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"Thirty-eight percent of financial advisors express strong interest in recommending sustainable investments to their clients; 72% express some interest."
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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%)."
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"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."
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(UK) January 2014

 
 

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

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Investment giants are demanding climate action, so why aren't corporates delivering? "As investors renew calls for climate action, a survey shows nine out of 10 investors see sustainability as a competitive advantage - so why are the firms they invest in not making faster progress?

Yesterday saw the latest intervention from many of the world's largest institutional investors, as more than 340 companies with over $24tr (£14.7tr) of assets under management issued a fresh declaration calling for world leaders to deliver 'stable, reliable and economically meaningful carbon pricing' and increased support for clean technologies."

[COMMENTARY] My impression is that most company CEOs believe they're performing better on sustainability issues, but except for some key outliers, investors don't see it. Thus, investors want regulatory changes to force companies to be more sustainable. This is a good article for ethical investors to read.
Investment giants are demanding climate action, so why aren't corporates delivering? By James Murray, September 19, 2014, BusinessGreen, UK.

New report (from UN Principles for Responsible Investment) shows that ESG can mitigate risk, provide value in debt capital markets. "Analysis of Environmental, Social and Governance (ESG) issues such as corruption and climate change should be considered as a natural fit for fixed income investors as it can help to manage risk and identify credit strength, according to a new report released by Principles for Responsible Investment (PRI).

The report is intended as a guide for fixed income investment managers and their clients on how to incorporate ESG into their investment strategies to gain the available information advantage."

[COMMENTARY] That latter point, "to gain the available information advantage," is really what will increasingly attract fund managers. Not only have we seem inordinate confirmation of higher returns when ESG analysis is applied to equities, but that same type of confirmation is coming with fixed income investments. Most ethical investors have only thought of applying ESG to their stocks. This is a prompt to them that they should also apply such values and analysis to their fixed income investments as well.
New report shows that ESG can mitigate risk, provide value in debt capital markets, September 18, 2014, KFW Group, Germany.

Shares prices boosted by corporate sustainability policies, says University of Oxford study. "The University of Oxford’s Smith School of Enterprise and the Environment and Arabesque Asset Management, a sustainable investor, carried out a so-called meta-study of more than 190 academic studies and other literature on the impact of environmental, social and governance (ESG) policies on performance.

They found that corporate sustainability helps to lower a business’s cost of capital and boosts a company’s operating performance.

In addition, 80pc of studies – 31 out of 39 – showed a “positive correlation” between sustainability and stock market performance."

[COMMENTARY] Send this (the full report) to all those advisors and fund managers still dubious of socially responsible-ethical investing! Their claims that such investing lowers returns are nonsense.
Shares prices boosted by corporate sustainability policies, by Ben Martin, September 15, 2014, The Telegraph, UK.

Shareholder pressure fails to promote sustainable practices – survey. "Barely one in 10 companies feel compelled to improve their sustainability record, despite pressure from institutional investors, a study by the UN-backed Principles for Responsible Investment (PRI) has found."

[COMMENTARY] The criticism seems to be that shareholder activism concerning corporate sustainability efforts is too diffuse, short-term in nature, and not focused on specific, identifiable actions that companies can undertake. One great finding: 80% of executives viewed sustainability as a key competitive advantage!
Shareholder pressure fails to promote sustainable practices – survey, by Jonathan Williams, September 12, 2014, IPE, UK.

Banks showing limited commitment to responsible investing. "Only 7% of banks surveyed by Sustainalytics report that the share of responsible assets is more than 5% of total assets under management. Nearly all of these institutions are from Europe, with three from North America and one from South America.

Another 96 institutions (27%) either have less than 5% of AUM dedicated to RI assets or do not disclose the value of their RI assets. Two hundred and forty-one institutions (67%) don’t provide any evidence of RI assets under management."

[COMMENTARY] The research findings of the Sustainalytics survey are quite an indictment of western banking. In comparison with the investment industry--which is increasingly applying ESG in stock and portfolio selection--banking institutions are way behind.
Banks showing limited commitment to responsible investing, by Doug Watt, September 12, 2014, SRI Monitor, Canada.

Global water availability 'could limit fracking developments'. "A new report that looks into the potential environmental effects of fracking has revealed that drilling and fracturing shale gas wells poses a 'significant risk' to freshwater supplies across the globe."

[COMMENTARY] I might add a huge risk to geological stability (earthquakes) as well. All the excitement in the US about what fracking means for their gas and oil supplies could be severely hampered as the environmental problems associated with fracking become known and the industry forced to become liable for environmental and human health damages and costs. Many companies in this industry will eventually have 'stranded assets.' That means, gas and oil assets that has to be written down, greatly impairing the financial results of many, many of these companies.
Global water availability 'could limit fracking developments,' September 9, 2014, edie newsroom, UK.

Swiss pension fund members willing to sacrifice returns for sustainability. "More than 70% of pension fund members in Switzerland want their schemes to apply sustainability criteria when selecting investments, according to a survey commissioned by RobecoSAM.

Approximately 40% of the 1,200 participants surveyed said they would be willing to sacrifice returns in exchange for sustainable investments, with 20% of that number willing to give up as much as half the return.

More than 70% of respondents said they were convinced the application of ESG criteria would lead to more cautious investment decisions and probably even better ones."

[COMMENTARY] Note the latter comment that plan participants actually expected possibly superior returns by investing sustainably! Too many times these types of questionnaires start with the premise that investing in sustainable, socially responsible, impact, or ethical investments, must lower returns. Now we see that not only in this survey, but in many such surveys, investors/plan participants probably expect better results from investing with ESG, etc., criteria. This is why we're seeing asset/fund managers everywhere beginning to incorporate ESG analysis in their portfolio selection criteria. It's about time too!
Swiss pension fund members willing to sacrifice returns for sustainability, by Barbara Ottawa, September 9, 2014, IPE, UK.

Study links high ESG ratings to positive investment portfolio performance. "Asset managers can create better-performing portfolios by excluding stocks with lower environmental, social and governance (ESG) ratings, according to new research. The study by New Amsterdam Partners used the Thomson Reuters Corporate Responsibility Ratings, which screens the ESG ratings of almost 5,000 companies."

[COMMENTARY] Of course, one needs to understand all the screening parameters and methodologies of this study to competently remark as to its conclusions. Nonetheless, at face value and considering the reputation of the study's sponsors, the study appears to offer further confirmation that screening companies for their ESG performance can be profitable.
Study links high ESG ratings to positive investment portfolio performance, by Tom Revell, September 5, 2014, Blue & Green Tomorrow, UK.

How to make Wall Street notice sustainability leaders. "As Joel Makower noted in August in 'Why sustainability leaders don’t impress Wall Street,' (GreenBiz) investors seem unconvinced that strong sustainability performance delivers shareholder value. More specifically, he argues that investors don’t have the data they need to connect the dots."

[COMMENTARY] This article harps on themes I've been talking about for many, many years. In particular, the lack of ESG reporting standardization, independent assessment of data, and direct relevance to corporate success and profits. Daniel Esty has done a good job in presenting this case. It's important reading for all concerned with ethical investing.
How to make Wall Street notice sustainability leaders, by Daniel C. Esty, September 2, 2014, GreenBiz, USA.

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.

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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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