Ethical Investing News/Commentaries
Commentaries by Ron
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European Banking Ethics Study Notes Challenges
"Ethics is seen as reputational risk but is not
included in risk management of organisations as
such. Financial institutions have ethics policies in
place but lag behind in setting targets and
objectives implying that the level of integration
and progress cannot be evaluated. Most financial
institutions do not have a separate business
function or dedicated person in place to manage
ethics. Financial institutions are facing
difficulties in finding the balance between ethical
and commercial matters."
Clearly, European banks need to do better. Recent
history suggests banks and other financial
institutions have a long way to go. It’s well known
that European banks’ leverage is horrendous. I read
a recent report indicating it’s 26:1! Can one be
ethical with other people’s money when you take on
CSR Europe and KPMG publish report on the challenges
of implementing and managing ethical values in the
European banking and insurance industry, October
30, 2012, CSR Europe, Belgium.
First Study Of ESG Portfolio Risk &
Performance In China.
"While the report shows significant investment
opportunities using Chinese ESG criteria within the
Chinese markets, the alpha is generally lower when
using Western ESG criteria for Chinese listings.
Additionally, research has not yet shown a potential
for ESG on Chinese stocks that are listed
internationally." At last we’re beginning to see
how Chinese companies’ stock performance behaves in
relation to ESG factors. From this report it seems
that ESG factors are just beginning to play a role in
their stock valuations.
First Study Of ESG Portfolio Risk & Performance In
China, October 30, 2012, Green Investment
Resource Center, USA.
BSR Survey: Investors Don′t Read CSR Reports.
"Sustainability has traveled lightyears in the last
two decades, but is not yet woven into the fabric of
the American corporation, according to this year′s
BSR/Globescan State of Sustainable Business 2012
survey of 550 member companies. The survey, looking
at the last 20 years in honor of BSR′s 20th
anniversary, shows that transparency and reporting
have been the greatest area of progress, but that
this increased knowledge has not yet changed the
behavior of investors, R&D and product design, or
What an interesting analysis. One can see the
consciousness of Americans in the recent
Presidential debates: discussion of climate change
didn’t rate a mention. Is it any wonder that most
investors don’t yet take it seriously too?
BSR Survey: Investors Don′t Read CSR Reports, by
Hannah Miller, October 24, 3012, TriplePundit, USA.
US Consumers More Likely To Purchase
Products/Services Of Companies Who Practice &
"86 percent of consumers are more likely to trust a
company that reports its CSR results; 82 percent say
they are more likely to purchase a product that
clearly demonstrates the results of the company’s
CSR initiatives than one that does not; 40 percent
say they will not purchase a company’s products or
services if CSR results are not communicated."
This report is useful for both ethical investors and
Consumers Demand More Than CSR "Purpose," by
Cone Communications, October 23, 2012,
Newsweeks 2012 Green Rankings. Top 3:
Santander Brasil (Brazil), Wipro (India), and Bradesco
(Brazil). - [COMMENTARY]
"We compared the world′s largest 500
companies according to their environmental
footprint, management (policies, initiatives,
controversies), and transparency. We partnered with
Trucost and Sustainalytics, two leading research
companies. The methodology was developed in
consultation with an advisory panel of experts in
corporate sustainability. The resulting ranking is
the most comprehensive available on the topic."
It’s interesting that two of the top three are
Brazilian companies! There are separate rankings for
the US and for a number of different segments.
Considering the companies involved in doing the
assessing, this listing and analysis must be taken
seriously. Newsweeks green rankings are a must read
for ethical investors.
Newsweek green rankings, October 22, 2012,
Funds With $2 Trillion In Assets Say Oilsands
Companies Must Cut Environmental Risks.
"’But (we) are concerned that the current approach
to development, particularly the management of the
environmental and social impacts, threatens the
long-term viability of the oilsands as an
investment.’ The statement is signed by 49 funds.
Some are controlled by labour and church groups,
such as the United Church of Canada and the Canadian
Labour Congress. There are also public-sector
pension funds from both sides of the border and
private funds from Canada, the U.S. and Europe."
