Gustavo Bernal Torres
Socially Responsible Divestment, Anti-ESG Engagement, Deforestation, Mining, and Niger
Here are 5 ESG insights you might have missed this week:
1. Socially Responsible Divestment-
New research paper, from Alex Edmans, Doron Levit and Jan Schneemeier.
Blanket exclusion of "brown" stocks is seen as the best way to reduce their negative externalities, by starving them of capital and hindering their expansion. We show that a more effective strategy may be tilting -- holding a brown stock if it is best-in-class, i.e. has taken a corrective action. While such holdings allow the firm to expand, they also encourage the corrective action. We derive conditions under which tilting dominates exclusion for externality reduction.
However, many asset owners, rating agencies and commentators mark asset managers down if they hold brown stocks. These accusations dissuade asset managers from doing their own research and finding out whether a company is taking corrective actions. If they learn that a company is transitioning, and so they buy stock but the improvement isn't yet captured in ESG ratings or other data, they're accused of greenwashing.
Link to Source: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4093518
2. The Rise of Anti-ESG Shareholder Proposals-
These proposals, though few, are increasing and contribute noise to analyses of ESG voting.
The shareholder proposals and underlying issues we’ve covered have mostly highlighted the advocacy efforts of sustainability-minded investors. The proposals they file at companies have been made in an earnest effort to secure long-term value for investors and other stakeholders, whether one shares the views of the proxies’ authors or not. Recently, though, we’ve seen an increase in what we’ve been calling ‘anti-ESG’ proposals. These are disingenuously submitted proposals, usually by groups that oppose the work of ‘pro-ESG’ investors.
Issues include ideological diversity of the boards, lobbying, charitable donations, and, more recently, issues around racial justice.
Link to Source: https://www.morningstar.ca/ca/news/220000/the-rise-of-anti-esg-shareholder-proposals.aspx
3. Forest Pulse: The Latest on the World’s Forests-
The Forest Pulse draws on the most recent data and analysis to reveal the latest trends in global forest loss and deforestation.
The loss of humid tropical forests contributed 2.5 billion tons of carbon dioxide emissions into the atmosphere last year, which is equivalent to the annual fossil fuel emissions of India — the world’s fourth-largest emitter,
The tropics lost 11.1 million hectares of tree cover in 2021, according to new data from the University of Maryland and available on Global Forest Watch.
Link to Source: https://research.wri.org/gfr/latest-analysis-deforestation-trends
4. How Farmers in Earth’s Least Developed Country Grew 200 Million Trees-
In arid Niger, south of the Sahara, farmers who allowed cut trees to regrow in their fields have seen crop yields soar.
In the past 35 years, as scientists begged nations to get serious about reviving forests, one of Earth’s poorest countries, in one of the planet’s harshest regions, added an astonishing 200 million new trees—maybe more. Across at least 12 million acres of Niger, woodlands have been re-established with little outside help, almost no money, and without driving people off their land. The trees here weren’t planted; they were encouraged to come back naturally, nurtured by thousands of farmers. Now, fresh trees are popping up in village after village. As a result, soils are more fertile and moister, and crop yields are up.
Link to Source (free registration required): https://www.nationalgeographic.com/environment/article/how-farmers-in-earths-least-developed-country-grew-200-million-trees
5. Where The Rubber Meets The Road: Getting Serious About ESG In Mining-
ESG commitments within the mining industry have to be about more than glossy reports and compliance metrics.
That challenge is the focus of several trends in this year’s Tracking the trends, Deloitte’s annual global mining report. The trends outlined below explore how mining companies are achieving ESG targets—and what companies can do to jumpstart their ESG journeys.
It can be daunting to translate these trends into concrete action. Meeting ESG commitments often requires an organizational shift that may seem contrary to current business models and objectives. But the following steps can help jumpstart the ESG journey (see link).
Link to Source: https://www.forbes.com/sites/deloitte/2022/04/18/where-the-rubber-meets-the-road-getting-serious-about-esg-in-mining
One more thing: Because we had a lot of reports on deforestation. Check out the charts from Our World in Data on thousands of years of deforestation and how we can become the first generation that achieves a world in which forests expand.
Find the charts here: https://ourworldindata.org/global-forest-transition
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