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Ethical Investing News/Commentaries:
Sept. 2010 |
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Commentaries by Ron
Robins
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California Requiring Companies To
Disclose Supply Chain Policies.
-
[COMMENTARY]
"SB 657 requires major retail sellers and
manufacturers doing business in California to
disclose their voluntary efforts to eradicate
slavery and human trafficking from its direct supply
chain for tangible goods offered for sale." Well
done California! Should this become prevalent, it
should help ethical investors in their search for
the most ethical and socially responsible companies.
Gov. Schwarzenegger Signs Legislation to Combat
Human Trafficking, press release, September 30,
2010, Office of the Governor, California, USA.
Islamic Finance Needs Scholar
Standardization & Reform.
-
[COMMENTARY]
"Islamic finance is toughening supervision of its
powerful religious advisers as shareholders
worldwide demand increasing accountability from
directors, but key reforms may do little to boost
independence and transparency."
Islamic finance is growing globally but will only
make major inroads into Western finance if it can
provide two things: (1) full transparency of both
money flows and the scholars on Islamic advisory
boards; and (2), some standardization of Islamic
scholar credentials. For my recent discussion of
Islamic finance see,
The Rise of Islamic Finance.
Analysis: Islamic finance seems overwhelmed by
scholar reforms, by Liau Y-Sing and Frederik
Richter, September 28, 2010, Reuters,
Malaysia/Bahrain.
NASDAQ Launches Array Of Indexes
To Track Green Economy.
-
[COMMENTARY]
"The company, which owns the NASDAQ and bills
itself as the world's largest exchange company,
unveiled the first four in a family of indexes
tracking companies operating in 13 sectors,
including energy efficiency, renewable energy and
healthy living. NASDAQ OMX said it will launch more
green economy indexes in the coming months." The
proliferation of green indices is an obvious
indicator of global investor sentiment towards
investing in greener businesses. Ethical investors
should be continually encouraged by these
developments.
NASDAQ Launches Indexes to Track Green Economy,
September 24, 2010, GreenBiz, USA.
Canadian Mutual Funds Less
Supportive Of Company Management Says Proxy
Analysis.
-
[COMMENTARY]
"Funds rejected a significant 20-30% of
compensation resolutions put forward by
management... SHARE released its third annual survey
of proxy voting by Canadian mutual funds. The report
examines four years of data on votes cast by 258
funds managed by 21 fund companies in connection
with the shareholder meetings of more than 200
senior Canadian issuers."
It seems that Canadian mutual funds are starting to
get more active in engaging company management! This
is important if we are to get companies to be more
ethical, transparent, and proactive on environmental,
social and governance (ESG) issues.
Support by Canadian mutual funds for corporate
management declining: SHARE, by James Langton,
September 27, 2010, Investment Executive, Canada.
NYSE Calls For Probe Into Proxy
Advisory Firms.
-
[COMMENTARY]
"Citing the 'increased level of concern' about
advisory firms, NYSE has called on the Securities
and Exchange Commission to 'engage in a study of the
role of proxy advisory firms to determine their
potential impact on, among other things, corporate
governance and behaviour and consider whether or not
further regulation of these firms is appropriate.'"
I
believe this is welcome news and ultimately may just
bring more democracy and accountability to company
management and boards.
NYSE calls for probe into proxy firms, by Daniel
Brooksbank, September 27, 2010, Responsible
Investor, UK.
US Social Investment Forum (SIF)
Praises Bill Allowing US Federal Government
Employees An SRI Retirement Option.
-
[COMMENTARY]
"The introduction of the Federal Employees
Responsible Investment Act (FERIA) is a significant
milestone for socially responsible and sustainable
investing (SRI), proposing to grant federal
employees the opportunity to select an SRI option in
their Thrift Savings Plan (TSP)." While so many
corporate retirement plans have such an option while
Federal government employees do not--is
extraordinary. Hopefully, the bill will pass and
further help spur socially responsible-ethical investing.
Social Investment Forum Applauds Introduction of
Bill Allowing Federal Employees to Select Socially
Responsible Investment (SRI) Retirement Option,
news release, September 22, 2010, Social Investment
Forum, USA.
Canada's Institutional Investors
Increasingly Using ESG Info. Say Accountants.
-
[COMMENTARY]
"A new publication from the Canadian Institute of
Chartered Accountants (CICA) finds that mainstream
institutional investors are beginning to incorporate
environmental, social and governance (ESG) factors
into their decision making." This is more good news to
encourage full disclosure and transparency in
corporate environmental, social and governance (ES)
reporting. Ethical investors continue to benefit
from this trend.
