From excluded to best in class
“Tilting” is the best way to manage investments in brown (high-carbon emitting) industries, according to London Business School professor Alex Edmans. And before you think he’s got a Christine and The Queens obsession—if we have to explain it, it won’t be funny—he hasn’t. Edmans is talking about decarbonising investment portfolios and doesn’t believe complete disinvestment is a runner.
“The way to encourage the economy to decarbonise is to give incentives for ‘brown’ industries to reform. This involves being willing to hold best-in-class companies within those industries, rather than outright exclusion.”
Makes sense. We can see Christine becoming an anthem for the modern portfolio manager: “I am actually good; can’t help it if we’re tilted.” Can’t say fairer than that. (Still not funny—Ed.)
BlackRock blackballed
Speaking of portfolio managers and carbon, treasurers at a number of Republican-run states in the US have pulled their funds from BlackRock because they are apparently upset with the investment manager’s ESG policies. The FT’s back-of-petrol-receipt calculation suggests that, altogether, they’ve withdrawn $1bn to allocate to other fund managers instead.
This little conflict has been simmering for some time and seems to be because these particular states host big energy companies and BlackRock has been pushing companies to disclose more on their greenhouse gas emissions and their plans for reduction.
It’s very messy but we suppose we can expect more gas as this issue heats up. (Groan—Ed.)
Double trouble
Over to the rancorous debate on the legitimacy of dual class shares (DCS). Readers may remember that this has been a sore point for many stock exchanges as they try to figure out how to attract big tech flotations because founders just love dual class shares and all the powers that come with them.
Many investment leaders rail against DCS but a new piece of research may muddy the water slightly. A team from Singapore Management University has put together a study of 2,000 US company prospectuses, revealing “significant post-IPO outperformance by firms adopting DCS [dual class shares] with a sunset clause, especially incapacity-based sunset, which stipulates that the DCS will cease after the founder’s death, incapacitation, or departure…”.
It’s worth bearing in mind that Singapore has already plumped for dual class shares. So we suppose a little justification ex post facto is always handy.
Investors drag their heels
Many investors fail to play a role in addressing sustainability issues, according to a new paper from campaign body Principles for Responsible Investment and the UN Environment Programme Finance Initiative.
The paper calls on the UK government to ensure stewardship powers are used to pursue “sustainability impact goals” and when the goals must be considered “as part of an investor’s fiduciary duties”. A lot of pressure has been put on companies, but it seems the PRI wants to ensure investors play their part, too.
Margarita Pirovska, PRI’s director of policy, said: “Investors in the UK remain hesitant to change their established practices and pursue sustainability impact goals, even when this is required to achieve financial objectives.”
What’s holding you back, guys?