Alpha-Centric ESG Research

Kyle Rudden

<ul>
<li>The Monetary Authority of Singapore (MAS) recently launched a public consultation regarding a Code of Conduct for ESG ratings providers and ESG data product providers in Singapore.</li>
<li>It is the right approach for Singapore – a voluntary best-practices framework furthering one of the world's most credible "green" economies, not a regulatory force-fix of something broken.</li>
<li>No surprise ratings methodology changes. No en masse upgrades/downgrades. No acute shocks to the system. Just slow and steady progress for ESG investing and finance in Singapore.</li>
</ul>


The Monetary Authority of Singapore (MAS) recently launched a public consultation regarding a Code of Conduct for ESG ratings providers and ESG data product providers in Singapore.
It is the right approach for Singapore – a voluntary best-practices framework furthering one of the world's most credible "green" economies, not a regulatory force-fix of something broken.
No surprise ratings methodology changes. No en masse upgrades/downgrades. No acute shocks to the system. Just slow and steady progress for ESG investing and finance in Singapore.


Singapore Code of Conduct for ESG Ratings Is Less Risk and More Reward

Cross-Asset Liquidity Strategist, CrossBorder Capital

Michael J. Howell

Cross-Asset Liquidity Strategist

Implementing Research Using Alt Data & AI

CrossBorder Capital

CrossBorder Capital is a London-based independent investment advisory firm. Founded in 1996, it exploits a gap in the investment arena by focusing on Central bank liquidity. 

It specialises in the monitoring and analysis of global liquidity flows - an important determinant of asset prices, from currencies through to bonds, equities and real estate.

CrossBorder Capital implements its investment strategy and currently manages over US$ 350m.


Cross Asset Strategy

<ul>
<li>
 Global Liquidity Index (GLI) moves higher to 17.5 (normal range 0-100). Most national liquidity indexes bottomed around October 2022 
</li>
<li>
Global Liquidity will reverse its recent fall and rebound to US$174 trillion. Rising Central Bank Liquidity is a common theme. Financial dominance driving a return to Central Bank QE.</li>
<li>More liquidity is consistent with future stabilisation and moderate gains in World asset markets. Rebound investment phase. Emerging Markets and Cyclicals favoured. Gold, commodities and crypto also could be winners</li>
</ul>



 Global Liquidity Index (GLI) moves higher to 17.5 (normal range 0-100). Most national liquidity indexes bottomed around October 2022 


Global Liquidity will reverse its recent fall and rebound to US$174 trillion. Rising Central Bank Liquidity is a common theme. Financial dominance driving a return to Central Bank QE.
More liquidity is consistent with future stabilisation and moderate gains in World asset markets. Rebound investment phase. Emerging Markets and Cyclicals favoured. Gold, commodities and crypto also could be winners


<ul>
<li>
 S&amp;P500 (SPX) likely to test 3200, may be even 3000, as earnings get crushed. It looks like a classic ‘second leg-down’ in the bear market</li>
<li>Tight Central Bank Liquidity has hit sensitive bond markets driving yields higher, but also causing term premia to worryingly collapse to near all-time lows 
</li>
<li>Term premia fall is already set-in-stone and historically has led to much weaker reported corporate earnings some 15 months later. Hence US S&amp;P500 earnings could skid by 20% in 2023 
</li>
</ul>



 S&amp;P500 (SPX) likely to test 3200, may be even 3000, as earnings get crushed. It looks like a classic ‘second leg-down’ in the bear market
Tight Central Bank Liquidity has hit sensitive bond markets driving yields higher, but also causing term premia to worryingly collapse to near all-time lows 

Term premia fall is already set-in-stone and historically has led to much weaker reported corporate earnings some 15 months later. Hence US S&amp;P500 earnings could skid by 20% in 2023 



The Second Leg Down In This Bear Market May Be Happening Now?

<ul>
<li>After its IPO, <a href="https://www.smartkarma.com/entities/lg-energy-solution" target="_blank" data-smartkarma-citation="entities:33464:1" rel="noopener">LG Energy Solution (LGENERGY KS)</a> is destined for inclusion in various indexes, from broad market indexes to countless sustainable/ESG niche indexes.</li>
<li>The sustainable/ESG index niche includes a growing number of EV/EV battery-themes indexes in large part because of the climate-importance of decarbonising transportation.</li>
<li>Indexing leader <a href="https://www.smartkarma.com/entities/msci-inc" target="_blank" data-smartkarma-citation="entities:17865:1" rel="noopener">MSCI (MSCI US)</a> publishes a number general sustainable/ESG indexes relevant to LGES, and small number of thematic indexes like the Future Mobility Index.</li>
</ul>


After its IPO, LG Energy Solution (LGENERGY KS) is destined for inclusion in various indexes, from broad market indexes to countless sustainable/ESG niche indexes.
The sustainable/ESG index niche includes a growing number of EV/EV battery-themes indexes in large part because of the climate-importance of decarbonising transportation.
Indexing leader MSCI (MSCI US) publishes a number general sustainable/ESG indexes relevant to LGES, and small number of thematic indexes like the Future Mobility Index.


LG Energy Solution (Pre-IPO ESG Analysis): Relevant Thematic Sustainable/ESG Indices from MSCI

<ul>
<li>On 23 November, the International Organization of Securities Commissions (IOSCO) released a framework aimed at greater oversight and accountability of ESG ratings and data providers.</li>
<li>Generally, this is a positive for ESG investing. Implications for specific stocks, however, are still vague and depend on how regional regulators interpret and implement IOSCO's suggestions.</li>
<li>That said, one of IOSCO's concerns – conflicts of interest – could affect certain ESG ratings and data providers, especially those owned by the "Big Three" credit rating agencies.</li>
</ul>


On 23 November, the International Organization of Securities Commissions (IOSCO) released a framework aimed at greater oversight and accountability of ESG ratings and data providers.
Generally, this is a positive for ESG investing. Implications for specific stocks, however, are still vague and depend on how regional regulators interpret and implement IOSCO's suggestions.
That said, one of IOSCO's concerns – conflicts of interest – could affect certain ESG ratings and data providers, especially those owned by the "Big Three" credit rating agencies.


ESG Ratings and Data Providers Subject to Greater Oversight Under IOSCO Framework

United States

MSCI Inc. provides investment decision support tools to investment institutions worldwide. The Company produces indices and risk and return portfolio analytics for use in managing investment portfolios.

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MSCI Inc (MSCI US)

Singapore Code of Conduct for ESG Ratings Is Less Risk and More Reward

Singapore's Code of Conduct for ESG ratings is more light-handed than other regulation-based approaches, but therein lies the "less risk and more...

Kyle Rudden

Global Liquidity Has Bottomed …

Spurred by rising Global Liquidity, expect strong gains in several asset markets. But major World equities and bonds may be largely range-bound for...

Michael J. Howell

The Second Leg Down In This Bear Market May Be Happening Now?

S&P500 (SPX) likely to test 3200, may be even 3000, as earnings get crushed. Bond markets already warn that US EPS could skid by minus 20% in 2023....

Michael J. Howell

LG Energy Solution (Pre-IPO ESG Analysis): Relevant Thematic Sustainable/ESG Indices from MSCI

LG Energy Solution is destined for inclusion in countless indexes, from broad market indexes to thematic sustainable/ESG indexes such as MSCI's...

Kyle Rudden

ESG Ratings and Data Providers Subject to Greater Oversight Under IOSCO Framework

ESG ratings and data are largely unregulated, despite growing relevance to capital markets. That is why IOSCO decided it is time for greater...

Kyle Rudden

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