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Shareholder Values

 
"64% of those polled were interested in investing, or
investing more money, in SRI fund options; and 22%
said they were very interested."
--
TIAA-CREF Asset
    Management
(USA)
    November 2014

"Canadian investors are generally favourable towards SRI. A third (32%) said they are 'very' or 'somewhat' interested. [Another] 55 per cent indicated that they would consider SRI if the return was 'as good or better' than other investments... The majority of investors surveyed view SRIs as 'futuristic' (78%) and 'a win-win for the individual and society' (77%)."
--
Ipsos Reid/
    Standard Life
   
(Canada) October 2011

"78 per cent of UK investors are more likely to invest in a company with ethical practices, and 64 per cent are planning to invest in ethical funds in the next few years."
--
TD Direct Investing
   
(UK) October 2014

 
 

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     Links may only be valid for a limited time                                                December 22, 2014

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Bloomberg Markets Strategies: Finding Value in Good Governance. "Stoxx Europe 600 companies with higher-than-average female representation on their boards have outperformed the overall index by 13 percentage points since 2008. Global oil companies with leading safety records returned 63 percent in the five years through September 2014, double those with higher incident rates. Those examples highlight why investors and executives are embracing the importance of environmental, social and governance issues and how they can affect a company’s reputation and performance. "

[COMMENTARY] That last sentence says it all. But I'll continue to harp about the majority of financial/investment advisors who are blind to this information and not representing their clients' interests!
Bloomberg Markets Strategies: Finding Value in Good Governance, by Lee O’Dwyer, December 17, 2014, Bloomberg, USA.

New York fracking ban reverberates nationally. (Bans fracking due to health and environmental risks!) "New York’s Department of Environmental Conservation Commissioner Joe Martens recommended the ban Wednesday after reviewing the results of Acting Health Commissioner Howard Zucker’s long-awaited report on the potential health effects of fracking. 'I asked myself, would I let my family live in a community with fracking? The answer is no,' Zucker said in a statement. 'I therefore cannot recommend anyone else’s family to live in such a community either.'"

[COMMENTARY] Finally, some reputable public health authority has reviewed the respective environmental and health risks related to fracking. And they've considered it too risky. Many European countries also have come to the same conclusion. It'll be informative and unfortunate to see the resultant health and environmental problems from fracking in the states that have so vigorously promoted it. Furthermore, as everyone realizes, should the low prices of oil and gas continue, the growth of the fracking industry is likely to stall or even decline in the years ahead.
New York fracking ban reverberates nationally, by Peter Moskowitz, December 17, 2014, Aljazeera America, USA.

Independent Research in Responsible Investment (IRRI) Awards 2014. "Evaluating how asset managers rate the services of independent providers of sustainable and responsible investment (SRI) & corporate governance (CG) research. Responses were gathered through October 2014 by WeConveneExtel from... over 1,000 voters, 500 different firms, in 35 different countries.

· Best SRI analysis (firm) - Sustainalytics
· Best SRI analyst (individual) – Tobias Jung, Inrate
· Best Corporate Governance analysis (firm) – ISS & MSCI ESG Research (joint first place)
· Best Corporate Governance analyst (individual) – LoïcDessaint, Proxinvest
· Best Asset Management analyst (voted by companies) – Cedric Laverie, Amundi
· Best Research firm analyst (voted by companies) – Albert Charlier, Vigeo
· Best Asset Manager / Owner for use of SRI & CG research – ERAFP
· Best Asset Manager / Owner for contribution to the SRI debate – PGGM"

[COMMENTARY] Evident from this survey is that it is mostly smaller organizations winning the awards. Review the video link below for the full survey results and explanations.
Independent Research in Responsible Investment (IRRI) Awards 2014, video, December 15, 2014, UK.

State of Corporate Citizenship Finds Executive Support for Corporate Citizenship. "The Carroll School of Management Center for Corporate Citizenship at Boston College... finds that executives believe that corporate citizenship contributes to success, and plan to increase their investment in the future...

The 2014 State of Corporate Citizenship key findings include:
• The majority of executive respondents, across all business types and industries, confirm that corporate citizenship helps them successfully achieve strategic goals, ultimately improving performance.
• For the first time in over a decade, the majority of executives anticipate resources for every corporate citizenship dimension to increase over the next three years.".

