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Ethical Investing News/Commentaries:
Nov. 2011 |
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Commentaries by Ron
Robins
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Solar Spat Threatens US-China Trade War.
- [COMMENTARY]
"China is hitting back at the US by launching its
own probe into the US government’s support for
renewable energy. This comes just weeks after US
federal officials announced they would investigate a
complaint by domestic solar companies accusing the
Chinese solar sector of unfair trade practices."
When it comes to trade and economic policies,
China has 'checkmated' the US long ago. China
lured US manufacturers to its shores, got their
technology, and then created its own companies to
outcompete them. Meanwhile, China buys US treasuries
with its huge foreign exchange dollar surpluses to
eventually 'indenture' the US. China thinks
long-term; the US--just until the next election.
Now China has also overtaken the US in renewable
and alternative energy spending. And a huge chunk of
a new $1.7 tn spending programme over the next
five years is going towards those sectors.
Solar spat threatens US-China trade war, by
Gloria Gonzalez, November 30, 2011, Environmental
Finance, UK.
CSR Reports Often Mislead, Say Researchers At
The University Of Leeds & Euromed Management School.
- [COMMENTARY]
"After examining more than 4,000 CSR reports,
rankings and surveys published by companies
worldwide, researchers conclude reports often
feature unsubstantiated claims, holes and inaccurate
figures."
I have long advocated for standardized and
audited CSR reports. Auditing means that an
outside-regulated entity following codes of conduct
comparable to certified accountants performs the
audit and provides a statement in the CSR report as
to the validity of what is found. Otherwise, how is
it really possible to know that what the
company is saying is true, and how can investors
compare companies? My 'hats off' to these
researchers!
Quality of CSR reports 'appalling at times,' by
Clare Harrison, November 28, 2011, CorpComms, UK.
NYSE Euronext, Bloomberg New Energy Finance
Launch Clean Energy Indices.
- [COMMENTARY]
"NYSE Euronext and Bloomberg New Energy Finance have
announced the launch of three clean energy indices.
Regionally-focused, the indices will cover the
Americas, Europe, Middle East and Africa and Asia
and Oceania. These are just the first of indices
that will be published over the next few months,
allowing for tracking of the listed companies' shift
to alternative energy." It's difficult to keep
track of the number of such indices now. However,
they do indicate a continuing strong interest in
renewable and alternative energy sectors despite the
stock market gyrations in such company stocks.
NYSE Euronext, Bloomberg New Energy Finance launch
clean energy indices, press release, November
29, 2011, FierceEnergy, USA/UK.
India Takes Steps To Mandate CSR Reporting.
- [COMMENTARY]
"In order to assess fulfillment of the
environmental, social and governance
responsibilities of listed entities, it has been
decided to mandate listed entities to submit
Business Responsibility Reports, as a part of their
Annual Reports, describing measures taken by them
along the key principles enunciated in the 'National
Voluntary Guidelines on Social, Environmental and
Economic Responsibilities of Business’ framed by the
Ministry of Corporate Affairs (MCA). To start with,
the requirement will be applicable to top 100
companies in terms of market capitalisation and
would be extended to other companies in a phased
manner."
Despite my concerns about the general quality of
CSR reporting, this is still a huge step forward for
India, and futher spurs the creation of a CSR reporting
framework for both developing and developed
countries.
SEBI Board meeting, November 24, 2011,
Securities & Exchange Board of India, India.
Judyth Piazza Interviews Ron Robins On
Sustainable-Green Country Bonds & Green Jobs,
- [COMMENTARY]
In a time when there is so much concern
about sovereign bonds (bonds-debt issued by
countries), I discuss exciting new research that
compares and ranks them from a
green-environmental-social perspective. The
interview is about 15 minutes long. The first two
minutes are ads. The discussion of the bonds is
midway through the interview. November 27, 2011,
SOP Radio, USA.
Swedish Study Says Ethical Mutual Fund
Investors Look At Returns First & Then Social,
Ethical, & Environmental (SEE) Performance.
