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Ethical Investing News/Commentaries
June 2012 |
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Commentaries by Ron
Robins
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Toyota,
Johnson & Johnson and Honda Are The Top Global Green
Brands, Says Interbrand.
- [COMMENTARY]
"After evaluating the world′s top brands on the
basis of their performance as well as the public′s
perception of their green credentials, Interbrand
and Deloitte have carefully ranked—and
wholeheartedly applaud—the 50 Best Global Green
Brands that are featured in this report. These
strong, highly innovative brands are paving the way
to a new era of stability, prosperity and
confidence—and they embody our greatest hopes for
the future." This list and analysis could prove
useful for ethical investors.
Welcome to Interbrand’s Best Global Green Brands,
June 2012, Interbrand, USA.
UK Financial
Advisors Need More Convincing Concerning Sustainable
Investments.
- [COMMENTARY]
"The research, titled ’The Power of Advice in the UK
Sustainable and Impact Investment Market’, was
conducted by Susannah Nicklin under the auspices of
the first Bridges Fellowship Programme... It
reflects the findings from over 90 interviews with
representatives from across the chain of advice
including asset owners, consultants, social
entrepreneurs, trade bodies and industry
associations among others... It found that, while
there are already some outstanding specialist
advisers in the sustainable investment arena, the
vast mainstream investment advisory community itself
needs advice and convincing to play a more active
role in the market."
Nothing new here. Most advisors globally still
need much more education and training in
ethical-socially responsible-sustainable investing.
Advisers′ commitment to sustainable and impact
investment crucial for sector growth, press
release, June 25, 2012, Bridges Ventures LLP, UK.
Fewer
Wealthy Americans Willing To Pay More For Ethical
Products.
- [COMMENTARY]
"Almost half (45%) of wealthy consumers say they
seek out brands with high ethical standards, but
only 39% of these shoppers would be willing to pay a
premium. That’s down from 56% who would pay a
premium in 2007. Apple, BMW, Coach, Lexus,
Mercedes-Benz, Nordstrom, Starbucks and Whole Foods
are frequently cited as highly ethical standouts...
’Even wealthy consumers have de-emphasized social
responsibility as this economy focuses everyone on
price/value and away from social issues,’ says
Luxury Institute CEO Milton Pedraza.’"
Is this a sign of the times? Since it’s largely
the wealthy that control our economics and politics,
it’s little wonder that Rio+20 failed in gaining
governmental agreements on anything.
Social Responsibility Is Nice But Not Worth Paying
for in Today’s Economy, According to Wealthy
Consumers Surveyed by Luxury Institute, press
release, June 26, 2012, The Luxury Institute, LLC,
USA.
Fitch Says
Standard Equity Analysis Mustn’t Be Forgotten In
Socially Responsible Investing.
- [COMMENTARY]
"SRI is no protection to poor or average investment
processes and Fitch highlights that SRI in itself
has not improved the average risk/return profile of
a European equity fund in the recent past. Even on a
longer term basis, including 2008, downside
protection is not statistically proven. By contrast,
European SRI bond funds have delivered better
returns with lower risk in the past three years."
Fitch is of course correct. Just because you like
the moral values of a company doesn’t necessarily
make the company a good investment. Unfortunately,
particularly for many novice ethical investors, they
often disregard fundamental financial analysis.
Perhaps it’s also because they don’t understand
financial analysis. It’s often easier to understand
a company’s moral compass than it is their financial
ratios!
Fitch: SRI criteria no substitute to solid fund
management processes, June 25, 2012, Reuters,
UK.
UK To Give
Shareholders Power Over Executive Pay.
- [COMMENTARY]
"Britain will legislate to give shareholders the
power to reject company director pay deals in a bid
to improve the link to performance and calm public
anger over soaring executive earnings, Business
Secretary Vince Cable said on Wednesday. The move
puts Britain in the vanguard of a clampdown on
corporate pay that has seen investors voicing their
disapproval at FTSE 100 boardroom pay levels which
have quadrupled over the past decade, far exceeding
the performance of share values."
This is precedent setting and timely! It is
likely this could catch on throughout the EU and
some parts of Asia too. Inward, ’old boy’ networking
boards have for far too long aided each other in
bumping-up executive compensation even while their
employees see marginal or no gains.
UK to give shareholders power over executive pay,
by Tim Castle, June 20, 2012, Reuters, UK.