This is good news that such funds are finally
speaking to oilsands companies to reduce their
environmental risks for the sake of long-term
viability for these companies.
Investor group says oilsands industry must cut
environmental risks, by Bob Weber, October 21,
2012, Canadian Press, Canada.
UK Investors Act On Carbon Control.
"A grouping representing investors from UK charities
and pension funds plans to target FTSE 350
companies... The investors are focusing on utilities
companies and those in the extractive industries
that have scored badly in a carbon reduction survey.
They plan to file a series of shareholder
resolutions at annual general meetings in 2013-14 if
the companies do not improve... CCLA, which is
leading the initiative said it was part of a
long-term engagement programme ... The group
includes the Local Authority Pension Fund Forum
which represents £100bn in assets under management
and the Church of England′s Ethical Investment
Advisory Group, which looks after £8bn."
It’s good to see powerful and large asset
managers get involved in such initiatives. They may
have considerable influence over the companies they
lobby for change.
Investors act on carbon control, by Ruth
Sullivan, October 21, 2012, The Financial Times, UK.
Research Claims Non-Sustainable Funds Perform
Similarly To SRI Funds.
"Traditional funds often behave similarly to funds
with clear environmental, social and corporate
governance in terms of reputational risk, research
claims." The research was conducted by AfU
Investor Research GmbH and RepRisk AG. This is
interesting. Unfortunately, it is true that many
SR-ethical funds are almost indistinguishable from
Research claims non-sustainable funds perform
similarly to SRI funds, by Naomi Rainey, October
18, 2012, Professional Pensions, UK.
UK Charities Move Gradually Towards Ethical
"Following research published by UK Sustainable
Investment and Finance Association reporting that
three in five adults with investments want charities
to take a leadership role in responsible investment
of assets, Charity Finance Group have released
findings from a survey of its members showing that
51% of charities now have an ethical investment
policy. This figure, from the survey for National
Ethical Investment Week, is an increase from 46% in
a similar survey carried out in 2009."
It’s a pity we don’t see surveys like this in
North America. I suspect similar progress is being
made there too. For charities to fear lower returns
through ethical investments demonstrates a lack of
understanding of the data--or rigidity to change.
Charities are adopting ethical investment policies,
but concerns over returns remain, says CFG, by
Andrew Holt, October 18, 2012, Charity Times, UK.
BMO Tops 2012 Carbon Disclosure Project
"Only one company scored high enough to make the
2012 Canada 200 Carbon Performance Leadership Index
(CPLI) – Bank of Montreal. Performance is grouped
into 6 bands A, A-, B, C, D and E. The CPLI includes
only Performance band A, which this year was
achieved only by Bank of Montreal." It’s clear
that large Canadian companies have a long way to
travel in reducing their carbon use and reporting of
BMO tops 2012 Carbon Disclosure Project rankings,
by Sucheta Rajagopal, October 17, 2012, SRI Monitor,
59% Of UK Investors Want Charities To Lead on
’Stewardship’ (Ethical) Issues.
"The YouGov survey of 1,291 investors, released as
part of National Ethical Investment Week, which
began on Monday, found that 59 per cent felt it was
the job of charities to take a lead on ‘stewardship′
issues by engaging with companies to make sure their
environmental, social and governance policies were
sufficiently ethical. And 56 per cent of respondents
said they believed that charities should measure the
social impact of their investments to the same
extent that they measured that of their charitable
Other data show that charities in the UK and
around the world have far to go in aligning
their goals with their investments. It just
shouldn’t be this way. Charity boards are
’missing-in-action’ on this.
Charities should set an example on ethical
investment, survey of investors finds, by David
Ainsworth, October 17, 2012, The Third Sector, UK.
The Environment Is The Top Issue Among Ethical
"The latest results from Worldwise Investor suggest
that the environment is the biggest ethical issue
amongst ethical investors and highlights why new
fund launches have tended to come with minimal
social screens, but instead focus on the positive
impact investment can have." The results of this
survey are unsurprising. It is useful reading for
ethical investors though.
Our survey says - the environment is the top ethical
issue! By Arabella Murphy, October 15, 2012,
Worldwise Investor, UK.
