Diversity, Data, and Decarbonisation: Latest ESG thinking

ESG agenda refocuses on most pressing problems

Mass vaccination rollouts, President Xi's comments about speeding up China's push towards net-carbon neutrality, and a more receptive ear in the White House mean that the global ESG agenda can now refocus back towards decarbonisation and rising diversity issues. In an interesting collection of papers, Candriam highlights that ESG investors can no longer remain silent about diversity policy and practice in investee companies. S&P Dow Jones Indices examines the thorny issue of ESG data collection, while several commentators tackle aspects of the post-pandemic rush towards decarbonisation. We'll Plant a Tree for Every New Member  Savvy Investor has committed to plant a tree for every new member who registers on our site. So please do invite your work colleagues to register and help us to make a difference. You can read more details about this initiative here.

Webinar: How deeper data impacts ESG investing (S&P Dow Jones Indices, 2021)

Experts from S&P Dow Jones Indices discuss the critical role that ESG data and scores play in investor decision making. This data assessment has wide-ranging implications for portfolio construction decisions, debates about whether stocks should be included in ESG indices, and portfolio risk and return considerations.

Ethnic Diversity: Why investors cannot afford to remain silent (Candriam, 2021)

For compliance reasons, this paper is only accessible in certain geographies

Candriam notes that corporate entities are becoming entangled in a wider debate about societal values in the era of responsible capitalism. Minorities are usually under-represented throughout organisations – often more so at the higher end of the corporate ladder. ESG investors need to engage with investee companies to ensure that diversity remains front and centre of the ESG debate.

Responsible Investing and Stock Allocation (Amundi, 2021)

For compliance reasons, this paper is NOT accessible in the United States

In their analysis of over 913,000 active employee savings accounts in France, Amundi finds that adding responsible investing options to the range of available funds encourages a higher equity weighting by plan participants. This behaviour is in direct contrast to what happens when conventional equity funds are added to the mix.

Climate Change: Active stewardship vs. divestment (RBC GAM, 2021)

For compliance reasons, this paper is only accessible in certain geographies

RBC GAM highlights the active engagement role that asset managers should take with investee companies, particularly over the issue of climate change. They also outline the use of divestment as a valid investment strategy, focusing on the fossil fuel sector.

Taking the Lead on ESG Investing Through Client Communications (SimCorp, 2020)

SimCorp outlines, via a roundtable discussion, how some organisations have managed to implement an integrated ESG data and reporting system within existing processes. They also illustrate how the resulting positive feedback loop might be used to attract new clients.

Trends in EM SRI/ESG Fund Flows (Informa Financial Intelligence, 2021)

Informa looks at emerging market fund flow data since 2018, noting that while there has been a net outflow of funds from most equity and balanced funds, those with ESG mandates have seen significant net inflows.

8 ESG Trends for 2021 (BlueBay Asset Management)

For compliance reasons, this paper is only accessible in certain geographies

BlueBay Asset Management highlights some of the key themes and trends they believe will feature prominently in ESG investing this year.

The Market Measure of Carbon Risk and Minimum Variance Portfolio (Amundi, 2021)

For compliance reasons, this paper is NOT accessible in the United States

Amundi considers a different approach to evaluating carbon risk, one in which they measure the sensitivity of stock prices with respect to a carbon risk factor. They use this new metric to build minimum variance strategies and illustrate how its use impacts portfolio construction.

IIGCC & ESG Integration in Strategic Asset Allocation (DWS, 2021)

DWS experts Michael Lewis (Head of ESG Thematic Research) and Murray Birt (Senior ESG Strategist) debate the key issues currently impacting sustainable and responsible investing across markets and asset classes.

Podcast: ESG investing - Luck versus skill? (Man Group, 2021)

Man Group’s Jason Mitchell discusses with Campbell Harvey, Professor of Finance at Duke University’s Fuqua School of Business, whether the claims made about ESG performance have merit and why there isn’t consistent evidence coming from statistical research.

Asset Owner Technical Guide: Investment manager monitoring (PRI, 2020)

This PRI guide aims to assist both asset owners and asset managers as they incorporate ESG factors into the owner/manager relationship. Consistency of reporting formats is one of the key objectives. Asset owners also need to ensure that any approach to responsible investment from their manager is fully aligned with their own goals

Global Innovations Driving Zero-Carbon Cement (Franklin Templeton, 2021)

For compliance reasons, this paper is only accessible in the EMEA region

Franklin Templeton’s report looks at the cement industry, one of the world’s most polluting in terms of CO2 emissions. With no adequate substitute, it poses a tricky dilemma for many ESG investors. How can one improve standards of living while also decarbonising national economies?

China Decarbonisation: The emergence of a mega-theme (Janus Henderson, 2021)

For compliance reasons, this paper is only accessible in the United States and Canada

In this paper, Janus Henderson outlines the implications of the statement made by Chinese President Xi to target peak emissions in 2030, while aiming to achieve carbon neutrality by 2050. They believe that this ambitious initiative could reframe the entire climate change debate.

Clean Energy Outlook 2021 – Decarbonisation efforts drive growth (Robeco)

Robeco sees positive times ahead for the clean energy sector in 2021 and beyond, as both country and corporate efforts to decarbonise continue. Additional impetus is likely to come from the new US administration, as well as certain Asian and European countries.

Building Back Better: The path to net zero (Aviva Investors, 2021)

For compliance reasons, this paper is only accessible in certain geographies

In this paper from Aviva Investors, the authors investigate how countries and companies can 'build back better' after the Covid-19 pandemic. They discuss how such an approach contributes to a cleaner, safer, and more sustainable world.

Is Battery Storage a Good Investment Opportunity? (LCP, 2021)

LCP’s Energy Analytics team highlights the opportunities available in the British battery storage market. They investigate how markets might change over time and note that decarbonisation efforts should keep demand for battery storage solutions high, making this a potentially lucrative investment over the medium term.

Economic Aspects of the Energy Transition (NBER, 2020)

This paper highlights three points pertinent to the debate on the transition from fossil fuels to a non-carbon energy sector. Geoffrey Heal argues that the cost of moving from fossil fuels to renewable energy in electricity generation is very low, and probably lower than many estimates of the economic benefits. He also argues that carbon taxes would have to be far higher than anticipated, and that electricity prices would need to migrate nearer marginal cost of production, which would bring into question the business models of utility companies.