Institutional investors increasingly seeking
environmental, social and governance information:
Canada’s CAs, news release, September 23, 2010,
The Canadian Institute of Chartered Accountants (CICA),
Canada.
United Nations Conference On
Trade & Development (UNCTAD) Wants All Institutional
Investors To Articulate Their Responsible Investment
Policies.
-
[COMMENTARY]
"UNCTAD found almost half the world’s largest
funds disclose at least one or more indicators based
on the United Nations Principles for Responsible
Investment. But no evidence could be found of RI
practices at 51 of the top 100 funds, representing
$3.4trn assets (or 39%) of the 100 funds’ total AUM."
Such disclosure should absolutely be the rule.
By doing this, they will encourage greater ethical
behaviour in their own investing activities and for
the financial markets generally.
UN body calls on all institutional investors to
disclose RI stance, by Daniel Brooksbank,
September 21, 2010, Responsible Investor, UK.
Sustainable Stock Exchanges
Dialogue in Xiamen.
-
[COMMENTARY]
"The event’s main focus was to review the recent
challenges that exchanges have experienced with the
introduction of sustainability indices and ESG
(environment, social and governance) disclosure
regulation, and discuss whether it was even possible
to pursue mandatory reporting with such large
differences in the materiality of reporting
indicators across each industry."
The main point I got from reading this overview was
that the large for-profit and private stock
exchanges are hesitant on an individual basis to go
to fast mandating environmental, social and
governance reports from their listed companies. They
are afraid of losing those listings to other
exchanges not requiring such reporting.
Conference report: Sustainable Stock Exchanges
Dialogue in Xiamen: “One destination, many journeys,
by Lucy Carmody, September 22, 2010, Responsible
Investor, UK.
IMF Issues Working Paper On
Financial Crisis Comparing Its Effects On Islamic &
Conventional Banks.
-
[COMMENTARY]
"Factors related to IBs‘ [Islamic banks] business
model helped contain the adverse impact on
profitability in 2008, while weaknesses in risk
management practices in some IBs led to larger
decline in profitability compared to CBs
[conventional banks] in 2009. In particular,
adherence to Shariah principles precluded IBs from
financing or investing in the kind of instruments
that have adversely affected their conventional
competitors and triggered the global financial
crisis."
Ethical investors may want to acquaint themselves
with Islamic finance due both to its increasing
global importance and some similarities to ethical
finance and investing.
The Effects of the Global Crisis on Islamic and
Conventional Banks: A Comparative Study,
September 2010, International Monetary Fund (IMF),
USA. (Conclusions are on page 33.) Also, see my
September 16 alrroya column,
The
Rise of Islamic Finance.
Siemens, Deutsche Post, BASF,
Bayer and Samsung Electronics Lead In Carbon
Management, Says Carbon Disclosure Project (CDP).
-
[COMMENTARY]
"This year, CDP, backed by 534 institutional
investors overseeing more than $64 trillion in
assets, sent inquiries to more than 4,700
companies... Some 82 percent of Global 500 companies
responded to the questionnaires, compared to 70
percent of S&P 500 companies, illustrating a trend
that has been playing out for several years: North
American companies lag their European counterparts
in both climate disclosure and performance." The
data is interesting, and indicates the trend is in
the right direction.
More Companies Report Data to CDP Despite Uncertain
Climate, September 19, 2010, ClimateBiz, USA.
China Launches Its First
Sustainability Index.
-
[COMMENTARY]
"The CSI ECPI China ESG 40 Equity Index, made up
of 40 domestic companies in mainland China, is a
collaboration between Chinese Securities Index
Company, a Chinese index provider backed by the
Shanghai and Shenzhen stock exchanges, and ECPI, a
European ESG research and indices company."
Welcome China!
China in ESG index joint venture, by Ruth
Sullivan, September 19, 2010, FT.com, UK. For source
information, see
CSI ECPI ESG China 40 index To Be Launched,
China Securities Index co.Ltd.
Justmeans Releases Its Global
1000 Best CSR Companies List.
-
[COMMENTARY]
"Justmeans released its Global 1000, a list
produced in conjunction with the relatively new ESG
ratings firm CRD Analytics. As with the various CSR
rankings we have explored in this blog in the past,
the list contains many of the usual suspects. So
what distinguishes this selection from those made by
CRO, Ethisphere, Corporate Knights, legacy KLD and
legacy Innovest products?" The discussion
article raises concerns about various CSR rankings'
methodologies. This short article is worthwhile
reading.
