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Links may only be valid for a limited time    March 28, 2015

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87% of UK financial advisers asked about ethical investment by clients. "The number of financial advisers who are asked about sustainable, responsible, ethical investment has risen to 87% in 2014 from 73% in 2012. 22% expect their clients to require more advice about ethical investments this year than last. After a slip dip in 2013, the percentage of a financial adviser’s clients asking for sustainable investment has also grown from one in seven (15%) to just under one in five (19%)."

[COMMENTARY] These numbers are clearly positive for ethical investing! However, as just 200 financial advisors responded to the survey there might be a question of its statistical validity. It would be great to see such survey's in the USA and Canada.
87% of financial advisers asked about ethical investment, by Simon Leadbetter, March 27, 2015, Blue & Green Tomorrow, UK.

New Morgan Stanley Report Challenges Misperceptions Regarding Sustainable Investing and Performance. "Although some investors may believe sustainable investing requires a financial sacrifice, a new report from the Morgan Stanley Institute for Sustainable Investing finds that investing in sustainability has usually met and often exceeded the performance of comparable traditional investments, both on an absolute and risk-adjusted basis, across asset classes and over time."

[COMMENTARY] Morgan Stanley's study clearly shows that most investors favour companies that seriously implement sustainability and ESG strategies into their operations. Thus, stock prices for these companies often outperform the general market.
New Morgan Stanley Report Challenges Misperceptions Regarding Sustainable Investing and Performance, press release, March 24, 2015, Morgan Stanley, USA.

Most institutional investors say ESG criteria raise risk-adjusted returns. "Mercer’s March survey into ESG attitudes shows that 57 percent of respondents believe ESG policies boost risk-adjusted returns while 34 percent say they lower their returns and 9 percent say they have no effect. About 20 percent see ESG issues as ‘very important’ to their stakeholders while 49 percent say they are ‘somewhat’ important."

[COMMENTARY] Mercer's survey results demonstrate that use of ESG criteria in the investment industry has become mainstream. Its taken a long time, but finally we can say it has happened. Ethical investors can be proud of having brought their values to the forefront of the investing world. It's encouraging news too in that companies will need to increasingly focus on continually improving their ESG performance to satisfy analysts, stockholders and other stakeholders.

However, as everyone knows, a further intensification of ESG efforts by companies is required if we're to successfully cope with climate change.
Most institutional investors say ESG criteria raise risk-adjusted returns, by Adam Brown, March 23, 2015, IRMagazine, UK/USA.

State of Green Business Report 2015, by GreenBiz/Trucost. "During 2013 alone, the largest 500 companies in the United States had a natural capital cost equal to 6.2 percent of the national GDP. If businesses had to pay these environmental damage costs, it would more than wipe out their profits."

"There was a sharp increase in the number of companies who have committed to natural capital initiatives... U.S. companies emitted 16 percent less GHGs per dollar of revenue in 2013 than they did in 2009... The use of electricity from renewable sources by major corporations, expressed as a percentage of overall energy use, continues to grow year on year."

[COMMENTARY] This report by GreenBiz/Trucost is exemplary. Business is becoming more sustainable but the pace to full sustainability is still too slow. And if businesses had to include all their natural capital costs profits would be wiped-out! Thus, at some point -- if the data contained in this and other similar reports are to be believed and corporate actions for sustainability are not greatly increased -- our consumption-oriented economies will endure major dislocations.

It's a good time for ethical investors to review their holdings in the light of this reports' findings.
State of Green Business Report 2015 (for download of report, pdf format), March 18, 2015, GreenBiz/Trucost, USA/UK.

Corporate Sustainability: First Evidence on Materiality (Harvard Business School study.) "We find that firms with good performance on material sustainability issues significantly outperform firms with poor performance on these issues, suggesting that investments in sustainability issues are shareholder-value enhancing.

Further, firms with good performance on sustainability issues not classified as material do not underperform firms with poor performance on these same issues, suggesting investments in sustainability issues are at a minimum not value-destroying.

Finally, firms with good performance on material issues and concurrently poor performance on immaterial issues perform the best."

[COMMENTARY] The results of Harvard's study are significant! They should further encourage corporate management and investors alike on the importance of companies' demonstrating good performance on sustainability issues. We're entering a new era where ESG and sustainability are becoming a core focus of corporate management and investors.
Corporate Sustainability: First Evidence on Materiality, by Mozaffar Khan, George Serafeim, and Aaron Yoon, March 2015, all at Harvard Business School, USA.

