MAIN MENU

#WellSaid

Our investment professionals share and challenge each other’s views, creating a diverse marketplace of ideas for the Wellington Blog.

SUSTAINABILITY

The “plum rains” of Taiwan’s monsoon season, or Meiyu, have started to fall, bringing a modicum of relief to the island’s worst drought conditions in over 50 years and enabling manufacturers and technology investors to exhale — at least temporarily. While the weather forecast in Taiwan would not normally make financial headlines, the island’s exposure to climate risk, current severe water shortage, and reliance of its large semiconductor industry on water have the global business and investment community on alert.

Global semiconductor hub

Taiwan produces 50% of the world’s semiconductors and 92% of the high-end transistors used in advanced technology applications like autonomous driving and high-performance computing. Any disruption in local manufacturing could short circuit the global technology supply chain. The overarching risk to semiconductor fabrication in Taiwan is lack of water. Semi fabrication requires enormous amounts of water: the typical chip factory consumes between two and four million gallons of water per day; larger companies use even more. Without sufficient water to power and cool chip fabrication, production…

SUSTAINABILITY
Santiago Millan headshot
Santiago Millán
CFA
Macro Strategist
Hong Kong
Jenny Xie
Jenny Xie
Climate Physical Risk Analyst
Boston

A climate-driven capital cycle is underway, and we believe companies must invest in low-carbon solutions to protect and grow the value of their assets and strengthen competitive positions. In our view, companies that prioritize environmental stewardship and establish clear climate strategies can be first movers and market leaders that profit from the low-carbon transition and deliver value for investors.

Identifying — and encouraging — climate leadership

We want all portfolio companies to achieve net-zero greenhouse gas (GHG) emissions by 2050 and set science-based targets to accomplish this. We look for companies that view climate planning as a strategic priority. We seek businesses adapting to changing regulations and positioning themselves to capitalize on evolving governmental incentives and consumer preferences. During our engagements, we ask boards and management teams to embrace low-carbon practices and align business plans with the Paris Agreement to cap global temperature rise to 1.5°C. We seek leadership on supplier practices and sustainable product innovation as a way to reduce indirect emissions. Our proxy voting policies are aimed at…

SUSTAINABILITY
Mark Mandel
Mark Mandel
CFA
Equity Portfolio Manager
Boston
Yolanda Courtines
Yolanda Courtines
CFA
Equity Portfolio Manager
London

The challenges of the past year have highlighted the potential for environmental, social, and governance (ESG) factors to become even more relevant to the investments we make on our clients’ behalf and have underscored the increasing importance of stewardship by fiduciaries and active investors. In 2020, an unprecedented number of our corporate engagements included ESG topics, a trend we think will continue in 2021 and beyond. In particular, we expect many conversations to address executive compensation and climate change, along with diversity, equity, and inclusion (DEI).

video-iframe

SUSTAINABILITY
Carolina San Martin Headshot
Carolina San Martin
CFA
Director, ESG Research

At Wellington, we have long believed that strong environmental, social, and governance (ESG) ratings and characteristics can generate value for shareholders and improve a company’s long-term investment performance. We believe this applies broadly across market sectors and have established frameworks — what we call “research playbooks” — for evaluating companies within each sector based on various ESG criteria that we deem to be of material importance.

Here we look at the health care sector, to be followed by other market sectors in future blog posts by our ESG team.

Key ESG issues for the health care sector

ESG is of course just one input into our investment team’s multi-pronged fundamental analysis of…

SUSTAINABILITY
lindsay blitstein
Lindsay Blitstein
CFA
ESG Analyst
Boston
Carolina San Martin Headshot
Carolina San Martin
CFA
Director, ESG Research

I’ve always liked this quote from the movie The Incredibles and finally have a work-related context in which to use it. From an environmental, social, and governance (ESG) investment standpoint, its logical extension is: “When everyone’s super, no one will be. And valuations of similar companies should converge.”

