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Asset Allocation

Institutional Investors Press CEOs to Disclose Climate Lobbying Practices

Group says companies will be held accountable for not aligning with the goals of the Paris Agreement.
By Michael Katz


A group of some of the largest institutional investors in the world sent letters to 47 of the largest US-based corporate greenhouse gas emitters, pressing them to disclose their climate lobbying practices to make sure they align with the goals of the Paris Agreement.

The 47 companies are among the 161 focus companies of Climate Action 100+, an initiative on climate change that is backed by more than 500 investors with a combined $47 trillion in assets under management (AUM).

In letters addressed to CEOs and board of director chairs, the group warned companies to make sure their climate lobbying, including indirect lobbying through their trade associations, is consistent with the Investor Expectations on Corporate Lobbying on Climate Change that was released last year. The investors also called on the firms to take corrective action if there is any misalignment with those expectations.

“We urge you to make the climate lobbying issue a high priority for your government affairs office and board public policy committee in their work with top management to address rising expectations regarding climate policy advocacy,” said the letter.

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To align with the goals of the Paris Agreement, the investors requested the companies set strong governance of their climate lobbying activities and provide full public transparency of their lobbying activities. The investors group said the latest science indicates that limiting global temperature rise to 1.5 degrees Celsius is required to avoid the most catastrophic outcomes, including droughts, floods, extreme heat, and poverty for millions of people.

“As long-term investors, we need to see our portfolio companies address the financial risks posed by climate change,” New York State Comptroller Thomas DiNapoli, who is among the letter’s signatories, said in a statement. “In order to assess these risks to our portfolio companies, we need greater transparency and accountability, especially when it comes to lobbying.”

Other signatories of the letters include BNP Paribas Asset Management, Boston Trust Walden, the California Public Employees’ Retirement System (CalPERS), the California State Teachers’ Retirement System (CalSTRS), Mercy Investment Services, the New York City Comptroller’s Office, the New York State Common Retirement Fund, and Wespath Benefits & Investments. All the investors are also signatories to Climate Action 100+ and members of the Ceres Investor Network on Climate Risk and Sustainability, which includes more than 175 institutional investors, managing more than $29 trillion in assets.

Earlier this year, the Climate Action 100+ focus companies were notified that their climate progress would be benchmarked against a set of indicators that reflect the goals of the initiative. The full assessment is expected to be released early next year.

“The urgency of the climate crisis means that companies must not only take bold in-house actions to reduce emissions to net-zero and improve governance of climate risk,” said Ceres CEO Mindy Lubber, “they must also look beyond their four walls and publicly advocate for federal and state policies to mitigate climate change.”

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Home > News > Market Moves > ETFs on the March: Huge Inflows in September Set Up 2020 for Near Record
Market Moves

ETFs on the March: Huge Inflows in September Set Up 2020 for Near Record

They gathered $35.2 billion last month, which should make this year second only to 2017’s blowout.
By Larry Light


September wasn’t a great month for stocks—the S&P 500 shed 3.8%—but it was just fine for exchange-traded funds (ETFs), which just logged their second-best month for inflows.

ETFs in the US took in a net $35.2 billion last month and  are on track to garner $425 billion for the year, which would be topped only by 2017’s record $476 billion, according to etf.com. The inflows came in roughly equal proportions among US equity, international equity, and fixed income, the service indicated.

The inflows come at a time when traditional mutual funds are suffering overall outflows, actually from stock funds, not bond ones.

This ETF trend shows no sign of stopping. Why the popularity? These baskets of stocks, which often track an index, are easily tradeable (as they are listings on exchanges), unlike mutual funds.

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Another part of the appeal: ETFs are more tax efficient than mutual funds, which are forced to redeem holdings when an investor sells the funds, thus triggering a capital gains tax that remaining holders must shoulder, often to their surprise and dismay.

The importance of ETFs was explored in a recent forum held by CIO magazine, our 2020 Summit, a four-day virtual gathering. While some traders, such as at hedge funds, use ETFs for rapid-fire transactions, these vehicles regularly end up as stalwarts anchoring portfolios.

With so many ETFs linked to indexes, “the advantage of indexes is that they give you a long-term, thoughtful approach to tracking the market,” said Marina Mets, head of Americas, fixed income and multi-asset product management at FTSE Russell.

“Clients are increasingly holding ETFs on a permanent basis, having been drawn to ETFs given their flexibility initially,” as ETFs are very liquid, pointed out Del Stafford, head of iShares portfolio consulting at BlackRock.

One question that came up at the symposium: What if you needed to buy or sell some stocks—perhaps to rebalance? ETFs can help without going into the underlying stocks, to express market views at that time through a liquidity sleeve. “Then you don’t have to go to redeem or sell individual securities or redeem from alpha strategies,” Stafford said.

One more advantage is also found in fixed income. “There is less risk trading a basket than individual bonds,” said Stephen Laipply, US head of iShares fixed income ETFs at BlackRock. “This narrows the trading costs. And, with ETFs, you don’t have to redeem bonds as you do with a mutual fund.” This is because ETFs trade on an exchange and can be bought and sold among investors without having to create or redeem shares.

His reference was to that practice that is the bane of individual mutual fund investors, the capital gains tax mentioned previously.

Also beneficial are ETFs used to express a theme, allowing investors to follow mega-trends, Stafford said. “Like clean energy, genome, and immunology.”

What’s more, you can even use ETFs to hedge against macroeconomic forces, such as inflation. Stafford noted that investors are taking long positions in Treasury futures as a way to gain inflation break-even, so they only get paid the premium.

To learn more about fixed income ETFs, read “A turning point for fixed income ETFs” by iShares and “Bond ETFs show maturity in March market mayhem” by FTSE Russell.

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Why Index Fund Creator Jack Bogle Hated ETFs

ETFs Are in Higher Demand from Insurers

ESG ETF Investing ‘Should At Least Double’ This Year, Says Industry Savant

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