Shareholders set to file record number of ESG-related proposals in 2015. "Shareholders had filed 433 resolutions related to ESG issues by the middle of February, compared with 417 in the same period last year, As You Sow says in its annual Proxy Preview report. The number represents a record for that time of year and the organization says the proxy season is on track to meet an overall annual record."

[COMMENTARY] With the appreciation of ESG factors becoming increasingly mainstream in the financial community, the likelihood for success of ESG related shareholder ESG resolutions is growing. This is good news for ethical investors everywhere.
Shareholders set to file record number of ESG-related proposals in 2015, by Adam Brown, IR Magazine, UK/USA.

IMF to Co-host Ethics in Finance Robin Cosgrove Prize Award Ceremony. "The International Monetary Fund will co-host the award ceremony for the 5th edition of the global Ethics in Finance Robin Cosgrove Prize. The Ceremony will take place at the IMF headquarters in Washington, USA, at a special event on the 21st September 2015. Ms. Christine Lagarde, Managing Director of the International Monetary Fund will congratulate the Prize laureates."

"The global Prize aims to promote greater awareness of the importance of ethics in finance among young people with an interest in accountancy, banking and financial services... The global financial crisis has since shown the relevance of the theme and the significance of the Prize. The Prize for Innovative Ideas for Ethics in Finance is open to young people, aged 35 years or younger, from throughout the world."

[COMMENTARY] This is a very worthy endeavour and I encourage those under 35 with an interest in this subject to submit their ideas! The fact that Christine Lagarde, IMF's Managing Director is involved, demonstrates the importance of what the prize is attempting to do. For entering the competition or information on the prize, go to: Ethics in Finance Robin Cosgrove Prize.

Bank of England warns of huge financial risk from fossil fuel investments. "The new warning from one of the world’s key central banks follows a caution from its head Mark Carney that the 'vast majority of [fossil fuel] reserves are unburnable' if climate change is to be limited to 2C, as pledged by the world’s governments. The bank will deliver a report to government on the financial risk posed by a 'carbon bubble' later in 2015."

[COMMENTARY] Could the US Fed ever issue such a warning? Most unlikely. The powerful US oil lobby wouldn't allow it. Though 'oilmen' don't elect the Fed governors -- many of those banks are massively tied to oil interests. So, bravo to the Bank of England for calling a spade a spade!

One of the biggest political issues in coming years will be whether the public clamour for stricter environmental regulations (ask any youngster how they feel on that subject) will succeed against the backdrop of huge financial losses in insurance, pension, and other portfolios.

If shareholder proposals to re-orient fossil fuel companies to renewable fuels are successful, some of the eventual losses on fossil fuel assets could be mitigated. However, ethical funds and managers who own fossil fuel investments so that they might engage with those companies will need to be nimble so they aren't caught on the wrong side with those investments when the hammer of regulation comes down.
Bank of England warns of huge financial risk from fossil fuel investments, by Damian Carrington, The Guardian, March 3, 2015, UK.

Ethisphere Announces the 2015 World’s Most Ethical Companies. "The Ethisphere Institute, the global leader in defining and advancing the standards of ethical business practices, today announced the 2015 World’s Most Ethical Companies®. The latest list includes 132 companies representing more than 50 industries spanning 21 countries and five continents."

[COMMENTARY] This is always a good list to peruse. Ethical investors might want to review their scoring and methodology. No one methodology captures everything, but Ethisphere's is pretty good.
Ethisphere Announces the 2015 World’s Most Ethical Companies, press release by BusinessWire, March 9, 2015, CNBC, USA.

Canadian Mining Company Social Star in Cambodia. "For the Canadian mining and exploration company operating in Eastern Cambodia, corporate social responsibility (CSR) comes before the first hole is drilled in the ground—and not just in the corporate presentation."

[COMMENTARY] Mining companies have a terrible image when it comes to operating in the developing world. However, it's great to see that some mining companies are doing it right. Many ethical investors will never invest in mining companies. I can understand this. However, they might want to ask themselves where the steel will come from to satisfy China's need for 20 million new cars each year. Recycling will only go so far.