[COMMENTARY] Executives are increasingly finding that CSR pays. Aside from ESG/CSR actions taken internally frequently showing demonstrable financial benefits, such actions also enhance a company’s overall reputation, benefiting all aspects of its operations -- including its stock price. Thank you Boston College for this insightful research.
State of Corporate Citizenship Finds Executive Support for Corporate Citizenship, December 2014, Carroll School of Management Center for Corporate Citizenship at Boston College, USA.

Survey: UK pensions industry rejects polling members on ethical investing. "A survey has revealed that almost two thirds of the (UK) pension industry does not believe that defined benefit schemes should poll members on investment concerns, such as environmental, social and governance (ESG) issues."

[COMMENTARY] Many in the pension industry believe the divergences of responses they might get back from such surveys don't warrant the effort. To me, that's a copout. The opinions of those who're paying you to manage their funds should matter a great deal! This only illustrates the arrogance of many pension fund managers. In this respect they're similar to numerous financial advisors and brokers who really don't want to know the personal values of their clients. In fact, they fear knowing their values as it might mean changing the way they do business.
Survey: pensions industry rejects polling members on ethical investing, by Charlotte Malone, December 12, 2014, Blue & Green Tomorrow, UK.

Green Investors Flunk Fracking Industry on Impact Management. "ExxonMobil, Chevron, and WPX Energy are ranked among the worst fracking companies in a new report by a coalition of green investment firms that scores major oil and gas firms on their efforts to reduce the negative impacts of their operations."

[COMMENTARY] According to this report, “Disclosing the Facts 2014: Risk and Transparency in Hydraulic Fracturing,” the fracking industry is getting away with massive un-reporting and misrepresentation concerning environmental degradation and destruction. America's desire to be energy self-sufficient is allowing it to overlook the full health and environmental consequences of fracking. With low oil prices likely restraining fracking industry growth, perhaps some breathing room will be found to consider the potential health and environment effects of fracking. Meanwhile, most ethical investors stay clear of this industry for good reason.
Green Investors Flunk Fracking Industry on Impact Management, December 11, 2014, Environmental News Service, USA.

European investors stepping up responsible investment strategies. "European asset owners are increasingly moving towards responsible investment strategies, according to a new survey that shows 72% of investors have drawn up formal responsible investment policies, an increase of 7% on 2013.

Novethic published the survey at its annual event in Paris. It questioned 185 long-term investors, with over €6 trillion (£4.7tn) in assets in 13 European countries about their commitment to integrating environmental, social and governance (ESG) factors into asset management."

[COMMENTARY] The survey's findings are impressive and continue to point to mainstream asset managers accepting that ESG analysis adds to returns. If only investment advisors and brokers were so knowledgeable!
European investors stepping up responsible investment strategies, by Charlotte Malone, December 9, 2014, Blue & Green Tomorrow, UK.

Green Bonds to reach $100 billion in 2015. "Delegates from Spain, France, UK, Portugal and the Netherlands have gathered at the Green Bonds International Conference on yesterday in Madrid, organized by the sustainability experts SUST4IN. The number and variety of attendees at the conference can be explained by the fact that the market for green bonds has tripled this year to 35bn USD, including in Spain, and should reach 100bn USD in 2015, according to the forecasts of most of the speakers."

[COMMENTARY] The issuance of green bonds is exploding. The above projection is made by an authoritative figure, Sean Kidney, CEO of the Climate Bonds Initiative. This is tremendous news for ethical investors who'll now have many new fixed income investment options.
Green Bonds to reach $100 billion in 2015, December 4, 2014, SUST4IN, Spain.

Oil Investors at Brink of Losing Trillions of Dollars in Assets. Gore: It's That Road Runner Moment. "A major threat to fossil fuel companies has suddenly moved from the fringe to center stage with a dramatic announcement by Germany’s biggest power company and an intriguing letter from the Bank of England... Bank of England Governor Mark Carney... instructed his staff to review whether sizable losses from stranded coal, oil and gas reserves could hurt banks, investors, insurance companies and the rest of the financial system."

[COMMENTARY] When the Governor of the Bank of England is concerned about the potential for stranded (fossil fuel) assets to adversely impact the financial system, you know that the economic and political elites are worried. Actually, the stranded assets scenario--the writing-down of fossil fuel reserves--might also happen because of the current oil glut and very low oil prices!
Oil Investors at Brink of Losing Trillions of Dollars in Assets. Gore: It's That Road Runner Moment, by Alex Morales, December 2, 2014, Bloomberg, USA.

