Triple Point Social Housing faces shareholder dissent over chair and directors re-election

Resolutions to re-elect four directors received 18.6% of votes against each, regarding chair Christopher Phillips, Ian Reeves, Peter Coward and Tracey Fletcher-Ray. Cecily Davis was the only director who did not face the same objections, as her re-appointment was passed with 97.3% of votes in favour. Triple Point Social Housing eyes portfolio sales to resume share buybacks Additionally, around 21% of investors voted against a resolution to dis-apply pre-emption rights “up to a further 5% in connection with an acquisition or specified capital investment”. In a stock exchange noti…

Sequoia Economic Infrastructure Income amends investment policy to lock in higher rates

In a stock exchange notice today (17 May), SEQI explained it has amended its investment policy to decrease its exposure to floating rate investments from 50% to 40%. As a result, up to 60% of its portfolio will target fixed-rate investments in a bid to “lock in current interest rates” and protect its income should interest rates begin to fall. The move comes as both the European Central Bank and Bank of England are expected to start cutting rates in the summer, while speculation mounts over whether the Fed will pass even a single cut this year. SEQI noted the policy amendment “is n…

Take Five: Green Means Green

A selection of the major stories impacting ESG investors, in five easy pieces. 

European regulators have ratcheted up efforts to eliminate greenwashing from the investment sector.

End of an era I – The fight against greenwashing inched ahead with the release of final guidelines for naming ESG- or sustainability-related funds by the European Securities and Markets Authority (ESMA). It had previously been possible to launch an EU environmental opportunities fund, claiming Article 8 classification under the Sustainable Finance Disclosure Regulation (SFDR), while allocating as little as 10% of assets to demonstrably green investments. ESMA has now declared that era to be over, with new guidelines and thresholds including a minimum of 80% of investments to meet funds’ environmental or social characteristics, or sustainable investment objectives. Initial reactions suggested the market has welcomed some aspects – such as definitions for what could be included in a fund with an ‘impact’ or ‘transition’ label – but is baffled by others. These include ditching plans to require funds labelled ‘sustainable’ to contain at least 50% sustainable investments as defined by SFDR – due to feedback saying this was too open to discretion – instead opting to introduce a commitment to invest “meaningfully” in sustainable investments – whatever that means.

End of an era II – Until recently, opportunistic portfolio managers could stuff their ‘green’ portfolios with tech stocks to deliver strong returns at relatively little expense to the planet. That scam has long been rumbled, but the gig is definitely up now that Microsoft – which in 2020 pledged to become carbon negative by the end of the decade – has admitted its carbon emissions jumped 30% last year, as it pursued dominance in the AI market. The upsurge – confirmed in the tech giant’s annual sustainability report this week – followed news of a deal with asset manager Brookfield to build 10.5 gigawatts of renewable energy capacity to support its plans to rely solely on clean power sources by 2030. With Microsoft having offered to relocate staff amid rising US-China tensions, its AI strategy might face as many ‘S’ and ‘G’ as ‘E’ headwinds. But a sector-wide power grab seems likely, within the context of wider demand trends, with the International Energy Agency forecasting data centres will double their energy needs to 800 terrawatts by 2026, fuelled by both cryptocurrencies and AI.

Levels of engagement – More evidence was provided this week

Investor and ‘Dragon’ Deborah Meaden: ‘I am not mean. What I am is . . . tough’

Standard DigitalWeekend Print + Standard Digital

wasnow $85 per month

Billed Quarterly at $199. Complete digital access plus the FT newspaper delivered Monday-Saturday.

What’s included

Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts10 monthly gift articles to shareGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionEverything in PrintWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisPlusEverything in Premium DigitalEverything in Standard DigitalGlobal news & analysisExpert opinionSpecial featuresFirstFT newsletterVideos & PodcastsFT App on Android & iOSFT Edit app10 gift articles per monthExclusive FT analysisPremium newslettersFT Digital Edition10 additional gift articles per monthMake and share highlightsFT WorkspaceMarkets data widgetSubscription ManagerWorkflow integrationsOccasional readers go freeVolume discountFT Weekend Print deliveryPlusEverything in Standard DigitalFT Weekend Print deliveryPlusEverything in Premium Digital

FTAV’s Friday charts quiz

Unlock the Editor’s Digest for free

Happy Norway day, everyone! 🇳🇴

For newbies, here are the rules: tell us what the three charts below show and email us (alphaville@ft.com) your answers by Monday.

From the pool of winners we will choose one at random, who will walk away with a desirable ‘I ❤️ Charts’ T-shirt. As a career-enhancer it is ahead of a Wharton MBA or MIT PhD and only behind an FT Alphaville Pub Quiz Champion coffee mug in the office cupboard.

Oh and do please remember to:

📊 Put “QUIZ” as the subject line;

📈 Include your preferred T-shirt size;

📉 Say if you DON’T want to be identified should you be one of the people that get all three right.

Godspeed, and have a great weekend.

Investor Stewardship at a Crossroads

Rickard Nilsson, Head of Stewardship Success at Esgaia, considers how asset owners can maximise long-term impact at a time of regulatory uncertainty.

