Wednesday, May 20, 2026

Will populist uprising movements impact investors?

By
Gino Baltazar, MS Finance
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PA ANALYSIS: How will the populist uprising impact investors?

Populist uprising and protectionist movements that are trending worldwide are poised to impact investing activity in negative ways, according to views compiled by Portfolio Adviser.

Key Message

Listen to the trends, study history. Prioritize capital to projects with short payback periods over those with higher internal rates of return and longer time horizons.

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Uncertainty means it will also be more difficult to predict future returns. Such an environment is negative for assets with long duration, be it bonds or equities, says Gervais Williams CEO of Miton, a London-based asset manager that focuses on small to mid caps. “Therefore it seems appropriate to prioritise those companies with capital projects on short payback periods over those with higher internal rates of return that stretch off further into the future,” he adds.

A combination of populist fiscal policy and protectionism will also fuel inflation, another red flag for long-duration assets. “This could lead to a derating of company valuations and to a trade away from bond proxies to cyclicals,” says Keith Wade, chief economist at Schroders.

Short-duration assets and companies with low investment needs could therefore be relative benefactors of deglobalisation. But overall, the effect will be negative. “A retreat in globalisation probably won’t improve people’s lives,” says Williams. But protectionism would have an unintended consequence that could prove beneficial in the longer term: it would bring a recession closer, which is long overdue, he believes.

“I don’t want a recession, but it would invigorate the economy,” says Williams.

Impact Investing is Like Climbing Mountains

By
Gino Baltazar, MS Finance
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How sustainable investing is like climbing a mountain
James Lumberg

“Every summit is uncertain when a climb begins. Saving the world is no different,” James Lumberg, mountain climber and co-founder, EVP of Envestnet,  profiled on Investment News.

***

The time I’ve spent on and around the world’s biggest mountains has convinced me that directing some of the world’s wealth at making a positive impact is one of the best levers we have to solve our world’s biggest problems.

On the biggest and most dangerous mountains, you are literally tied to your fellows, an act known as the brotherhood of the rope. It always reminds me of just how reliant and interdependent we are with our fellow human beings and of the responsibility that we share for the world’s well-being. On and around these mountains, I’ve seen too just how fragile our globe’s diverse natural and cultural environments are.

I’ve seen how dramatically Kilimanjaro’s iconic glaciers are receding, and how African children will devote an entire day to securing and bringing home a five-gallon pail of water only slightly less tainted than what’s available closer to home. I’ve seen the residents of Kathmandu, Nepal’s capital, wearing masks to ward off the effects of their polluted air, as environmental degradation touches even remote corners of the world. I’ve seen the indigenous people of Russia’s Caucasus region displaced by the Russian-Chechen conflict, and the viability of the centuries-old way of life of the Sherpa of the Himalaya region pressured by an increasing flood of visitors.

Solutions are at work, too. Targeted micro-finance projects in the Khumbu Valley, the Sherpa’s traditional home, are revitalizing that region’s indigenous clothing design, manufacturing and export operations, helping the Sherpa to better sustain their mercantile culture. Fair trade initiatives are empowering a growing export market in Tanzania for coffee and cocoa, boosting that region’s economic prospects. Investment approaches encouraging divestiture of global arms manufacturers are signaling the world’s growing rejection of armed conflict in the Caucasus and elsewhere.

And, preparing for my Antarctica climb, I’ve been reminded of just how beneficial an impact investment in alternative energy sources — and reduced carbon emissions — will have in safeguarding that continent’s unique landscape.

Policymakers can Bridge Ideas and Impact Investors

By
Gino Baltazar, MS Finance
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Q&A with Ticora Jones, Division Chief, Higher Education Solutions Network, USAID Global Development Lab

Policymakers can be relationship-builders between people who are passionate about ideas and places where those ideas are needed, says Ticora Jones, Division Chief, Higher Education Solutions Network, USAID Global Development Lab. 

An excerpt from her interview via audio speaking at the UN’s Commission on Science and Technology for Development in Geneva, Switzerland, this week January 23-25. 