Ontario requiring pension funds to report their ESG policies and practices. "The statement of investment policies and procedures shall include information as to whether environmental, social and governance factors are incorporated into the plan’s investment policies and procedures and, if so, how those factors are incorporated."

[COMMENTARY] This is an important new step for ethical investing in Canada. It's likely that all the other Canadian provinces and territories will follow Ontario's lead.
Pension's Benefits Act changes, November 26, 2014, Ontario, Canada.

Concordia becomes first Canadian university to begin divesting from fossil fuels. "However small or tentative this first step may be, Concordia University now has the distinction of saying it is the first university in the country to have initiated the process of divesting from fossil fuels... But while some student groups welcomed this as a step in the right direction, Divest Concordia has called it a 'flat-out rejection of student calls for full divestment from fossil fuels.'"

[COMMENTARY] Though small, it is a beginning. It could serve as 'wake-up' call for other Canadian universities. The 'ice is broken' so it'll encourage other university divestment groups and campaigns.
Concordia becomes first Canadian university to begin divesting from fossil fuels, by Karen Seidman, December 2, 2014, Montreal Gazette, Canada.

Deep Misalignment Between Corporate Economic Performance, Shareholder Return And Executive Compensation. "New research details an over-reliance on accounting metrics that do not measure capital efficiency, and how total shareholder return obscures a line of sight to the underlying drivers of economic performance... Only 12% of CEO Pay Determined by Economic Performance; More than 75% of S&P 1500 Companies Not Equipped to Measure, Manage Key Factors Driving Sustained Corporate Value."

[COMMENTARY] Echoing other researchers and commentators, these findings again demonstrate that reliance on total shareholder return (i.e. stock price increases and dividends) over durations of mostly one to three years -- the most common way of basing executive compensation -- is absurd. Such measures only focus management on short-term stock market public relations and stock buybacks! Thus, medium and long term corporate prospects and profitability are frequently sacrificed for short term stock gains.

Ethical investors might want to scrutinize executive compensation when selecting investments.
Deep Misalignment Between Corporate Economic Performance, Shareholder Return And Executive Compensation, press release, November 24, 2014, USA.

Analysis Shows Growing Support from U.S. Mutual Funds for Action on Climate Change Risks. "One-third of votes cast across 42 fund families supporting climate-related shareholder resolutions on average in 2014, according to an analysis by the sustainability advocacy group, Ceres... the 2014 proxy season saw one of the sharpest increases ever in support for climate-related resolutions in the past decade, with 11 fund groups – including GMO, John Hancock, Delaware and Oppenheimer – increasing their support for climate... Morgan Stanley, for example, supported climate resolutions 70 percent of the time in 2014 – a shift from supporting only 13 percent in 2013... however, eight fund families failed to cast a single vote in support of a climate-related resolution in 2014, the most noteworthy being Vanguard."

[COMMENTARY] Mutual fund managers -- increasingly applying ESG criteria to their investments -- are beginning to see the financial significance to companies incorporating climate change risks/mitigation and sustainability in their operations. It's strange that Vanguard is a hold out since it's a signatory to the UN's Principles for Responsible Investment (PRI) which demands adherence to ESG principles.
Analysis Shows Growing Support from U.S. Mutual Funds for Action on Climate Change Risks, press release, Ceres, USA.

US Sustainable, Responsible and Impact Investing Assets Grow 76 Percent in Two Years. "Sustainable, responsible and impact investing (SRI) assets have expanded 76 percent in two years: from $3.74 trillion at the start of 2012 to $6.57 trillion at the start of 2014, according to the US SIF Foundation’s latest biennial survey, the Report on US Sustainable, Responsible and Impact Investing Trends 2014. As a result, assets managed with SRI strategies now account for more than one out of every six dollars under professional management in the United States...

The assets managed at the start of 2014 by investment firms considering ESG issues grew more than three-fold—from $1.4 trillion at the start of 2012 to $4.8 trillion."

[COMMENTARY] The numbers are great, though note the growth in assets of "firms considering ESG issues" accounts for more than the entire growth in the headline number. Obviously, the proven relatively higher financial returns by integrating ESG factors into portfolio screening are drawing ever more asset managers into ESG believers.
US Sustainable, Responsible and Impact Investing Assets Grow 76 Percent in Two Years, press release, November 20, 2014, US SIF Foundation, USA.

