2023: Vereinfacht zusammengefasst haben meine Portfolioregeln in 2023 diese Wirkung gehabt: Passive Allokation und ESG gut, SDG schlecht und Trendfolge sehr schlecht…. Im Jahr 2022 hatten dagegen besonders meine Trendfolge und SDG-Portfolios gut rentiert (vgl. SDG und Trendfolge: Relativ gut in 2022).
Passives Allokations-Weltmarktportfolio 2023 mit guter Rendite
Das nicht-nachhaltige Alternatives ETF-Portfolio hat in 2023 mit 7,2% rentiert, also deutlich schlechter als Aktien insgesamt mit ca. 17%. Das regelbasierte „most passive“ Multi-Asset Weltmarkt ETF-Portfolio hat mit +9,9% trotz seines hohen Anteils an Alternatives dagegen relativ gut abgeschnitten, denn die Performance ist sogar etwas besser als die flexibler aktiver Mischfonds (+8,2%).
Eine vergleichbare Performance gilt für das ebenfalls breit diversifizierte ESG ETF-Portfolio mit +9%. Das ESG ETF-Portfolio ex Bonds lag dagegen mit +12,8% aufgrund des hohen Alternatives- und geringen Tech-Anteils erheblich hinter traditionellen Aktien-ETFs. Die Rendite ist aber ganz ähnlich wie die +12,1% traditioneller aktiv gemanagter globaler Aktienfonds. Das ESG ETF-Portfolio ex Bonds Income verzeichnete ein geringeres Plus von +9,1%. Das ist etwas schlechter als die +9,8% traditioneller Dividendenfonds.
Mit +0,8% schnitt das ESG ETF-Portfolio Bonds (EUR) ähnlich wie die +1,5% für vergleichbare traditionelle Anleihe-ETFs ab. Aktive Fonds haben jedoch +4,6% erreicht. Anders als in 2022, hat meine Trendfolge mit -1,8% für das ESG ETF-Portfolio ex Bonds Trend aber nicht gut funktioniert.
SDG ETF-Portfolio: 2023 naja
Das aus thematischen Aktien-ETFs bestehende SDG ETF-Portfolio lag mit +2,6% stark hinter traditionellen Aktienanlagen zurück und das SDG ETF-Trendfolgeportfolio zeigt mit -10% eine sehr schlechte Performance. Für thematische Investments mit ökologischem Fokus lief es allerdings in 2023 generell nicht so gut.
Um das Portfolioangebot zu straffen, werden künftig nur noch 4 ESG ETF-Portfolios aktiv angeboten: Multi-Asset (Start 2016), Aktien, renditeorientierte Anleihen und sicherheitsorientierte Anleihen (alle Start 2019). Hinzu kommen, wie gehabt, die beiden SDG ETF-Portfolios (Start 2019 und 2020).
Direkte pure ESG-Aktienportfolios OK
Das aus 30 Aktien bestehende Global Equities ESG Portfolio hat +14,6% gemacht und liegt damit besser als traditionelle aktive Fonds (+12,1%) aber hinter traditionellen Aktien-ETFs, was vor allem an den im Portfolio nicht vorhandenen Mega-Techs lag. Das nur aus 5 Titeln bestehende Global Equities ESG Portfolio S war mit +8,9% etwas schlechter, liegt aber seit dem Start in 2017 immer noch vor dem 30-Aktien Portfolio.
Das Infrastructure ESG Portfolio hat -5,1% verloren und liegt damit erheblich hinter den +0,8% traditioneller Infrastrukturfonds und den +9,2% eines traditionellen Infrastruktur-ETFs. Das Real Estate ESG Portfolio hat +7,2% gewonnen, während traditionelle globale Immobilienaktien-ETFs +6,9% und aktiv gemanagte Fonds +7,9% gewonnen haben. Das Deutsche Aktien ESG Portfolio hat +6,7% zugelegt. Das wiederum liegt erheblich hinter aktiv gemanagten traditionellen Fonds mit +15,1% und nennenswert hinter vergleichbaren ETFs mit +16,2%.
Direkte ESG plus SDG-Aktienportfolios: Nicht so gut
Das auf soziale Midcaps fokussierte Global Equities ESG SDG hat mit -0,7% im Vergleich zu allgemeinen Aktienfonds sehr schlecht abgeschnitten. Das ist vor allem auf den hohen Gesundheitsanteil zurückzuführen. Das Global Equities ESG SDG Trend Portfolio hat mit -8,4% – wie die anderen Trendfolgeportfolios – besonders schlecht abgeschnitten. Das Global Equities ESG SDG Social Portfolio hat dagegen mit +10,4% im Vergleich zum Beispiel zu Gesundheits-ETFs bzw. aktiven Fonds (-0,6 bzw. -1,0%) dagegen ziemlich gut abgeschnitten.
Aufgrund mangelnder Nachfrage werden die direkten ESG-Aktienportfolios für globale Aktien, deutsche Aktien, Infrastrukturaktien und Immobilienaktien (alle Start 2016 und 2017) künftig nicht mehr aktiv angeboten, sondern nur noch die ESG + SDG-Aktienportfolios (Start 2017 und 2022).
Fondsperformance: Nicht so gut
Mein FutureVest Equity Sustainable Development Goals R Fonds (Start 2021) zeigt nach einem im Vergleich zu anderen Portfolios sehr guten Jahr 2022 (-8,1%) in 2023 mit +0,5% eine starke Underperformance gegenüber traditionellen Aktienmärkten. Das liegt vor allem an der Branchenzusammensetzung des Portfolios mit Fokus auf Gesundheit und an den relativ hohen nachhaltigen Infrastruktur- und Immobilienanteilen (weitere Informationen wie z.B. auch den aktuellen detaillierten Engagementreport siehe FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T). Hinzu kommt, dass die sogenannten Glorreichen 7 bewusst in keinem meiner direkten Portfolios enthalten sind (vgl. Glorreiche 7: Sind sie unsozial? – Responsible Investment Research Blog (prof-soehnholz.com)). Dafür sind das letzte Quartal 2023 mit +9,4% und vor allem der Dezember mit +9,0% besonders gut gelaufen.
Sustainable investment can be radically different from traditional investment. „Asset Allocation, Risk Overlay and Manager Selection“ is the translation of the book-title which I wrote in 2009 together with two former colleagues from FERI in Bad Homburg. Sustainability plays no role in it. My current university lecture on these topics is different.
Sustainability can play a very important role in the allocation to investment segments, manager and fund selection, position selection and also risk management. Strict sustainability can even lead to radical changes: More illiquid investments, lower asset class diversification, significantly higher concentration within investment segments, more active instead of passive mandates and different risk management. Here is why:
Central role of investment philosophy and sustainability definition for sustainable investment
Investors should define their investment philosophy as clearly as possible before they start investing. By investment philosophy, I mean the fundamental convictions of an investor, ideally a comprehensive and coherent system of such convictions (see Das-Soehnholz-ESG-und-SDG-Portfoliobuch 2023, p. 21ff.). Sustainability can be an important element of an investment philosophy.
Example: I pursue a strictly sustainable, rule-based, forecast-free investment philosophy (see e.g. Investment philosophy: Forecast fans should use forecast-free portfolios). To this end, I define comprehensive sustainability rules. I use the Policy for Responsible Investment Scoring Concept (PRISC) tool of the German Association for Asset Management and Financial Analysis (DVFA) for operationalization.
When it comes to sustainable investment, I am particularly interested in the products and services offered by the companies and organizations in which I invest or to which I indirectly provide loans. I use many strict exclusions and, above all, positive criteria. In particular, I want that the revenue or service is as compatible as possible with the Sustainable Development Goals of the United Nations (UN SDG) („SDG revenue alignment“). I also attach great importance to low absolute environmental, social and governance (ESG) risks. However, I only give a relatively low weighting to the opportunities to change investments („investor impact“) (see The Soehnholz ESG and SDG Portfolio Book 2023, p. 141ff). I try to achieve impact primarily through shareholder engagement, i.e. direct sustainability communication with companies.
Other investors, for whom impact and their own opportunities for change are particularly important, often attach great importance to so-called additionality. This means, that the corresponding sustainability improvements only come about through their respective investments. If an investor finances a new solar or wind park, this is considered additional and therefore particularly sustainable. When investing money on stock exchanges, securities are only bought by other investors and no money flows to the issuers of the securities – except in the case of relatively rare new issues. The purchase of listed bonds or shares in solar and wind farm companies is therefore not considered an impact investment by additionality supporters.
Sustainable investment and asset allocation: many more unlisted or alternative investments and more bonds?
In extreme cases, an investment philosophy focused on additionality would mean investing only in illiquid assets. Such an asset allocation would be radically different from today’s typical investments.
Better no additional allocation to illiquid investments?
Regarding additionality, investor and project impact must be distinguished. The financing of a new wind farm is not an additional investment, if other investors would also finance the wind farm on their own. This is not atypical. There is often a so-called capital overhang for infrastructure and private equity investments. This means, that a lot of money has been raised via investment funds and is competing for investments in such projects.
Even if only one fund is prepared to finance a sustainable project, the investment in such a fund would not be additional if other investors are willing to commit enough money to this fund to finance all planned investments. It is not only funds from renowned providers that often have more potential subscriptions from potential investors than they are willing to accept. Investments in such funds cannot necessarily be regarded as additional. On the other hand, there is clear additionality for investments that no one else wants to make. However, whether such investments will generate attractive performance is questionable.
Illiquid investments are also far from suitable for all investors, as they usually require relatively high minimum investments. In addition, illiquid investments are usually only invested gradually, and liquidity must be held for uncertain capital calls in terms of timing and amount. In addition, illiquid investments are usually considerably more expensive than comparable liquid investments. Overall, illiquid investments therefore have hardly any higher return potential than liquid investments. On the other hand, mainly due to the methods of their infrequent valuations, they typically exhibit low fluctuations. However, they are sometimes highly risky due to their high minimum investments and, above all, illiquidity.
In addition, illiquid investments lack an important so-called impact channel, namely individual divestment opportunities. While liquid investments can be sold at any time if sustainability requirements are no longer met, illiquid investments sometimes have to remain invested for a very long time. Divestment options are very important to me: I have sold around half of my securities in recent years because their sustainability has deteriorated (see: Divestments: 49 bei 30 Aktien meines Artikel 9 Fonds).
Sustainability advantages for (corporate) bonds over equities?
Liquid investment segments can differ, too, in terms of impact opportunities. Voting rights can be exercised for shares, but not for bonds and other investment segments. However, shareholder meetings at which voting is possible rarely take place. In addition, comprehensive sustainability changes are rarely put to the vote. If they are, they are usually rejected (see 2023 Proxy Season Review – Minerva).
I am convinced that engagement in the narrower sense can be more effective than exercising voting rights. And direct discussions with companies and organizations to make them more sustainable are also possible for bond buyers.
Irrespective of the question of liquidity or stock market listing, sustainable investors may prefer loans to equity because loans can be granted specifically for social and ecological projects. In addition, payouts can be made dependent on the achievement of sustainable milestones. However, the latter can also be done with private equity investments, but not with listed equity investments. However, if ecological and social projects would also be carried out without these loans and only replace traditional loans, the potential sustainability advantage of loans over equity is put into perspective.
Loans are usually granted with specific repayment periods. Short-term loans have the advantage that it is possible to decide more often whether to repeat loans than with long-term loans, provided they cannot be repaid early. This means that it is usually easier to exit a loan that is recognized as not sustainable enough than a private equity investment. This is a sustainability advantage. In addition, smaller borrowers and companies can probably be influenced more sustainably, so that government bonds, for example, have less sustainability potential than corporate loans, especially when it comes to relatively small companies.
With regard to real estate, one could assume that loans or equity for often urgently needed residential or social real estate can be considered more sustainable than for commercial real estate. The same applies to social infrastructure compared to some other infrastructure segments. On the other hand, some market observers criticize the so-called financialization of residential real estate, for example, and advocate public rather than private investments (see e.g. Neue Studie von Finanzwende Recherche: Rendite mit der Miete). Even social loans such as microfinance in the original sense are criticized, at least when commercial (interest) interests become too strong and private debt increases too much.
While renewable raw materials can be sustainable, non-industrially used precious metals are usually considered unsustainable due to the mining conditions. Crypto investments are usually considered unsustainable due to their lack of substance and high energy consumption.
Assuming potential additionality for illiquid investments and an impact primarily via investments with an ecological or social focus, the following simplified assessment of the investment segment can be made from a sustainability perspective:
Sustainable investment: Potential weighting of investment segments assuming additionality for illiquid investments:
Source: Soehnholz ESG GmbH 2023
Investors should create their own such classification, as this is crucial for their respective sustainable asset allocation.
Taking into account minimum capital investment and costs as well as divestment and engagement opportunities, I only invest in listed investments, for example. However, in the case of multi-billion assets with direct sustainability influence on investments, I would consider additional illiquid investments.
Sustainable investment and manager/fund selection: more active investments again?
Scientific research shows that active portfolio management usually generates lower returns and often higher risks than passive investments. With very low-cost ETFs, you can invest in thousands of securities. It is therefore no wonder that so-called passive investments have become increasingly popular in recent years.
Diversification is often seen as the only „free lunch“ in investing. But diversification often has no significant impact on returns or risks: With more than 20 to 30 securities from different countries and sectors, no better returns and hardly any lower risks can be expected than with hundreds of securities. In other words, the marginal benefit of additional diversification decreases very quickly.
But if you start with the most sustainable 10 to 20 securities and diversify further, the average sustainability can fall considerably. This means that strictly sustainable investment portfolios should be concentrated rather than diversified. Concentration also has the advantage of making voting and other forms of engagement easier and cheaper. Divestment threats can also be more effective if a lot of investor money is invested in just a few securities.
Sustainability policies can vary widely. This can be seen, among other things, in the many possible exclusions from potential investments. For example, animal testing can be divided into legally required, medically necessary, cosmetic and others. Some investors want to consistently exclude all animal testing. Others want to continue investing in pharmaceutical companies and may therefore only exclude „other“ animal testing. And investors who want to promote the transition from less sustainable companies, for example in the oil industry, to more sustainability will explicitly invest in oil companies (see ESG Transition Bullshit?).
Indices often contain a large number of securities. However, consistent sustainability argues in favor of investments in concentrated, individual and therefore mostly index-deviating actively managed portfolios. Active, though, is not meant in the sense of a lot of trading. In order to be able to exert influence by exercising voting rights and other forms of engagement, longer rather than shorter holding periods for investments make sense.
Still not enough consistently sustainable ETF offerings
When I started my own company in early 2016, it was probably the world’s first provider of a portfolio of the most consistently sustainable ETFs possible. But even the most sustainable ETFs were not sustainable enough for me. This was mainly due to insufficient exclusions and the almost exclusive use of aggregated best-in-class ESG ratings. However, I have high minimum requirements for E, S and G separately (see Glorious 7: Are they anti-social?). I am also not interested in the best-rated companies within sectors that are unattractive from a sustainability perspective (best-in-class). I want to invest in the best-performing stocks regardless of sector (best-in-universe). However, there are still no ETFs for such an approach. In addition, there are very few ETFs that use strict ESG criteria and also strive for SDG compatibility.
Even in the global Socially Responsible Investment Paris Aligned Benchmarks, which are particularly sustainable, there are still several hundred stocks from a large number of sectors and countries. In contrast, there are active global sustainable funds with just 30 stocks, which is potentially much more sustainable (see 30 stocks, if responsible, are all I need).
