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Ethical Investing News/Commentaries
June 2014 |
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Commentaries by Ron
Robins
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New Web Tool Provides Easy Access to SEC
Climate Change Disclosure from 3,000 Public
Companies. "Ceres and CookESG Research today
launched a free, easy to use web tool for accessing
climate change-related disclosures in company
filings with the U.S. Securities Exchange
Commission, which issued formal climate disclosure
guidance in 2010. Available at
www.ceres.org/secsearchtool, the tool allows
users to filter and customize company 10-K filing
excerpts relating to clean energy, renewables,
weather risk and climate-related regulatory risks
and opportunities."
[COMMENTARY] This is great tool for
ethical investors. You have to register (which is
free) to use it. Thank you Ceres!
New Web Tool Provides Easy Access to SEC Climate
Change Disclosure from 3,000 Public Companies,
press release, June 30, 2014, Ceres/CookESG
Research, USA.
British Islamic bond debut becomes a market
hit. "Britain has become the first western
country to sell a five-year Islamic bond or ’sukuk’.
The $340 million offering drew in orders of $3.9
billion which was more than ten times
oversubscribed... ’Demand for high credit quality
sukuk in the triple-A and double-A space far exceeds
supply, particularly among the fast growing Islamic
banks who need an increasing amount of high grade
assets to address forthcoming Basel III liquidity
requirements,’ Reuters quotes Khalid Howladar,
Moody’s global head of Islamic finance."
[COMMENTARY] Given the Basel III
requirements, it’s difficult to assess what would’ve
been the real underlying demand. Nonetheless, this
first ever western government sukuk launch was
highly successful. Considering that developed
country governments around the world want to
encourage Islamic finance in their domestic markets,
government sukuk offerings might become more common.
If at some point the US Treasury finds it difficult
to sell its dollar denominated bonds--after all, the
Fed, China and others are reducing their
purchases--perhaps it will even consider selling
sukuk? That’ll be the day!
British Islamic bond debut becomes a market hit,
June 26, 2014, RT, UK.
Fossil Free Indexes Launches First US Index.
"Fossil Free Indexes LLC (FFI))... is the
first index to leverage the long-term growth of US
large cap indices while protecting investors from
the risk of a carbon bubble. Over the ten years
ending 5/30/14 the correlation between returns on
FFIUS and the S&P 500 has been very high, suggesting
that index investors need not sacrifice returns when
choosing not to invest in the biggest carbon
resource companies."
[COMMENTARY] From an ethical
investors’ viewpoint this index might protect from
the possible, eventual, cost of carbon-based
stranded assets among many fossil fuel companies. Of
course, with Wall Street’s current love affair with
shale oil and gas production, this would be a
contrarian investment.
Fossil Free Indexes Launches First US Index,
press release, June 26, 2014, Fossil Free Indexes,
USA.
How do you demonstrate a ’sustainability
premium’ to investors? "More companies are
translating their sustainability efforts into
revenue and productivity. But for the most part,
investors don’t understand or even know about the
shareholder value that sustainability initiatives
can create."
[COMMENTARY] The discussion in this
article is pertinent for companies and investors.
For investors, it provides insight into what they
might demand companies to report.
How do you demonstrate a ’sustainability premium’ to
investors? By Deb Gallagher, June 26, 2014,
GreenBiz.com, USA.
Scientists Strengthen Link Between Prolonged
Fracking and Large Quakes. "A study conducted
by Southwestern Methodist University and the
University of Texas in 2010 found that there was
“plausible” evidence that injection wells were
causing earthquakes in the Dallas-Fort Worth area.
But nine different studies looking at recent
earthquake sites in north, central and south Texas
have now confirmed that suspicion."
[COMMENTARY] Will the environmental
risks of fracking be overridden? Yes, but it’ll take
unfortunate loss of life and significant property
damage attributed to fracking before its use will be
restrained. And again, unfortunately, that’ll happen
in time.
Scientists Strengthen Link Between Prolonged
Fracking and Large Quakes, by Jan Lee, June 16,
2014, Triple Pundit, USA.
Presbyterians Vote to Divest Holdings to
Pressure Israel. "After passionate debate
over how best to help break the deadlock between
Israel and the Palestinians, the Presbyterian Church
(U.S.A.) voted on Friday at its general convention
to divest from three companies that it says supply
Israel with equipment used in the occupation of
Palestinian territory."
