A clarifying time for sustainable investing

Sustainable investing is languishing in the US – at least as a mainstream concept – as the biggest asset managers cut products and show less support for ESG in proxy votes.

Money has been pouring out the category, too. Last year, about $19.6 billion left US open-end mutual funds and ETFs with sustainable strategies, data from a recent Morningstar report show.

Amid that, fund shops closed or repurposed 55 funds, up from 45 in 2023. Fund launches plummeted compared with those of recent years, with just 10 products appearing on the scene in 2024, according to Morningstar.

And facing pressure from politicians at the state and federal level, the biggest asset managers showed far less support for shareholder resolutions with environmental, social, or governance aims than they did in the past. All those factors put the US at odds with other countries across Europe and Asia, where sustainability has continued to attract assets and attention.

That might make it sound like it’s a difficult time to guide clients on sustainable investing – but advisors say that’s not necessarily the case. Although big firms like BlackRock and Vanguard have distanced themselves from the category, there are plenty of others that, so far, appear less willing to back off from ESG.

“I view it as a natural market correction – one that clarifies which firms are truly committed to ESG and which were just riding the trend. For advisors, this means we have to be more selective, focusing on funds and strategies with strong, transparent sustainability mandates rather than those that simply checked the ESG box for marketing purposes,” said Daniel Milks, cofounder of Woodmark Advisors, in an email.

The politicization of ESG has frustrated clients, though the demand hasn’t subsided, he said.

“Because of that, some are looking beyond ESG to alternative approaches like biblically responsible investing (BRI) or broader ethical investing, which often provide clearer alignment with personal values without the baggage that ESG has accumulated,” he said.

Last year, BlackRock supported 10 percent of major ESG-themed shareholder resolutions, down from a rate of 52 percent in 2021, according to a separate Morningstar report last week. Vanguard supported zero such resolutions, compared with a high of 37 percent in 2021. Other firms that don’t market themselves as sustainability shops had much higher rates of support for ESG resolutions. For example, Principal voted in favor of 90 percent last year, while Pimco did so for 96 percent, and Franklin Templeton supported 75 percent, Morningstar found.

While the high number of sustainable fund closures last year hints at a retreat from ESG commitments due to political pressure, performance has also been a headwind for many sustainable funds recently, said Daniel Masuda Lehrman, founder of Masuda Lehrman Wealth, in an email.

“The next few years will likely reveal which asset managers are genuinely committed to sustainability and responsible investing,” he said. “The bright side is that this allows investors to better identify investment firms that prioritize long-term ESG strategies.”

Those who see the value and responsibility in sustainable investing will remain committed to it, despite ongoing political pushback, advisors said.

“Sustainable investing has come a long way in recent years. Eighty-five percent of large-cap companies now report carbon emissions data because investors demand it. Rating a company on ESG criteria has become more straightforward as available data becomes increasingly standardized,” said Cathleen Tobin, owner of Moonbridge Financial Design, in an email. “By rewarding the companies with the strongest ESG practices and avoiding the worst offenders in each sector, a high-quality ETF can maintain the diversification needed to perform comparably to major indices like the S&P 500 or Russell 3000, if that is a stated objective.”

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Farmland in England to be reduced by more than 10% under government plans

By: Helena Horton - Guardian

Grassland for livestock faces largest cut, so people will be encouraged to eat less meat, says environment secretary

Farmland in England will be reduced by more than 10% by 2050 under government plans, with less meat produced and eaten by the country’s citizens.

The environment secretary, Steve Reed, launched the government’s blueprint for land use change on Friday, designed to balance the need to build infrastructure and meet nature and carbon targets.

Grassland, used to rear livestock, faces the largest reduction under government plans. This meant, Reed said, people would be encouraged to eat less meat.

Reed explained: “I’ll speak to consumers about the choices that they’re taking there. We know we need to develop a food strategy. If we can give parents better information to make better informed choices, they will do that. I’m sure that there will be no mandate from government about that, but I’m sure those informed choices will then affect what farmers grow, and producers and manufacturers provide, to meet the demands as that changes.”

He added that farmland that was currently flooded most years should not be used for growing food and could potentially be put to better use if it was restored for nature.

Reed said: “Into the future it is probably not a good idea to keep growing crops in fields like that, because your investment will get destroyed. But what a great location, perhaps, to plant more vegetation, more trees, to help reduce flooding in a nearby urban area.”

Reed added that while the government was “not going to tell farmers what to do”, “levers and incentives” would be used to ensure land was used in the most efficient way.

Government officials have produced maps of England showing where there is the most potential for different types of nature restoration, and where it is best to farm. Farmland will be used more intensively under the guidelines, producing more food in less space. Some areas have been highlighted that need to be protected, such as rare peatland and places with high potential for woodland to be grown.

Some arable land will be lost under the plans, as large areas next to rivers will have to be kept free for the government to meet its river cleanliness targets, for example with trees planted to soak up nutrient pollution in the waters.

