Does Sustainable Investing Really Help the Environment?
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    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,516,817 (-0.06%)       Melbourne $971,359 (-1.00%)       Brisbane $819,969 (+2.77%)       Adelaide $731,547 (+1.72%)       Perth $621,459 (+0.34%)       Hobart $751,359 (-0.46%)       Darwin $633,554 (-4.02%)       Canberra $1,005,229 (+2.77%)       National $966,406 (+0.40%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $700,089 (-0.30%)       Melbourne $470,277 (-0.26%)       Brisbane $404,718 (+2.58%)       Adelaide $332,602 (+1.44%)       Perth $348,181 (-0.09%)       Hobart $551,005 (+2.68%)       Darwin $355,689 (-3.55%)       Canberra $477,440 (+4.12%)       National $484,891 (+0.89%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 8,451 (-507)       Melbourne 12,654 (-279)       Brisbane 9,158 (+847)       Adelaide 2,765 (-40)       Perth 9,974 (+39)       Hobart 595 (+36)       Darwin 247 (-1)       Canberra 666 (-49)       National 44,510 (+46)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 8,895 (+164)       Melbourne 8,149 (-24)       Brisbane 2,260 (+33)       Adelaide 649 (+5)       Perth 2,489 (-21)       Hobart 101 (-3)           Canberra 430 (+13)       National 23,351 (+167)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $630 $0       Melbourne $470 $0       Brisbane $460 ($0)       Adelaide $495 (+$5)       Perth $500 ($0)       Hobart $550 $0       Darwin $600 ($0)       Canberra $700 ($0)       National $562 (+$)                UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $540 (+$10)       Melbourne $410 (+$2)       Brisbane $460 (+$10)       Adelaide $380 $0       Perth $440 (-$10)       Hobart $450 $0       Darwin $500 ($0)       Canberra $550 $0       National $473 (+$2)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 5,470 (-50)       Melbourne 7,404 (-70)       Brisbane 1,986 (-122)       Adelaide 875 (-29)       Perth 1,838 (-38)       Hobart 254 (+18)       Darwin 70 (-3)       Canberra 388 (+17)       National 18,285 (-277)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 10,652 (+58)       Melbourne 9,001 (-180)       Brisbane 1,567Brisbane 1,679 (-62)       Adelaide 403 (+4)       Perth 1,050 (-21)       Hobart 87 (+1)       Darwin 131 (-10)       Canberra 453 (+43)       National 23,344 (-167)                HOUSE ANNUAL GROSS YIELDS AND TREND       Sydney 2.16% (↑)      Melbourne 2.52% (↑)        Brisbane 2.92% (↓)       Adelaide 3.52% (↓)       Perth 4.18% (↓)     Hobart 3.81% (↑)      Darwin 4.92% (↑)        Canberra 3.62% (↓)       National 3.03% (↓)            UNIT ANNUAL GROSS YIELDS AND TREND       Sydney 4.01% (↑)      Melbourne 4.53% (↑)        Brisbane 5.91% (↓)       Adelaide 5.94% (↓)       Perth 6.57% (↓)       Hobart 4.25% (↓)     Darwin 7.31% (↑)        Canberra 5.99% (↓)       National 5.07% (↓)            HOUSE RENTAL VACANCY RATES AND TREND         Sydney 1.5% (↓)       Melbourne 1.9% (↓)       Brisbane 0.6% (↓)       Adelaide 0.5% (↓)       Perth 1.0% (↓)     Hobart 0.8% (↑)        Darwin 0.9% (↓)       Canberra 0.6% (↓)     National 1.2%        National 1.2% (↓)            UNIT RENTAL VACANCY RATES AND TREND         Sydney 2.3%ey 2.4% (↓)       Melbourne 3.0% (↓)       Brisbane 1.3% (↓)       Adelaide 0.7% (↓)     Perth 1.3% (↑)        Hobart 1.2% (↓)     Darwin 1.1% (↑)        Canberra 1.6% (↓)     National 2.1%       National 2.1% (↓)            AVERAGE DAYS TO SELL HOUSES AND TREND         Sydney 31.2 (↓)       Melbourne 30.9 (↓)       Brisbane 35.7 (↓)       Adelaide 27.6 (↓)       Perth 40.5 (↓)       Hobart 30.2 (↓)       Darwin 27.1 (↓)     Canberra 28.1 (↑)        National 31.4 (↓)            AVERAGE DAYS TO SELL UNITS AND TREND         Sydney 33.7 (↓)       Melbourne 32.6 (↓)       Brisbane 34.8 (↓)       Adelaide 29.5 (↓)       Perth 46.6 (↓)       Hobart 27.4 (↓)       Darwin 38.2 (↓)       Canberra 30.2 (↓)       National 34.1 (↓)           
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Does Sustainable Investing Really Help the Environment?