Issuers of sustainable ETFs often exercise sustainable voting rights and even engage, even if only to a small extent. However, most providers of active investments do no better (see e.g. 2023 Proxy Season Review – Minerva). Notably, index-following investments typically do not use the divestment impact channel because they want to replicate indices as directly as possible.
Sustainable investment and securities selection: fewer standard products and more individual mandates or direct indexing?
If there are no ETFs that are sustainable enough, you should look for actively managed funds, award sustainable mandates to asset managers or develop your own portfolios. However, actively managed concentrated funds with a strict ESG plus impact approach are still very rare. This also applies to asset managers who could implement such mandates. In addition, high minimum investments are often required for customized mandates. Individual sustainable portfolio developments, on the other hand, are becoming increasingly simple.
Numerous providers currently offer basic sustainability data for private investors at low cost or even free of charge. Financial technology developments such as discount (online) brokers, direct indexing and trading in fractional shares as well as voting tools help with the efficient and sustainable implementation of individual portfolios. However, the variety of investment opportunities and data qualities are not easy to analyze.
It would be ideal if investors could also take their own sustainability requirements into account on the basis of a curated universe of particularly sustainable securities and then have them automatically implemented and rebalanced in their portfolios (see Custom ESG Indexing Can Challenge Popularity Of ETFs (asiafinancial.com). In addition, they could use modern tools to exercise their voting rights according to their individual sustainability preferences. Sustainability engagement with the securities issuers can be carried out by the platform provider.
Risk management: much more tracking error and ESG risk monitoring?
For sustainable investments, sustainability metrics are added to traditional risk metrics. These are, for example, ESG ratings, emissions values, principal adverse indicators, do-no-significant-harm information, EU taxonomy compliance or, as in my case, SDG compliance and engagement success.
Sustainable investors have to decide how important the respective criteria are for them. I use sustainability criteria not only for reporting, but also for my rule-based risk management. This means that I sell securities if ESG or SDG requirements are no longer met (see Divestments: 49 bei 30 Aktien meines Artikel 9 Fonds).
The ESG ratings I use summarize environmental, social and governance risks. These risks are already important today and will become even more important in the future, as can be seen from greenwashing and reputational risks, for example. Therefore, they should not be missing from any risk management system. SDG compliance, on the other hand, is only relevant for investors who care about how sustainable the products and services of their investments are.
Voting rights and engagement have not usually been used for risk management up to now. However, this may change in the future. For example, I check whether I should sell shares if there is an inadequate response to my engagement. An inadequate engagement response from companies may indicate that companies are not listening to good suggestions and thus taking unnecessary risks that can be avoided through divestments.
Traditional investors often measure risk by the deviation from the target allocation or benchmark. If the deviation exceeds a predefined level, many portfolios have to be realigned closer to the benchmark. If you want to invest in a particularly sustainable way, you have to have higher rather than lower traditional benchmark deviations (tracking error) or you should do without tracking error figures altogether.
In theory, sustainable indices could be used as benchmarks for sustainable portfolios. However, as explained above, sustainability requirements can be very individual and, in my opinion, there are no strict enough sustainable standard benchmarks yet.
Sustainability can therefore lead to new risk indicators as well as calling old ones into question and thus also lead to significantly different risk management.
Summary and outlook: Much more individuality?
Individual sustainability requirements play a very important role in the allocation to investment segments, manager and fund selection, position selection and risk management. Strict sustainability can lead to greater differences between investment mandates and radical changes to traditional mandates: A lower asset class diversification, more illiquid investments for large investors, more project finance, more active rather than passive mandates, significantly higher concentration within investment segments and different risk management with additional metrics and significantly less benchmark orientation.
Some analysts believe that sustainable investment leads to higher risks, higher costs and lower returns. Others expect disproportionately high investments in sustainable investments in the future. This should lead to a better performance of such investments. My approach: I try to invest as sustainably as possible and I expect a normal market return in the medium term with lower risks compared to traditional investments.
First published in German on www.prof-soehnholz.com on Dec. 30th, 2023. Initial version translated by Deepl.com
Nachhaltige Geldanlage kann radikal anders sein als traditionelle. „Asset Allocation, Risiko-Overlay und Manager-Selektion: Das Diversifikationsbuch“ heißt das Buch, dass ich 2009 mit ehemaligen Kollegen der Bad Homburger FERI geschrieben habe. Nachhaltigkeit spielt darin keine Rolle. In meiner aktuellen Vorlesung zu diesen Themen ist das anders. Nachhaltigkeit kann eine sehr wichtige Rolle spielen für die Allokation auf Anlagesegmente, die Manager- bzw. Fondsselektion, die Positionsselektion und auch das Risikomanagement (Hinweis: Um die Lesbarkeit zu verbessern, gendere ich nicht).
Strenge Nachhaltigkeit kann sogar zu radikalen Änderungen führen: Mehr illiquide Investments, erheblich höhere Konzentration innerhalb der Anlagesegmente, mehr aktive statt passive Mandate und ein anderes Risikomanagement. Im Folgenden erkläre ich, wieso:
Zentrale Rolle von Investmentphilosophie und Nachhaltigkeitsdefinition für die nachhaltige Geldanlage
Dafür starte ich mit der Investmentphilosophie. Unter Investmentphilosophie verstehe ich die grundsätzlichen Überzeugungen eines Geldanlegers, idealerweise ein umfassendes und kohärentes System solcher Überzeugungen (vgl. Das-Soehnholz-ESG-und-SDG-Portfoliobuch 2023, S. 21ff.). Nachhaltigkeit kann ein wichtiges Element einer Investmentphilosophie sein. Anleger sollten ihre Investmentphilosophie möglichst klar definieren, bevor sie mit der Geldanlage beginnen.
Beispiel: Ich verfolge eine konsequent nachhaltige regelbasiert-prognosefreie Investmentphilosophie. Dafür definiere ich umfassende Nachhaltigkeitsregeln. Zur Operationalisierung nutze ich das Policy for Responsible Investment Scoring Concept (PRISC) Tool der Deutschen Vereinigung für Asset Management und Finanzanalyse (DVFA, vgl. Standards – DVFA e. V. – Der Berufsverband der Investment Professionals).
Für die nachhaltige Geldanlage ist mir vor allem wichtig, was für Produkte und Services die Unternehmen und Organisationen anbieten, an denen ich mich beteilige oder denen ich indirekt Kredite zur Verfügung stelle. Dazu nutze ich viele strenge Ausschlüsse und vor allem Positivkriterien. Dabei wird vor allem der Umsatz- bzw. Serviceanteil betrachtet, der möglichst gut mit Nachhaltigen Entwicklungszielen der Vereinten Nationen (UN SDG) vereinbar ist („SDG Revenue Alignment“). Außerdem lege ich viel Wert auf niedrige absolute Umwelt-, Sozial- und Governance-Risiken (ESG). Meine Möglichkeiten zur Veränderung von Investments („Investor Impact“) gewichte ich aber nur relativ niedrig (vgl. Das-Soehnholz-ESG-und-SDG-Portfoliobuch 2023, S. 141ff). Impact möchte ich dabei vor allem über Shareholder Engagement ausüben, also direkte Nachhaltigkeitskommunikation mit Unternehmen.
Andere Anleger, denen Impact- bzw. eigene Veränderungsmöglichkeiten besonders wichtig sind, legen oft viel Wert auf sogenannte Additionalität bzw. Zusätzlichkeit. Das bedeutet, dass die entsprechenden Nachhaltigkeitsverbesserungen nur durch ihre jeweiligen Investments zustande gekommen sind. Wenn ein Anleger einen neuen Solar- oder Windparkt finanziert, gilt das als additional und damit als besonders nachhaltig. Bei Geldanlagen an Börsen werden Wertpapiere nur anderen Anlegern abgekauft und den Herausgebern der Wertpapiere fließt – außer bei relativ seltenen Neuemissionen – kein Geld zu. Der Kauf börsennotierter Anleihen oder Aktien von Solar- und Windparkunternehmen gilt bei Additionalitätsanhängern deshalb nicht als Impact Investment.
Nachhaltige Geldanlage und Asset Allokation: Viel mehr nicht-börsennotierte bzw. alternative Investments und mehr Anleihen?
Eine additionalitätsfokussierte Investmentphilosophie bedeutet demnach im Extremfall, nur noch illiquide zu investieren. Die Asset Allokation wäre radikal anders als heute typische Geldanlagen.
Lieber keine Mehrallokation zu illiquiden Investments?
Aber wenn Additionalität so wichtig ist, dann muss man sich fragen, welche Art von illiquiden Investments wirklich Zusätzlichkeit bedeutet. Dazu muss man Investoren- und Projektimpact trennen. Die Finanzierung eines neuen Windparks ist aus Anlegersicht dann nicht zusätzlich, wenn andere Anleger den Windpark auch alleine finanzieren würden. Das ist durchaus nicht untypisch. Für Infrastruktur- und Private Equity Investments gibt es oft einen sogenannten Kapitalüberhang. Das bedeutet, dass über Fonds sehr viel Geld eingesammelt wurde und um Anlagen in solche Projekte konkurriert.
Selbst wenn nur ein Fonds zur Finanzierung eines nachhaltgien Projektes bereit ist, wäre die Beteiligung an einem solchen Fonds aus Anlegersicht dann nicht additional, wenn alternativ andere Anleger diese Fondsbeteiligung kaufen würden. Nicht nur Fonds renommierter Anbieter haben oft mehr Anfragen von potenziellen Anlegern als sie akzeptieren wollen. Investments in solche Fonds kann man nicht unbedingt als additional ansehen. Klare Additionalität gibt es dagegen für Investments, die kein anderer machen will. Ob solche Investments aber attraktive Performances versprechen, ist fragwürdig.
Illiquide Investments sind zudem längst nicht für alle Anleger geeignet, denn sie erfordern meistens relativ hohe Mindestinvestments. Hinzu kommt, dass man bei illiquiden Investments in der Regel erst nach und nach investiert und Liquidität in Bezug auf Zeitpunkt und Höhe unsichere Kapitalabrufe bereithalten muss. Außerdem sind illiquide meistens erheblich teurer als vergleichbare liquide Investments. Insgesamt haben damit illiquide Investments kaum höhere Renditepotenziale als liquide Investments. Durch die Art ihrer Bewertungen zeigen sie zwar geringe Schwankungen. Sie sind durch ihre hohen Mindestinvestments und vor allem Illiquidität aber teilweise hochriskant.
Hinzu kommt, dass illiquiden Investments ein wichtiger sogenannter Wirkungskanal fehlt, nämlich individuelle Divestmentmöglichkeiten. Während liquide Investments jederzeit verkauft werden können wenn Nachhaltigkeitsanforderungen nicht mehr erfüllt werden, muss man bei illiquiden Investments teilweise sehr lange weiter investiert bleiben. Divestmentmöglichkeiten sind sehr wichtig für mich: Ich habe in den letzten Jahren jeweils ungefähr die Hälfte meiner Wertpapiere verkauft, weil sich ihre Nachhaltigkeit verschlechtert hat (vgl. Divestments: 49 bei 30 Aktien meines Artikel 9 Fonds – Responsible Investment Research Blog (prof-soehnholz.com)).
Nachhaltigkeitsvorteile für (Unternehmens-)Anleihen gegenüber Aktien?
Auch liquide Anlagesegmente können sich in Bezug auf Impactmöglichkeiten unterscheiden. Für Aktien kann man Stimmrechte ausüben (Voting), für Anleihen und andere Anlagesegmente nicht. Allerdings finden nur selten Aktionärsversammlungen statt, zu denen man Stimmrechte ausüben kann. Zudem stehen nur selten umfassende Nachhaltigkeitsveränderungen zur Abstimmung. Falls das dennoch der Fall ist, werden sie meistens abgelehnt (vgl. 2023 Proxy Season Review – Minerva-Manifest).
Ich bin überzeugt, dass Engagement im engeren Sinn wirkungsvoller sein kann als Stimmrechtsausübung. Und direkte Diskussionen mit Unternehmen und Organisationen, um diese nachhaltiger zu machen, sind auch für Käufer von Anleihen möglich.
Unabhängig von der Frage der Liquidität bzw. Börsennotiz könnten nachhaltige Anleger Kredite gegenüber Eigenkapital bevorzugen, weil Kredite speziell für soziale und ökologische Projekte vergeben werden können. Außerdem können Auszahlungen von der Erreichung von nachhaltigen Meilensteinen abhängig gemacht werden können. Letzteres kann bei Private Equity Investments aber ebenfalls gemacht werden, nicht jedoch bei börsennotierten Aktieninvestments. Wenn ökologische und soziale Projekte aber auch ohne diese Kredite durchgeführt würden und nur traditionelle Kredite ersetzen, relativiert sich der potenzielle Nachhaltigkeitsvorteil von Krediten gegenüber Eigenkapital.
Allerdings werden Kredite meist mit konkreten Rückzahlungszeiten vergeben. Kurz laufende Kredite haben dabei den Vorteil, dass man öfter über die Wiederholung von Kreditvergaben entscheiden kann als bei langlaufenden Krediten, sofern man sie nicht vorzeitig zurückbezahlt bekommen kann. Damit kann man aus einer als nicht nachhaltig genug erkannter Kreditvergabe meistens eher aussteigen als aus einer privaten Eigenkapitalvergabe. Das ist ein Nachhaltigkeitsvorteil. Außerdem kann man kleinere Kreditnehmer und Unternehmen wohl besser nachhaltig beeinflussen, so dass zum Beispiel Staatsanleihen weniger Nachhaltigkeitspotential als Unternehmenskredite haben, vor allem wenn es sich dabei um relativ kleine Unternehmen handelt.
In Bezug auf Immobilien könnte man annehmen, dass Kredite oder Eigenkapital für oft dringend benötigte Wohn- oder Sozialimmobilien als nachhaltiger gelten können als für Gewerbeimmobilien. Ähnliches gilt für Sozialinfrastruktur gegenüber manch anderen Infrastruktursegmenten. Andererseits kritisieren manche Marktbeobachter die sogenannte Finanzialisierung zum Beispiel von Wohnimmobilien (vgl. Neue Studie von Finanzwende Recherche: Rendite mit der Miete) und plädieren grundsätzlich für öffentliche statt private Investments. Selbst Sozialkredite wie Mikrofinanz im ursprünglichen Sinn wird zumindest dann kritisiert, wenn kommerzielle (Zins-)Interessen zu stark werden und private Verschuldungen zu stark steigen.
Während nachwachsende Rohstoffe nachhaltig sein können, gelten nicht industriell genutzte Edelmetalle aufgrund der Abbaubedingungen meistens als nicht nachhaltig. Kryptoinvestments werden aufgrund fehlender Substanz und hoher Energieverbräuche meistens als nicht nachhaltig beurteilt.
Bei der Annahme von potenzieller Additionalität für illiquide Investments und Wirkung vor allem über Investments mit ökologischem bzw. sozialem Bezug kann man zu der folgenden vereinfachten Anlagesegmentbeurteilung aus Nachhaltigkeitssicht kommen:
Nachhaltige Geldanlage: Potenzielle Gewichtung von Anlagesegmenten bei Annahme von Additionalität für illiquide Investmentsund meine Allokation
Quelle: Eigene Darstellung
Anleger sollten sich ihre eigene derartige Klassifikation erstellen, weil diese entscheidend für ihre jeweilige nachhaltige Asset Allokation ist. Unter Berücksichtigung von Mindestkapitaleinsatz und Kosten sowie Divestment- und Engagementmöglichkeiten investiere ich zum Beispiel nur in börsennotierte Investments. Bei einem Multi-Milliarden Vermögen mit direkten Nachhaltigkeits-Einflussmöglichkeiten auf Beteiligungen würde ich zusätzliche illiquide Investments aber in Erwägung ziehen. Insgesamt kann strenge Nachhaltigkeit also auch zu wesentlich geringerer Diversifikation über Anlageklassen führen.