What this means is that, as ESG issues become more mainstream across industries, the “uniqueness” that differentiates individual companies may begin to dim over time, which could result in more uniformity among companies in the eyes of shareholders, customers, and…

SUSTAINABILITY
Andrew Corry
Andrew Corry
CFA
Equity Portfolio Manager
Boston

Over the next 20 years, trillions of dollars are likely to be spent modernizing the global electric grid to accommodate increased “electrification” and the growing dominance of renewable energy sources.

We believe regulated electric utilities are an underrecognized way to invest in the energy transition and can be attractive investments due to their high growth potential and stable return profile. With relative valuations recently at 15-year lows, we think electric utility stocks look particularly attractive versus the broader equity market in today’s environment.

Capitalizing on the energy transition

As the world shifts toward a low-carbon economy to stem the effects of climate change, decarbonizing the global energy sector will be critical. The clean energy, clean transport, and electricity sectors may experience unprecedented…

SUSTAINABILITY
Tom Levering
Tom Levering
Global Industry Analyst
Boston
Timothy Casaletto
Timothy Casaletto
CFA
Global Industry Analyst
Boston
ken Baumgartner
Ken Baumgartner
CFA
Investment Director
Boston

Recently, a few people have asked me a version of: “So, when will we start to see some climate events?” I can interpret this question in one of two ways. They either believe worsening hurricanes, wildfires, floods, and other climate events are simply bad weather, or they are displaying a cognitive bias, where bad memories associated with disturbing events fade quickly.

Investors risk becoming desensitized to the increasing frequency and severity of climate-related events and discounting the long-term consequences for capital markets of a changing climate. It would be difficult to dismiss the many record-breaking (and near-record-breaking) climate events that occurred in 2020 (and recent years) as a spate of “bad weather.” Devastating hurricanes, floods, and wildfires are occurring more frequently, and climate models project similar increases in the probability of…

SUSTAINABILITY
Chris Goolgasian
Chris Goolgasian
CFA, CPA, CAIA
Director of Climate Research
Boston

How to incorporate environmental, social, and governance (ESG) research and ratings into fundamental security analysis can be a vexing question for investors. The connection of ESG issues to equity returns isn’t always clear and disconnects can persist for companies that screen well on fundamentals but poorly on ESG. As ESG-focused investors with extensive fundamental investing experience, here are some ways we help our colleagues think about applying ESG to their investment process.

Yolanda’s perspectives

Look for red flags. I see ESG as a cost-of-equity scaler. The more material ESG red flags there are, the more concerns the market may have about a company’s financial risks. These concerns can reduce the likelihood for strong fundamental performance to translate reliably into strong share-price performance over the long term. Conversely, the more a company’s ESG profile improves and concerns abate, the more the stock’s…

 

SUSTAINABILITY
Yolanda Courtines
Yolanda Courtines
CFA
Equity Portfolio Manager
London
Mark Mandel
Mark Mandel
CFA
Equity Portfolio Manager
Boston

The Biden presidency, bolstered by Democratic majorities in the US Senate and House of Representatives, indicates a paradigm shift in climate policy at the highest levels of government. Along with immediately rejoining the Paris Agreement, President Biden has announced ambitious plans to position the US as a global leader in several climate-related areas, including clean energy, clean technology, and sustainable infrastructure.

Biden’s plan views climate change as an “existential threat — not just to our environment, but to our health, our communities, our national security, and our economic well-being.”1 The initiative also includes language linking clean energy with job growth, a connection I’ve been…

SUSTAINABILITY
Chris Goolgasian
Chris Goolgasian
CFA, CPA, CAIA
Director of Climate Research
Boston
Load More

Archive

The US military defines a “complex catastrophe” as a “natural or man-made incident […] which results in cascading failures of multiple, interdependent, critical, life-sustaining infrastructure sectors and causes extraordinary levels of mass casualties, damage, or disruption severely affecting the population, environment, economy, public health, national morale, response efforts, and/or government functions.”1

Working with Wellington’s Climate Research Team, our Global Macro Team is studying the macro, market, and geopolitical implications of climate change. We see climate change as a complex catastrophe in the making, with the potential to exacerbate geopolitical instability and multiply threats to economic and national security. Governments, including the US, China, and European Union, are beginning to treat climate change as a structural peril. Under the Biden administration, climate change has…

MACRO
SUSTAINABILITY

ARCHIVED

Thomas Mucha
Thomas Mucha
Geopolitical Strategist
Boston

Did you know?

