"ESG Investing Is Heading for a Reckoning, Says One Veteran Manager" - Bloomberg

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https://archive.ph/PDwx0

ESG Investing Is Heading for a Reckoning, Says One Veteran Manager

Lisa Pham

Mon, June 6, 2022, 8:36 AM·2 min read

 

 

(Bloomberg) -- The ESG investment industry may be headed for a reckoning and many companies won’t survive this period of higher interest rates.

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That’s according to James Penny, who’s been running ethically focused funds for about a decade and is currently the London-based chief investment officer at TAM Asset Management. He predicted that several companies owned by ethically focused funds will struggle to refinance their debt, without naming any specific firms.

 

“A lot of ESG companies out there that probably can’t survive with interest rates going where they are,” Penny said in an interview. “There will be ESG companies that will go to the wall because of this market.”

It’s the latest in a string of warnings to hit the ESG space. The investing style rode out the pandemic better than other corners of the market, but is now coming under pressure from higher inflation and interest rates. It’s been particularly punishing for technology stocks, a staple of ESG funds.

For fund managers, the period ahead “could be like a baptism of fire,” Penny said.

There are now signs that interest in ESG investments is flagging. After more than three years of inflows, stock investors pulled about $2 billion from US exchange-traded ESG funds in May, the biggest monthly redemption on record, according to Bloomberg Intelligence.

Meanwhile, the Impact Shares MSCI Global Climate Select ETF is set to close after less than a year because none of the backers pitched in with anticipated funding.

The tougher market environment for ESG has coincided with growing disillusionment. Insiders such as activist hedge fund boss Chris Hohn have publicly lambasted the way in which much of the asset management industry does ESG, characterizing it as toothless.

And according to a recent survey conducted by the Journal of Financial Planning and the Financial Planning Association, there are signs of a broader cooling under way in sentiment toward ESG. The investment model “may have reached an inflection point,” the groups wrote in a press release.

“It’s the environment that’s causing ESG stocks to underperform, but it’s also sentiment causing ESG stocks to underperform,” Penny said. He added that ESG fund managers need to be more selective and come up with “a full suite of different investment strategies” rather than rely on a limited number of asset classes.

TAM Asset Management has been working on diversifying. The goal is to find ethically sound investments that are uncorrelated, which could include dividend paying stocks, property, infrastructure or funds with an overweight to health care, he said.

TAM is tilted towards quality and value, but still has exposure to growth stocks in its ESG strategies, Penny said. Ultimately, the goal for investors right now is not to lose money, he added.

“You’ve got this broad-based sentiment turning against even high-quality companies,” he said. “People are just very fearful.”

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Anti-Green Blowback: ESG Funds Suffer Biggest Monthly Outflows On Record

by Tyler Durden

Sunday, Jun 05, 2022 - 02:00 PM

Has the ESG fraud bubble finally burst? More than two years ago, long before Elon Musk joined the growing anti-ESG bandwagon, we were the first to slam ESG as nothing but the latest Wall Street scam meant to fast-track gains for all those hypocrites who pretended to care about the environment but really had found a quick and efficient way of parting fools from their money (see from Feb 2020 "Behold The "Green" Scam" and from April 2020 "The Fraud That Is ESG Strikes Again: Six Of Top 10 ESG Funds Underperform The S&P500").

Well, it appears that after years of forced capital allocations, the party is over and the bubble has burst. As Bloomberg writes, this year’s weak performance by US stocks has forced many investors to recalibrate their portfolios. And they’re fleeing "do-good" scams strategies.

After more than three years of inflows, investors are now pulling cash out of US equity exchange-traded funds with higher environmental, social and governance standards. May saw $2 billion of outflows from ESG equity funds, according to data from Bloomberg Intelligence -- the biggest monthly cash pullback ever.

“There’s no way to know for certain why the outflows were so extreme,” said Bloomberg Intelligence analyst James Seyffart, who noted that the funds had started from a high-asset base after years of inflows. “But also ESG ETFs may be finding that people care a lot more about them in bull markets.”

Do-good investing boomed during the pandemic, with more than $68 billion flowing into ESG equity funds in the past two years. Many believed that this momentum would continue into 2022. But the spike in oil prices since Russia invaded Ukraine has lifted fossil-fuel shares, driving the S&P 500 Energy Index to gain 59% this year even as the benchmark overall has dropped 14%.

This has made do-good investing more of a sacrifice. RBC Wealth Management recently surveyed over 900 of its US-based clients and 49% said that performance and returns were a higher priority than ESG impact, up from 42% last year.

“The story has been told that you don’t have to give up returns in order to do ESG, but everyone assumed that you would get the same exact return profile as a traditional benchmark, which is absolutely not true because traditional benchmarks are not looking at ESG factors,” said Kent McClanahan, vice president of responsible investing at RBC Wealth Management.

He added that social and environmental policy can take time to implement, so investors should focus more on longer-term payoffs.
“You would think that now more than ever, people will be looking to ESG investing given what we are seeing in the energy markets and the need not to be so dependent on certain countries such as Russia and their energy and their oil and gas,” said Fiona Cincotta, senior market analyst at City Index.

That might be one reason that at least 20 ESG-focused funds have launched in the US this year, netting almost $3.2 billion of inflows in 2022, according to data compiled by Bloomberg.

Yet RBC clients also expressed skepticism about the ESG label. Though nearly two-thirds said that socially responsible investing is the way of the future, 74% of those surveyed said many companies provide misleading information about their ESG initiatives. This is an issue that could eventually be addressed through a Securities and Exchange Commission’s proposal for new restrictions to ensure ESG funds accurately describe their investments.