Nachhaltige Geldanlage und Manager-/Fondsselektion: Wieder mehr aktive Investments?
Wissenschaftliche Forschung zeigt, dass aktives Portfoliomanagement meistens geringe Renditen und oft auch höhere Risiken als passive Investments einbringt. Mit sehr günstigen ETFs kann man in tausende von Wertpapieren investieren. Es ist deshalb kein Wunder, dass in den letzten Jahren sogenannte passive Investments immer beliebter geworden sind.
Diversifikation gilt oft als der einzige „Free Lunch“ der Kapitalanlage. Aber Diversifikation hat oft keinen nennenswerten Einfluss auf Renditen oder Risiken. Anders ausgedrückt: Mit mehr als 20 bis 30 Wertpapieren aus unterschiedlichen Ländern und Branchen sind keine besseren Renditen und auch kaum niedrigere Risiken zu erwarten als mit hunderten von Wertpapieren. Anders ausgedrückt: Der Grenznutzen zusätzlicher Diversifikation nimmt sehr schnell ab.
Aber wenn man aber mit den nachhaltigsten 10 bis 20 Wertpapiern startet und weiter diversifiziert, kann die durchschnittliche Nachhaltigkeit erheblich sinken. Das bedeutet, dass konsequent nachhaltige Geldanlageportfolios eher konzentriert als diversifiziert sein sollten. Konzentration hat auch den Vorteil, dass Stimmrechtsausübungen und andere Formen von Engagement einfacher und kostengünstiger werden. Divestment-Androhungen können zudem wirkungsvoller sein, wenn viel Anlegergeld in nur wenige Wertpapiere investiert wird.
Nachhaltigkeitspolitiken können sehr unterschiedlich ausfallen. Das zeigt sich unter anderem bei den vielen möglichen Ausschlüssen von potenziellen Investments. So kann man zum Beispiel Tierversuche in juristisch vorgeschriebene, medizinisch nötige, kosmetische und andere unterscheiden. Manche Anleger möchten alle Tierversuche konsequent ausschließen. Andere wollen weiterhin in Pharmaunternehmen investieren und schließen deshalb vielleicht nur „andere“ Tierversuche aus. Und Anleger, welche die Transition von wenig nachhaltigen Unternehmen zum Beispiel der Ölbranche zu mehr Nachhaltigkeit fördern wollen, werden explizit in Ölunternehmen investieren (vgl. ESG Transition Bullshit? – Responsible Investment Research Blog (prof-soehnholz.com)).
Indizes enthalten oft sehr viele Wertpapiere. Konsequente Nachhaltigkeit spricht aber für Investments in konzentrierte, individuelle und damit meist indexabweichende aktiv gemanagte Portfolios. Dabei ist aktiv nicht im Sinne von viel Handel gemeint. Um über Stimmrechtsausübungen und andere Engagementformen Einfluss ausüben zu können, sind eher längere als kürzere Haltedauern von Investments sinnvoll.
Immer noch nicht genug konsequent nachhaltige ETF-Angebote
Bei der Gründung meines eigenen Unternehmens Anfang 2016 war ich wahrscheinlich weltweit der erste Anbieter eines Portfolios aus möglichst konsequent nachhaltigen ETFs. Aber auch die nachhaltigsten ETFs waren mir nicht nachhaltig genug. Grund waren vor allem unzureichende Ausschlüsse und die fast ausschließliche Nutzung von aggregierten Best-in-Class ESG-Ratings. Ich habe aber hohe Mindestanforderungen an E, S und G separat (vgl. Glorreiche 7: Sind sie unsozial? – Responsible Investment Research Blog (prof-soehnholz.com). Ich interessiere mich auch nicht für die am besten geraten Unternehmen innerhalb aus Nachhaltigkeitssicht unattraktiven Branchen (Best-in-Class). Ich möchte branchenunabhängig in die am besten geraten Aktien investieren (Best-in-Universe). Dafür gibt es aber auch heute noch keine ETFs. Außerdem gibt es sehr wenige ETFs, die strikte ESG-Kriterien nutzen und zusätzlich SDG-Vereinbarkeit anstreben.
Auch in den in besonders konsequent nachhaltigen globalen Socially Responsible Paris Aligned Benchmarks befinden sich noch mehrere hundert Aktien aus sehr vielen Branchen und Ländern. Aktive globale nachhaltige Fonds gibt es dagegen schon mit nur 30 Aktien, also potenziell erheblich nachhaltiger (vgl. 30 stocks, if responsible, are all I need – Responsible Investment Research Blog (prof-soehnholz.com)).
Emittenten nachhaltiger ETFs üben oft nachhaltige Stimmrechtsausübungen und sogar Engagement aus, wenn auch nur in geringem Umfang. Das machen die meisten Anbieter aktiver Investments aber auch nicht besser (vgl. z.B. 2023 Proxy Season Review – Minerva-Manifest). Indexfolgende Investments nutzen aber typischerweise den Impactkanal Divestments nicht, weil sie Indizes möglichst direkt nachbilden wollen.
Nachhaltige Geldanlage und Wertpapierselektion: Weniger Standardprodukte und mehr individuelle Mandate oder Direct Indexing?
Wenn es keine ETFs gibt, die nachhaltig genug sind, sollte man sich aktiv gemanagte Fonds suchen, nachhaltige Mandate an Vermögensverwalter vergeben oder seine Portfolios selbst entwickeln. Aktiv gemanagte konzentrierte Fonds mit strengem ESG plus Impactansatz sind aber noch sehr selten. Das gilt auch für Vermögensverwalter, die solche Mandate umsetzen könnten. Außerdem werden für maßgeschneiderte Mandate oft hohe Mindestanlagen verlangt. Individuelle nachhaltige Portfolioentwicklungen werden dagegen zunehmend einfacher.
Basis-Nachhaltigkeitsdaten werden aktuell von zahlreichen Anbietern für Privatanleger kostengünstig oder sogar kostenlos angeboten. Finanztechnische Entwicklungen wie Discount-(Online-)Broker, Direct Indexing und Handel mit Bruchstücken von Wertpapieren sowie Stimmrechtsausübungstools helfen bei der effizienten und nachhaltigen Umsetzung von individuellen Portfolios. Schwierigkeiten bereiten dabei eher die Vielfalt an Investmentmöglichkeiten und mangelnde bzw. schwer zu beurteilende Datenqualität.
Ideal wäre, wenn Anleger auf Basis eines kuratierten Universums von besonders nachhaltigen Wertpapieren zusätzlich eigene Nachhaltigkeitsanforderungen berücksichtigen können und dann automatisiert in ihren Depots implementieren und rebalanzieren lassen (vgl. Custom ESG Indexing Can Challenge Popularity Of ETFs (asiafinancial.com). Zusätzlich könnten sie mit Hilfe moderner Tools ihre Stimmrechte nach individuellen Nachhaltigkeitsvorstellungen ausüben. Direkte Nachhaltigkeitskommunikation mit den Wertpapieremittenten kann durch den Plattformanbieter erfolgen.
Risikomanagement: Viel mehr Tracking-Error und ESG-Risikomonitoring?
Für nachhaltige Geldanlagen kommen zusätzlich zu traditionellen Risikokennzahlen Nachhaltigkeitskennzahlen hinzu, zum Beispiel ESG-Ratings, Emissionswerte, Principal Adverse Indicators, Do-No-Significant-Harm-Informationen, EU-Taxonomievereinbarkeit oder, wie in meinem Fall, SDG-Vereinbarkeiten und Engagementerfolge.
Nachhaltige Anleger müssen sich entscheiden, wie wichtig die jeweiligen Kriterien für sie sind. Ich nutze Nachhaltigkeitskriterien nicht nur für das Reporting, sondern auch für mein regelgebundenes Risikomanagement. Das heißt, dass ich Wertpapiere verkaufe, wenn ESG- oder SDG-Anforderungen nicht mehr erfüllt werden.
Die von mir genutzten ESG-Ratings messen Umwelt-, Sozial- und Unternehmensführungsrisiken. Diese Risiken sind heute schon wichtig und werden künftig noch wichtiger, wie man zum Beispiel an Greenwashing- und Reputationsrisiken sehen kann. Deshalb sollten sie in keinem Risikomanagement fehlen. SDG-Anforderungserfüllung ist hingegen nur für Anleger relevant, denen wichtig ist, wie nachhaltig die Produkte und Services ihrer Investments sind.
Stimmrechtsausübungen und Engagement wurden bisher meistens nicht für das Risikomanagement genutzt. Das kann sich künftig jedoch ändern. Ich prüfe zum Beispiel, ob ich Aktien bei unzureichender Reaktion auf mein Engagement verkaufen sollte. Eine unzureichende Engagementreaktion von Unternehmen weist möglicherweise darauf hin, dass Unternehmen nicht auf gute Vorschläge hören und damit unnötige Risiken eingehen, die man durch Divestments vermeiden kann.
Traditionelle Geldanleger messen Risiko oft mit der Abweichung von der Soll-Allokation bzw. Benchmark. Wenn die Abweichung einen vorher definierten Grad überschreitet, müssen viele Portfolios wieder benchmarknäher ausgerichtet werden. Für nachhaltige Portfolios werden dafür auch nachhaltige Indizes als Benchmark genutzt. Wie oben erläutert, können Nachhaltigkeitsanforderungen aber sehr individuell sein und es gibt meiner Ansicht nach viel zu wenige strenge nachhaltige Benchmarks. Wenn man besonders nachhaltig anlegen möchte, muss man dementsprechend höhere statt niedrigere Benchmarkabweichungen (Tracking Error) haben bzw. sollte ganz auf Tracking Error Kennzahlen verzichten.
Nachhaltigkeit kann also sowohl zu neuen Risikokennzahlen führen als auch alte in Frage stellen und damit auch zu einem erheblich anderen Risikomanagement führen.
Nachhaltige Geldanlage – Zusammenfassung und Ausblick: Viel mehr Individualität?
Individuelle Nachhaltigkeitsanforderungen spielen eine sehr wichtige Rolle für die Allokation auf Anlagesegmente, die Manager- bzw. Fondsselektion, die Positionsselektion und auch das Risikomanagement. Strenge Nachhaltigkeit kann zu stärkeren Unterschieden zwischen Geldanlagemandaten und radikalen Änderungen gegenüber traditionellen Mandaten führen: Geringere Diversifikation über Anlageklassen, mehr illiquide Investments für Großanleger, mehr Projektfinanzierungen, mehr aktive statt passive Mandate, erheblich höhere Konzentration innerhalb der Anlagesegmente und ein anderes Risikomanagement mit zusätzlichen Kennzahlen und erheblich geringerer Benchmarkorientierung.
Manche Analysten meinen, nachhaltige Geldanlage führt zu höheren Risiken, höheren Kosten und niedrigeren Renditen. Andere erwarten zukünftig überproportional hohe Anlagen in nachhaltige Investments. Das sollte zu einer besseren Performance solcher Investments führen. Meine Einstellung: Ich versuche so nachhaltig wie möglich zu investieren und erwarte dafür mittelfristig eine marktübliche Rendite mit niedrigeren Risiken im Vergleich zu traditionellen Investments.
ESG research criticism: 13x new research on e-commerce, petrochemical and corruption problems, good and average sustainable performance, high transition risks, EU Taxonomy, Greenium, climate disaster effects, good investment constraints and private equity benchmarks (# shows SSRN full paper downloads as of Dec. 14th, 2023)
Social and ecological research (ESG research criticism)
Brown e-commerce: Product flows and GHG emissions associated with consumer returns in the EU by Rotem Roichman, Tamar Makov, Benjamin Sprecher, Vered Blass, and Tamar Meshulam as of Dec. 6th, 2023 (#5):“Building on a unique dataset covering over 630k returned apparel items in the EU … Our results indicate that 22%-44% of returned products never reach another consumer. Moreover, GHG emissions associated with the production and distribution of unused returns can be 2-14 times higher than post-return transport, packaging, and processing emissions combined“ (abstract).
US financed European petrochemicals:Toxic Footprints Europe by Planet Tracker as of December 2023: “Petrochemicals, which provide feedstocks for numerous products embedded in the global economy, carry a significant environmental footprint. One of the most important is toxic emissions. The financial market appears largely unconcerned by toxic emissions. This could be for several reasons: • perhaps because they are viewed as an unpriced pollutant or investors’ focus remains on carbon rather than other discharges or for those monitoring the plastic industry the spotlight is on plastic waste rather than toxic releases. In the Trilateral Chemical Region of Europe – an area consisting of Flanders (Belgium), North Rhine-Westphalia (Germany), Planet Tracker identified 1,093 facilities …. These facilities have released and transferred 125 million tonnes of chemicals since 2010 resulting in an estimated 24,640 years of healthy life being lost and 57 billion fractions of species being potentially affected. … BASF and Solvay are the most toxic polluters in the region, appearing in the top 5 of all four metrics analysed (physical releases, ecotoxicity, human toxicity and RSEI hazard). The financiers behind these toxic footprints are led by BlackRock (5.4% of total investments by equity market value), Vanguard (5.2%) and JPMorgan Chase (3.6%). In terms of debt financing, Citigroup leads with 6.4% of total 10-year capital underwriting (including equity, loans and bonds), followed closely by JPMorgan Chase (6.3%) and Bank of America (5.2%)“ (p. 3).
Corruption Kills: Global Evidence from Natural Disasters by Serhan Cevik and João Tovar Jalles from the International Monetary Fund as of Nov. 2nd, 2023 (#12): “… we use a large panel of 135 countries over a long period spanning from 1980 to 2020 … The empirical analysis provides convincing evidence that widespread corruption increases the number of disaster-related deaths … the difference between the least and most corrupt countries in our sample implies a sixfold increase in the number of deaths per population caused by natural disaster in a given year. Our results show that this impact is stronger in developing countries than in advanced economies, highlighting the critical relationship between economic development and institutional capacity in strengthening good governance and combating corruption“ (p. 11/12).
Investment ESG research criticsm
Complex sustainability: Sustainability of financial institutions, firms, and investing by Bram van der Kroft as of Dec. 7th, 2023 (#22): “… financial institutions will take on additional risk in ways unpriced by regulators when facing financial constraints. Throughout the paper, we provide evidence that this additional risk-taking harms society as banks and insurance corporations acquire precisely those assets most affected in economic downturns” (p. 194) … “we find for over four thousand listed firms in 77 countries, as two-thirds of firms substantively improve their sustainable performance when institutional pressure is imprecise and increases, while one-third of firms are forced to start symbolically responding” (p. 196) … “One critical assumption underlining .. sustainable performance advances is that socially responsible investors can accurately identify sustainable firms. In practice, we show that these investors rely on inaccurate estimates of sustainable performance and accidentally “tilt the wrong firms” (p. 196) … “First, we find that MSCI IVA, FTSE, S&P, Sustainalytics, and Refinitiv ESG ratings do not reflect the sustainable performance of firms but solely capture their forward-looking sustainable aspirations. On average, these aspirations do not materialize up to 15 years in the future” (p. 84). …“Using unique identification in the real estate market and property-level sustainable performance information, we find that successful socially responsible engagement improves the sustainable performance of firms”(p. 196). My comment regarding the already published ESG rating criticism: Not all rating agencies work in the criticized way. My main ESG ratings supplier shifted its focuses to actual from planned sustainability (see my Researchpost #90 as of July 5th, 2022 relating to this paper: Tilting the Wrong Firms? How Inflated ESG Ratings Negate Socially Responsible Investing under Information Asymmetries).
