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This week in ESG
A drop in environmental targets, no ESG support from Vanguard and Trump plans to claw-back climate funds.
Key highlights
❌ Vanguard backs zero 2024 ESG proposals – despite voting on over 400+ environmental and social matters in US company meetings this year, Vanguard didn’t back a single one.
⚡ Volvo abandons EV-only by 2030 goal – citing sluggish demand and fierce competition from China, Volvo dropped its electric-only commitment to exclusively sell EVs by 2030.
🏛️ Trump vows to revoke Biden’s climate funds – if re-elected, Trump plans to reclaim any unspent funds allocated under Biden’s signature sustainability policy, the Inflation Reduction Act.
🚫 Germany rejects $20m of fraudulent carbon credits – authorities uncovered irregularities in carbon credits from eight different projects in China. German companies had previously been using these credits to report lower emissions and meet EU reduction rules.
🦘 Australia passes extensive climate reporting law – the new law will require large and medium sized companies to report on climate risks, opportunities and emissions data.
Chart spotlight
Average annualised returns across regions (December 2014 – April 2023).
Source: Morningstar, August 2024.
The chart above shows the average annualised returns for portfolios with high and low ESG risk, split by region. For this report Morningstar used Sustainalytics ESG analysis to build these baskets, while keeping market-cap and sector allocation consistent for a fair comparison.
Why this matters
The chart shows low ESG-risk portfolios outperformed their high-risk counterparts, in all three regions analysed. This is a very encouraging result that points to the well-established benefits of ESG-investing; from long-term risk reduction by avoiding sectors likely to become stranded to choosing companies better prepared for changing regulation and evolving consumer trends. What’s even better is that these results were achieved with equal or lower levels of risk.
However, keep in mind that most ESG portfolios take a much broader range of factors into consideration, beyond a simple quantitative risk-based score. Different timeframes or baskets of stocks may produce different results.
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.