Pictet Launches Megatrends Fund

Pictet is launching what it claims is a first-of-its-kind 'megatrends' fund that includes exposure to its water, clean energy and timber investment themes.

The Swiss private bank is hoping to raise €1 billion ($1.27 billion) into the Global Megatrends Selection Fund, which is aimed at retail investors across Europe.

The fund will invest on an equally weighted basis across eight themes, against which Pictet is already running thematic funds. These are biotech, digital communications, security, generic pharmaceuticals and premium brands, in addition to the three environmental themes.

“Pictet has identified these as [creating] persistant, secular changes in structural factors (such as demographics, lifestyle, regulation and the environment) which have the potential for long-term growth,” the company said.

I attended the launch of Pictet's Timber Fund in September 2008, and since inception it has only attracted around €10 million, so it will be interesting to see if the combination of these themes can achieve more attraction.  Pictet's Timber Fund is not a pure timber play however, as it invests in companies along the timber value chain, but it is more desirable to invest directly in timberland via a Timberland Investment Management Organization (TIMO) or REIT, although there is a trade-off with regards to liquidity.  A analysis of the merits of investing in timberland is detailed in my first post Money Does Grow on Trees.

Each month, the fund will be rebalanced, selling out of those themes which have overperformed and increasing investments in those that have underperformed, aiming to reduce its exposure to overvalued stocks.

The company – whose asset management subsidiary manages Sfr115 billion ($98 billion) – claims to have been a pioneer in thematic investing, launching its first such fund, a biotech fund, in 1995.

These existing themed funds invest in a mix of market capitalisations, typically a third large-cap, with the rest small- and mid-cap companies. 

The Megatrends fund – which is benchmarked to the MSCI World index – is not structured as a fund of funds, but will be invested alongside the existing funds, avoiding the ‘double charging’ of most fund of funds. It carries an administration fee of 1.6%.

Paul Gaston, head of UK sales, said that the fund is a “unique proposition” in the retail market, but it is likely to compete with Goldman Sachs’ recently launched Sustain fund product. That fund similarly combines demographic, environmental and social themes in a global mixed-cap equity portfolio.

U.S. Companies Red Carded for Climate Risk

A U.S. coalition of investors known as Ceres, that work with companies to address sustainability challenges,  placed nine companies on  a "Climate Watch" list, claiming the long-term competitiveness of the firms could be hurt by their lack of action on climate change. Investors filed shareholder resolutions with eight of the nine companies—and 49 other businesses—aimed at improving their focus and attention to the financial risks and opportunities from climate change. Below I have posted a list of the companies that have been red flagged, and the reasons justifying these concerns.  As environmental, social and corporate governance (ESG) issues become more widely publicized and analyzed, the ability to utilize this information to increase portfolio returns will improve, as an understanding of the material effects on business will become increasingly clear.

Oil Sands

The group also targeted companies investing in Canada's tar sands, including Chevron Corp, which owns part of the Athabasca Oil Sands Project, and Canadian Natural Resources, one of the largest producers in oil sands.

Alberta's oil sands rival Saudi Arabia's conventional oil reserves in size, but environmentalists say mining and processing them releases huge amounts of greenhouse gases.

I have previously discussed Canada's oil sands as a focal point in its climate change policy in a post titled Toxic Alberta, stating that it is imperative that if production of the oil sands is to continue, it must be done in a environmentally friendly manner, taking advantage of the latest developments in technology to avoid significant detriment to the environment. 

Fortunately President Barack Obama understands the necessity for this and has said oil extracted from tar sands in Canada can be made a clean energy source, and the U.S. will work with its northern neighbor to develop the technology.

A joint effort by the U.S. and Canada, its biggest trading partner, on ways to capture and store carbon dioxide underground would “be good for everybody,” Obama said yesterday in an interview with the Canadian Broadcasting Corp. 

When Obama visits Canada's Prime Minister Stephen Harper in Ottawa on Thursday, energy will be a key topic in the talks. About 75 percent of Canada's oil sands output is shipped to the U.S. market. 