Ivy Jack, head of equities at Northstar Asset Management, said that this year’s performance has exposed the fact that some investors were caught up in ESG as a fad and misinformed.

“If you really want to understand if someone is serious about ESG, I would first ask them to look at their portfolio and ask them to explain why all the companies are in there and how those companies relate to their values,” Jack said. “To the extent that someone can’t do that for you, well that’s a red flag.”

See John Authers latest "ESG Is Alive and Well. Just Call It Protectionism" for another take on ESG.

https://www.zerohedge.com/markets/anti-green-blowback-esg-funds-suffer-biggest-monthly-outflows-record

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ESG Crusade On Backburner As World Grapples With Energy Crisis

By Tsvetana Paraskova - May 24, 2022, 7:00 PM CDT

• Energy security is quickly becoming a priority over ESG investing.
• Institutions are calling for investment in both fossil fuels and renewable energy sources. 
• “In the context of voting on shareholder proposals regarding climate-related risk, companies face particular challenges in the near term,” BlackRock Investment Stewardship (BIS) said.

Join Our Community

The ESG investment momentum has run up against energy supply disruptions since the Russian invasion of Ukraine.  As shareholders at the biggest energy companies are asked to vote—again—on various climate resolutions, many investors continue to call for more transparent and detailed plans for how firms intend to align with the Paris Agreement goals. Others, such as the world’s top asset manager, BlackRock, expect to support fewer shareholder proposals this AGM season compared to 2021 as it finds that climate-related shareholder proposals have become unduly more prescriptive and micromanaging. 

Sure, large institutional investors are not abandoning the ESG trend or insistence that companies need to be prepared to change as the energy transition progresses. But some, including BlackRock, acknowledge the current energy market pressures and the need for investment in both traditional and renewable energy sources. 

Fund managers want companies to double down on the energy transition, which has become an even more urgent topic of conversation after the Russian war in Ukraine and Europe’s subsequent struggles to cut—and ultimately eliminate—its dependence on Russian fossil fuels. 

Yet, energy security and economic stability in the short term appear to override the longer-term drive to accelerate the transition toward green energy sources. 

Investors are also looking to shift their focus onto actual outcomes instead of on simplified ESG ratings that are based on policy statements. 

Related: Permian Drillers Lead The Charge As Rig Count Climbs

 

BlackRock: Investment In Both Traditional And Renewable Energy Needed  BlackRock said in early May that “many of the climate-related shareholder proposals coming to a vote in 2022 are more prescriptive or constraining on companies and may not promote long-term shareholder value.”

“Importantly, in the context of voting on shareholder proposals regarding climate-related risk, companies face particular challenges in the near term, given under-investment in both traditional and renewable energy, exacerbated by current geo-political tensions,” BlackRock Investment Stewardship (BIS) said. 

“This set of dynamics will — at least in the short- and medium-term — drive a need for companies that invest in both traditional and renewable sources of energy and we believe the companies that do that effectively will produce attractive returns for our clients.” 

That’s why BlackRock is likely to back proportionately fewer climate-related resolutions this proxy season than in 2021, as it does not consider them to be consistent with its clients’ long-term financial interests, the asset manager said. 

Doubling Down On Energy Transition 

Still, investors are not backing down on seeking active engagement with companies and demanding detailed, credible energy-transition plans. 

“The way out of the situation we currently find ourselves in is not to abandon the energy transition but to double down,” Nick Stansbury, head of climate solutions at the UK’s largest fund manager, Legal & General Investment Management (LGIM), told the Financial Times. 

Last month, LGIM said in its ‘Active Ownership’ report for 2021 that “We believe voting against a company is a powerful tool to express our views and concerns on key thematic issues such as climate change and diversity, as part of our ‘engagement with consequences’ approach.” 

LGIM welcomed in its report “positive steps” taken by ExxonMobil to commit to net-zero emissions for operated assets by 2050, as well as BP’s strengthened climate targets announced in February 2022.  

Related: Slew Of New Discoveries Brings UAE Closer To Production Goals

“We engaged with BP’s senior executives on six occasions in 2021 as they develop their climate transition strategy to ensure alignment with Paris goals. Following constructive engagements with the company, we were pleased to learn about the recent strengthening of BP’s climate targets, announced in a press release on 8 February 2022, together with the commitment to become a net-zero company by 2050 – an ambition we expect to be shared across the oil and gas sector as we aim to progress towards a low-carbon economy.”  

Change Of Focus   

Investors are also increasingly looking to affect change in the companies they are invested in, rather than just picking firms with the best ESG scores on paper. 

“What do ESG scores tell us about anything?” Ben Caldecott, director of the UK Centre for Greening Finance and Investment, told FT. “They are mainly measuring processes and policies — if a company has a policy in place against deforestation it will get a good score, even if it is deforesting.”

Others are shifting focus to the industries that use the energy produced by oil and gas companies. For example, the Church of England Pensions Board said earlier this month that after co-leading the investor process to establish the first Net Zero Standard for the oil and gas sector, it is shifting focus this year to industry sectors.  

“This will see the Board step down from leading engagement with Shell and begin co-leading engagement with Europe’s largest car manufacturers, BMW, Mercedes-Benz, Renault, and Volkswagen,” the board said.

“If the demand for energy doesn’t change, those companies that are supplying it won’t change. We have developed an exacting global net zero standard for the oil and gas sector, which companies that wish to retain their social license can implement. Ultimately those same companies’ ability to deliver on their targets will largely be shaped by a change in demand for oil and gas from sectors like autos, aviation and shipping” said Adam Matthews, Chief Responsible Investment Officer at the Church of England Pensions Board.   

However, with energy security concerns front and center and governments prioritizing energy supply in the biggest energy market shock in decades, demand for oil and gas is set to rise in the short term, while chronic underinvestment would plague supply in the medium term. 