Experts argue whether green investing is benefitting Wall Street or the planet.

By WILLIAM POWER
Thu, Nov 11, 2021Grey Clock 6 min

Sustainable investing has been a wild success. For Wall Street, at least.

Mutual funds and exchange-traded funds that focus on ESG (environmental, social, and governance issues) have made a lot of money for investment firms. Investors worried about climate change, in particular, have poured money into such funds, even though the funds charge higher fees than standard funds. More money is expected to flow in. The Labor Department has proposed a rule that would make it easier for investors to buy ESG funds in their 401(k) plans.

For some investors, it is purely a financial bet on a popular sector. Many others are hoping that the billions of dollars flowing into ESG will create positive change for the environment and other causes. But whether Wall Street or Mother Nature will be the ultimate beneficiary of all of these ESG dollars is a difficult question to answer.

We asked two experts to weigh in.

Tariq Fancy, chief executive officer of the Rumie Initiative, an education-technology nonprofit, has been a critic of ESG investing since leaving his job as chief investment officer for sustainable investing at BlackRock. Mr. Fancy says that much needs to be done to address climate change and prevent environmental disasters in the future. He says he doesn’t believe that ESG investing and financial products associated with it are a real help in achieving those goals. In his writings, including an online essay in August, “The Secret Diary of a Sustainable Investor,” he argues that funds that focus on ESG issues are profitable for Wall Street—but amount to a “dangerous placebo” that doesn’t cure the planet’s problems.

Alex Edmans, professor of finance at London Business School and an adviser on responsible investing to Royal London Asset Management and other investment firms, disagrees that the investing efforts represented by ESG funds and other private-investment-based strategies are as pointless as Mr. Fancy says. Dr. Edmans says that while he sees merit in some of Mr. Fancy’s criticisms, they are more sweeping and blanket than justified.

Here are edited excerpts of their discussion, conducted by email:

WSJ:You both have been advocates of sustainable investing, though you disagree about Wall Street’s role. Overall, do you feel better about the fate of the planet now that Wall Street has carved a niche for ESG?

MR. FANCY: Unfortunately, I feel worse about it. Is ESG good for the industry? Undoubtedly yes. It presents a lucrative new opportunity to raise funds and fees. And as an added bonus, it keeps government regulation to address the climate crisis at bay through feeding us yet another narrative in which our answers are solved by the “free market” magically self-correcting.

But good for the planet? I think even Alex would agree that there is no compelling empirical evidence that ESG investing mitigates climate change. Outside of a very small minority of private, long-term funds, such as venture-capital funds that back promising technological solutions to the climate crisis, the vast majority of funds marketed as ESG and sustainable funds today—as well as the nonbinding practice of ESG integration into existing investment processes—can’t point to any real-world impact that would not have otherwise occurred.

DR. EDMANS: I feel modestly better about it. Only modestly better, because Tariq is right that divestment has a negligible effect on company behaviour. But still better, because Tariq’s essay in August ignored the key mechanism through which sustainable investing has impact—engaging with companies on ESG issues. We’ve seen such impact with upstart hedge fund Engine No. 1 getting three climate-conscious directors appointed to Exxon’s board, and this isn’t just an isolated case. Indeed, careful research shows that engagement by index fundshedge funds and investor collective-action groups creates shared value for both shareholders and society. In particular, activism on ESG issues creates shareholder value as a byproduct, and activism to enhance long-term shareholder value ends up improving ESG.