***

I run a programme that is focused on building bridges between universities around the world and their partners, such as NGOs, communities, impact-investing organizations and other universities, with a focus on science, technology and innovation.

We are trying to get people to think about multidisciplinary ways to approach international development. We know that there’s a lot of wonderful work that goes on in food security and public health, for example, but we also know that there are people in engineering and business that have been doing work in international development. We wanted to find ways of bringing all of those entities to the table and focus them on understanding the needs of communities and how science, research, innovation, invention and entrepreneurship could work in partnership with them.

It is not enough just to frame the problem, put a call out and get a bunch of solutions in, if you don’t know where they can go and who can implement them. Being that bridge between people who are passionate about ideas and a place where those ideas can be implemented is another role that the policy community can play.

Sustainable Investing Demand Fueled by Millenials, Panel says

By
Gino Baltazar, MS Finance
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3 Socially Responsible Stocks Millennials Would Love

Nearly two-thirds of Millennials are increasingly interested in impact investing, according to a panel at the Inside ETF conference this week in Florida.  Millennials are expected to drive up to $30 trillion in financial assets in the coming years.

***

“Much of the demand is coming from institutions with a mandate for sustainable investing, but millennials also want to bring social responsibility and ethical investing into their portfolios.”

Almost two-thirds (61%) of people under the age of 35 are interested in stocks whose companies are socially responsible — 32 percentage points higher than the most jaded of age groups, those 55 and over, who only want profits at any cost to the earth.

This does suggest that investors might want to take into account a company’s ESG (environmental, social, and governance) record because American millennials, who currently control US$1 trillion in financial assets, a number that’s expected to grow to more than US$30 trillion in the decades to come, are deeply committed to companies that provide decent returns — and do the right things on the ESG front.

Higher Returns on ESG stocks, Study Finds

By
Gino Baltazar, MS Finance
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Steps remain to fully integrate ESG
Rodrigo Tavares and Daniela Barone Soares - PiOnline

Investing in ESG related stocks does not necessarily increase risk to portfolios, and in fact can produce higher returns, says a study by Granito and Partners.

The study, utilizing the Dow Jones Sustainability Index to identify 157 firms, found that returns ranged from 2.25% to as high as 31.84%, in energy, health care and food/beverage in particular.

Complemented by Other Studies

Granito’s finding complements other studies centered primarily on the correlation between returns and ESG. Among them include studies published by Cambridge Associates and the Global Impact Investing Network, Allianz Global Investors. All demonstrate that integrating ESG factors do not inherently introduce portfolios.

Bias remains however, as a recent survey by RBC Global Asset Management suggests. Invest Impactly will plans to write a post on biases in the near future.

***

Several investors are demanding more quantitative studies on the link between ESG and risk. Is there a difference in the average of the standard deviation of stock prices of companies with good ESG ratings vis-a-vis stocks with bad ESG performance? Is it possible to quantitatively demonstrate this difference, and establish that ESG firms bear less risk compared to non-ESG stocks? And, critically, since lower risk has traditionally meant lower financial returns, how can ESG investment really be a viable investment strategy?

Granito Analysis – Lower Risk, Higher Return for ESG companies than peers

A new study conducted by Granito & Partners in collaboration with Madrid’s IE Business School has shed light on this issue. Just published by the Journal of Sustainable Finance & Investment and available on Granito’s website, the study … identified 157 firms using the DJSI against a randomly selected  pool, a greater number of companies — 809 — that are not listed on the DJSI. As the materiality of the ESG factors is highly related to the industry in which the firm operates, the study grouped equity stocks into 12 industries. The authors of the study are N.C. Ashwin Kumar, Camille Smith, Leila Badis, Nan Wang, Paz Ambrosy and Rodrigo Tavares.

The results are striking. In all 12 industries studied, the group of ESG companies listed in the DJSI, shows lower stock return volatility in comparison to the reference companies — on average by 28.67 percentage points less. But risk varies according to industry, with a stronger impact in materials, banking, energy and technology.

