The ESG Hype Cycle

Issue #72: A weekly update on responsible investment. Forwarded by a friend? Subscribe here.

I love a good valley of death / hype cycle analogy when it comes to describing a new industry. That is why I was particularly excited when I saw this article by Susan Winterberg: “Bridging the ESG Valley of Death.” In her article she focuses on one specific area (and makes some excellent points) in terms of the expanding ESG needs within the venture capital industry. She goes on to layout ‘5 Steps to Accelerate ESG in Venture Capital’ which I found excellent.

Off the back of that I article, I decided to think about the ESG industry as a whole and where we are at on the hype cycle graph. I started by trying to think through some of the events that sparked the massive industry momentum: Research tying ESG to financial return, more standards on the market, massive statements made by both asset managers and companies. Then, that could lead to the ESG trough of disillusionment: My view is this is primarily around concerns with standards / if ESG is all greenwashing. Finally, I thought of how we could move up the glorious Slope of Enlightenment to the Plateau of Productivity: It will be a combination of industry collaboration, standards arriving to the market and useful tools (Plug: Like Nossa Data!) entering the market.

Anything you think I should add to it?

The 10 Commandments of ESG Investing

1. Above all else, it is about people and planet.
2. You must allocate significant resources
3. You must be patient
4. It will be painful
5. You must be consistent
6. You will be forgiven
7. You must remember S and G
8. You must go beyond data
9. You must understand the limits
10. You must always focus on outcome

Head of Sustainable Finance, Sasja Beslik on Medium.

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Top Stories

Silicon Valley led the software revolution — but Europe is leading the sustainability revolution
First, there was the enterprise software revolution, driven by the advent of the PC. Next, the development of mobile phones and the worldwide web led by firms like Cisco and Qualcomm drove new forms of communication. Then came the explosion of internet companies, with social media changing the very fabric of our societies. We are now riding the next great wave of technological change, driven by entrepreneurs who want to lead an environmental revolution. But unlike in the 90s, when Silicon Valley was at the heart of the action, this revolution is taking place in Europe.
Sifted.

Breaking the ESG myths

• Why is ESG investing important? For a range of reasons. For some it’s because investors want to play their part in building a fairer, more sustainable world — and they understand the importance of ESG issues in creating that.
• Does an ESG fund mean it’s environmentally friendly? Are they like ethical funds? Not necessarily. ESG are factors in analyzing companies. They are not moral judgements on what the company does as a business.
• What is active engagement? This is when owners of a company’s shares or bonds — investors — talk with its management to try to persuade the adoption, or cessation of certain actions.

The Asset.

UBS AM launches first S&P 500 ESG ‘elite’ ETF
The index offers exposure to 100 companies in the S&P 500 that score best from an ESG perspective after sector weights have been taken into account. The UBS ETF S&P 500 ESG Elite UCITS ETF (S5EG) is listed on the London Stock Exchange and Deutsche Boerse with a total expense ratio (TER) of 0.20%. S5EG is the first ETF to track the S&P 500 ESG Elite index which was created by S&P Dow Jones Indices in December 2020. It excludes any company involved in fossil fuels, nuclear power, tobacco, controversial weapons, small arms, military contracting, adult entertainment, alcohol, gambling, GMO, predatory lending, palm oil or companies with poor United Nations Global Compact (UNGC) scores.
ETF Stream.

Temasek commits $500m to impact investing specialist Leapfrog
Temasek, the $214bn Singapore state-backed investment company, has made a $500m allocation to Leapfrog Investments, in a partnership that marks the largest single commitment to a specialist impact investment manager. “There is an urgent need to address the critical social and environmental challenges that the world is facing. We believe in the potential of impact investing to unlock the capital to meet these challenges,” said Benoit Valentin, Temasek’s head of impact investing.
Financial Times.

Want a greener world? Don’t dump oil stocks
If you are a nice person you won’t hold shares in any companies involved in fossil fuels or mining. Their activities are dirty, environmentally unsound and that’s that. You can’t believe the planet is in trouble and also hold businesses involved in creating that trouble. End of. When you sell the shares, someone else buys them and the business just carries on. The transition to cleaner energy is under way. But it’s going to take several decades. In the meantime we need traditional sources of energy. What we want, then, is not no oil, no tin and no copper, but more carefully produced oil, tin and copper. How do you get that? Probably not by making a show of flouncing off in a huff. Enter impact investing, the idea that instead of divesting, big investors should stay invested and encourage better behaviour.
Financial Times.

*Want to make your ESG processes digital, schedule a call to see a demo of Nossa Data’s software via emailing: team@nossadata.com

Standards Standards Standards

Strengthening an integrated report using SASB Standards

The <IR> Framework drives a holistic view of the value creation process through governance and business model disclosure, and the connectivity of information, while SASB Standards add comparability to sustainability-related data across peer companies. Notably, both the <IR> Framework and the SASB Standards were designed to ease the burden of disclosure.

<IR> & SASB wrote about it.

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Kind regards,

The Nossa Data Team

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Julianne Sloane
Co-founder of Nossa Data
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