Walk along the path with us through the world of environmental, social and governance investing.

What exactly are these people doing with their time and money that makes them think they should be making decisions to point our societies and where could this go very wrong?

Take a look and we will continue to find out why this is a focus of approach for globalists, like John Kerry, and why they are so interested in making these the focus points of projects for “The Great Reset”.

Watch here: https://www.weforum.org/agenda/2020/11/the-great-reset-building-future-resilience-to-global-risks

I will share the Wikipedia for these initiatives and we can together dissect what is actually going on here.

“Environmental concerns[edit]

Threat of climate change and the depletion of resources has grown, so investors may choose to factor sustainability issues into their investment choices. The issues often represent externalities, such as influences on the functioning and revenues of the company that are not exclusively affected by market mechanisms.^[18] As with all areas of ESG, the breadth of possible concerns is vast (e.g. greenhouse gas emissions, biodiversity, waste management, water management, …) but some of the chief areas are listed below:

Climate change[edit]

The body of research providing evidence of global trends in climate change has led investors—pension funds, holders of insurance reserves—to begin to screen investments in terms of their impact on the perceived factors of climate change. Fossil fuel reliant industries are less attractive.^[19] In the UK, investment policies were particularly affected by the conclusions of the Stern Review in 2006, a report commissioned by the British government to provide an economic analysis of the issues associated with climate change. Its conclusions pointed towards the necessity of including considerations of climate change and environmental issues in all financial calculations and that the benefits of early action on climate change would outweigh its costs.^[20]

Sustainability[edit]

In every area of the debate from the depletion of resources to the future of industries dependent upon diminishing raw materials the question of the obsolescence of a company’s product or service is becoming central to the value ascribed to that company. The long-term view is becoming prevalent amongst investors.^[15]

Social concerns[edit]

Diversity[edit]

The level of diversity as well as inclusion in a company’s recruitment and people management policies is becoming a key concern to investors. There is a growing perception that the broader the pool of talent open to an employer the greater the chance of finding the optimum person for the job.^[21] Innovation and agility are seen as the great benefits of diversity, and there is an increasing awareness of what has come to be known as ‘the power of difference’.^[22]

Human rights[edit]

In 2006 the US Courts of Appeals ruled that there was a case to answer bringing the area of a company’s social responsibilities squarely into the financial arena.^[23] This area of concern is widening to include such considerations as the impact on local communities, the health and welfare of employees and a more thorough examination of a company’s supply chain.

Consumer protection[edit]

Until fairly recently, caveat emptor (“buyer beware”) was the governing principle of commerce and trading. In recent times however there has been an increased assumption that the consumer has a right to a degree of protection and the vast growth in damages litigation has meant that consumer protection is a central consideration for those seeking to limit a company’s risk and those examining a company’s credentials with an eye to investing. The collapse of the US subprime mortgage market initiated a growing movement against predatory lending has also become an important area of concern.^[24]

Animal welfare[edit]

From the testing of products on animals to the welfare of animals bred for the food market, concern about the welfare of animals is a large consideration for those investors seeking a thorough understanding of the company or industry being analyzed.^{[citation needed]}

Corporate governance concerns[edit]

Corporate governance covers the area of investigation into the rights and responsibilities of the management of a company—its board, shareholders and the various stakeholders in that company.^{[citation needed]}

Management structure[edit]

The system of internal procedures and controls that makes up the management structure of a company is in the valuation of that company’s equity.^[16] Attention has been focused in recent years on the balance of power between the CEO and the Board of Directors and specifically the differences between the European model and the US model—in the US studies have found that 80% of companies have a CEO who is also the Chairman of the Board, in the UK and the European model it was found that 90% of the largest companies split the roles of CEO and Chairman.^[25]

Employee relations[edit]

From diversity to the establishment of corporate behaviours and values, the role that improving employee relations plays in assessing the value of a company is proving increasingly central. In the United States Moskowitz’s list of the Fortune 100 Best Companies to Work For has become not only an important tool for employees but companies are beginning to compete keenly for a place on the list, as not only does it help to recruit the best workforce, it appears to have a noticeable impact on company values.^[8] Employee relations relate also to the representation of co-workers in the decision-making of companies, and the ability to participate to a union.

Executive compensation[edit]

Companies are now being asked to list the percentage levels of bonus payments and the levels of remuneration of the highest paid executives are coming under close scrutiny from stock holders and equity investors alike.