Capital markets play a key role in influencing resource mobilisation. At a time when political division is delaying needed policy action, investors find themselves at a crossroads over how to act amid regulatory uncertainty.

Capitalism is governed by existing hard and soft law. As intermediaries with obligations to clients and end-beneficiaries, institutional investors are bound to play by those rules. Trying to play a more ethical game in anticipation of a developing rule book will put an organisation’s competitiveness at risk.

How can investors position against this, and implement a stewardship strategy that maximises impact over the long term for both clients and society at large?

The purpose of investor stewardship

The investment stewardship ecosystem reflects a complex web of stakeholder relationships and interests. From the underlying assets and the institutions owning them to clients, civil society, and the public sector, a myriad of actors influence industry practices, norms and policies.

From an investor perspective, the stewarding of assets generally entails selecting a board of directors who in turn assign and oversee management for the strategy and daily running of the asset. Investors can then choose to monitor and engage the asset, e.g. to build trust and align on longer-term plans. Engagement dialogues also play an important role in setting expectations and as an accountability mechanism when performance is lacking.

As evidenced in literature, and by the experience of many investors, good management practices are not adopted by many organisations because of cognitive, knowledge, incentive and capability barriers. Unsurprisingly then, research suggests that successful investment stewardship can increase returns, lower risks, and empower real-world outcomes – but needs to become more effective to have the intended impact.

The current state

Historically, investment stewardship has focused on individual company performance, generally perceived as high-cost monitoring. Normally only investors with large stakes would have sufficient ‘skin in the game’ to engage with a firm and undertake restructurings that truly increase productivity and investment efficiency. Today, practices are changing with institutional investors representing the single largest category of investors in public equity markets, and with the majority of portfolio performance due to overall economic development.

Most institutional investors’ portfolios now consist of hundreds, if not thousands, of holdings. Therefore, it seems obvious that investment stewardship should focus on reducing non-diversifiable/ market-wide

Carbon Markets can Move the Needle

Improvements in technology and measurement are showing that forest conservation projects do work – and should be accelerated, says Antoine Rostand, Co-founder of Kayrros.

The voluntary carbon market continues to divide opinion. Just recently, the Science Based Targets initiative (SBTi) provoked a backlash – including from within the organisation itself – when it revised its Corporate Net Zero Standard to let companies use environmental attribute certificates, including carbon offsetting schemes. A group that claimed to speak for the “overwhelming majority” of SBTi staff said they were “deeply concerned’ by the move”. SBTi later appeared to backtrack, saying that there were “no changes” to its standards and a formal draft of rules on carbon offsetting would be presented in July.

The strength of the reaction shows how polarised – a now-familiar term – the conversation has become. This does no one any good: we’re all conscripts in the battle to prevent the climate crisis spiralling out of control. Taking swipes at each other merely wastes precious time. We need to find a way to direct the flow of money from those who have a lot of it to those who have much less, and who are, by virtue of where they live, charged with protecting resources on which we all depend.

The climate finance gap – the difference between the amount of funding allocated for climate-related activities and the amount actually needed to effectively address climate change – stood, as of late 2022, at US$2.61 trillion a year. According to BloombergNEF’s ‘Long-Term Carbon Offsets Outlook 2024’ report, carbon credits could reach US$238 per tonne in 2050, and the market could be worth US$1.1 trillion annually by the same year.

Support for the green transition

The world cannot afford the green transition without the carbon market. This is the hard truth of the matter. The good news is that, despite the scepticism and the bad press, the carbon market does, in fact, work. In June last year, we used our Forest Carbon Monitor to assess more than 90% of the Amazon, which is the world’s largest rainforest and one of the world’s largest carbon sinks. Our analysis, which we ran by processing terabytes of satellite data with AI, showed that of 75 reviewed conservation and emissions-reduction projects funded by the carbon market, just five showed the same static deforestation rates. In other words, 96% were working.

More recent analyses have yielded similar

Net Zero is Bringing Business Back to Britain

Graham Upton, Chief Architect – Intelligent Industry, Capgemini UK, explains how climate goals are driving UK firms to reindustrialise.

The UK has recently been accused of watering down its net zero ambitions, with a report from the Climate Change Committee suggesting that the UK is on course to miss meeting the pledges it made at COP28.

Despite this, new data indicates UK businesses are taking decarbonisation efforts seriously, increasingly bringing their manufacturing back home to shorten supply chains and cut emissions. According to a new report by the Capgemini Research Institute, UK organisations are investing £338.5 billion into reindustrialisation over the next three years, an increase of £57.8 billion on the previous three years.

Sustainability is a driver of reindustrialisation

Reindustrialisation, or the act of moving manufacturing operations closer to home, is emerging as a key strategy to decrease a company’s greenhouse gas (GHG) emissions. Responsible for 54% of the world’s energy consumption, manufacturing has a massive carbon footprint, and is a key concern for any business considering how they can balance economic growth with a responsibility to work towards net zero.

Ensuring that a business has a strong ESG strategy adherence is also attractive to investors. Companies committed to ESG are often at less risk of exposure to accidents or lawsuits, and so offer better returns. Data from credit ratings agency and index provider Standard & Poor’s show that its ESG index has outpaced the S&P 500 in recent years.