By Tsvetana Paraskova for Oilprice.com

More Top Reads from Oilprice.com:

• Biden Calls Energy Crisis "Incredible Transition"
• Germany Expects Oil Embargo Decision This Week
• Poland Says Norway Should Share Its “Gigantic” Oil & Gas Profits

https://oilprice.com/Energy/Energy-General/ESG-Crusade-On-Backburner-As-World-Grapples-With-Energy-Crisis.html

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[Tom Nolan + 2,443]

QT2 - Quantitative Tightening 2 started in June.

https://www.zerohedge.com/markets/qt2-officially-begins-what-happens-next

EXCERPT QUOTES

For the second time in the past decade, the Fed will try (and fail) to shrink its balance sheet to some "reasonable" size, a process known as Quantitative Tightening 2. ...

...What it means in practice, is that we will get a brief period of BS shrinkage for a few months before the "next big crisis" emerges and the Fed blows up the balance sheet again...

We know this will happen with 100% certainty and without a trace of doubt, if for no other reason than the green agenda of the anti-climate change crusaders, the one event that western politicians have been salivating over for decades, will cost $150 trillion over the next 50 years, of which roughly $2 trillion will come in the form of global QE every year (as we explained in "Here is The Hidden $150 Trillion Agenda Behind The "Crusade" Against Climate Change".)

 

Related article

https://www.zerohedge.com/markets/how-quantitative-tightening-ends

[Those anti-CO2 crusaders want everyone to own nothing and be happy. - Tom Nolan]

 

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https://www.zerohedge.com/markets/fearing-looming-bubble-state-treasurers-square-against-esgs-invisible-fist

Fearing Looming Bubble, State Treasurers Square Up Against ESG's "Invisible Fist"

by Tyler Durden

Thursday, Jun 09, 2022 - 01:25 PM

Authored by Nathan Worcester via The Epoch Times,

Environmental, social and governance ratings batter states, choke off capital from fossil fuel industry...

 

State treasurers spoke out against the imposition of environmental, social and governance (ESG) scoring on public money in a June 8 press conference, with one official comparing it to the social justice-driven push for universal homeownership that helped trigger the Great Recession.

“I would be very concerned about investing in green energy right now,” said Utah State Treasurer Marlo Oaks, in response to a question from The Epoch Times.

He did not rule out the possibility of an ESG bubble similar to the housing one that burst during the late 2000s—an event that drove the nation’s worst economic downturn since the Great Depression.

That bubble was inflated in part by two government-sponsored enterprises, Fannie Mae and Freddie Mac.

Beginning in earnest with the Clinton administration’s 1995 National Homeownership Strategy, which committed to “expanding creative financing” for home buyers, the firms continually reduced the requirements for loans.

By 2006, fully 43 percent of first-time home buyers put down no deposit, according to a study from the National Association of Realtors.

In contrast to the “invisible hand”—Adam Smith’s metaphor for the operation of the free market—Oaks sees ESG as an “invisible fist.”

Oaks was one signatory to an April 21 letter from Utah’s governor, senators, congressional representatives and other public officials in response to S&P Global’s issuance of ESG ratings for US states and territories.

“Considering recent global events, the current economic situation in the United States, and the unreliability and inherently political nature of ESG factors in investment decisions, we view this newfound focus on ESG as politicizing the ratings process.

“It is deeply counterproductive, misleading, potentially damaging to the entities being rated, and possibly illegal,” Oaks and his colleagues argued in that letter.

Idaho officials sent a similar letter to S&P Global on May 18. They echoed the Utah letter’s concerns with the firm’s scoring of American energy companies relative to some of their foreign counterparts.

China’s state-owned Sinopec, for example, earned a 41 from S&P Global. ExxonMobil Corporation, by contrast, received a 36, while Chevron Corporation received a 39.

Sinopec’s sub-scores on both “social” and “governance and economic” factors were well above the industry mean.

The results raise questions about the rankings’ reliability in light of the use of forced labor in China as well as the Chinese Communist Party’s heavy influence over corporate governance in the country.

For example, in an analysis of executive-level shake-ups in China’s oil industry during 2011, experts from the Brookings Institution and Ian Bremmer’s Eurasia Group opined that the movement of leaders from one company to another is “a blatant reminder of the CCP’s control over China’s flagship firms.”

Another speaker at the June 8 press conference, West Virginia’s Treasurer Riley Moore, made headlines in January when the state divested from Blackrock over its ESG practices.

“In West Virginia, we’re an energy state. We produce coal, gas, and oil—and this ESG movement in its current form is really an existential threat to our jobs, our economy, and our tax revenue,” Moore told reporters.

A law passed by the West Virginia Senate on March 12 will exclude financial institutions from competitive bidding with the state if they are boycotting fossil fuel companies.

Financial institutions slated for inclusion on West Virginia’s contracting blacklist will be sent letters allowing them to appeal the decision. Thirty days later, the full list will be published.

Moore told reporters that those initial letters will likely be sent out at the end of this week.

He also suggested ESG scoring could soon be incorporated into individuals’ credit scores—for example, through favorable mortgage rates for people who put solar panels on their homes.

In a follow-up interview with The Epoch Times on June 8, Riley cited a presentation from J. Michael Evans, president of China’s Alibaba Group, to the World Economic Forum.

Evans said his company is developing an “individualized carbon footprint tracker,” which he claimed would let consumers measure their travel, food consumption, and more.

“You’re going to come to a very logical conclusion if we continue down this path,” Moore told The Epoch Times.

