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July 15, 2021

DISCLOSURE COULD LEAD TO ‘GREENWASHING’

Without establishing standards for labelling environmental, social, and governance (ESG) products, the CFA Institute’s proposed disclosure standards could lead to more “greenwashing” of investment funds, says the Investment Funds Institute of Canada. In May, the CFA updated its initial consultation paper that sought to match common client needs with six “ESG-related features” of funds. The draft disclosures aren’t meant to be a labelling standard and don’t require funds to meet certain thresholds to be considered ESG, sustainable, responsible, or impact. Instead, fund companies would provide a three- to five-page “compliant presentation” outlining a fund’s ESG components. The Investment Funds Institute submission says, “This limits their direct utility in providing advisors and retail investors with succinct and accessible information for identifying and comparing ESG products and aligning products with investment goals.” It says the CFA should continue the work that was started in last summer’s consultation paper and develop standards for naming products. “Without naming and categorization standards and established minimum standards for ESG product features, investors could confuse a ‘compliant presentation’ with one that achieves a standard of ESG investment practice,” IFIC says. “In other words, the standards could facilitate rather than mitigate ‘greenwashing.’”

July 15, 2021

CRYPTO EXPOSURE TO INCREASE

Institutional investors and wealth managers who have experimented with crypto markets expect to increase exposure, says research from Nickel Digital Asset Management. Its international survey found 82 per cent will increase holdings of cryptocurrencies and digital assets. Nearly half said they would “dramatically” increase their holdings, although eight per cent said they will reduce or completely sell their holdings. Anatoly Crachilov, chief executive of Nickel, says, “The number of institutional investors and corporates holding bitcoin and other crypto-assets is growing and their confidence in the asset class is also increasing.” Its analysis at the start of June this year revealed that 19 listed companies with a market cap of over $1 trillion had around $6.5 billion invested in bitcoin, having originally spent $4.3 billion buying the cryptocurrency. As well, $43.2 billion worth of bitcoin is held through various bitcoin closed-ended trusts and exchange-traded products. Other findings show long-term capital growth prospects are the main reason (58 per cent of respondents) for investing and 38 per cent said they had become more comfortable and confident in holding the asset class, As well, 34 per cent said an improving regulatory environment was also a key factor in wanting to increase their allocation.

July 15, 2021

PALLADIUM PRICES GOING HIGHER

Tighter emissions controls are expected to drive palladium prices higher prompting almost half of European pension funds looking to go overweight in the metal, says a study by the Global Palladium Fund. It says palladium is the most expensive of the world’s most important precious metals due to its rarity and the difficulty mining it. Its price has surged over the past five years, rising from $500 per ounce to around $2,700. However, a production deficit and tighter emissions standards in Europe and China have caused demand for the metal, which is used in catalytic converters to scrub exhaust emissions from gasoline-powered vehicles and in exhausts of the hybrid electric vehicles, is set to increase. Its research shows European institutional investors are positive about the outlook for palladium as demand for catalytic converters increases, with 55 per cent expecting the price to reach between $2,801 and $3,000 an ounce in the third quarter of 2021, with a further 18 per cent expecting it to range between $3,001 and $3,200. The study shows that 43 per cent of pension funds are expecting to increase their allocation to palladium over the next 12 months, compared to 15 per cent who expect to underweight the metal.

July 15, 2021

WTW JOINS NET ZERO

Willis Towers Watson (WTW) has joined the ‘Net Zero Asset Managers Initiative’ in its capacity as an OCIO (outsourced chief investment officer) provider. This follows its previous net zero commitment across 100 per cent of its discretionary assets around the world which is fully aligned with the ‘Net Zero Asset Managers Initiative’ objectives. As part of the initiative, it will work in partnership with other stakeholders to enable and support the system level change required for the transition to a net zero economy.

July 15, 2021

INVESTORS FAR LESS BULLISH

Investors are far less bullish on global growth and profit expectations, says the Bank of America’s ‘July Global Fund Manager Survey.’ It shows global growth expectations have dropped 28 percentage points on a month-over-month basis to net 47 per cent in July, down from the peak of 91 per cent in March. Profit expectations have also peaked, now at net 53 per cent among survey respondents, down 14 percentage points from June and down from the 89 per cent peak in March. In addition, inflation expectations among fund managers have also dropped considerably, with net 22 per cent of saying they expect higher inflation in the next 12 months, down 42 per cent from the previous month’s survey.