- [COMMENTARY]
"Based on these results, it is argued that although
SEE quality is important to customers, marketers of
pro-socially profiled products should primarily
focus on conventional quality attributes, as a good
SEE record unlikely to generate customer
satisfaction alone." I suspect that these
results apply to investors in most countries. This
study is especially important reading for fund
managers, but ethical investors might find it
interesting as well.
Determinants of customer satisfaction with socially
responsible investments: Do ethical and
environmental factors impact customer satisfaction
with SRI profiled mutual funds? By Jonas
Nilsson, Johan Jansson, Sofia Isberg and Anna-Carin
Nordvall, Umeå School of Business at Umeå
University, November 24, 2011, Sweden.
Climate Bond Standard Created To Assure
Integrity Of Green Claims For Investors,
Governments.
- [COMMENTARY]
"The Standard is a screening tool for investors and
governments to support investment in delivering a
Low Carbon Economy. Bonds complying with the
Standard will be certified as ‘Climate Bonds’— a
mark that assures their contribution to the delivery
of a Low Carbon Economy... The finalized text was
approved by the Climate Bond Standards Board, a
group of institutional investors and leading
environmental NGOs consisting of the California
State Teachers’ Retirement System(CalSTRS); the
Natural Resources Defense Council; the California
State Treasurers’ Office; the Investor Group on
Climate Change (IGCC); the Carbon Disclosure
Project; and the Ceres Investor Network on Climate
Risk (INCR)."
With such backing, this is a great step forward
and could encourage significant growth and interest
in green bonds!
Climate Bond Standard launch backed by investors and
NGOs; Goal to Assure Integrity of Green Claims for
Investors, Governments, by Sean Kidney, November
24, 2011, Climate Bonds Initiative, UK.
US Millionaires Significantly Lower Their
Expectations For Socially Responsible-Green
Investment Gains In 2012, Says Survey.
- [COMMENTARY]
"According to a study from PNC Wealth Management,
only one in ten millionaires are optimistic about
the U.S. economy – the lowest since the survey
started in 2006, and even below the 2008-2009 crisis
levels. Fully 9% [are] invested in gold. When asked
where they see the biggest growth for stocks in
2012, most said technology (54%), energy/utilities
(49%), health-care (44%) and financial stocks (19%).
They are followed by socially responsible
investments (11%) [down from 21% in 2011],
manufacturing (11%) and transportation (7%). Retail
ranked dead last, at 7%."
I have been following this survey since its
inception. After reading this review of the 2011
survey, I suspect there is an important dynamic at
play here. I believe the reason for such a lowering
of expectations for socially responsible-green
investments has to do with their belief that the
perceived hard times will push oil prices lower and
thus interest in alternative energy lower as well.
Also, that companies will downshift ESG as a
priority to save money.
Personally, I never believe in short-term
forecasts, but for the long-term I strongly suspect
that oil prices will go much higher, and that
corporate ESG activities to continue strong as they
frequently relate to reducing costs and improving
stock prices.
How to Invest Like a Millionaire in 2012, by
Robert Frank, November 21, 2011, The Wall Street
Journal, USA.
UK Survey Finds Only 5% Invest Ethically & 63%
Don't Know What An Ethical Investment Is.
- [COMMENTARY]
"Ethical investments are growing investments, but
awareness amongst consumers is still surprisingly
low, according to new research commissioned by
Emerald Knight... While 16 per cent of British
people would only ever invest for personal profits,
only 30 per cent think that you can have both
profits and principles when it comes to a socially
responsible approach to investment." In
developed countries everywhere, there is still the
wrong perception that profits have to be sacrificed
to invest ethically.
Low ethical investment awareness, despite recent
growth, by Millie Dyson, November 21, 2011,
Myintroducer.com, UK.
Shariah-Compliant Interbank Funding Rate Set
To Launch.