MR. FANCY: Given the scale of the challenge presented by the climate crisis, we need to stay focused on the bigger picture: The ESG industry may be developing data sets, standards, and ushering in a wave of talented young people to work with them, but these tools are clearly not being combined in the right way right now—given that ESG assets and marketing spin are increasing rapidly alongside carbon emissions, inequality and a host of problems they’re meant to do something about. Are there a few isolated areas where ESG can create win-wins? Sure. But overall, the ESG industry today consists of products that have higher fees but little or no impact and narratives that mislead the public and delay the government reforms we need.

The small wins that Alex highlights, insofar as they exist, are nowhere near sufficient to rapidly decarbonize our economy on the timeline required, which only governments can catalyze through rapidly adjusting the incentives of all the players in the system, for example through a price on carbon. I refer to ESG’s small, mainly marketing wins as “giving wheatgrass to a cancer patient.” And there is now evidence emerging that they may be a giant societal placebo that lowers the likelihood of us following expert recommendations to address the climate crisis. In that sense, the wheatgrass isn’t harmless; it’s delaying the chemotherapy that science tells us we need immediately.

If you sell people a win-win fantasy, they’re less likely to accept the truth: Fighting climate change is going to require an economic transformation that will of course 100% involve the private sector, but must be sparked by government, including through taxes and regulation, and is going to be very difficult and cost us a lot of money.

WSJ:Dr. Edmans, you seem to have more faith than Mr. Fancy in the role of investors in helping the planet.

DR. EDMANS: Tariq is correct that government intervention is key. However, it’s not either/or. Investors launching sustainable funds does not prevent government action; in contrast, doing so encourages action by shifting the so-called Overton window—the range of ideas that is currently acceptable in the political mainstream. Moreover, many investors directly call for government action. In July, investors representing over $6 trillion in assets called for a global carbon price.

MR. FANCY: The only people shifting the Overton window toward a robust response to the climate crisis are brave activists, climate scientists, climate economists and other experts who are telling us that saving the planet will involve taking sacrifices, and needs to happen quickly. The Overton window wasn’t shifted by the ESG industry; on the contrary, today it’s unfortunately being wasted by it by diverting the growing momentum for climate action into yet another dodgy free-markets-self-correct fable.

WSJ: Mr. Fancy in his August essay made the analogy that capitalism is like a basketball game: Each is a competition to score (whether points or profits), and sportsmanship happens only when it’s required under the rules. The implication is that Wall Street doesn’t really have its heart in helping the planet.

DR. EDMANS: Many ESG advocates immediately got on the defensive and started arguing why Tariq’s essay is wrong. But we should first consider the possibility that it might be right. Relying on companies/investors to do the right thing without government action is as naive as having a professional basketball league without rules or referees, but clubs writing glossy purpose statements promising to play fair.

However, the analogy is imperfect in two ways. First, basketball is a zero-sum game. One team can only win if the other loses, and so instances of sportsmanship will be limited. But, in many cases, business is a positive-sum game. Rigorous evidence shows that “sportsmanship” to your stakeholders can also benefit shareholders, so it’s in investors’ own interest to take stakeholders seriously. For example, companies that treat their employees well outperformed their peers in total shareholder returns by a range of 2.3 to 3.8 percentage points a year over a 28-year period—that’s 89 points to 184 compounded. Similar results hold for companies that deliver value to customers, the environment and material stakeholders. Second, many key ESG dimensions can’t be regulated, such as corporate culture—hence the role for investors to hold companies to account.

There are certainly institutional investors who claim that their sustainability actions are a substitute for government action, and who launch ESG products with bold claims of impact to dupe unsuspecting clients to pay fat fees for them. Tariq’s essay has a lot of value in calling them out. However, most true ESG investors don’t do this. They don’t make unsupported claims of impact; their marketing argues that ESG’s main effect is to improve long-term returns rather than change company behaviour. Investors who are late to the ESG game are suddenly jumping on the bandwagon and making a lot of noise in a desperate attempt to play catch-up. Tariq is right to expose them, just like those who promote faddish weight-loss programs should be exposed—but this doesn’t mean the entire weight-loss industry is a ruse.

