Posts Categorized: Industrials/Transport

Evolving Lifecycles in an ESG Materiality Matrix

For most sectors, the likelihood of adverse ESG events and their potential financial impacts evolve through a lifecycle. ESG lifecycles determine the time it takes for a sustainability issue to become relevant to a sector as well as the magnitude of the financial impact. We believe the ability to anticipate ESG lifecycles can enhance the investment decision-making process.

Regional and Sector Strategy: Monthly Update

Our earnings momentum metric has been refined. In addition, we have also introduced a methodology for weighting ESG factors in sectors and regions. These modifications have resulted in an unusually large number of changes in recommendations.

Global Earnings Synthesis: On Track for Modest Gains in 2016

Building on the recent analysis in our Regional and Sector Strategy: Monthly Update, we continue to embrace an outlook for just a single-digit increase in profits in 2016, which is in contrast to consensus estimates that imply a 21% gain in earnings.

Regional and Sector Strategy: Monthly Update

We remain Overweight Information Technology (largest weighting in Overweight North America region) and Consumer Discretionary (largest weighting in Japan, our other Overweight). We continue to avoid regions with heavy exposure to commodities, most notably Latin America (Underweight), South Africa and Russia (both ranked Neutral).

Global Earnings Synthesis

As a complement to our Regional and Sector Strategy: Monthly Update we introduce a new publication that will examine in detail the outlook for global earnings on a regular basis.

Regional and Sector Strategy: Monthly Update

We are becoming a little more cyclical once again. We are now upgrading the Industrials sector to Neutral from Underweight, largely reflecting improved valuation. We remain Neutral on the two sectors that are widely considered the most defensive: Consumer Staples and Health Care.

A Shifting ESG Materiality Matrix: What Has Mattered, What May Matter

As we continue our research on sustainability factors that play a role in market outcomes, we embrace a more nuanced view. ESG factors that impact different sectors are not static, and are determined by a wide range of lifecycles.

Regional and Sector Strategy: Monthly Update

We are Underweight Energy, Materials, and Industrials. Our only Overweight is in Financials. We upgrade China and Russia to Neutral from Underweight.

Regional and Sector Strategy: May Update

We are now underweight the most cyclically sensitive sectors: Industrials, Materials, Energy. While we upgrade the CEEMEA region to Neutral from Underweight — in large part because of an improved earnings outlook — this likely reflects a modest rebound in oil prices, which remain 40% below year-ago levels.

Updating the Global Equity Strategy Investment Clock

An Increasingly Cautious Near-Term Equity Outlook — Plotting our sector and regional equity recommendations on the face of an “investment clock” suggests an increasingly cautious near-term outlook for global equities. A Tilt Away from Cyclical Sectors and Regions — Last month, we tilted further from cyclical sectors and regions. As for sectors, we are underweight Energy and Materials, neutral Industrials. In terms of regions, we are underweight CEEMEA and Latin America.

Regional and Sector Strategy: April Update

We continue to have a defensive tilt in our regional recommendations, and are Underweight the commodity-rich regions of Central and Eastern Europe, Middle East and Africa (CEEMEA) and Latin America …

Judges Announced for “Sustainable Games” Competition

Harvard Business School, Intel Education among Business and Entrepreneurial Leaders to Select Winner of $25,000 Prize Five global leaders from across business, the capital markets and academia have been selected as judges for “Sustainable Games:  The Business Model Challenge.”  The competition, which offers a $25,000 prize, is sponsored by Cornerstone Capital Inc., together with the Clinton… Read more »

Environmental Issues & Country Valuations: What Matters?

What Matters? — Some environmental issues that are the subject of popular focus — such as carbon dioxide emissions — do not appear to be statistically significant for global investors. Moreover, many countries’ environmental “health” has moved in the opposite direction of their economic development i.e., more pollution and higher per capita GDP.

