Two presentations from the Sustainable, Responsible, Impact Investing Conference.

ESG Integration into a Portfolio

Advantages and differences in using environmental, social and governance (ESG) factors in both active and passive investments, as well as international and domestic portfolios. Differences and opportunities in portfolio construction, company engagement, and diversification versus concentration. Including the latest trends in academic research on the topic of sustainable, responsible, impact investing (SRI) from around the world. The latest work on the performance of responsible investment strategies.

Speakers: Colleen Denzler, Karina Funk, Jessica Huang, aham Mahimwalla
Speakers: Caroline Flammer, Lloyd Kurtz

NOTES

• It’s a given that there are not lower returns for SRI vs traditional
• Different rating systems do not always agree – experts are not agreement – will tighten up with time and we will see less differences
• Top 20 holdings in the S&P make up 30% of the S&P500 value
• Ratings within sector cannot compare across sectors – a good rating in one sector is not equal to a good rating in another sector
• Better to reference multiple ratings systems and look to see if it is included in social indexes
• Center for Responsible Businesses at Berkeley Hoss – good resource
• Carbon disclosure increases stock price because less unknowns
• Performance is the primary concern
• How to make impacts best – engagement, impact, long term holding, and incentives
• There are increased risk and costs associated with climate change
• Government’s actions to curb climate change (2015 Paris) 195 nations, now 194
• Pressure from activist groups
• Pressure from shareholders
• CSR issues proposals – Corporate Social Responsibility
• 75% of CSR proposals get less than 20% of shareholder votes
• Over past 20 years, more shareholder proposals, move voting, more approved
• CSR issues are part of exec compensation – ex Valero energy 13% of compensation based on CSR performance
• Intel, Xcel also include CSR in executive compensation
• 37% of companies using CSR in compensation.
• In mining industry 57% use CSR contracting
• Managers – longer time horizon, attention towards stakeholders, more sustainable practices
• CSR contracting – 4.2% of performance bonus exec comp for CSR
• Using CSR contracting – increased performance – in all and in SRI companies
• Improve in natural environment and communities

California’s Leadership in the Low Carbon Economy

California is leading in building a clean energy future, electrifying the transportation fleet and accelerating a low carbon economy in partnership with state and local governments around the world. Despite concerns, the enormous environmental and commercial progress of the California clean energy revolution has helped the California economy.

Speakers: David Hochschild – California energy commission

NOTES

• Ahead of the rest of the us in clean energy – skeptics worried
• Unemployment reduced more than overall USA
• Economy growth higher than overall USA
• Energy savings with better: refrigerators, TVs, plugin chargers
• California is 29% renewable
• Offshore wind – possibility in CA – can be larger – on land wind terbine sizes are limited by truck size
• 80% of electric demand on coast – including great lakes – offshore wind an option close to these demands
• 27% new homes in Southern CA built with solar
• Debate about coal jobs – rediculas – renewable job growth huge – wind cheaper than coal – coal should not be held onto just to save a few jobs that sooner or later will be gone
• Energy storage – batteries is an obstical – Testla has invested in a $5B battery factory
• 14k electric charging stations in CA
• Stanford U is off of natural gas and all other fossil fuels – all electric
• Companies committed to 100% renewable, include: Apple, Facebook, GM, Walmart
• Military is a partner – Navy 50% renewable by 2020, Marines have renewable targets
• High speed rail in the works in CA
• Natural gas sold as a bridge – but it’s a detour. Not 100% efficient.  Leaks, losses up flues
• Clean energy getting cheaper – estimated 15-25% cheaper in next 10 yrs
• Recommend not using natural gas – move directly to renewable energy
• Energy storage changes everything
• Offshore wind complements solar as far as production time – wind good in morning and evening when solar power is lower – need diverse energy sources
• CA committed in finding solutions – $1.5B for R&D
• Recommend using many small community solar plants
• Diversified – not all in one location is also better for security (from natural disasters)
• Lower transmission losses because energy not travelling as far