The University of Toronto Asset Management Corp. (UTAM), which manages over $10 billion in assets on behalf of the university, plans to reduce the carbon footprint of the endowment and pension investment portfolios by at least 40 per cent by 2030.
U of T’s arms-length investing body outlined the commitment in its 2019 Carbon Footprint Report, which analyzed the carbon footprint of public equity, private equity, private real estate and private infrastructure holdings within the university’s pension portfolio as of Sept. 30, 2018. The report uses the pension portfolio as a proxy for the endowment portfolio because the investments in each portfolio are substantially similar.
The planned 40 per cent reduction across the two portfolios would have three times the impact of simply eliminating all oil and gas companies, which UTAM estimates would reduce the carbon footprint of the portfolios by only about 13 per cent.
“This is a target that is ambitious yet achievable,” said Daren Smith, president and chief investment officer at UTAM.
“Having a carbon reduction target is a highly effective way to address the risks and opportunities related to climate change in an investment portfolio.”
The 2019 Carbon Footprint Report calculates the pension’s carbon footprint in 2018 at 136.1 tonnes of carbon dioxide equivalent per million dollars invested – a 2.2 per cent reduction from 2017, which was the first year a carbon footprint was calculated and will serve as the base year for the 40 per cent reduction target to 83.5 tonnes or less by the end of 2030.
Smith said UTAM management worked closely with its board and investment committee, along with university leaders and stakeholders, to determine a carbon footprint-reduction target that is both significant from a climate action perspective and is consistent with the university’s risk and return objectives for the pension and endowment portfolios.
While responsible investing has long been a component of UTAM’s investment process, the organization adopted formalized environmental, social and governance (ESG) protocols in 2016 in response to U of T President Meric Gertler’s 14-point plan to make U of T a leader in tackling climate change.
UTAM has since signed on to the United Nations-supported Principles for Responsible Investment (PRI), signed the Montreal Carbon Pledge and released carbon footprint and responsible investing reports, among other initiatives.
“The University of Toronto recognizes that the coming decade will be crucial in the fight against climate change,” President Gertler said, noting the university pledged in its Low Carbon Action Plan to cut its own greenhouse gas emissions by 37 per cent from 1990 levels by 2030, putting it on a path to becoming a “net-zero” institution.
“We applaud UTAM for taking this latest giant stride in its ongoing efforts to address climate change and responsible investing while continuing to invest the university’s assets prudently,” President Gertler continued. “Although the 40 per cent reduction target for the pension portfolio is expected to be reviewed by the University Pension Plan (UPP) Trustees when the assets transfer to the new plan in 2021, we felt it was important to get started on this important initiative now instead of waiting any longer.”
UTAM doesn’t buy and sell individual securities itself, but hires external investment managers to invest assets on its behalf in what’s referred to as a “manager of managers” approach. To that end, Smith said that one of the strategies under consideration to achieving the 40 per cent reduction target will be to work with investment managers to create lower carbon footprint portfolios.
“We’ve been talking to our investment managers to understand how they factor in material environmental, social and governance considerations, and that includes climate considerations,” Smith said. “We score our managers on responsible investing as part of our investment due diligence.
“We rate the managers and encourage them to adopt best practices.”
Smith, who sits on the board of the Canadian Coalition for Good Governance, said the approach enables UTAM to play a key role in influencing the approaches and attitudes of investment managers going forward. That, in turn, allows U of T to have a sustainable, long-term impact that goes well beyond that of its own investment holdings.
Smith cited an example of one investment manager who, thanks in large part to encouragement from UTAM, has become an emerging leader in responsible investment in their space.
In addition to announcing its carbon footprint reduction target, UTAM, on behalf of U of T’s pension and endowment funds, endorsed the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) that was established by the Financial Stability Board, a Switzerland-based organization that promotes oversight and regulatory policies for the financial system.
Starting in 2020, UTAM will provide reporting following the TCFD framework, which includes recommendations for companies and organizations pertaining to disclosure of their climate-related financial risks. The endorsement makes U of T the first Canadian university to endorse the TCFD recommendations on behalf of its pension and endowment funds, joining the ranks of over 930 public and private sector organizations in supporting the initiative.
“We are taking a comprehensive approach to addressing climate change,” Smith said. “The carbon reduction target and our support for the TCFD recommendations are important aspects of this approach, but it also includes incorporating ESG factors into our investment decision-making process, active ownership through proxy voting and company engagement, and assuming an advocacy role with regards to policy-makers and regulators.”
