Displaying items by tag: esg

A Texas statute that targets environmental, social, or governance funds, includes a notable number of funds that don’t have an ESG focus. Out of 348 funds singled out by Texas Comptroller Glenn Hegar, 14% don’t qualify as ESG, according to Morningstar. In addition, almost 40% of the funds invest in the oil and gas industry based on data compiled by Bloomberg. The findings highlight just how much ESG investing has become a hot-button political issue. In fact, many of the leaders of investment firms that have been attacked for pushing ESG policies, have themselves been attacked for their continued investment in the oil and gas industry. In regards to the findings, Hortense Bioy, Global Director of Sustainability Research at Morningstar stated, “The fact that many funds on the banned fund list hold companies involved in the oil and gas industry raises questions about the research done by the Texas comptroller on these investments. Clearly, these funds aren’t boycotting energy companies.”

Finsum: A significant number of funds singled out by Texas Comptroller Glenn Hegar due to their ESG activities, don’t qualify as ESG.

It seems that during the past couple of years, ESG news has downright owned news cycles, according to mediablog.prnewswire.com.

In the course of that period, certain trends have reared their heads. With that in mind, as Q3 grinds to a conclusion, it appears that companies are fine tuning their messaging in a trio of ways as reflected In press releases PR Newswire received this month.

1. Avoiding the Appearance of Greenwashing

2. More Frequent, Detailed Progress Updates

3. Simplifying ESG

In time, it’s anticipated that there will be a further uptick in disclosures associated with the climate, according to indiacsr.in.

It will be associated with commitments internationally to, among other things, the EU’s proposed Corporate Sustainability Reporting Directive and the International Sustainability Standards Board.

From around the globe, top five ESG updates are:

1. Inflation Reduction Act – the most significant investment turned into law in the US

2. Climate-related shock is a severe financial risk

3. Allocation of the largest – ever corporate sustainability bond

4. New renewable energy goals for the city of Chicago

5. The world’s first 100% hydrogen-powered passenger train

According to Sage Advisory in its recently released fourth annual stewardship report, ETF issuers offered much less manager disclosure and transparency regarding their ESG activities compared to their responses in the previous year’s report. The financial firm said that ETF firms had a “distinct change in tone” and “restrained language” in their responses to the survey. The firm attributes the drop in transparency to pending regulation in Europe and from the SEC that would require issuers to define ESG investments more clearly. Regulators are looking to crack down on firms that government agencies believe are overstating their fund’s ESG credentials, also known as greenwashing. The survey covered seven areas of stewardship such as proxy voting, climate and governance, and had a total of 69 questions. Based on its report, the firm believes that fines and proposed regulations could have both positive and negative consequences. The positive is that greenwashing could become less common, while the negative is that a lack of transparency could become an issue.

Finsum:As a result of pending regulations, ETF firms are becoming less transparent regarding their ESG activities.

Direct indexing has recently become a hot topic in the financial industry and for advisors looking to differentiate themselves from the pack, fund giant Vanguard recently identified four situations that they should consider using direct indexing. The first is tax-loss harvesting. For example, when an index is up, some of its holdings can be trading at a loss. An investor in a direct indexing strategy can sell those stocks and create a tax loss that can be used to offset taxes that are due as a result of an overall gain for the index. The firm also lists ESG as another reason. A custom index can be designed to avoid shares of firms involved with fossil fuels. The third situation is factor investing, or investing in companies that have specific factors such as growth, value, or quality. A custom index can be created to meet those criteria. The last situation Vanguard recommends is diversification. A custom index can be built to accommodate an investor that may be required to hold a certain number of shares in his or her employer.

Finsum:According toVanguard, tax-loss harvesting, ESG, factor investing, and diversification are four strategies that advisors should consider when building custom indexes.

According to an analysis by ESG specialist Elisabeth Steyn, U.S. equity funds that are classified as ESG, have on average 29% of their holdings in tech stocks. Steyn told Alice Ross of Financial Times that the figure is well above the 23% average for general equity funds. Ross used the iShares ESG Aware MSCI USA ETF as an example. The fund’s top holdings include Apple, Microsoft, Amazon, Tesla, and Alphabet. This may help explain why many ESG funds are seeing heavy losses this year. Ross attributed the reason to two factors. First, ESG funds are exclusionary. Once certain areas of the market are stripped out, tech is typically over -represented. The second reason is that ESG rating agencies can differ greatly on which companies are sustainable. That reason alone can help explain why the SEC is going after ESG labeling. Ross also noted that ESG funds outside the U.S. are not typically overweight in tech stocks.

Finsum:U.S. ESG funds are heavily overweight in tech stocks due to differing ESG labels and exclusionary factors.