What happens to investing strategies focused on ESG during a market downturn or when oil prices nosedive? The short answer is no one knows.
ESG investing has become a $30 trillion-plus industry following the financial crisis of 2008. The premise is that companies scoring well on factors such as diversity, health and safety, and managing carbon risk will do better than their peers.
Yet ESG is untested in times of extreme stress, particularly with short-term market disturbances. We simply don’t know how investors and fund managers will act when squeezed for returns.
Some investors are proving to be sticky. A Bloomberg Intelligence analysis of ESG exchange-traded funds during the last week of February found that only 8% of US ESG ETFs saw outflows, compared to almost 25% of all ETFs – despite some of these indexes being down ~20%.
One positive side effect that has correlated with tough times in the market and current pandemics is the reduction in carbon emissions. In 2009 the US produced 10% less carbon emissions and China over the last 3 months has produced 25% less than the rolling average.
While that may be a “win” for ESG - it does raise an uncomfortable question. What happens to ESG when doing good isn’t necessarily the same as doing well?
Digital banks, payments startups face their first major test and are prepared - Many fintech companies are experiencing a market slump for the first time. These companies, including portfolio company MoneyLion, are prepared and believe they are positioned well to acquire, keep, and expand their customer base in turbulent times. Read more
Embroker shares insurance coverage for COVID-19 cases. - Matt Miller, Founder and CEO of portfolio company Embroker, explains what small businesses are up against when filing claims relating to coronavirus. Coverage that can protect small business owners in this outbreak include D&O insurance. Following the SARS outbreak, the insurance industry does not have policies for first-party losses as a result of business disruption. Read more
Do Well Or Do Good?
When the (Environment, Social, and Governance) ESG "Report Card" finally arrives - If things continue like the past few weeks, it may be a little tough to prove the case for ESG investing based on stock market returns this year. The question then becomes whether ESG investors are producing real-world outcomes. What kind of report card will scientists, rather than Wall Street, give them? Read more
For richer or poorer: coronavirus, cheap oil test climate vows - In 2009, global carbon emissions fell to 31.5 gigatons from 32 gigatons, but as the global economy recovered, emissions jumped to 36.8 Gt in 2019, a record high. Coronavirus has dropped China emissions by a reported 25% but low oil and gas prices could reduce incentives to wean the big emitting countries off fossil fuels. Read more
Millennials’ passions haven’t affected how they invest - Despite feeling strongly about the environment and other causes, most millennials have never heard of, or don’t fully understand, ESG investing. Read more
Stocks rout poses a $30 trillion ethical test - Socially responsible investing, which has become a feature of the financial landscape and a $30 trillion-plus industry, came of age long after the last major financial crisis. ESG will be put to the test during the tenous market where the performance will be the determining indicator of success. Read more
Sequoia is giving away $21 million to Finix, as it walks away from the deal in led - Seqouia has given up its ownership citing a conflict of interest with Stripe. Stripe did not ask Sequoia to walk away from Finix — that's a decision the VC firm made on its own, it is unclear if Sequoia's LP's will be refunded. Read more
‘Rent-a-Banks’ defy states’ growing efforts to curb high-cost lending - A new California state law passed this year capped interest rates for some consumer loans at about 37% a year. But OppLoans is charging 160% on a typical loan in California, according to its website, using a partnership with a Utah bank to continue selling in the state despite the new rules. Read more
Robinhood App is down again - Robinhood customers were locked out of trading for the second time in a week as stocks were routed Monday morning. The company may compensate customers who have subscribed to Robinhood Gold, the company's premium subscription. Read more
Surge in sanctions lifts compliance services - A surge in economic sanctions and a tangled web of international blacklists are overwhelming in-house compliance staffs and lifting the ledgers of third-party compliance services. Fines issued by OFAC, which enforces U.S. sanctions, issued about $1.29 billion in penalties against 22 companies in 2019, compared with $71.5 million against seven companies in 2018. Read more
Salary Finance acquires Goldman-backed rival Neyber - Salary Finance, a London-based startup focused on salary-linked savings and loans for employees, has acquired Goldman Sachs-backed rival Neyber, significantly expanding its reach across UK workforces. The combined company will now serve 500 clients and reach 3 million employees. Read more
Stocks extend sell-off after trading resumes, S&P 500 down more than 7% - Trading was halted in the U.S. for the first time on Monday after hitting the circuit breaker triggered by a 7% decline. Circuit breakers in the U.S. were first instituted by U.S. exchanges after the 2008 financial crisis. Read more
Real estate platform Orchard adds new features to home search portal - The startup, formerly Perch, is sprinting towards its goal of having a fully integrated home buying and selling platform, from title and mortgage services to its tech-focused real estate brokerage to a consumer search portal. Read more
Akur8 - Paris based insurance pricing SaaS startup raised €8m ($8.9m) in a Series A funding round led by BlackFin Capital Partners and MTech Capital. Read more
Albert - Los Angeles based digital challenger bank raised $50m in Series B funding led by CapitalG, Alphabet’s independent growth fund. Read more
Goodlord - London based rental management platform raised £10m in Series B funding co-led by Finch Capitaland Latitude Ventures. Read more
GrainChain - Texas based agricultural commodity blockchain platform raised $8.2m in Series A funding led by Medici Ventures, the investment arm of Overstock.com. Read more
Human Interest - San Francisco based retirement plan provider for SMEs raised a $40 million Series C round led by Oberndorf Enterprises LLC. Read more
Inbox Health - New Haven, Connecticut based patient engagement, communication, and payment platform raised a $3.5m funding round led by Healthy Ventures. Read more
NorthOne - New York based digital challenger bank focused on small businesses raised $21m in Series A funding led by Battery Ventures. Read more
Overhaul - Austin based supply chain tech and compliance startup raised $17.5m in Series B funding led by Edison Partners. Read more
Rivet - Utah based healthcare pricing SaaS startup raised $8.25m in Series A funding led by Menlo Ventures. Read more
SpotOn - San Francisco based POS and payments startup focused on SMBs raised a $50m Series B led by 01 Advisors. Read more
Synthesized - London data-sharing platform for the insurance industry raised $2.8m in Seed funding co-led by IQ Capital and Mundi Ventures. Read more
Zumper - San Francisco based rental platform raised $60m in Series D funding led by e.ventures. Read more
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