- [COMMENTARY]
"A group of 16 banks resolved a quandary that dogged
the $1 trillion Islamic financing market for nearly
three decades: how to represent rates on interbank
funding when Islamic moral principles prohibit firms
from charging interest. The banks say the solution
lays in considering money flowing between banks as
investments that depend on the performance of
underlying assets, rather than as interest-bearing
loans." This is a major development in the world
of Islamic finance. However, reading about how it is
planned to work makes me wonder exactly how far it
might be straying from Shariah edicts.
Shariah-Compliant Interbank Funding Rate Set To
Launch, by Katy Burne, November 22, 2011, Dow
Jones Newswires, USA.
More Women In Management Improves Corporate
CSR & Profitability.
- [COMMENTARY]
"A new study conducted by researchers at Catalyst
and Harvard Business School (HBS) suggests that
what’s good for women is good for business and also
for society as a whole. According to Gender and
Corporate Social Responsibility: It’s a Matter of
Sustainability, companies with more women at the top
may be better practitioners of corporate social
responsibility (CSR). Prior Catalyst research has
shown that such companies also financially
outperform, on average, those with fewer women in
senior leadership roles."
There are one or more US mutual funds
that only invests in companies with high ratios of
women in management! Ethical investors might want to
incorporate gender ratios when they are reviewing the
managements of the companies they invest in.
New Catalyst Study Links More Women Leaders to
Greater Corporate Social Responsibility, press
release, November 16, 2011, Catalyst, USA.
France's Vigeo Hands Out CSR/SRI Awards To
Vivendi, Rhodia, Unilever.
- [COMMENTARY]
"Vivendi is the inaugural winner in the CAC 40
category of the Vigeo Socially Responsible
Investment Prize. Established for the first time
this year during the Socially Responsible Investment
Week in France, the prize was awarded Jean-Bernard
Levy, chairman of Vivendi, in the presence of
sustainable development minister Nathalie Kosciusko-Morizet.
There were two other winners, Rhodia in the SBF 120
companies' category and Uniliver in the Stoxx Europe
50 division."
Congratulations to the winners, but also to
Vigeo, a highly respected French CSR ratings agency,
for beginning this award programme. Such awards act
as an incentive for companies to do better in their
CSR activities. In return, they command higher
public respect and even the possibility of higher
stock prices.
Vivendi, Rhodia, Unilever win responsible investment
awards, press release, November 18, 2011, Vigeo,
France.
Water Usage Of Increasing Concern To
Companies And Investors.
- [COMMENTARY]
"Water represents a resource that poses many risks
for companies now, not just later. Look no further
than the drought in Texas to catch a glimpse of the
consequences of not having enough water. Yet far
fewer boards of directors have oversight of
water-related issues compared to those for climate
change, according to the CDP Water Disclosure Global
Report 2011 released today."
The part I like best about this report is that
63% of respondents see opportunities to reduce water
usage and enhance efficient water utilization. For
many companies, rising water costs could become a
big drag on their profitability. Ethical investors
realize this and it will not be long before the
mainstream investing community understands this too.
For the full CDP survey,
click here.
CDP Report Shows Water Slowly Moving Up the
Sustainability Agenda, by Tilde Herrera,
November 16, 2011, GreenBiz, USA.
New Sustainable Corporate Bond Fund Launched
By Bank Sarasin, Switzerland.
- [COMMENTARY]
"Bank Sarasin is this week to begin marketing its
first sustainable corporate bond fund, amid growing
institutional interest in sustainable fixed income
and real estate offerings. The Swiss private bank
has had 'a good response' to a mixed corporate and
sovereign bond fund it offers, where the investible
universe is subject to Sarasin's sustainability
screening."
A new investing paradigm is beginning with the
launching of sustainable corporate bond funds. With
so much interest in sustainability by investors
worldwide, such funds could become sought after.
Congratulations to Bank Sarasin for being in the
vanguard of this new bond vehicle.
Sarasin launches sustainable corporate bond fund,
by Mark Nicholls, November 14, 2011, Environmental
Finance, UK.
Islamic Finance Assets Projected To Double To
$1.8 Tn By 2016, Says Deutsche Bank.
