Mexican companies remain dedicated as government backtracks on climate commitments

Since taking office in December 2018, Mexico’s president Andres Manuel Lopez-Obrador, often referred to as AMLO, has not inspired much hope among investors in the country’s energy sector. The first six months of his presidency has confirmed investor concerns that the privatizing of the energy industry would be rolled back under AMLO, who has made energy sovereignty a cornerstone of his administration’s agenda. The contracts issued under the 2013 energy reforms have been placed under review and the energy auctions for oil, natural gas and renewables projects that were scheduled for 2018 were cancelled. The energy auctions scheme was introduced in 2015 as a key measure to achieve Mexico’s energy reduction commitments of 30 per cent and 35 per cent by 2021 and 2024, respectively.

High and Dry Down Under: Water Risk in Australia

In June, Sydney introduced water restrictions[i] amid an ongoing two-year drought in New South Wales. Authorities stated that the city was experiencing some of the lowest inflows into its catchment dams since the 1940s. At the end of the month, the City of Sydney also officially declared a climate emergency[ii], joining over 600 other local governments around the world.

ESG Ratings: A Rebuttal of Prevailing Criticisms

“No offence, but…”. This has become a common introduction to questions directed at environment, social and governance (ESG) rating providers and reflects a body of criticism centered on the premise that ESG research and ratings are fundamentally flawed.

Controversial Weapons: Regulatory Landscape and Best Practices

Since the beginning of modern warfare in the 20th century, we have witnessed the development of weapon types that have a severe, disproportionate and indiscriminate impact on civilians, even years after a conflict has ended. Over the past decades, several protest movements have attempted to halt and ban the production of specific, controversial weapon types, and many countries have adopted international conventions to this effect. More recently, some financial institutions have begun to restrict or exclude financing of companies with involvement in certain weapons. This article explores what investors can do, beyond existing legal frameworks, with respect to controversial weapons.

Point of Sale Financing: Inclusive for all?

What is Point of Sale Financing? Point of sale financing (PSF) is a relatively new financial product that has garnered significant interest from consumers, retailers and financial institutions. It provides financing to markets that were previously underserviced by conventional financial products but can also be a gateway to impulsive spending and poor financial choices if not managed properly. This article provides a brief overview of PSF, the pros and cons for consumers, a comparison of PSF with conventional lending vehicles and a sector review looking at policies addressing financial inclusion.

Can Italian Banks Avoid Another Financial Crisis?

Italy is the birthplace of the accounting and credit systems and is home to some of the world’s oldest banks. Despite this legacy, poor lending decisions in the past decade and a high number of non-performing loans (NPLs) is putting the Italian banking sector at risk. This article will explore the connection between responsible product marketing practices and the financial stability of Italian banks by analyzing Sustainalytics’ ESG data.

India Raises Corporate Governance Standards

India saw several enhancements to its corporate governance framework on April 1, 2019, when the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 came into effect. The amendments to SEBI listing regulations reflect the adoption of a slew of recommendations made by the “Kotak Committee” – a blue-ribbon panel formed in June 2017 under the chairmanship of banker Uday Kotak, with the purpose of improving corporate governance standards in India. The committee’s recommendations are being phased in between October 1, 2018 and April 1, 2020.

Earth Day 2019 | The Water Scarcity Challenge

Earth Day 2019 is focused on protecting the species that make up our natural environment. With nearly three-quarters of the Earth’s surface covered in water, it’s a natural resource that we can’t take for granted. Human activity has irrevocably impacted this natural resource, affecting the quality and quantity of water available for consumption and for the natural habitat. In this article, we examine the role companies can play in addressing this water crisis and the potential opportunities for investors to support solutions.

Passive ESG Investing: Q4 2018 Sample Portfolio Analysis

The global equities market experienced substantial growth over the first quarter of 2019 as the FTSE All-World (AW) index returned 12.5%. But this growth spurt comes on the tail of a significant selloff during the preceding quarter; the total return of the FTSE AW over Q4 2018 sunk to -12.6%.[i]

Corruption and Whistleblower Protection in Australia

Recent inquiries and public scrutiny have questioned the accountability and ethical conduct of companies in Australia. The performance and integrity of the public sector, as well as the private sector, are being closely watched.