Regional and Sector Strategy: March Update

Our regional strategy is unchanged. We continue to have a defensive tilt in our regional recommendations, and are Underweight the commodity-rich regions of CEEMEA and Latin America. Japan continues to be the top-ranked country. Over the past twelve months, share buybacks in Japan have been the largest of any country / region, the first time that country has been the global buyback leader since we launched the regional model in April 2014. We highlight changes in the Energy suggesting, perhaps, that stock prices in the sector have not fallen as fast as earnings estimates . . .

Regional and Sector Strategy: February Update

Our regional strategy is unchanged, even with a heightened focus on monetary policies and exchange rates in the past month driven, in part, by fears of deflation. We continue to have a defensive tilt in our regional recommendations, and are Underweight the commodity-rich regions of CEEMEA and Latin America. Our sector strategy is also unchanged and remains “less cyclical, more defensive.” We maintain our relatively defensive posture given pockets of economic weakness globally. We are Overweight Health Care in North America, the U.K. and Europe ex U.K. We are Underweight or Neutral Energy in the majority of regions….

Introducing the Global Equity Strategy Investment Clock

Developing a multi-class asset allocation model — that also incorporates Environmental, Social and Governance (ESG) factors — is a lofty undertaking. In this report, we take a first step by introducing our global equity strategy “investment clock”, which helps flesh out the equity outlook implied by our sector and regional recommendations….

Navigating the Recycling Industry

My journey to the recycling world, is a circuitous one primarily driven by environmental and social motives. A child of immigrants from India and the UK, and one of six children, I never sought easy answers. We came from England with just the clothes on our backs. My parents had big dreams of not only… Read more »

SustainableShipping.mobi

Nils Anderson, the CEO of AP Moller Maersk, spoke at this month’s BSR Conference in New York City and articulated his company’s aspiration to be “Taking the lead in a world of change.”  This company represents the ultimate player in global trade. And, if one subscribes to the economic theory of comparative advantage, then the… Read more »

Sustainable Agriculture: What Drives Investor Decisions?

Sustainable agriculture ensures that production keeps up with both demographic changes and resource scarcity while providing economic development and investment portfolio growth. And agricultural production is big business, encompassing land, equipment, crop inputs (chemicals and seeds), expert production (farmers maximizing crop yields), value-added processing, and sales and distribution.  Agricultural sustainability depends on a number of… Read more »

Water & Sanitation: Everybody Needs Them, Especially During a Crisis

“Readers, I selected this story–written by a colleague here at Oxfam–when I learned that the focus of October’s issue of The Journal of Sustainable Finance and Banking would be on food and nutrition. Although Oxfam has worked on food and hunger issues from our inception, far too few people recognize the significance that clean water… Read more »

Market Summary: Overview

In a year of surprisingly muted market volatility, this month we saw risk assets tumble as investor concerns reached a decisive tipping point. Anxiety over a less accommodative Fed, the pace and sustainability of global economic growth, continued conflict in Ukraine, escalating violence in the Middle East, and even the Ebola crisis have investors fleeing… Read more »

SustainableGames.com

In an effort to ignite and support the efforts of the next generation of business leaders, and a form of capitalism that is based upon greater collaboration and transparency, we launch this initiative among the world’s students who will be essential drivers of sustainable innovation…This is a call to action for social entrepreneurship: “Sustainable Games:… Read more »

Paths to a Fossil-Free Future Create Disruptive Business Opportunities

Fossil-free by 2075. That is the answer the International Energy Agency (IEA) found when it explored technology transition paths for the global energy sector consistent with stabilizing climate change. As an intergovernmental formation of industrialized nations, the IEA’s aim was the same target as the one repeatedly sought by in international negotiations – 2 degrees Celsius above pre-industrial global average temperatures, a level intended to avoid the most catastrophic effects of climate change. While investment analysts are often bound to performance horizons of just a few quarters, the IEA view to 2075 has implications for capital allocations today….