MR. FANCY: There are indeed areas where small win-wins exist, and where shareholder value can be enhanced by serving all stakeholders. I used to eagerly trumpet these areas in my previous role in sustainable investing. I’ve received an avalanche of messages from people thanking me for saying something they also felt needed to be said. Yet few want to say that out loud themselves, which I understand: I couldn’t have said the same things while I was still in the industry.

I think the ESG industry has the potential to move from serving as a dangerous placebo to playing a leading role in this change, but that requires us having an open and honest debate about how to arrive at a more rigorous and honest ESG 2.0.

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Private club memberships and luxury cars are some of freebies on the table.

By SHIVANI VORA
Mon, Aug 15, 2022 6 min

When Ryan Wolitzer was looking to buy an apartment in Miami Beach late last year, several beachfront properties caught his eye. All were two-bedroom homes in high-end buildings with amenities aplenty and featured glass walls, high ceilings and an abundance of natural light. But only The Continuum, in the city’s South of Fifth district, came with a gift: a membership to Residence Yacht Club, a private club that offers excursions on luxury yachts ranging from a day in south Florida to a month around the Caribbean. Residents receive heavily discounted charters on upscale boats that have premier finishes and are stocked with top shelf spirits and wine. Mr. Wolitzer, 25, who works for a sports agency, was sold.

“The access to high-end yachts swayed my decision to buy at The Continuum and is an incentive that I take full advantage of,” Mr. Wolitzer said. “It’s huge, especially in my business when I am dealing with high-profile sports players, to be able to give them access to these incredible boats where they experience great service. I know that they’ll be well taken care of.”

Freebies and perks for homeowners such as a private club membership are a mainstay in the world of luxury real estate and intended to entice prospective buyers to sign on the dotted line.

According to Jonathan Miller, the president and chief executive of the real estate appraisal and consulting firm Miller Samuel, they’re primarily a domestic phenomenon.

In the U.S. residential real estate market, gifts are offered by both developers who want to move apartments in their swanky buildings and individuals selling their homes. They range from modest to over-the-top, Mr. Miller said, and are more prevalent when the market is soft.

“When sales lag, freebies increase in a bid to incentivize buyers,” he said. “These days, sales are slowing, and inventory is rising after two years of being the opposite, which suggests that we may see more of them going forward.”

Many of these extras are especially present in South Florida, Mr. Miller said, where the market is normalizing after the unprecedented boom it saw during the pandemic. “The frenzy in South Florida was intense compared with the rest of the country because it became a place where people wanted to live full time,” he said. “Now that the numbers are inching toward pre-pandemic levels, freebies could push wavering buyers over the finish line.”

Kelly Killoren Bensimon, a real estate salesperson for Douglas Elliman in Miami and New York, said that the gifts that she has encountered in her business include everything from yacht access and use of a summer house to magnums of pricey wine. “One person I know of who was selling a US$5 million house in the Hamptons even threw in a free Mercedes 280SL,” she said. “They didn’t want to lower the price but were happy to sweeten the deal.”

A car, an Aston Martin to be exact, is also a lure at Aston Martin Residences in Miami’s Biscayne Bay. Buyers who bought  one of the building’s 01 line apartments—a collection of 47 ocean-facing residences ranging in size from 325 to 362sqm and US$8.3 million to US$9 million in price—had their choice of the DBX Miami Riverwalk Special Edition or the DB11 Miami Riverwalk Special Edition. The DBX is Aston Martin’s first SUV and retails for around US$200,000. It may have helped propel sales given that all the apartments are sold out.

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An Aston Martin came with the sale for some buyers at Aston Martin Residences in Miami’s Biscayne Bay. Aston Martin Residences

The US$59 million triplex penthouse, meanwhile, is still up for grabs, and the buyer will receive a US$3.2 million Aston Martin Vulcan track-only sports car, one of only 24 ever made.

“We want to give homeowners the chance to live the full Aston Martin lifestyle, and owning a beautiful Aston Martin is definitely a highlight of that,” said Alejandro Aljanti, the chief marketing officer for G&G Business Developments, the building’s developer.  “We wanted to include the cars as part of the package for our more exclusive units.”