ESG research criticism (1)?Comment and Replication: The Impact of Corporate Sustainability on Organizational Processes and Performance by Andrew A. King as of Dec. 7th, 2023 (#186): “Do High Sustainability companies have better financial performance than their Low Sustainability counterparts? An extremely influential publication in Management Science, “The Impact of Corporate Sustainability on Organizational Processes and Performance”, claims that they do. … after reviewing the report, I conclude that its critical findings are unjustified by its own evidence: its main method appears unworkable, a key finding is miscalculated, important results are uninterpretable, and the sample is biased by survival and selection. … Despite considering estimates from thousands of models, I find no reliable evidence for the proposed link between sustainability and financial performance” (abstract). My comment: If there is no negative effect of sustainability on performance, shouldn’t all investors invest 100% sustainably
ESG research criticism (2)?Does Corporate Social Responsibility Increase Access to Finance? A Commentary on Cheng, Ioannou, and Serafeim (2014) by Andrew A. King as of Dec. 12th, 2023 (#7): “Does Corporate Social Responsibility (CSR) facilitate access to finance? An extremely influential article claims that it does … I show that its research method precludes any insight on either access to finance or its connection to CSR. … I correct the original study by substituting more suitable measures and conducting further analysis. Contrary to the original report, I find no robust evidence for a link between CSR and access to finance” (abstract).
High transition risk: The pricing of climate transition risk in Europe’s equity market by Philippe Loyson, Rianne Luijendijk, and Sweder van Wijnbergen as of Aug. 22nd, 2023 (#46): “We assessed the effect of carbon intensity (tCO2/$M) on relative stock returns of clean versus polluting firms using a panel data set consisting of 1555 European companies over the period 2005-2019. We did not find empirical evidence that carbon risk is being priced in a diversified European equity portfolio, implying that investors do not seem to be aware of or at least do not require a risk premium for the risk they bear by investing in polluting companies“ (p. 32). My comment: Apparently, at least until 2019, there has not been enough sustainable investment to have a carbon risk impact
Green indicator confusion: Stronger Together: Exploring the EU Taxonomy as a Tool for Transition Planning by Clarity.ai and CDP as of Dec. 5th, 2023: „We find that out of the 1,700 NFRD (Sö: EU’s Non-Financial Reporting Directive) companies that published EU Taxonomy reports this year, around 600 identified their revenues and spending as part of their transition plans, and approximately 300 have validated science-based targets, both of which correlate to higher taxonomy alignment overall. There is a large dispersion of eligibility across companies within similar sectors which suggests that individual companies are involved in a variety of economic activities. This influences the low correlation between corporate GHG emissions and Taxonomy eligibility and alignment, as non-eligibility can be the result of exposure to either very high-impact or very low-impact economic activities. We observe that higher taxonomy alignment does not necessarily lead to lower carbon intensity when comparing companies within sectors. It is important to highlight that the largest source of corporate emissions might not always be well reflected in revenue shares” (p. 38). My comment: My experience is that the huge part of Scope 3 CO2 emissions and almost all non-CO2 emissions like methane are still seriously neglected by many corporations and investors
Greenium:Actions Speak Louder Than Words: The Effects of Green Commitment in the Corporate Bond Market by Peter Pope, Yang Wang, and Hui Xu as of Nov. 22nd, 2023 (#64): “This paper studies the effects of green bond issuance on the yield spreads of other conventional bonds from the same issuers. A traditional view of new bond issuance suggests that new bonds (whether green or brown) will increase secondary market bond yields if higher leverage increases default risk and dilutes creditors’ claim over assets. However, we find that the issuance of green bonds reduces conventional bond yield spreads by 8 basis points in secondary markets, on average. The effect is long-lasting (beyond two years) … An event study shows that the “bond” attribute of the green bonds still increases the yield spreads of outstanding conventional bonds by 1 basis point. It is the “green” attribute that lowers the yield spreads and ultimately dominates the net effects. … we show that socially responsible investors increase their demand for, and hold more, conventional bonds in their portfolios following the issuance of green bonds … we show that shareholders submit fewer environment-related proposals following green bond issuance. … Finally, our analysis highlights that green bonds give rise to positive real effects, though such effects are confined to the issuer“ (p. 42/43).
Costly values?Perceived Corporate Values by Stefano Pegoraro, Antonino Emanuele Rizzo, and Rafael Zambrana as of Dec. 4th, 2023 (#54): “…. analyzing the revealed preferences of values-oriented investors through their portfolio holdings … Using this measure of perceived corporate values, we show that values-oriented investors consider current and forward-looking information about corporate misconduct and controversies in their investment decisions. We also show that values-oriented investors sacrifice financial performance to align their portfolios with companies exhibiting better corporate values and lower legal risk” (p. 24). My comment: According to traditional investment theories, lower (ESG or other) risk should lead to lower returns. Any complaints about that?
Some investor impact: Propagation of climate disasters through ownership networks by Matthew Gustafson, Ai He, Ugur Lel, and Zhongling (Danny) Qin as of Dec. 5th, 2023 (#127): “We find that climate-change related disasters increase institutional investors’ awareness of climate change issues and accordingly these investors engage with the unaffected firms in their portfolios to influence corporate climate policies. In particular, we observe that such institutional investors vote in greater support of climate-related shareholder proposals at unaffected firms only after getting hit by climate change disasters in their portfolios and compared to other institutional investors. … In the long-run, firm-level GHG emissions and energy usage cumulatively decline at the same time as the unaffected firms adopt specific governance mechanisms such as linking their executive pay policies to GHG emission reductions, suggesting that changes in governance mechanisms potentially incentivize firms to internalize some of the negative externalities from their activities. … our results are more pronounced in brown industries“ (p. 26). My comment: When changing executive pay, negative effects have to be mitigated, see Wrong ESG bonus math?
Other investment research
Good constraints:Performance Attribution for Portfolio Constraints by Andrew W. Lo and Ruixun Zhang as of Nov. 1st, 2023 (#57): “While it is commonly believed that constraints can only decrease the expected utility of a portfolio, we show that this is only true when they are treated as static. … our methodology can be applied to common examples of constraints including the level of a particular characteristic, such as ESG scores, and exclusion constraints, such as divesting from sin stocks and energy stocks. Our results show that these constraints do not necessarily decrease the expected utility and returns of the portfolio, and can even contribute positively to portfolio performance when information contained in the constraints is sufficiently positively correlated with asset returns“ (p. 42). My comment: Traditional investment constraints are typically used to reduce risks. Looking at a actively managed funds, that does not always work as expected. Maybe responsible investment constraints are better than traditional ones?
PE Benchmark-Magic: Benchmarking Private Equity Portfolios: Evidence from Pension Funds by Niklas Augustin, Matteo Binfarè, and Elyas D. Fermand as of Oct. 31st, 2023 (#245): “We document significant heterogeneity in the benchmarks used for US public pension fund private equity (PE) portfolios. … We show that general (Soe: investment) consultant turnover predicts changes in PE benchmarks. … we find that public pension funds only beat their PE benchmarks about 50% of the time, that they tend to use public market benchmark indices that underperform private market benchmark indices, and that their benchmarks have become easier to beat over the last 20 years“ (abstract).
Skilled fund managers: 22x new research on skyscrapers, cryptos, ESG-HR, regulation, ratings, fund names, AI ESG Tools, carbon credits and accounting, impact funds, voting, Chat GPT, listed real estate, and fintechs (# shows the SSRN full paper downloads as of Dec. 7th, 2023):
Social and ecological research
Skyscaper impact:The Skyscraper Revolution: Global Economic Development and Land Savings by Gabriel M. Ahlfeldt, Nathaniel Baum-Snow, and Remi Jedwab as of Nov. 30th, 2023 (#20): “Our comprehensive examination of 12,877 cities worldwide from 1975 to 2015 reveals that the construction of tall buildings driven by reductions in the costs of height has allowed cities to accommodate greater populations on less land. … one-third of the aggregate population in cities of over 2 million people in the developing world, and 20% for all cities, is now accommodated because of the tall buildings constructed in these cities since 1975. Moreover, the largest cities would cover almost 30% more land without these buildings, and almost 20% across all cities. …. Given the gap between actual and potential building heights we calculate for each city in our data, only about one-quarter of the potential welfare gains and land value losses from heights have been realized, with per-capita welfare gains of 5.9% and 3.1% available by eliminating height regulations in developed and developing economies, respectively. As the cost of building tall structures decreases with technical progress, such potential for welfare gains will only increase into the future. … in most cities it is in landowners’ interest to maintain regulatory regimes that limit tall building construction, … benefits may be greatest for those who would move into the city with the new construction to take advantage of the higher real wages and lower commuting costs“ (p. 47).
Hot cryptos:Cryptocarbon: How Much Is the Corrective Tax? by Shafik Hebous and Nate Vernon from the International Monetary Fund as of Nov. 28th, 2023 (#14): “We estimate that the global demand for electricity by crypto miners reached that of Australia or Spain, resulting in 0.33% of global CO2 emissions in 2022. Projections suggest sustained future electricity demand and indicate further increases in CO2 emissions if crypto prices significantly increase and the energy efficiency of mining hardware is low. To address global warming, we estimate the corrective excise on the electricity used by crypto miners to be USD 0.045 per kWh, on average. Considering also air pollution costs raises the tax to USD 0.087 per kWh“ (abstract).
ESG attracts employees: Polarizing Corporations: Does Talent Flow to “Good’’ Firms? by Emanuele Colonnelli, Timothy McQuade, Gabriel Ramos, Thomas Rauter, and Olivia Xiong as of Nov. 30th, 2023 (#48): “Using Brazil as our setting, we make two primary contributions. First, in partnership with Brazil’s premier job platform, we design a nondeceptive incentivized field experiment to estimate job-seekers’ preferences to work for socially responsible firms. We find that, on average, job-seekers place a value on ESG signals equivalent to about 10% of the average wage. … Quantitatively, skilled workers value firm ESG activities substantially more than unskilled workers. … results indicate that ESG increases worker utility relative to the baseline economy without ESG. The reallocation of labor in the economy with ESG improves assortative matching and yields an increase in total output. Moreover, skilled workers benefit the most from the introduction of ESG, ultimately increasing wage differentials between skilled and unskilled workers“ (p. 32). My comment: see HR-ESG shareholder engagement: Opinion-Post #210 – Responsible Investment Research Blog (prof-soehnholz.com)
Always greenwashing: Can Investors Curb Greenwashing? Fanny Cartellier, Peter Tankov, and Olivier David Zerbib as of Dec. 1st, 2023 (#40): “… we show that companies greenwash all the time as long as the environmental score is not too high relative to the company’s fundamental environmental value. The tolerable deviation increases with investors’ pro-environmental preferences and decreases with their penalization. Moreover, the greenwashing effort is all the more pronounced the higher the pro-environmental preferences, the lower the disclosure intensity, and the lower the marginal unit cost of greenwashing. In particular, we show that beyond a certain horizon, on average, companies always greenwash“ (p. 31).
Insufficient ESG regulation?ESG Demand-Side Regulation – Governing the Shareholders by Thilo Kuntz as of Nov. 30th, 2023 (#45): “Instead of addressing the corporate board and its international equivalents as a supplier of ESG-friendly management, demand-side regulation targets investors and shareholders. It comes in two basic flavors, indirect and direct demand-side regulation. Whereas the first attempts to let only those retail investors become stockholders or fund members who already espouse the correct beliefs and attitudes, the latter pushes professional market participants towards ESG through a double commitment, that is, to the public at large via disclosure and to individual investors through pre-contractual information. .. Judging from extant empirical studies, indirect demand-side regulation in its current form will change the equation only slightly. … for most retail investors, including adherents to ESG, .. beliefs and attitudes seem to lie more on the side of monetary gains“ (p. 49/50).
Big bank climate deficits:An examination of net-zero commitments by the world’s largest banks by Carlo Di Maio, Maria Dimitropoulou, Zoe Lola Farkas, Sem Houben, Georgia Lialiouti, Katharina Plavec, Raphaël Poignet, Eline Elisabeth, and Maria Verhoeff from the European Central Bank as of Nov. 29th, 2023 (#25): “We examined the net-zero commitments made by Global Systemically Important Banks (G-SIBs). In recent years, large banks have significantly increased their ambition and now disclose more details regarding their net-zero targets. … The paper … identifies and discusses a number of observations, such as the significant differences in sectoral targets used despite many banks sharing the same goal, the widespread use of caveats, the missing clarity regarding exposures to carbon-intensive sectors, the lack of clarity of “green financing” goals, and the reliance on carbon offsets by some institutions. The identified issues may impact banks’ reputation and litigation risk and risk management” (abstract).
ESG investment research (Skilled fund managers)
Good fund classification: Identifying Funds’ Sustainability Goals with AI: Financial, Categorical Morality, and Impact by Keer Yang and Ayako Yasuda as of Nov. 30ths, 2023 (#23): “… developing a supervised machine-learning model-based method that classifies investment managers’ stated goals on sustainability into three distinct objectives: financial value, categorical morality, and impact. This is achieved by evaluating two dimensions of investor preferences: (i) whether investors have nonpecuniary preferences or not (value vs. values) and (ii) whether investors have ex ante, categorical moral preferences or ex post, consequentialist impact preferences. … Among the funds identified as sustainable by Morningstar, 54% state they incorporate ESG to enhance financial performance, while 39% practice categorical morality via exclusion and only 33% state they seek to generate impact. Stated goals meaningfully correlate with how the funds are managed. Financially motivated funds systematically hold stocks with high MSCI ESG ratings relative to industry peers, which is consistent with ESG risk management. Morally motivated funds categorically tilt away from companies in controversial industries (e.g., mining), but are otherwise insensitive to relative ESG ratings. Impact funds hold stocks with lower ESG performance than the others, which is consistent with them engaging with laggard firms to generate positive impact. Impact funds are also more likely to support social and environmental shareholder proposals. Hybrid funds are common. Funds combining financial and moral goals are the largest category and are growing the fastest” (p. 37/38). My comment: My fund may be unique: It holds stocks with high ESG ratings, is morally motivated and tries to achieve impact by engaging with the most sustainable companies.
ESG ratings explanations:Bridging the Gap in ESG Measurement: Using NLP to Quantify Environmental, Social, and Governance Communication by Tobias Schimanski, Andrin Reding, Nico Reding, Julia Bingler, Mathias Kraus, and Markus Leippold as of Nov. 30th, 2023 (#345): “… we propose and validate a new set of NLP models to assess textual disclosures toward all three subdomains … First, we use our corpus of over 13.8 million text samples from corporate reports and news to pre-train new specific E, S, and G models. Second, we create three 2k datasets to create classifiers that detect E, S, and G texts in corporate disclosures. Third, we validate our model by showcasing that the communication patterns detected by the models can effectively explain variations in ESG ratings” (abstract). My comments: I selected my ESG ratings agency (also) because of its AI capabilities
AI ESG Tools: Artificial Intelligence and Environmental Social Governance: An Exploratory Landscape of AI Toolkit by Nicola Cucari, Giulia Nevi, Francesco Laviola, and Luca Barbagli as of Nov. 29th, 2023 (#35): “This paper presents an initial mapping of AI tools supporting ESG pillars. Through the case study method, 32 companies and tools supporting environmental social governance (ESG) management were investigated, highlighting which of the different AI systems they use and enabling the design of the new AI-ESG ecosystem” (abstract).