Incidentally, MacCormick IMC, a Vancouver company, in 2013 published a social responsibility index of junior mining companies (generally gold and silver producers) listed on the Vancouver Stock Exchange. (Of course most of the big miners are already covered by the various SRI rating's groups.)
Canadian Mining Company Social Star in Cambodia, by Valentin Schmid, March 6, 2015, Epoch Times, USA.

Global impact assets expected to hit $12.7 billion for 2014. "Global impact investing — investments designed to generate a social or environmental impact as well as often targeting a competitive investment return — were expected to grow to $12.7 billion last year, up 20% from the previous year, according to a report released Thursday by Global Impact Investing Network."

[COMMENTARY] Impact investing is a wonderful marriage of promoting the social good while those investors providing the funds for such activities receive, potentially, decent returns. This is an area that many of the largest foundations on earth are targeting. Among them are -- from this article -- "the $32.4 billion Bill & Melinda Gates Foundation, $10.2 billion Ford Foundation, $4 billion Rockefeller Foundation, TIAA-CREF, J.P. Morgan Chase & Co., Prudential Financial, Morgan Stanley (MS) and UBS."
Global impact assets expected to hit $12.7 billion for 2014, by Barry B. Burr, March 5, 2015, Pensions & Investments, USA.

Islamic Finance: Scholar Ethics Rule Pushed Globally by Malaysia. "Malaysia is pushing for its one-year old rules overseeing Islamic scholars to be implemented globally in a push for more rigid governance... Islamic finance institutions require rulings from scholars, known as fatwa, before they can sell securities or funds in an industry that Ernst & Young LLP projects will double to $3.4 trillion in assets by 2018. Ensuring that consistent standards are adopted would require coordination between the key markets of Asia and the Middle East along with effective sanctions to ensure compliance."

[COMMENTARY] This is a huge issue as Islamic finance makes big strides in western capital markets. For many western bankers and fund managers, the scholars who must give their determination as to whether a particular investment, fund, etc., meets Islamic-shariah standards, is concerning. Some western interests have purportedly linked a few of these scholars to radical Islamic groups. Having a universal ethics and professional standards code will help alleviate such concerns and assist in the development of Islamic finance globally.
Scholar Ethics Rule Pushed Globally by Malaysia: Islamic Finance, by Y-Sing Liau, March 2, 2015, Bloomberg, Malaysia.

IMF working paper finds support for Islamic finance -- and resilience in financial panics. "Using data from Pakistan, where Islamic and conventional banks co-exist, this paper compares these banks during a financial panic.
The results show that Islamic bank branches are less prone to deposit withdrawals during financial panics, both unconditionally and after controlling for bank characteristics."

[COMMENTARY] It seems that people may have more trust in banks that follow strict ethical and religious beliefs. Is that surprising? I don't believe so. Look at the exceedingly low levels of trust that Americans and Brits have in their financial institutions. Obviously, the message here for western banks is that they must demonstrate they're serious about ethics, sustainability, and so forth, or eventually lose out to other institutions that live such promises.

It's possible that in the future financial institutions will compete on ethics as much as they presently do on services, financial returns, etc.
IMF working paper finds support for Islamic finance, by Robin Amlôt, February 28, 2015, UAE.

Morgan Stanley Survey Finds Sustainable Investing Poised for Growth. " Over seventy percent of active individual investors (71%) describe themselves as interested in sustainable investing, and nearly two in three (65%) believe sustainable investing will become more prevalent over the next five years, according to a new survey published today by the Morgan Stanley Institute for Sustainable Investing."

[COMMENTARY] These are among the highest numbers I've seen on such a survey. They roughly correlate with the percentage of the public concerned about climate change. Notwithstanding the potential negative effects of our unresolved economic problems, such numbers bode well for the future of sustainable-socially responsible-ethical investing -- however you define these terms.
Morgan Stanley Survey Finds Sustainable Investing Poised for Growth, press release, February 27, 2015, Morgan Stanley, USA.

Global RI (responsible investing) assets grew 61% from 2012 to 2014 to reach $ 21.4 trillion. "Assets employing RI strategies have risen from 21.5 percent to 30.2 percent of the professionally management assets across in the regions covered... The majority of the identified global RI assets discussed in the Review— 64% —are in Europe. Together, Europe, the United States and Canada account for 99% of global RI assets identified in the Review."

