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☆ This key element of ESG investing could drive real change at companies and boost returns
▼ + stars: | 2023-11-18 | by ( Alex Harring | ) www.cnbc.com time to read: +6 min

The social pillar of the environmental, social and corporate governance investing framework — known as ESG in short — has been dubbed the "middle child" largely due to data challenges. For years, the social pillar has been considered relatively nebulous and hard to quantify. And it comes despite the fact that the ESG investing framework has found itself in hot water politically. In these cases, she said the social pillar comes into play in ensuring a carbon transition is equitable and just. A fraught environmentGlobally, it appears social themes will become more clear and important to investors over time.

Persons: Michael Nagle, ESG, Michael Young, Young, They're, Marian Macindoe, Insperity, Fuller, Macindoe, that's, Yijia Chen Organizations: New York Stock Exchange, Bloomberg, Getty Images Bloomberg, Getty, Sustainable Institute, BNP, Securities and Exchange, Commission, Parnassus Investments, Irrational Capital, Microsoft, Apple, Apple Hospitality, Calvert Research, Management Locations: New York, U.S, United States, Harbor, ESG

☆ Microsoft extends cloud lead over Alphabet with focus on OpenAI, big clients
▼ + stars: | 2023-10-25 | by ( Aditya Soni | ) www.reuters.com time to read: +4 min

In the battle to tap the next growth driver for the cloud business, Microsoft has focused on its core business clients that already use many of its software services, while Google has turned to startups. The results show cloud spending is coming from enterprise clients, whereas smaller businesses are reducing their expenditure, he said. Strong AI use was responsible for a 3 percentage point boost to the Microsoft's cloud business in the September quarter. "Unlike many others who are touting their AI story, Microsoft is capable of delivering meaningful AI products to their customers," brokerage D.A. Many analysts were also optimistic about strength in Alphabet's core search business, but they warned the weakness in the cloud business would continue.

Persons: Morningstar, Ali Mogharabi, Krishna Chintalapalli, Satya Nadella, Davidson, Bernstein, Sundar Pichai, Aditya Soni, Akash Sriram, Arun Koyyur Organizations: Microsoft, Google, Parnassus Investments, Fortune, Thomson Locations: Bengaluru

Microsoft's chief financial officer Amy Hood said on a conference call with analysts that higher-than-expected AI consumption was responsible for a 3 percentage point boost to its cloud business. Alphabet has prioritized snaring AI startups as customers for its cloud division, while Microsoft has relied on its existing relationships to secure larger customers. Azure revenue rose 29%, higher than a 26.2% growth estimate from market research firm Visible Alpha. RBC Capital Markets has previously estimated that Microsoft will clock over $3 billion in revenue from generative AI offerings this fiscal year. Quite surprising to see strong growth reacceleration in the Azure Cloud segment, which is clearly driven by AI-as-a-service related demand," said Global X analyst Tejas Dessai.

Persons: Microsoft's, Bob O'Donnell, Bing, Bard, Amy Hood, Krishna Chintalapalli, capex, Akash Sriram, Anna Tong, Max Cherney, Yuvraj Malik, Greg Bensinger, Stephen Nellis, Sayantani Ghosh, Sonali Paul Organizations: Microsoft, Wall, Microsoft's, TECHnalysis, Parnassus Investments, DAZZLES, Alpha, RBC Capital Markets, Reuters Graphics Microsoft, Tejas Dessai, AWS, Thomson Locations: Bengaluru, Anna, San Francisco

Consumer goods makers say the price hikes are necessary, and that they have taken a hit to margins over the past two years. Some companies such as Clorox (CLX.N) have even begun to ease off the hikes to protect sales volumes as input costs fall. "In the U.S. in particular, these pressures are more acute than in Europe," Janus Henderson portfolio manager Luke Newman told Reuters. U.S. consumer strength has begun weakening, "and that's bad news for the consumer companies," Barclays analyst Iain Simpson said. Still, cost inflation has chipped away at margins, which have broadly fallen 2-4 percentage points over the past two years for the consumer goods industry.

Persons: Janus Henderson, Luke Newman, Newman, Richard Marwood, Robert Klaber, Parnassus, Iain Simpson, Alvarez, Marsal, David Chavern, Stephanie Niven, Niven, Irene Jensen, Jensen, Thomas Joekel, Richa Naidu, Jessica DiNapoli, Matt Scuffham, Deepa Babington Organizations: U.S, Consumer, Reuters, Royal London Asset Management, Investments, Biden, Barclays, Procter, Gamble, Consumer Brands Association, Sustainable Equity Fund, Norges Bank Investment Management, Unilever, Reckitt, Investment, Thomson Locations: Ukraine, U.S, Europe, San Francisco, United States

The Ukraine war made energy and other commodities even more expensive than they were during the pandemic, prompting a global cost-of-living crisis. What has that done to their market share as competitors may be pricing lower and gaining share?" Tineke Frikkee, a fund manager at Unilever and Reckitt investor Waverton Asset Management, said. "Price rises should gradually decelerate as input costs do the same," Frikkee said, adding that companies should instead be investing in product innovation. "It will be a delicate balance, with consumer disposable income stretched in many key markets for these firms," Jack Martin, a fund manager at Unilever investor Oberon Investments, said.

Investors souring on ESG funds could pose a challenge to governments seeking to enlist them in the fight against climate change. In 2021, 40% of actively managed ESG funds beat their benchmarks, almost as well as conventional funds. In 2020, the actively managed ESG funds did even better; 57% of them beat their benchmarks, while only 43% of conventional funds did so. One active ESG fund that has suffered in the downturn is Parnassus Core Equity fund (PRBLX.O). It's possible that market trends will come to favour the portfolios of ESG funds in the coming months.

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