An ’SRI’
Fund That Invests In Companies Which Support ’Free
Market Institutions & Principles.’
- [COMMENTARY]
"It turns out that when management believes in
creative destruction, it translates into business
success over the long term. One of the best ways to
determine which companies really believe in the free
markets is to look at which ones donate to free
market organizations... From that research, I
decided to launch The Hayek Fund."
This is a very novel approach to SRI. However,
it’ll be most interesting to watch. Since its
inception in September 2010, the fund claims to have
outperformed the S&P 500 by gaining 37.7% vs. 27.7%
for the S&P. The economist Friedrich Hayek was a
co-winner of 1974 Nobel Prize in Economics. His
thinking re-energized the concept of Austrian
economics, which many would say is the antithesis of
Keynesianism as practiced today by most western
economic and political leaders.
Socially Responsible Investing with The Hayek Fund:
An Index Fund for Conservatives, press release,
June 20, 2012, George Jarkesy Show, USA.
Corporate
Reporting On Water Use Improves But Data Still
Lacking, Says Ceres.
- [COMMENTARY]
"Overall corporate disclosures of water-related
risks have increased since 2009, but most reporting
remains weak and inconsistent according to Clearing
the Waters: A Review of Corporate Water Risk
Disclosure in SEC Filings, a new report issued today
by Ceres. Since 2010, the Securities and Exchange
Commission has required companies to disclose
financially material risks from climate change to
their investors. These risks include ’significant
physical effects of climate change, such as effects
on the severity of weather (for example, floods or
hurricanes), sea levels, the arability of farmland,
and water availability and quality.’”
Congratulations to those companies who are taking
water usage seriously. However, with increasing
scarcity of fresh water and rapidly rising
demand--and prices--for it, many companies appear to
be choosing to avoid the future problems associated
with water usage. Long-term investors should keep a
weary eye on investing in companies with huge water
demands--even if those companies make the
ethical-socially responsible grades!
Report Shows More Corporations Disclose Water Risk
Following SEC Guidance, Though Data is Lacking,
press release, June 18, 2012, Ceres, USA.
Deutsche
Bank′s Climate Change Advisors Finds Academic
Studies Demonstrate Stock Market Outperformance Of
Companies Favouring Sustainability.
- [COMMENTARY]
"The findings, from a report called Sustainable
Investing: Establishing Long-Term Value and
Performance, were drawn up after researchers
examined over 100 academic studies into sustainable
investment. Every paper studied was in agreement
that high ratings for corporate social
responsibility (CSR) and environmental, social and
corporate governance (ESG) would see a company′s
capital costs be significantly lower. Meanwhile, 89%
of the studies had evidence for ’market-based
outperformance’ for these companies."
This study demonstrates the power of
’meta-analysis’--of examining multiple studies
related to a few variables. Too often, critics of
CSR/ESG refer to only one study. Now, reviewing over
100 studies related to CSR/ESG, this study should
convince even the most sceptical that all portfolios
must incorporate this analysis for optimal results.
Ethical investors are again vindicated!
Investing sustainably is a ‘clear win′ says study,
by Alex Blackburne, June 18, 2012, Blue & Green, UK.
Stock
Exchanges Commit To Promoting Sustainability
Reporting.
- [COMMENTARY] "A core group of
five stock exchanges - NASDAQ OMX, BM&FBOVESPA, the
Johannesburg Stock Exchange (JSE), the Istanbul
Stock Exchange (ISE) and The Egyptian Exchange (EGX)
- today announced a commitment to promote long-term,
sustainable investment in their markets."
This is a good start. Hopefully we’ll see many
other exchanges taking this position soon. Among the
big exchanges, nobody wants to jump out in front on
this issue for fearing their listings will move to
other exchanges with less demanding listing
requirements.
Sustainable Stock Exchanges Initiative: Exchanges
listing over 4,600 companies commit to promoting
sustainability, press release, June 18, 2012,
UN, Brazil.
Sovereign
Wealth Funds & Socially Responsible Investing: Do′s
& Don′ts, Study.