CSR Rankings Revisited... Again, by Madeline
Ravich, September 17, 2010, Justmeans, USA.
Australia Launches First Global
Standard For Responsible Investment Training.
-
[COMMENTARY]
"It is backed by the United Nations Principles
for Responsible Investment (UNPRI) and includes
web-based courses on UNPRI compliance and the
integration of ESG factors in finance decisions
across pensions and investment organisations."
This is exciting news. Such training needs to become
commonplace, particularly among investment
professionals. Congratulations to Responsible
Investment Association Australasia (RIAA) for
establishing this and to the Australian government
for funding its creation.
Australia launches first global standard for RI
training, by Hugh Wheelan, September 15, 2010,
Responsible Investor, UK.
83% Of US Consumers Want More
Products & Services Related To Cause Marketing.
-
[COMMENTARY]
"Eighty-three percent of U.S. consumers want more
of the products, services and retailers they use to
benefit causes, according to the new 2010 Cone Cause
Evolution Study. The report also finds that 41
percent of consumers have purchased a product in the
past year because it was associated with a social or
environmental cause (41 percent), a two-fold
increase since Cone first began benchmarking cause
marketing in 1993." Another, in a continuing
stream of such surveys that show US consumers want
companies and their products/services to be socially
and environmentally responsible.
83% of U.S. Consumers Want More Products, Services
Related to Cause Marketing, September 16, 2010,
Environmental leader, USA.
32 Investment Firms Call On
California Governor To Support Supply Chain
Transparency Bill.
-
[COMMENTARY]
"... [investment firms] sent a letter to
California Governor Arnold Schwarzenegger
encouraging him to sign SB 657, a bill that, if
enacted, would require retailers and manufacturers
doing business in California to disclose their
efforts to eradicate slavery and human trafficking
from their direct supply chain. Human rights,
slavery and human trafficking are key issues for
CBIS, which supports transparency and disclosure of
supply chain risks."
History would be made were
California to pass this legislation. It could
probably encourage similar legislation in many other
US states too. Ethical investing would receive a
boost from both the enactment of such bills and
associated media coverage. Also, such legislative
action might encourage retailers to demand improved
human rights and better work conditions, etc., for
suppliers' workers.
Eurosif Says Financial Crisis
Aids Sustainable Investments.
-
[COMMENTARY]
"A study carried out by the European Sustainable
Investment Forum, found that 75 per cent of high
net-worth investors and 94 per cent of their wealth
managers believe the global financial crisis had a
positive effect on the performance of their
sustainable investments... more than €729bn (£599bn)
has now flowed into the European sustainable
investment market – a rise of 35 per cent over the
past two years." This is good news for ethical
investors and for our world.
Crisis aids sustainable investment, says study,
by Simoney Girard, September 16, 2010, FT
Advisor, UK.
European Survey Found 90% Of Buy Side
Firms Plan To Increase SRI & Sustainability Asset
Allocation In Next Year.
-
[COMMENTARY]
"The 2010 Survey represents the views of over 450
investment professionals from 16 countries, making
it the most extensive assessment of socially
responsible investing (SRI) in the European
investment community. Voting was conducted from 20
March to 03 June 2010. It reflects a contribution
from 254 buyside firms and 42 brokerage
firms/research houses."
When will North America get a
survey like this? It ranks SRI analysts and firms on
several variables.
Thomson Reuters and UKSIF 2010 Socially Responsible
Investing & Sustainability Survey Results, pres
release, September 17, 2010, UK.
Two New Surveys Show CSR
Important To Consumers.
-
[COMMENTARY]
The first surveys Hispanics and African Americans
while the other covers Canadians. They again
underscore the value of CSR to brand image, sales
and profits.
Quoting the Canadian survey,
"Two thirds of Canadians say that corporate
reputation significantly impacts their brand
choice... "
Two thirds of Canadians say corporate reputation
significantly impacts their brand choice,
September 14, 2010, ILSTV.com, Canada.
European Pension Funds
Increasingly Request Their Fund Managers To Be
United Nations Principles For Responsible Investment
Signatories.
-
[COMMENTARY]
"Some 17% of requests for proposals by European
pension funds in the first half of this year asked
whether asset managers were signatories to the
United Nations Principles for Responsible Investment
[UNPRI], a survey by Aberdeen Asset Management has
found." As the realization grows that
environmental, social and governance (ESG) factors
have profound implications for corporate viability
and profits, more asset managers will see it in
their interests to join UNPRI.
