Insights

How climate friendly is your capital?

To celebrate New York Climate Week, we measured the SDG impact of every US-domiciled fund. Download the full report below.

Download the full report: How SDG-aligned are ESG funds?

View from the top

💸 Winter is coming, and soaring gas prices—455% in 12 months—are creating a headache for leaders trying to balance national needs and emissions targets. Good news for the UK: its first green gilt sale drew £10bn to help it meet both demands.

🌱 Mark Carney launched the Net Zero Financial Service Providers Alliance: the newest addition to the UN’s Race to Zero campaign. Bringing together 17 high-profile inaugural members, the alliance aims to green global financial institutions.

🔬 Two little-noticed developments in Australia and the Netherlands underscore the fact that regulators worldwide are ramping up scrutiny of ESG claims, reports the FT. Meanwhile, the SEC is taking aim at traditional materiality tests and greenwashing.

⚖️ Is the trillion-dollar ‘win-win’ fantasy of ESG distracting from a real economic reset? Finance can be a source of positive change, writes Kenneth Pucker, but only impact measurement can separate ESG-marketed funds from ESG-committed funds.

🚨 Climate change ETFs are undermining the war on global warming by routinely engaging in greenwashing, finds EDHEC. In a new report, the business school reveals ETFs additionally starve sectors of capital to invest in transition to cleaner energy.

How Earth friendly is ESG?

This Week in Impact coincided with NY Climate Week: one brimming with net-zero pledges and trip-off-your-tongue initiatives.

To celebrate, we downloaded every N-Port from the SEC, separated the sustainable from the non-sustainable funds, and ran the respective groups through our machine-learning models. (As you do.)

Our objective, on the back of recent backlash, was to get past the headlines and pledges, marketing and disclosures, to discover the relative holding exposure and real-world impact, as measured against the UN #SDGs, of sustainable and non-sustainable funds.



The good news? Sustainable funds, broadly, do better. The bad? This is the clearest evidence yet that the environment is the greatest, unequivocal casualty of all invested capital: a crisis at risk of being concealed by well-meaning #ESG strategies.

We’re not all doom and gloom. There IS a solution! But investors must act today, come hell or high water (of which there will be a lot if we don’t), to reassess their assumptions and rebalance their portfolios.

Because here’s the other thing we discovered: impact is much more complicated than previously thought.

Sources of good and bad impact are unpredictable. Positive and negative relationships arise between ostensibly uncorrelated investments and SDGs, meaning your clean-energy portfolio shouldn’t only be exposed to renewables. It might also be exposed to other sectors with surprising, positive bearings on environmental SDGs.

That chaos creates strategic challenges, but also financial opportunities.

Why? So far, sustainable thematic funds have had a hard time balancing theme purity and liquidity. Exposure to the full value chain of a theme, rather than only the most obvious performers, yields untapped sources of alpha and diversification.

The future is impact investing. The future of impact investing? Machine learning. https://lnkd.in/daGGTvw5