretary of Labor Eugene Scalia. "Rather, ERISA plans should be managed with unwavering focus on a single, very important social goal: providing for the retirement security of American workers."

Our 135 page response, filed on July 26, 2020, concerned the social impact of the proposed rule, and stated that:

"With this proposal, we believe the Administration and, by extension, the Secretary, have violated their oath to protect the public and should resign or be removed. Of course, we understand how committed these specific individuals are to self-promotion, as evidenced by their willingness to damage the public.

We will oppose this draft rule in Federal Court. As a recommendation from a Department headed by a person appointed by a president who conspired with foreign interests to win election so that he could damage the US, (as evidenced, once again, by this action) we believe any proposals put forward are illegal."

We provided a complete listing of all violations of law and custom that the Administration has committed over the past few years, including and leading up to 200,000+ deaths from the COVID 19 crisis.

The letter can be downloaded at: https://drive.google.com/file/d/126T-F0dwZLTdArOyduYZVcLD36Xtlqj_/view?usp=sharing

Tuesday, June 2, 2020

The Intersection of ESG & Covid-19, Lana Feteiha, Impact Investing Intern

COVID-19 has forever altered standard business practices.

Prior to recent events, Environmental, Social, and Governance efforts have been an afterthought. But the global pandemic demonstrates the fundamental role that ESG plays in corporate investments. The presentation focused on three main points: corporations’ social responses and disclosures to stakeholders regarding ESG factors, how investors incorporate ESG factors into business decisions, and how this crisis will affect what happens next.

The first speaker, Martin Whittaker, is the CEO of Just Capital; a non-profit organization that strives to create a more just market in America through the collection of data. Whittaker discussed the importance of corporate social responses in today’s climate by addressing the Environment and Social aspects of the crisis. COVID-19 has resulted in hazardous working conditions, so companies should be prioritizing the wellbeing of their employees. According to Whittaker, the proper treatment of workers is pivotal for investors. Therefore, companies that protect the health and wellbeing of their employees are more resilient. Whittaker applauded the corporate social response of some, stating that the humanity of business has shone through during the crisis, as companies continue to support stakeholders as we slowly start to reopen.

The head of International and Corporate Strategy for BlackRock, Mark Wiedman, spoke next. He detailed the importance of implementing sustainable business strategies, citing that this year, 90% of them have outperformed their conventional counterparts. This statistic is significant because it notes a distinct correlation between ESG efforts and a company’s success. Moving forward, Wiedman believes that corporate strategy, risk management, and human management will be the long-term focus of businesses. Therefore, improved and accurate disclosure of ESG efforts should be a priority.

Katherine Collins, the head of Sustainable Investing at Putnam Investments, expanded on the importance of ESG reporting and data. She acknowledged that the improvement of data has allowed companies to provide more real time data. However, there is still a gap between businesses reporting ESG, and businesses that are not. This gap not only exists because companies are at different points in making their operations sustainable, but also because some companies are disclosing irrelevant information. For the purpose of investing, Collins recommended that ESG reports be tailored to each corporations’ main function. In doing so, ESG reports will more accurately reflect on the efforts of each individual business. This is important because companies shifting to sustainable outlines will attract larger groups of investors. As we shift away from crisis mode, Collins recommends financing sustainable practices and decision making as a long-term solution. Although these efforts are not typically noticeable on a surface level, these types of investments payoff overtime.

The last speaker was John Goldstein, the head of the Sustainable Finance Group for Goldman Sachs. He spoke about ESG as a whole, claiming that some may get caught up in which letter of the acronym is more important. Goldstein sets the record straight by declaring Environmental, Social, and Governance of equal significance since all three components determine the financial performance of a business. He predicts that the key focus of sustainability will be strategic clarity, data, and making information accessible and relevant.

The COVID-19 crisis brought the foundational cracks in certain corporations to the forefront,
emphasizing the importance of ascertaining ESG requirements in order to remain resilient.

Tuesday, March 3, 2020

Growth in ESG Funds. Comments by Jalil Boulahssas, Impact Investing Intern, University of Richmond


According to the Deloitte Center for Financial Services, there has been a significant increase in environmental, social, and governance (ESG) investments since 2017.

This follows a clear trend as the public and the global media have begun to focus on sustainability. As a result of this movement, it is predicted that client-driven ESG investments will reach half of all professionally managed investments by the year 2025. While the dollar amount of ESG investments are highest in Europe, the data shows increased American interest in this investment type that will drive future growth.

According to the Deloitte Center report, the share of ESG investments in the United States has grown from 11% of assets in 2011 to 26% of assets in 2018. One factor driving the growth of ESG mandated funds is client demand from both retail and institutional investors.

In response to this unprecedented growth, government agencies and investment institutions are working to establish consistent definitions, regulations, and growth measurements for the asset category. Consistent measurements and data in this category are key to tracking and evaluating environmentally and socially friendly investments.

The rise of this investment style will benefit environmentally-friendly businesses as well as investment managers as ESG funds, mostly actively managed. As ESG investment funds move forward to their fourth straight year of record inflows, there is no sign of slowing down.