He agreed that the economy could be facing an ESG bubble. Moore argued coal prices could be an indicator—the international benchmark for a tonne of coal has shot up from less than $50 in September 2020 to roughly $400 today.

“The coal producers are booked out through 2023. They can’t produce any more than they are right now,” he added.

Kentucky State Treasurer Allison Ball also addressed reporters at the June 8 press conference, arguing that the application of ESG could violate her state’s laws.

Kentucky Attorney General Daniel Cameron agrees.

In a May 26 opinion prompted by an inquiry from Ball, officials from Cameron’s office concurred that ESG asset management practices run afoul of Kentucky law.

“This isn’t really about profitability. It’s not about retirement security. It’s not about your investments. It’s about political activism. And they’re doing it in a way that they could not do through the democratic process,” Ball told reporters.

“ESG today is misallocating capital, in that it’s not providing capital where it is desperately needed, in the traditional energy space—and it’s leading to higher gas prices,” Oaks said.

Left-wing activists and financiers have celebrated the movement of investments from the hydrocarbon sector, arguing that pressure in that direction is both ethically and financially sound.

“Getting lenders to choke off money to fossil fuel companies is the next needed move for the industry to address the material risks that the coal, oil and gas industry faces,” said Green Century Capital Management’s Leslie Samuelrich, as quoted in a February 2021 CNBC article.

“Fossil fuel mining, exploration, and extraction all are capital intensive activities that demand constant access to capital. If capital costs rise or the supply of capital is reduced, projects can become uneconomical and fossil fuel companies can see their valuations fall,” wrote David Carlin in a February 2021 article for Forbes, “The Case for Fossil Fuel Divestment.”

He argued that coal, oil, and natural gas companies may face “a grim financial future” if their reserves remain untapped as a result of political or financial pressure, suggesting that divestment advocates are “making a savvy financial decision.”

While ESG has trended in a leftward direction, at least one fund appears to offer a more conservative alternative.

The exchange-traded fund (ETF) Inspire Investing, which claims to offer “Biblically responsible investing” in the vein of ESG, has bucked ESG trends by investing in the firearms companies Sturm Ruger & Company and Vista Outdoor, as reported by Bloomberg Law and confirmed by Inspire’s Securities and Exchange Commission filing.

Yet, speakers at the June 8 press conference told The Epoch Times they reject the notion of pushing ESG to the right through state power over public pensions.

“We just want the politics to come back to a neutral base,” said Derek Kreifels of the State Financial Officers Foundation, adding that the use of public pension funds to advance a political agenda was “the big offense with ESG.”

“If you want to invest in some second amendment ETF, please feel free to do it. We don’t want to be forced to invest in that,” Moore said.

Robert Netzly, president and CEO of Inspire, told The Epoch Times, “We believe that the solution to gun violence is not removing firearms from law-abiding citizens, but strong law enforcement removing criminals from our streets.

“We believe state pensions should not be forced to invest along any particular ESG guidelines, but should have the freedom to do so if they decide that is in the best interest of their constituents.”

The Epoch Times has reached out to S&P Global and Alibaba Group.

[Tom Nolan + 2,443]

https://www.zerohedge.com/markets/anti-green-blowback-esg-funds-suffer-biggest-monthly-outflows-record

Anti-Green Blowback: ESG Funds Suffer Biggest Monthly Outflows On Record

by Tyler Durden

Sunday, Jun 05, 2022 - 02:00 PM

Has the ESG fraud bubble finally burst? More than two years ago, long before Elon Musk joined the growing anti-ESG bandwagon, we were the first to slam ESG as nothing but the latest Wall Street scam meant to fast-track gains for all those hypocrites who pretended to care about the environment but really had found a quick and efficient way of parting fools from their money (see from Feb 2020 "Behold The "Green" Scam" and from April 2020 "The Fraud That Is ESG Strikes Again: Six Of Top 10 ESG Funds Underperform The S&P500").

Well, it appears that after years of forced capital allocations, the party is over and the bubble has burst. As Bloomberg writes, this year’s weak performance by US stocks has forced many investors to recalibrate their portfolios. And they’re fleeing "do-good" scams strategies.

After more than three years of inflows, investors are now pulling cash out of US equity exchange-traded funds with higher environmental, social and governance standards. May saw $2 billion of outflows from ESG equity funds, according to data from Bloomberg Intelligence -- the biggest monthly cash pullback ever.

 

“There’s no way to know for certain why the outflows were so extreme,” said Bloomberg Intelligence analyst James Seyffart, who noted that the funds had started from a high-asset base after years of inflows. “But also ESG ETFs may be finding that people care a lot more about them in bull markets.”

Do-good investing boomed during the pandemic, with more than $68 billion flowing into ESG equity funds in the past two years. Many believed that this momentum would continue into 2022. But the spike in oil prices since Russia invaded Ukraine has lifted fossil-fuel shares, driving the S&P 500 Energy Index to gain 59% this year even as the benchmark overall has dropped 14%.

This has made do-good investing more of a sacrifice. RBC Wealth Management recently surveyed over 900 of its US-based clients and 49% said that performance and returns were a higher priority than ESG impact, up from 42% last year.

“The story has been told that you don’t have to give up returns in order to do ESG, but everyone assumed that you would get the same exact return profile as a traditional benchmark, which is absolutely not true because traditional benchmarks are not looking at ESG factors,” said Kent McClanahan, vice president of responsible investing at RBC Wealth Management.

He added that social and environmental policy can take time to implement, so investors should focus more on longer-term payoffs.
“You would think that now more than ever, people will be looking to ESG investing given what we are seeing in the energy markets and the need not to be so dependent on certain countries such as Russia and their energy and their oil and gas,” said Fiona Cincotta, senior market analyst at City Index.