Sustainalytics’ Carbon Risk Rating: Platypus Asset Management Live Test

Climate change is at the centre of public debate: from school strikes around the world to a recent landmark court ruling blocking a new coal mine in Australia on climate grounds. It is also increasingly becoming an investment risk and investors are looking to understand how this risk can affect their portfolios.

How will ESG investing fare in a volatile or bear market?

Much has been written about the rise of responsible investing and environment, social and governance (ESG) integration over the past decade. From 2014 to 2016, assets that systematically considered ESG factors in the investment process grew from USD 7.5 trillion to USD 10.4 trillion, with continued momentum over the past several years[i]. However, recent commitments to ESG integration (vs. values-based strategies) have yet to be tested by a significant market downturn. The spike in market volatility experienced in late 2018 has led some to question whether the consideration of ESG factors by investors will continue to flourish in a market environment characterized by investor fear and valuation corrections.

Huawei and Beyond: Increasing Scrutiny of China’s Technology Sector

In December 2018, Canadian authorities arrested Meng Wanzhou, based on a U.S. extradition request. Ms. Wanzhou is the CFO of Huawei, the world’s largest telecom equipment provider and third largest mobile phone manufacturer. In January 2019, the U.S. Department of Justice (DOJ) charged Huawei and Meng with 23 counts of fraud related to alleged breaches of U.S. sanctions and trade secret theft.

Slavery in the Seafood Industry

On January 30, 2019[i], Thailand became the first Asian country to ratify the International Labor Organization’s (ILO) Working in Fishing Convention (C188). This comes after years of criticism over illegal, unreported and unregulated fishing (IUU) and findings of slavery and human trafficking within its fishing industry.

Self-Driving Technology: Risks and Opportunities through an ESG Lens

As technology and automobile companies race to bring autonomous vehicles (AVs) to the road, we consider the ESG risks and opportunities facing this disruptive technology. Estimates of when AVs will be fully automated vary (Figure 1); however, the consensus is that AVs are inevitable and different stages of automation will be slowly introduced.

Preparing for the Storm: Extreme Weather Events and the Chemicals Industry

In 2017, extreme weather events (i.e., hurricanes and flooding) resulted in USD 344 million in economic losses, globally.[i] Chemical companies are particularly exposed to this risk due to their concentration of assets in regions prone to extreme weather events, such as the Gulf Coast region of the United States. This region is home to several refining and petrochemical plants, and to more than half of the country’s downstream chemical production.[ii] With growing investor concern about the physical impacts of climate change and extreme weather events, we examine chemical companies’ preparedness to face this material issue. We also take a closer look at Arkema as a case study.

The Democratic Republic of the Congo – Presidential elections and mining, what’s next?

Updated March 4th, 2019 On the December 30th 2018, presidential elections finally took place in the Democratic Republic of the Congo (DRC), the first “democratic” elections in the country’s history. A peaceful transition of power in the region is of particular significance to the mining and renewable energy sectors. The DRC produced an estimated 58 per cent of the world’s cobalt in 2018, an essential element in battery technology. Any political instability or collapse into violence after the elections could restrict cobalt supply and potentially drive up the cost of batteries.

The Royal Commission Report: a new path for the Australian finance industry?

On Monday 4 February, the final report from the Royal Commission inquiry into misconduct in the Australian financial sector was published. It contained a scathing review of years of misconduct and of the failures by regulators to appropriately supervise and hold companies accountable. The report also provided 76 recommendations to fix these issues.

Water Risks in Extractive Industries

Water is an important natural input for mining, as extractive operations rely heavily on this natural resource to process the ore. However, the impacts of climate change (higher temperatures and more extreme, less predictable weather conditions) are affecting the availability of water resources globally.

Companies Invest to Extend their Life of Mines

In December 2018, an investor trip was organised to see the operations of Vedanta’s Konkola Copper Mines (KCM) and Glencore’s Mopani Copper Mines (MCM) located in the Copperbelt of Zambia. We’ve been engaging with Vedanta and Glencore for several years as the companies have experienced several ESG issues in their histories. As part of our engagement process, we conduct in-person visits to gain a better understanding of what’s happening on the ground. During this trip we saw how investment can extend the life of mines and continue to support the local communities. In this article I’ll discuss the importance of stakeholder and government relations as these companies make major investments to improve and extend their operations in the country.