Green investment ‘nosediving.’ "Global investment in low carbon technologies fell for the second consecutive year in 2013 to $331bn from $359bn in 2012, according to a report by Climate Policy Initiative... The declining cost of solar PV accounted for a large part of the fall in private investment. Solar deployment cost $40bn less in 2013 than would have been the case with 2012’s solar investment costs, CPI said."

[COMMENTARY] The headline is a somewhat misleading. True, investment in low carbon technologies is not growing as fast as many would hope, but with declining costs for such energy systems, actual energy output continues to rise significantly.
Green investment ‘nosediving,’ November 20, 2014, RENews, UK.

Banking culture breeds dishonesty, scientific study finds. "A banking culture that implicitly puts financial gain above all else fuels greed and dishonesty and makes bankers more likely to cheat, according to the findings of a scientific study. Researchers in Switzerland studied bank workers and other professionals in experiments in which they won more money if they cheated, and found that bankers were more dishonest when they were made particularly aware of their professional role."

[COMMENTARY] I have seen similar research and findings before concerning financial industry employees. However, despite such observations, investors follow almost without question the financial recommendations from the financial/investment advisors at these institutions. Rarely do investors ask how independent and impartial (for instance, preferential fees for selling particular products) is the advice they're given.

Similarly, why do the media almost always go to the large (biased) financial institutions for comments on the economy and financial markets? I've investigated this before. The media say that economists in academia (who I argue are less likely to be biased) are difficult to reach, whereas economists at financial institutions respond on the first ring of the phone!
Banking culture breeds dishonesty, scientific study finds, by Kate Kelland, November 19, 2014, Reuters, UK.

New study: Are Ethical Investments Good? "We find that there are positive and statistically significant long-run abnormal returns for firms being included in the MSCI KLD400. These abnormal returns are associated with higher shareholdings by institutional investors (who are subject to higher public scrutiny), higher analyst coverage and higher growth opportunities."

[COMMENTARY] The benefits of ethical investing are again seen in this study, which analyzed the returns on companies both included and dropped from the MSCI KLD400.
Are Ethical Investments Good? By Gariet Chow (University of Western Australia), Robert B. Durand (Curtin University of Technology), and SzeKee Koh (Singapore Institute of Technology), November 13, 2014, Australian Journal of Management, Vol. 39, No. 4, 2014, Australia.

Barclays and MSCI announce launch of Green Bond Index family. "Barclays, a publisher of leading broad market bond benchmarks, and MSCI Inc., a leading provider of investment decision support tools worldwide, announced today the launch of a new green bond index family measuring the global market of fixed income securities issued to fund projects and initiatives with direct environmental benefits. The Barclays MSCI Green Bond Index family complements the existing Barclays MSCI ESG (Environmental, Social, and Governance) Fixed Income Index family, and is now available to clients.

Eligibility for the Barclays MSCI Green Bond Index family is based on an independent and objective assessment of securities by MSCI ESG Research along four dimensions closely tracked by green bond investors: use of proceeds, project evaluation, management of proceeds, and reporting. Additional fixed income index criteria are then applied to this screened universe to identify index membership on a monthly basis. These assessment criteria and thresholds for eligibility were finalized following a market consultation."

[COMMENTARY] This illustrates the fast growing interest and development of green bonds. It's a welcome sign. For too long ethical investors haven’t had the opportunities to invest in properly developed green bonds.
Barclays and MSCI announce launch of Green Bond Index, press release, Barclay's/MSCI, November 13, 2014.

Study Links SRI With Enhanced Portfolio Performance. "Harvard University professor Allen Ferrell and two colleagues at Tilburg University in the Netherlands won the 2014 Moskowitz Prize for Socially Responsible Investing, awarded yesterday at the 25th annual SRI Conference--The Conference on Sustainable, Responsible, Impact Investing--in Colorado Springs, Colo. Almost 600 financial professionals are attending the three-day event."

[COMMENTARY] Congratulations to Allen Ferrell, Hao Liang and Luc Renneboog for their insightful and valuable study that has won them the 2014 Moskowitz Prize! What's truly useful about their study is that they reviewed ESG activities of companies in 59 countries. Most studies of a similar nature were usually more regional. Also, their findings -- with such a huge dataset to use -- are really exciting, finding that "certain aspects of CSR (e.g., environmental, labor and social protection) are associated with increased executive pay-for-performance sensitivity and the maximization of shareholder value."
Study Links SRI With Enhanced Portfolio Performance, by Leila Boulton, November 11, 2014, FA Magazine, USA.