- [COMMENTARY]
"This article explores the scope of responsibilities
of SWFs in terms of social responsible investment
(SRI)... Moreover, it is examined which private
regulatory regimes were adopted by these SWFs. The
UN Principles of Responsible Investment (UN PRI) and
the Santiago Principles will be discussed in more
depth. Finally, this article discusses whether SWFs,
due to their link to the state, should become
leaders in the sustainable investment field." I
believe that Norway’s SWF, with its ESG emphasis, is
a model for all SWFs. It achieves good long-term
results while being mindful of ESG impacts.
Sovereign Wealth Funds and Socially Responsible
Investing: Do′s and Don′ts, by Eva Van der Zee,
June 13, 2012,
University of Oslo Faculty of Law, Norway.
2012 FT/IFC
Sustainable Finance Awards Announced.
- [COMMENTARY]
"The Financial Times and IFC, a member of the World
Bank Group, today announced the winners of the 2012
FT/IFC Sustainable Finance Awards, with Bridges
Ventures of the UK winning the Award for Excellence
in Sustainable Finance, Standard Chartered named as
Global Sustainable Bank of the Year, and Kilimo
Salama of Kenya taking the prize for Technology in
Sustainable Finance." Congratulations to the
winners. These and similar awards help to publicize
and promote sustainable investing. Thanks to the
UK’s Financial Times and IFC for sponsoring them.
FT/IFC 2012 Sustainable Finance Awards, press
release, June 12, 2012, UK.
CA Cheuvreux Named Leading Pan-European Brokerage
Firm for Sustainability Research In Thomson Reuters
Extel Survey.
- [COMMENTARY]
"The 2012 Thomson Reuters Extel Survey... Voting was
conducted primarily online and ran from 19 March to
4 May 2012. It reflects the contribution of over
2,100 buy-side firms, 2,500 analysts from 270
brokerage firms/research houses and nearly 800 of
Europe’s largest quoted companies worldwide - over
14,000 individual voters in total, casting over
950,000 votes. All data, votes received and
methodology applied were independently checked and
verified by Deloitte." Why nothing similar in
North America? Runners-up were Bank of America
Securities - Merrill Lynch and UBS.
Thomson Reuters Announces 2012 Extel Survey Results,
June 12, 2012, Reuters, UK.
Canada’s Top 50 Corporate Citizens, Corporate
Knights.
- [COMMENTARY]
"Corporate Knights′ 11th annual Best 50 Corporate
Citizens in Canada is a reflection... be it evidence
of increasing diversity in the boardrooms of the
nation or more efficient use of energy, water and
the natural resources that are the pillars of our
economy. The meaning of corporate citizenship has
evolved from philanthropy as a side project to how
corporations can change the world for the better
through their individual core competencies."
The top three are: Desjardins Group Diversified
Financials, Vancouver City Savings C.U., and
Co-operators Group. Interesting how all three are
involved in the financial industry--as are many of
the top performers.
The state of Canadian corporate citizenship,
June 8, 2012, Corporate Knights, Canada.
Big US Banks Backing Green Energy.
- [COMMENTARY]
"Call it the greening of Wall Street. In the wake of
a $30 billion commitment to new environmental
investments by Wells Fargo in April and a $40
billion promise from Goldman Sachs this month, Bank
of America will announce a 10-year, $50 billion
initiative of its own on Monday." One might be
cynical about their reasons for backing green
energy, nonetheless, we can only offer our support
for such endeavours. This funding is positive for
the environment--and for most ethical investors.
Banks Look to Burnish Their Images by Backing Green
Technology Firms, by Nelson D. Schwartz, June
12, 2012, The New York Times, USA.
72% Of US Financial Advisors Express Some
Interest In Recommending Sustainable Investments To
Their Clients.
- [COMMENTARY]
"Thirty-eight percent of financial advisors express
strong interest in recommending sustainable
investments to their clients; 72% express some
interest. The advisors who express strongest
interest in advising their clients on sustainable
investment strategies tend to be female, have
advanced certifications, are affiliated with
national registered investment advisor (RIA) firms,
have average client assets under management (AUM)
between $1 million to $10 million, and have less
than 10 years of tenure as advisors."
The study also found that, "advisors are
willing to place 2.5% of their total assets under
management in sustainable investments for a market
potential of $650 billion." In reality,
considering that around 2 to 3% of US retail mutual
fund/ETF assets are already in ethical-socially
responsible investments, it seems that financial
advisors are still reluctant to really promote
them.
New Research Shows $650 Billion Potential for
Sustainable and Impact Investing, press release,
June 7, 2012, PRWeb, USA.
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