The 2019 Proxy Season Was A Boon for ESGs — The Loop

October 15, 2019, 11:22 AM UTC

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Good morning.

Last week financial services firm Morningstar hosted its second quarterly webinar on sustainable investing where Director of Sustainability Research, Jon Hale, noted two trends since the firm’s inaugural seminar on Environmental, Social and Governance (ESG) investing in May.

First, the notion of corporate responsibility is changing, most notably through revision of the Business Roundtable’s statement on the purpose of a corporation in August. Secondly, the sense of urgency regarding the climate crisis has increased, evidenced and precipitated by an upswing in media reports (guilty), extreme weather events and political protests.

“Climate change is perceived more often now as an immediate crisis that needs immediate action rather than a long-term issue that doesn’t really affect us day to day. Because of that, I think we’re going to see more and more investors wanting to take action to protect their portfolio against climate risk,” Hale says.

According to data from Morgan Stanley’s Sustainable Signals report last month, there is already an increase of investor interest in ESG issues. The survey of 1,000 U.S. investors found that interest in sustainable investing had jumped to 85% this year, with 49% of respondents “very” interested — up from 75% and 19% respectively in 2017.

Morningstar’s own research reveals that roughly 50% of the 500 shareholder resolutions put forward during the 2019 proxy period in the U.S. addressed ESG risks. Of the 177 proposals that made it to vote, support in favor of them average 29%.

That seems low but is a record high for the second year running and, according to Morningstar, is enough to make directors take notice.

“Corporations are more likely to adopt this world view if they have a base of support for it among investors,” Hale says. Investors are voting with their wallets, too. According to Morningstar’s assessment, fund flows in ESG-related stocks have surged to $13.5 billion so far this year, up from what was a record year of $5.5 billion in flows last year.

While that value is just a fraction of the overall equities market, Bank of America Merrill Lynch predicts that inflows into ESG-type strategies over the next few decades could be equivalent to the size of the S&P 500 today — an estimate the bank calls “conservative.”

It will pay to join the trend early.

Eamon Barrett

Carbon Copy

The Bat Pack. The Nobel prize in chemistry was awarded to three scientists who each played a pivotal role in developing lithium-ion batteries. The Royal Swedish Academy of Sciences, which awards the prize, said the trio of chemistry laureates had “laid the foundation of a wireless, fossil-fuel free society.” Batteries are integral to the function of energy grids powered by renewables and – unless there’s a breakthrough in solid state cells – will be vital to the growth in electric vehicles too. The Nobel Prize

Plastic soup. A team of scientists from MIT and Woods Hole Oceanographic Institution have found that sunlight can breakdown polystyrene in a matter of decades, as opposed to the normally posited millennia. U.V. rays degrades polystyrene into organic carbon, which dissolves in seawater, and low levels of carbon dioxide. One of the authors of the report said that while this doesn’t mean efforts to prevent plastic pollution should be stopped, it does suggest models that predict the longevity of waste should be recalibrated. New York Times

Money where your mouth ain’t. Google has made “substantial” contributions to a number of U.S. lobby groups that deny the science on climate change, including the Competitive Enterprise Institute (CEI) and the State Policy Network (SPN). People close to Google say the company supports groups like CEI to advance the lobbyist’s deregulatory policies while a Google spokesperson says, “We’re hardly alone among companies that contribute to organizations while strongly disagreeing with them on climate policy.” The Guardian

In The Loop

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Dyson Pulls the Plug on Its Plan to Build an Electric Car by Jeremy Kahn

Closing the ‘First Promotion’ Gender Gap Would Add 1 Million Women to Management by Emma Hinchliffe

More Renewables Than Fossil Fuels: As the U.K. Reaches an Energy Milestone, Here’s How Far Others Have Gotten by David Meyer

Closing Number

$178 billion

Developed countries rarely see electricity consumption trend downwards yet, in 2017, U.S. households spent $178 billion on electricity — in real terms, 10% less than they spent in 2010. Average consumption in megawatt-hours decreased too, falling from 11.5 to 10.4. The reason? LEDs. According to the Wall Street Journal, no other improvement in the efficiency of household electrical appliances has been as dramatic as the switch from incandescent bulbs to LEDs. “When you take an incandescent bulb out and screw in an LED, consumption goes down 80%. Imagine you could get a car that uses 80% less gasoline. That would be amazing,” economist Lucas Davis says — forgetting EVs for a moment.

This edition of The Loop was edited by Eamon Barrett. Find previous editions here, and sign up for other Fortune newsletters here.

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