Whether it is called sustainable investing or responsible investing, this concept of allocating capital that creates value for both the investor and society as a whole, has achieved traction among various institutional stakeholders in recent years. Commonly referred to as ESG investing (environmental, social and governance), a number of institutional investors are participating in the movement such as the New Zealand Superannuation Fund. In May, Australia’s Future Fund announced that it hired Joel Posters to head its ESG program. Already, the Future Fund is prohibited from investing in companies such as General Dynamics, Lockheed Martin and Singapore Technologies Engineering.
Moving beyond the screening process and usage of responsible investing principles, some institutional investors have hired ESG specialists to incorporate agreed factors into the decision-making process.
First Generation of ESG Strategy is Avoidance
Historically, application of ESG was conducted through a stock filtration process. Leading the early movements of responsible investing, pensions and church endowments, that focused on ESG, would screen out companies that were involved with areas such as gambling, human rights violations, defense companies and tobacco growers. Sovereign wealth funds like Norway’s Government Pension Fund Global and the Future Fund have adopted similar screening measures. In January 2014, Dutch pension juggernaut ABP let go of its investment in the Tokyo Electric Power Company, saying in a press release that, “During and after the nuclear disaster in Fukushima, the Japanese company structurally violated our standards [of responsible investing].”
According to ABP’s website, the pension giant sees itself as a long-term investor that views sustainable economic growth and ESG issues as key factors in investment analysis. As of June 1, 2014, the ABP excluded government bond investments from Somalia, Congo, Central African Republic, Sudan, North Korea, Iraq, Iran, Ivory Coast, Liberia, Libya and Eritrea.
Integration of ESG Factors in the Decision-Making Process
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Dr Dan Matjila, the Chief Executive Officer of the Public Investment Corporation (PIC) of South Africa, plans to resign according to South Africa’s finance ministry, which oversees the organization. The finance ministry commented that PIC’s board was dealing with Matjila’s intentions. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
International Petroleum Investment Company (IPIC), which is now wrapped up into Abu Dhabi-based Mubadala Investment Company, is suing Goldman Sachs over its role in the 1MBD international corruption scandal. IPIC, through its unit Aabar Investments, was once an investment partner of 1Malaysia Development Berhad (IMDB). In the lawsuit, Aabar believes Goldman Sachs conspired with others to bribe both IPIC and Aabar Investment former executives. SWFI and other media outlets have written extensively on the matter.
In the fall, the U.S. Department of Justice (DOJ) already unsealed criminal charges against key players in the massive fraudulent scheme, while Malaysian government officials have jailed its former prime minister Najib Razak.
Lloyd Blankfein, the recent former CEO of Goldman Sachs, attended a 2009 meeting with Malaysian financier Jho Low (name: Low Taek Jho). According to various media sources, Blankfein is the unidentified Goldman executive who attended the 2009 meeting in New York in the U.S. court documents.
Goldman Sachs faces a plethora of lawsuits and regulatory probes stemming from its involvement in the 1MDB scandal.
Remember the days of experts talking about peak oil. The peak oil concept is the point in which the global petroleum production rate starts its inevitable historic decline. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
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