Investors Representing More Than $1 Trillion
In Assets Win Better Sustainability Disclosure And
Performance From Emerging Market Companies.
"The Emerging Markets Disclosure Project (EMDP)
released its final report today, Lessons Learned:
The Emerging Markets Disclosure Project, 2008 –
2012, documenting a five year initiative championing
greater transparency among emerging market companies
on key environmental, social and governance (ESG)
The group comprises: the US SIF (The Forum for
Sustainable and Responsible Investment); the Boston
Common Asset Management, LLC; Calvert Investments;
and the United Nations (UN) Principles for
Responsible Investment (PRI) Secretariat. The work
of this group is helping to significantly improve
the opportunities for ethical investors in emerging
Investors Representing More Than $1 Trillion in
Assets Win Better Sustainability Disclosure and
Performance from Emerging Market Companies,
press release, October 15, 2012, The Emerging
Markets Disclosure Project, USA.
Companies′ Sustainability Improves – But
Reputations Worsen, Says Brandlogic and CRD
"AXA, Coca-Cola, Deustche Bank, EADS, General
Electric and L′Oreal – companies that last year were
not getting enough credit for their actual
environmental, social and governance performance –
have now earned reputations that match their
relatively high sustainability achievements,
according to a report by Brandlogic and CRD
Analytics... [but] corporations face growing
skepticism among professional investors, supply
chain officials and recent higher education
graduates." Interesting, is it that companies
are failing to properly communicate their
sustainability successes or is it part of the
growing distrust in business?
Companies′ Sustainability Improves – But Reputations
Worsen, October 15, 2012, Environmental Leader,
Half Of Investors Expect IFAs
(Independent Financial Advisors) To Offer ‘Green′
"IFAs must be prepared to discuss environmental
investment issues post-Retail Distribution Review
according to the UK′s ethical investment trade body,
which has published data showing 58 per cent of
adults expect IFAs to be able to advise on green
issues that might shape their choices." The data
in this YouGov survey will not surprise most
investors. It provides further confirmation that
many investment advisors don’t know the interests of
Half of investors expect IFAs to offer ‘green′
advice, by Donia O’Loughlin, October 15, 2012,
FT Advisor, UK.
Investments In Emerging Markets Up Almost 30%
Since 2009, Says EIRIS.
"The total AUM [assets under administration] of the
2012 survey respondents came in at a figure of
nearly USD 2.4tn. Of the USD 2.4tn around USD 161bn,
approximately 7%, was allocated to emerging markets.
The respondents to the 2009 survey reported that
they had around USD 125bn allocated to emerging
markets. This means that emerging market AUM in 2012
is almost 30% higher than the 2009 figure, despite
the respondent group being smaller."
EIRIS’s views regarding ESG in emerging markets
are that, "It is clear that there are a number of
strong currents within emerging markets that are
carrying forward ESG disclosure and performance by
companies. These currents include; the continuing
process of the integration of emerging markets into
the global economy with increasing inflows of
investment into emerging market companies; the
growing determination of investors to include ESG
factors in their investment decisions as evidenced
by the expansion of responsible investment
organisations such as the PRI; and the significant
materiality of ESG issues in emerging markets."
It’s good to see the figures and get EIRIS’s
survey results on ESG in emerging markets.
Evolving markets: what′s driving ESG in emerging
economies? October 2012, EIRIS, UK.
Reaching £806 Million, Responsibly Invested
Assets In UK Now 18% Of European Total.
"The survey [by YouGov] found a 50% rise in the
number of investors UK-wide who want their bank or
financial adviser to tell them about ’impact
investing’ – investments that produce both a
financial and a social or environmental benefit – up
from 36% a year ago to 55%." This week, the UK
begins its National Ethical Investment Week.
Half of Scottish savers prefer green or ethical
investments, by Simon Bain, October 13, 2012,
Interesting Research At UK University On
Difference in Ethical and Islamic Funds.
"the average efficiency of socially responsible
funds is slightly higher than that of Islamic funds.
Although this result is robust across the
state-of-the-art methods considered to measure
mutual fund performance, further testing indicates
that the differences are, in general, not
statistically significant. When they are
significant, it only happens for some particular
quantiles of the distribution of efficiencies. When
geographical focus is considered, their research
shows that on average, investing in the West yields
higher returns, and lower in the MENA region
including the GCC."