Cheaper green loans:Does mandatory sustainability reporting decrease loan costs? by Katrin Hummel and Dominik Jobst as of Dec. 1st, 2023 (#31): “We focus on the passage of the NFRD, the first EU-wide sustainability reporting mandate. Using a sample of global loan deals from 2010 to 2019, we begin our analysis by documenting a negative relationship between borrowers’ levels of sustainability performance and loan costs. … In our main analysis, we find that loan costs significantly decrease among borrowers within the scope of the reporting mandate. This decrease is concentrated in firms with better sustainability performance. In a further analysis, we show that this effect is stronger if the majority of lead lenders are also operating in the EU and are thus potentially also subject to the reporting mandate themselves “ (p. 26/27).
Widepread ESG downgrade costs:Do debt investors care about ESG ratings? by Kornelia Fabisik, Michael Ryf, Larissa Schäfer, and Sascha Steffen from the European Central Bank as of Nov. 27th, 2023 (#53): “We use a major ESG rating agency‘s methodology change to firms’ ESG ratings to study its effect on the spreads of syndicated U.S. corporate loans traded in the secondary market. We find that loan spreads temporarily increase by 10% relative to the average spread of 4%. … we find some evidence that the effect is stronger for smaller and financially constrained firms, but not for younger firms. We also find that investors penalize firms for which ESG-related aspects seem to play a more prominent role. Lastly, when we explore potential spillover effects on private firms that are in the same industry as the downgraded firms, we find evidence supporting this channel. We find that private firms in highly affected industries face higher loan spreads after ESG downgrades of public firms in the same industry, suggesting that investors of private (unrated) firms also price in ESG downgrades of public firms“ (p. 28).
High ESG risks: Measuring ESG risk premia with contingent claims by Ioannis Michopoulos, Alexandros Bougias, Athanasios Episcopos and Efstratios Livanis as of Nov. 9th, 2023 (#109): “We find a statistically significant relationship between the ESG score and the volatility and drift terms of the asset process, suggesting that ESG factors have a structural effect on the firm value. We establish a mapping between ESG scores and the cost of equity and debt as implied by firm’s contingent claims, and derive estimates of the ESG risk premium across different ESG and leverage profiles. In addition, we break down the ESG risk premia by industry, and demonstrate how practitioners can adjust the weighed average cost of capital of ESG laggard firms for valuation and decision making purposes“ (abstract). … “We find that ESG risk has a large effect on the concluded cost of capital. Assuming zero ESG risk premia during the valuation process could severely underestimate the risky discount rate of ESG laggard firms, leading to distorted investment and capital budget decisions, as well as an incorrect fair value measurement of firm’s equity and related corporate securities” (p. 20).
ESG fund benefits: Renaming with purpose: Investor response and fund manager behaviour after fund ESG-renaming by Kayshani Gibbon, Jeroen Derwall, Dirk Gerritsen, and Kees Koedijk as of Nov. 27th, 2023 (#42): “Using a unique sample of 740 ESG-related name changes …. Our most conservative estimates … suggest that mutual funds domiciled in Europe may enjoy greater average flows by renaming … we provide consistent evidence that mutual funds improve the ESG performance and reduce the ESG risks of their portfolios after signalling ESG repurposing through fund name changes. Finally, we find that renaming has no material impact on funds’ turnover rates or on the fees charged to investors“ (p. 15/16). My comment: Maybe I should have integrated ESG in my FutureVest Equity Sustainable Develeopment Goals fund name (ESG and more see in the just updated 31pager 231120_Nachhaltigkeitsinvestmentpolitik_der_Soehnholz_Asset_Management_GmbH).
Green for the rich?Rich and Responsible: Is ESG a Luxury Good? Steffen Andersen, Dmitry Chebotarev, Fatima Zahra Filali Adib, and Kasper Meisner Nielsen as of Nov. 27th, 2023 (#91): “… we examine the rise of responsible investing among retail investors in Denmark. … from 2019 to 2021. The fraction of retail investors that hold socially responsible mutual funds in their portfolios has increased from less than 0.5% to 6.8%, equivalent to an increase in the portfolio weight on socially responsible mutual funds for all investors from 0.1% to 1.6%. At the same time, the fraction of investors holding green stock has increased from 8.7% to 15.9%, equivalent to an increase in portfolio weight on green stocks from 2.4% to 3.3%. Collectively, the rise of sustainable investments implies that more than 4.9% of the risky assets are allocated to sustainable investments by 2021. The rise in responsible investments is concentrated among wealthy investors. Almost 13% of investors in the top decile of financial wealth holds socially responsible mutual funds and one out of four holds green stocks. Collectively, the portfolio weight on socially responsible assets among wealth investors is 4.8% in 2021. … Using investors’ charitable donations prior to inheritance, we document that the warm glow effect partially explains the documented results“ (p. 20/21).
Emissions control: Carbon Accounting Quality: Measurement and the Role of Assurance by Brandon Gipper, Fiona Sequeira, and Shawn X. Shi as of Nov. 29th, 2023 (#135): “We document a positive association between (Sö: third party) assurance and carbon accounting quality for both U.S. and non-U.S. countries. This relation is stronger when assurance is more thorough. We also document how assurance improves carbon accounting quality: first, assurors identify issues in the carbon accounting system and communicate them to the firm; subsequently, firms take remedial actions, resulting in updated disclosures, faster release of emissions information, and more positive perceptions of emissions figures by reporting firms. …. our findings suggest that even limited assurance can shape carbon accounting quality“ (p. 34).
Impact investment research (Skilled fund managers)
Carbon credit differences: Paying for Quality State of the Voluntary Carbon Markets 2023 by Stephen Donofrio Managing Director Alex Procton from Ecosystem Marketplace as of Oct. 10th, 2023: “Average voluntary carbon markets (VCM) … volume of VCM credits traded dropped by 51 percent, the average price per credit skyrocketed, rising by 82 percent from $4.04 per ton in 2021 to $7.37 per ton in 2022. This price hike allowed the overall value of the VCM to hold relatively steady in 2022, at just under $2 billion. To date in 2023, the average credit price is down slightly from 2022, to $6.97 per ton. … Nature-based projects, including Forestry and Land Use and Agriculture projects, made up almost half of the market share at 46 percent. … Credits that certified additional robust environmental and social co-benefits “beyond carbon” had a significant price premium. Credits from projects with at least one co-benefit certification had a 78 percent price premium in 2022, compared to projects without any co-benefit certification. … Projects working towards the UN Sustainable Development Goals (SDGs) also demonstrated a substantial price premium at 86 percent higher prices than projects not associated with SDGs … Newer credits are attracting higher prices” (p. 6).
Unsuccessful voting:Minerva Briefing 2023 Proxy Season Review as of November 2023: “Most resolutions are proposed by management (96.90% overall) … In 2023, there were 621 proposals from shareholders, mostly in the US (530), and mostly Social- and Governance-related (259 and 184 respectively). However, an increasing number of proposals are also being put forward on Environmental issues. The higher number of shareholder proposals in the US may reflect more supportive regulations on the filing of proposals and the absence of an independent national corporate governance code, as there is in the UK. Although well-crafted shareholder proposals can receive majority support, the overall proportion doing so has decreased (5.80% in 2023 vs. 11.56% in 2022), partly dragged down by ‘anti-ESG’ proposals” (p. 3/4). My comment: 621*6%=37 majority supported shareholder proposals including non ESG-topics seems to a very low number compared to the overall marketing noise asset managers produce regarding their good impact on listed companies. Direct shareholder engagement with companies seems to have more potential for change. My respective policy see Shareholder engagement: 21 science based theses and an action plan – (prof-soehnholz.com)
Good impact returns:Impact investment funds and the equity market: correlation, performance, risk and diversification effects – A global overview by Lucky Pane as of July 2021: “Impact investing funds from the twelve economies reported an average return of 10.7% over the period 2004-2019, higher than the average return of the MSCI World Equity Index (8.7%). … Negative/low correlations were observed between impact investment funds and traditional assets of the following countries: Germany, Australia, UK, Brazil, China, Poland, South Korea and Turkey” (p. 35/36). My comment: Unfortunately, there are very few (liquid) impact investing studies. A study including 2022 and 2023 would come to less favorable return conclusions, though.
Other investment research
Skilled fund managers (1): Sharpening the Sharpe Style Analysis with Machine-Learning ― Evidence from Manager Style-Shifting Skill of Mutual Funds by George J. Jiang, Bing Liang, and Huacheng Zhang as of Dec. 3rd, 2023 (#38): “Nine out of 32 indexes are selected as the proxy of style set in the mutual fund industry. We … find that most active equity funds are multi-style funds and more than 85% of them allocate capitals among three to six styles. Single-style funds count less than 3% of the total number of funds. We further find that around 3% of funds shift their investment styles in each quarter and each shifting fund switches styles three times over the whole period … We find that shifting funds perform better in the post-shifting quarter than in the pre-shifting quarter in terms of both total returns and style-adjusted returns, but we do not find performance improvement by non-shifting funds. We further find that style-shifting decision is positively related to future fund returns. … We find that style-shifting in the mutual fund industry is mostly driven by fund managers’ expertise in the new style“ (p. 42).
Skilled fund managers (2):Do mutual fund perform worse when they get larger? Anticipated flow vs unanticipated flow by Yiming Zhang as of Nov. 14th, 2023 (#17): “… I provide empirical evidence from a novel setting that supports the decreasing returns to scale in active mutual funds. My identification strategy relies on the nature of Morningstar Rating, which has a large impact on fund flow. … I find that for each 1% of inflow (outflow), the return will decrease (increase) by around 0.6% on average in the next month, and the return will decrease (increase) by around 0.2% on average in the next month. … I find that for experienced manager, they make more new investment after the flow shock and their performance does not decrease. For inexperienced manager, it is quite the opposite. These results indicate that if fund managers can anticipate the 36th month flow shock, they will try to generate more investment ideas, and execute them when the flow arrives“ (p. 22/23).
Skilled fund managers (3)?Can ChatGPT assist in picking stocks? Matthias Pelster and Joel Val as of Nov. 29th, 2023 (#199): “… we find that ratings of stocks by ChatGPT positively correlate to future (out-of-sample) stock returns. … ChatGPT seems to be able to successfully identify stocks that yield superior performance over the next month. ChatGPT-4 seems to have some ability to evaluate news information and summarize its evaluation into a simple score. We find clear evidence that ChatGPT is able to distinguish between positive and negative news events, and adjusts its recommendation following negative news” (p. 11). My comment: Interesting, because most active fund managers underperform their benchmarks most of the time, but I am skeptical regarding AI investment benefits see How can sustainable investors benefit from artificial intelligence? – GITEX Impact – Leading ESG Event 2023
Listed real estate:Drivers of listed and unlisted real estate returns by Michael Chin and Pavol Povala as of Nov. 2nd, 2023 (#25): “The differences between listed and unlisted real estate appear to reduce over the longer term, where the return correlations between the two segments increases with horizon. In addition, the correlations with the broader equity market are lower at longer horizons for both real estate segments. … We find that both segments of real estate hedge inflation risk more than the aggregate equity market, and that listed real estate has a high exposure to transitory risk premium shocks“ (abstract). My comment: I started “my” first listed real estate fund more than 10 years ago and still like the market segment despite all of its problems
Fintech success factors: Fintech Startups in Germany: Firm Failure, Funding Success, and Innovation Capacity by Lars Hornuf and Matthias Mattusch as of Nov. 29th, 2023 (#75): “ … using a hand-collected dataset of 892 German fintechs founded between 2000 and 2021 … We find that founders with a business degree and entrepreneurial experience have a better chance of obtaining funding, while founder teams with science, technology, engineering, or mathematics backgrounds file more patents. Early third-party endorsements and foreign partnerships substantially increases firm survival. … Fintechs focusing on business-to-business models and which position themselves as technical providers have proven more effective. Fintechs competing in segments traditionally attributed to banks are generally less successful and less innovative.” (abstract).
Skilled fund managers (?) advert for German investors
ESG and impact: 12x new research on AI, poverty, crime, green demand, ESG risks, brown lending, green agency issues, voting, engagement, impact investing, CEO compensation, small caps etc. (# shows the number of SSRN downloads as of Nov. 30th, 2023)
Social and ecological research
AI job-booster:New technologies and jobs in Europe by Stefania Albanesi, António Dias da Silva, Juan F. Jimeno, Ana Lamo and Alena Wabitsch as of Aug. 24th, 2023 (#111): “… we … find that AI-enabled automation in Europe is associated with employment increases. This positive relationship is mostly driven by occupations with relatively higher proportion of skilled workers … the magnitude of the estimates largely varies across countries, possibly reflecting different economics structures, such as the pace of technology diffusion and education, but also to the level of product market regulation (competition) and employment protection laws. … wages do not appear to be affected in a statistically significant manner from software exposure“ (p. 28).
Climate-induced poverty: Does Global Warming Worsen Poverty and Inequality? An Updated Review by Hai-Anh H. Dang, Stephane Hallegatte, and Trong-Anh Trinh from the World Bank as of Mov. 4th, 2023 (#38): “Our findings suggest that while studies generally find negative impacts of climate change on poverty, especially for poorer countries, there is less agreement on its impacts on inequality. … Our results suggest that temperature change has larger impacts over the short-term than over the long-term and more impacts on chronic poverty than transient poverty” (p. 32).
Refugee crimes:Do Refugees Impact Crime? Causal Evidence From Large-Scale Refugee Immigration to Germany by Martin Lange and Katrin Sommerfeld as of Nov. 14th, 2023 (#21): “Our results indicate that crime rates were not affected during the year of refugee arrival, but there was an increase in crime rates one year later. This lagged effect is small per refugee but large in absolute terms and is strongest for property and violent crimes. The crime effects are robust across specifications and in line with increased suspect rates for offenders from refugees’ origin countries. Yet, we find some indication of over-reporting“ (abstract).
ESG investment research (ESG and impact)
Green demand: Responsible Consumption, Demand Elasticity, and the Green Premium by Xuhui Chen, Lorenzo Garlappi, and Ali Lazrak as of Nov. 27th, 2023 (#122): “… decreasing product price are signals of high price competition and hence high demand elasticity. We sort firms into portfolios based on their demand elasticity and their ESG score. We refer the spread return on this portfolio as the Green Minus Brown (GMB) spread, or green premium” (p. 3). … “… when consumers have a “green” bias, green firms producing high demand elasticity goods are riskier than brown firms producing high demand elasticity products. The riskiness of these firms flips for firms that produce low demand elasticity goods. …. we find that the green-minus-brown (GMB) spread is increasing in the price elasticity of demand. Specifically, the annual spread is 2.6% and insignificant in the bottom elasticity tercile and 11.7% and significant in the top tercile. … we show that the cumulative positive return spread of green vs. brown stocks over the last decade is mainly attributed to high-demand-elasticity stocks, with low demand elasticity stocks earning an insignificant or negative spread“ (p. 32).
