The exchange took a step in that direction in December with a proposal that at least two members of most listed companies’ boards cannot be straight white men. Small boards with five or fewer members will be allowed to have just one “diverse” director.

The move has drawn praise from the American Civil Liberties Union – hardly known as a friend of big business. “By pushing its listed companies to address racial and gender equity in corporate boards, Nasdaq is heeding the call of the moment,” said Anthony Romero, the ACLU’s executive director. “Incremental change and window-dressing isn’t going to cut it anymore as consumers, stakeholders and the government increasingly hold corporate America’s feet to the fire.”

Critics accuse Nasdaq of trying to set quotas for corporate boards, but the exchange has noted that more than two dozen studies have found links between diverse boards and improved financial performance and corporate governance.

Under the proposal, all Nasdaq-listed companies will have between two and five years to comply with the new rules, or explain in writing why they have not. The Securities and Exchange Commission is set to rule on the proposal this summer.

Quartz estimates that the move will add at least 570 women to corporate boards, plus at least the same number who identify as Black, Hispanic, Asian, Indigenous, LGBTQ or other minorities.

Welcome as Nasdaq’s move is, it is not the first – nor the most aggressive – push for boardroom diversity. California passed one law in 2018 and another last year stipulating that, among other requirements, companies with nine or more directors must include at least three from under-represented groups. Goldman Sachs, a Wall Street powerhouse, said last July that it would take a company public only if the board includes at least one woman or member of a racial minority.

Such initiatives are bearing fruit. A record number of women took the reins of Fortune 500 companies last year, including at UPS, Clorox, Gap and Citigroup. Forty-one Fortune 500 companies now have female CEOs, up from 24 in 2018 and just two at the start of the millennium. The ball may be rolling more slowly than many would like. But at least it is rolling – and in the right direction.

Vanguard Group and Fidelity Investments are not putting their climate-change mouths where their money is.

The two asset-management giants, which together manage close to US$10 trillion, clearly recognize the benefit of investing in companies with strong environmental records. Fidelity’s vast stable of mutual funds, for example, includes a water sustainability fund centred on new technologies to improve the availability of safe and affordable water.

“Investors are increasingly seeking to meet their financial goals while contributing to positive social and environmental outcomes,” Fidelity proclaims in its promotional material. “As stewards of our clients’ capital, we endeavour to satisfy these aspirations.”

One may be forgiven, however, for wondering whether these endeavours amount to much. Neither Vanguard nor Fidelity Investments signed a pledge by 30 mostly European money managers last December to invest only in companies with net-zero carbon dioxide emissions by 2050. (One signatory is Fidelity International, which was spun off in the 1980s.) Nor have they joined Climate Action 100+, a five-year global initiative by 400 investors to prod the largest corporate greenhouse-gas emitters to mend their ways.

InfluenceMap, a London-based climate-action advocacy group, notes in its latest Asset Managers and Climate Change report that the two firms lag their main U.S. rivals, BlackRock and State Street Global Advisors: “Their transparency on the climate engagement process is poor with minimal references to transitioning companies in line with Paris goals or governance of lobbying practices.”

Fidelity was the worst performer of 30 groups assessed by InfluenceMap in 2020, prompting the rebuke that it “continues to show limited to no evidence of engaging on climate.”

In contrast to the water sustainability fund, the report singles out Fidelity’s Contrafund as “particularly misaligned” with the goals of the Paris Agreement, given the fund’s holdings in oil production and the lack of investment in electric vehicle technology.

Vanguard supported just 21% and Fidelity 23% of all climate-related shareholder resolutions that they voted on during the 2020 proxy season. Together with Los Angeles–based Capital Group, they opposed every resolution related to climate policy lobbying – as they had in the previous two years. By contrast, most leading European asset managers backed the vast majority of such resolutions.

As InfluenceMap puts it, “The lack of support from the world’s largest asset managers on resolutions relating to lobbying, energy transition plans, and other key climate issues remains a barrier for forceful stewardship by investors on the climate emergency.”

The post Heroes & zeros: Who’s advancing diversity and who’s selling out the climate? appeared first on Corporate Knights.

The COVID-19 crash came on suddenly. Investors panicked when they realized the severity of the situation, and there was talk that we could be headed into a depression. Central banks including the Bank of Canada and the U.S. Federal Reserve stepped in quickly, providing liquidity to prevent the bond market from collapsing. Many of us were afraid that it would be a repeat of the 2008/09 crash, when sustainability got thrown on the backburner. Fortunately, it feels like this time is different, as leading economies around the globe are baking social and environmental concerns into their economic recovery strategies.