There is nothing earth shattering here, but is a
useful read for those ethical investors interested
in this subject.
New Research Findings on Ethical Funds, October
8, 2012, University of Leicester, UK.
WWF Publishes Guide To Responsible Investment
In Agricultural, Forest, and Seafood Commodities.
"Providing distilled guidance based on leading
industry practice, The 2050 Criteria is designed to
serve as a field guide for investors to access
mainstream agricultural, forest, and seafood
commodities in a responsible manner." This type
of investment could be really interesting to many
Guide to Responsible Investment in Agricultural,
Forest, and Seafood Commodities, October 2012,
WWF Global, Switzerland.
Major Investment Consultants Lag In Efforts To
Integrate Environmental, Social and Governance
Factors Into Investment Practices, Says Ceres.
"A new Ceres report shows that investment
consultants retained by major asset owners such as
pension funds, foundations and endowments have
generally not considered environmental, social and
governance (“ESG”) risks and opportunities as they
advise their investor clients on their portfolios.
Of the 13 U.S. and international consulting firms
surveyed for the report, few have developed
expertise in ESG investing, fewer than half believe
environmental and social factors can impact
long-term financial risk and reward, and only one
integrates ESG into its risk/return and asset
These findings will come as shock to most ethical
investors! When we consider all the studies saying
how companies with high ESG scores outperform
financially and in relative stock prices, these
investment consultants have a lot to answer for to
their clients. I can only conclude that their
clients are ignoramuses for retaining consultants
that don’t regard ESG as important in stock and
Major Investment Consultants Lag in Efforts to
Integrate Environmental, Social and Governance
Factors into Investment Practices, by Peyton
Fleming, October 5, 2012, press release, Ceres, USA.
Socially Responsible/Ethical Investments
Growing Rapidly In Europe.
"The European SRI Study 2012 shows that all
responsible investment strategies surveyed have
outgrown the market, and four out of six have grown
by more than 35% per annum since 2009. The combined
growth of all strategies at European level continues
to outpace the overall investment market,
demonstrating the continuous appetite by investors
to take into account Environmental, Social and
Governance factors, despite (or maybe due to) the
ongoing economic and market turmoil."
We have continuing good news with this report. Not sure this study adds too much to what we
already know. However, it does provide good detail
and perspective on the subject.
European SRI Study, October 2012, Eurosif,
Public Pension Plans More Than Twice As Likely
To Implement SRI/ESG Strategies Than Corporate
Plans, Says BNY Mellon.
"35% of public pension funds have adopted SRI/ESG
strategies, compared to 27% of foundations &
endowments, and 16% of corporate pension plans.
Concerns around ERISA [Employee Retirement Income
Security Act] weigh on U.S. corporate clients, with
debate about their role as a fiduciary when
integrating ESG investing."
Those US fund managers concerned about ERISA
restricting stock selection on ESG grounds are
probably not considering that by leaving out ESG
considerations they could be also liable for
possible ’imprudent’ stock selection.
Public Pension Plans More Than Twice As Likely To
Implement SRI/ESG Strategies Than Corporate Plans,
Says BNY Mellon, press release, October 2, 2012,
BNY Mellon Asset Servicing, USA.
Winners Of 2012 Moskowitz Prize For
Sustainable, Responsible, Impact Investing Study
"Using 10 years of privately compiled data, three
leading academics have tied positive market
performance to corporate social responsibility (CSR)
activities at major publicly traded U.S. companies.
Their research has netted them the Moskowitz Prize
for Socially Responsible Investing, the only global
prize recognizing outstanding quantitative research
in the field of sustainable, responsible, impact
This prize performs an admirable function in
helping recognize legitimate academic research that
advances our understanding of the interplay of human
values and its impact on the world of corporate
behaviour and investing.
Winners of 2012 Moskowitz Prize for sustainable,
responsible, impact investing study announced,
press release, October 3, 2012, Center for
Responsible Business at The Haas School of Business,
UC Berkeley, USA.
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