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Shareholder Values

 
"Thirty-eight percent of financial advisors express strong interest in recommending sustainable investments to their clients; 72% express some interest."
--
Calvert Foundation
   
(USA) June 2012

"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

"Some 83% of British women want their personal values to be reflected in their investments, with the majority saying they would be unhappy if they knew their money supported unethical practices."
--
Abundance
    Generation
   
(UK) January 2014

 
 

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        Links may only be valid for a limited time                                               August 31, 2014

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U.S., int’l equities show greatest ESG growth potential. "Most asset managers believe that investors’ heightened focus on environmental, social and governance (ESG) strategies is a long-term 'secular' trend, according to a new report. Cerulli Associates discloses this finding in its August 2014 edition of 'The Cerulli Edge: U.S. Monthly Product Trends.' Asset managers surveyed by Cerulli have observed a moderate (65 percent) or significant (13 percent) increase in demand among clients and prospects for the United Nations-supported Principles for Responsible Investment (PRI) Initiative."

[COMMENTARY] The latter comment is most interesting as it displays significant and growing interest in matters pertaining to ESG among investors. This suggests companies excelling in ESG might outperform peers with regard to stock prices. And as readers here know, much research supports this view.
U.S., int’l equities show greatest ESG growth potential, by Warren S. Hersch, August 28, 2014, LifeHealthPro, USA.

Is Sin Always a Sin? The Interaction Effect of Social Norms and Financial Incentives on Market Participants’ Behavior, Research Study. "Our results show that social norms and financial incentives have a powerful interaction effect in determining the behavior of market participants, suggesting that social norms can be crossed when motive and opportunity exist."

[COMMENTARY] What the findings of these researchers suggest is that given sufficient financial incentives, even ethical investors could succumb to investing in companies producing products/services opposed to their personal values. This is an interesting new area of research. It might also explain a lot about investor motivation--where they always say they want to invest ethically--yet only rarely invest in ethical investment products.
Is Sin Always a Sin? The Interaction Effect of Social Norms and Financial Incentives on Market Participants’ Behavior, by Yanju Liu, Singapore Management University - School of Accountancy; Hai Lu, University of Toronto - Rotman School of Management; and Kevin J. Veenstra, McMaster University - DeGroote School of Business. Accounting, Organizations and Society, Volume 39, Issue 4, 2014, Canada/Singapore.

Trends in corporate social responsibility 2014, by Grant Thornton. "Businesses report an increase in drivers to move towards more environmentally and socially sustainable business practices. Cost management is the main driver globally, followed by customer demand and because it’s the ‘right thing to do’. How a business is perceived to be operating is also important in many countries, especially China."

[COMMENTARY] The report is useful reading for ethical investors. It provides a glimpse as to how executives currently see the utility of CSR in their own firms. You need to register--which is free--to get the report.
Trends in corporate social responsibility 2014,  August 22, 2014, Grant Thornton, UK.

Conflict minerals reports are filed, but what do they say? "The supply chain complexities will make it very difficult for most companies to ever definitively determine the conflict mineral status of their products. For those that eventually do, it may take years of due diligence efforts before they can credibly reach such determination."

[COMMENTARY] The US SEC requirement that companies file Conflict Mineral Reports for tantalum, tin, tungsten and gold is proving to be a bit of a sham at the moment. According to this article, it seems companies aren't taking this reporting too seriously at the moment. Part of it is that companies have two years to come-up with answers. Another part is that suppliers are frequently uncooperative. We'll have to see each year what progress is being made. Ethical investors will need a lot of patience with this. At least this subject is coming into the open and with investors and consumers becoming more vocal on this subject, companies will have to eventually take notice.
Conflict minerals reports are filed, but what do they say? By Allie Rutherford and Steve Starbuck, August 19, 2014, GreenBiz, USA.

Generation Y's savings shortage may hit green investment. "Scepticism about the financial industry means 18-34 year olds are keeping savings as cash, reducing pot for much-needed green infrastructure funding."