As Obama backs slashing emissions of heat-trapping gases to 1990 levels, I hope he takes into account the massive scale of carbon capture and storage which must be implemented to ensure cleaner development of Canada's oil sands. The new president will also have to square his environmental agenda with his call to trim dependence on oil supplies from the Mideast and with the U.S.’s longstanding policy to treat Canada as a commercial and strategic ally.

Although, Obama is aware of the need to implement carbon capture and storage to stave of global warming, it will remain to be seen whether or not this is too little, too late.  "Extraction of oil from oil sands is a risky proposition and will likely in the long term be a disaster for both investors and inhabitants of an increasingly warming planet," said Margaret Weber, board chair of the Interfaith Center on Corporate Responsibility, which coordinates shareholder filings with Ceres.

The Climate Watch companies are as follows:

Chevron: Chevron is named to the Climate Watch List for its extensive investments in Alberta, Canada’s oil sands, and for resisting shareholder requests to disclose potential financial risks associated with the carbon-intensive project that encompasses millions of acres. Greenhouse gas emissions associated with oil sands development is three times higher than conventional oil extraction and refining according to the investors. Chevron owns 20 percent of a major oil sands extraction effort, the Athabasca Oil Sands Project, and is the operator at a large proposed oil sands project at Ells River, yet its public disclosure of potential financial exposure from climate regulations and other project risks pales in comparison to Shell and Suncor. The resolution outlines key risks from the project and asks that the company report on environmental damage resulting from its expanding oil sands operation.   (Green Century contact: Emily Stone, 617-482-0800, and Ceres contact: Andrew Logan, 202-746-0661)

CONSOL Energy: Given that coal combustion accounts for about one-third of all greenhouse gas (GHG) emissions in the U.S. and given the growing regulatory momentum to reduce emissions from power plants, the New York City Pension Funds filed a resolution with the Pittsburgh-based company requesting a report on how the company is responding to growing regulatory and competitive pressure to significantly reduce GHG emissions. CONSOL is the nation’s largest bituminous coal producer. (NYC Comptroller Contact: Laura Rivera, 212-669-2701)

ExxonMobil: ExxonMobil has been unresponsive to investor requests for a decade regarding strategies intended to meet growing demand for diversified clean energy sources. Four climate resolutions filed this year request that: the board develop comprehensive GHG emission reduction goals: that it report on the impact of climate change on emerging markets and on U.S. leadership in achieving energy independence; and that it disclose its plans for developing for renewable energy. The resolutions were filed by the: Tri-State Coalition for Responsible Investment, Jessie Smith Noyes Foundation and Reynolds Foundation, Province of St. Joseph of the Capuchin Order, and Neva Goodwin.  (Tri-State Coalition Contact: Pat Daly, 973-509-8800)

General Motors: Investors have a long, unsuccessful history of filing shareholder resolutions with General Motors and engaging with the company on climate-related business strategies. The resolution filed by the Tri-State Coalition for Responsible Investment asks General Motors to set GHG reduction goals from its products and operations, as other U.S. and foreign automakers have already done. The resolution cites GM’s ongoing litigation to stop California’s clean car standards from being adopted and its lackluster response compared to Ford in developing a business model that accounts for climate change. (Tri-State Coalition Contact: Pat Daly, 973-509-8800)

Massey Energy: The Virginia-based coal company continues to resist shareholder resolutions requesting the company to develop and disclose a strategy for responding to climate change. Thirty percent of shareholders voted in favor of the resolution last year. Given that coal combustion accounts for about one-third of all GHG emissions in the U.S., the New York City Pension Funds filed a resolution, for the third consecutive year, requesting a report on how the company is responding to growing regulatory and competitive pressure to reduce GHG emissions. Massey is the nation’s 4th largest coal producer. (NYC Comptroller Contact: Laura Rivera, 212-669-2701) 

Standard Pacific: Unlike other leading homebuilders, Standard Pacific has opposed shareholder requests the past three years to disclose its strategies and performance on energy efficiency and other climate-related issues. The resolution filed by the Nathan Cummings Foundation asks the CA-based homebuilder to adopt quantitative goals for boosting energy efficiency and reducing greenhouse gas (GHG) emissions from its products and operations. Homebuilders have an important role in mitigating climate change because 40 percent of GHGs come from building energy use, and building energy efficiency is one of the most cost effective means of reducing global warming pollution. (Nathan Cummings Foundation Contact: Lance Lindbloom, 212-787-7300, and Ceres contact: Betsy Boyle, Ceres 617-247-0700 X143;)