That might be one reason that at least 20 ESG-focused funds have launched in the US this year, netting almost $3.2 billion of inflows in 2022, according to data compiled by Bloomberg.

Yet RBC clients also expressed skepticism about the ESG label. Though nearly two-thirds said that socially responsible investing is the way of the future, 74% of those surveyed said many companies provide misleading information about their ESG initiatives. This is an issue that could eventually be addressed through a Securities and Exchange Commission’s proposal for new restrictions to ensure ESG funds accurately describe their investments.

Ivy Jack, head of equities at Northstar Asset Management, said that this year’s performance has exposed the fact that some investors were caught up in ESG as a fad and misinformed.

“If you really want to understand if someone is serious about ESG, I would first ask them to look at their portfolio and ask them to explain why all the companies are in there and how those companies relate to their values,” Jack said. “To the extent that someone can’t do that for you, well that’s a red flag.”

See John Authers latest "ESG Is Alive and Well. Just Call It Protectionism" for another take on ESG.

[Tom Nolan + 2,443]

https://archive.ph/PDwx0

ESG Investing Is Heading for a Reckoning, Says One Veteran Manager

(Bloomberg) -- The ESG investment industry may be headed for a reckoning and many companies won’t survive this period of higher interest rates.

That’s according to James Penny, who’s been running ethically focused funds for about a decade and is currently the London-based chief investment officer at TAM Asset Management. He predicted that several companies owned by ethically focused funds will struggle to refinance their debt, without naming any specific firms.

 

“A lot of ESG companies out there that probably can’t survive with interest rates going where they are,” Penny said in an interview. “There will be ESG companies that will go to the wall because of this market.”

It’s the latest in a string of warnings to hit the ESG space. The investing style rode out the pandemic better than other corners of the market, but is now coming under pressure from higher inflation and interest rates. It’s been particularly punishing for technology stocks, a staple of ESG funds.

For fund managers, the period ahead “could be like a baptism of fire,” Penny said.

There are now signs that interest in ESG investments is flagging. After more than three years of inflows, stock investors pulled about $2 billion from US exchange-traded ESG funds in May, the biggest monthly redemption on record, according to Bloomberg Intelligence.

Meanwhile, the Impact Shares MSCI Global Climate Select ETF is set to close after less than a year because none of the backers pitched in with anticipated funding.

The tougher market environment for ESG has coincided with growing disillusionment. Insiders such as activist hedge fund boss Chris Hohn have publicly lambasted the way in which much of the asset management industry does ESG, characterizing it as toothless.

And according to a recent survey conducted by the Journal of Financial Planning and the Financial Planning Association, there are signs of a broader cooling under way in sentiment toward ESG. The investment model “may have reached an inflection point,” the groups wrote in a press release.

“It’s the environment that’s causing ESG stocks to underperform, but it’s also sentiment causing ESG stocks to underperform,” Penny said. He added that ESG fund managers need to be more selective and come up with “a full suite of different investment strategies” rather than rely on a limited number of asset classes.

TAM Asset Management has been working on diversifying. The goal is to find ethically sound investments that are uncorrelated, which could include dividend paying stocks, property, infrastructure or funds with an overweight to health care, he said.

TAM is tilted towards quality and value, but still has exposure to growth stocks in its ESG strategies, Penny said. Ultimately, the goal for investors right now is not to lose money, he added.

“You’ve got this broad-based sentiment turning against even high-quality companies,” he said. “People are just very fearful.”

[Tom Nolan + 2,443]

https://oilprice.com/Energy/Energy-General/ESG-Crusade-On-Backburner-As-World-Grapples-With-Energy-Crisis.html

ESG Crusade On Backburner As World Grapples With Energy Crisis

By Tsvetana Paraskova - May 24, 2022, 7:00 PM CDT

• Energy security is quickly becoming a priority over ESG investing.
• Institutions are calling for investment in both fossil fuels and renewable energy sources. 
• “In the context of voting on shareholder proposals regarding climate-related risk, companies face particular challenges in the near term,” BlackRock Investment Stewardship (BIS) said.

Join Our Community

The ESG investment momentum has run up against energy supply disruptions since the Russian invasion of Ukraine.  As shareholders at the biggest energy companies are asked to vote—again—on various climate resolutions, many investors continue to call for more transparent and detailed plans for how firms intend to align with the Paris Agreement goals. Others, such as the world’s top asset manager, BlackRock, expect to support fewer shareholder proposals this AGM season compared to 2021 as it finds that climate-related shareholder proposals have become unduly more prescriptive and micromanaging. 

Sure, large institutional investors are not abandoning the ESG trend or insistence that companies need to be prepared to change as the energy transition progresses. But some, including BlackRock, acknowledge the current energy market pressures and the need for investment in both traditional and renewable energy sources. 

Fund managers want companies to double down on the energy transition, which has become an even more urgent topic of conversation after the Russian war in Ukraine and Europe’s subsequent struggles to cut—and ultimately eliminate—its dependence on Russian fossil fuels. 

Yet, energy security and economic stability in the short term appear to override the longer-term drive to accelerate the transition toward green energy sources. 

Investors are also looking to shift their focus onto actual outcomes instead of on simplified ESG ratings that are based on policy statements. 

Related: Permian Drillers Lead The Charge As Rig Count Climbs

 

BlackRock: Investment In Both Traditional And Renewable Energy Needed  BlackRock said in early May that “many of the climate-related shareholder proposals coming to a vote in 2022 are more prescriptive or constraining on companies and may not promote long-term shareholder value.”

“Importantly, in the context of voting on shareholder proposals regarding climate-related risk, companies face particular challenges in the near term, given under-investment in both traditional and renewable energy, exacerbated by current geo-political tensions,” BlackRock Investment Stewardship (BIS) said. 