[COMMENTARY] As this article states, it's important that generation y understands and makes green investing a priority or the future of the planet becomes increasingly hazardous. Investment returns would suffer as well. (Subscription required, free for first 4 weeks.)
Generation Y's savings shortage may hit green investment, August 22, 2014, Business Green, UK.

UK corporate giving: rise in donations. "In the last five years the UK’s biggest companies have doubled the amount of donations to charities, according to a report by the Charities Aid Foundation. The report, Corporate Giving by the FTSE 100, reveals big companies increased their donations to charities to £2.5bn in 2012, a rise of £1.2bn since 2007. Since 2007 the average amount donated to charity from these big companies has trebled from £1 million to £3 million."

[COMMENTARY] Improved corporate reputation occurs when a company gives to charities, thereby potentially, though usually marginally, positively affecting its stock price. Some ethical investors might want to investigate this relationship.
UK CORPORATE GIVING: Rise in donations, by Alan Cole, August 19, 2014, Xperedon, UK.

Are Socially Responsible Funds a Smart Way to Invest? "A TIAA-CREF Asset Management survey taken in January asked 1,000 plan participants about their interest in socially responsible investments. Among survey respondents under age 35, 76 percent said they were interested or very interested in SRI options versus 64 percent of all survey takers. Seventy percent of women surveyed were also interested in SRI strategies, which take social, environmental and corporate governance factors into account, compared with 55 percent of men."

[COMMENTARY] Again, given a choice, most investors want to invest in SR-ethical investment strategies. Almost always, the impediment for them doing so is their investment advisors and financial planners.
Are Socially Responsible Funds a Smart Way to Invest? By Casey Quinlan, August 19, 2014, US News & World Report, USA.

Female clients' unique approach to investing. "As they do with most things, men and women think about investing differently. Heather Locus, principal at Balasa Dinverno Foltz, points to a meeting she had with a brother and sister to highlight those differences. Both had inherited funds, and while the brother said, 'Give me what's going to do the very best,' the sister sought out socially responsible investments for a good portion of the money."

[COMMENTARY] In every survey I've seen concerning SR-ethical investing, women are more favourably inclined towards it. This is something that investment advisors seeking to maximize their 'book' might want to emphasize in the marketing of their services. They should also note that, "According to the Center for Talent Innovation, women control $11.2 trillion, or 39%, of the investible assets in the U.S." (Subscription required—which is free.)
Female clients' unique approach to investing, by Liz Skinner, August 17, 2014, Investment News, USA.

Pension beneficiaries prepared to sacrifice returns in favour of responsible investing. "Forty percent of pension participants are willing to forfeit part of their retirement income if the fund’s investment strategy matches their view on responsible investment, a survey has suggested."

[COMMENTARY] The researchers at TIAS Business School of Tilburg University, Netherlands, also found that those with higher education and incomes, as well as women, were more likely to be comfortable with lower returns if investments met with their views on responsible investment. Of course, this whole premise--that one has to sacrifice returns for ethics--is wrong to begin with! It just shows how much education is needed, not only in the Netherlands but everywhere, that investing ethically can actually benefit returns!
Pension beneficiaries prepared to sacrifice returns in favour of responsible investing, by Olaf Boschman, August 14, 2014, IPE, UK.

Russian banks lobby central bank to draft Islamic finance law. "A lobby group for Russian banks has written to Moscow's central bank seeking measures to promote Islamic finance at a time when the banking sector is facing a squeeze on foreign financing due to economic sanctions imposed over the Ukraine crisis. The Association of Russian Banks (ARB) said in a letter sent to the central bank late last week that promoting Islamic finance could give a boost to the economy and draw significant investment from the Middle East and Southeast Asia, regions where Islamic finance is flourishing."

