Investing

SEC alert as investors flock to new ESG fund, plus talking energy with Andy Vesey

By David Callaway, Callaway Climate Insights

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t’s likely just a coincidence that the Securities and Exchange Commission’s risk alert for investors in ESG funds came out the same day as the record debut of BlackRock’s (BLK) new low-carbon ETF, but the timing couldn’t have been better.

Investors poured more than $1.25 billion into the BlackRock U.S. Carbon Transition Readiness ETF (LCTU) on Friday, which Bloomberg News said was the most cash ever invested on the first day in the 30-year history of exchange-traded funds. The BlackRock fund, which will invest in Russell 1000 companies geared toward the carbon transition, was trading about half a percent higher on Monday.

The SEC issued its risk-alert on environmental, social and governance funds later in the day. The alert didn’t mention BlackRock or any fund companies by name, but it did go into specific detail about the myriad of problems the regulator found in examining ESG funds, which investors should pay attention to.

From inconsistent disclosures and inadequate controls to misleading representation and, well, flat-out lying about proxy practices, the SEC’s alert revealed a shocking lack of compliance among funds and financial advisers with their stated ESG goals. The regulator did say it found many good examples of compliance and disclosure as well, but that’s not why it sent out the alert.

Most everyone in the fund industry probably could have predicted this, but before we move along to the next record low-carbon ETF launch, a few words about regulator follow-up.

Usually in these cases, the SEC spells out the issues, and may even issue a second warning. But at some point, someone is going to get nailed in a very public way. Only then will the fund community sit up and take notice.

The question is whether investors will care as long as the market is rising.

More insights below. . . .

Talking climate and carbon transition with Andy Vesey

. . . . Having run energy companies in both Australia and California, including PG&E Corp.’s utility business, energy entrepreneur Andy Vesey knows a thing or two about climate change, wildfires and carbon transition. That’s why I was thrilled to be the first guest on his new podcast series, Investing in Zero last week.

We discussed the impact young investors are having on the climate economy, the surge in renewable activity and the future of public vs private investment in pushing the economy into a long-term transition from fossil fuels. Please take a listen and enjoy. . . .

Monday’s insights: BlackRock’s record ETF launch, last-minute South Korea deal saves U.S. plants

. . . . BlackRock’s record launch of its new carbon transition ETF, likely led by massive institutional interest in the new fund, signals that despite some rocky weeks in environmental, social and governance investing, the ESG trend is more than a fad. Fighting global warming is a long-term strategy, which investing will enable. Read more here. . . .

. . . . An 11th-hour settlement between two South Korean battery makers saved the future of two U.S. massive manufacturing plants over the weekend and bore the imprint of a White House willing to ram home whatever it takes to stay competitive with China on electric vehicle growth. Coming alongside new climate talks between the U.S. and South Korea, the deal between SK Innovation and LG Energy Solution removed a threat that would have hobbled President Joe Biden’s climate change plans before they began. Read more here. . . .

Markets report: Electric vehicle stocks buck downtrend as climate stocks end lower for a second month

. . . . Climate stocks measured by the Callaway Climate Index fell last week to close out a second month of declines, though a group of electric vehicle stocks bucked the trend. Shares of Romeo Power (RMO), Canoo (GOEV), and Blink Charging Co. (BLNK), which provides charging equipment and networked EV charging services, all rose for the week. They offset declines in shares of Maxeon Solar Technologies, Sunworks (SUNW) and Sunnova Energy (NOVA). Read more here. . . .

Book review: Of rising tides and ‘dull-sighted men’

. . . . In Daniel Defoe’s first book, The Storm, 300 years ago, the famous author laments about the role “dull-sighted men” played in one of Britain’s great natural tragedies of the early 1700s, writes Jack Hamilton in his book review of Jeff Goodell’s The Water Will Come. Hamilton, who recently won the Goldsmith Prize for his own book, Manipulating the Masses: Woodrow Wilson and the Birth of American Propagandawonders if that same hubris will become the epigraph for our watery future in places such as Miami and New York. Read the review here. . . .

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