North America

Going Green

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The growing popularity of investment strategies incorporating ESG (environmental, social and governance) criteria is one of investment’s biggest trends. More investors want their money to be invested in a sustainable way or in a way that makes a positive impact.

Investment companies in the Environmental and Infrastructure – Renewable Energy sectors achieve this by investing in environmental companies and green energy. However, it’s less well known that ESG plays an increasingly important role in the investment process for many investment companies outside these sectors.

The AIC has spoken to a number of managers from a diverse range of sectors about the role of ESG in their investment approach and how this benefits investors. Their thoughts are collated below.

ESG: its role in the investment process
Mark Mobius, Joint Manager of Mobius Investment Trust, said: “At Mobius Capital Partners we have developed a specialised active investment strategy built on working closely with portfolio companies to improve corporate governance and to provide a clear ESG pathway. We see ourselves as atypical, as we do not screen out investments or only focus on companies with high ESG ratings. We work with companies on a range of material factors, from helping to improve investor relations to suggesting enhancements to decrease water usage or lower employee turnover.”

Austin Forey, Manager of JPMorgan Emerging Markets Investment Trust, said: “ESG considerations are a natural part of our fundamental research and overall approach to investing which focuses on the longer term. It’s embedded in our process. Our fundamental analysis of any company examines what we call its economics, duration and governance. Environmental and social issues are part of the consideration of a company’s duration and its economics; a business simply isn’t thinking about its long-term future if it’s destroying the environment or abusing the community in which it operates. It will eventually pay a price for this. When considering governance, we focus on whether a company shows a proper regard for the interests of all shareholders and whether it can demonstrate proper stewardship of a a company’s assets and value over time.”

Andrew Graham, Portfolio Manager of Martin Currie Asia Unconstrained Trust, said: “Integral to our fundamental research is a focus on environmental, social and governance (ESG) factors, as we believe sustainable, well-managed companies make more successful long-term investments. We believe that to gain a full understanding of how sustainability factors can impact a company’s future returns they must be embedded throughout the entire investment process. Active ownership and engagement are a key part of how this analysis is carried out and will inform a continuous assessment of the investment case.”

Adam Heltzer, Head of ESG and Sustainability at Partners Group, the investment manager of Princess Private Equity, said: “We take a systematic approach to integrating ESG factors throughout the investment process, from sourcing, through to due diligence and continuing during ownership. For each investment opportunity, our investment teams are required to perform an ESG assessment, using a proprietary ESG due diligence tool we have developed. The tool distils the wide range of potential ESG topics into those most likely to be material for a given industry and geography.”

“…we believe sustainable, well-managed companies make more successful long-term investments.”
Andrew Graham, Portfolio Manager of Martin Currie Asia Unconstrained Trust


Examples of ESG investing in practice
Mark Whitehead, Portfolio Manager of Securities Trust of Scotland, said: “We believe well-managed companies that exhibit strong corporate governance are more likely to be successful long-term investments. This sentiment isn’t driven by idealism, but simply by the reality that companies exhibiting strong governance tend to outperform over time. Take Dutch science company DSM for example. Having engaged with the company, we were able to better understand the most material benefits that the company experiences from its well-regarded sustainability programme. In particular, we noted the positive impact its sustainability credentials had on its ability to attract workers, as well as the importance of supply-chain transparency and sustainability for its customers. This increased our confidence in the long-term outlook for the company as well as reducing the overall risk profile of the business.”

Andrew Graham, Portfolio Manager of Martin Currie Asia Unconstrained Trust, said: “Establishing a dialogue with companies enables us to engage on areas where we need further assurance or clarification, often with quite technical questions. Recently we have had a very successful engagement with one of the portfolio’s holdings, Hong Kong-based insurer AIA, around issues of disclosure, governance and remuneration. The clarifications we received from the company helped resolve some of the questions we had, but crucially the process reconfirmed our assessment that the company scores highly in terms of disclosure and indicated where improvement is still possible.”

Zehrid Osmani, Portfolio Manager of Martin Currie Global Portfolio Trust, said: “With a global movement to reduce the human impact on the environment and preserve our precious resources, the development of electric vehicles is a key theme for us. This trend will be driven by both regulations – as governments legislate to enforce the switch away from the internal combustion engine – and consumer demand, as more environmentally-aware customers seek out cleaner forms of transportation. ESG analysis therefore provides the crucial lens for understanding the impact these changes have at a company level.”