European pension funds increasingly including ESG in
RFPs – survey, by Daniel Brooksbank, September
14, 2010, Responsible Investor, UK.
French Study Showed Ethical Funds
Provided No Protection From Market Downturn, But
Over Long-Term Green Funds Outperformed With Higher
Risk.
-
[COMMENTARY]
"... the focus on the financial crisis reveals
that SRI funds provided no protection from market
downturns during this period, as illustrated by the
considerable increase of extreme risks borne by
these funds. Finally, the comparison of
best-in-class funds and green funds, reveals, over
the long term, higher alpha for green funds, with
higher risks, including higher extreme risks."
The study focused on French funds, though probably
somewhat applicable to most other regions as well.
Nothing remarkable here and not already known by
most of us who closely follow ethical investing. For
a brief discussion on this study and others, see
No proof SRI outperforms traditionals, by Ruth
Sullivan, September 12, 2010, Financial Times, UK.
See the study at:
The Performance of Socially Responsible Investment
and Sustainable Development in France: An Update
after the Financial Crisis, by Noël Amenc and
Véronique Le Sourd of the EDHEC-Risk Institute,
September 2010, France.
Security Analysts Favouring Firms
With Good CSR, Says Study.
-
[COMMENTARY]
"Security analysts are increasingly awarding more
favorable ratings to firms with corporate socially
responsible (CSR) strategies, according to this
paper by Ioannis Ioannou and HBS professor George
Serafeim."
This is an important study! It is one of the few
links indicating that mainstream analysts are taking
CSR seriously AND that CSR benefits stock prices.
The
Impact of Corporate Social Responsibility on
Investment Recommendations, by Ioannis Ioannou
(London Business School) and George Serafeim (Harvard
Business School), September 10, 2010. For a quick
review see,
Study: More Wall Street Analysts Buy Corporate
Social Responsibility, by Michael Connor,
September 10, 2010, Business Ethics, USA.
CSRHUB, A New CSR Research Site
Could Be Valuable Resource For Ethical Investors.
"CSRHUB
gives our users the information they need to
evaluate corporate social values and sustainability.
Once armed with ratings based on their own values,
users can take action to both change their behavior
and to change the world."
CSRHUB,
September 11, 2010, USA.
United Steelworkers Of America
Files Trade Complaint Against Alleged Illegal
Chinese Subsidies Of Renewable Energy Products.
-
[COMMENTARY]
"The United Steelworkers union filed a trade
complaint with the U.S. government against
renewable- energy products from China, urging an
investigation of subsidies and preferences given by
that nation.
Illegal export credits, preferences in bidding,
restrictions on the export of minerals used in
production and discrimination against foreign firms
give Chinese producers an unfair advantage over
competitors, the union said."
Unfortunately, we could be in the
early stages of a tit-for-tat trade war between US
and China. It may soon extend to their respective
currencies too. Investors might want to review their
holdings to determine how such a trade war would
affect them.
China Clean-Energy Aid Triggers Trade Complaint From
U.S. Union, by Mark Drajem, September 9, 2010,
Bloomberg, USA.
New MSCI ESG Indices Launched.
-
[COMMENTARY]
"MSCI Inc. (NYSE: MSCI)... announced today the
launch of a family of MSCI ESG Indices. With over 40
years of expertise in index construction and
maintenance, MSCI aims to set new standards for ESG
indices — allowing clients to more effectively
benchmark their ESG investment performance, issue
index-linked ESG investment products, as well as
manage, measure and report on their compliance with
ESG mandates."
Generally, it is great that there are so many new
ESG indices out there for ethical investors today.
However, I am not sure that it is necessary to
report on new ones anymore. One difference here
though is that they are offering some 23 different
indexes under their MSCI ESG index umbrella.
MSCI Launches ESG Indices, press release,
September 7, 2010, MSCI, UK.
South Africa Proposes A
Sustainable Investment Code For Institutional
Investors. -
[COMMENTARY]
"In June of this year, the Johannesburg Stock
Exchange (JSE) began requiring its more than 450
companies to produce integrated reports, and
announced its collaboration with four other South
African organizations in forming the Integrated
Reporting Committee (IRC) to issue guidelines on
good practice in integrated reporting... the
Committee on Responsible Investing by Institutional
Investors in South Africa has issued a Draft Code
for Responsible Investing by Institutional Investors
in South Africa. The only other country with a code
for institutional investors is the UK, where the U K
Stewardship Code was adopted in July of this year."