Balancing Nature and Energy

This is an abstract from the September edition of The Cornerstone JSFB. Subscribers can read the full article here. Learn more about the JSFB here.   When discussions about the imperative to lower greenhouse gases turn to the subject of hydraulic fracturing, or fracking, tensions get white hot. Opponents cite the horrors of gas and… Read more »

The 2014 El Niño: Disrupting the Climate for Business?

Climate forecasters breathed a collective sigh of relief earlier this month as predictions of a “mega El Niño” on par with severe incidents that took place in 1997-98 were downgraded. Scientists now believe a more modest event will develop later this year and run through the winter of 2014/2015. Nonetheless, the revised “60-65% chance” forecast… Read more »

Not Just a ‘Flash,’ But a Call to Arms

I was still at the Securities and Exchange Commission, overseeing the Division of Trading and Markets, when I first heard about a small band of traders and technology experts at the Royal Bank of Canada who were using technology to tilt the playing field back in favor of ordinary investors. I could hardly have imagined… Read more »

Accelerating Impact in Real Asset Investing

Written by James Lee, James Schaffer and Jaclyn Anku, Schaffer & Combs As the nation’s housing market rebounds, investors have taken notice. But with many still scarred from the protracted economic downturn, questions about risk remain.  But what if a real asset investing strategy could earn market-rate returns while simultaneously improving local communities?  OpenPath Investments,… Read more »

Risk Mitigation — the Basis for Chemical Safety

This is an abstract from The Cornerstone JSFB’s September edition. Subscribers can read the full article here. Chemical safety, especially when it comes to our everyday consumer products, is a topic of increasing relevance for the public. Almost weekly, news about food being contaminated, poisonous toys due to use of lead paints or unhealthy indoor… Read more »

The Cornerstone Capital Strategy Update: Less Cyclical, More Defensive

We have updated the inputs to the Cornerstone Capital Sector Strategy Model in which we rank the ten GICs in the MSCI All Country World Index (ACWI). Figure 1 summarizes the most recent rankings. Figure 1:  Cornerstone Capital Global Markets Equity Strategy Model Sector Overview Relative to the previous rankings (published in the June edition… Read more »

What is Shareholder Engagement… Why is it Important?

The article by Susan Baker and Jonas Kron provides a fascinating example of how Trillium Asset Management has used its influence as an investor to impact corporate policies on an important social issue. But is Trillium’s story an outlier or part of a trend? Do companies change their governance practices in response to input from shareholders? If so, why? And more importantly, does it benefit the bottom line?

Confirmation Bias in the Investment Process

The ancient Greek historian, Thucydides, wrote, “It is a habit of mankind . . . to use sovereign reason to thrust aside what they do not fancy.” The phenomenon to which he speaks manifests itself in all walks of life, from politics to religion and investing. Today, this concept is termed “confirmation bias” and refers to the tendency of people to favor information that confirms their beliefs or hypotheses….

Business of CSR and Sustainability in India

ABSTRACT FROM THE CORNERSTONE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE JUNE 2014 EDITION.  Four years ago, a good friend and a very senior government colleague here in India, Pravir Kumar, asked me to weigh the prospects of getting into the area of CSR. Given that his thoughts and ideas were way ahead of… Read more »

Introducing Cornerstone Capital Global Sector Strategy

In this note, we introduce the Cornerstone Capital Global Sector Strategy Model.  The model ranks the 10 GICS in the MSCI All Country World Index.  As discussed in detail below, the model employs a quantitative multi-factor methodology to generate sector recommendations based on proprietary measures of valuation and earnings.  The Cornerstone Capital model also takes… Read more »

The Cornerstone Capital Regional Strategy Update

ABSTRACT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE MAY 2014 EDITION In the April edition of The Cornerstone Journal of Sustainable Finance & Banking we introduced the Cornerstone Capital Regional Strategy Model. This month there is no change in our regional weightings. We provide a quick update by region. Michael Geraghty is the… Read more »