“With a global movement to reduce the human impact on the environment and preserve our precious resources, the development of electric vehicles is a key theme for us.”
Zehrid Osmani, Portfolio Manager of Martin Currie Global Portfolio Trust

Adam Heltzer, Head of ESG and Sustainability at Partners Group, the investment manager of Princess Private Equity, said: “In 2018, we invested in Techem, a German-based global market leader in the provision of heat and water sub-metering services. During our investment committee discussions, it became clear that energy efficiency was at the heart of the company’s offering. By enabling heating and energy supplies to be managed in a more precise and sustainable manner, Techem’s solutions today account for 6.9 million metric tons of CO2 emission savings per year, thus contributing to global climate protection objectives. We decided that growing Techem’s positive impact on the environment had to be a key component of our business plan. Through our investment, not only of capital but also of human resources, we hope to make a significant contribution to making Techem even more impactful.”

What does an ESG approach offer to investors?
Mark Mobius, Joint Manager of Mobius Investment Trust, said: “First and foremost, taking ESG seriously means risk management. Companies that have good corporate governance and pay attention to the environment and social issues run less risk of becoming involved in scandals, having to pay fines or facing social problems.

“A recent study shows that companies implementing changes to environmental, social or governance standards following engagement from investors generated more than 7% of excess returns after 18 months. This is also supported by our personal experience during many years of investing in emerging markets. By taking ESG factors into account, investors can significantly reduce the risk profile of their investments, which over the long term not only translates into positive risk-adjusted returns, but also positively impacts all stakeholders.”

Austin Forey, Manager of JPMorgan Emerging Markets Investment Trust, said: “We do not see ESG as something that restricts our ability to generate returns. It’s a necessary part of what we do. We take a long-term view because we believe it delivers better results, reduces costs and allows the power of compounding to translate into investment outcomes. Anything which affects the long-term prospects of companies is important to us, just as it should be to the companies themselves.”

“First and foremost, taking ESG seriously means risk management.”
Mark Mobius, Joint Manager of Mobius Investment Trust

Adam Heltzer, Head of ESG and Sustainability at Partners Group, the investment manager of Princess Private Equity, said: “We believe that the integration of material ESG factors into our investment processes is a core part of our duty to act in the best interest of our clients and their beneficiaries. Furthermore, when it comes to managing ESG factors effectively, we believe private market investors have inherent corporate governance advantages compared to their public market peers, both in terms of mitigating ESG risks and creating value from ESG factors through targeted value creation initiatives. Our active, hands-on ownership model provides opportunities to work closely with portfolio companies to implement superior, sustainable investment strategies and enhance investment returns.”

“Our active, hands-on ownership model provides opportunities to work closely with portfolio companies to implement superior, sustainable investment strategies and enhance investment returns.”
Adam Heltzer, Head of ESG and Sustainability at Partners Group, the investment manager of Princess Private Equity 

 

SecureKey Technologies Brings Digital Identity Network to Canadian Banks

As of June 6th, 2019, Fintech News has announced the implementation of new blockchain technology, Verified.Me, in five Canadian banks. 

Verified.Me is an IOS-and-Android-compatible mobile app created by SecureKey Technologies. Built upon IBM Blockchain, Verified.Me allows users to help verify their identity digitally to access financial services in a secure manner. 

Currently, the Verified.Me app has been adopted by Canadian Imperial Bank of Commerce (CBIC), Royal Bank of Canada (RBC), ScotiaBank, Toronto-Dominion (TD) Bank, and Desjardins Group. Furthermore, SecureKey Technologies promises to have two more banks and an insurance group added to their impressive roster soon. 

“This announcement marks the first time that consumers are officially able to access the Verified.Me application and gain greater control over their digital identities,” said Greg Wolfond, Founder and CEO, SecureKey Technologies. “Digital identity is one of the most enduring challenges of our time, and having the opportunity to showcase how a network of cross-industry organizations can come together to build a solution by and for consumers is an honor. We are excited to bring this first-of-its-kind network to market and look forward to its expansion as new participants join our service.” 

 

Obama set to speak at Brilliant Minds in Stockholm

Former US President Barack Obama has been revealed as one of the speakers at the invite-only Brilliant Minds conference in Stockholm and arrived early this morning on June 13th.

Brilliant Minds was founded by Spotify's Daniel Ek and Avicii's former manager Ash Pournouri in 2015 and has strived to be a meeting ground for tech entrepreneurs, creatives and innovators ever since.

"We are thrilled to welcome President Barack Obama, the 44th president of the United States of America, to Brilliant Minds 2019," the organization wrote in a statement.