  • Renewables are expected to meet nearly 30% of power demand in 2023.1
  • Efficient production and use of materials could help cut CO2 emissions by 25 gigatons.2
  • The world consumed 92.1 billion tons of material in 2017.3

Amid recent natural disasters and growing awareness, climate change has become a focus of social discourse, and we believe the ranks of market participants seeking solutions are growing. Many impact issuers contribute to environmental sustainability and help society better prepare for climate change. Here we share some of the environmental and climate-related innovations we are…

SUSTAINABILITY

ARCHIVED

Tara Stilwell
Tara Stilwell
CFA
Equity Portfolio Manager
Boston
Campe Goodman
Campe Goodman
CFA
Fixed Income Portfolio Manager
Boston
Climate 101 is an ongoing series designed to enhance basic understanding of climate change, including terminology and concepts, and to communicate our current research themes.

Author and financial commentator Nassim Taleb introduced the concept of black swans, rare occurrences — often macro or market shocks — viewed after the fact as obvious or bound to happen, but that were difficult to predict or prepare for. Carbon prices may be black-swan-like for their potentially substantial impact on markets coupled with a lack of collective preparation or understanding. Let’s call them green swans.

What are carbon prices and why do they matter?

Carbon prices are costs, or taxes, placed on each metric ton of CO2 produced. The objective of a carbon price — derived via regulation or the market — is to…

SUSTAINABILITY

ARCHIVED

Alan Hsu
Alan Hsu
Global Industry Analyst
Boston

Did you know?

  • A 10% increase in mobile broadband adoption may correlate with up to 2.8% increase in GDP.1
  • Each grade a child completes may raise his or her earning potential as an adult by 10%.2
  • Small businesses employ 50% of workers worldwide and create seven of 10 jobs in emerging markets.3
  • By some estimates, cybercrime costs an estimated US$600 billion annually, or nearly 1% of global GDP.4

In many ways, these are the modern essentials: broadband internet and mobile technology; online education and financial services; and home, workplace, and product safety. These products and services help people climb the socioeconomic ladder, become more productive and competitive, and contribute to economic growth.

Digital divide

Internet access can make getting an education or a job or accessing financial services easier by increasing users’ productivity, providing agency, lowering costs, and enabling transparency. In many countries, the digital gaps between rich and poor, and between men and women are still…

SUSTAINABILITY

ARCHIVED

Tara Stilwell
Tara Stilwell
CFA
Equity Portfolio Manager
Boston
Campe Goodman
Campe Goodman
CFA
Fixed Income Portfolio Manager
Boston

Did you know?

  • Access to affordable housing may be one of the most cost-effective ways to reduce childhood poverty.1
  • Global demand for fresh water is expected to grow by 70% by 2050.2
  • Immunization prevents between two and three million deaths every year.3
  • One in nine people suffer from hunger, and one in three are malnourished.4

Meeting basic human needs like access to health care, affordable housing, clean water, and sustainable food sources may not seem like a compelling thesis for active investors seeking to outperform market indices. But we have found that disruptive impact issuers working to solve the world’s most pressing problems are often underappreciated market opportunities with…

SUSTAINABILITY

ARCHIVED

Tara Stilwell
Tara Stilwell
CFA
Equity Portfolio Manager
Boston
Campe Goodman
Campe Goodman
CFA
Fixed Income Portfolio Manager
Boston
Climate 101 is an ongoing series designed to enhance basic understanding of climate change from an investment point of view, and to communicate our current research themes and areas of focus for our clients.