Canadian Natural Resources Ltd: One of the largest and most established producers currently active in Canada’s oil sands, the Calgary-based company has refused to date to meet with investors on the issue of climate change, and, unlike other oil companies, it has not made any renewable energy investments. Ethical Funds filed a resolution with Canadian Natural Resources in 2007 requesting that it disclose its climate risks, but the company has not responded to the resolution. CNQ is the only oil company opposing the recommendations of the Government of Alberta’s Cumulative Environmental Management Association Multi-stakeholder process. (http://www.cemaonline.ca/ ) (Ethical Funds Contact: Robert Walker, 604-714-3833)

Southern: The nation’s largest electric power producer, which emits more than 160 million tons of CO2 emissions a year, has balked at shareholder resolutions the past several years asking it to set GHG reduction targets. In filing the resolution, the Sisters of Charity of St. Elizabeth cited the company for its adequate climate risk disclosure, but weak action to mitigate that exposure by reducing GHG emissions. Thirty-seven percent of the company’s industry peers, including American Electric Power, Duke Energy and Exelon, disclosed absolute GHG reductions targets in the Carbon Disclosure Project’s most recent annual survey released in 2008.  Atlanta-based Southern opposes mandatory federal limits to reduce GHG emissions. (Sisters of Charity of St. Elizabeth, NJ contact: Sr. Barbara Aires, 973-290-5402)

Ultra Petroleum: Houston-based Ultra has resisted shareholder requests the past three years to disclose its strategies for addressing climate change, despite relatively strong shareholder voting support. While Ultra has a relatively small market capitalization (about $5 billion), its resistance to acknowledging climate change risks puts it out of step with its peers. The resolution filed by the Nathan Cummings Foundation asks the company to report on its plans to address climate change. (Nathan Cummings Foundation Contact: Lance Lindbloom, 212-787-7300, Ceres contact: Andrew Logan, 202-746-0661)

In addition to the Climate Watch companies, investors filed resolutions with the following other businesses. The list of investors filing resolutions with each of the companies can be found at http://www.ceres.org/resolutions or http://www.iccr.org.

Auto/Transportation: Avis/Budget, Hertz

Banks: Ameriprise, Citigroup, Fifth Third Bancorp, State Street

Building and Big Box Companies: Bed, Bath & Beyond, Boston Properties, General Growth, Home Depot, Las Vegas Sands, Lennar, Pulte Homes, Ryland

Coal: Alpha Natural Resources, Foundation Coal, International Coal

Electric Power: Dominion, Dynegy, Idacorp, Mirant, NV Energy (formerly Sierra Pacific)

Forestry:  International Paper, Meredith, RR Donnelly

Oil & Gas: ConocoPhillips, Haliburton, Noble Energy, Oneok, Range Resources, South Jersey Industries, Spectra

Other S&P 500 Companies: Apple, Aqua America, Assurant, Broadcom, Denbury Resources, Dover Corporation, Flowserve, Kadant, MetLife,  Middleby, Novell, SanDisk, Southwest Airlines, St. Jude, Stryker, Valmont. 

Canadian Companies: Great-West Life & Annuity

The Time for a Green Stimulus is Now!

US President Barack Obama will today sign the $787bn (£551bn) economic stimulus package in Denver, Colorado with proponents of green business celebrating that a tenth of the money will be directly targeted at environmental initiatives.

Environmental America, a federation of state-based, environmental advocacy organizations, examined the final bill and said there were $32.80bn in funding for clean energy projects, $26.86bn for energy efficiency initiatives and $18.95bn for green transportation, giving a total of $78.61bn directly earmarked for green projects.  

Although this is not the initial $150bn promised for green projects, it marks a historic step in the right direction.  One that if followed worldwide, with a concerted effort, will dramatically change the face of the world for the better.  Ban Ki-moon, UN secretary-general and Al Gore, former US vice-president discussed this issue in an article in the FT yesterday that I have posted below.  

