Reports

Industrial agriculture continues to drive land grabs, deforestation and human rights abuse in the palm oil, soy, beef, leather, rubber, cocoa, timber, and pulp and paper sectors at the tropical forest frontier.This paper highlights how ground-truthing offers major potential to improve risk assessments and audits to prevent harmful supply chain impacts on human rights. It intends to stimulate dialogue on actions and innovations needed to increase company and investor use of ground-truthing to enable better human rights due diligence.

This report examines several cases where two mining companies with good reputations among ‘ethical’ investors have not only created severe and lasting environmental damage but have then walked away, leaving responsibility for clean-up to others who have proved unable or unwilling to do it.

This study for the European Commission focuses on due diligence requirements to identify, prevent, mitigate and account for abuses of human rights, including the rights of the child and fundamental freedoms, serious bodily injury or health risks, environmental damage, including with respect to climate.

MSCI’s latest research, “ESG investing in emerging markets” was published Feb 11 on MSCI.com. To read more blogs from MSCI, visit our Research & insights page.     Talking points:Recent studies by MSCI ESG Research LLC have shown historical positive links between ESG considerations and corporate financial performance.Because investors might still question whether ESG historically added value in emerging markets, where companies’ consideration of ESG risks is a more recent phenomenon we compared the performance of four ESG indexes to their MSCI emerging-market parent.We found historical outperformance for the four broad-based integration ESG indexes and that a significant component of this outperformance can be explained by the index being overweight or underweight certain stocks based on ESG criteria.We also found that higher-rated emerging-market companies had higher profitability, lower idiosyncratic risk and a premium on their valuation over the study period of June 2013 until July 2019.Overall, we found that despite emerging-market companies tending to have lower MSCI ESG Ratings than global peers on average, ESG characteristics measured by MSCI ESG Ratings had contributed to performance overall.Associated Marketing Collateral: MSCI Emerging Markets ESG Leaders Index 

The European Union’s Non-Financial Reporting Directive (NFR Directive) was described at the time it was passed, as the world’s foremost legislation on corporate transparency. For the second year since its implementation, the Alliance for Corporate Transparency has undertaken the most comprehensive analysis of how companies are actually reporting, with this year’s research covering 1,000 European companies. Its publication is also very timely, as it comes at the start of the process whereby the European Commission will substantially update the Directive and initiate the development of the European Non-Financial Reporting Standard.

Gradual or Rapid Energy Transition: What path are we on?The energy industry is complex, and understanding the major trends changing the industry can be challenging. Investors, policy makers, business people, and other interested stakeholders require clear information about the evolution of the energy system to inform present decisions, which can have long lasting impacts.

The 2020s: a decisive decade for sovereign bonds and sustainability Sovereign bonds are one of the largest asset classes with an outstanding global value of US$66 trillion. They are also one of the most systemic asset classes: sovereign bonds capture a range of macro-economic factors, influence broader capital market pricing and system stability and are core holdings for financial institutions.

Pension scheme trustees’ policies on ESG factors like climate change are vague and non-committal, and many have not even published their policies - despite their legal obligation to do so.

The Davos Manifesto 2020: The Universal Purpose of a Company in the Fourth Industrial Revolution , articulates the principles of stakeholder capitalism and reflects the ethos of the World Economic Forum since its founding fifty years ago. The Forum’s original Davos Manifesto 1973: “A Code of Ethics for Business Leaders” , stated that “the purpose of professional management is to serve clients, shareholders, workers and employees, as well as societies, and to harmonize the different interests of the stakeholders”. The updated manifesto expands on this idea by stating, “A company is more than an economic unit generating wealth. It fulfils human and societal aspirations as part of the broader social system. Performance must be measured not only on the return to shareholders, but also on how it achieves its environmental, social and good governance objectives.”

In response to growing investor interest in sustainable investing, asset managers have started to offer a wide range of products that incorporate sustainability or environmental, social, and governance (ESG) strategies. There are various ways that investors and their due diligence officers can begin to distinguish among the increasingly-available sustainability-focused managers and products and identify those that align with their interests and goals.