Alpha-Centric ESG Research

Kyle Rudden

<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

In a recently published report (<a href="https://www.smartkarma.com/insights/cop26-u-n-climate-conference-to-address-mitigation-financing-and-carbon-pricing" target="_blank" data-smartkarma-citation="insights:59779" rel="noopener">COP26: U.N. Climate Conference to Address Mitigation, Financing, and Carbon Pricing</a>) I mentioned how the COP26 international climate conference (31 October to 12 November) will have far-reaching implications for global capital markets and investing.That Insight was largely about the COP26 conference itself – background, objectives, three critical agenda items with trillions of dollars at stake, and that will influence global financial markets from today (headlines coming out of the conference) through the end of this century.That report was necessary context for this Insight and others that will follow; successively deeper dives into country-specific climate action plans, and investment themes and trading ideas around the COP26 conference and climate change in general. This is the first of those follow-up reports.Herein, I present a brief overview of investment themes and angles directly linked to the three key COP26 agenda items: 1) mitigation of global warming, 2) climate finance, and 3) the development of international carbon markets and pricing mechanisms. Themes and subthemes such as:<ul>
<li>
Climate Transition: "Green" utilities, renewable energy, cleantech, electric vehicles and other areas of smart mobility, green buildings, and related. The "buy solar, sell coal" kinds of stuff.</li>
<li>
Climate Financing: Financial sector stocks poised to benefit from climate change mitigation, reduced risk from portfolio debarbonisation, and new inflows into sustainable/ESG funds.</li>
<li>
Carbon Markets: Pure-play (or close thereto) carbon capture and storage/sequestration (CCS) stocks, plus a few financial sector overlaps (e.g., related to carbon markets, futures, etc.)</li>
</ul>

In a recently published report (COP26: U.N. Climate Conference to Address Mitigation, Financing, and Carbon Pricing) I mentioned how the COP26 international climate conference (31 October to 12 November) will have far-reaching implications for global capital markets and investing.That Insight was largely about the COP26 conference itself – background, objectives, three critical agenda items with trillions of dollars at stake, and that will influence global financial markets from today (headlines coming out of the conference) through the end of this century.That report was necessary context for this Insight and others that will follow; successively deeper dives into country-specific climate action plans, and investment themes and trading ideas around the COP26 conference and climate change in general. This is the first of those follow-up reports.Herein, I present a brief overview of investment themes and angles directly linked to the three key COP26 agenda items: 1) mitigation of global warming, 2) climate finance, and 3) the development of international carbon markets and pricing mechanisms. Themes and subthemes such as:

Climate Transition: "Green" utilities, renewable energy, cleantech, electric vehicles and other areas of smart mobility, green buildings, and related. The "buy solar, sell coal" kinds of stuff.

Climate Financing: Financial sector stocks poised to benefit from climate change mitigation, reduced risk from portfolio debarbonisation, and new inflows into sustainable/ESG funds.

Carbon Markets: Pure-play (or close thereto) carbon capture and storage/sequestration (CCS) stocks, plus a few financial sector overlaps (e.g., related to carbon markets, futures, etc.)


COP26: An Overview of Investment Themes and Catalysts Related to COP26 Conference

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*A50 Challenges From HKEx: On October 18, 2021, the Hong Kong Exchange &amp; Clearing (388.HK) [HKEx] is set to launch a derivative product (China A50 contract), which is predicated on the new MSCI A50 Index. Unfortunately, this new product will be in direct competition with Singapore Exchange’s (SGX.SP) [SGX]  FTSE A50 contract, which represents approximately 10% of company revenue or close to 20% of PBT - not to mention 53% of its equity derivatives volume. HKEx has a very broad range of liquid Hong Kong-China linked products, with the new A50 contract being linked to the northbound Stock Connect – on top of a better fee offering; and*Time For Massive Strategic Move: As SGX needs to contend with a greater than expected impact from the earlier-than-expected launch of HKEX's MSCI China A50 index futures – on top of weaker equity volumes and fees, it continues to do numerous tiny bolt-on deals which appear to be more of a distraction than their worth. SGX must consider significant strategic alternatives if it is to avoid being hollowed out over the longer-term.