Martin Lines, the chief executive of the Nature Friendly Farming Network, said: “For too long, land use has been viewed in narrow or binary terms, often pitting food production against nature, or farming against biodiversity restoration. We must acknowledge that most of our land can deliver on multiple fronts, safeguarding food production, mitigating climate change and protecting nature. The focus must be on maximising the benefits land can provide by embracing its multifunctionality, rather than limiting it to single uses.”

The National Farmers’ Union warned that the framework should not hinder farmers in producing food. Tom Bradshaw, the NFU’s president, said: “Over the past 18 months, the UK farming industry has taken a battering. Volatile input costs, commodity prices on the floor in some sectors, a reduction in direct payments, one of the wettest periods in decades, and a brutal budget delivered by this government. All have left their mark and have put homegrown food production under serious pressure. It’s imperative this framework does not further restrict farmers’ ability to produce the nation’s food.”

In recent weeks, environmental groups have been concerned that the government is pitting growth against the climate and the target of net zero by 2050. But Reed made a full-throated defence of nature’s role in the economy and said it had to be a thread running through the government’s decisions. He said: “This is a government that is absolutely committed to protecting and restoring nature. It runs through all of the plan for change, the government’s plans, and it is present in all of the missions, it’s in all the speeches. We are working on commonsense changes that create a win-win for nature and the economy, and the land use framework is a significant part of that.”

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CenterPoint Energy settles rate case, will lower power costs for customers

By Pavan Acharya, The Texas Tribune

“CenterPoint Energy settles rate case, will lower power costs for customers” was first published by The Texas Tribune, a nonprofit, nonpartisan media organization that informs Texans — and engages with them — about public policy, politics, government and statewide issues.

More than six months after CenterPoint Energy came under fire for its response to Hurricane Beryl — and its proposal to raise its rates — Houston’s main electricity company announced Wednesday that it reached a settlement that will lower customers’ bills.

Instead of the proposed rate increase that the company had requested shortly before Beryl made landfall, most CenterPoint Energy customers will have their average bill reduced by about $1 per month moving forward — pending approval from the Public Utility Commission of Texas.

Centerpoint withdrew its rate increase proposal on Aug. 1 amid the Beryl backlash.

“Following customer feedback and constructive discussions with intervening parties over the last several months, this plan keeps our customers at the forefront and supports CenterPoint’s ultimate goal of building the most resilient coastal grid in the country,” Jason Ryan, CenterPoint’s executive vice president of regulatory services and government affairs, said in a Wednesday statement.

CenterPoint faced public outrage and sharp criticism from Texas lawmakers after more than 2 million households and businesses lost power after Beryl struck the city, prompting a public apology from the company’s CEO. At least 23 people in Texas died from the storm and associated power outages. Beryl also caused about $1.2 billion to $1.3 billion in damages to CenterPoint’s electrical infrastructure.

Texas Gov. Greg Abbott criticized the utility for its response to Beryl, which left hundreds of thousands of customers in Houston without power nearly a week after the hurricane struck. In July, he said the state may have to reconsider how much territory CenterPoint could serve if the company didn’t “fix its ongoing problems.” CenterPoint serves more than 2.6 million customers across the greater Houston area and coastal communities like Galveston.

In addition to calling on CenterPoint to create a detailed plan about how it would restore power, the governor also asked the PUC to investigate the utility’s response. The PUC presented their findings in a November report that said customers had trouble getting reliable information during Beryl and recommended that lawmakers pass legislation requiring utility companies to provide information about power restoration during outages.

The same investigation also recommended more than a dozen improvements to CenterPoint’s emergency plans, communications and vegetation management. The PUC announced in November that it would also hire an outside company to audit CenterPoint, with results expected in April.

In August, Attorney General Ken Paxton also opened a criminal investigation into CenterPoint to examine allegations of fraud, waste and improper use of taxpayer funds.

After Beryl hit, CenterPoint President and CEO Jason Wells vowed to improve the company’s communications and the electrical system’s resiliency. In early August, CenterPoint launched a new outage tracker. The previous tracker had been offline for several months before Beryl struck.

During its Beryl response, CenterPoint also faced criticism for not utilizing massive generators designed to help during extended power outages. The PUC had allowed CenterPoint to charge its customers to help pay for the $800 million needed to lease the generators and make a profit.

In Wednesday’s statement, CenterPoint said it “would make no revenue or profit off of the temporary emergency generator proposal,” suggesting that customers would no longer be on the hook to help pay for the generators. The change comes after lawmakers, including Lt. Gov. Dan Patrick, called on the PUC to block CenterPoint from passing that cost onto its customers.

CenterPoint is also proposing moving the emergency generators to the San Antonio area for two years starting this spring to help the Electric Reliability Council of Texas, which manages the state power grid, address any potential energy shortfalls this summer. The proposed change is subject to approval from ERCOT.