Sustainable investment assets grew to $35.3 trillion globally last year amid mounting concerns about societal inequities and climate change. That’s about $1 of every $3 managed globally seeking out a profit from environmental, social and governance concerns, according to Global Sustainable Investment Alliance’s report last month.
It’s an impressive number. But the bulk of that money—some $25 trillion—is in a strategy called “ESG integration,” also known as “ESG consideration.” In theory, this means that managers are including ESG data in their financial models, according to GSIA.
In practice, money managers may be “aware of” and “take into account” ESG factors when making investment decisions, said Rob Du Boff, an analyst at Bloomberg Intelligence. But they’re not necessarily compelled to act on that information, he said.
Nicolette Boele, an executive for policy and standards for the Responsible Investment Association Australasia, agrees that ESG integration doesn’t always translate into action. Unless it’s paired with things like proxy voting and corporate engagement, that alone won’t necessarily “deliver better sustainability outcomes for a better world,” she said.
Many large fund managers are saying they’re integrating ESG across their holdings in a bid to attract assets from pension plans and other investors amid the boom in sustainable investing. Since ESG lacks definitions, it can often mean different things to different people, said Lisa Sachs, who heads Columbia University’s Center on Sustainable Investment. And because ESG integration is often conflated with other responsible investment strategies such as impact investing and negative and positive screening, it’s helping to create a false impression that the world of money management is directing capital towards helping solve societal ills.
“The major risk is that finance is purporting to solve social and environmental problems through ESG and that there’s no need for government action,” Sachs said. “But we need rigorous policy to address the big issues.”
Some regulators are trying. European sustainable investments shrank by $2 trillion between 2018 and 2020 as policymakers tightened the parameters for what can be considered a responsible investment, GSIA said. In March, the EU implemented a set of rules known collectively as the Sustainable Finance Disclosure Regulation, which require fund managers to classify and disclose the ESG features of their products. Those that promise to actively promote ESG goals have a higher bar to clear on transparency.
In Australia, the finance industry is relying on its own voluntary rules rather than regulators. The Responsible Investment Association Australasia has a certification program and a responsible investment-leaders scorecard that rely on publicly disclosed policies and reporting on processes to help reward responsible investing, according to Boele.
“The requirement of this transparency is key to industry accountability,” she said.
Sustainable finance in brief
JPMorgan—the world’s largest underwriter of green bonds—is putting the ESG label on derivatives.
A quant firm adjusted its models for ESG and found some “crazy” pricing.
Shareholders are calling on the world’s top miner, BHP Group, to abandon its divestment plans in favor of better management.
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
