Important update: February 4, 2018 — see end of this brief for details.
It’s the “bible” for Wall Street professionals, who take in the print and digital content (usually over the weekend) to find out more about the markets — and then plunge into the serious work on Monday morning, leveraging what they learned in the authoritative Barron’s magazine.
Barron’s, owned by Dow Jones & Company Inc., is a publication that we can say “moves the market”.
The company advertises: “Prosper in a pivotal time with the trusted insights and in-depth analysis that have been guiding investors since 1921.”
The October 9, 2017 issue is
devoted to sustainable investing. The title of the Special Section is “Fund Quarterly – The Top
The scope of the content is an important development for both investment professionals and for corporate managements. This brief explains the why.
The important takeaways are in Editor Beverly Goodman’s column under the heading of “No Shame Around Sustainable”:
- She writes: As a team of seven writers and I began work on Barron’s first special section devoted entirely to sustainable investing, we realized something — we couldn’t get people to stop talking about it!
- CEO’s wanted to tout the strides they’re making in labor practices and protecting the environment.
- Fund managers wanted to talk about how adding ESG criteria to their stock-picking process isn’t that much of a stretch from the multitude of decisions they routinely use.
- Barron’s plans to cover this burgeoning style of investing on a more regular basis. A lot of possible content that was developed was left on the cutting room floor, she notes. But not for long!
- Says Barron’s: We are only in Version 1.0 of sustainable investing. 2.0 is where ESG is not a separate category but a natural part of active management.
She ends her commentary on this note:
Given the corporate scandals of recent days (Wells Fargo, Equifax, Chipotle, Volkswagen, Valeant Pharmaceuticals), it is clear that focus on companies with good ESG policies is the pathway to greater returns for investors!
About the issue’s contents…
The Top-Performing Sustainable Funds
The magazine’s cover story is about assessing the performance of the most sustainable [mutual] funds based on data provided by Morningstar using Sustainalytics data. (Morningstar made a strategic investment in buying 40% of Sustainalytics this year in the company.) This year, 37% of the 203 funds (76 funds) won a “high” or “above average” rating — and beat the S&P 500 index.
Note that only 28% of actively managed large-cap mutual funds beat the all-important S&P 500 benchmark. (One might ask: what I am getting for my fees paid for these types of advisor-managed funds?)
This is the second annual Barron’s performance ranking of the most sustainable funds. We see the content sending a strong signal to investment professionals that (as the editors say) “the color of outperformance [alpha] is green…”
Who is NOT on the winning list?
Writer Crystal Kim focuses our attention on the 55 actively managed U.S. equity large-cap funds with “sustainable goals” — of these, 37 did NOT make the list. Most were too small to meet Barron’s threshold number (US$300 million). Not sustainable enough? That was 14 funds. Some funds fell off the first year list. (They were not really doing “ESG” work, says Morningstar.)
Investing for Change
Veteran investor Jeremy Grantham (Grantham Foundation for the Protection of the Environment) talks about his almost $1 billion AUM enterprise. He is a big feature in this issue, with the focus on climate change (a variety of issues in focus).
Investing in sustainable bonds — a better way to go? The writer Amey Stone explores that approach. Maybe a better way to go to get started, with munis vs. equities.
Slow to Market
There are 200+ sustainable mutual funds available to investors, many from well-known bold print names on Wall Street — so where are the ETFs? Abby Schultz writes about this. She finds sustainability-focused ETFs generally too small, too new, and too expensive to recommend. The writer notes “this won’t be the case for long.”
That’s an encouraging call for action to BlackRock, MSCI, Vanguard, Clearbridge, Eaton Vance, and other marketers of Exchange Traded Funds.
Derelict Proxy Voters
Lewis Braham talks about the proxy voting patterns of fiduciaries, and why the way a sustainable fund invests is only a part of the overall rating story. The mutual fund advisors (the folks who run the funds) are not doing a very good job of holding corporate boards and managements accountable at proxy voting time is the underlying theme. This is a must-read for investors.
Barron’s sister publication is The Wall Street Journal; the company also publishes MarketWatch. According to the publisher’s statement, the Barron’s print magazine has about 300,000 subscribers each week in 2017.
