Sovereign bonds are not exempt from ESG consideration
The incorporation of ESG factors in sovereign bond analysis is not completely new. For instance, a country’s institutional strength and regulatory effectiveness have traditionally been part of the governance assessment, the factor with the greatest pricing impact; demographic trends and labour market indicators are examples of social factors; and in economies reliant on natural resources and tourism, environmental factors have long been considered.
However, so far, systematic ESG consideration has not been applied to sovereign bonds – traditionally considered lower-risk assets – partly due to a lack of consistency in defining and measuring material ESG factors and generally less developed tools and techniques. Read more
Why Do ESG Funds Own Shares Of Facebook?
Facebook was fined $5 billion that same year and forced to reorganize its corporate structure by the Federal Trade Commission (FTC) for use of deceptive practices to “undermine users’ privacy preferences.” The practices violated an earlier 2012 order by the FTC.
These reports beg a pretty big question for ESG funds: Why is Facebook among your top holdings? Take the iShares ESG Aware exchange-traded fund (ESGU), which has more than $22 billion in assets under management. It counts Facebook in its top five holdings—as does the Vanguard ESG U.S. Stock fund (ESGV), with more than $5 billion in assets.
If the Wall Street Journal reports on Facebook are true (their reporting is amply backed by internal Facebook documents), ESG funds may need to take a timeout. Not only would socially conscious investors’ money be supporting a socially irresponsible company, but they’d be paying premium annual fees for the privilege. Read more
Executive Bonuses in Britian Increasingly Hinge on ESG Targets
In the United Kingdom, an increasing number of executives are discovering that their remuneration is based on how well they perform on environmental, social, and governance parameters. According to Alvarez & Marsal, which studied the most recent annual reports of FTSE 100 members, nearly half of the annual bonus plans handed to executives at the largest U.K. corporations now include an ESG component, up from approximately a third a year earlier. According to the firm, a third of long-term incentive plans are now linked to ESG, up from a quarter a year earlier. The move comes as shareholders use their clout to exert pressure on firms, with concerns about climate change fueling investor activism and pressuring companies to adapt.Read more
What is the key to ESG investing?
Client interest in investing in ESG (environmental, social, and governance) continues to grow. Annamaria Testani, Senior Vice President, National Sales, at National Bank Investments (NBI), feels advisers have a wonderful chance to educate customers on ESG investing as more products become accessible.Read more