Huffington Post founder Arianna Huffington, actor Forest Whitaker and fashion designer Diane von Furstenberg are also on the list of speakers at Brilliant Minds, to be held in Stockholm from June 13th-15th.

Uber unveils next-generation Volvo self-driving car

WASHINGTON (Reuters) - Uber Technologies Inc unveiled its newest Volvo self-driving car in Washington on Wednesday as it works to eventually deploy vehicles without drivers under some limited conditions. 

Uber said the new production XC90 will be assembled by Volvo Cars in Sweden and have human controls like steering wheels and brake pedals, but also with factory-installed steering and braking systems designed for computer rather than human control. 

Uber Advanced Technologies Group chief scientist Raquel Urtasun showed off the company’s artificial intelligence technology that allows it to drive autonomously for long distances on highways without maps and “on the fly” to plot its course and navigate construction zones. 

“Our goal is get each one of you to where you want to go much better, much safer, cheaper,” Urtasun said. 

As the race to push out autonomous cars across the globe heats up, other companies are also working to deploy self-driving vehicles in limited areas. 

Ford Motor Co’s majority-owned autonomous vehicle unit, Argo AI, launched its new fleet of self-driving test vehicles - Ford Fusion Hybrid - in Detroit on Wednesday, expanding to five U.S. cities. 

The No. 2 U.S. automaker also opened a research center in Tel Aviv, joining a growing number of major automakers and suppliers setting up shop in Israel’s tech hub. 

General Motors Co in January 2018 sought permission from U.S. regulators to deploy a ride-sharing fleet of driverless cars without steering wheels or other human controls before the end of 2019, but is still struggling to win regulatory approval. 

Alphabet Inc’s Waymo unit is operating a robotaxi service in Arizona and said last month it is partnering with Lyft Inc to serve more riders. 

South Korea’s Hyundai Motor Co and Kia Motors Corp both said they would invest in the self-driving car software startup Aurora and speed up development of their respective autonomous vehicle technologies. 

Carmakers have struggled to maintain profit margins faced with the rising costs of making electric, connected and autonomous cars. As a result, they are setting up alliances and lining up outside investors to combat spiraling development costs. 

Previously, Uber had purchased about 250 Volvo XC90 SUVs and retrofitted them for self-driving use. 

The new vehicles - known by the internal code number 519G and under development for several years - are safer, more reliable and will replace the older vehicles in Uber’s fleet “soon,” according to Eric Meyhofer, the head of Uber’s Advanced Technologies Group. 

“This is about going to production,” Meyhofer said in an interview at an Uber conference in Washington on Tuesday. 

The new vehicle also has several backup systems for both steering and braking functions as well as backup battery power and new cybersecurity systems. 

HUMAN CONTROLS 

Uber is not ready to deploy vehicles without human controls, Meyhofer said. 

“We’re still in a real hybrid state,” he said. “We have to get there and we’re not going to get to thousands of cars in a city overnight. It’s going to be a slower introduction.” 

The new XC90 vehicles have an interior fish-eye camera to scan for lost items, Uber said. They also do not have sunroofs since the self-driving vehicles have large sensors on the roof and are equipped with auto-close doors to prevent an unsafe departure. 

Uber, which has taken delivery of about a dozen prototypes of the new vehicle, but has not yet deployed them on public roads, said the car’s “self-driving system will one day allow for safe, reliable autonomous ridesharing without the need” for a safety driver. 

Asked if Uber will deploy self-driving cars without safety drivers in limited areas in the next few years, Meyhofer said: “Yes - way before that.” 

But he added that Uber wants to be in “the good graces of public trust and regulatory trust” before making the business decision to deploy. 

In December, Uber resumed limited self-driving car testing on public roads in Pittsburgh, nine months after it suspended the program following a deadly accident in Arizona. 

In March 2018, authorities in Arizona suspended Uber’s ability to test its self-driving cars after one of its XC90 cars hit and killed a woman crossing the street at night in the Phoenix suburb of Tempe, then Uber’s largest testing hub. The crash was the first death attributed to a self-driving vehicle. 

In March 2019, prosecutors in Arizona said the company was not criminally liable in the crash and would not pursue charges. Uber has since ended testing in Arizona, but plans to eventually resume testing in Toronto and San Francisco, Meyhofer said. 

The death prompted significant safety concerns about the nascent self-driving car industry, which is racing to get vehicles into commercial use. 

Volvo Cars Chief Executive Hakan Samuelsson said in a statement that “by the middle of the next decade, we expect one-third of all cars we sell to be fully autonomous.” 

