SEC Proposals, SEC Enforcement, HSBC, Turning Points, and Mammals
Here are 5 ESG insights you might have missed this week:
1. SEC Takes Aim at Greenwashing with New Proposals-
The SEC has proposed two new ESG rules for asset managers.
(1) A Names Rule that would require investment funds using Sustainability or ESG terms in their names to adopt an investment policy that invests at least 80 percent of their assets in accordance with the investment focus the fund’s name suggests.
(2) funds that follow ESG strategies would need to make certain ESG Strategy Disclosures in prospectuses, annual reports, and adviser brochures.
2. SEC Charges BNY Mellon Investment Adviser for Misstatements and Omissions on ESG Considerations-
The SEC's ESG case suggests more enforcement is coming.
The Securities and Exchange Commission today charged BNY Mellon Investment Adviser, Inc. for misstatements and omissions about Environmental, Social, and Governance (ESG) considerations in making investment decisions for certain mutual funds that it managed. To settle the charges, BNY Mellon Investment Adviser agreed to pay a $1.5 million penalty.
The SEC’s order finds that, from July 2018 to September 2021, BNY Mellon Investment Adviser represented or implied in various statements that all investments in the funds had undergone an ESG quality review, even though that was not always the case. The order finds that numerous investments held by certain funds did not have an ESG quality review score as of the time of investment.
Link to Source: https://www.sec.gov/news/press-release/2022-86
3. Asset Managers Divided by HSBC Executive’s Climate Criticism-
Stuart Kirk’s speech has won plaudits for prompting debate, but drawn criticism for downplaying risks.
Hendrik du Toit, chief executive officer at asset manager Ninety One, said: “This has given us all food for thought and encouraged healthy debate around the biggest existential topic of our time. It doesn’t change the fact that we need to address the climate challenge that impacts the vast majority of the world’s population and resonates far beyond the S&P 500.”
“Who cares if Miami is six metres underwater in 100 years?” asked Stuart Kirk, head of responsible investing at HSBC Asset Management, during an FT conference last week. “Amsterdam has been six metres underwater for ages, and that’s a really nice place. We will cope with it.” Many in the industry disagreed with the tone of Kirk’s speech. “Flippant, off-the-cuff remarks don’t do any favours,” said one executive. Another said: “He was maybe trying to be a bit too clever.” But some welcomed Kirk’s willingness to expose groupthink and highlight some of the inconsistencies of environmental, social and governance investing.
Link to Source: https://www.ft.com/content/3e7cd452-77d8-4c61-b44a-96858bcd0764
4. Deloitte's Report: The Turning Point-
We cannot afford to waste another year, another month, debating the merits of doing something versus doing nothing. As leaders, every choice, every day is a chance to speed the realization of that vision.
Such a transformation could increase the size of the world economy by $43 trillion in net present value terms from 2021-2070. We have the technologies, business models, and policy approaches today to deliver rapid decarbonization and limit global warming to as close to 1.5°C by century’s end.
The status quo is the costlier choice. According to the modeling, unchecked climate change could cost the global economy US$178 trillion in net present value terms from 2021–2070. The human costs would be far greater: a lack of food and water, a loss of jobs, worsening health and well-being, and reduced standard of living.
5. ‘Collateral Damage’: ESG Funds Pulled Down by Tumble in Tech Shares-
Funds focused on environmental and governance issues have heavy allocations to tech sector.
Parnassus Core Equity Fund, with $25.9bn under management, has fallen by over 18 per cent in 2022 while Vanguard’s $14.3bn FTSE Social Index fund is down over 22.5 per cent. Technology is the top sector in both funds, making up 30 per cent of the Vanguard fund’s investments and over a fifth of Parnassus’. Other big ESG funds have also been knocked this year.
Tech has typically been a big part of ESG portfolios because their carbon footprints tend to be lower than peers in other industries, and they have policies in place on issues such as diversity and human rights, while making up an outsized proportion of public markets due to their huge size.
Link to Source: https://www.ft.com/content/86f25e7b-954e-4c50-b9d8-3b20b6680349
One more thing: An infographic from Our World in Data showing how Wild mammals are making a comeback in Europe thanks to conservation efforts.
Find the infographic here: https://ourworldindata.org/europe-mammal-comeback
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