ESG IN THE NEWS
Funds Keep Flowing. According to Calastone’s latest fund flow index, inflows into ESG funds were near record levels inJ uly. ESG inflows totaled US$1.37 billion in July and represented 90% of inflows for the month as overall inflows to equity funds fell by US$1.5 billion. Most of the inflows to ESG went to global equity actively managed funds.
Ida Exposes Infrastructure Issues. In the wake of Hurricane Ida, two new natural gas plants in New Orleans were knocked offline. More than a million customers in Louisiana had no power, and Entergy said it would take weeks to restore service. Given the growing impacts of climate change and more severe weather, calls for a more resilient, decentralized, and climate-proof energy grid continue to rise.
Phillip Morris: Sustainable Company? Phillip Morris is embracing sustainably linked bonds. The company plans to increase smoke-free revenue to 50% of total revenues by 2025, up from 23.8% today. It also plans to generate $1 billion of revenue from nicotine-free products. Whether or not these changes make the company more “sustainable” remains up for debate.
VALUES IN ACTION
Earth: AT&T Sets Ambitious GHG Reduction Goal. AT&T announced a target to help businesses reduce GHG emissions by 1 billion metric tons by 2035. The company recently formed the Connected Climate Initiative, through which it will work with leading technology companies, business customers, universities, and nonprofits to develop best practices, new products, and innovations to deliver broadband-enabled climate solutions. At this time, Seeds has no direct exposure to AT&T.
People: Amazon Pressured to Improve Safety. Amazon, which employs 1.3 million people worldwide, received a “dishonerable mention” from the Council for Occupational Safety and Health as one of the most dangerous employers. Jeff Bezos recently said, “We need a better vision for our employees’ success.” The company continues to suffer from high turnover and workplace injury rates exceeding industry averages. Seeds does not own Amazon stock because of concerns over employee welfare and the company’s large carbon footprint.
Corporate Integrity: CEO Pay Tied To ESG. More companies are adding ESG metrics to executive pay. Valero Energy is targeting renewable fuels, greenhouse gas emissions, energy efficiency, and climate risk. Achieving ESG targets can boost CEO pay by up to 16%. Seeds prioritizes companies that have executive pay linked to ESG targets. Seeds has no direct exposure to Valero Energy.
Specialty retailer Target (NYS-TGT) is one of Seeds’ top performing stocks, with a YTD gain of 40% and 52-week gain of 64% (as of [9/3/21). The company has over $100 billion sales, 1,900 stores, and 350,000 employees. Target’s approach to sustainability revolves around three pillars: Elevate sustainable brands, eliminate waste, and accelerate opportunity and equity. Target tracks its products across its almost 4,000 manufacturing facilities, conducting unannounced audits to look for child labor and other health and safety violations. The company also performs well when it comes to inclusion, with 50%of women on the leadership team and 31% on the board of directors. People of color represent 25% and 40% of the leadership team and board, respectively. From an environmental perspective, Target has reduced the use of virgin plastic, improving recycling, and diverting waste from landfills. Target has a science-based target for carbon emissions and plans to increase purchased electricity from renewable sources to 100% by 2030. Lastly, Target responded well to COVID-19 by rolling out well-being and safety programs, offering paid leave and free virtual doctor visits, providing PPE, and giving bonuses to hourly employees. The company encourages vaccinations by offering free Lyft rides to vaccine appointments and paid leave in the event an employee has an adverse reaction to the vaccine. TGT may not be held in certain Seeds portfolios.
The opaqueness created by broad indexing, account statement complexity, and overly complicated portfolio construction has allowed investors to unwittingly empower companies clearly antithetical to their personal values for decades. But for financial advisors, and investors, the "Ignorance Is Bliss" Age of Investing is over. The moment investors realize that aligning financial goals with values is not only possible but pragmatic and easier than ever to do, they are taking action. 77%of the investors who are familiar with ESG choose to take an ESG approach to investing. But just a third of investors are so far familiar with ESG concepts! (Harris Poll). While ESG fund flows are already hitting massive numbers, the untapped opportunity for financial advisors to reveal the future of investing to clients is even bigger.
· How Morningstar and Seeds are Bringing ESG to Everyday Investors: Linkedin Live presentation on Thursday, September 9th at 1pm: Seeds CEO Zach Conway will be featured with Jon Hale, Global Head of Sustainability Research of Morningstar.
· RIABiz: Seeds CEO comments on the $5M startup that makes RIAs the quarterback of“Impact Investing” endowments
· Zachary Conway, Seeds co-founder, speaks with the Youngpreneur Podcast with Anjalee Naren to discuss the values he lives by and how he practices these values with Seeds.