South Africa has become a world
leader in implementing CSR/ESG mandates for its
companies. Ethical investing there has major
government and business support. See my column,
Ethical Investing Shines in Africa as Economy Grows.
South Africa Proposes Code for Sustainable
Investment by Institutional Investors, by Robert
Krupp, September 7, 2010, SocialFunds, USA.
Global Insurers Call For
Private-Public Plan For Climate Change Research &
Costs.
-
[COMMENTARY]
"Four initiatives representing more than 100
leading international insurance companies are today
calling on governments worldwide to harness risk
management techniques and insurance expertise to
help implement climate change adaptation measures in
the developing world as well as to firmly anchor
insurance mechanisms as part of the future
international climate change regime under the UNFCCC."
It seems to me that insurers are very concerned
about the rising insurance costs that climate change
is bringing. Anyone investing in general insurance
companies should be aware of the future problems of
this industry. Read this report and keep-up-to-date
on the industry's challenges.
Global insurance industry statement: Adapting to
climate change in developing countries,
September 6, 2010, UNEP Finance Initiative,
Switzerland. Also, a useful overview, see
Insurers call for government backing on climate
change: UNEPFI issues power sector water report,
by Hugh Wheelan, September 7, 2010, UK.
Water Scarcity Becoming Problem
For Power Generation Says UNEP Finance Initiative.
-
[COMMENTARY]
"The Chief Liquidity Series inform risk analysts,
portfolio managers and sustainability experts about
financial risks and emerging opportunities
associated with water challenges across a
range of particularly exposed sectors and
hydrologically diverse geographies. Following the
first issue on agribusiness, UNEP FI is releasing
the second issue on the power generation sector,
which focuses specifically on thermal and hydropower
and, to a lesser extent, solar energy... The report
finds that increasing water scarcity due to climate
change and higher demand, are posing material
challenges for financial institutions in exposed
sectors, such as power generation in water-scarce
areas."
Investors relying on high utility
stock yields for income purposes should keep track
of developments here too. If utility companies--and
other companies too--who rely on heavy water use,
then water shortages or rising water costs might
make them less profitable in the future.
Impact of Water Scarcity on Power Generation,
September 6, 2010, UNEP Finance Initiative,
Switzerland.
Eurosif Says Portfolios Of
Europe's Wealthy Increasingly Focus On
Sustainability.
-
[COMMENTARY]
"According to Eurosif estimates, the proportion
of rich Europeans’ portfolios managed sustainably
was 11 per cent at the end of 2009, up from 8 per
cent two years earlier. That represents €729bn
(£606bn, $936bn), more than a third higher than in
2007." This is good news for ethical investors.
As concerns for the environment grow, the numbers
shown in the Eurosif survey are likely to continue
to increase.
Sustainability draws the wealthy, by Sophia
Grene, September 5, 2010, The Financial Times,
UK.
Report Says China Ready to Invest
$739 billion In 'Newly Developing Energy Industries"
By 2020.
-
[COMMENTARY]
"The government in China – concerned with issues
of security, economic prosperity and keeping a
growing population content – has made spending on
green initiatives a top priority. China contributed
US$200 billion of the $521 billion in stimulus money
set aside for cleantech initiatives worldwide...with
more on the way?"
China appears not to have the financially
constrained problem of the West concerning green
energy development. Green-ethical investors should
read this special report, "Cleantech Innovation in
China" by Cleantech.
The Chinese Cleantech Market, September 3, 2010,
Cleantech, USA.
Study Says Over 19 Years Returns
Of SRI & Conventional Funds Show Statistically
Indistinguishable Results.
-
[COMMENTARY]
"This article explores that topic through an
analysis of those actively managed mutual funds
categorized as “Socially Conscious” from 1990 to
2008 (19 calendar years) and finds that while SRI
funds tend to slightly underperform their non-SRI
peers (−17 bps per year), they tend to slightly
outperform on a risk-adjusted basis (+1 bps year),
but the results were neither statistically nor
economically significant." Here we have another
study demonstrating the general equivalency of long
term performance between SR/ethical and conventional
funds.
Exploring the Cost of Investing in Socially
Responsible Mutual Funds: An Empirical Study, by
David M. Blanchett, Fall 2010, The Journal of
Investing, USA.
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