Asset Owners, Impact of Passive ESG Funds, Legal Terms, and the Ocean
Here are 5 ESG insights you might have missed this week:
Transformational Investment Practices of Advanced Investors-
A new report from the World Economic Forum, alongside 60 global asset owners, explores how global asset owners are approaching global systemic trends such as climate change, low and negative real long-term interest rates and technological evolution.
The white paper summarizes the actions asset owners have taken to integrate systemic trends into their investment and risk management processes. It synthesizes the findings into a self-assessment framework that investors can use to improve their readiness in dealing with global challenges. It also presents investment solutions and opportunities that accelerate the industry’s ability to address the trends.
The document includes a framework for addressing global systemic trends that investors can use to benchmark their progress against their peers. The framework focuses on vision, governance and implementation approaches. Investors should take a disciplined approach to integrate and measure trend-linked products in their strategic portfolio construction processes.
The Sustainability Impact of Popular Passive ESG Funds-
From Impact Cubed, white paper asks the net impact of passive ESG funds and their performance vis-à-vis tracking error.
The report reaches two main conclusions. First, it argues that passive ESG fund performance can be “patchy”. Indeed, the study found at least three funds had a net negative overall impact, suggesting sustainable investors would have been better off not investing in those funds.
Secondly, investors can find a passive ESG fund with positive impact and lower tracking error. Indeed, although the report notes that “the potential for impact goes up with tracking error”, it also notes that this is not always the case. Moreover, even among the funds with a net positive impact, ESG performance varied four-fold between the ‘best’ and the ‘worst’.
Impact Cubed applied its impact measurement model to 13 popular passive ESG funds: iShares ESG Enhanced, Invesco ESG Screened, L&G ESG Global Markets, ISS ESG Prime, Lyxor ESG Trend Leaders, XTrackers World ETF, Invesco ESG Multi-Factor ETF, iShares World SRI, MS DM Sustainability 200, La Francaise Zero Carbon, MS DM Sustainability Leaders and MSCI Select ex Fossil Fuel.
World Bank Plans Climate Shift but no Fossil Fuel Halt: Report-
A revised World Bank policy on climate change commits to making financing decisions in line with efforts to limit global warming but stops short of promising to halt the funding of fossil fuels.
The World Bank, the biggest provider of climate finance to developing countries, is finalising a new five-year climate action plan amid growing political momentum in the United Kingdom, the United States and other countries for ending public financing of high-emission fossil fuel projects.
World Bank board members from Europe urged the bank’s management in February to use the new climate plan to halt all investments in oil and coal-related projects and to gradually phase out investment in natural gas projects. The draft presentation did not include these commitments.
Gender Lens Investing: Legal Perspectives-
A report from Calvert Impact Capital and the New York University School of Law, explores how investors incorporate gender considerations into the legal documentation and terms of their debt financing, summarizing the results of a survey of 20 investors.
The report details, this is still a relatively nascent practice. Most investors are not using strong legal mechanisms to enforce gender considerations and there are a variety of approaches taken to incorporate gender into documentation. However, all investors surveyed shared their desire to learn from their peers.
In the appendices of the report, you will find a sample term sheet and a legal documentation questionnaire with guiding questions to help investors think through whether and how to incorporate gender into their deal documentation within the context of their broader gender lens strategy.
What’s Good for the Ocean May Also Be Good for Business-
An article on how companies are trying to prove that the Blue Economy and conservation of a vast resource that directly supports the livelihoods of billions of people, make business sense.
Using his training as an engineer, Mr. Odlin has decided to try to reverse that decline with his company, Running Tide, which is based in Portland, Maine. Using a combination of robotics, sensors and machine learning, he is building an aquaculture operation that is selling oysters now and eventually clams.
SafetyNet Technologies, builds high-tech fishing nets for trawling boats: Attached to the nets are LED lights that flash in various patterns and levels of brightness to signal emergency escape hatches (right-size holes) for those species that fishing boats aren’t trying to catch, known collectively as bycatch.
One more thing: An early April Fools’ Day joke?- German automaker Volkswagen is said to be rebranding the name of its U.S. operations to Voltswagen to reflect its electric vehicle ambitions.
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