[COMMENTARY] No matter what one thinks about western sanctions against Russia, Iran, etc., there is an interesting potential side outcome: increasing the growth of Islamic finance. Whether this is to the detriment of western banking, finance and investment, remains to be seen. However, Islamic finance, depending on how it's organized, could be a force to spur higher ethics, ESG and CSR in the world of finance, globally. Thus, possibly, even benefiting ethical investing.
Russian banks lobby central bank to draft Islamic finance law, by Bernardo Vizcaino and Alexander Winning, August 14, 2014, Reuters, UAE/Russia.

Head-To-Head Comparison Of Top Global Household Products Companies On Environmental, Social And Governance Metrics. "This blog provides environmental, social and governance (ESG) performance metrics for four global household products: Colgate-Palmolive (NYSE:CL), Kimberly-Clark (NYSE:KMB), Unilever (NYSE:UL) and Procter & Gamble (NYSE:PG). My contribution is to provide readers with current analytics that go beyond financial metrics, to evaluate how well these companies perform on comparable environmental, social and governance – or ESG – metrics, also known as sustainability metrics."

[COMMENTARY] Besides providing great ESG analysis of these companies, this blog post shows readers how some professionals conduct such research.
Head-To-Head Comparison Of Top Global Household Products Companies On Environmental, Social And Governance Metrics, by Katherine Schrank, August 13, 2014, Seeking Alpha, USA.

GEMS study uncovers leaders, laggards in environmental management. "Along with my data provider, IW Financial, I [Peter Soyka] have just released a newly updated and expanded study, '2014 GEMS Benchmarking Analysis of U.S. Corporate Environmental Practices.' It identifies the U.S. firms with the strongest reported environmental policies and infrastructure and finds that — notwithstanding noteworthy improvements during the past several years — many publicly traded companies have limited discernible capability with which to manage complex environmental and sustainability issues."

[COMMENTARY] The study evaluates all the companies in the Russell 3000 stock index. Overall, companies are getting better at disclosing their environmental practices. Also, it seems that the bigger the company, the better it's reporting. This is a useful article for ethical investors to read.
GEMS study uncovers leaders, laggards in environmental management, by Peter A. Soyka, August 7, 2014, GreenBiz, USA.

The socially responsible corporation? It’s a myth argues researcher. "Question of whether corporations could be socially responsible when you looked at all the components of the value chain or the individuals underlying this – the workers, the investors, and the managers. Whether you could have a socially responsible corporation when, in fact, the natural tendencies of the individuals in the corporation were, in the value chain of the corporation, were themselves not going to be prepared to sacrifice for their conscience, in some sense."

[COMMENTARY] Timothy Devinney, leadership chair in international business at Leeds University, UK, found that consumers, investors, and corporate employees will not always act socially responsibly or ethically and that there really isn't an 'ethical consumer.'

I believe what Professor Devinney is really describing has been observed many times in recent years: that individuals are only partly ethical and happy to cheat if it suits them. And it goes all the way back to their years at school. For instance, in a 2011 post, Free Markets Need Higher Consciousness of Participants, I wrote that, "Cheating by students has grown alarmingly in US schools, colleges and universities in recent decades. The highly respected US Educational Testing Service says that 'while about 20 per cent of college students admitted to cheating in high school during the 1940s, today between 75 and 98 per cent of college students surveyed each year report having cheated in high school.'" Cheating and poor ethics are everywhere!

Hence, we need a new, higher consciousness in society before true CSR is possible. Nonetheless, I believe gains are being made in this direction and am thus hopeful for the future for CSR. (Unfortunately, the article linked to below might not be available to all readers.)
Transcript: The socially responsible corporation? It’s a myth, Karl Moore of the Desautels Faculty of Management at McGill University, Canada, interviews Timothy Devinney [leadership chair in international business at] Leeds University, UK, August 5, 2014, The Globe & Mail, Canada.

Why sustainability leaders don’t impress Wall Street. "Investors don’t have the data they need, or understand how sustainability connects to creating shareholder value. And companies don’t know how to tell a story that’s relevant to Wall Street. What we have here is a multi-trillion-dollar failure to communicate."