Introducing Cornerstone Capital Global Sector Strategy

ABSTRACT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE MAY 2014 EDITION We introduce the Cornerstone Capital Global Sector Strategy Model which ranks the 10 GICS in the MSCI All Country World Index. The model employs a quantitative multi-factor methodology to generate sector recommendations based on proprietary measures of valuation and earnings and incorporates… Read more »

Introducing Cornerstone Capital Global Markets Regional Equity Strategy Model

In this note, we introduce the Cornerstone Capital Global Markets Regional Equity Strategy Model.  As discussed in detail below, the model employs a quantitative multi-factor methodology to generate regional recommendations based on proprietary measures of valuation and earnings.  The Cornerstone Capital model also takes into account corporate governance metrics by region.  We will be updating… Read more »

Smart Grid Infrastructure – Status, Opportunities and Risks

As we strive towards a system change, replacing linear business models with circular, impact-integrating strategies, network infrastructures are at the core of a major shift. From low-risk, low-return physical assets, they are being transformed into smart grids….

Unleashing Impact Capital into Public Infrastructure and Building Projects

EXCERPT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE APRIL 2014 EDITION. Our national economy is in a world of hurt when it comes to its very foundation: the public infrastructure and buildings that enable and support economic activity.  Bridges, highways, transit, energy, and environmental infrastructure as well as social infrastructure including healthcare, education… Read more »

Building Sustainable Cities with New Design Processes and Open Data

EXCERPT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE APRIL 2014 EDITION. New data and technology advancements in the infrastructure design industry have the potential to revolutionize how finance and banking professionals screen opportunities for impact investments. The design industry is rapidly moving from the practice of drawing lines and circles to an intelligent,… Read more »

Filling the Infrastructure Data Gap in Impact Investing

EXCERPT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE APRIL 2014 EDITION. The OECD estimates USD 53 trillion in investment or the equivalent of an annual 2.5% of global GDP by the year 2030, to meet demand for infrastructure investment by 2030. Those numbers are so large and intimidating that most people are tempted… Read more »

CBA-BIM Using Established Tools to Achieve Standard for Infrastructure Project Valuation and Risk Assessment

EXCERPT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE APRIL 2014 EDITION. Building Information Modelling (BIM) is changing the planning, design, building, and operation of infrastructure. When Cost Benefit Analysis (CBA) is added to BIM investors get both transparency of value and understanding of risks in complex infrastructure projects. CBA-BIM has the potential to… Read more »

New Tools, New Tricks: How Emerging Applications Are Becoming Game-Changers for Impact Investors and Infrastructure Development

EXCERPT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE APRIL 2014 EDITION. The creation of standardized economic tools that can be used in the context of infrastructure exchanges may enable a new era of impact investing. Investors can use new standardized metrics to shape the definitions of new asset classes, including green bonds and… Read more »

Maersk: Sustainability as a Driver for Growth

EXCERPT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE APRIL 2014 EDITION. It is our experience that sustainability adds value if it is tied closely into business and is allowed to help the company take a longer term perspective on material matters. At its core, it adds value through better risk management whether it… Read more »

Trinity River Vision Authority Applies Sustainability Rating and Business Case Analysis to Set Stormwater Management Principles

EXCERPT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE APRIL 2014 EDITION. The financial benefits coupled with the benefits of maintaining the water quality of the lake and canals planned for Panther Island makes a clear case for expanding the use of green infrastructure in North Texas that will benefit the development community and… Read more »

Infrastructure Imperatives Drive Regional Competitiveness

EXCERPT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE APRIL 2014 EDITION. Today, our urban areas face enormous threats and costs including those associated with the quality, integration and performance of their civil infrastructure systems. Over time, as comprehensive business cases become more common, users will realize additional benefits as projects are regionally bundled… Read more »

WCX Finalizes Project Principles and Standards

EXCERPT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE APRIL 2014 EDITION. On January 2nd, the West Coast Infrastructure Exchange (WCX) released the final version of “Infrastructure Project Certification –Principles and Framework” which was developed by the WCX Business Standards Committee. The principles and project standards are the first-ever attempt by multiple US states… Read more »

