ESG: A Candidate in the U.S. Presidential Race?

ESG Trifecta — A Tipping Point?

Inequality, gender issues and climate risk – you might be forgiven for thinking that you had a ringside seat at the U.S. Presidential campaign. While these have been topics raised and debated by both candidates recently, they are top of mind for ESG investors too.

While the terrible fires on the U.S. West Coast and the Black Lives Matter movement are indeed topical, their underlying causes and themes are not new to ESG investors. This selection of papers explores how a coalescence of global events may be pushing ESG more fully into the mainstream.

INEQUALITY/GENDER ISSUES

Shaping a Better Future: Responsible investing post-Covid (NN IP, Sep 2020)

NN Investment Partners' report collates responses from across and beyond the investment profession on how the COVID-19 pandemic might affect the behaviour of governments, corporations, and individuals. They also examine whether recent developments might function as a key moment in the widespread adoption of responsible investing.

The Digital Divide, Fracturing Society (BNP Paribas AM, 2020)

Senior investment strategist at BNP Paribas, Daniel Morris, discusses the problem of the digital divide and its connotations for investors with Anu Rames, technology and healthcare analyst for their Sustainability Centre.

Inequality Issues Brought to the Boardroom by COVID-19 (Calvert, Sep 2020)

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

In this paper from Calvert, they acknowledge the magnitude of both US and global inequality, examining its recent history and investigating how inequality affects the functioning of systems to which both corporates and investors are exposed.

Women in the Workforce: A positive impact on the global city (Nuveen, 2020) 

Nuveen suggests that the case for bringing more women into the workforce is a strong one, as productivity in cities and companies improves – with McKinsey suggesting that an additional $28 trillion a year might be added to global GDP if full gender equality was met. Women tend to offer a distinct perspective and may also bring a different approach to problems and tasks.

COVID-19 and Gender Equality: Countering the regressive effects (McKinsey, 2020)

McKinsey & Company notes some disturbing trends arising from the COVID-19 pandemic as it relates to gender equality and argues that steps need to be taken now to mitigate and then reverse those effects.

Investing in Racial Equity: A primer for colleges and endowments (IEN, 2020)

Intentional Endowment Network presents this introduction to racial equity in the US for fiduciaries of university endowments. The aim of the paper is to engender discussion, debate, and action from the sector, which has a unique position to begin to address the issue of inequality directly.

CLIMATE CHANGE

Emerging Markets: Risks from climate change (Wellington Management, Sep 2020)

Wellington Management offers their perspective on the investment implications at the intersection between emerging markets and climate change. They also suggest a framework around which portfolio themes relating to climate change might be built.

Measuring and Managing Carbon Risk in Investment Portfolios (Amundi AM, 2020)

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

Amundi takes a deep dive into how to first measure, then manage, carbon risk at both a stock and portfolio level. They then suggest how to implement their findings across an enhanced index portfolio with lower carbon risk exposure than a normal cap-weighted index.

Gold and Climate Change: Supply chain impact (World Gold Council, Oct 2019)

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

World Gold Council has revised and extended analysis first undertaken in 2018 into greenhouse gas emissions (GHG’s) across the gold industry. This report focuses upon the investment implications of a potential decarbonisation of the gold supply chain.

ESG IN FIXED INCOME

Webinar: Sustainable investing in fixed income (FTSE Russell, Sep 2020)

In this webinar roundtable, FTSE Russell hosts a discussion about integrating a sustainable investment approach into Fixed Income allocations. The debate focuses on topics such as the differences between a corporate/sovereign approach, sustainable performance measurement across asset classes, and the quantitative tools available to managers.

What is the Size and Scope of the Impact Bonds Market? (Brookings, Sep 2020)

This Brookings Institution paper investigates the extent to which the impact bond market has developed in the UK since its inception back in 2010. Noting that although almost 200 bonds and $500m in commitments have been contracted, they suggest that much more needs to be done.

Climate Change and Credit Risk (EDHEC-Risk Institute, 2020)

EDHEC-Risk Institute examines the association that exists between climate change exposure and corporate credit risk. They note that the market appears to act rationally, in that companies with the highest carbon footprint tend to be those viewed as most likely to default. This paper suggests that policymakers and regulators should be aware of such risks on financial stability – particularly via the channels of lending institutions and the corporate bond market.

Innovation in the Green Bond Market (NN Investment Partners, Sep 2020)

This paper from NN Investment Partners explains that green bond issuance increased recently after the German government made its inaugural foray into this niche area. €6.5bn of a 10-year ‘twinned’ bond (that was five times oversubscribed) paves the way for further German issuance and the gradual build out of a European green yield curve.

ESG IN THE INVESTMENT PROCESS

Integrating ESG to Create Long-Term Value (State Street, Sep 2020)

CIO of the University of California, Jagdeep Singh Bachher, discusses with Ron O’Hanley, CEO State Street Corporation, the principles underlying the University’s approach to ESG investing, while expanding upon his own experiences and journey as an ESG investor.

Stoxx ESG-X Indices Outperform During Market Distress (Qontigo, Aug 2020)

Qontigo examines the performance and risk characteristics of their ESG-X exclusion-based indices and notes that many excluded companies belonged to those sectors which performed poorly in the recent downturn. Over the longer term, they conclude that the risk-return profile of such exclusion indices is not markedly different from a normal benchmark index.