Displaying items by tag: esg

Friday, 27 January 2023 14:00

Advisors Prepare for ESG Backlash

According to analysts, advisors are preparing for investor backlash regarding ESG investing amid divestments from red states. Several states such as Kentucky, Florida, Missouri, and Texas have threatened to pull pension funds from companies that boycott energy companies. In addition, anti-ESG firm Strive Asset Management recently launched a “financial educational campaign” aimed at encouraging investors to press advisors on ESG issues. Michele Giuditta, director of Cerulli Associates noted that during a 2022 poll, 46% of financial advisors cited the perception that ESG investing is politically motivated as a “significant deterrent to ESG adoption,” compared to just 16% in 2021. However, two-thirds of advisors say they consider ESG factors for at least a portion of their client accounts. Giuditta added, “Advisors will need to discuss the merits of ESG and sustainable investing with their clients and reinforce how and why asset managers are using relevant ESG data to drive long-term economic value.” Craig Kilgallen, relationship manager at Fuse Research, told Ignites that while state bans can discourage institutions from investing with an asset manager, the same may not be true for retail investors. He added, “As it relates to the intermediary world, I’ve anecdotally heard that firms are not changing the way ESG is discussed.”


Finsum:While state bans on ESG-focused managers may discourage institutions from investing with an asset manager,it won’t stop advisors from considering ESG for their clients.

Published in Eq: Total Market

Putnam recently announced the launch of five new transparent, actively managed exchange-traded funds, including three fixed-income ETFs that build upon the capabilities and experience of the firm’s Fixed Income team. The bond ETFs include the Putnam ESG Core Bond ETF (PCRB), the Putnam ESG High Yield ETF (PHYD), and the Putnam ESG Ultra Short ETF (PULT). As part of the announcement, Carlo Forcione, Head of Product and Strategy at Putnam stated, “We are enthused about extending our ETF product shelf into the actively managed fixed income and non-U.S. equity spaces.” PCRB invests in bonds of governments and private companies located in the United States that are investment grade in quality with intermediate- to long-term maturities with a focus on issuers that Putnam believes meet relevant ESG criteria. PHYD invests in bonds that are below investment grade in quality which are obligations of U.S. issuers and have intermediate- to long-term maturities. The fund will also focus on issuers that Putnam believes meet relevant ESG criteria on a sector-specific basis. PULT invests in a diversified portfolio of fixed-income securities composed of short-duration, investment-grade money market, and other fixed-income securities, with a focus on issuers that the firm believes meet relevant ESG criteria on a sector-specific basis.


Finsum:Putnam recently launched three actively managed bond ETFs, including the Putnam ESG Core Bond ETF, the Putnam ESG High Yield ETF, and the Putnam ESG Ultra Short ETF.

Published in Bonds: Total Market
Saturday, 21 January 2023 09:18

ESG Themes to Keep an Eye on in 2023

Last year was a notable year for ESG investing. While ESG funds dealt with underperformance, anti-ESG initiatives, and regulation, demand continued to be strong for these funds. This year could be just as eventful for the strategy. First, there were record numbers of shareholder resolutions filed at public companies last year due to the SEC’s friendlier stance on them. That is expected to continue as companies set climate-related targets and shareholders press them on ESG matters. Second, while 57% of institutions expect the energy sector to outperform the market again this year, according to Natixis’ Global Survey of Institutional Investors, 46% said that they are increasing investments in renewables, twice the rate of those increasing investments in fossil fuels. Third, while the SEC has proposed a set of rules designed to help curb greenwashing, firms have a bigger motivator to stop, sweep examinations. According to Michael McGrath, a partner at K&L Gates, “That has had a greater impact on the approaches of firms to their ESG marketing actions thus far than have the new rules. That’s really because firms have an immediate concern that needs to be addressed.” The last theme to watch is anti-ESG initiatives. Asset managers that are focused on sustainable investing will have to accept the fact that they may not be competitive in some markets.


Finsum:2022 was a highly eventful year for ESG investing and this year will be no different due to themes such as shareholder resolutions, increased investments in renewables, SEC sweep examinations, and continued anti-ESG initiatives. 

Published in Wealth Management

While ESG continues to face backlash on the political front, this is still a strong demand for sustainability from investors. For example, recent research from Ernst and Young (EY) found that sustainability experience at the board level in Europe has increased over the last six months as companies respond to investor demand. The latest EY Boardroom Monitor found that 32% of companies currently have board directors with professional experience or expertise in sustainability. While that figure may seem low, it’s a big jump from EY’s Boardroom Monitor in June, when only 19% of boards monitored listed sustainability expertise. The jump in experience corresponds with EY’s research that showed sustainability was a dealbreaker for investing for a majority of investors. Over fifty percent (51%) of investors said boardroom experience in sustainability has a ‘significant’ impact in terms of making a company an attractive investment. Twenty-two percent went further, saying it has a “highly significant” impact on a company’s investment case. Other findings from EY’s research revealed that sustainability experience is much more prevalent among female board members. While the current gender split in financial services boardrooms is 58% male and 42% female, 72% of board directors with experience in sustainability are female.


Finsum:According to research from Ernst and Young, sustainability experience in the board room jumped from 19% in June to 32% as companies respond to investor demand.

Published in Wealth Management

Last month, the Vanguard Group decided to drop out of the Net Zero Asset Managers initiative, whose members commit to making their investment portfolios emission-neutral by 2050. The decision by Vanguard emphasizes the notion that retail investors are less focused on ESG priorities than institutional investors. The fund giant said that 80% of its nearly $8 trillion in assets are in index funds, which typically attract retail investors. The rationale for the decision, according to Vanguard was that it was responding to the desire of its clients to provide "clarity" and make its independence clear. Vanguard's largest competitors, BlackRock and State Street rely more on institutional investors such as pension funds and foundations. Todd Rosenbluth, head of research at VettaFi told Reuters that “Institutional investors focus more on climate and other ESG priorities amid pressure to do so by clients, regulators and investment activists. BlackRock and State Street are appealing to an investment base that cares more about ESG." Both BlackRock and State Street have stuck with the Net Zero Asset Managers initiative. Rosenbluth also stated that “Many retail investors are also interested in matters like climate change, but prioritize them less in building retirement portfolios.” That matches a FINRA Investor Education Foundation study of retail investors last year that found only 9% of respondents held ESG investments.


Finsum:Many retail investors are interested in climate change, but prioritize them less in building portfolios, while institutional investors focus more on ESG amid pressure from clients, regulators, and activists.

Published in Wealth Management
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