The week in investor relations: ETF inclusion hurts performance, investors back late-cycle stocks and climate rebellions mount
– US large-cap stocks commonly held by ETFs underperform compared with companies that have lower ETF ownership, according to the Financial Times (paywall). The research, conducted by Vincent Deluard, global macro strategist at StoneX, says the poor performance has become more pronounced over recent years. The findings add to concerns by some investors that ETFs lead to crowding in popular stocks, creating bubbles that later burst.
– The International Energy Agency said investors should shun new investments in oil, gas and coal to help the world reach net-zero carbon emissions by 2050, reported Reuters (paywall). The global energy agency made the call in a new report that sets out 400 milestones to achieve the net-zero target. Reuters noted that such a dramatic halt to new projects seems unlikely given the current plans of businesses and governments.
– Fund managers are investing in ‘late cycle’ opportunities and have upped exposure to areas such as commodities, banks, the UK and emerging markets, according to Marketwatch, which cited data from a monthly survey of investors by Bank of America. In terms of potential interest rate rises, respondents have brought forward their expectations for a first hike by the Federal Reserve to November 2022, versus January 2023 in the April edition of the survey.
– The Financial Reporting Council (FRC), the UK’s financial reporting watchdog, called on companies to offer ‘better explanations [of] balance sheet movements’ in their interim reports, according to Accountancy Today. In the same announcement, the FRC said it was broadly pleased with how companies have approached interim reporting and noted that most have taken its guidance on Covid-19 disclosure into account.
– US President Joe Biden ordered the federal government to investigate ways to reduce the risk of climate change on financial assets, reported CNBC. As part of the order, Janet Yellen, the Treasury Secretary, is required to produce a report covering financial risk data. ‘The agency actions spurred by the president’s directive today will help safeguard the financial security of America’s families, businesses and workers from the climate-related financial risks they are already facing,’ noted a White House factsheet.
– Shell suffered a shareholder rebellion at its AGM where 30 percent of votes backed a resolution from Follow This, a climate activist group, calling for binding emissions-reduction targets, reported the Guardian. Last year, a similar proposal received 14 percent of votes. Under UK governance rules, Shell must now consult with shareholders about the issue and report back in six months. Last week, a resolution from Follow This at BP’s AGM received 21 percent of votes, also doubling its support from last year.