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NYSE TV Interview in Defense of Sustainable Investing

NYSE TV Interview in Defense of Sustainable Investing

September 19, 2023

Watch the TV interview here!

Because commenting on environmental, social, and governance (ESG) considerations in investing have increased over the past year, Responsible Alpha was invited to the floor of the NYSE to give a TV interview with FintechTV in defense of sustainable investing.

The attention firms such as Responsible Alpha are getting because we voluntarily advise institutions on their transition paths to a low-carbon, sustainable, and equitable future demonstrates that the message is clear: sustainable investing while nascent yesterday is becoming mainstream today while it will become required tomorrow.

While the term ESG was first coined in 2004 in Who Cares Wins: The Global Compact Connecting Financial Markets to a Changing World published by the U.N., other governments, and endorsed by leading capital market institutions, the underlying categories of metrics, whether environmental, social, or governance go back many decades and in some cases hundreds of years. For example:

  • Environmental includes metrics such as companies reporting if they have a corporate climate change policy which goes back at least to the work co-lead CalPERS, CalSTRS, Ceres, and the Investor Network on Climate Risk (INCR) in 2005.

  • Social includes metrics such as the supply chain ISO 9000 family while first published in 1987, this metrics history starts in with the U.S. Department of Defense MIL-Q-9858 standard in 1959.

  • Governance includes metrics such as Number of Board of Directors, which were first codified in the U.S. in New York State’s 1811 Act.

Mandatory ESG disclosure is happening in most of the capital markets globally from China, Japan, Hong Kong, Singapore, India, EU, UK to the US, focused on what is material for each region based on the risks and opportunities as the region understands them.

Like any market innovation, change is a constant. Just like 20 years ago, we had cell phones and now we have smart phones, we improved upon mobile phones over the past 20 years. Similarly, just like we had Board of Directors first standardized under New York States’ 1811 Act, we have related governance metrics today.

ESG will continue to evolve to provide material information to support achieving risk-adjusted returns while addressing the impacts within a corporation’s boundaries.

With this in mind, we leave you today with a quote from the Graham and Dodd’s Security Analysis, the book launched in 1934 during the Great Depressions after the Wall Street Crash of 1929. Their quotes are as prescient 89 years ago as they are today.

Principal Obstacles to Success of the Analyst. a. Inadequate or Incorrect Data.—Needless to say, the analyst cannot be right all the time. Furthermore, a conclusion may be logically right but work out badly in practice. The main obstacles to the success of the analyst’s work are threefold, viz., (1) the inadequacy or incorrectness of the data, (2) the uncertainties of the future, and (3) the irrational behavior of the market.” Graham and Dodd, Security Analysis, p. 34

ESG is fundamentally about improving data for effective and efficient decision-making within the constraints our economy and ecology face.

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