It’s not easy bein’ green
It seems you blend in with so many other ordinary things
And people tend to pass you over ’cause you’re
Not standin’ out like flashy sparkles on the water
Or stars in the sky
But green is the color of spring
And green can be cool and friendly-like
And green can be big like an ocean
Or important like a mountain
Or tall like a tree
-Kermit The Frog, “It Isn’t Easy Being Green”
With apologies to Kermit, green is growing in the investment world. Black Rock scored the largest EFT launch in history last week with a carbon transfer fund. More investment banks are greening up their portfolios and investment managers are making their own commitments.
However, the Securities and Exchange Commission is raising some concerns.
What Is Green Investing
Green investments come in two categories – ESGs (Environment, Social and Governance) and SRIs (Socially Responsible Investing).
ESGs, as the designation indicates, judge investments by how they benefit the environment, social issues, and the manner in which they are run.
SRIs filter investments to eliminate those they feel do social or environmental harm. However, they do not necessarily seek companies actively trying to improve the environment or social issues.
This article focuses on ESGs.
Green Is Growing
The Net Zero Asset Managers Initiative announced it had more than doubled its membership at the end of last month. Thirty socially-conscious managers and investment funds founded the group in December. It now has 73 members managing $32 trillion. That is over 36 percent of total global assets under management.
Members of the initiative commit to seeking investments that will achieve zero greenhouse gas emissions by 2050. That is in keeping with The Paris Agreement on climate change.
“The initiative’s collective assets have tripled in less than six months, underscoring its growing global recognition and significance,” writes Reed Montague, research analyst for Calvert, one of the initiative’s founding firms. “The Net Zero Asset Managers initiative is now also accredited by the United Nations’ ‘Race to Zero’ climate change campaign, joining 120 countries in the largest-ever alliance committed to achieving net-zero carbon emissions by 2050, at the latest.”
Banks Going Green
Some of the largest banks in the United States are launching green initiatives.
JPMorgan Chase & Co is putting over $2.5 trillion to work on climate change and sustainability through the end of 2030.
Morgan has already established a “Green Economy” team to provide financing, banking, and consulting services to green companies. The emphasis is on businesses that produce environmentally sensitive products and/or contribute to conservation.
“Climate change and inequality are two of the critical issues of our time, and these new efforts will help create sustainable economic development that leads to a greener planet and critical investments in underserved communities,” said Jamie Dimon, Chairman, and CEO of Morgan. “Business, government, and policy leaders must work together to support long-term solutions that advance economic inclusion, bolster sustainable development and further the transition to a low-carbon economy. We are committed to doing our part.”
The San Francisco bank recently unveiled its own commitment to helping achieve zero greenhouse gas emissions by 2050. As part of that plan, Wells Fargo has entered into a 20-year agreement to purchase renewable energy from NextEra Energy Resources. Terms of the contract specify that Wells Fargo will purchase all of the solar energy produced by Blackburn Solar Project, a 600-acre facility to be owned and developed by NextEra. The 58-megawatt facility is scheduled to be operational by 2022.
Bank of America
The Charlotte, NC, bank will use $1 trillion to aid the transition to a low-carbon economy by 2050. The initiative will be spearheaded by its Environmental Business Initiative.
It is part of the $1.5 trillion B of A is putting toward green investing and the development of social inclusiveness and sustainable development.
“The private sector is well-positioned to ensure that the capital needed – at the scale it is needed – can drive the transition to a low-carbon, sustainable economy,” said Bank of America Vice Chairman, Anne Finucane.
Carbon Transfer ETF Breaks Record
The new Black Rock venture is part of a surge in ESG funds. Last year, green ETFs raised $31 billion. Already this year such funds have topped $6.3 million.
More companies than ever are going green. However, the Securities and Exchange Commission (SEC) has raised concerns about transparency.
Some claims by those representing some ESG investment may be “misleading” according to the SEC.
“During examinations of investment advisers, registered investment companies, and private funds engaged in ESG investing, the staff observed some instances of potentially misleading statements regarding ESG investing processes and representations regarding the adherence to global ESG frameworks,” reads an SEC report.
Acting SEC Chair Allison Herren Lee is launching an initiative to standardize and clarify reporting by ESG companies.
“The most fundamental role that the SEC must play with respect to climate and ESG is the provision of information – helping to ensure material information gets into the markets in a timely manner,” Lee told a meeting of the Center for American Progress. “Investors are demanding more and better information on climate and ESG, and that demand is not being met by the current voluntary framework.”
Meanwhile, Lee recently issued a request for input from the public about climate and social sustainability disclosure.
Evaluating ESGs and SRIs
It can seem daunting to find the right ESG or SRI.
First, you have to decide what is most important to you in such an investment. For instance, is social justice a higher priority than climate change?
You want to be sure your money is really going to a company or fund that meets your standards. That can be difficult. The simplest, most time-consuming way is to read the company or fund prospectus and quarterly reports.
However, there are companies that evaluate ESG/SRI mutual funds and EFTs. Some of the most popular are:
ESGs offer an exciting opportunity. You can profit while helping humanity and the planet. However, just as with any financial venture, you should do your homework to ensure your money is working to do what you want it to do.
As a bonus, here’s a little something from Kermit.
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