Boston Beer founder Jim Koch defends hard seltzer investment after disappointing earnings report – CNBC
Boston Beer Company co-founder Jim Koch defended its heavy investment in hard seltzer Thursday as shares fell after weak guidance and a per-share earnings miss.
“Sometimes growth, it’s not cheap, particularly in something capital-intensive like beer,” Koch said on “Closing Bell.“
Hard seltzer, in particular, demands significant investment because “it’s the biggest thing that’s come into the beer business since light beer,” Koch said.
Shares of Boston Beer Company slid 7.6% to $396 Thursday following its after-the-bell earnings report a day earlier. It posted earnings of $1.12 per share for the fourth quarter while analysts had forecast earnings of $1.47 per share.
It also reported full-year EPS guidance of $10.70 to $11.70. Wall Street consensus had been $11.72.
Boston Beer CEO David Burwick said on the earnings call that margins will continue to suffer as it increases capacity to meet demand around hard seltzer.
“We expect this program to run for two to three years and begin showing margin improvement by the first half of 2021,” he said, according to a transcript from The Motley Fool.
The Samuel Adams brewer said it saw triple-digit growth around its hard seltzer brand, Truly, which helped deliver quarterly revenue of $301.3 million. It represents a 33.8% increase compared with the prior year.
Despite Thursday’s slide, Boston Beer’s stock remains up 47% in the past 12 months as the hard seltzer category exploded.
“Let’s not get distracted by what happens today or tomorrow,” Koch said in defense of the company’s strategy. “Let’s make sure we’re building for the future.”
And that’s a future in which Truly plays a critical role, said Koch, who launched the Boston Beer Company in his kitchen in 1984.
“We really don’t know how far is up” for hard seltzer, Koch said.
So far, Koch said, the fresh competition from Bud Light Seltzer has not hurt Truly’s popularity among consumers.
“We were actually very pleased with the entrance of Bud Light Seltzer,” he said. “Since Bud Light Seltzer’s been introduced, we’re the only hard seltzer that actually gained market share.”
Koch said hard seltzer’s growth has far exceeded what Boston Beer expected when it launched Truly about four years ago. It’s appealing to a wider range of consumers than they thought, Koch said.
“It kind of presses all the buttons. Great taste. Not much compromise. Health and wellness cues,” Koch said. “We think that the category can double again in 2020.”
Intel is a good investment and a bad trade, this investor says – Cantech Letter
US semiconductor name Intel (Intel Stock Quote, Chart, News NASDAQ:INTC) has had a great run over the past few months but is there more upside to come?
Likely in the long term, says Scotia Wealth’s Andrew Pyle, but for short term traders you might want to look elsewhere.
“The tech sector has been on fire, with the NASDAQ hitting another record high [on Tuesday]. I still like Intel right now,” says Pyle, portfolio manager for Scotia Wealth Management, who spoke to BNN Bloomberg on Wednesday.
After staying range-bound for a good year and a half, Intel broke out last fall to post a 25 per cent return for 2019, while so far in 2020 the stock is already up ten per cent and is now hanging around $66-$67 in recent weeks. (All figures in US dollars.)
“We seem to be having a bit of an issue in getting the stock up to the $70 range,” says Pyle. “We’re seeing a bit of consolidation right now which is a little bit different from what we’ve seen from some of the other high-fliers in the tech sector,” he said. “Having said that, I still think the fundamentals for Intel are good for a long-term play.”
“If we’re looking at five years out or more I think these levels are probably still attractive. For a short-term trade, I’d probably say we’re a little bit pricey right now,” Pyle said.
Intel’s share price got a nice boost near the end of January on the company’s fourth quarter earnings which surprised analysts with better-than-expected top and bottom line results.
Intel’s revenue climbed eight per cent year-over-year to $20.21 billion whereas analysts were calling for $19.23 billion, while earnings came in at $1.52 per share excluding certain items compared to the Street’s estimate at $1.25 per share.
The company saw just two per cent growth in its Client Computing segment but posted a whopping 19 per cent increase in its Data Center Group which manufactures chips for computer servers, with the rise being attributed to more business in cloud computing, especially by the big names in the field, the so-called hyperscale companies such as Amazon, Microsoft, Alibaba and Baidu.
Looking ahead, Intel management has called for 2020 revenue of $73.5 billion compared to 2019’s $72.0 billion.
“In 2019, we gained share in an expanded addressable market that demands more performance to process, move and store data,” said Bob Swan, Intel CEO, in the fourth quarter press release. “One year into our long-term financial plan, we have outperformed our revenue and EPS expectations. Looking ahead, we are investing to win the technology inflections of the future, play a bigger role in the success of our customers and increase shareholder returns.”