Monday, July 15, 2019

Financial Services Subcommittee Hearing on “Building a Sustainable and Competitive Economy: An Examination of Proposals to Improve Environmental, Social, and Governance Disclosures.”


Last week the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets held a hearing on “Building a Sustainable and Competitive Economy: An Examination of Proposals to Improve Environmental, Social, and Governance Disclosures.”

Several pieces of legislation, or bills, have been proposed, (but not filed yet) in the US House of Representatives regarding Environmental, Social and Governance (ESG) reporting by large corporations.

HR ___: ESG Disclosure Simplification Act of 2019 (Rep. Vargas)
HR ___: Shareholder Protection Act of 2019
HR ___: Corporate Human Rights Risk Assessment, Prevention, and Mitigation Act of 2019
HR ___: To require issuers required to file an annual or quarterly report under the Securities Exchange Act of 1934 to disclose the total amount of corporate tax such issuer paid in the period covered by the report, and for other purposes
HR ___: Climate Risk Disclosure Act of 2019 (Rep. Casten)

The US Securities and Exchange Commission (SEC) has broad rule-making authority to require the disclosure of specific information that it determines to be in the public interest or for the protection of investors. Investors overwhelmingly support greater ESG disclosures to evaluate reputational risks as well as financial performance. Over 2,300 institutional investors worldwide, representing over $80 trillion in assets, are signatories to the UN-sponsored Principles for Responsible Investment which formally commits them to incorporate ESG factors into their investment decisions.

Investors need ESG information to hold managers accountable, enhance the accuracy of stock prices, and ensure a more efficient allocation of capital.

Some of the testimony at the hearing included the following:

Subcommittee Chair Rep. Maloney:
ESG disclosures include environmental issues (climate change), social issues (human rights), and governance issues (political spending by public companies).
Considerable evidence shows that companies with better ESG also perform better financially.
Many companies disclose some ESG info which lacks detail and a standardized format.
Rep. Maloney called for SEC to establish standards for ESG Disclosure to apply to all public companies.
Rep. Juan Vargas:
“Investors increasingly view ESG Disclosures as crucial tools and material information for evaluating a company's financial performance. Research has shown that companies that account for ESG factors tend to perform better with more stable returns.”

From an outline written by Willem Sheetz, Impact Investing Analyst, University of Wisconsin (Madison).

Sunday, March 24, 2019

We are one of the premier firms in understanding and analyzing Environmental, Social and Governance (ESG) trends


We are one of the premier firms in understanding and analyzing Environmental, Social and Governance (ESG), Corporate Social Responsibility (CSR), and impact investing trends.

Our work has focused on long-term changes that will affect and influence the economy, financial system, society and environment at large:
  • We developed the first targeted Mortgage-backed Security (MBS) investment CRA securitization, an MBS pool backed by loans from minority financial institutions. We designed and created the investment in 1992. (See: https://www.creativeinvest.com/wglelca.pdf )
  • On June 15, 2000, we testified before the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises (GSE’s) of the US Congress. We suggested that the GSE’s (Fannie Mae and Freddie Mac) be subject to a thorough “Social Audit.” A Social Audit is an examination of the performance of an enterprise relative to certain social objectives. It also includes a review of ethical practices at the firm. Had they been subject to this audit, certain flaws in their operation which led to their failure, including ethical shortcomings, would have been revealed earlier.
  • Mr. Cunningham is an unaffiliated member of NARALO, the North American Regional At-Large Organization of ICANN, the Internet Corporation for Assigned Names and Numbers.
  • We stated, on February 5, 2015, in testimony to the Norwegian Ministry of Finance (http://www.creativeinvest.com/NorwayTestimonyFeb52015.pdf ) and on April 22, 2015 in testimony to the Government of the United Kingdom: “As the market value of environmental, social and governance factors continues to grow, companies and investment managers will engage in fraudulent practices related to these factors. These practices will range from simple falsification of environmental, social and governance records to more sophisticated, but no less fraudulent methods related to environmental, social and governance ratings.” On September 22, 2015 automaker Volkswagen admitted that “’defeat devices’ used to cheat emissions testing were installed in 11 million vehicles worldwide.
  • On December 26, 2016, we determined that: "Under any conceivable scenario, the (election result) is very bad, and we mean toxic, for democratic institutions in general and for people of color specifically. Bottom line: our Fully Adjusted Return Forecast** indicates that, over time, things will get much, much worse....." See: https://www.linkedin.com/pulse/trumpism-william-michael-cunningham-am-mba/
  • We tied ESG to the competitive position of the U.S. capital markets. As we noted on Oct. 5, 2006, foreshadowing the rise of cryptocurrencies: "competitive advantage with respect to capital access is available to any country with significant economic potential and a modest telecommunications infrastructure." https://www.sec.gov/comments/4-526/4526-1.pdf
In addition, federal appeals and lower courts have accepted several “Amicus Curiae” or “Friend of the Court” briefs we filed in signal cases concerning financial marketplace structure and fraud cases: