The week in investor relations: Social issues, active ETFs and climate risk

Buy side

– Investors taking part in an SEC roundtable called for more corporate disclosure on social issues, such as diversity and human capital, reported Cooley PubCo. The roundtable discussed how US companies should approach second-quarter reporting. One investor participant ‘predicted that, once Covid-19 and its economic impact were under control, in his view, the biggest topic for boards would be social issues,’ said the article.

– Companies are seeing growing pressure from the investment community to reveal more information about racial diversity, according to Reuters. US companies with more than 100 staff already report on diversity through an annual form, the EEO-1, but they are not required to publicly release it. ‘The EEO-1 is not the Holy Grail, but it’s an excellent starting point,’ said Calvert Research and Management CEO John Streur.

– Active investment is making a comeback through actively managed ETFs, reported the Financial Times (paywall). This year for the first time there have been more launches of actively managed ETFs, which do not follow an index, than ETF index trackers in the US, said the newspaper, citing data from FactSet and ULTUMUS.  

– The FT noted that, with the odds growing on a win for Joe Biden in the US presidential election in November, investors are starting to consider how they would adapt their portfolios if the Democrat wins. One investor said a partial reversal of US President Donald Trump’s corporate tax cut could hit corporate earnings in every sector. Others see opportunities in healthcare and clean energy.

ESG

– Banks and insurance firms were told by the Bank of England (BoE) to use new guidance to investigate how climate risk will affect their businesses, reported Reuters. The guidance was released by the Climate Financial Risk Forum, a body created last year by the BoE and the UK’s Financial Conduct Authority. 

– The Covid-19 pandemic could prove a key turning point in ESG integration by investors, according to a report from JPMorgan, which was covered by CNBC. Hugo Dubourg and Jean-Xavier Hecker, who head the bank’s sustainability research, wrote in the report: ‘The Covid-19 crisis has not only brought on the greatest recession since World War II, but investors are also calling it the 21st century’s first ‘sustainability’ crisis and one that has renewed the focus on climate change, acting as a wake-up call for decision-makers to prioritize a more sustainable approach to investment.’

Markets and companies

– Trading volume on the DAX index fell 35 percent on Wednesday during a three-hour-long technical problem on Deutsche Börse, reported Bloomberg. Volumes also fell substantially in Budapest and Prague, where the exchanges share Deutsche Börse’s technology platform. Trading was already light given the US public holiday on Friday and with many traders away on vacation, noted the article.

– Tesla overtook Toyota to become the world’s most valuable carmaker, reported the BBC. Shares in the electric carmaker have risen strongly this year, despite the Covid-19 pandemic and a tweet from CEO Elon Musk that said the company was overvalued. Toyota sold 30 times more cars than Tesla last year, added the article.

And to recap, here are IR Magazine’s stories posted this week:

– IR budgets hit by Covid-19 disruption
– The importance of debt IR: Ticker 117
– Markets not out of the woods yet
– The changing face of financial reporting on social media
– Wednesday winner: Blackbaud’s use of social media
– Impact investors favor climate impact, study finds
– ESG ratings added to Spanish service for companies without analyst coverage