[COMMENTARY] Many are comparing this
divestment campaign to the one that helped to end
South African apartheid. However, there is one big
difference: divestment to end apartheid included the
support of many governments. As yet, this present
campaign seems to have little, if any, government
support. Hence, until this happens--which may well
not happen--this campaign is unlikely to make
sufficient headway to sway Israel from its current
course of action. As for it affecting stock prices
of companies engaged in these activities with
Israel, it’ll depend on the size of the company and
how far this campaign goes.
Presbyterians Vote to Divest Holdings to Pressure
Israel, by Laurie Goodstein, June 20, 2014, The
New York Times, USA.
Harvard Universities’ Initiative for
Responsible Investment details global ESG regulatory
and stock exchange reporting requirements.
(Interactive map by ESG Analytics.) "This
map... summarizes recent requirements by governments
and stock exchanges related to CSR/ESG disclosure by
country."
[COMMENTARY] Thanks to Daniel
Bressler at ESG Analytics for this link. This
research centre at Harvard should be interesting to
watch!
Harvard Universities’ Initiative for Responsible
Investment interactive ESG global reporting, ESG
Analytics, USA.
Global Consumers Are Willing to Put Their
Money Where Their Heart is When It Comes to Goods
and Services from Companies Committed to Social
Responsibility. "Fifty-five percent of global
online consumers across 60 countries say they are
willing to pay more for products and services
provided by companies that are committed to positive
social and environmental impact, according to a new
study by Nielsen. The propensity to buy socially
responsible brands is strongest in Asia-Pacific
(64%), Latin America (63%) and Middle East/Africa
(63%). The numbers for North America and Europe are
42 and 40 percent, respectively."
[COMMENTARY] It’s fascinating that
consumers in the Asia-Pacific and Latin American
regions lead by a wide margin in their desire to
purchase goods and services from socially
responsible companies. Ethical investors might want
to consider this information in selecting companies
for their investments.
Global Consumers Are Willing to Put Their Money
Where Their Heart is When It Comes to Goods and
Services from Companies Committed to Social
Responsibility, press release, June 17, 2014,
Nielsen/Natural Marketing Institute, USA.
Canadian Responsible Investment Funds
Challenge Status Quo – Support ESG Resolutions.
"Canadian mutual funds with responsible
investment (RI) mandates take more active ownership
roles than many of their counterparts, according to
a study released today by the Responsible Investment
Association (RIA), a non-profit membership
association that promotes the integration of
environmental, social and governance (ESG) issues in
Canada′s investment sector."
[COMMENTARY] I welcome this type of
research--even if the results are unsurprising. To
me it highlights the shareholder apathy and
unwillingness to challenge corporate management on
issues--any issues--by most mainstream funds. I
guess with their incredibly high churn rate of
corporate holdings among funds, most fund managers
just sell their stocks in companies they don’t like
rather than challenge management to do better!
Responsible Investment Funds Challenge Status Quo –
Support ESG Resolutions, press release, June 17,
2014, Responsible Investment Association, Canada.
How Can Fixed-Income Investors Address ESG
Considerations? "We spoke with Christoph M.
Klein, CFA, who is a managing director, portfolio
strategist, and head of ESG credit at Deutsche Asset
& Wealth Management, based in Germany."
[COMMENTARY] A useful discussion of
ESG factors as they pertain to fixed income
securities.
How Can Fixed-Income Investors Address ESG
Considerations? Usman Hayat interviewing
Christoph M. Klein, June 17, 2014, CFA Institute,
USA.
S&P/TSX 60 ESG Index Launched by S&P Dow Jones
Indices, RobecoSAM and Toronto Stock Exchange.
"The S&P/TSX 60 ESG index is designed for market
participants who currently use the S&P/TSX 60 and
are looking to deepen the scope of their stock
analysis to include sustainability criteria. The
construction methodology is based on the S&P/TSX 60,
while companies’ sustainability profiles are
evaluated using the RobecoSAM Corporate
Sustainability Assessment (CSA). Companies are then
re-weighted according to their sustainability score,
meaning those with a higher score are weighted
higher in the S&P/TSX 60 ESG index than in the S&P/TSX
60."
[COMMENTARY] The interesting twist in
this index is in bold above. Most
ethical/SR/sustainable indices actually exclude
those companies that perform poorly in these
measures. As in every market, it’ll be fascinating
to watch how this type of index performs! However, I
wonder about the scale of the weightings, i.e., what
will be the difference between top and poor
performers?
S&P/TSX 60 ESG Index Launched by S&P Dow Jones
Indices, RobecoSAM and Toronto Stock Exchange,
press release, June 16, 2014, S&P Dow Jones Indices,
RobecoSAM and Toronto Stock Exchange, Canada.