Risky calls: ESG risk by Najah Attig and Abdlmutaleb Boshanna as of Oct. 5th, 2022 (#62): “… using Natural Language Processing, we measure firm-level ESGR (Sö: ESG risk) faced by US firms, as reflected in the discussion of ESG issues associated with words capturing risk and uncertainty in the transcripts of firms’ earning calls. We first validate ESGR as measure of risk by documenting its positive association with the volatility of stock returns and CSR concerns. We then show that ESGR is associated with a deterioration in corporate value … We show also that ESGR bears negatively on conference call short-term returns during the COVID-19 pandemic“ (p. 31). My comment: I try to only invest in the best E/S/G rated companies, see e.g. Glorreiche 7: Sind sie unsozial? – Responsible Investment Research Blog (prof-soehnholz.com)
Retail ESG:Better Environmental Performance Attracts the Retail Investor Crowd during Crisis by Anil Gautam and Grace Lepone as of Nov. 24th, 2023 (#12): “… we use the Robinhood data set to examine the firm size-adjusted changes in investor numbers. We find that investors moved away from holding securities with low (Sö: ESG) scores following the COVID-19 pandemic shock. The observation holds for the bottom quartile of securities sorted by ESG, E, emissions, corporate social responsibility (CSR), human rights, management, shareholder and community scores. … No significant reaction to S and G scores is observed for either quartile“ (p. 16).
Green bank disclosure:Do banks practice what they preach? Brown lending and environmental disclosure in the euro area by Leonardo Gambacorta, Salvatore Polizzi, Alessio Reghezza, and Enzo Scannella from the ECB as of Nov. 14th, 2023 (#21): “… we found that banks that provide higher levels of environmental disclosure lend more to low polluting firms and less to highly polluting firms. … we found that banks that use a more negative tone (i.e. those that are more aware and genuinely concerned about environmental risks and climate change) lend less to brown firms, while banks that use a more positive tone (i.e. those that are less aware and concerned about environmental risks) tend to finance more brown firms. Therefore, we show that the tone of disclosures plays a crucial role in assessing whether a bank is engaging in window dressing or its willingness to inform stakeholders and investors on environmental matters results in actual behaviour to tackle environmental risks by reducing brown lending“ (p. 21).
Good transparency?The Eco-Agency Problem and Sustainable Investment by Moran Ofir and Tal Elmakiess as of Nov. 28th, 2023 (#10): “… we first define the eco-agency problem—the special conflict of interest between the corporate officers who focus on short-term profitability and the other stakeholders who seek long-term profitability and sustainability—and then discuss existing coping measures, such as green bonds, CoCo bonds, and ESG compensation metrics. To assess the extent of the eco-agency problem, we have conducted an experimental study of both professional and nonprofessional investors. According to our findings, both groups exhibit strong and significant preferences for sustainable investments. Revealing the preferences of investors towards sustainability can inspire corporate officers to embrace their role as sustainability advocates, encouraging them to align their decisions with investor preferences, and can thus drive positive change both within their organizations and across industries. … By embracing transparency as a strategic advantage, corporations can transcend traditional reporting boundaries, heralding a new era in which investors implement their ecological preferences in the capital market pricing mechanism” (abstract). My comment: My shareholder engagement strategy seems to focus on the right topics, see Shareholder engagement: 21 science based theses and an action plan – (prof-soehnholz.com)
Impact investing research (ESG and impact)
Voting and engagement approaches: UK Asset Owner Stewardship Review 2023: Understanding the Degree & Distribution of Asset Manager Voting Alignment by Andreas Hoepner as of Nov. 17th, 2023 (#33): “… Empirically, we observe misalignment between UK asset owners and asset managers to varying degrees. Specifically, misalignment is more pronounced (i) in recent years, (ii) for shareholder resolutions than for management resolutions, (iii) for issuers in the Americas compared with European issuers, (iv) and, on average, for non-participating than for participating asset managers (Sö regarding the survey). … (a) Only very selected asset managers publicly reason like asset owners. (b) Some asset managers somehow see voting and ESG engagement as mutually exclusive and appear to fear the loss of access to management if they voted against management. (c) Among asset managers, there appears to be a substantial divergence as to their interpretation of shareholders’ and even society’s interests. Some asset managers are aligned with asset owners, while others have fundamentally different views that may be consistent with short term commercial interest but do not reflect scientific evidence. Third, we reviewed the ESG Engagement success across all relevant issuers, which revealed three different engagement process types. Type 1 is “textbook style” persistent, long duration, large scale engagement with considerable progress. Type 2 appears to be “quick fix style” engagements which are characterised by less consistency, shorter duration, and more mixed progress. Type 3 engagements are “jumping the bandwagon style” as they appear to target only firms that already have been improved by others” (abstract). My comment: My approach and other potential shareholder engagement strategies see Shareholder engagement: 21 science based theses and an action plan – (prof-soehnholz.com) and DVFA-Fachausschuss Impact veröffentlicht Leitfaden Impact Investing – DVFA e. V. – Der Berufsverband der Investment Professionals
Risky impact? What Do Impact Investors Do Differently? by Shawn Cole, Leslie Jeng, Josh Lerner, Natalia Rigol, and Benjamin N. Roth as of Nov. 16th, 2023 (#340): “In recent years, impact investors – private investors who seek to generate simultaneously financial and social returns – have attracted intense interest and controversy. … we document that they are more likely to invest in disadvantaged areas and nascent industries and exhibit more risk tolerance and patience. We then examine the degree to which impact investors expand the financing frontier, versus investing in companies that could have attracted traditional private financing. … we find limited support for the assertion that impact investors expand the financing frontier, either in the deal-selection stage or the post-investment stage“ (abstract).
Other investment research
Lower-paid CEOs?CEO Compensation: Evidence From the Field by Alex Edmans, Tom Gosling, and Dirk Jenter as of Oct. 13th, 2023 (#3130): “We survey directors and investors on the objectives, constraints, and determinants of CEO pay. We find .. that pay matters not to finance consumption but to address CEOs’ fairness concerns. 67% of directors would sacrifice shareholder value to avoid controversy, leading to lower levels and one-size-fits-all structures. Shareholders are the main source of constraints, suggesting directors and investors disagree on how to maximize value. Intrinsic motivation and reputation are seen as stronger motivators than incentive pay“ (abstract). My comment: Within my shareholder engagement activities, I ask to disclose the CEO-medium employee pay ratio so that other interested parties can engage with the companies to reduce this typically vey large difference
Better big or small?The Size Premium in a Granular Economy by Logan P. Emery and Joren Koëter as of Nov. 21st., 2023 (#81): “… Our analysis provides robust evidence that the expected size premium increases during periods of higher stock market concentration. … we find that smaller firms receive less attention, are less likely to complete a seasoned equity offering, and have higher fundamental volatility during periods of higher stock market concentration. Moreover, our results occur predominantly among firms in industries with a greater dependence on external equity financing, or for firms with relatively low book-to-market ratios (i.e., growth firms). … we find that the expected size premium weakens following idiosyncratic shocks to the largest firms in the stock market” (p. 32).
ESG and Impact + Engagement advert for German investors
Biodiversity risk: 10x new (critical) research on ESG ETF and net-zero, sustainability-linked bonds, lifecycle and thematic investments, altruism and stablecoins
Biodiversity risk research
Broad biodiversity risk: Living in a world of disappearing nature: physical risk and the implications for financial stability by Simone Boldrini, Andrej Ceglar, Chiara Lelli, Laura Parisi, and Irene Heemskerk from the European Central Bank as of Nov. 14th, 2023 (#23): “Of the 4.2 million euro area NFCs (Sö: Non-financial corporations) that were included in our research, around 3 million are highly dependent on at least one ecosystem service. … approximately 75% of euro area banks’ corporate loans to NFCs (nearly €3.24 trillion) are highly dependent on at least one ecosystem service. … we have enough data and knowledge available to enable timely and nature-friendly decision-making” (p. 38).
Biodiversity risk reduction? How could the financial sector contribute to limiting biodiversity loss? A systematic review by Lisa Junge, Yu-Shan Lin Feuer, and Remmer Sassen as of Feb. 7th, 2023 (#109) “the currently available scientific discourse is also not unanimous about the status of biodiversity in finance. Therefore, this paper aims to synthesise existing publications to gain transparency about the topic, conducting a systematic review. Three main concepts emerge about how the private finance sector can aid in halting biodiversity loss, namely: (1) by increasing awareness of biodiversity, (2) by seizing biodiversity-related business opportunities, and (3) by enlarging biodiversity visibility through reporting. Overall, we assume that the private finance sector upholds a great leverage power in becoming a co-agent of positive biodiversity change”(abstract).
Responsible investment research (Biodiversity risk)
Blackrock-problem?Fossil-washing? The fossil fuel investment of ESG funds by Alain Naef from Banque de France as of Nov. 16th, 2023 (#19): “… I analysed all the large equity Exchange Traded Funds (ETFs) labelled as ESG available at the two largest investors in the world: Blackrock and Vanguard. For Blackrock, out of 82 funds analysed, only 9% did not invest in fossil fuel companies. Blackrock ESG funds include investments in Saudi Aramco, Gazprom or Shell. But they exclude ExxonMobil or BP. This suggests a best-in-class approach by the fund manager, picking only certain fossil fuel companies that they see as generating less harm. But it is unclear what the criteria used are. For Vanguard, funds listed as ESG did not contain fossil fuel investment. Yet this needs to be nuanced as information provided by Vanguard on investments is less transparent and Vanguard offers fewer ESG funds” (abstract). My comment: For my ESG and SDG ETF-selection I use demanding responsibility criteria and more so for my direct equity portfolios, see the newly updated Das-Soehnholz-ESG-und-SDG-Portfoliobuch.pdf (soehnholzesg.com)
Listed equity climate deficits: The MSCI Net-Zero Tracker November 2023 – A guide to progress by listed companies toward global climate goals from the MSCI Sustainability Institute as of November 2023: “Listed companies are likely to put 12.4 gigatons (Gt) of GHG emissions into the atmosphere this year, up 11% from 2022. … global emissions are on track reach 60.6 Gt this year, up 0.3% from 2022. … Domestic emissions in eight emerging-market G20 countries examined rose by an average of 1.2% per year over the period, while emissions of listed companies in those markets climbed 3.2% annually. … Just over (22%) of listed companies align with a 1.5°C pathway, as of Aug. 31, 2023 … Listed companies are on a path to warm the planet 2.5°C above preindustrial levels this century … More than one-third (34%) of listed companies have set a climate target that aspires to reach net-zero, up from 23% two years earlier. Nearly one-fifth (19%) of listed companies have published a science-based net-zero target that covers all financially relevant Scope 3 emissions, up from 6% over the same period” (page 6/7).
ESG or cashflow?Does Sustainable Investing Make Stocks Less Sensitive to Information about Cash Flows? by Steffen Hitzemann, An Qin, Stanislav Sokolinski, and Andrea Tamoni as of Oct. 30th, 2023 (#56): “Traditional finance theory asserts that stock prices depend on expected future cash flows. … Using the setting of earnings announcements, we find that sustainable investing diminishes stock price sensitivity to earnings news by 45%-58%. This decline in announcement-day returns is mirrored by a comparable drop in trading volume. This effect persists beyond the immediate announcement period, implying a lasting alteration in price formation rather than a short-lived mispricing“ (abstract).
Similar calls:SLBs: no cal(l)amity by Kamesh Korangi and Ulf Erlandsson as of Nov. 16th, 2023 (#13): A common criticism of sustainability-linked bonds (SLBs) has been around callability, where it is sometimes suggested that bond issuers are pushing this feature into bond structures to wriggle out of sustainability commitments. … Our analysis finds scant quantitative evidence to support this critique. Overall, when comparing SLBs with similar non-SLB issuances, we observe little ‘excess’ callability in SLBs. The key to this result is to control for sectors, ratings and issue age when comparing SLBs with the much larger market of traditional bonds” (p. 1).
Other investment research
100% Equity!Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice by Aizhan Anarkulova, Scott Cederburg and Michael S. O’Doherty as of Nov.1st, 2023 (#950): “We challenge two central tenets of lifecycle investing: (i) investors should diversify across stocks and bonds and (ii) the young should hold more stocks than the old. An even mix of 50% domestic stocks and 50% international stocks held throughout one’s lifetime vastly outperforms age-based, stock-bond strategies in building wealth, supporting retirement consumption, preserving capital, and generating bequests. These findings are based on a lifecycle model that features dynamic processes for labor earnings, Social Security benefits, and mortality and captures the salient time-series and cross-sectional properties of long-horizon asset class returns” (abstract).
Lemming investors?The Big Shortfall? Thematic investors lose lion’s share of returns due to poor timing by Kenneth Lamont and Matias Möttölä from Morningstar as of Nov. 15th, 2023 : “While thematic funds‘ average total return was 7.3% annualized over the five-year period through June 30, 2023, investors earned only a 2.4% return when the impact of cash inflows and outflows is considered. … Investors lost more value in focused funds such as those tracking Technology or Physical World broad themes compared with more diversified Broad Thematic peers. Return gaps were far wider in exchange-traded funds than in thematic mutual funds. ETFs tend to offer more concentrated bets and lend themselves to tactical usage. The largest return shortfalls occur across highly targeted funds, which posted eye-catching performance, attracting large net inflows before suffering a change of fortune“ (p. 1). My comment: My approach to thematic investments see e.g. Alternatives: Thematic replace alternative investments (prof-soehnholz.com)
Risk-loving altruists?Can Altruism Lead to a Willingness to Take Risks? by Oded Shark as of Mov. 7th, 2023 (#7): “I show that an altruistic person who is an active donor (benefactor) is less risk averse than a comparable person who is not altruistic: altruism is a cause of greater willingness to take risks” (abstract). … “The lower risk aversion of an altruistic person … might encourage him to pursue risky ventures which could contribute to economic growth and social welfare” (p. 7).
Unstable coins?Runs and Flights to Safety: Are Stablecoins the New Money Market Funds? by Kenechukwu Anadu et al. from the Federal Reserve Bank of Boston as of Oct. 9th, 2023 (#743): “… flight-to-safety dynamics in money market funds have been extensively documented in the literature—with money flowing from the riskier prime segment of the industry to the safer government segment … flight-to-safety dynamics in stablecoins resemble those in the MMF industry. During periods of stress in crypto markets, safer stablecoins experience net inflows, while riskier ones suffer net outflows. … we estimate that when a stablecoin’s price hits a threshold of 99 cents (that is, a price drop of 100 basis points relative to its $1 peg), investor redemptions accelerate significantly, in a way that is reminiscent of MMFs’ “breaking the buck … Should stablecoins continue to grow and become more interconnected with key financial markets, such as short-term funding markets, they could become a source of financial instability for the broader financial system” (p. 33).
Glorreiche 7 werden die Megaunternehmen Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia und Tesla genannt. Sie haben im Jahr 2022 und bis Juli 2023 besonders gute Aktienkursentwicklungen gehabt (vgl. Marktanalyse: Was ist los mit den Glorreichen Sieben? | Morningstar). Ich habe bewusst keinen dieser Werte in meinen direkten Aktienportfolios und auch nur sehr wenig Allokation dazu in meinen SDG ETF-Portfolios.
Glorreiche 7: Kein expliziter Ausschluss
Dabei schließe ich die „Glorreichen 7“ nicht explizit aus meinen Geldanlageportfolios aus. Sie sind aufgrund ihrer hohen Aktienindexallokationsanteile in meinen traditionellen passiven Allokationsportfolios enthalten. Auch in den ESG ETF-Portfolios sind die meisten der Glorreichen 7 zu finden, weil sie in den von mir genutzten ESG-ETFs enthalten sind. In meinen selbst zusammengestellten direkten Aktienportfolios findet sich jedoch keine der „Glorreichen 7“ Aktien.