The difference ranges from 6.1 percentage points (for food and beverage) to as much as 50.75 percentage points (the energy industry). This difference of percentage is a risk premium that the reference or non-ESG companies face and that investors should take into consideration when making investment decisions. (Risk was calculated using Sharpe and Treynor ratios.)

In contrast to conventional thinking in which lower risk means lower return, the model shows that even with a lower risk, the investment could achieve a higher equity return. The majority of the industries that were studied (eight of the 12) resulted in better returns for ESG companies than their peers — ranging from 2.25 percentage points to 31.84 percentage points higher.

Across all 12 industries, the positive effect on equity return is 6.12 percentage points higher for ESG companies on average. And, if one looks at only the eight industries with clearly higher ESG returns, this difference jumps to an average 14.08 percentage points for ESG companies compared with their peers.

The industries of energy, food and beverage, and health care show the highest advantage regarding the positive impact of good ESG practices on the stock return (lower risk and higher return).

It becomes clear, therefore, that ESG factors give investors a more complete picture of business opportunities, reducing risk and improving alpha.

India-based Aavishkaar-Intellecap Group raises $25M

By
Gino Baltazar, MS Finance
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Vineet Rai. Founder, Aavishkaar

Mumbai India-based impact investor Aavishkaar-Intellecap Group has raised $25 million in a round partnered with European impact investor Triodos Investment Management and the Shell Foundation, the charity arm of the Shell Group.

Founded in 2001, the Group models its investment strategy after Silicon Valley’s famed venture capital methodology but serves India’s underserved regions and sectors in agriculture, dairy, education, energy, handicrafts, health, water and sanitation, technology for development, microfinance and financial inclusion.  Aavishkaar means “invention” in Hindi.  The AUM of its current impact portfolio is $446 million.

Vineet Rai, Founder, Aavishkaar–Intellecap Group says, “We are excited with our partnership with Triodos Investments and Shell Foundation, who join us as equity holders and as trusted long term partners in our audacious journey of making impact by building businesses with the other three billion.”

Marilou Van Golstein,  chair — management board and managing director, Triodos Investment Management said, “With this new investment we look forward to continuing our shared journey in building an impact investing ecosystem where entrepreneurship can thrive, creating sustainable livelihoods and contributing to positive change for our planet and society.”

Sam Parker, director, Shell Foundation said, “We aim to help social enterprises benefit 100 million people in India and East Africa over the next three years. If we succeed we will demonstrate that enterprises can meet basic needs in ways that are fast, cost-effective and attractive to both governments and investors.”

Source: www.business-standard.com

ESG Trends to Impact Institutional Investing in 2017

By
Gino Baltazar, MS Finance
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Major ESG Trends to Impact Capital Markets in 2017
MSCI ESG Trends

In 2017, institutional investors may start applying differentiating strategies while  incorporating ESG data across asset classes and risk calculations, according to a recent report by MSCI.

One anticipated trend, in 2017, is the conversation shifting from “how” to use ESG to “where” to use ESG, one that will manifest in diverse applications in portfolio strategies (see chart).

MSCI ESG Trends 2017

***

The newly published paper, “2017 ESG Trends to Watch,” which explores how the major ESG trends will affect the capital markets for the next decade. According to the report, in 2017 some of the world’s largest investors may differentiate themselves by gearing toward the long view.

The researchers also see increased adoption of corporate disclosures targeting UN Sustainable Development Goals as a boost for institutions that aim to broaden their programs for impact investing.

In China and India, domestic and global standards will likely converge in 2017 as companies in these markets deepen their understanding of standards required to attract sustainable finance from international investors.

 

Following The ESG Money At Bloomberg

By
Gino Baltazar, MS Finance
-
Barbara Pomfret, formerly of Bloomberg.

An increasing number of financial advisors are leveraging ESG data available at Bloomberg, evidenced by the growth of “ESG power users” by 33% in 2016, according to Barbara Pomfret, Bloomberg’s ESG product manager.

Before joining Joele Frank in 2017 as a Managing Director in New York, Barbara Pomfret was Bloomberg’s Environmental, Social and Governance (ESG) global product manager where, among her responsibilities, was integration of ESG content into Bloomberg’s sector research.