*A50 Challenges From HKEx: On October 18, 2021, the Hong Kong Exchange &amp; Clearing (388.HK) [HKEx] is set to launch a derivative product (China A50 contract), which is predicated on the new MSCI A50 Index. Unfortunately, this new product will be in direct competition with Singapore Exchange’s (SGX.SP) [SGX]  FTSE A50 contract, which represents approximately 10% of company revenue or close to 20% of PBT - not to mention 53% of its equity derivatives volume. HKEx has a very broad range of liquid Hong Kong-China linked products, with the new A50 contract being linked to the northbound Stock Connect – on top of a better fee offering; and*Time For Massive Strategic Move: As SGX needs to contend with a greater than expected impact from the earlier-than-expected launch of HKEX's MSCI China A50 index futures – on top of weaker equity volumes and fees, it continues to do numerous tiny bolt-on deals which appear to be more of a distraction than their worth. SGX must consider significant strategic alternatives if it is to avoid being hollowed out over the longer-term.

Singapore Exchange – 50 Hits To Bottom-Line

Two days ago the U.K. Financial Reporting Council announced 125 successful signatories (aka "not greenwashers") to the revised U.K. Stewardship Code. Signatories are integrating stewardship and ESG (Environmental, Social, Governance) factors into investment decisions, to high standards.Whilst this is ostensibly limited to U.K. pension assets, ramifications are more far-reaching than it might at first appear (one indication is the number of North American and Asia Pacific signatories, in addition to the expected European names). More specifically, the broad relevance is because it:<ul>
<li>Affects firms doing business with U.K. asset managers/owners not just the managers/owners.</li>
<li>Is a quasi-blueprint for similar anti-greenwashing initiatives taking root in the U.S. and Asia.</li>
<li>Greenwashing is having an increasing impact on stocks prices (e.g., DWS Group last month).</li>
</ul>This is one battle in an emerging global war on greenwashing. The U.S. SEC has its own agenda to fight greenwashing and Asia isn't far behind (e.g., regulators in Japan stepping up scrutiny). There is more to come, and a lot to learn from this including who is (and is not) on the signatory list.

Two days ago the U.K. Financial Reporting Council announced 125 successful signatories (aka "not greenwashers") to the revised U.K. Stewardship Code. Signatories are integrating stewardship and ESG (Environmental, Social, Governance) factors into investment decisions, to high standards.Whilst this is ostensibly limited to U.K. pension assets, ramifications are more far-reaching than it might at first appear (one indication is the number of North American and Asia Pacific signatories, in addition to the expected European names). More specifically, the broad relevance is because it:
Affects firms doing business with U.K. asset managers/owners not just the managers/owners.
Is a quasi-blueprint for similar anti-greenwashing initiatives taking root in the U.S. and Asia.
Greenwashing is having an increasing impact on stocks prices (e.g., DWS Group last month).
This is one battle in an emerging global war on greenwashing. The U.S. SEC has its own agenda to fight greenwashing and Asia isn't far behind (e.g., regulators in Japan stepping up scrutiny). There is more to come, and a lot to learn from this including who is (and is not) on the signatory list.