Employee compensation[edit]

Besides executive compensation, equitable pay of other employees is a consideration in the governance of an organization. This includes pay equity for employees of all genders. Pay equity audits and the results of those audits may be required by various regulations and, in some cases, made available to the public for review. Hermann J. Stern differentiates four methods to include ESG performance in employee compensation:^[26]

1. ESG Targets (Objectives for activities, projects and ESG results set by the company as a goal)
2. ESG Relative Performance Measurement (compared to peers, on the basis of key figures the company considers relevant)
3. ESG Ratings Agencies (Refinitiv, S&P Trucost and RobecoSam, Sustainalytics, ISS ESG, MSCI ESG, Vigeo Eiris, EcoVadis, etc.)
4. ESG Performance Evaluations (internal or independent performance assessment by means of expert opinions, based on internally and externally available objective and subjective facts)

Responsible investment[edit]

The three domains of social, environmental and corporate governance are intimately linked to the concept of responsible investment. RI began as a niche investment area, serving the needs of those who wished to invest but wanted to do so within ethically defined parameters. In recent years it has become a much larger proportion of the investment market. By June 2020, flows into U.S. sustainable funds reached $20.9 billion, nearly matching 2019’s flows of $21.4 billion.^[27]

Investment strategies[edit]

RI seeks to control the placing of its investments via several methods:

• Positive selection; where the investor actively selects the companies in which to invest; this can be done either by following a defined set of ESG criteria or by the best-in-class method where a subset of high performing ESG compliant companies is chosen for inclusion in an investment portfolio.
• Activism; strategic voting by shareholders in support of a particular issue, or to bring about change in the governance of the company.
• Engagement; investment funds monitoring the ESG performance of all portfolio companies and leading constructive shareholder engagement dialogues with each company to ensure progress.^[28]
• Consulting role; the larger institutional investors and shareholders tend to be able to engage in what is known as ‘quiet diplomacy’, with regular meetings with top management in order to exchange information and act as early warning systems for risk and strategic or governance issues.^[29]
• Exclusion; the removal of certain sectors or companies from consideration for investment, based on ESG-specific criteria.
• Integration; the inclusion of ESG risks and opportunities into traditional financial analysis of equity value.

Institutional investors[edit]

One of the defining marks of the modern investment market is the divergence in the relationship between the firm and its equity investors. Institutional investors have become the key owners of stock—rising from 35% in 1981 to 58% in 2002 in the US^[30] and from 42% in 1963 to 84.7% in 2004 in the UK^[31] and institutions tend to work on a long term investment strategy. Insurance companies, Mutual Funds and Pension Funds with long-term payout obligations are much more interested in the long term sustainability of their investments than the individual investor looking for short-term gain.^[15] Where a Pension Fund is subject to ERISA, there are legal limitations on the extent to which investment decisions can be based on factors other than maximizing plan participants’ economic returns.^[32]

Based on the belief that addressing ESG issues will protect and enhance portfolio returns, responsible investment is rapidly becoming a mainstream concern within the institutional industry. By late 2016, over a third of institutional investors (commonly referred to as LPs) based in Europe and Asia-Pacific said that ESG considerations played a major or primary role in refusing to commit to a private equity fund, while the same is true for a fifth of North American LPs.^[33] In reaction to investor interest in ESG, private equity and other industry trade associations have developed a number of ESG best practices, including a due diligence questionnaire for private fund managers and other asset managers to use before investing in a portfolio company.^[34]

There was clear acceleration of the institutional shift towards ESG-informed investments in the second semester of 2019. The notion of “SDG Driven Investment” gained further ground amongst pension funds, SWFs and asset managers in the second semester of 2019, notably at the World Pensions Council G7 Pensions Roundtable held in Biarritz, 26 August 2019,^[35] and the Business Roundtable held in Washington, DC, on 19 August 2019.^[36]

Principles for Responsible Investment[edit]

The Principles for Responsible Investment Initiative (PRI) was established in 2005 by the United Nations Environment Programme Finance Initiative and the UN Global Compact as a framework for improving the analysis of ESG issues in the investment process and to aid companies in the exercise of responsible ownership practices. As of April 2019 there are over 2,350 PRI Signatories.^[37]

Equator Principles[edit]

The Equator Principles is a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risk in project finance. It is primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making.^[38] As of October 2019, 97 adopting financial institutions in 37 countries had officially adopted the Equator Principles,^[39] the majority of international Project Finance debt in emerging and developed markets.^[40] Equator Principles Financial Institutions (EPFIs) commit to not provide loans to projects where the borrower will not or is unable to comply with their respective social and environmental policies and procedures.

The Equator Principles, formally launched in Washington DC on 4 June 2003, were based on existing environmental and social policy frameworks established by the International Finance Corporation. These standards have subsequently been periodically updated into what is commonly known as the International Finance Corporation Performance Standards on social and environmental sustainability and on the World Bank Group Environmental, Health, and Safety Guidelines.^[41]

ESG ratings agencies[edit]

Asset managers and other financial institutions increasingly rely on ESG ratings agencies to assess, measure and compare companies’ ESG performance.^[42] More recently, data providers have applied artificial intelligence to rate companies and their commitment to ESG.^{[non-primary source needed]} Each rating agency uses its own set of metrics to measure the level of ESG compliance and there is, at present, no industry-wide set of common standards.

