Surrounding ESG Funds and How they Affect an Investor’s Expectations Related to Climate Change
Michael Cosack, ImpactWise, LLC
Snapshot of Global Sustainable Investing Assets (USD billions)
Source:
2020
GSIR
Key Concerns and Challenges Surrounding the Expansion of Sustainable Investing
• Definitional Confusion: Increasing confusion regarding the meaning of sustainable investing (i.e values-based investing versus ESG integration)
• Investment Product Clarity: Difficultly differentiating between various funds and their sustainable strategies and outcomes (risk of “greenwashing”)
• Disclosure Gap: Transparency practices limiting the ability to assess financial and non-financial outcomes
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• Deutsche Bank raided by authorities over ESG ‘greenwashing’ claims: ‘We’ve found evidence that that could support allegations of prospectus fraud’ • SEC Alleges BNY Mellon made ESG Misstatements and Omissions
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2022 ESG News Headlines
Key Recommendation
#1 Adoption of Standardized Definitions: The adoption of a consistent widely accepted set of standards and definitions to cover the various sustainable investing approaches. We suggest the following: • Values-based Investing • Exclusionary Investing • Impact Investing • Thematic Investing • ESG Integration • Engagement/Proxy Voting 7
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Key Recommendation - #2
Creation
of
Accepted Product Classifications:
A widely adopted supplemental classification framework superimposed on top of investment classifications to emphasize the
achievement of social impacts or societal outcomes.
Eaton Vance Dividend Builder Fund
Brown Advisory Eq Income Fund
Goldman Sachs Internat’l Eq ESG Fund
ESG IntegrationConsideration
ESG IntegrationStraight
ESG IntegrationMixed
As part of the research process, portfolio management may consider financially material environmental, social and governance (“ESG”) factors.
The Adviser views ESG characteristics as material to fundamentals and seeks to understand their impact on companies in which the Fund may invest.
The Fund’s ESG criteria are generally designed to exclude companies that are involved in, and/or derive significant revenue from, certain industries or product lines, including: gambling, alcohol, tobacco, coal, and weapons.
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Key Recommendation - #3
Closure of Disclosure Gap: Explicit sustainable disclosure mandates on non-financial outcomes for all funds isolating the effect of ESG on performance.
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Michael Cosack ImpactWise, LLC cosackm@impactwise.us 215-806-7733