The US$800,000 furniture budget for buyers of the North Tower condominiums at The Estates at Acqualina in Sunny Isles, Florida, is another recent head-turning perk. The 94 residences sold out last year, according to president of sales Michael Goldstein, and had a starting price of US$6.3 million. “You can pick the furniture ahead of time, and when buyers move in later this year, all they’ll need is a toothbrush,” he said.

Then there’s the US$2 million art collection that was included in the sale of the penthouse residence at the Four Seasons Residences in Miami’s Brickell neighbourhood. The property recently sold for $15.9 million and spans 817sqm feet. Designed by the renowned firm ODP Architects, it features contemporary paintings and sculpture pieces from notable names such as the American conceptual artist Bill Beckley and the sculptor Tom Brewitz.

But it’s hard to top the millions of dollars of extras that were attached to the asking price in 2019 of the US$85 million 1393sqm  duplex at the Atelier, in Manhattan’s Hell’s Kitchen neighbourhood. The list included two Rolls-Royce Phantoms, a Lamborghini Aventador, a US$1 million yacht with five years of docking fees, a summer stay at a Hamptons mansion, weekly dinners for two at lavish French restaurant Daniel and a live-in butler and private chef for a year. And the most outrageous of all: a flight for two to space.

It turned out that the so-called duplex was actually a collection of several apartments and a listing that went unsold. It did, however, generate plenty of buzz among the press and in real estate circles and was a marketing success, according to Mr. Miller.

“A listing like this that almost seems unbelievable with all the gifts will get plenty of eyeballs but is unlikely to push sales,” he said. “Empirically, it’s not an effective tactic.”

On the other hand, Mr. Miller said that more reasonable but still generous freebies, such as the membership to a yacht club, have the potential to push undecided buyers to go for the sale. “A nice but not too lavish gift won’t be the singular thing toward their decision but can be a big factor,” he said. “It’s a feel-good incentive that buyers think they’re getting without an extra cost.”

Examples of these bonuses include a membership to the 1 Hotel South Beach private beach club that buyers receive with the purchase of a residence at Baccarat Residences Brickell, or the one-year membership to the Grand Bay Beach Club in Key Biscayne for those who spring for a home at Casa Bella Residences by B&B Italia, located in downtown Miami and a residential project from the namesake renowned Italian furniture brand. The price of a membership at the Grand Bay Beach Club is usually a US$19,500 initiation fee and US$415 in monthly dues.


The Grand Salon at at Baccarat Residences Brickell in Miami.
Baccarat Residences

Still enticing but less expensive perks include the two-hour cruise around New York on a wooden Hemmingway boat, valued at US$1,900, for buyers at Quay Tower, at Brooklyn Bridge Park in New York City. The building’s developer, Robert Levine, said that he started offering the boat trip in July to help sell the remaining units. “We’re close to 70% sold, but, of course, I want everything to go,” he said.

There’s also the US$1,635 Avalon throw blanket from Hermes for those who close on a unit at Ten30 South Beach, a 33-unit boutique condominium; in Manhattan’s Financial District, a custom piece of art from the acclaimed artist James Perkins is gifted to buyers at Jolie, a 42-story building on Greenwich Street. Perkins said the value of the piece depends on the home purchase price, but the minimum is US$4,000. “The higher end homes get a more sizable work,” he said.

When gifts are part of a total real estate package, the sale can become emotional and personal, according to Chad Carroll, a real estate agent with Compass in South Florida and the founder of The Carroll Group. “If the freebie appeals to the buyer, the transaction takes on a different dynamic,” he said. “A gift becomes the kicker that they love the idea of having.”

Speaking from his own experience, Mr. Carroll said that sellers can also have an emotional connection to the exchange. “I was selling my house in Golden Isles last year for US$5.4 million and included my jet ski and paddle boards,” he said. “The buyers were a family with young kids and absolutely loved the water toys.” Mr. Carroll could have held out for a higher bidder, he said, but decided to accept their offer. “I liked them and wanted them to create the same happy memories in the home that I did,” he said.

The family moved in a few months later.