Research Documents Positive Link Between
Corporate Human Resources Policies & Investment
Outcomes. "Of the many studies of human
capital policies, the new paper examines 92 that
focus on the links to corporate financial
performance. The authors find that a large majority
of the studies - conducted over several decades and
encompassing dozens of countries and industries -
reported positive correlations...
However, investors face significant challenges
in attempting to incorporate human capital metrics
into investment analyses. For example, there are no
standard metrics or definitions and there is no
clear consensus about which HR policies in what
combinations have the most impact on financial
Intuitively, we know that properly managed human
resources and their development are significant to a
company's progress. This report is the first to
correlate human resources policies to investment
outcomes. What this report could do is to encourage
investors/fund managers to ask companies for much
more detail about their human resource policies,
training etc., to try to understand the potential
links between good and bad human resource policies
with respect to corporate financial performance.
The report also opens-up a new field of academic
enquiry into these linkages.
Research Documents Positive Link Between Corporate
Human Resources Policies & Investment Outcomes,
press release, April 23, 2015, Investor
Responsibility Research Center Institute & Harvard
Law Labor & Worklife Program, USA.
Canada’s greenest employers help the Earth –
and their bottom lines. "As environmental
leaders, they’ve put their strategy into action
through multiple initiatives, both formal and
informal, both corporate and employee-led. For many
organizations, building sustainability isn’t a
trendy thing to do, but has evolved to become a part
of how they operate, notes Richard Yerema, managing
editor of Mediacorp Canada."
We know that corporate sustainability has a long way
to go, so it's good that attention -- and awards --
is creating a competitive atmosphere to encourage it
while raising its profile corporately. Many of the
initiatives cited could clearly demonstrate a
corporate financial benefit. It would have been
great if such benefits could've been ascertained and
Canada’s greenest employers help the Earth – and
their bottom lines, by Diane Jermyn, April 22,
2015, The Globe and Mail, Canada.
Malaysia and Saudi facing Iran’s rising
finance power -- Iran's entire banking system is
Shariah-compliant with $482bn (2014) in assets, the
largest in the world by far. "[Iran's Shariah
compliant banking assets are] almost a quarter of
total global Islamic finance assets, more than
Malaysia’s, Saudi Arabia’s and the UAE’s Islamic
Should an agreement transpire between the Iran and
the rest of the world concerning it's nuclear
programme and Iran re-enter the global finance
industry, it'll have an enormous influence in global
Islamic finance. It might also influence global
banking, generally. This is one area that ethical
investors will want to particularly watch.
Malaysia and Saudi facing Iran’s rising finance
power, by Arno Maierbrugger, April 22, 2015,
Gulf Times, Qatar.
Meet the Best for the World (of Certified B
Corporations) Overall Honorees for 2015. "The
Best for the World Honorees are recognized for
creating the most positive social and environmental
impact. These companies have earned an overall score
in the top 10% of all Certified B Corporations on
the B Impact Assessment, a rigorous and
comprehensive assessment of a company's impact on
its workers, community, and the environment."
This is a fascinating list to review when
considering the first major B corp. listing on the
NASDAQ last week, that of Etsy, an online and
offline marketplaces to buy and sell handmade items,
vintage goods, and craft supplies.
Best for the World Overall Honorees for 2015,
April 21, 2015, B Lab, USA.
The World's Most Reputable Companies In 2015.
"The Global RepTrak list stands out from other
corporate lists... because it aims to quantify the
way companies are perceived by consumers... rather
than looking at how companies manage their internal
affairs... According to RI’s data, 83% of consumers
say they would definitely buy products sold by
companies with top reputations while only 9% want to
buy from companies with poor reputations... Google
scores No. 2 on the list, just behind BMW and above
The Forbes article covering the Global RepTrack 100
list is highly informative. It refers to Google's
problems with anti-competition regulators in Europe
and why they're having zero effect on its reputation
and that no oil and gas producers are on the list as
they're perceived as being polluting and unethical!
The World's Most Reputable Companies In 2015, by
Susan Adams, April 21, 2015, Forbes, USA.
Why Gender Matters to Investors. "A
2014 Credit Suisse study of 3,000 companies
assessing the level of women in senior management
found that more diversity in management coincides
with better corporate performance and higher
The writer also cites several other studies that
include those by Thomsen Reuters and McKinsey, which
all find that women on boards leads to greater
financial performance and increased stock values!