Transportation Facilities Focus on Sustainability at Billion Dollar Scale

EXCERPT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE APRIL 2014 EDITION. When we commute and travel, do we think about the long-term sustainability of the facilities we use? Does it matter that these buildings are efficient and provide healthy environments? Up until now, we have considered multi-modal transit facilities as positive infrastructure since… Read more »

ChurchillsVoice.com

Among the many extraordinarily articulate statements from Winston Churchill is one which has exceptional resonance in today’s global economy and to today’s investment imperatives.  In the mid-1940’s after the Battle of Britain when the House of Commons was being rebuilt following the bombings, Churchill made the statement: “We shape our buildings; thereafter they shape us.”… Read more »

San Diego Airport Named First LEED Platinum Certified Commercial Airport Terminal

EXCERPT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE APRIL 2014 EDITION. Abridged Article based upon SAN Press release courtesy of Jim Grant HNTB Corporation San Diego International Airport has been awarded Leadership in Energy and Environmental Design Platinum certification for The Green Build terminal expansion from the U.S. Green Building Council. LEED certification… Read more »

BMW Urban Mobility: Re-creating the Status Quo through Sustainable Design

The ability to independently travel from location to location based on nothing more than a simple desire to move about freely is a powerful and historical concept that breeds individuality, builds personal character, and spurs innovation through the free exchange of ideas and cultures. Personal mobility has long been quintessential in the development of the United States, especially when considering the early 19th and 20th centuries where transportation slowly evolved from the stage coach, to railroads, to streetcars and subway systems….

Not a Team Sport: The State of Play in Global Shipping

Extract from the Cornerstone Journal of Sustainable Finance & Banking, January 20134written by Robert DiMarsico, Managing Director at Poseidon Capital Corp and Senior Advisor to Shipping Practice at FTI Consulting Inc. Subscribers can view the full article in the January edition. Carrying 90% of world trade, shipping is a critically important industry, one which until recently… Read more »

Water Scarcity as a Business Risk and Opportunity

Extract from the Cornerstone Journal of Sustainable Finance & Banking, January 2014 written by William Sarni, Director and Practice Leader, Enterprise Water Strategy | Sustainability, Deloitte Consulting LLP. Subscribers can view the full article in the January edition. What should the future of water look like? Achieving the desired outcomes, in 21st century water management, means… Read more »

A Construction Company Can Be Sustainable

Extract from the Cornerstone Journal of Sustainable Finance & Banking, December 2013, written by Carlos Terepins, CEO & Chairman of the Board of Directors, Even Construtora e Incorporadora SA. The reasoning that should propel environmental initiatives is the certainty that society is increasingly recognizing and rewarding companies imbued with true social and environmental duty and… Read more »

“Extremes vs. Realities: Opportunities for China’s Urban Development”

Extract from the Cornerstone Journal of Sustainable Finance & Banking, November 2013, written by Zheng Xiaoping, Vice President of the China City Development Foundation and Director of BAZO. This is an era in which to connect worldwide resources to opportunities, and all of us can contribute to and benefit from them.  If there is one… Read more »

A Zero Sum Game: Assessing Water Risks in China’s Mega Infrastructure

Extract from the Cornerstone Journal of Sustainable Finance & Banking, November 2013, written by Cyrus Lotfipour, Emily Chew, and Shuyuan Jin, MSCI ESG Research, a leading provider of in-depth environmental, social& governance research, ratings and analysis, with more than 150 ESG specialists worldwide. Water Scarcity poses an operational risk to companies in the metals, mining,… Read more »

The 3% Solution: Driving Profits Through Carbon Reductions

Extract from the Cornerstone Journal of Sustainable Finance & Banking, October 2013, written by Chris Fowle, Vice President, Investor Initiatives, CDP. This report from WWF and CDP identifies novel approaches for the private sector to realize significant cost-savings achieved through boosting energy-efficiency measures and transitioning to low-carbon energy sources. In the process, the US corporate… Read more »