Carbon emissions from the production and consumption of fossil fuels are the primary cause of climate change. Increasing atmospheric concentrations of greenhouse gasses (GHGs) are changing climate patterns, warming the earth’s surface, and exacerbating physical climate risks. Signatories of the 2016 Paris Agreement named reducing heat-trapping emissions as the most important step in reaching their goals. Since then, governments, companies, and market participants have been aiming to quantify, benchmark, and track emissions associated with their activities. Here we offer a high-level description of carbon emissions and describe industry efforts to standardize their…

SUSTAINABILITY

ARCHIVED

Chris Goolgasian
Chris Goolgasian
CFA, CPA, CAIA
Director of Climate Research
Boston
Julie Delongchamp
Julie Delongchamp
CFA
Climate Transition Risk Analyst
London
  • A town in Siberia near saw the mercury hit 38°C (100.4°F) in June.
  • May 2020 tied for the warmest May on record, globally.
  • In Florida, heat and humidity levels are breaking overnight high-minimum records.

Highs are getting higher

The assumption that the planet needs to warm by an average of 2°C before heat becomes an issue obscures the risks of extreme heat. Abnormally high temperatures during heat waves or planting and harvest seasons can be devastating. According to projections, within the next few decades, numerous regions will experience many more days with average daytime temperatures over…

SUSTAINABILITY

ARCHIVED

Jenny Xie
Jenny Xie
Climate Physical Risk Analyst
Boston

In our view, engagement with portfolio companies can enhance positive social and environmental impact and create lasting value for shareholders. We see material environmental, social, and governance (ESG) issues as strategic business issues that can affect a company’s financial performance, competitiveness, and sustainability. The better impact investors understand material ESG issues, the more informed their investment decisions.

Hands-on approach

We believe in taking a hands-on approach to engagement, meeting in person with boards and management teams, writing letters, or hosting calls multiple times each year. Further, we think productive engagements should aim for…

SUSTAINABILITY

ARCHIVED

Tara Stilwell
Tara Stilwell
CFA
Equity Portfolio Manager
Boston
Louise Kooy-Henckel
Louise Kooy-Henckel
Associate Director of Investment Products and Strategies
London

How coronavirus in India may impact macro and climate policy

Complex and dynamic, India faces unique challenges from both the current public-health crisis and looming climate-related risks. In this 20-minute audiocast, we explore how India has managed the coronavirus thus far, and we look ahead to how its response may shape its climate policy. Finally, we consider the many investment risks and opportunities these issues represent.

video-iframe

CORONAVIRUS
SUSTAINABILITY

ARCHIVED

Chris Goolgasian
Chris Goolgasian
CFA, CPA, CAIA
Director of Climate Research
Boston
Tushar Poddar
Tushar Poddar
PhD
Macro Strategist
London
Thomas Mucha
Thomas Mucha
Geopolitical Strategist
Boston

During this period of unprecedented upheaval and disruption, some companies will rise to the challenge of the moment, while others will not. In many cases, their most enduring actions — and the ones that help them survive — will include ESG decisions as well as financial ones. How are companies ensuring employees’ safety? What benefits are they providing? How are they treating customers and communities? Are they evaluating the resilience of their supply chains?

During our engagement calls with executives and boards, we are asking questions like these to understand how each company is responding to the COVID-19 crisis and considering all its stakeholders. I’ve included a few of our investors’ insights here.

Carolina San Martin, CFA
Director, ESG Research

On a recent energy-company call, it was clear that the board and management have increased their focus on employees in light of the COVID-19 crisis. While they didn’t rule out…

CORONAVIRUS
SUSTAINABILITY

ARCHIVED

Wendy Cromwell
Wendy Cromwell
CFA
Vice Chair, Director of Sustainable Investment, and Portfolio Manager
Boston
Load More
Share on linkedin
Share on email