[COMMENTARY] This is a great article focusing on the soon to be published work of Sheila Bonini and Steven Swartz at McKinsey & Company. Their research highlights ways in which mainstream Wall Street and investors can connect on corporate sustainability and how it relates to shareholder value.
Why sustainability leaders don’t impress Wall Street, by Joel Makower, August 4, 2014, GreenBiz, USA.

McKinsey: company leaders rallying behind sustainability. "Some 43% said their companies are seeking to align their sustainability with their overall goals, mission or value, compared to the 30% that said this in 2011. McKinsey links this trend to business leaders themselves placing more importance on sustainability, the number of CEOs that described it as their top priority was double that seen two years ago."

[COMMENTARY] Survey results like this from a firm such as McKinsey are credible. Also, indirectly, these results support ethical investing. As more companies take sustainability to heart they perform better on ESG issues, subsequently improving their attractiveness to ethical investors.
McKinsey: company leaders rallying behind sustainability, by Charlotte Malone, August 2, 2014, Blue & Green Tomorrow, UK.

The carbon taxes we're already paying. "The world's 3,000 biggest companies, according to a U.N. Environment Program report, cause $2.15 trillion in annual environmental costs, most of which are not accounted for in their profit/loss statements."

[COMMENTARY] This is a good article describing the carbon 'taxes' that we're already paying and asks who should pay them!
The carbon taxes we're already paying, by Mark Shapiro, July 29, 2014, Justmeans, USA.

Benchmarking Utility Clean Energy Deployment 2014, Ceres. "Benchmarking Utility Clean Energy Deployment assembles data from more than 10 sources, including state Renewable Portfolio Standard (RPS) annual reports, U.S. Securities and Exchange Commission 10-K filings and Public Utility Commission reports, to show how 32 of the largest U.S. investor-owned electric utility holding companies stack up on renewable energy and energy efficiency."

[COMMENTARY] This is a terrific review of the major public US energy utilities concerning their clean energy development and performance. As we know, many investment advisors regard energy utilities as one of those basic holdings, but for ethical investors they are often a problem because of their carbon footprints. This review should help ethical investors gain a better perspective on these utilities. You have to register for the free report.
Benchmarking Utility Clean Energy Deployment 2014, July 2014, Ceres, USA.

9 key trends in corporate sustainability reporting. "Nearly three-quarters of sustainability professionals ranked CSR above seven out of 10 in relation to their business objectives (with one being low and 10 being high.) Meanwhile, most organizations dedicate between $34,000 and $84,000 of their budget to CSR reporting activity."

[COMMENTARY] For investors, this provides an interesting perspective on how sustainability professionals within corporations rate who and what's important to them. Interestingly, 45% said that the most important stakeholder group for their CSR strategy was customers, while investors and boards were a distant 20%.
9 key trends in corporate sustainability reporting, by Victoria Knowles, July 23, 2014, GreenBiz, USA.

Survey: Increasing number of professionals value sustainability as reason to invest. "A survey of more than 360 international investment professionals on sustainable investment has outlined how environmental, social and governance (ESG) policies are becoming increasingly fundamental for the sector. The survey, by Thomson Reuters and the UK Sustainable Investment and Finance Association (UKSIF), assessed 179 buy-side firms and 14 brokerage firms and research houses."

[COMMENTARY] See my commentary for the post immediately below.
Survey: Increasing number of professionals value sustainability as reason to invest, by Ilaria Bertini, July 17, 2014, Blue & Green Tomorrow, UK.

Fixed income managers shift focus to ESG. "A majority of global fixed income managers are now taking environmental, social and governance (ESG) factors into serious consideration, according to a JANA survey. The JANA ESG in Fixed Interest Survey, which recorded the responses of 63 of the largest fixed income managers, found 88 per cent of respondents believe ESG factors influence the financial outcomes of fixed income investments."