Al Gore is widely recognized for his groundbreaking film, 'An Inconvenient Truth' , but I believe many are unaware of his involvement in Generation Investment Management LLP.  Former U.S. Vice President Al Gore is chairman of Generation, and David Blood — previously chief executive of Goldman Sachs Asset Management — is CEO. The pair has given the company its nickname, "Blood and Gore."  Generation has built a global research platform to integrate sustainability research into fundamental equity analysis. The firm focuses on the economic, environmental, social, and governance risks and opportunities that can materially affect a company's ability to sustain profitability and deliver returns.    

Green growth is essential to any stimulus

By Ban Ki-moon and Al Gore

Published: February 16 2009 19:40 | Last updated: February 16 2009 19:40

Economic stimulus is the order of the day. This is as it must be, as governments around the world struggle to jump-start the global economy. But even as leaders address the immediate need to stimulate the economy, so too must they act jointly to ensure that the new de facto economic model being developed is sustainable for the planet and our future on it.

What we need is both stimulus and long-term investments that accomplish two objectives simultaneously with one global economic policy response – a policy that addresses our urgent and immediate economic and social needs and that launches a new green global economy. In short, we need to make “growing green” our mantra

First, a synchronised global recession requires a synchronised global res ponse. We need stimulus and intense co-ordination of economic policy among all main economies. We must avoid the beggar-thy-neighbour policies that contributed to the Great Depression. Co-ordination is also vital for reducing financial volatility, runs on currencies and rampant inflation as well as for instilling consumer and investor confidence. In Washington last November, G20 leaders expressed their determination “to enhance co-operation and work together to restore global growth and achieve needed reforms in the world’s financial systems”. This needs to happen urgently.

Stimulus is intended to jump-start the economy, but if properly conceived and executed it can also launch us on a new, low-carbon path to green growth. Some $2,250bn (€1,750bn, £1,569bn) of stimulus has already been announced by 34 nations. This stimulus, along with new initiatives by other countries, must help catapult the world economy into the 21st century, not perpetuate the dying industries and bad habits of yesteryear. Indeed, continuing to pour trillions of dollars into carbon-based infrastructure and fossil-fuel subsidies would be like investing in subprime real estate all over again.

Eliminating the $300bn in annual global fossil fuel subsidies would reduce greenhouse gas emissions by as much as 6 per cent and would add to global gross domestic product. Developing re newable energy will help where we need it most. Already, developing economies account for 40 per cent of existing global renewable resources as well as 70 per cent of solar water heating capacity.

Leaders everywhere, notably in the US and China, are realising that green is not an option but a necessity for recharging their economies and creating jobs. Globally, with 2.3m people employed in the renewable energy sector, there are already more jobs there than directly in the oil and gas industries. In the US, there are now more jobs in the wind industry than in the entire coal industry. President Barack Obama’s and China’s stimulus packages are a critical step in the right direction and their green components must be followed through urgently.

We urge all governments to expand green stimulus elements, including energy efficiency, renewables, mass transit, new smart electricity grids and reforestation, and to co-ordinate their efforts for rapid results.

Second, we need “pro-poor” policies now. In much of the developing world, governments do not have the option to borrow or print money to cushion the devastating economic blows. Therefore, governments in industrialised countries must reach beyond their borders and invest immediately in those cost-effective programmes that boost the productivity of the poorest. Last year, food riots and unrest swept more than 30 countries. Ominously, this was even before September’s financial implosion, which sparked the global recession that has driven a further 100m people deeper into poverty. We must act now to preventfurther suffering and potential widespread political instability.

This means increasing overseas development assistance this year. It means strengthening social safety nets. It means investing in agriculture in developing countries by getting seeds, tools, sustainable agricultural practices and credit to smallholder farmers so they can produce more food and get it to local and regional markets.

Pro-poor policy also means inc reasing investments in better land use, water conservation and drought-resistant crops to help farmers adapt to a changing climate, which – if not add ressed – could usher in chronic hunger and malnutrition across large swaths of the developing world.

Third, we need a robust climate deal in Copenhagen in December. Not next year. This year. The climate negotiations must be dramatically accelerated and given attention at the highest levels, starting today. A successful deal in Copenhagen offers the most potent global stimulus package possible. With a new climate framework in hand, business and governments will finally have the carbon price signal businesses have been clamouring for, one that can unleash a wave of innovation and investment in clean energy. Copenhagen will provide the green light for green growth.This is the basis for a truly sustainable economic recovery that will benefit us and our children’s children for decades to come.

