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ESG

System change investing – A new approach to ESG

The world is changing, and it’s changing quickly, as we face global systemic threats, from climate change to inequality to loss of biodiversity. Even as investors looking to finance a transition to a more sustainable future focus on these challenges, many recognize that ESG strategies alone will not be enough because they fail to address the root causes of the problems – the economic and political systems that underpin society. According to Kevin Dixon, Founder of Global System Change, ESG strategies are flawed because they set up a paradox – they ask companies to voluntarily stop harming the environment and…

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Should AI be an ESG priority?

The potential of Artificial Intelligence (AI) to profoundly disrupt our economy and society, from AI bots that can replace jobs on the factory floor, to drafting lawsuits, writing screenplays and composing music, is becoming increasingly clear. As a recent Goldman Sachs report noted, while AI could add to labor productivity growth and boost global GDP by as much as 7% over time, it will also severely disrupt labor markets, posing new challenges. According to the report, two-thirds of jobs in the US and Europe could be automated and around the world, as many as 300 million jobs could be impacted….

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Antitrust and the pushback on ESG

As the rhetoric on the pushback against ESG in the U.S. heats up, the question now is: does this challenge have a legal basis or is this just about politics? From a legal standpoint, it is becoming clear that the anti-ESG advocates may in fact have a powerful tool in the form of the Sherman Antitrust Act, which generally prohibits agreements between competitors that unreasonably restrain trade and other forms of unilateral business conduct that may have an anticompetitive effect. Of specific concern here is whether participation in ESG initiatives and coalitions that are shaping markets or excluding specific industries…

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Notes from RI USA 2022

From navigating new SEC regulations to setting net zero targets to managing an increasing divisive political discourse around ESG, 2022 has brought many new challenges to the field of sustainable investing and catalyzed new debates on where it is heading. On December 6 and 7, sustainable finance and ESG investment professionals from across North America gathered in New York City for Responsible Investor’s 14th annual RI USA conference to discuss developments and best practices for hot-button issues from human rights and biodiversity to net zero and the role of Big Tech. Some of the questions raised in the panels included:…

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How will the “revolution in shareholder democracy” impact investment stewardship?

As part of the pushback on ESG, large institutional investors have come under increasing pressure from conservative states and asset owners for their support of ESG in their investment stewardship and proxy access engagement with companies. As a response to this criticism, Larry Fink, CEO of BlackRock, the world’s largest asset manager, announced on Wednesday a plan to allow BlackRock’s retail investors to vote on proxy battles for the first time. He characterized it as a “revolution in shareholder democracy” that will “transform the relationship between asset owners and companies.” How this will work out in practice remains to be…

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Credit Markets – The Elephant in the ESG Room

To read the headlines, you could easily be forgiven for thinking that ESG integration in capital markets is now fully underway, as the value of global assets applying environmental, social and governance data to drive investment decisions has soared to $40.5 trillion and now represents more than a third of the $95 trillion equity market in 2020.

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Biden and ESG:

How the new administration might shape the sustainability landscape

With one week until President-Elect Joe Biden takes office, the U.S. is likely in for a major shift in tone at the top. The Trump administration has been marked by a loosening of regulations, both environmental and economic, that have drawn criticism for their negative impact on ESG issues from climate change to social justice. Analysts are already predicting that a Biden presidency will give a substantial boost to ESG investing and many of his early cabinet and advisor picks appear to be ESG-friendly. With the recent runoff election in Georgia adding two Democratic seats to the Senate, giving the…

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The Role of Trade Associations in ESG

While ESG integration has been widely explored from company, investor, and broader capital market perspectives, there has been less focus on the role of trade associations in ESG integration and their influence on regulation and policy development on ESG issues such as climate change. This research note, prepared by KKS Advisors, shines a light on the role that trade associations play in promoting and inhibiting the integration of ESG in business practices and reporting. It examines the ways that companies currently disclose their trade association memberships and identifies barriers to increased disclosure and transparency. Specifically it makes a case for…

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Sustainability in Capital Markets: A Survey of Current Progress and Practices

In the three years since our 2015 survey on the state of ESG integration in Capital Markets, interest and engagement with ESG in capital markets can truly be said to have gone mainstream. ESG investment products flood the market in almost every investment category, from ETFs to fixed income and alternatives. ESG assets under management now total $30 trillion, up from $23 trillion in 2016 and are projected to grow to $35 trillion by 2020. The first version of this report was published in January 2016, using 2015 data. The report offered a landscape analysis of the mainstream capital market…

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ESG Integration in Investment Management: Myths and Realities

Until very recently, there has been considerable doubt, especially among mainstream investors, that companies with high ESG “scores” could succeed in producing competitive returns for their shareholders. Studies of the last three decades of the 20th century have reported that what was then known as Socially Responsible Investing (or SRI)—an investment approach that worked mainly by screening out the companies with the lowest ESG scores or entire industries such as tobacco and alcohol—produced shareholder returns that were often below market averages. And this finding has in turn contributed to the widespread perception that corporate efforts to address environmental and social…

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