- [COMMENTARY]
"The global debt crisis may help Islamic finance
nearly double to $1.8 trillion in assets by 2016 as
stagnant corporate lending pushes institutions to
seek alternative financing to traditional methods,
according to a report by Deutsche Bank. The bank
forecasts that there is over $2 trillion of
deleveraging in the United States and Europe,
creating a financing glut for both struggling
countries and countries in developed markets."
I have remarked many times that Islamic finance,
once it can overcome market suspicions of it being
linked to terror groups, particularly, is a real
contender to conventional finance. Furthermore, many
of its tenets, i.e. bonds and derivatives that must
be asset-based and use of ethical-spiritual screens,
etc., might well be integrated into many conventional
finance products too in the years ahead.
Islamic finance may double in assets by 2016-D.Bank,
by Shaheen Pasha, November 15, 2011, Dubai, UAE.
'Free, Prior And Informed Consent' Required
From Indigenous Communities For Resource Extraction
Projects, Says IFC.
- [COMMENTARY]
"In August 2011, the International Finance
Corporation (IFC, an agency of the World Bank)
released its revised Sustainability Framework, after
18 months of public consultation. Among the
noteworthy revisions is a new requirement that
clients obtain the free, prior and informed consent
(FPIC) of indigenous communities under certain
circumstances, including the exploitation of natural
resources on lands traditionally owned by, or under
the customary use of, indigenous peoples."
This is a good step forward. One wonders why it
has taken the World Bank and its agencies so long to
come to this conclusion! Some extractive industry
companies are increasingly taking this approach
anyway. The following study is highly worthwhile
reading for investors interested in mining industry
ethics.
License to Operate. Indigenous Relations and Free
Prior and Informed Consent in the Mining Industry,
by Irene Sosa, October 2011, Sustainalytics, Canada.
China CSR Study Demonstrates Need To
Understand How CSR Data Is Gathered & Interpreted.
- [COMMENTARY]
"Believe it or not, if there was no information on
the CSR activities of a company, they scored that
firm zero! And if their search of negative reports
uncovered anything, then the company ended up with a
negative score." As I have said many times, when
reading CSR/SRI rankings, it's important to know the
biases, methodology and financial backers of the
pertinent study. This article makes it very clear as
to how investors can be duped by such rankings.
China CSR Report: A New Low in Statistical Analysis,
by Stan Abrams, November 9, 2011, Business Insider,
USA.
Corporate Accountability Of Political
Expenditures Improving In The US, Says The Investor
Responsibility Research Center (IRRC) Institute.
- [COMMENTARY]
"Corporate accountability and disclosure of
political expenditures is on the upswing, with the
boards of 31 percent of S&P 500 companies now
explicitly overseeing such spending, compared to 23
percent in 2010. However, this increased oversight
and transparency does not necessarily translate into
less spending, as companies with board oversight of
political expenditures spent about 30 percent more
in 2010 than those without such explicit policies."
Personally, I'm dubious of any spending by
corporations on political activities. The fact that
only 31% of US corporate boards actually control
such spending appears terribly negligent to me, as
it is to probably most ethical investors.
New Study Finds Oversight and Disclosure of
Corporate Political Spending Increasing, but Such
Measures Do Not Necessarily Limit Spending,
press release, November 10, 2011, IRRC Institute,
USA.
HP, Dell & Nokia Lead New, Revised, Greenpeace
Electronics' Companies Rankings.
- [COMMENTARY]
"You also won't find easy comparisons to previous
editions of the report. 'That this really is a new
day,' Casey Harrell, an analyst and campaigner at
Greenpeace, explained in an interview. 'We've added
enough criteria that it's not completely
apples-to-apples to compare with previous versions
of the report.'" This article provides a good
overview of what Greenpeace has done in revising its
just released rankings. Some of the findings might
be surprising--but worthwhile for ethical investors
to consider.
HP Leads Greenpeace's Relaunched Green Electronics
Rankings, by Matthew Wheeland, November 9, 2011,
GreenBiz, USA.