Disclosure and regulation[edit]

The first ten years of the new century has seen a vast growth in the ESG defined investment market. Not only do most of the world’s big banks now have departments and divisions exclusively addressing Responsible Investment but boutique firms specialising in advising and consulting on environmental, social and governance related investments are proliferating. One of the major aspects of the ESG side of the insurance market which leads to this tendency to proliferation is the essentially subjective nature of the information on which investment selection can be made. By definition ESG data is qualitative; it is non-financial and not readily quantifiable in monetary terms. The investment market has long dealt with these intangibles—such variables as goodwill have been widely accepted as contributing to a company’s value. But the ESG intangibles are not only highly subjective they are also particularly difficult to quantify and more importantly verify.

One of the major issues in the ESG area is disclosure. Environmental risks created by business activities have actual or potential negative impact on air, land, water, ecosystems, and human health. The information on which an investor makes their decisions on a financial level is fairly simply gathered. The company’s accounts can be examined, and although the accounting practices of corporate business are coming increasingly into disrepute after a spate of recent financial scandals, the figures are for the most part externally verifiable. With ESG considerations, the practice has been for the company under examination to provide its own figures and disclosures.^[43] These have seldom been externally verified and the lack of universal standards and regulation in the areas of environmental and social practice mean that the measurement of such statistics is subjective to say the least. As integrating ESG considerations into investment analysis and the calculation of a company’s value become more prevalent it will become more crucial to provide units of measurement for investment decisions on subjective issues such as degrees of harm to workers, or how far down the supply chain of the production chain of a cluster bomb do you go.

One of the solutions put forward to the inherent subjectivity of ESG data is the provision of universally accepted standards for the measurement of ESG factors. Such organisations as the ISO (International Organisation for Standardisation) provide highly researched and widely accepted standards for many of the areas covered.^[44] Some investment consultancies, such as Probus-Sigma have created methodologies for calculating the ratings for an ESG based Ratings Index that is both based on ISO standards and externally verified,^[45] but the formalisation of the acceptance of such standards as the basis for calculating and verifying ESG disclosures is by no means universal.

The corporate governance side of the matter has received rather more in the way of regulation and standardisation as there is a longer history of regulation in this area. In 1992 the London Stock Exchange and the Financial Reporting Commission set up the Cadbury Commission to investigate the series of governance failures that had plagued the City of London such as the bankruptcies of BCCI, Polly Peck, and Robert Maxwell‘s Mirror Group. The conclusions that the commission reached were compiled in 2003 into the Combined Code on Corporate Governance which has been widely accepted (if patchily applied) by the financial world as a benchmark for good governance practices.^[46]

In the interview for Yahoo! Finance Francis Menassa (JAR Capital) says, that “the EU’s 2014 Non-Financial Reporting Directive will apply to every country on a national level to implement and requires large companies to disclose non-financial and diversity information. This also includes providing information on how they operate and manage social and environmental challenges. The aim is to help investors, consumers, policy makers, and other stakeholders to evaluate the non-financial performance of large companies. Ultimately, the Directive encourages European companies to develop a responsible approach to business”.^[47]

One of the key areas of concern in the discussion as to the reliability of ESG disclosures is the establishment of credible ratings for companies as to ESG performance. The world’s financial markets have all leapt to provide ESG relevant ratings indexes, the Dow Jones Sustainability Index, the FTSE4Good Index (which is co-owned by the London Stock Exchange and Financial Times^[48]), Bloomberg ESG data,^[49] the MSCI ESG Indices^[50] and the GRESB benchmarks^[51]

There is some movement in the insurance market to find a reliable index of ratings for ESG issues, with some suggesting that the future lies in the construction of algorithms for calculating ESG ratings based on ISO standards and third party verification.”

NEW WORLD ORDERS

Here are more sites that further explain what these groups and investors intend to promote… We, at least in a fairly vague way without giving insight into what the overarching agendas may be outside of social justice and climate change, get an idea of what they are aiming to do. They seem to have it covered if you bring it up. A ruling class eager to tell everyone what they need to do. These are the same people who got us here, and now they seem to think they should be running our economic systems, major investments within our nation, and creating law to rule our land we live on…

MSCI: https://www.msci.com/what-is-esg

Forbes: https://www.forbes.com/sites/tinethygesen/2019/11/08/everyone-is-talking-about-esgwhat-is-it-and-why-should-it-matter-to-you/?sh=6bcfeac532e9 

KPMG: https://home.kpmg/uk/en/home/services/environmental-social-governance.html

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Holden Caulfield

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