Categories

Trending posts

DISCLOSURES

Wellington Management Company LLP (WMC) is an independently owned investment adviser registered with the US Securities and Exchange Commission (SEC). WMC is also registered with the US Commodity Futures Trading Commission (CFTC) as a commodity trading advisor (CTA) and serves as a CTA to certain clients including registered commodity pools and their operators. WMC provides commodity trading advice to all other clients in reliance on exemptions from CTA registration. WMC, along with its affiliates (collectively, Wellington Management), provides investment management and investment advisory services to institutions around the world. Located in Boston, Massachusetts, Wellington Management also has offices in Chicago, Illinois; Radnor, Pennsylvania; San Francisco, California; Beijing; Frankfurt; Hong Kong; London; Luxembourg; Singapore; Sydney; Tokyo; Toronto; and Zurich. ■ This material is prepared for, and authorized for internal use by, designated institutional and professional investors and their consultants or for such other use as may be authorized by Wellington Management. This material and/or its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase shares or other securities. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients.

In Canada, this material is provided by Wellington Management Canada ULC, a British Columbia unlimited liability company registered in the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan in the categories of Portfolio Manager and Exempt Market Dealer. ■ In Europe (ex. Austria, Germany and Switzerland), this material is provided by Wellington Management International Limited (WMIL), a firm authorized and regulated by the Financial Conduct Authority (FCA) in the UK. This material is directed only at persons (Relevant Persons) who are classified as eligible counterparties or professional clients under the rules of the FCA. This material must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment service to which this material relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. ■ In Austria and Germany, this material is provided by Wellington Management Europe GmbH, which is authorized and regulated by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin). This material is directed only at persons (Relevant Persons) who are classified as eligible counterparties or professional clients under the German Securities Trading Act. This material does not constitute investment advice, a solicitation to invest in financial instruments or information recommending or suggesting an investment strategy within the meaning of Section 85 of the German Securities Trading Act (Wertpapierhandelsgesetz). ■ In Hong Kong, this material is provided to you by Wellington Management Hong Kong Limited (WM Hong Kong), a corporation licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), and Type 9 (asset management) regulated activities, on the basis that you are a Professional Investor as defined in the Securities and Futures Ordinance. By accepting this material you acknowledge and agree that this material is provided for your use only and that you will not distribute or otherwise make this material available to any person. ■ In Singapore, this material is provided for your use only by Wellington Management Singapore Pte Ltd (WM Singapore) (Registration Number 201415544E). WM Singapore is regulated by the Monetary Authority of Singapore under a Capital Markets Services Licence to conduct fund management activities and is an exempt financial adviser. By accepting this material you represent that you are a non-retail investor and that you will not copy, distribute or otherwise make this material available to any person. ■ In Australia, Wellington Management Australia Pty Ltd (WM Australia) (ABN 19 167 091 090) has authorized the issue of this material for use solely by wholesale clients (as defined in the Corporations Act 2001). By accepting this material, you acknowledge and agree that this material is provided for your use only and that you will not distribute or otherwise make this material available to any person. Wellington Management Company LLP is exempt from the requirement to hold an Australian financial services licence (AFSL) under the Corporations Act 2001 in respect of financial services provided to wholesale clients in Australia, subject to certain conditions. Financial services provided by Wellington Management Company LLP are regulated by the SEC under the laws and regulatory requirements of the United States, which are different from the laws applying in Australia. ■ In Japan, Wellington Management Japan Pte Ltd (WM Japan) (Registration Number 199504987R) has been registered as a Financial Instruments Firm with registered number: Director General of Kanto Local Finance Bureau (Kin-Sho) Number 428. WM Japan is a member of the Japan Investment Advisers Association (JIAA), the Investment Trusts Association, Japan (ITA) and the Type II Financial Instruments Firms Association (T2FIFA). ■ WMIL, WM Hong Kong, WM Japan, and WM Singapore are also registered as investment advisers with the SEC; however, they will comply with the substantive provisions of the US Investment Advisers Act only with respect to their US clients.

Wellington Management logo

Contact Us

*Mandatory Field

Contact Us

*Mandatory Field