Das liegt daran, dass meine ESG-Anforderungen erheblich strenger sind als die der meisten nachhaltigen ETFs. Nachhaltigkeit wird oft anhand von ESG-Ratings gemessen. Dabei werden Umwelt- Sozial- und Unternehmensführungsrisiken zu einer Kennzahl zusammengefasst. Nachhaltige ETFs nutzen meistens aggregierte Best-in-Class ESG-Ratings.
Best-in-Class heißt, dass die Ratings innerhalb der jeweiligen „Klassen“, meist Branchen, untereinander verglichen werden. So kann ein Autohersteller wie Tesla im Vergleich zu anderen Autoherstellern relativ geringe ESG-Risiken haben. Im Vergleich zu Herstellern von Personenzügen oder Fahrrädern kann das jedoch ganz anders aussehen. Wenn Ratings aller Unternehmen branchenunabhängig miteinander verglichen werden, nennt man das Best-in-Universe Ansatz.
ETF-Anbieter nutzen oft Mindestanforderungen an solche Ratings für ihre Wertpapierauswahl und/oder deren Gewichtung. Das geschieht zum Beispiel, indem nur Wertpapiere solcher Unternehmen zugelassen sind, die zur besseren Hälfte der jeweilig ESG-gerateten gehören.
Glorreiche 7: Relativ große Abweichungen bei Sozial- und Umweltratings
Die „Glorreichen 7“ scheinen auf den ersten Blick ziemlich nachhaltig zu sein. Sie erreichen Anfang November 2023 nach Best-in-Class Ansatz jeweils mindestens 55 von maximal 100 Punkten meines Ratinganbieters Clarity.ai. Apple liegt sogar über 70 und auch Microsoft schneidet sehr gut ab. Bei der Nutzung eines vergleichbaren aggregierten Best-in-Universe Ratings sinkt das durchschnittliche Rating zwar, aber alle sieben Werte liegen noch über 50.
Für meine Portfolios sind aber jeweils E, S und G-Mindestratings von 50 erforderlich, denn ich möchte kein Unternehmen im Portfolio haben, das überdurchschnittlich hohe ökologische, soziale oder Unternehmensführungsrisiken hat.
Bei Nutzung der separierten Best-in-Class Ratings meines Anbieters dürften Alphabet, Amazon, Meta und Tesla nicht ins Portfolio aufgenommen werden, weil die Sozialratings jeweils unter 50 liegen. Nur Apple, Microsoft und NVIDIA haben E, S und G Best-in-Class Ratings von jeweils mindestens 50.
Best-in-Universe sind viel anspruchsvoller als Best-in-Class Ratings
Das sieht bei der Nutzung von Best-in-Universe Ratings anders aus. NVIDIA zum Beispiel hat ein durchschnittliches ökologisches Rating im Vergleich zu anderen Halbleiterherstellern. Aber im Vergleich zu allen börsennotierten Unternehmen (BiU-Ansatz) liegt NVIDIA erheblich unter meiner Mindestanforderung von 50. Ähnliches gilt für Apple und Microsoft mit Best-in-Universe-Sozialratings unterhalb der 50.
Bei der Nutzung von Best-in-Universe Ratings liegen Alphabet, Meta und Tesla sogar unterhalb von 40. Ökologische und Unternehmensführungsrisiken werden dagegen bis auf das Umweltrating von NVIDIA auch nach Best-in-Universe Ansatz mit über 50 bewertet.
ESG-Ratings setzen sich aus Dutzenden von Einzelkriterien zusammen und variieren deshalb oft von Anbieter zu Anbieter. Die Ratings meines Anbieters sind aber gut nachvollziehbar. So wird bei Alphabet unter anderem eine fehlende „Freedom of Association“-Politik und der niedrige gewerkschaftliche Organisationsgrad kritisiert, bei Amazon werden Bezahlung und Arbeitsbelastung aufgeführt, bei Apple Vorkommnisse (Incidents) in Zusammenhang mit Produktwerbung, bei Meta die geringe Anzahl von Frauen an den Mitarbeitenden und Managementpositionen, bei Microsoft Themen des Kundendatenschutzes, bei Tesla Produktqualitäts- und Sicherheitsthemen und bei NVIDIA eine geringe Wasserrecyclingquote.
Fehlende Vergleiche von Best-in-Universe Ratings
Das ist durchaus auch für Anleger relevant, die nicht besonders an Nachhaltigkeit interessiert sind. Denn mit ESG-Ratings werden Umwelt-, Sozial- und Unternehmensführungsrisiken gemessen. Und an niedrigen derartigen Risiken sollten auch traditionelle Geldanleger interessiert sein.
Für meine direkten Aktienportfolios ist meine selbst gesetzte Regel klar: Weil keine der „Glorreichen 7“ nach Best-in-Universe Ansatz bei Umwelt-, Sozial- und Governanceratings zugleich über 50 liegt, darf ich keine davon in meine Portfolios aufnehmen.
Bisher habe ich noch keine systematischen Vergleiche von Best-in-Class und Best-in-Universe Ratings gesehen. Meine Analysen nur auf Basis der Glorreichen 7 und nur mit Daten von Anfang November 2023 zeigen Folgendes: Bei den aggregierten ESG-Ratings liegen die Best-in-Universe Ratings im Schnitt um etwa 7 Prozentpunkte unter den Best-in-Class Werten. Bei den Governanceratings gibt es kaum Unterschiede zwischen den beiden Ansätzen. Die Best-in-Universe-Umweltratings der 7 Aktien fallen sogar um 5 Prozentpunkte besser aus, während die Best-in-Universe-Sozialratings sogar 16 Prozentpunkte schlechter sind als die Best-in-Class Sozialratings. Unterschiede für andere Unternehmen sind sogar teilweise noch stärker, wie eine vergleichbare Analyse der 30 Small- und Midcaps meines Fonds ergab.
Warum andere vor allem Best-in-Class Ratings nutzen
Geldanlageanbieter nutzen in der Regel einen Best-in-Class Ansatz. Das liegt daran, dass sie meist über mehrere Branchen gestreute Portfolios anbieten wollen. Mit dem Best-in-Class Ansatz können sie das einfach erreichen. Bei einem konsequenten Best-in-Universe Ansatz so wie ich ihn nutze, müssten viele Marktsegmente aufgrund ihrer hohen ESG-Risiken ganz entfallen.
Generell gilt: Konzentrierte (Best-in-Universe) Ansätze können nachhaltiger sein als stark diversifizierte Portfolios. Grund: Wenn man so wie ich mit den nachhaltigsten Aktien startet, reduziert zusätzliche Diversifikation die durchschnittliche Nachhaltigkeit. Der Grenznutzen weiterer Diversifikation für Risikoreduktion ist aber sehr gering und abnehmend (vgl. dazu 30 stocks, if responsible, are all I need – Responsible Investment Research Blog (prof-soehnholz.com)).
Privatanleger haben typischerweise keinen Zugang zu Best-in-Universe Ratings. Ich weiß jedenfalls nicht, in welcher frei zugänglichen Datenbank man Investmentfonds finden kann, die einen Best-in-Universe Ansatz oder separate E, S und G Mindestratings nutzen.
Glorreiche 7: Geringe Allokation in meinen SDG ETF-Portfolios
Für meine SDG ETF-Portfolios schließe ich die Glorreichen 7 ebenfalls nicht explizit aus. Aber ich versuche, nur eine geringe Allokation zu den Glorreichen 7 haben. Das mache ich jedoch eher aus Diversifikations- als aus Nachhaltigkeitsgründen. Kerninvestments enthalten typischerweise bereits hohe Alloaktionen zu den Glorreichen 7. Und meine SDG-ETF Portfolios sind als Ergänzung bzw. Satelliteninvestments für Kerninvestments gedacht.
Deshalb versuche ich, Überschneidungen der SDG ETFs mit typischen Kerninvestments und auch untereinander möglichst gering zu halten. Das ist gar nicht so einfach, weil viele SDG-aligned bzw. Themen-ETFs teilweise mehrere der Glorreichen 7 enthalten. Allerdings suche ich vor allem ETFs mit möglichst vielen sogenannten SDG-aligned Pure Plays. Und fokussierte Unternehmen sind meist eher klein. Deshalb nutze ich nur ETFs mit Fokus auf kleine und mittlere Marktkapitalisierungen. Darum enthalten diese meist keine der Glorreichen 7. Und so ist es mir auch in diesem Jahr gelungen, ETFs zu den Themen Dekarbonisierung, Energie, Ernährung, Gesundheit, Immobilien, Pharmazie, Smarte Städte und Wasser zu finden, die untereinander kaum Überschneidungen aufweisen.
SDG rating confusion: 13x new research on emissions, life expectancy, green bonds, physical risks and transition, environmental information, private equity ESG, SDG ratings, bond and equity factors, fraud, health-wealth relations, LLM financial analysts (# shows the number of full paper SSRN downloads as of Nov. 16th, 2023)
Ecological and social research (SDG rating confusion)
Too hot:The State of Climate Action: Major Course Correction Needed from +1.5% to −7% Annual Emissions by the World Economic Forum and The Boston Consulting Group as of November 2023: “As 1.5°C is slipping out of reach, achieving it now calls for a 7% annual emissions reduction, more than the climate reduction impact from COVID-19 and against the current trend of a 1.5% annual increase. … Only 35% of emissions are covered by a national net-zero commitment by 2050, and only 7% by countries that complement bold targets with ambitious policies. Fewer than 20% of the world’s top 1,000 companies have set 1.5°C science-based targets, and, based on the Net Zero Tracker, fewer than 10% also have comprehensive public transition plans. Technologies that are economically attractive now or will be in the near future can only achieve just over half of the emissions reductions needed to reach 1.5°C. … More than half of climate funding needs are still unmet, with critical gaps in early technologies and infrastructure particularly acute, and the climate funding gap twice as large in developing economies as in developed ones” (p. 4).
Longer lifes:The Long-run Effect of Air Pollution on Survival by Tatyana Deryugina and Julian Reif as of Nov. 13th, 2023 (#8): “We show that the short-run mortality effects of acute SO2 exposure can be decomposed into two distinct phenomena: mortality displacement, where exposure kills frail individuals with short counterfactual life expectancies, and accelerated aging, where mortality continues to increase after exposure has ceased. … we calculate that a permanent, ten percent decrease in air pollution exposure would improve life expectancy by 1.2–1.3 years … our estimates imply that value of reducing pollution exposure may be substantially larger than has previously been recognized“ (p. 37).
Responsible investing research (SDG rating confusion)
Green bond limits:Decoding Corporate Green Bonds: What Issuers Do With the Money and Their Real Impact by Yufeng Mao as of Nov. 8th, 2023 (#157): “This paper reveals a distinct motivation for issuing green bonds compared to conventional bonds. Proceeds from green bonds remain as cash for longer periods, largely owing to the time required to identify eligible projects. Contrary to the notion of fungibility, my results indicate that they neither lead to more new investments than conventional bonds nor are used in apparent green-washing. … firms issuing green bonds show improved environmental performance, particularly in the reduction of GHG intensity. However, this improvement appears not to stem from incremental green investments facilitated by green bonds but rather from issuers that would have pursued green initiatives regardless” (p. 44).
Physical risk costs: The cost of maladapted capital: Stock returns, physical climate risk and adaptation by Chiara Colesanti Senni and Skand Goel as of July 23rd, 2023 (#48): “Using S&P Global Sustainable data on Physical Risk and measures of adaptability to physical risk from S&P Global Corporate Sustainability Assessment, we find evidence that higher physical risk is associated with higher expected returns. However, this risk premium diminishes with increased adaptability, signifying that risk management through adaptation reduces a company’s cost of capital. Notably, this adaptability-driven risk discount is more pronounced for high levels of physical risk, reflecting market incentives for efficient adaptation” (abstract).
Carbon-free distance: Carbon-Transition Risk and Net-Zero Portfolios by Gino Cenedese, Shangqi Han, and Marcin Kacperczyk as of Oct. 5th, 2023 (#493): “…. using a novel measure of distance-to-exit (DT E) … we show that companies that are more exposed to exit from net-zero portfolios have lower values and require higher returns from investors holding them. This result is economically large and is consistent with the view that DT E are useful measures of transition risk. Notably, we show that DT E capture distinct variation to that captured by previously used measures based on corporate carbon emissions. Distinct from these, they capture information that is forward-looking and is grounded in climate science“ (p. 29)
Attention, outsiders: Do Insiders Profit from Public Environmental Information? Evidence from Insider Trading by Sadok El Ghoul, Zhengwei Fu, Omrane Guedhami, and Yongwon Kim as of Oct. 19th, 2023 (#26): “We provide evidence that insiders sell their stocks profitably based on publicly available information on environmental costs. Further analysis indicates that these results become more pronounced when the search frequency for environmental information in Google is low, in countries governed by left-leaning governments, and in countries where investor protection is weak. These results … suggest that investor inattention and investor protection are key drivers of insider trading performance“ (abstract).
PE ESG boost: ESG Footprints in Private Equity Portfolios: Unpacking Management Instruments and Financial Performance by Noah Bani-Harounia, Ulrich Hommel, and Falko Paetzold as of Nr. 8th, 2023 (#13): “Based on data covering 206 buyout funds for the time period 2010-2022, … Improving fund-level ESG footprints by 50% explains a statistically and economically significant net IRR increase of up to 12.4% over a fund’s life cycle. The outcome is linked to specific ESG-management instruments of private equity investors, such as centralised ESG management and ESG value enhancement plans, while no significant effect is recorded for other measures, such as ESG reporting frequencies and ESG impact controlling” (abstract).
SDG rating confusion: “In partnership for the goals”? The (dis)agreement of SDG ratings by Tobias Bauckloh, Juris Dobrick, André Höck, Sebastian Utz, and Marcus Wagner as of May 31st, 2023 (#59): „This paper analyzes the (dis)agreement of Sustainable Development Goals (SDGs) ratings across different rating providers and implications for portfolio management. It documents a considerable level of disagreement that is particularly high for large companies and for companies from the Healthcare and the Basic Materials sector. In general, the sector in which the companies are mainly active explains a large part of the variation in disagreement measures of the SDG ratings. Moreover, we document different return characteristics and risk factor exposures of portfolios sorted according to SDG ratings of different rating providers” (abstract). My comment: I expect SDG-Risk-Ratings to have little additional value to ESG-Ratings. I prefer to use SDG-related revenues or Capex in addition to ESG-Ratings to avoid SDG rating confusion (see e.g. Divestments: 49 bei 30 Aktien meines Artikel 9 Fonds – Responsible Investment Research Blog (prof-soehnholz.com)).
Other investment research
Equity factors: Factor Zoo (.zip) by Alexander Swade, Matthias X. Hanauer, Harald Lohre and David Blitz from Robeco as of Nov. 15th, 2023 (#2546): “Using a comprehensive set of 153 U.S. equity factors, we find that a set of 10 to 20 factors spans the entire factor zoo, depending on the selected statistical significance level. This implies that most candidate factors are redundant but also that academic factor models, which typically contain just three to six factors, are too narrowly defined. When repeating the factor selection to factors as they become available over an expanding window, we find that newly published factors sometimes supersede older factor definitions, emphasizing the relevance of continuous factor innovation based on new insights or newly available data. However, the identified factor style clusters are quite persistent, emphasizing the relevance of diversification across factor styles” (p. 20/21). My comment: Without good (almost impossible) forecasts which factors will outperform, outperforming factor investing is difficult.
