Thursday morning news drop
Canada makes bid to host headquarters of new sustainable accounting standards organization Canada has submitted a bid to host the headquarters of the new International Sustainability Standards Board (ISSB), a proposed group that would develop rules for how companies report on environmental, social and governance matters. The ISSB is a creation of the International Financial Reporting Standards (IFRS) used by Canadian companies that trade on public stock exchanges. The ISSB will create a global set of sustainability standards rather than continue with companies picking from among multiple existing frameworks for disclosing these issues. (Globe and Mail)
Sustainability reporting: Getting clarity on materiality At its simplest, materiality means information that is likely to influence the assessment process and decisions of stakeholders. (Financial Management)
The Next Big Investment Hub For Unicorns—And It’s Not China The United States leads the world in unicorns — privately held startups valued at more than $1 billion — with 154 new ones since last October, according to the American research firm CB Insights. China was a longtime favorite of unicorn hunters, but Covid-19, Chinese regulatory actions against its own tech giants and the sudden loss of civil rights in Hong Kong have given investors pause. So they are crowding into India, which is home to 58 unicorns today. For comparison, the United Kingdom has just 20. (Forbes)
Not All Risk is Rewarded “Higher risk, higher reward.” This is one of the most repeated maxims in investing, and the basis of Modern Portfolio Theory. It’s also intuitive: riskier investments should be compensated with a higher return. But what should happen and what actually happens is not always one in the same… (Compound)
Can Ancient Indigenous Technology Help Save BC’s Salmon? After an earthquake exposed thousands of mysterious wooden stakes off Vancouver Island, researchers spent over a decade figuring out what they mean (Walrus)
Fleeing Disaster Is Hard. Climate Change Is Making It Harder Hurricane Ida and California wildfires are two sides of the same coin: On a warmer planet, it’s getting harder to evacuate from extreme events. (Wired)
Classic songs are strangling new music “A large portion of the people that are streaming, they’ve never owned a CD, they may not listen to the radio, and when they hear David Bowie’s Life On Mars, they’re hearing it for the first time,” he says. “So the source of discovery is the last 70 years of music. It’s all brand new, right now. So you’re competing with every song that has ever come out.” (BBC)
Seth Rogen Wants to Tell Your Story: The actor–author–ceramicist–weed entrepreneur adds podcaster to his repertoire. (Vulture)
The dividend yield of the S&P500 has spent the past decade (the 2010s) averaging around a ~2% yield. This yield has made it part of a trend towards higher equity exposure as a way to make up for lower bond yields. Making stocks a bond substitute(!?) has had a few direct and interesting results:
1. 60/40: The traditional 60/40 portfolio has become more of a 70/30 or even 75/25 mix of stocks and bonds. This trade-off includes 1) an increase in volatility and drawdowns (though not this year); 2) higher expected returns; 3) an increase in total portfolio risks.
2. Valuations have risen, and U.S. stocks are fully if not richly valued (the nature of bull markets is for valuations to rise, and P/E multiples to expand. This quarter has seen record profits, with about 80% of the SPX reporting
3. Inflows: With a few notable exceptions, capital has continued to flow put of actively managed funds and towards passive indices. This is another driver sending yields dividend lower.
4. Default? For many, the S&P500 has become the default setting for where to sweep new cash and other unallocated capital.
5. Streak: 2021 has seen 7 consecutive monthly gains in the index, the longest such streak since December 2017.
6. Higher Yield: Before the 1990s, the S&P 500 yielded 3% or more and topped 6% at a market low in 1982. This was an era of higher bond yields (Barron’s)