“This set of dynamics will — at least in the short- and medium-term — drive a need for companies that invest in both traditional and renewable sources of energy and we believe the companies that do that effectively will produce attractive returns for our clients.” 

That’s why BlackRock is likely to back proportionately fewer climate-related resolutions this proxy season than in 2021, as it does not consider them to be consistent with its clients’ long-term financial interests, the asset manager said. 

Doubling Down On Energy Transition 

Still, investors are not backing down on seeking active engagement with companies and demanding detailed, credible energy-transition plans. 

“The way out of the situation we currently find ourselves in is not to abandon the energy transition but to double down,” Nick Stansbury, head of climate solutions at the UK’s largest fund manager, Legal & General Investment Management (LGIM), told the Financial Times. 

Last month, LGIM said in its ‘Active Ownership’ report for 2021 that “We believe voting against a company is a powerful tool to express our views and concerns on key thematic issues such as climate change and diversity, as part of our ‘engagement with consequences’ approach.” 

LGIM welcomed in its report “positive steps” taken by ExxonMobil to commit to net-zero emissions for operated assets by 2050, as well as BP’s strengthened climate targets announced in February 2022.  

Related: Slew Of New Discoveries Brings UAE Closer To Production Goals

“We engaged with BP’s senior executives on six occasions in 2021 as they develop their climate transition strategy to ensure alignment with Paris goals. Following constructive engagements with the company, we were pleased to learn about the recent strengthening of BP’s climate targets, announced in a press release on 8 February 2022, together with the commitment to become a net-zero company by 2050 – an ambition we expect to be shared across the oil and gas sector as we aim to progress towards a low-carbon economy.”  

Change Of Focus   

Investors are also increasingly looking to affect change in the companies they are invested in, rather than just picking firms with the best ESG scores on paper. 

“What do ESG scores tell us about anything?” Ben Caldecott, director of the UK Centre for Greening Finance and Investment, told FT. “They are mainly measuring processes and policies — if a company has a policy in place against deforestation it will get a good score, even if it is deforesting.”

Others are shifting focus to the industries that use the energy produced by oil and gas companies. For example, the Church of England Pensions Board said earlier this month that after co-leading the investor process to establish the first Net Zero Standard for the oil and gas sector, it is shifting focus this year to industry sectors.  

“This will see the Board step down from leading engagement with Shell and begin co-leading engagement with Europe’s largest car manufacturers, BMW, Mercedes-Benz, Renault, and Volkswagen,” the board said.

“If the demand for energy doesn’t change, those companies that are supplying it won’t change. We have developed an exacting global net zero standard for the oil and gas sector, which companies that wish to retain their social license can implement. Ultimately those same companies’ ability to deliver on their targets will largely be shaped by a change in demand for oil and gas from sectors like autos, aviation and shipping” said Adam Matthews, Chief Responsible Investment Officer at the Church of England Pensions Board.   

However, with energy security concerns front and center and governments prioritizing energy supply in the biggest energy market shock in decades, demand for oil and gas is set to rise in the short term, while chronic underinvestment would plague supply in the medium term. 

By Tsvetana Paraskova for Oilprice.com

More Top Reads from Oilprice.com:

• Biden Calls Energy Crisis "Incredible Transition"
• Germany Expects Oil Embargo Decision This Week
• Poland Says Norway Should Share Its “Gigantic” Oil & Gas Profits

[Tom Nolan + 2,443]

 

[Tom Nolan + 2,443]

https://finance.yahoo.com/news/sec-greenwashing-plan-seen-facto-143058620.html

SEC Greenwashing Plan Seen as De Facto Bar for Canada Issuers

(Bloomberg) -- The US Securities and Exchange Commission’s plan requiring companies to comply with a set of climate-related disclosures is set to become a de facto standard for most large corporations in Canada, according to an analysis by Toronto-based consultancy firm ESG Global Advisors.

That’s because the SEC’s draft regulation is stricter than a similar plan being circulated by the Canadian Securities Administrators. The US plan requires disclosure of potential financial impacts of severe weather events, transition, as well as assumptions used for those stress tests, Sarah Keyes and Dustyn Lanz said in a report Thursday.

There are over 200 Canadian firms listed both in the US and domestic markets ranging from oil producers Suncor Energy Inc. and Cenovus Energy to the large telecom companies Rogers Communications and BCE. Also the US bond market is a major funding source for Canadian corporations with over $72 billion raised in dollars so far this year, according to data compiled by Bloomberg.

“The SEC’s proposed regulations are far more rigorous than the CSA’s,” said Keyes and Lanz, the chief executive officer and senior adviser at the firm, respectively. “Therefore, unless dramatic changes are made, the SEC’s climate disclosure rules will likely become the go-to disclosure framework for cross-listed issuers.”

The SEC released its plan for issuers in March, followed by a parallel proposal for investment funds last month. In October, the CSA requested feedback from market participants on a proposed set of climate-related disclosures from issuers other than investment funds.

If the SEC regulation is enacted, issuers will have to carry out a mandatory evaluation and disclosure of the potential financial impacts of severe weather events, transition, and mitigation activities. In the case that those can produce a change of 1% or more to any line item in the financial statements, this would need to be disclosed in a note in financial statements. In addition, securities issuers will need to disclose the assumptions used for their projections. In contrast, the CSA draft has no requirement to disclose financial statement impacts based on a quantitative threshold.

Under the SEC proposal, if an issuer uses climate scenario analysis, it should disclose parameters, assumptions and projected financial impacts, as well as the volume of carbon offsets to reach emission reduction targets. These requirements are not included in the proposal from the Canadian regulators, the report said.