For millions of people from Detroit to Delhi these are the worst of times. Families have lost jobs, homes, healthcare and even the prospect of their next meal. With so much at stake, governments must be strategic in their choices. We must not let the urgent undermine the essential. Investing in the green economy is not an optional expense. It is a smart investment for a more equitable, prosperous future.

Ban Ki-moon is UN secretary-general. Al Gore is former US vice-president

See Original Article

Assessing Water Opportunities and Risks

Following my post on the drought in China, I came across this framework of guidelines for assessing the opportunities and risks posed by rising water stress from the United Nations Environment Program Finance Initiative (UNEPFI), which is a global partnership between UNEP and the financial sector. Over 170 institutions, including banks, insurers and fund managers, work with UNEP to understand the impacts of environmental and social considerations on financial performance. It is titlted, Half Full or Half Empty? A Set of Indicative Guidelines for Water Related Risks and an Overview of Emerging Opportunities for Financial Institutions. If you would like a brief summary and analysis of water scarcity issues, which I will be expanding on in the future, I suggest you take a look at one of my previous posts titled, Blue Gold.
I used to have a gym teacher in junior high school that use to say to kids when they were out of line, "Listen son! You'd better ask yourself a question, is your glass half full or half empty?" in a Clint Eastwood, Dirty Harry manner. Coincidentally, he also led a class called outdoor education and was a rather environmentally focused individual. I'm happy to say that I learned the lesson he was trying to teach me, and that my glass will always be half full, the unfortunate thing is that more and more I begin to realize that the World's glass is half empty, and something needs to be done about it.

Drought in China Diminishes Wheat Crops

I apologize for the lack of posts this month, as I have been extremely busy so far in 2009. I am currently preparing many articles and working on additions to this blog, to improve access to resources and events focused on SRI.

Climate scientists working for the United Nations' Intergovernmental Panel on Climate Change (IPCC) have forecast more catastrophic weather events in the near future: more floods, hurricanes, tornadoes, wildfires, and droughts. Mainstream media worldwide have already reported on the significant increased unpredictable and extreme weather events linked to global warming

Let's take a very brief glimpse at China’s water problems associated with climate changed-induced extreme weather events in the past two years:

• Begun on May 26, 2008, the 20-day torrential rains, floods, and landslides in the 15 provinces of eastern and southern China left more than 200 dead or missing and forced 1.3 million people to evacuate. The damages were estimated at $2.2 billion.
• In the first three months of 2008, China suffered a devastating drought in Liaoning Province, which left nearly 700,000 people without drinking water; approximately 66 reservoirs dried up, and 1,700 new wells were drilled in a desperate search for drinking water, according to Reuters and Xinhua. Also affected were 19.4 million hectares (48 million acres) of land and 3.3 million hectares (8.15 million acres) of cropland. Water is a serious problem in China: annually about 30 million rural and 20 million urban Chinese face drinking-water shortages.
• In mid-2008, Shanxi Province was also hit with drought: 560,000 people had no drinking water, according to Xinhua news agency.
• In mid-2007 in Liaoning, the worst drought in 30 years left more than 8 million people without water; nearly 90 reservoirs dried up and 25,000 wells could no longer supply enough water, and 1.4 million hectares of crops were damaged, according to Xinhua news agency. In Inner Mongolia Province, 870,000 people and 1.5 million livestock had no water (and many livestock died of hunger and thirst).
• In August 2008, Sichuan Province suffered the worst drought in 50 years, with no rain for more than 70 days: more than 10 million people had no drinking water, and economic losses totaled at least 9.9 billion yuan. Two-thirds of lakes and rivers dried up, and more than 200 reservoirs were extremely low; the Chongqing section of the Yangtze River was lowest in 100 years.

Today, I came across this news clip on Reuters titled 'Rare Drought Hits China'. In light of China's already severe water issues, I fail to understand how this drought is classified as 'Rare', but I believe it highlights the trends pointing towards an elevated price for wheat, due to a increasing uncertainty in supply from climate change induced weather events and water shortages.