Bond factors: Corporate Bond Factors: Replication Failures and a New Framework by Jens Dick-Nielsen, Peter Feldhütter, Lasse Heje Pedersen, and Christian Stolborg as of Oct. 26th, 2023 (#1257): “Many corporate bond factors cannot be reproduced even when attempting to use the methodology of the corresponding paper. More broadly, even factors that can be reproduced should be questioned, since the corporate bond literature is based on data full of errors. … we show that the majority of corporate bond factors from the literature fail to replicate, but a minority of factors remain significant. Further, analyzing corporate bond factors based on equity signals, we find a number of significant new factors“ (p. 27/28). My comment: Same as above: Without good (almost impossible) forecasts which factors will outperform, outperforming factor investing is difficult.
Big fraud?How pervasive is corporate fraud? by Alexander Dyck, Adair Morse, and Luigi Zingales as of Oct. 2nd, 2023 (#120): “… we use the natural experiment provided by the sudden demise of a major auditing firm, Arthur Andersen, to infer the fraction of corporate fraud that goes undetected. This detection likelihood is essential to quantify the pervasiveness of corporate fraud in the United States and to assess the costs that this fraud imposes on investors. We find that two out of three corporate frauds go undetected, implying that, pre Sox, 41% of large public firms were misreporting their financial accounts in a material way and 10% of the firms were committing securities fraud, imposing an annual cost of $254 billion on investors“ (p. 31). My comment: It would be interesting to see the relationship between governance-ratings and fraud.
Health-Wealth-Gap: Health Heterogeneity, Portfolio Choice and Wealth Inequality by Juergen Jung and Chung Tran as of Oct. 18th, 2023 (#28): “… the early exposure to health shocks has strong and long-lasting impacts on the portfolio choice of households and the observed wealth gap among households at retirement age. … as sicker individuals often forgo investing in risky assets that pay higher returns in the long-run. This health-wealth portfolio channel amplifies wealth concentration across groups and over the lifecycle. … In the absence of the health-wealth portfolio channel, the observed wealth gap at retirement is 40–50 percent smaller. In addition, we provide new insights into the social benefit of health insurance. The expansion of public or private health insurance in the US can reduce wealth inequality via mitigating exposure to health expenditure shocks and thereby allow households to make riskier investment choices with higher long-term returns” (p. 27/28).
LLM financial analysts:Large Language Models and Financial Market Sentiment by Shaun A. Bond, Hayden Klok, and Min Zhu as of Oct. 23rd, 2023 (#257): “… we use ChatGPT and BARD to recall daily news summaries related to the S&P 500 Index, classify sentiments from these texts, and use these sentiments to forecast future index returns. … we demonstrate ChatGPT and BARD can recall and classify summary market-level financial text from the perspective of a financial analyst. … we show these sentiments proxy for aggregate investor sentiment and forecast future return reversals of the S&P 500 Index … we provide evidence that incorporating ChatGPT-derived sentiments leads to superior economic performance compared to portfolios that incorporate sentiments from BARD, simpler transformer models, and traditional dictionary approaches. LLMs have superior potential to process contextual information around specific topics or themes beyond that of simpler transformer models and context-indifferent word frequency methods. This greater context awareness leads to better identification of aggregate market sentiment, and superior short-term economic performance when taken into account. Further, results suggest LLMs can identify different aspects of sentiment from text, such as information on different frequencies, and the presence of persistent effects“ (p. 45). My comment see AI: Wie können nachhaltige AnlegerInnen profitieren? – Responsible Investment Research Blog (prof-soehnholz.com) or How can sustainable investors benefit from artificial intelligence? – GITEX Impact – Leading ESG Event 2023
18 Divestments wegen unerwünschter Aktivitäten oder Länder
Divestments erfolgen bei regelbasierten Investments, wenn Regeln nicht mehr eingehalten werden. Mein regelbasieter Artikel 9 Fonds „FutureVest Equities Sustainable Development Goals R“ enthält nur die aus meiner Sicht nachhaltigsten 30 Aktien. Ich prüfe laufend, ob meine Nachhaltigkeitsanforderungen noch erfüllt werden. Einmal pro Jahr analysiere ich zudem anhand aller mir zur Verfügung stehenden (immer mehr) Nachhaltigkeitsdaten aller Aktien, ob ich meine Nachhaltigkeitsanforderungen weiter erhöhen kann.
Seit dem Fondsstart im August 2021 habe ich bis Mitte November 2023 insgesamt 49 Aktien komplett verkauft (Divestments). Das ist mehr, als erwartet. Hier sind die Gründe:
13 der Verkäufe sind auf unerwünschte Aktivitäten der jeweiligen Unternehmen zurückzuführen. Die meisten derartigen Divestments erfolgten zum Jahreswechsel 2022/2023. Grund war, dass ich seitdem nicht nur grausame und kosmetische, sondern auch medizinische Tierversuche und Aktivitäten in Bezug auf Genmanipulierte Organismen (GMO) ausgeschlossen habe. Das war möglich, weil ich auch mit diesen neuen Ausschlüssen genug Aktien identifizieren konnte, die alle meine Selektionskriterien erfüllten. Hinzu kam, dass damit vor allem große Unternehmen der Gesundheitsbranche ausgeschlossen wurden. Das führte zu einer Verringerung des bis dahin besonders hohen Gesundheitsanteils und einer erheblich niedrigeren durchschnittlichen Kapitalisierung der Unternehmen im Fonds.
Durch den zunehmenden Smallcap-Anteil wurde auch die Überlappung mit gängigen Indizes und auch mit anderen konzeptionell grundsätzlich ähnlichen Fonds reduziert (und damit auch die sogenannte Active Share erhöht). Damit wurde der Fonds als Beimischung für Portfolios (noch) interessanter. Eine Mitte des Jahres durchgeführte Analyse ergab eine Active Share von über 99% und nur maximal 4 gleiche Aktien mit anderen Nachhaltigkeitsfonds.
Seit der Fondsauflage konnte auch die Anforderung an zulässige Länder erhöht werden. So werden nur Aktien mit Hauptsitz oder Hauptbörsennotiz in einem Land mit hoher Rechtssicherheit zugelassen. Nachdem ursprünglich noch 50% aller Länder akzeptiert wurden, wurde die Grenze später auf 40% verschärft. Auslöser für die Regeländerung war die für mich überraschende Entwicklung, dass China erstmals zu den Top 50% gezählt wurde. Aufgrund von zunehmend wahrgenommenen direkten Eingriffen chinesischer Behörden, wollte ich chinesische Aktien aber weiterhin ausschließen. Durch die Regelverschärfung mussten insgesamt 5 Aktien aus Südafrika und Italien aus dem Portfolio genommen werden, denn diese Länder gehören nicht zu den Top 40% nach „Rule of Law“.
16 der 17 Verkäufe erfolgten aufgrund von Regeländerungen zum Selektionszeitpunkt und nur ein Aktivitätsausschluss erfolgte unterjährig, weil eine unerwünschte Aktivität erstmals bekannt wurde.
23 Divestments wegen Sozial- bzw. Umweltratings
Von den 23 Verkäufen aufgrund von E, S bzw. G-Ratings erfolgten 17 zum Jahresende und 6 ungeplant unterjährig. Unterjährige Ratings, die unter unsere Mindestanforderungen fallen, werden zunächst geprüft. Dazu erfolgt oft eine Rücksprache mit dem Ratinganbieter und/oder dem Unternehmen selbst. Die Prüfung kann einige Wochen dauern. Zudem erfolgt ein unterjähriger Verkauf typischerweise nur, wenn die Ratingänderung mehr als 10% ausmacht, also zum Beispiel das Sozialrating von 50 auf unter 45 fällt. Für ein Divestment ist zudem normalerweise erforderlich, dass Aktien, die ebenfalls alle Anforderungen erfüllen, mit nennenswert besseren Ratings zur Verfügung stellen. Wenige Monate vor geplanten Jahresselektionen findet ebenfalls kein schneller Verkauf mehr statt, weil zunächst mögliche Regeländerungen abgewartet werden sollen. Bei Jahreselektionen dagegen stehen typischerweise genug Aktien zur Verfügung, die besser geratet sind und die dann auch Aktien ersetzen können, die noch ausreichende Ratings aufweisen.
Normalerweise erwarten wir, dass gerade die von uns selektieren besonders nachhaltigen Unternehmen sich weiterhin anstrengen noch nachhaltiger zu werden. Andererseits bemühen sich immer mehr Unternehmen um Nachhaltigkeit. Datenupdates des Hauptratinganbieters sollten trotzdem insgesamt eher zu besseren als schlechteren Ratings für die von uns selektierten Aktien führen. Das war jedoch 2023 nicht der Fall. Etliche Ratings der von uns selektierten Unternehmen haben sich unterjährig teilweise erheblich verschlechtert, so dass wir keine Nachrücker mehr hatten, die alle unsere Mindestanforderungen erfüllten. Wir haben unsere jährliche Aktienselektion, die normalerweise zu Jahresende stattfindet, deshalb auf Ende September vorgezogen.
Von den 23 ESG-Ratingbedingten Divestments entfielen zwei Drittel auf Sozial- und ein Drittel auf Umweltratings, während Governanceratings nicht zu Divestments geführt haben. Das ist nicht überraschend, denn die meisten Aktien des Fonds sind eher sozial- als ökologieorientiert und weisen damit auch höhere Sozialrisiken aus. Governanceratings sind zudem meist ziemlich stabil. Außerdem wurden sie von uns bis September 2023 zudem zum Ranking der zulässigen Aktien genutzt, so dass die Mindestgovernanceratings der Aktien im Fonds höher waren als die ökologischen oder Sozialmindestratings.
8 Divestments wegen Übernahmen, SDG-Alignment und Kursverlusten
Drei weitere Verkäufe erfolgten, weil die entsprechenden Unternehmen übernommen wurden. Zwei weitere Aktien wurden verkauft, weil sie unsere Anforderungen an die Vereinbarkeit mit den nachhaltigen Entwicklungszielen der Vereinten Nationen nicht mehr erfüllten. Zudem wurden Aufgrund unterjähriger Verluste oberhalb der von uns akzeptierten (relativ hohen) Grenze drei weitere Aktien aus dem Fonds genommen. „Maximaler Verlust“, der einzige „kommerzielle“ beziehungsweise „nicht-nachhaltige“ Regelbestandteil führte also nur zu einem sehr geringen Portfolioturnover.
Zwei dieser sieben Verkäufe erfolgten unterjährig aufgrund von Übernahmen der betreffenden Unternehmen, die sechs anderen im Rahmen der jährlichen Neuselektion. Aufgrund von mangelnder Reaktion auf Engagementversuche wurde bisher noch kein Unternehmen aus dem Fonds ausgeschlossen.
Regeländerungen für 2024 u.a. zur Turnover-Reduktion
Die jährliche Selektion wird vor allem genutzt, um Verschärfungen der Nachhaltigkeitsregeln zu prüfen. Bei der für 2024 etwas vorgezogenen Selektion konnte zum Beispiel das von Ratinganbieter neu zur Verfügung gestellte Kriterium SDG-Umsätze genutzt werden. In der Vergangenheit wurde für das gewünschte möglichst hohe SDG-Alignment nach entsprechenden Branchen bzw. Unternehmensaktivitäten gesucht und zusätzlich Mindestanforderungen an das SDG-Risiko gestellt.
Mit der Festlegung auf mindestens 50% SDG-Umsätze auf Basis der Analyse des Ratinganbieters Clarity.ai wurden die Regeln objektiviert. Gewünscht wären 100% SDG-Alignment, wie es auch für die meisten Portfoliounternehmen ausgewiesen wird. Allerdings konnten nicht genug Unternehmen gefunden werden, die 100% SDG-Alignment sowie die Erfüllung aller anderen Selektionskriterien aufwiesen. Außerdem ist für uns nicht nachvollziehbar, warum zum Beispiel für Sozialimmobilien- und einige Infrastrukturanbieter von dem von uns genutzten Ratinganbieter kein ausreichendes SDG-Alignment ausgewiesen wird. Auch für Arbeitsvermittlungsunternehmen gehen wir weiter von einem guten SDG-Alignment aus und auch diese werden vom Ratinganbieter nicht so klassifiziert. Wir haben uns deshalb entschieden, zumindest bis zur nächsten jährlichen Selektion Ende 2024 solche Unternehmen weiter im Portfolio zu behalten, auch wenn die ausgewiesenen SDG-Umsätze unter 50% liegen.
Die Neuselektion wurde auch deshalb vorgezogen, weil das SDG-Risikorating ab Oktober 2023 nicht mehr zur Verfügung gestellt wird, aber noch für die Selektion genutzt werden sollte.
Andere, kleinere Regeländerungen wurden aus analysetechnischen Gründen gemacht. So werden nicht mehr tausende potenzielle Unternehmen auf maximale Verluste geprüft, sondern nur noch, ob der maximale Kursverlust über 50% liegt. 50% wurde gewählt, weil im Vorjahr ein Viertel der unsere sonstigen Regeln erfüllenden Unternehmen mehr als 50% Kursverlust aufwies und somit ausgeschlossen wurde. Ähnliches erfolgte in Bezug auf die Mindestratinganforderungen an den zweiten Ratinganbieter. In der Vergangenheit durfte Aktien im Portfolio nicht zu den schlechtesten 25% gehören und bei der aktuellen Selektion wurde ein E, S und G Ratings von mindestens 33/100 angesetzt. Auch das entspricht ungefähr den Vorjahres-Cutoffs.
Insgesamt kam es aufgrund der neuen Selektionskriterien zum Ersatz von 10 Aktien, was etwas unterhalb des hohen vorjährigen Austauschs lag. Weil 2022 erstmals mit dem Shareholder Engagement begonnen wurde und in 2023 auf alle Unternehmen ausgedehnt wurde, soll künftig der Turnover im Fonds idealerweise weiter sinken. Grund dafür ist, dass Shareholder Engagement relativ lange braucht, um zu wirken. Ich strebe zwar an, auch mit Unternehmen, deren Aktien nicht mehr im Portfolio sind, weiter im Dialog zu bleiben, aber der Engagementfokus liegt natürlich auf den Unternehmen im Bestand.
10 Verkäufe im 4. Quartal 2023 und Portfolioauswirkungen
Die Gründe für die zehn oben bereits mitgezählten Divestments im vierten Quartal 2023 sind ebenfalls unterschiedlich. Für sechs Aktien wurde Ersatz mit besseren Sozialratings gefunden und für zwei Aktien welche mit besseren Umweltratings. Bei einem weiteren Unternehmen haben inzwischen vom Ratinganbieter bestätigte unerwünschte Aktivitäten zum Ausschluss geführt und bei einem anderen der maximale Verlust.
Erwähnenswert ist noch, dass zwei Aktien schon früher im Portfolio waren und jetzt wieder re-investiert werden. Eine davon wurde in einer früheren Jahresselektion ausgeschlossen, weil es andere Unternehmen mit aus meiner Sicht besserer Vereinbarkeit mit den SDGs gab. Clarity-Daten zeigen für diese Gesellschaft aber aktuell über 95% Umsatzvereinbarkeit mit den SDG und sehr gute ESG-Ratings. Die andere Aktie wurde verkauft, weil sie in der Vergangenheit einen Kursverlust größer 50% hatte, der jetzt außerhalb der betrachteten 12-Monatsperiode liegt.
Insgesamt führten diese Änderungen dazu, dass sich der USA-Anteil etwas senkt aber immer noch bei knapp 50% liegt. Dafür stieg der vorher relativ geringe Anteil von ökologisch fokussierten Aktien auf über ein Drittel an. Vor allem aber haben inzwischen 2/3 der Aktien eine Marktkapitalisierung von maximal fünf Milliarden Euro und nur noch drei über 20 Milliarden.
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