With results like this it behoves ethical investors
to consider gender/diversity screening in stock
evaluations if they do not already do so.
Why Gender Matters to Investors, by Joseph F.
Keefe and Sallie L. Krawcheck, April 21, 2015. (This
article originally appeared in the April 2015 issue
Green Money Journal on “Women and Investing”),
Fossil-Free Portfolios Outperform Those With
Coal, Gas, Oil. "MSCI Inc. calculates that
portfolios without coal, gas and oil earned 1.2
percent more since 2010. Average fossil-free returns
have been 13 percent a year, as opposed to 11.8
percent for conventional investors, reports The
Guardian. Sure, during this period the price of oil
tanked, driving down shares of companies, but
fossil-free indexes outperformed before this
happened, said MSCI. And the volatility of oil
shares is another reason to get out of these
These results should be a wake-up call to all those
fund managers who say their returns will suffer
going fossil fuel-free. With such data and today's
oil and gas prices -- plus renewables becoming
increasingly competitive -- we might finally be
witnessing the beginning of the relative decline of
the entire fossil fuel industry. Many ethical
investors have longed for this moment.
Fossil-Free Portfolios Outperform Those With Coal,
Gas, Oil, April 13, 2015,
SustainableBusiness.com News, USA.
The Type of Socially Responsible Investments
That Make Firms More Profitable, Harvard Business
Review. "We find that firms making
investments and improving their performance on
environmental, social, and governance (ESG) issues
exhibit better stock market performance and
profitability in the future...
However, not all such initiatives are equally
beneficial. My research, with Mozaffar Khan and
Aaron Yoon, suggests companies should stick to
social and environmental issues that are
strategically important for their business if they
want such efforts to contribute to the valuation."
The points made in this article are important for
both company managers and investors. The article is
written by one of the most well respected
researchers in this field.
The Type of Socially Responsible Investments That
Make Firms More Profitable, by George Serafeim,
April 14, 2015, Harvard Business Review, USA.
Clean Energy Investment Dips 15% In First
Quarter As Large Wind And Solar Projects Stall.
"About $50.5 billion was invested in the first
three months of this year, compared to $59.3 billion
a year earlier, the London research firm said. The
last period to show weaker investment was the first
quarter of 2013, when clean energy spending totaled
Even so, last quarter’s results should resolve
investors’ questions over whether low oil prices,
down 50 percent from last year, would harm global
interest in wind, solar, biomass and other renewable
energy projects. 'These figures indicate the answer
is not so much,' Michael Liebreich, chairman of
BNEF’s advisory board, said in a statement."
There's no-doubt that cheap oil will have some
effect on renewable energy development. However, at
the utility level, renewables are becoming cost
competitive with gas or nuclear. Also -- as most of
us expect -- fossil fuel production will be
increasingly curbed by governments due to the
dictates of climate change.
Clean Energy Investment Dips 15% In First Quarter As
Large Wind And Solar Projects Stall, by Maria
Gallucci, April 10, 2015, International Business
2015 Proxy Preview of 433 resolutions.
"Corporate political activity of all sorts and
environmental matters—predominantly climate
change—continue to vie for top billing with 26
percent and 27 percent of the total, respectively;
increasingly these are linked by investors who seek
corporate action to bypass some of the vitriol that
stymies government solutions. All told,
environmental and sustainable governance resolutions
combined represent 39 percent of the total so far,
as in 2014, while political activity accounts for
just over one-quarter of the total—down 4 percentage
points from last year’s mid-February share."
The survey is a compilation of three data sources:
As You Sow, Sustainable Investments Institute (Si2),
and Proxy Impact. As many ethical investors take a
keen interest in proxy voting, so I'm providing a
link to this survey
Sweden tops in the EU in ESG ranking (for
government bonds). "Bond investors looking to
remain true to their environmental, social and
governance principles have a new tool: a ranking of
European Union member countries. The study, 'EU
Member States under the Spotlight,' ranked the 28
countries based on 67 human rights and 17
environmental indicators, including gender equality,
labor rights, freedom of expression, and protection
of the environment."
Such rankings for government bonds are becoming more
common. Incidentally, though not directly ranking
EIRIS Country Sustainability Ratings and
RobecoSAM's Country Sustainability Ranking both
offer useful insights for judging government issued
bonds on ESG issues.