The War on Greenwashing: UK Stewardship Code "Successful Signatories" Has Broader Implications

Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

For our next Smartkarma Webinar, we are thrilled to welcome back Insight Provider <a href="https://www.smartkarma.com/profiles/kyle-rudden" target="_blank" data-smartkarma-citation="accounts:4495" rel="noopener">Kyle Rudden</a>, who continues his series on ESG investing.On this session, Kyle will give an overview of the “Metrics and Materiality” issue and debate, explore its implications for Corporate ESG Reporting and ESG Investing, and examine Metrics and Materiality in practice through examples and case studies.This webinar is organised jointly by Smartkarma and SGX.<h3>The webinar will be hosted on Wednesday, 25 August 2021, 17:00 SGT/HKT.</h3><div class="content-highlight"><h2><a href="https://share.hsforms.com/1H9pFZOB-RF2J00kbvMmxcw2c5gj?zoom_webinar_id=88191048159" target="_blank" rel="noopener">Register for the Webinar here</a></h2></div>Kyle Rudden is an ESG (Environmental, Social, Governance) analyst with an alpha-centric approach to ESG research. After all, ESG investing is, first and foremost, investing. "Alpha-centric" does not mean apathetic, however. Quite the contrary. Kyle believes global sustainability – i.e., environmental stewardship, social equality, and economic prosperity – is imperative, and private-sector capital is its cornerstone. Private-sector capital still has fiduciary responsibilities. Profitability is necessary for sustained impact. The Triple Bottom Line. People, Planet, AND Profit.

For our next Smartkarma Webinar, we are thrilled to welcome back Insight Provider Kyle Rudden, who continues his series on ESG investing.On this session, Kyle will give an overview of the “Metrics and Materiality” issue and debate, explore its implications for Corporate ESG Reporting and ESG Investing, and examine Metrics and Materiality in practice through examples and case studies.This webinar is organised jointly by Smartkarma and SGX.The webinar will be hosted on Wednesday, 25 August 2021, 17:00 SGT/HKT.Register for the Webinar hereKyle Rudden is an ESG (Environmental, Social, Governance) analyst with an alpha-centric approach to ESG research. After all, ESG investing is, first and foremost, investing. "Alpha-centric" does not mean apathetic, however. Quite the contrary. Kyle believes global sustainability – i.e., environmental stewardship, social equality, and economic prosperity – is imperative, and private-sector capital is its cornerstone. Private-sector capital still has fiduciary responsibilities. Profitability is necessary for sustained impact. The Triple Bottom Line. People, Planet, AND Profit.

Smartkarma Webinar | ESG Metrics and Materiality - What Matters to Whom and Why

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)

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

Singapore Exchange – 50 Hits To Bottom-Line

SGX: On October 18th HKEx is set to launch its own China A50 contract, which will be in direct competition with SGX FTSE A50 contract. SGX's A50...

Thomas J. Monaco

The War on Greenwashing: UK Stewardship Code "Successful Signatories" Has Broader Implications

Telegraph from European front in global war on greenwashing. U.K. names stewardship victors ("not greenwashers"). Many notable casualties. Anti...

Kyle Rudden

Smartkarma Webinar | ESG Metrics and Materiality - What Matters to Whom and Why

On 25 August, 5pm SGT, join us and Kyle Rudden for an overview of the “Metrics and Materiality” issue and debate in ESG investing. This webinar is...

Smartkarma Research

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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

COP26: An Overview of Investment Themes and Catalysts Related to COP26 Conference

COP26, the climate conference happening now, will impact global capital markets. Perhaps over the next two weeks, depending on headlines, but...

Kyle Rudden

Singapore Exchange – 50 Hits To Bottom-Line

SGX: On October 18th HKEx is set to launch its own China A50 contract, which will be in direct competition with SGX FTSE A50 contract. SGX's A50...

Thomas J. Monaco

The War on Greenwashing: UK Stewardship Code "Successful Signatories" Has Broader Implications

Telegraph from European front in global war on greenwashing. U.K. names stewardship victors ("not greenwashers"). Many notable casualties. Anti...

Kyle Rudden

Smartkarma Webinar | ESG Metrics and Materiality - What Matters to Whom and Why

On 25 August, 5pm SGT, join us and Kyle Rudden for an overview of the “Metrics and Materiality” issue and debate in ESG investing. This webinar is...

Smartkarma Research