“Compliance with the SEC’s proposed rules would cover nearly all the CSA’s proposed rules,” the report said. “Cross-listed companies that comply with the SEC’s proposed rules while also disclosing their targets and exposure to climate-related opportunities would likely be operating in compliance in both Canadian and US markets.”

Edited June 10, 2022 by Tom Nolan

[RichieRich216 + 454]

Invest with your brains, not with a group of Looney Environmental Groups!

[Ecocharger + 1,470]

On 6/10/2022 at 12:14 PM, Tom Nolan said:

https://finance.yahoo.com/news/sec-greenwashing-plan-seen-facto-143058620.html

SEC Greenwashing Plan Seen as De Facto Bar for Canada Issuers

(Bloomberg) -- The US Securities and Exchange Commission’s plan requiring companies to comply with a set of climate-related disclosures is set to become a de facto standard for most large corporations in Canada, according to an analysis by Toronto-based consultancy firm ESG Global Advisors.

That’s because the SEC’s draft regulation is stricter than a similar plan being circulated by the Canadian Securities Administrators. The US plan requires disclosure of potential financial impacts of severe weather events, transition, as well as assumptions used for those stress tests, Sarah Keyes and Dustyn Lanz said in a report Thursday.

There are over 200 Canadian firms listed both in the US and domestic markets ranging from oil producers Suncor Energy Inc. and Cenovus Energy to the large telecom companies Rogers Communications and BCE. Also the US bond market is a major funding source for Canadian corporations with over $72 billion raised in dollars so far this year, according to data compiled by Bloomberg.

“The SEC’s proposed regulations are far more rigorous than the CSA’s,” said Keyes and Lanz, the chief executive officer and senior adviser at the firm, respectively. “Therefore, unless dramatic changes are made, the SEC’s climate disclosure rules will likely become the go-to disclosure framework for cross-listed issuers.”

The SEC released its plan for issuers in March, followed by a parallel proposal for investment funds last month. In October, the CSA requested feedback from market participants on a proposed set of climate-related disclosures from issuers other than investment funds.

If the SEC regulation is enacted, issuers will have to carry out a mandatory evaluation and disclosure of the potential financial impacts of severe weather events, transition, and mitigation activities. In the case that those can produce a change of 1% or more to any line item in the financial statements, this would need to be disclosed in a note in financial statements. In addition, securities issuers will need to disclose the assumptions used for their projections. In contrast, the CSA draft has no requirement to disclose financial statement impacts based on a quantitative threshold.

Under the SEC proposal, if an issuer uses climate scenario analysis, it should disclose parameters, assumptions and projected financial impacts, as well as the volume of carbon offsets to reach emission reduction targets. These requirements are not included in the proposal from the Canadian regulators, the report said.

“Compliance with the SEC’s proposed rules would cover nearly all the CSA’s proposed rules,” the report said. “Cross-listed companies that comply with the SEC’s proposed rules while also disclosing their targets and exposure to climate-related opportunities would likely be operating in compliance in both Canadian and US markets.”

The proposed SEC rules ask for information about climate impacts which no one possesses or even could reasonably be expected to obtain.

Nonsensical, but not surprising coming from the Green Revolutionaries.

[Boat + 1,323]

I agree with you rednecks to a point. I don’t like mandates and rules and shyt that requires lawyers. The best widget to clean the air, water and calm Mother Nature are renewables. Large areas of southern ocean and southern solar to avoid winter will work for wind and solar and produce electricity cheaper. Nat gas is just to price volatile. It’s an economy killer. The Texas two step. Storms and wars, you can’t avoid them. 

 

 

[nsdp + 449]

On 6/9/2022 at 7:52 AM, Tom Nolan said:

Anti-Green Blowback: ESG Funds Suffer Biggest Monthly Outflows On Record

by Tyler Durden

Sunday, Jun 05, 2022 - 02:00 PM

Has the ESG fraud bubble finally burst? More than two years ago, long before Elon Musk joined the growing anti-ESG bandwagon, we were the first to slam ESG as nothing but the latest Wall Street scam meant to fast-track gains for all those hypocrites who pretended to care about the environment but really had found a quick and efficient way of parting fools from their money (see from Feb 2020 "Behold The "Green" Scam" and from April 2020 "The Fraud That Is ESG Strikes Again: Six Of Top 10 ESG Funds Underperform The S&P500").

Well, it appears that after years of forced capital allocations, the party is over and the bubble has burst. As Bloomberg writes, this year’s weak performance by US stocks has forced many investors to recalibrate their portfolios. And they’re fleeing "do-good" scams strategies.

After more than three years of inflows, investors are now pulling cash out of US equity exchange-traded funds with higher environmental, social and governance standards. May saw $2 billion of outflows from ESG equity funds, according to data from Bloomberg Intelligence -- the biggest monthly cash pullback ever.

“There’s no way to know for certain why the outflows were so extreme,” said Bloomberg Intelligence analyst James Seyffart, who noted that the funds had started from a high-asset base after years of inflows. “But also ESG ETFs may be finding that people care a lot more about them in bull markets.”

Do-good investing boomed during the pandemic, with more than $68 billion flowing into ESG equity funds in the past two years. Many believed that this momentum would continue into 2022. But the spike in oil prices since Russia invaded Ukraine has lifted fossil-fuel shares, driving the S&P 500 Energy Index to gain 59% this year even as the benchmark overall has dropped 14%.

This has made do-good investing more of a sacrifice. RBC Wealth Management recently surveyed over 900 of its US-based clients and 49% said that performance and returns were a higher priority than ESG impact, up from 42% last year.