Takeaways For Corporate Managers From The G&A Institute Team
- Barron’s content very often moves the markets. Members of the G&A Institute team live in Wall Street commuter communities; we see coffee shop copies fly off the shelf on Saturday mornings. The publication is frequently quoted in other media serving investor and corporations. Listen for the mention of the story among your colleagues.
- Tune in to Barron’s ongoing coverage now of the uptake of ESG metrics and analytic tools by asset owners and the managers they hire (internally and external firms).
- When scanning the stockholder list, look for mutual fund holders at the top 10, 20, 50 ranking. Are sustainable funds (as ranked by Morningstar) among those institutions on the list? Look for names like Vanguard, BlackRock, Dodge & Cox, Janus, Oakmark, Allianz, Goldman Sachs, Franklin, Federated, American Century. All of these are advisory firms that have ESG Top 50 ranking by Morningstar. (“The Most Sustainable Mutual Funds.”)
- CEOs quoted in the various Barron’s articles on the importance of corporate sustainability / sustainable investing include: Bob Iger – Disney, and Brian Moynihan – Bank of America. Their perspectives would be good to share with your CEO.
- Investor capital is the biggest driver of corporate behavior, notes Jeff Gitterman of Gitterman Wealth Management in Barron’s. If [client] demand is there [for products], the advisor community is behind us.
- If top management / and-or board / or both is not yet convinced of the importance of corporate sustainability, the company’s ESG strategies and performance to investors, get a copy of Barron’s current issue and share content inside the enterprise. There are many market experts quoted, many sustainable mutual fund examples shared, in this issue.
The Governance & Accountability Institute team is very involved in capital markets activities.
This past week, for example, we were part of the leadership team that presented the fourth annual ESG summit for financial professionals in New York City, organized by the CFA Society/New York Sustainable Investing Committee. (Hank Boerner is Immediate Past Committee Chair; Lou Coppola is a member of the leadership team.)
More than a hundred analysts and asset managers participated in the all-day confab on the theme of “Climate Change Is A Given — How to Drive Value and Manage Risk.”
Presenters included representatives of Mellon Capital; Bernstein Private Wealth Management; Terra Alpha Investments; SEIU (union fund); Morgan Stanley; Flat World Partners; S&P; Moody’s Investor Service; CDP; Sustainalytics; MSCI; Swiss Re… and others The keynote was by the Hon. Seth Magaziner, elected Treasurer of Rhode Island (and former VP of Trillium Asset Management).
Connect with us if you have questions about the directions being taken by analysts, asset owners and asset managers as the uptake in sustainable investing accelerates. We’re here in New York City — market capital of the nation — and participating in the revolution!
There’s more information about Barron’s at: http://www.barrons.com. The methodology for compiling the rankings of the funds is explained. The content in the issue and quoted above is copyrighted (C) 2017 by Dow Jones & Company Inc. – All Rights Reserved.
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IMPORTANT UPDATE: February 4, 2018 – Barron’s issue of February 5th:
Cover story: “The Top 100 Sustainable Companies — Big Corporations With The Best ESG Policies Have Been Beating the Stock Market.”
This is a feature article by Leslie P. Norton, along with a chart of the Top 100 Companies.
Details: Barron’s asked Calvert Research and Management, a unit of Eaton Vance, to develop the list from the universe of 1,000 largest publicly-held companies by market value, headquartered in the United States.
Calvert looked at 300 performance indicators provided by three key data and analytic providers: Sustainalytics, Institutional Shareholder Services (ISS) and Thomson Reuters ASSET4 unit.
Five categories were considered:
There were items examined like accounting policies and board structure; employees, workplace diversity and labor relations; GhG emissions; human rights and supply chain…and many more (300 indicators in all).
Every company was ranked 1-to-100, even those firms manufacturing weapons (usually excluded from other indexes and best-of lists, and a passel of third party recognitions).
“The 100 Most Sustainable Companies” list has each company’s weighted score and other information and is organized by sector and categories; the complete list and information about the methodology is found at Barron’s.com.
The Top 5 Companies were:
- Cisco Systems (CSCO)
- salesforce.com (CRM)
- Best Buy (BBY)
- Intuit (INTU)
- HP (HPQ)
Key takeaway for savvy investors:
These companies with high ESG ratings had an average 29% return, compared with the S&P 500(r) 22% return for 2017.
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