[COMMENTARY] This is terrific growth! The report finds that negative/exclusionary screening is still the most used aspect of RI, followed by ESG analysis and corporate engagement and shareholder actions. Europe -- as in the adoption of CSR by companies -- still leads!
Global RI assets grew 61% from 2012 to 2014 to reach $ 21.4 trillion, press release, February 24, 2015, Responsible Investment Association, Canada.

Young investors aim to make money responsibly. "'Anyone (who) has strong spiritual or religious beliefs would not want to see their investment support activities that are against those beliefs,' he said. 'I don’t give advice on what they should buy. What I do in a very general way is help them assess their personal values and then apply them to investments.'”

[COMMENTARY] That's a quote from me in an excellent article that also extensively quotes Dustyn Lanz, director of research and communications at the Responsible Investment Association of Canada. This is a good article to introduce the subject of ethical-responsible investing to those beginning to think about the subject, no matter their age."
Young investors aim to make money responsibly, by Ruane Remy, February 21, 2015, The Catholic Register, Canada.

Investors are driving increased adoption of ESG policies, report finds. "Institutional investors are increasingly demanding that private equity firms adopt ESG policies in their investment processes, according to new research conducted by the London Business School’s Coller Institute of Private Equity and supported by Adveq, the private equity investor. The study, based on responses from 42 private equity firms with collective assets under management of more than $640 billion, reveals that ESG is now a core value creation strategy at private equity firms."

[COMMENTARY] To me, what's most interesting about this study's findings relate to ESG moving out of the compliance and risk mitigation area in private equity and into it being seen as a value creation formulae used throughout their management organizations. ESG analysis is being inherently recognized for providing an opportunity to increase returns.
Growing pressure from LPs moves ESG from a compliance function to the heart of the investment process, February 23, 2015, London Business School, UK.

University of California announces progress on sustainable investment strategy. "The University of California today (Feb. 19) announced a series of steps it has taken to combat global climate change by investing in sustainability, including becoming the first university in the world to sign the Montreal Carbon Pledge... The university also recently joined... Ceres and its Investor Network on Climate Risk (INCR)... [and] The Carbon Disclosure Project (CDP)."

[COMMENTARY] The University of California is providing a great example of how educational institutions globally can assist in creating a better, sustainable world. One of it commitments is to "profitably invest at least $1 billion over the next five years in solutions to climate change."
University of California announces progress on sustainable investment strategy, press release, February 19, 2015, University of California, USA.

Hospitality workers name responsible, irresponsible private equity managers. "UNITE HERE, the union of hospitality workers throughout North America, is for the first time releasing its List of Responsible and Irresponsible Private Equity Managers in the Hospitality Industry (below) to help staff and trustees of pension funds and other institutional investors make smart decisions... [leading] the Responsible list is Blackstone Group LP; [leading] the Irresponsible list is Dallas-based Lone Star Funds."

[COMMENTARY] UNITE HERE is perhaps paving the way for other unions to offer their best and worst companies to work for. Actually, I believe such information would be useful for ethical investors, the 'rated' companies, and markets generally. So I hope that other unions come out of their shells and provide similar information!
UNITE HERE: Hospitality workers name responsible, irresponsible private equity managers, press release, February 18, 2015, UNITE HERE, USA.

New White Paper from Breckinridge Capital Advisors Examines the Value of Corporate Bond ESG Analysis. "Breckinridge Capital Advisors, a Boston-based high-grade fixed income manager with over $20 billion under management, has released a new white paper that examines its environmental, social and governance "ESG" analysis efforts on corporate bond investments. Breckinridge's white paper findings include:

1) Integrating ESG into its research process has been additive to its efforts to mitigate and appropriately price risk; 2) ESG analysis exhibits a low positive correlation with credit agency ratings; 3) ESG research is enhanced through engagement calls with corporate borrowers; 4) A company that works to manage its material ESG risks may be a more stable credit and a better investment."

[COMMENTARY] In short, Breckenridge finds ESG analysis is helpful in assessing bond risks and motivating issuers to higher ESG standards. For those managing or investing in fixed income assets, this is a most helpful paper. Download here.
New White Paper from Breckinridge Capital Advisors Examines the Value of Corporate Bond ESG Analysis, press release, February 11, 2015, Breckinridge Capital Advisors, USA.