Prior to Bloomberg, Barbara was an ESG analyst in the Sustainability Research team at Allianz Global Investors in London and Frankfurt.

***

What’s behind such a rapid growth rate? When we follow the growth of ESG investing in the industry, we see that in 2015 over 20 percent of professionally managed assets, or $8.7 trillion in the U.S., incorporated ESG metrics in selecting companies for investment, based on the US SIF Report on Sustainable, Responsible and Impact Investing Trends 2016.

In addition, 81 percent of S&P 500 companies published a sustainability or corporate responsibility report in 2015, up from just 20 percent in 2011, according to research by the Governance & Accountability Institute.

Ms. Pomfret explained that as more companies started reporting on ESG metrics, she saw the value of consolidating this information onto one ESG Analysis Page at Bloomberg. This makes it easy for advisors and asset managers to find the data and do analysis by company and by industry sector.

Gregory Elders, a Bloomberg Intelligence senior ESG analyst, explains the value of the ESG Analysis Page to analysts and advisors: “The development of the ESG Analysis Page on the Bloomberg platform has helped sustainability analysts get easier access to portfolio managers at their firms and distribute their work to other analysts across the platform.”

Investments in Environmental Conservation Grow to $8.2B

By
Gino Baltazar, MS Finance
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The state of private investment in conservation

Forest Trends recently released a report assessing that private sector investments in environmental conservation reaches $8.2B and returns of up to 9%.

The numbers indicate that impact investing in conservation is moving from “a niche product to something that resembles an emerging market,” according to the report.

***

Forest Trends’ Ecosystem Marketplace and partners — JPMorgan Chase & Co, the Gordon and Betty Moore Foundation, the David and Lucile Packard Foundation, the Nature Conservancy and NatureVest, Encourage Capital, Credit Suisse and Cornell University — recently released the 2016 edition of the State of Private Investment in Conservation that assesses and analyzes this growing trend of investments in the environment that yield both financial and environmental returns.

The chief findings are that the market is continuing to grow, and that investors targeting this space want more investment opportunities than they can find. Cumulative investment in conservation reached $8.2 billion through 2015, up 27 percent year over year since 2013. This represents roughly $1.6 billion in annual investments, with a doubling roughly every three years. Most investors reported expected internal rates of return (IRR) in a range of 5 to 9 percent. Notably, nearly a third of investors report IRR expectations above 15 percent.

The 2016 analysis was based on a global survey of 128 fund managers, family offices, investors, banks and non-governmental organizations, the majority of which fund managers and fund-of-fund managers based in the United States and Europe. In-depth interviews were carried out with 31 more representatives from these and other organizations to supplement the data with case study examples, emerging developments and areas of opportunity.

Thomson Reuters new Diversity and Inclusion Index to assist investors

By
Gino Baltazar, MS Finance
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Thomson Reuters has launched a Diversity & Inclusion Index a new tool to help investors better understand the environmental, social and corporate governance (ESG) aspects of their investments.

***

The index ranks the top 100 publicly traded companies globally with the most diverse and inclusive workplaces, as measured by 24 metrics across four key categories: diversity, inclusion, people development and news controversies. The index is then calculated by weighing each metric based on importance in the market and how each company compares with its peers.

‘Not only is diversity and inclusion a strategic objective for Thomson Reuters internally, but it also represents another step forward in our commitment to partner with clients to develop best practices in this space,’ says Patsy Doerr, global head of corporate responsibility and inclusion at Thomson Reuters. ‘Diversity and inclusion mean fostering a culture where diversity of thought, style, experience and approach is valued and nurtured so innovation can thrive.’

She says that over the next two decades, 70 percent of all assets globally – around $70 tn – will be managed by women and millennials. ‘That means there is much more pressure on impact investing, whether that be diversity and inclusion, sustainability or a community approach – but this focus is coming,’ she explains. ‘It will change the financial services industry in terms of financial analysis expertise, people’s understanding of this area and their appreciation of it. And they will need these types of tools to make those decisions.’

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