August 2020

Here are the top news, stories, observations and other interesting things that we hear about in the market, with relevance for selection teams and sustainable investing.

#1 The case against building vegan-focused portfolios

PODCAST: Union Investment’s Henrik Pontzen on the US, why backwards-looking ratings can prove problematic and when he feels his team has made a real difference.

While the meat industry is a major producer of emissions, the likelihood that it will go the way of coal or energy seems far-fetched, which means it might be a bit too early to build vegan-focused portfolios. That’s according to Henrik Pontzen, head of ESG at Union Investment. In a far-reaching episode of ‘Let’s Talk About ESG’, Pontzen explains why E, S and G don’t go far enough and how other dimensions, such as controversy, have to be considered. He also delves into his problems with backwards-looking ESG ratings and tackles the thorny issue of why US Treasurys could easily be excluded from many lists due to their stance on the death penalty.

The podcast can be found here (source: Citywire Selector)

#2 ESG flows leap 72% in Q2 2020

The amount of money flowing into ESG funds rose by 72% in Q2 2020, accounting for $71bn of new investments with Europe accounting for the majority of the allocations, according to Morningstar. In a Global Sustainable Funds Flow report, the research giant showed that the Covid-19 rebound had benefited ESG funds but also indicated a strong investor appetite for sustainability-focused products. The increase also reflects a recovery from Q1 2020, in which ESG assets dropped as the pandemic kicked in. However, the overall amount of money allocated to ESG funds now total $1.06tn in assets, as at the end of June, which equates to 13% of the entire fund’s industry.

‘The disruption caused by the pandemic has highlighted the importance of building sustainable and resilient business models based on multi-stakeholder considerations,’ the authors of the report said. Drilling down into the figures, of the $71bn of net new money coming into ESG-focused funds, $61.4bn was drawn from European investors. Morningstar said this is due to the greater experience of responsible investing and the favourable regulatory environment in Europe.

Read the full article here (source: Citywire Selector)

#3 CEO’s are qualified to make profits, not lead society

An old debate over the proper role of CEO’s has entered the political arena. But chief executives aren’t well equipped to take on broad social issues. Read this article in the New York Times on a subject that is very well connected to the continuing discussion on ESG and fiduciary duty.

The article can be found here (source: the New York Times)

#4 Bloomberg launches proprietary ESG-scores

Bloomberg has announced the launch of propriety ESG scores. This initial offering includes Environmental and Social (ES) scores for 252 companies in the Oil & Gas sector, and Board Composition scores for more than 4,300 companies across multiple industries.

The full article can be found here (source: PR Newswire)