[COMMENTARY] The good news confirming the mainstreaming of ESG in investment analyses continues. However, according to other more in-depth research (I believer by Mercer, particularly), analysts who say they consider ESG factors in their work generally only utilize it in a peripheral manner. They have yet to fully systemize and integrate it in their research work.
Fixed income managers shift focus to ESG, staff reporter, July 15, 2016, Investor Daily, Australia.

US corporate polluters are almost never prosecuted for their crimes. "More than 64,000 facilities are currently listed in [EPA] databases as being in violation of federal environmental laws, but in most years, fewer than one-half of one percent of violations trigger criminal investigations, according to EPA records."

[COMMENTARY] Before investing in a company, I've always advocated that ethical investors might want to check what environmental regulations a company might've broken and understand the possible legal penalties. Well, now we know that in the US the likelihood of costly environmental penalties are mostly nil. What a farce! And this is a nation that boasts about its 'rule of law.'

Unfortunately, it seems that US legislators purposely starve its regulatory agencies of funds (SEC, CTFC, EPA, etc.) due to the successful lobbying and manipulative efforts of potentially affected corporations--who just happen to be significant contributors to their political campaigns. There are names for this style of government--but I won't offend my US readers by using them.
Corporate polluters are almost never prosecuted for their crimes, by John Upton, July 15, 2014, GreenBiz, USA.

World Council of Churches pulls fossil fuel investments. "An umbrella group of churches, which represents over half a billion Christians worldwide, has decided to pull its investments out of fossil fuel companies. The move by the World Council of Churches, which has 345 member churches including the Church of England but not the Catholic church, was welcomed as a 'major victory' by climate campaigners who have been calling on companies and institutions such as pension funds, universities and local governments to divest from coal, oil and gas."

[COMMENTARY] This is a terrific step forward for coping with climate change. It will make many of their followers do the same and possibly even more. Exxon, Shell and other major oil and gas companies have been downplaying any possibility of carbon use restrictions ever happening. This is one of the first indications that a groundswell of public opinion to limit first, investments, and then carbon use, can and will happen. This is continuing good news for renewable fuels and bad news for carbon-based companies. Thank you, Desislava Dechkova, for bringing this article to my attention.
World Council of Churches pulls fossil fuel investments, by Adam Vaughan, July 11, 2014, The Guardian, UK.

New Vatican bank chief vows focus on 'Catholic, ethical investments.' "The newly appointed head of the Vatican's bank, the Institute for Religious Works, pledged on Wednesday to focus on 'Catholic, ethical investments,' as part of plans to clean up the scandal-plagued institution. Over the decades, the Vatican bank has been involved in a long list of financial scandals, allegedly offering safe haven to the funds of Italian mobsters, politicians and entrepreneurs, going beyond its prime remit of assisting worldwide church operations."

[COMMENTARY] Of all the religious institutions that should invest according to spiritual and ethical principles, you would think that the Vatican Bank would've been in the forefront. I guess it's better late than not doing it at all. Hopefully, the Vatican Bank will become a major force for spiritual and ethical investing. If it's able to influence Catholics everywhere to invest similarly, then it'll help create a better world for everyone, both Catholics and non-Catholics alike.
New Vatican bank chief vows focus on `Catholic, ethical investments,' by Alvise Armellini, July 9, 2014, The Record, Canada.

Millenials favour impact investing, real assets. "The number of Millennials that own or employ socially responsible investments is significantly higher than in any other age group, according to a study that explores family dynamics in wealthy families. US Trusts’ Insights on Wealth and Worth 2014 found that 63% of Millennials, those born between 1980 and 2000, own or are interested in socially responsible investments compared with 40% of Generation X. Generation X is defined as people born between 1960 and 1980."

[COMMENTARY] Perhaps it is that millenials--who are now starting careers and families--think more about the long-term for themselves and their kids and realize that they want a better, future world. If so, it offers promise for improved societal ethics, a better climate change response and the mainstreaming of ethical investing.
Millenials favour impact investing, real assets, by Michael Finnigan, July 2, 2014, CampdenFB, 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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