Volvo Cars, which is owned by China’s Geely Automobile Holdings Ltd, will use a similar autonomous base vehicle concept for the introduction of its first commercially available autonomous drive technology in the early 2020s. 

Volvo and Uber said in 2017 that the rideshare company planned to buy up to 24,000 self-driving cars from Volvo from 2019 to 2021 using the self-driving system developed by Uber’s Advanced Technologies Group. 

An Uber spokeswoman said Tuesday that the company plans “to work with Volvo on tens of thousands of vehicles in the future.”

Huawei asks Verizon to pay over $1 billion for over 230 patents

WASHINGTON (Reuters) - Huawei Technologies Co Ltd has told Verizon Communications Inc that the U.S. carrier should pay licensing fees for more than 230 of the Chinese telecoms equipment maker’s patents and in aggregate is seeking more than $1 billion, a person briefed on the matter said on Wednesday. 

Verizon should pay to “solve the patent licensing issue,” a Huawei intellectual property licensing executive wrote in February, the Wall Street Journal reported earlier. The patents cover network equipment for more than 20 of the company’s vendors including major U.S. tech firms but those vendors would indemnify Verizon, the person said. Some of those firms have been approached directly by Huawei, the person said. 

The patents in question range from core network equipment, wireline infrastructure to internet-of-things technology, the Journal reported. The licensing fees for the more than 230 patents sought is more than $1 billion, the person said. 

Huawei has been battling the U.S. government for more than a year. National security experts worry that “back doors” in routers, switches and other Huawei equipment could allow China to spy on U.S. communications. Huawei has denied that it would help China spy. 

Companies involved, including Verizon have notified the U.S. government and the dispute comes amid a growing feud between China and the United States. The licensing fee demand may be more about the geopolitical battle between China and the United States rather than a demand for patent fees. 

Huawei and Verizon representatives met in New York last week to discuss some of the patents at issue and whether Verizon is using equipment from other companies that could infringe on Huawei patents. 

Verizon spokesman Rich Young declined to comment “regarding this specific issue because it’s a potential legal matter.” 

However, Young said, “These issues are larger than just Verizon. Given the broader geopolitical context, any issue involving Huawei has implications for our entire industry and also raise national and international concerns.” 

Huawei and U.S. wireless carriers T-Mobile US Inc and AT&T Inc did not respond to Reuters’ requests for comment. Sprint Corp declined to comment. 

The United States last month put Huawei on a blacklist that barred it from doing business with U.S. companies on security grounds without government approval, prompting some global tech firms to cut ties with the world’s largest telecoms equipment maker. 

Washington is also seeking the extradition of Huawei Chief Financial Executive Meng Wanzhou from Canada after her arrest in Vancouver last December on a U.S. warrant. 

China has since upped the pressure on Canada, halting Canadian canola imports and in May suspended the permits of two major pork producers.

 

Mistrust of scientists and farmers is slowing the fight against climate change

Mistrust hampers food industry's climate ambitions. Scientists and farmers are slowing adoption of technologies needed to fight climate change while feeding a growing world population, senior food industry figures said on Tuesday.

(Reuters)

 

Agriculture is the second-largest sector for greenhouse gas emissions, trailing only energy, but it needs both the public and policymakers to buy into advances in technology, said Philip Miller, senior vice president at Bayer Crop Science USA.

“We are going to have to work hard on speed in policy formation. Innovations always outpace policy and we need these technologies now, not in 2050,” Miller said at the International Grains Council’s annual conference.

“I think it is going to require us, as an entire agri-food chain, to do a much better job at helping them (the public) understand the benefit of what we do; helping them understand the sustainability of what we do.”

Caroline Rhodes, chief executive at Australia’s Grain Producers S.A., said the lack of trust was reflected in a South Australian ban on the use of genetically modified crops that had been approved for use in other parts of the country.

“If you look at the concerns of the Australian public and the way it translated into the reaction of the political class, it really stems from a lack of confidence in the science-based regulatory system.”

Jonathan Horrell, Global Director for Sustainability at snack company Mondelez International, said the issue of consumer trust of science was fundamental.

“You cannot afford a situation where science is seen to be acting against the consumer interest,” he said.

Horrell said an effective science-based regulatory system is vital but users of science have an onus on them to show they are using it in the interest of consumers and the world in general.

More data and the adoption of technologies such as blockchain can help to boost transparency in supply chains, Horrell said, thereby increasing consumers’ confidence in their food.

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