82% Of Fund Managers Believe ESG Issues
Important When Choosing New Investments, Says Clear
Path Analysis.
- [COMMENTARY]
"82% of fund managers now believe that ESG issues
are an important consideration when choosing new
investments, however 43% remain unclear about the
links between ESG and profits in the short to medium
term. This is despite evidence from Allianz Global
Investors which indicates that this type of
investing can provide returns of up to 1.6% over
traditional equities." It should not be long
before ESG considerations are built-in to all
investment analysis, not only for stocks, but for
all forms of debt as well.
Awareness of environmental and social governance
among investors prompts fund managers to consider
new investments, press release, November 8,
2011, Clear Path Analysis, UK.
High Sustainability Firms Outperform
Financially & In Stock Prices, Says Harvard Study.
- [COMMENTARY]
"Using a matched sample of 180 companies, we find
that corporations that voluntarily adopted
environmental and social policies many years ago –
termed as High Sustainability companies – exhibit
fundamentally different characteristics from a
matched sample of firms that adopted almost none of
these policies – termed as Low Sustainability
companies... we provide evidence that High
Sustainability companies significantly outperform
their counterparts over the long-term, both in terms
of stock market and accounting performance."
This might be a landmark study and have powerful
positive ramifications for companies and investors
alike! Ethical investors can again take heart that
theirs is not only the ethical path--but possibly
one of the most profitable paths too.
The Impact of a Corporate Culture of Sustainability
on Corporate Behavior and Performance, by Robert
Eccles and George Serafeim of the Harvard Business
School and Ioannis Ioannou, London Business School,
November 4, 2011. USA/UK.
LOHAS (Lifestyles Of Health And
Sustainability) Markets To Grow From $200 Bn To $420
Bn In 3 Years.
- [COMMENTARY]
"18% of U.S. general population adults (43 million)
are classified as LOHAS consumers. LOHAS consumers
have strong attitudes regarding personal and
planetary health, which are widely reflected in
their behavior. They are heavy users of healthy and
'green' products and exude a strong influence over
others." This is encouraging news for many
ethical investors, who themselves are likely LOHAS
consumers.
LOHAS Consumers... Beyond Healthy Food & Beverage
Choices, November 2011, NHIondemand.com, USA.
US Firms Way Behind Europeans On Climate
Change Disclosure.
- [COMMENTARY]
"More than half of European companies -- 53.6
percent -- analyzed in a new report publicly
revealed complete data on their greenhouse gas
emissions and took the extra step of getting the
data verified. In comparison, a paltry 8.8 percent
of North American companies did the same, as
measured by the Environmental Investment
Organisation (EIO)."
Politically in the US, a large percentage of
American executives don't believe climate change is
a big deal. As climate change becomes increasingly
pronounced, I believe that US firms will then fall
in line. This will be especially true if investors
are willing to pay more for stocks in companies that
clearly make climate change a priority. And
according to some research, that is a scenario that
we are probably already seeing.
US Firms Barely Rank in Global Climate Change
Disclosure Lists, by Tilde Herrera, November 1,
2011, GreenBiz, USA.
Corporate Reputation Equity Index Fund
Launched.
- [COMMENTARY]
"RepuStars Variety Corporate Reputation Index
Launches November 1... by Steel City Re, a pioneer
in developing tools linking reputation, risk, and
enterprise value. The RepuStars Variety Corporate
Reputation Index tracks up to 57 company stocks that
appear to be underpriced relative to their metrics
as measured by Steel City Re’s proprietary Corporate
Reputation IndexTM, which tracks 5500 companies
weekly. In using the RepuStars Index as an
investment strategy, investors can take advantage of
this price disparity."
Though not strictly an ethical index, the index
may carry some credibility for ethical investors.
RepuStars past numbers suggest potential market
outperformance. It will be interesting to follow its
progress.
RepuStars® Variety Corporate Reputation Index –
Calculated by Dow Jones Indexes, press release,
November 1, 2011, RepuStars, USA.
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