Why companies should shelter in Sustainability Accounting Standards Board's (SASB) safe harbor. "People often ask me if SASB will replace the Global Reporting Initiative, compete with the International Integrated Reporting Committee or eliminate the need for research by socially responsible investment firms and other sources of sustainability information. Based on these questions, I have concluded that very few people actually understand what SASB is or how it fits into the world of sustainability metrics.

I personally believe that SASB is creating a 'safe harbor' for nonfinancial, sustainability-related reporting, meaning legal and regulatory protection for companies regulated by the U.S. Security and Exchange Commission."

[COMMENTARY] Most of you are aware of 'generally accepted accounting principles,' or GAAP, which underpins the structure for financial reporting. So SASB is trying to do the same for non-financial reporting, such as what to, and how to, report on environmental and social issues that might materially affect corporate performance and financial affairs. All ethical investors should read this article.
Why companies should shelter in SASB’s safe harbor, by Bahar Gidwani, November 11, 2014, GreenBiz, USA.

Charities prefer active investments says Newton survey. "Respondents from 74 UK charities with just under £6bn of combined investment assets took part. Broadly, the survey found that 65% choose a purely active management approach to investing; 67% are either exclusively or predominantly invested in pooled funds; Just over a quarter (25.7%) are invested in alternative assets; 60% apply a socially responsible policy, but appetite for social-impact investment remains low; and finally portfolio returns and income are the biggest concerns for respondents."

[COMMENTARY] The data speaks for itself. What I find both surprising and happy about is that 60% of the charities are now investing with an SRI orientation. However, it's uncertain if these findings are applicable to any other country.
Charities prefer active investments says Newton survey, press release, November 5, 2014, FTSE Global Markets, UK.

Conservation impact investing is about to boom. "The conservation impact investing market totalled $23 billion from 2009 to 2013 and is expected to increase to $37.1 billion over the next five years, according to a report released Thursday by The Nature Conservancy’s NatureVest division and EKO Asset Management. Conservation impact investments are intended to return principal or generate profit while driving a positive impact on natural resources and ecosystems.

In April, with support from JPMorgan Chase & Co., the Conservancy launched NatureVest, a dedicated division focused on deploying $1 billion in impact capital for conservation over the next three years by convening investors, developing and executing innovative financial transactions and building an investment pipeline across multiple sectors."

[COMMENTARY] It seems a whole new area of investing is opening up for ethical investors--that of conservation impact investing. Investing for profit in projects benefiting the environment. This could be a truly win win situation both for investors and the environment.
Conservation impact investing is about to boom, by Mike Hower, November 5, 2014, GreenBiz, USA.

UN calls on pension funds to cut investments in fossil fuels. "The United Nations is calling on pension funds to cut investments in oil companies and other fossil fuel businesses in a bid to tackle climate change.

Speaking at a climate change summit in Copenhagen yesterday, UN secretary-general Ban Ki-moon said big investors such as insurers and pension funds should cut their investments in fossil fuels and focus on renewable energy sources instead."

[COMMENTARY] Ban Ki-moon's advocacy for fossil fuel divestment is in some ways significant--but also' ceremonial.' It's significant in that the head of the UN is advocating for fossil fuel divestment but ceremonial in that it largely falls on deaf ears until governments enact carbon caps and limits. However, carbon caps and limits will (must) happen eventually, so ethical investors taking his advice could be rewarded over the long-term.
UN calls on pension funds to cut investments in fossil fuels, by Samuel Dale, November 4, 2014, Money Marketing, UK.

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Disclaimer: This website does not make investment recommendations. Nothing in this site should be interpreted as a recommendation or solicitation to buy/sell any securities or investments. Investing for the Soul is a source of general information and resources for spiritual investing, ethical investing, and socially responsible investing (SRI). Investors should consider their actions thoroughly and consult their financial advisers and other professionals, prior to taking any investment action. This website does not necessarily agree with the opinions expressed in articles on its pages or offered on the web pages to which it might be linked. Such opinions are the responsibility of the writers themselves. Furthermore, this site does not offer or provide any warranties, representations, guarantees, implied or otherwise, as to the accuracy, legality, copyright compliance, timeliness or usefulness of the information, materials or services on this, or other sites, to which it is linked. Also, Mr. Ron Robins is not an investment advisor, nor is he licensed with any professional investment related body, and thus is not able to, nor does he make, any investment recommendations.

 

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