Intel is facing rising competition across many of its businesses from Advanced Micro Devices, among others, which has been gaining market share from Intel. AMD’s share price rose 148 per cent last year and has kept up the pace so far in 2020 by climbing 27 per cent so far.
Swensen reaffirms climate change as a guiding factor in investment policy – Yale News
David Swensen, Yale University’s chief investment officer, this week underscored the importance of environmental sustainability in the university’s investment choices.
In a Feb. 20 letter to the university community, Swensen offered an update on Yale’s approach to incorporating the risks of climate change in investment decisions. The letter follows another letter Swensen wrote to the Yale community in 2016 offering a first progress report on an effort the Investments Office began in 2014 to give climate-change-related guidance to Yale’s external investment managers, who collectively manage nearly all of the endowment portfolio.
“Climate change,” Swensen writes in his latest letter, “poses a grave threat to human existence and society must transition to cleaner energy sources. This is a formidable task that requires swift and dramatic action on a global scale. The solution involves a combination of government policy, technological innovation and changes in individual behavior.”
Swensen writes that Yale’s greatest impact in fighting climate change will come through its research, scholarship and education, and notes that the university has committed to reducing its own carbon footprint. Yale President Peter Salovey has led an acceleration of these efforts: Provost Scott Strobel has been charged with convening relevant faculty leadership around a university-wide push for planetary solutions, and a committee charged with finding a way to get the campus to net-zero carbon emissions is due to issue a report soon. Meanwhile, Yale continues to be nearly unique in imposing a carbon charge on all of its buildings.
Yale was one of the first institutions to address formally the ethical responsibilities of institutional investors. In 1969, a small group of Yale faculty and graduate students conducted a seminar exploring the ethical, economic, and legal implications of institutional investments; this led to the publication in 1972 of “The Ethical Investor: Universities and Corporate Responsibility,” which established criteria and procedures by which a university could respond to requests from members of its community to consider factors in addition to economic return when making investment decisions and exercising rights as a shareholder. When in that year the Yale Corporation adopted the book’s guidelines, Yale became, according to The New York Times, “the first major university to resolve this issue by abandoning the role of passive institutional investor.” Swensen has been integral to this approach since his arrival at Yale in 1985.
Within the resulting procedural framework, the board of trustees’ Corporation Committee on Investor Responsibility (CCIR) is advised and supported by the Advisory Committee on Investor Responsibility (ACIR), which is composed of faculty, students, staff, and alumni. In 2014, the CCIR considered the request from some students for divestment from the fossil-fuel industry. The CCIR decided against divestment, largely on the grounds that assigning blame to the supply side of the carbon problem would distract from the fundamental, and shared, problem of demand.
In response to President Salovey’s challenge to find a way to address climate change issues in Yale’s investments, the Investments Office conceived and executed a plan that would guide the endowment toward increasingly green investments. Beginning in 2014, the university has asked all investment managers to incorporate the full costs of carbon emissions in investment decisions. As Swensen notes in the current letter and in his 2016 letter, the university asks its investment managers to avoid investing in companies that disregard the social and financial costs of climate change and that fail to take economically sensible steps to reduce greenhouse gas emissions.
Yale further asks investment managers to assess the greenhouse gas footprint of prospective investments, as well as the costs to expected returns of climate change consequences and of possible future policies aimed at reducing greenhouse gases.
“Yale’s investment approach to climate change contributes to the broader societal goal of transitioning to clean energy,” Swensen writes.
In keeping with this approach, Yale has in recent years, through its investment managers, jettisoned holdings in thermal coal companies and oil sands producers, because they are inconsistent with the university’s investment principles, he reports.
“The remaining thermal coal private investments are on their way out of the portfolio,” Swensen writes. Yale’s investment in thermal coal and oil sands has dropped from 0.24% of the endowment’s market value in 2014 to about 0.02% today, according to the letter.
The letter provides examples of successful steps taken by Yale’s investment managers to improve the environmental sustainability of investments for which they are responsible.
“For many managers, Yale is often one of the more significant investment partners, placing the university in a strong position to influence a manager to incorporate the risks of climate change into investment decisions,” Swensen writes.
Ultimately, he writes, the result of Yale’s approach is that “investments with large greenhouse gas footprints are disadvantaged relative to investments with small greenhouse gas footprints. When taking into account the full costs of climate change, investment capital flows towards less carbon-intensive businesses and away from more carbon-intensive businesses.”
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