New global 'ratings agency' ranks the 500 institutions with power to end deforestation by 2020. "The Global Canopy Programme has identified, assessed and ranked 250 companies, with total annual revenues in excess of US $4.5 trillion; 150 investors and lenders; 50 countries and regions; and 50 other influential actors in this space. Together, these 500 control the complex global supply chains of key 'forest risk commodities' such as soya, palm oil, beef, leather, timber, pulp and paper that have an annual trade value of more than US $ 100 billion and are found in over 50% of packaged products in supermarkets.

Assessed against dozens of policy indicators, only seven of the Forest 500 scored the maximum number of points - companies Groupe Danone (France), Kao Corp. (Japan), Nestle S. A. (Switzerland), Procter & Gamble (US) and Reckitt Benckiser Group (UK), Unilever (UK) and banking and financial services giant HSBC (UK)."

[COMMENTARY] Many ethical investors will be interested in these findings. However, some of the 'better' companies cited in this study do have other ESG issues. For instance, Nestle's promotion of baby formula over breast-feeding has angered many, while HSBC legal woes continue with the latest being possible criminal charges for allegedly helping US clients evade taxes.
New global 'ratings agency' ranks the 500 institutions with power to end deforestation by 2020, press release, February 11, 2015, Global Canopy Programme, UK.

Clean tech loses power in energy portfolios. "Last year, global clean-tech funds raised $2.9 billion, compared to $42.4 billion for global energy private equity funds, according to London-based alternative investment research firm Preqin. So far this year, clean-tech funds have raised $400 million vs. $2.9 billion for traditional energy funds."

[COMMENTARY] The thesis is obvious that low fossil fuel prices reduces the attractiveness of clean energy. Also, it seems that in recent years returns clean tech investments haven't matched those related to fossil fuels, according to some studies cited in this article.

Nevertheless, in reports by Ceres and many others, climate change will induce increasing government actions that negatively impact the growth and profitability of fossil fuel investments. Asset write-downs and stranded assets will likely feature prominently in future discussions concerning fossil fuel energy investments.

Furthermore, according to reliable sources such as Arthur Berman, US shale oil reserves and returns on those investments are way overblown.
Clean tech loses power in energy portfolios, by Arleen Jacobius, February 9, 21015, Pension & Investments, USA.

Japanese automotive companies take the lead in new CDP auto league. "This research focuses on the [environmental] regulation in the EU, US and China with the ranked companies, which responded to CDP's questionnaire, accounting for around 83% of the global auto market by sales volume... General Motors and FCA risk significant penalties in both the EU and US potentially equating to US$1.7bn (33% of EBIT) and US$574m (15% of EBIT) respectively. Ford is also at risk of a penalty in the US of US$889m (or 16% of EBIT)."

[COMMENTARY] This is a fascinating analysis of how prepared auto companies are for the regulatory environment in the near future. American companies are generally the least prepared and could suffer financially as a consequence. No doubt many ethical investors will want to consider the CDP analysis in their investing decisions. This is the first of many such reviews of different industries that CDP (formerly the Carbon Disclosures Project) is undertaking.
Japanese automotive companies take the lead in new CDP auto league, press release, February 5, 2015, CDP, UK.

RepRisk Releases Report on Most Controversial Companies of 2014. "Six out of the ten most controversial companies of 2014 are located in Asia and three are based in the United States."

[COMMENTARY] Uber, GM and the exclusive Neiman Marcus Group department store chain are #5, 8 and 10 respectively, on the list. Uber's problems included assaults by drivers on passengers; GM had to recall 30 million cars due to defects; and Neiman Marcus had a major data privacy breach plus allegations of child labor among its suppliers. There were other serious ESG issues with each of these and the other companies listed.
RepRisk Releases Report on Most Controversial Companies of 2014, report, February 4, 2015, Switzerland.

Health sector should divest from fossil fuels, medical groups say. "The health sector should get rid of its fossil fuel investments on moral grounds, as it previously did with its tobacco investments, according to a report by a coalition of medical organisations... The members of the British Medical Association have already voted to divest from fossil fuels, the first health organisation in the world to do so."

[COMMENTARY] How soon will fossil fuel companies be held in the same esteem as tobacco companies? Those invested in fossil fuel entities will have to keep a close eye on such developments. Presently, many investors are excited that potential lows have been seen in the oil price and that as the price moves higher there'll be big financial gains in related investments. However, for long-term gains, both ethically and financially, fossil fuel investments remain fraught with danger.
Health sector should divest from fossil fuels, medical groups say, by Damian Carrington, February 4, 2015, The Guardian, 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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