Sweden tops in the EU in ESG ranking, by Sophie
Baker, April 6, 2015, Pension&Investments, USA.
Japan's 137 trillion yen ($1.1 trillion) GPIF
may consider ESG factors in stock investments.
"In a mid-term plan announced on Thursday, GPIF
said it would consider taking account of
'environmental, social and governance' (ESG) factors
in equity-investment decisions, while pursuing
When the world's largest pension fund says it's
considering integrating ESG factors into its stock
selection process, we know that ESG has truly
arrived! This fund -- which traditionally mostly
invested in Japanese government bonds -- is now
gearing up to be heavily invested in stocks. Should
they go ahead with the ESG focus, it could further
promote outperformance for global stocks with high
Japan's GPIF may consider governance in stock
investments, by Takashi Umekawa, April 2, 2015,
The moral maze: How poor company ethics can
cost investors. "The Chartered Institute of
Internal Auditors’ study shows that while 91 per
cent of the FTSE100 refer in their annual reports to
their high standards of business ethics and
integrity, only 8 per cent provided a specific
metric of their company’s ethical performance."
Most firms are good at touting their ethical codes
and standards, but in reality quite a few don't live
up to them. Furthermore, though the public,
regulators, and politicians cry out for improved
corporate ethics, evidence suggests that these
groups are equally guilty of unethical conduct.
The problem of poor ethics in companies simply
reflects the level of ethics in the population
generally. Also, studies demonstrate that the richer
one is the more likely one is to engage in unethical
behaviour. The investment industry is populated with
high net worth individuals so it is no accident that
there might also be a higher incidence of unethical
activities in the industry.
Some of you might be interested to read,
How Ethics Benefits Corporate Profits.
The moral maze: How poor company ethics can cost
investors, by Joanne Frearson, March 17, 2015,
Business Reporter, UK.
Boards Lack Social and Environmental Risk
Governance, says expert Dr Raj Aseervatham.
"Many boards are heavily populated by experts in
finance and law as well as industry experts, and
thinly populated with other expertise.. the
prevalence of social and environmental skills on
boards today is miniscule."
This is another important article. It explores the
state of corporate boards today and how they must
change to adequately deal with the rising importance
of ESG in their companies today.
Boards Lack Social and Environmental Risk
Governance, by Dr Raj Aseervatham, March 30,
2015, TriplePundit, USA.
2015 SHARE Model Proxy Voting Guidelines for
institutional investors. "These guidelines
have been developed by SHARE as a model for use by
Canadian pension funds. The guidelines are written
in the first person—“[the fund]”—to make them
similar to guidelines that would be adopted by a
board of trustees."
All voting investors might want to look at these
guidelines. They're informative on numerous issues
of concern to every stockholder.
2015 SHARE Model Proxy Voting Guidelines, SHARE,
March 2015, Canada.
At U.S. Companies, Time to Coax the Directors
Into Talking. "Directors at European
companies routinely make themselves available for
investor discussions; in some countries, such
meetings are required. Many directors of foreign
companies even — gasp — give shareholders their
private email addresses and phone numbers.
Their counterparts in the United States seem fearful
of such contact. Large shareholders say that some
directors of American companies refuse to meet at
all, preferring to let company officials speak for
Not mentioned in this article is that American
corporate directors might fear litigation or
sanctioning should they disclose
corporate information that might not be public.
Nonetheless, European companies and their legal
system promoting director-investor communication is
a good thing. However, I do wonder if with such
improved communications, directors might sometimes
disclose to 'special' investors information that
might not always be public!
At U.S. Companies, Time to Coax the Directors Into
Talking, by Gretchen Morgenson, March 28, 2015,
The New York Times, USA.
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%)."
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
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
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
However, as everyone knows, a further
intensification of ESG efforts by companies is
required if we're to successfully cope with climate
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." [Underlining added.]
"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."
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
It's a good time for ethical investors to review
their holdings in the light of this reports'
State of Green Business Report 2015 (for download of
report, pdf format), March 18, 2015,
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
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
Finally, firms with good performance on
material issues and concurrently poor performance on
immaterial issues perform the best."
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
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
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,
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
"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."
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:
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."
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
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
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
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."
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
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
Canadian Mining Company Social Star in Cambodia,
by Valentin Schmid, March 6, 2015, Epoch
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."
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
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
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,
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