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Sustainable investing has been widely criticized over the past two years for practicing “woke capitalism” and abandoning its fiduciary responsibilities. Some Republican lawmakers have passed legislation attempting to ban it. However, there is some evidence that the theme of sustainable investing is gaining ground in business.
That’s the belief conveyed by investors and others who spoke at the annual Principles for Responsible Investment conference. The PRI, a United Nations-backed agency, provides guidance and a forum for investors seeking to address the risks of climate change and other non-financial factors that affect portfolio performance. They are certainly a selfish bunch. However, consider the following observations:
The study of environmental, social, and governance factors concentration is currently the sixth largest major at the Wharton School of the University of Pennsylvania. Witold Hennis, a business professor at Deloitte & Touche’s Wharton School, said he expects it to be No. 4 next year. The push for legislation to block sustainable investing is slowing, said Tiffany Reeves, a partner at Feigl Drinker, who heads the law firm. Institutional investor practices. In 2023, around 35 such laws were passed, but in 2024 that number has dropped to seven. “If fewer bills are introduced, fewer bills will be passed,” Reeves said. The Inflation Control Act is a landmark US climate law passed in 2022 that will cost nearly $400 billion. Kirsty Jenkinson, director of investments at the California Teachers’ Retirement System, has spent more than a decade investing five to six times more in private investment for every dollar of public funding to reduce carbon emissions that cause global warming. He points out that they have been collecting capital. This benefit is not political. The law, signed by a Democratic administration, would send about $40 billion to blue states and $160 billion to red states, Jenkinson noted. Member owners of the United Nations-convened Net Zero Asset Owners Alliance, a group of major pension funds and other assets, have reduced their greenhouse gas emissions by at least 6% per year on their loans. Greenhouse gases cause global warming. Furthermore, approximately 80% of companies in the Climate Action 100+ group have announced a commitment to achieve net-zero emissions by 2050 or sooner, compared to 51% as of March 2021. According to PRI CEO David Atkin, Atkin notes that awareness of addressing ESG risks is “very high among investors, and now covers more than 50% of capital under management worldwide.” According to Morningstar’s Voice of the Asset Owner survey, 85% of asset owners believe ESG factors are financially relevant to their investments. The PitchBook survey, based on 500 responses from private market investors, shows that ESG investing is alive and well and that ESG investing seeks market-rate returns. In addition to mitigating ESG risks.
Instead, the so-called anti-ESG movement is forcing investors to double down on the industry’s greenwashing and deceptive claims about the sustainability of their products, says the head of Australian diversified financial services company AMP Limited. says investment director Anna Sherry. .
The call for a tobacco-free portfolio
Breaking the habit of smoking can be difficult and painful for both the smoker and the portfolio. Take a look at the largest funds that own Altria MO. One of the reasons for its popularity is its high yield. Altria’s yield is 8%.
Source: Morningstar Direct, as of October 9, 2024.
The risks of tobacco use and tobacco stock ownership are already widely known. Nevertheless, there are many misunderstood risks and reasons to remove tobacco from your portfolio, says Rebecca Brown, U.S. director of the nonprofit Tobacco Free Portfolio. She makes several points here.
VAPE is highly addictive. “Producing a product with zero safety has a huge environmental impact,” Brown says. Cigarette filters are a large component of ocean plastic, and e-cigarettes rely on lithium-ion batteries and single-use plastics. Multinational companies involved in the tobacco business are also exposed to supply chain risks that approximate forms of slave and child labor.
Finally, the long-term investment outlook remains worrying, Brown says. And further regulation is not out of the question. After all, 168 countries have signed up to the World Health Organization’s framework for tobacco control.
The author owns shares in one or more securities mentioned in this article. Learn about Morningstar’s editorial policy.
