"The California State Teachers’ Retirement System (CalSTRS), the Florida State Board of Administration and Washington State Investment Board are the lead asset-owner signatories for the Investor Stewardship Group (ISG). This collective of some of the largest US-based asset owners and managers has articulated a set of fundamental stewardship responsibilities for institutional investors.
Among the asset-manager signatories are BlackRock, Vanguard and State Street Global Advisors – three of the largest funds managers in the world.
In addition to the stewardship fundamentals, the group has released a corporate governance framework that articulates six principles it considers fundamental for US-listed companies. They reflect the common beliefs embedded in each member’s proxy voting and engagement guidelines, and are designed to establish a foundational set of investor expectations about governance practices in US publicly traded companies.
The frameworks are long overdue. The US – the largest sharemarket in the world – operates without any stewardship code or agreed-upon corporate governance principles."
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"Most asset managers know that ESG data are emerging mainstream finance metrics. More than half of global assets today, $59 trillion, are controlled by asset managers or owners who consider ESG factors. The results are there too: thousands of studies since 1970 show a positive relationship between ESG criteria and corporate financial performance.
But individuals and asset owners are demanding ESG at higher rates than financial advisors are offering it, some studies show. That gap makes ESG savvy a significant advantage for a money manager.
The article then lists 10 reasons who investors are leading their advisors on ESG."
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"This is all well and good, but many sustainable investing devotees, young and old, have a blind spot that needs fixing. Blame it on the so-called “experts” in the industry.
They make a big deal of avoiding fossil fuel companies and polluters. The environment isn’t the only thing that needs minding. We also need a sustainable democracy. Without that, it doesn’t matter how clean the environment is. Life could get ugly.
And make no mistake, sustainable democracy is at risk. No, this isn’t another Donald Trump rant. Democracy was precarious before he came into office."
He concludes:
"Even if investing in sustainable democracy didn’t help you outperform the market, does this really matter?
After all, if socially responsible investing is about putting money into the stocks of companies that share your values, then maybe it’s OK to give up some gains in the process. People give up money and time whenever they donate to charities or volunteer. There is a cost to those activities. But it’s offset by the benefit of knowing you might be improving the world. Why should investing be any different?
A lot of millennials seem to agree with this. Over half of them in the Morgan Stanley study I cited above said they get it that sustainable investing may involve some trade-off in financial gain — yet they are some of the biggest fans of this style of investing."
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News from Arabesque
- In “Big Oil and Climate Change—A Way Forward” our Vice Chairman Georg Kell notes the critical oil that Big Oil plays in combatting climate change. He states that “The Norwegian Oil company, Statoil, has just put forward a new “Climate Roadmap” which outlines how the company plans to face the certainty of a low carbon future, to which I provided early stage input. The roadmap has two complementary approaches. “First, it outlines how the company will sustain its role as an industry leader in carbon efficiency when it comes to emissions from its own operations…The second approach is based on a significant expansion on new energy solutions, primarily large scale offshore windfarms and floating platform technology."
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He concludes:
"Statoil’s strong positioning on climate change also sends a welcome signal at a time when Washington is trying to set back the clock. A regulatory bump in the road can slow down the transition. But it cannot reverse it. Other countries are not betting on the past and countless local activities are moving ahead irrespective of federal politicking. In such a context, corporations and investors play an especially important role. How they assess climate related risks and opportunities, and how this will inform their investment decisions, is now more important than ever. There are of course any number of companies and investors who benefit from higher emissions. But there is also a growing number of companies and investors who understand that the transition towards a low carbon energy future is not only inevitable, but that it also offers new opportunities for growth. Roadmaps such as Statoil’s will help shift the balance in the right direction, if others follow."
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