It’s fair to assume that more of that baking lies ahead in Canada, with the appointment of impact investing maven Michael Sabia as deputy finance minister in November. The Canadian government is also in the midst of creating a Sustainable Finance Action Council to help ratchet up action on that front, and the Bank of Canada is launching a pilot project with major banks and insurance companies to assess and understand climate risk.

South of the border, things are looking even more optimistic. After four years of a White House that dismissed climate science, we’re seeing an administration that actually treats climate change like the crisis it is. The nomination of Janet Yellen to the role of Treasury secretary is encouraging, since she just co-chaired the G30 Working Group on Climate Change and Finance with Mark Carney, former governor of the Bank of Canada. Yellen has made her position clear: “Carbon must be priced appropriately to internalize the costs of polluting the planet.” A carbon tax in the U.S. would be a catalyst for further sustainable investment gains.

Sustainable investors are happy right now. According to the most recent report from the Responsible Investment Association, 80% of responsible investment funds have outperformed the average of their asset classes this year. The biggest winners have been the “doing more good” funds that invest in sustainability themes like cleantech and renewable energy. Electric car shares have been particularly impressive, with Tesla up eightfold (it’s now worth two and a half times more than ExxonMobil) and Chinese EV maker NIO up 20-fold.

Investors should be cautious since it’s unlikely that green sectors will continue to grow at such a rapid pace, but it does indicate markets have accepted that a green transition is underway and explains why sustainable investments have performed so well.

In addition to terrific financial performance, we’ve also seen the sustainable investment ecosystem mature considerably. Corporations are tripping over each other pledging to be net-zero by 2050, and 2020 saw the launch of a record number of new sustainable investment funds, including new exchange-traded funds (ETFs) from BMO, BlackRock and Wealthsimple. Sustainable investors now have more choice than ever, and demand is growing. A global report from Morningstar shows that more than US$347 billion poured into sustainable funds in 2020, eclipsing 2019’s record $160 billion of inflows. Much of that growth was in Europe, but in Canada, 41 new sustainable funds and ETFs were launched in 2020 alone, more than double 2019.

According to the 2020 RIA Investor Opinion Survey, 75% of respondents want their financial services provider to show them sustainable investment options, but only 28% of respondents have been asked if they are interested. For those of you who have been dragging your feet on switching your investments, consider this a kick in the butt to get it done ASAP. Almost every bank and financial advisor now has sustainable investment products on the shelf, and the myth that sustainable investments underperform financially has been thoroughly busted. If your advisor isn’t up to speed on these options, it’s time to find a new advisor (RIA has a marketplace for investment advice) or explore do-it-yourself investing. I’m hopeful that the 2021 Eco-Fund Ranking will be a helpful resource as you evaluate the options and decide which approach is right for you.

Tim Nash is the founder of Good Investing.

Corporate Knights ranked more than 1,000 mutual funds and ETFs based on their financial and sustainability performance and ESG-aligned management commitments.

Here are the top scorers.

Methodology: Funds are scored according to 1) three-year net return percentile rank (50%), 2) weighted sustainability rating percentile rank based on analysis of their holdings (40%), and 3) fund-manager intention to manage the fund according to responsible guidelines (10%). If the fund is less than three years old, its final score is based on #2 and #3, which are grossed up proportionately to 100%. Funds that do not have an ESG mandate or are not operated according to responsible guidelines are automatically excluded from the ratings. Funds that score in the highest or second-highest quintile among category peers receive a five-tree or four-tree rating respectively.

* Holdings that are red-flagged automatically receive a 0% CK Sustainability Rating Score. Red-flag holdings include companies that are classified in the Corporate Knights database for one or more of the following criteria: access-to nutrition laggards, access-to-medicine laggards, adult entertainment, companies blocking climate policy, cement-carbon laggards, civilian firearms, controversial and conventional weapons, deforestation and palm-oil laggards, fossil fuels (energy), farm-animal-welfare laggards, for-profit prisons, gambling, gross corruption violations, harmful pesticides, illegal activity, oil sands laggards, severe environmental damage, severe human rights violations, thermal coal, tobacco, alcohol, companies blocking climate resolutions, companies financing misleading media, industrial meat, nuclear energy, and companies most exposed to ESG and business-conduct risks.

Sources: Corporate Knights Research, Fundata, Responsible Investment Association, Refinitiv, InfluenceMap, Norges Bank Investment Management (NBIM), Chain Reaction, NZ Super Fund, Stockholm International Peace Research Institute, American Friends Service Committee, Access to Nutrition Initiative, Access to Medicine Initiative, Motley Fool, animal welfare experts, Unearthed, Urgewald/GCEL, Media Matters, MVIS, RepRisk

The post 2021 Eco-Fund Guide: The Ultimate Guide to Responsible Investing appeared first on Corporate Knights.