As UK manufacturing has shrunk over the past 50 years, the proportion of emissions produced beyond its borders has ballooned. Today, around half of the UK’s carbon footprint is found abroad. However, companies are now increasingly aware of their indirect Scope 2 and 3 emissions, both because of increased corporate social responsibility, and because the regulatory environment grows more stringent. For example, UK companies trading in the US and the EU now need to comply with regulations like the EU’s Corporate Sustainability Due Diligence Directive, its Circular Economy Action Plan, and the US’s Uyghur Forced Labor Prevention Act.

As a result of this and other concerns about supply chain resiliency and geopolitics, 78% of UK execs have a reindustrialisation strategy or are currently developing their strategies, and around two thirds are banking on reindustrialisation to help their organisation meet its climate ambitions in the next three years. According to our data, reindustrialisation is expected to drive on average

Japanese beauty needs to look beyond China

Unlock the Editor’s Digest for free

Buying into Japanese beauty products groups is a sure fire way to beat the market — or at least it was a decade ago. In the six years to 2018, investors in industry leader Shiseido would have generated around a ninefold return on their investment. The sector came with the added comfort of being low risk, known for its stable growth rates and high margins.

Today the sector is underperforming in a period when the broader market is trading near record highs. Operating margins have yet to recover to pre-pandemic levels. Activist interest is forcing companies to hunt for new sources of growth.

Shares of Shiseido are down 30 per cent in the past year, underperforming the benchmark Nikkei 225’s 30 per cent rally during the same period. Smaller peer Kao has barely matched the Nikkei’s gains.

That reflects weak earnings in China, a key market for Japanese beauty groups, and an even bleaker outlook. Kao’s net profit has fallen for the fifth straight year for the year to December. For Shiseido, which reported a 40 per cent slide in its latest annual earnings, China is its biggest market, accounting for 24 per cent of total sales.

The economic recovery following the pandemic has been slow. Unemployment among 16-to-24-year-olds, which remains at more than 15 per cent after hitting a record-high 21.3 per cent last June, has depressed consumer spending. Make-up has been quick to drop off shopping lists. That decline has been exacerbated by Chinese boycotts in protest against Tokyo’s decision to release treated water from a damaged nuclear reactor.

Longer term, the problem is that even once an economic recovery in China picks up, Japanese brands’ pre-pandemic share of local spending may not return. Chinese shoppers have been increasingly turning to homegrown beauty brands, with sales growing rapidly to account for about half of the local $80bn beauty and personal care market. Exports of Chinese cosmetics and personal care products started to grow too last year.

Falling earnings and share prices have attracted activist attention, including from Hong Kong investment firm Oasis Management, which currently holds more than 3 per cent of Kao shares. Oasis is considering submitting shareholder proposals to Kao next year to boost shareholder returns, which explains a rebound in the stock in the past month.

A longer term recovery would require diversifying beyond its key

Research Review | 17 May 2024 | Market Analytics

Regime-Based Strategic Asset Allocation
Eric Bouyé and Jerome Teiletche (World Bank)
April 2024
What should investors do in the presence of economic regimes? Researchers and practitioners usually address this topic from a tactical asset allocation point of view. In this article, we depart from the literature by tackling the issue strategically and analytically. Modeling economic regimes as a mixture of distributions, we first investigate what happens to moments of the distribution of returns. We next deduct the implications for portfolios built under popular asset allocation methodologies (mean-variance-optimization, risk budgeting). Using these analytical results, we define new portfolio construction methodologies seeking to exploit the information in macroeconomic (macro) regimes through the composition of optimal portfolios for each regime, the risk structure of these portfolios, and the long-term probability of the regimes. We empirically show that macro regime-based portfolios can outperform traditional asset-based portfolios, for both multi-asset and equity factor universes, over a sample of more than fifty years.

Do Oil Price Shocks Drive Risk Premia in Stock Markets? A Novel Investment Application
Riza Demirer (Southern Illinois University Edwardsville), et al.
March 2024
Motivated by the evidence from the investment-based theories in the asset pricing literature that links asset pricing factors to economic shocks, this paper examines the effect of disentangled oil price shocks on factor returns in a large set of 62 stock markets. Our findings show that oil market shocks capture significant predictive information regarding the size and direction of factor returns in global stock markets although we observe a great deal of heterogeneity in the response of factors to these shocks, depending on the market classification and the type of oil shock. We show that oil supply and precautionary demand shocks possess the greatest predictive power over systematic risk premia, particularly for value and momentum. We argue that time varying investor sentiment and the flexibility of firms to respond to economic shocks drive the responses of factors to oil market shocks. Further examining the economic implications of the predictive patterns observed, we show that a conditional global factor investing strategy wherein the investment positions are tilted towards factor-based portfolios conditional on the size and direction of the oil price shock yields significant improvements in portfolio returns and diversification over the passive investment strategy. Our findings show that the performance of smart beta strategies can be significantly improved by conditioning factor positions based on the size and direction of shocks.

Bond Risk Premiums at the Zero