FINSUM + Magnifi: Water Crisis Give New Dimension to ESG
April 6, 2021
Two extreme water crises have occurred since the new year and are moving water conservation to the top of the ESG pecking order. Access to clean water during Texas blackouts was a major concern and on the other side of the globe, Taiwan is experiencing a historic drought, detrimental to its semiconductor industry. Most ESG opportunities are centered around greenhouse gas emission, however nine of the ten greatest risk factors for humanity are linked to the water crisis. Many companies couldn’t survive without ample water. The Thomas Schuman Capital U.S. Water Security Index gives its weight to the largest 550 companies by their water footprints and risk exposure. Companies like AT&T or Microsoft are given higher weights. The TSC has outpaced the S&P 500 by over 14% since its inception. The Invesco Water Resources ETF directly invests in purification and conservation companies and has also outpaced the S&P.
FINSUM + Magnifi: ESG Grows and Branches into New Territory
March 2021
The pandemic has shifted the paradigm for many investors as they look to environmental, social, and governance (ESG) to make up a larger share of their portfolio. ESG will shape the future of investing but there is a new way to invest in green companies with a new twist. Sustainably linked bonds (SLB) allow firms to receive money for green energy initiatives but rather they will pay a penalty if they don’t meet expectations. Marilyn Ceci head of ESG development at JP Morgan expects SLB to hit $120-150 billion despite issuance since inception being only around $20 billion. SLB isn’t a threat to ESG as the industry is expected to grow from $270 billion last year to over $400 billion this year, but rather a compliment to the growing industry. ESG's ability to withstand the full business cycle is a testament to its future.
FINSUM + Magnifi: Vanguard Launches New Bond ETF with Custom ESG Strategy
(September 2020)
ESG has been flourishing since COVID began. ESG and COVID era investing naturally align—at their core, both are about risk mitigation. However, the challenge is figuring out the best way to invest in ESG. The whole area is vague. There are many funds to choose from, but the way fund providers separate good companies from bad is complicated and often opaque. To this environment, enter a new fund from Vanguard, the Vanguard ESG U.S. Corporate Bond ETF. The fund covers the broad corporate bond space with an ESG lens, but does so with a very well-defined methodology. The fund is using an ESG index specially developed by MSCI and Bloomberg. The index uses a “exclusionary screening process” which filters out companies involved in various vice industries, gas, GMOs, oil, thermal coal, firearms, and anything nuclear-related.
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