“The story has been told that you don’t have to give up returns in order to do ESG, but everyone assumed that you would get the same exact return profile as a traditional benchmark, which is absolutely not true because traditional benchmarks are not looking at ESG factors,” said Kent McClanahan, vice president of responsible investing at RBC Wealth Management.

He added that social and environmental policy can take time to implement, so investors should focus more on longer-term payoffs.
“You would think that now more than ever, people will be looking to ESG investing given what we are seeing in the energy markets and the need not to be so dependent on certain countries such as Russia and their energy and their oil and gas,” said Fiona Cincotta, senior market analyst at City Index.

That might be one reason that at least 20 ESG-focused funds have launched in the US this year, netting almost $3.2 billion of inflows in 2022, according to data compiled by Bloomberg.

Yet RBC clients also expressed skepticism about the ESG label. Though nearly two-thirds said that socially responsible investing is the way of the future, 74% of those surveyed said many companies provide misleading information about their ESG initiatives. This is an issue that could eventually be addressed through a Securities and Exchange Commission’s proposal for new restrictions to ensure ESG funds accurately describe their investments.

Ivy Jack, head of equities at Northstar Asset Management, said that this year’s performance has exposed the fact that some investors were caught up in ESG as a fad and misinformed.

“If you really want to understand if someone is serious about ESG, I would first ask them to look at their portfolio and ask them to explain why all the companies are in there and how those companies relate to their values,” Jack said. “To the extent that someone can’t do that for you, well that’s a red flag.”

See John Authers latest "ESG Is Alive and Well. Just Call It Protectionism" for another take on ESG.

https://www.zerohedge.com/markets/anti-green-blowback-esg-funds-suffer-biggest-monthly-outflows-record, Social

You have convinced me you are as stupid I have presumed.    ESG as trademarked is Environmental,  Social and Governmental compliance as copy righted by Capital Group in the 1950's. https://www.capitalgroup.com/institutional/policies-and-disclosures.html . If you want to use it do so properly so you don't start working for Federal Prison Industries (where are your investment disclaimers?).These elements are 25% Environmental Compliance , Social  compliance 25%(eg you are Exxon   so you don't black  or red line poor neighborhoods as a site for your new crystal meth plant or home lending), and 10% governance article by laws and you have no criminal cases pending. Wells Fargo, JP Morgan (for North Korea) Deutsche Bank  and Credit Suise are banks that come to mind for money laundering . SEC compliance (think undisclosed and  unplugged wells for OTC or exchange traded/options. quiet periods stocks.)15%. 

Having worked white collar  criminal compliance for forty years and worked for TEXAGULF SULPHER CO

https://h2o.law.harvard.edu/collages/8888 ESG in trade means a whole lot more than the people you cited. Find a source  that is current on their SEC disclosures.  Motley Fool perhaps, I will visit you at Ft. Leavenworth.

[Ron Wagner + 706]

On 6/11/2022 at 7:12 PM, Boat said:

I agree with you rednecks to a point. I don’t like mandates and rules and shyt that requires lawyers. The best widget to clean the air, water and calm Mother Nature are renewables. Large areas of southern ocean and southern solar to avoid winter will work for wind and solar and produce electricity cheaper. Nat gas is just to price volatile. It’s an economy killer. The Texas two step. Storms and wars, you can’t avoid them. 

 

 

The main thing stopping natural gas from being reasonable in price is so called environmentalists. The Germans sold out to Russia over Nordstream 2 and this led Putin to "jump the shark" by invading Ukraine. He got a very unexpected unilateral response from the West. He has now sealed the fate of Russia by alienating much of the world through his barbaric attack on Ukrainian cities with indiscriminate attacks that kill civilians of all ages and other atrocious crimes. 

The second most important culprit is Joe Biden, who has done everything possible to decrease the development of fossil fuels by America and is now going to beg the Saudis to increase their fossil fuel development! 

ESG is the third factor and that is hopefully fading away in the light of real facts about energy. 

Biden is now supporting importing solar panels from China, so that should make you very happy Boat. He has also pushed through large subsidies for electric fueling stations and even wants them every 50 miles on our interstates. He want to mandate electric vehicles, but all such thoughts should be given up. Americans will not be mandated to choose vehicles they do not want. Some will want electric vehicles or hybrids but others should not have to pay for their service stations or subsidies. 

[TailingsPond + 1,006]

22 minutes ago, Ron Wagner said:

The main thing stopping natural gas from being reasonable in price is so called environmentalists. The Germans sold out to Russia over Nordstream 2 and this led Putin to "jump the shark" by invading Ukraine. He got a very unexpected unilateral response from the West. He has now sealed the fate of Russia by alienating much of the world through his barbaric attack on Ukrainian cities with indiscriminate attacks that kill civilians of all ages and other atrocious crimes. 

The second most important culprit is Joe Biden, who has done everything possible to decrease the development of fossil fuels by America and is now going to beg the Saudis to increase their fossil fuel development! 

ESG is the third factor and that is hopefully fading away in the light of real facts about energy. 

Biden is now supporting importing solar panels from China, so that should make you very happy Boat. He has also pushed through large subsidies for electric fueling stations and even wants them every 50 miles on our interstates. He want to mandate electric vehicles, but all such thoughts should be given up. Americans will not be mandated to choose vehicles they do not want. Some will want electric vehicles or hybrids but others should not have to pay for their service stations or subsidies. 

.You acknowledge the political problem with fossil fuel dependency but then support the industry at the same time.

Russian gas is good gas, or gas is not good.

Vehicle regulations are nothing new.  Airbags, ABS, catalytic converters, seat belts, etc. The fact is the people can be forced to accept features they do not necessarily want.  Try to buy a new 2-stroke...

Edited June 14, 2022 by TailingsPond