Saintly stocks turning the tables on the
Sinners. "For the second year running,
however, the Saints have gained ground, and they
remain well ahead of the Sinners over one, three and
five years, although the Sinners retain the upper
hand over the past decade. But that long-term
advantage may not last much longer."
[COMMENTARY] The reason for the last
comment is that banks make-up a large proportion of
this ’saints’ index--as they do in many ethical
portfolios--and the banks underperformance over the
past ten-years is about to change for the better.
However, I question that premise. Firstly,
accounting rule changes a few years ago allowed the
banks to hide immense losses, which just might have
to be addressed at some point. Secondly, most major
banks mammoth and growing derivatives exposure pose
enormous risks as ’financial weapons of mass
destruction’ (quoting Warren Buffett) should we have
another financial crisis. Thus, I have substantial
concerns about bank stocks performing well until
these problems are dealt with. Nonetheless, as I’ve
written about many times, I do believe that
’saintly’ or ethical portfolios will outperform
’sinner’ portfolios over the long-term.
Saintly stocks turning the tables on the Sinners,
by Heather Connon, June 13, 2014, Interactive
Investor, UK.
Islamic funds lose their lustre.
"Mohammed Hassan, an analyst at Eurekahedge, said
that the popularity of many Islamic funds diminished
after the US Federal Reserve′s tapering
announcements last year. This triggered widespread
volatility in emerging markets, which many Islamic
funds are heavily exposed to."
[COMMENTARY] Islamic funds represent
only about 5% of the Islamic finance industry. That
industry, according to Ernst & Young, is scheduled
to see it’s assets rising to $1.8 trillion by 2018.
As emerging markets and interest in ethical
investing grows, it’s likely that assets in Islamic
funds will rise significantly as well. Thus, the
present decline of Islamic funds is likely temporary.
Islamic funds lose their lustre, by Madison
Marriage, June 15, 2014, The Financial Times, UK.
Green Bonds: European Acceptance, American
Reluctance. (Page does not allow quoting.)
[COMMENTARY] The amount of green
bonds issuance is growing substantially--up to about
$20 billion in 2014, doubling that of 2013. However,
as in believing that humans cause climate change,
Americans are slow to buy into green bonds which are
destined to be a significant portion of all bond
issuance in the years ahead.
Green Bonds: European Acceptance, American
Reluctance, by Joel Kranc, June 13, 2014,
Institutional Investor, USA.
Addressing shortcomings in current corporate
reporting. "Investors don′t have access to
all the information they need today. Raj
Thamotheram, Mark Van Clieaf and Alan Willis ask:
why aren′t investors (and their clients) demanding
it?"
[COMMENTARY] This is a terrific
article about a topic that I’ve been writing about
for many years! All investors should read it and
take whatever action they can to demand improved
corporate reporting.
Addressing shortcomings in current corporate
reporting, by Raj Thamotheram, Mark Van Clieaf
and Alan Willis, June 11, 2014, Top1000funds.com,
USA.
Four in five investors consider sustainability
issues – PwC survey. "Four in five investors
have looked at sustainability issues in one or more
investment contexts in the last year, according to
research from PwC. However, investors also cited
dissatisfaction with current reporting standards."
[COMMENTARY] The interest in
sustainability results largely from investors needs
to mitigate investment risk. This is fine. It just
reinforces the need for companies to make ESG/CSR/ethical
concerns central to their operations. Furthermore,
as research increasingly demonstrates, those
companies that lead in this way tend to have
better financial and stock performance than their
peers who underperform in these measures. The
dissatisfaction with reporting standards is a common
theme of mine too, as you would’ve noticed reading
my many commentaries related to it.
Four in five investors consider sustainability
issues – PwC survey, by Charlotte Malone, June
9, 2014, Blue & Green Tomorrow, UK.
How Solar Will Destroy The Power Companies, In
5 Easy Steps. "Barclays recently downgraded
the entire U.S. electric utilities sector to
’underweight’ on the threat posed by widespread
adoption of solar-storage. These systems allow
homeowners to use rooftop solar panels and a battery
to cut all but the figurative emergency backup cord
to their local electric grid, putting a severe
strain on an industry that has been a defacto
monopoly."
[COMMENTARY] With photovoltaic panel
prices plunging and the real possibility of much
less expensive solar storage on the horizon,
Barclays believes that utility companies are going
to face tremendous financial pressures.
Additionally, this will come at a time when
utilities have to upgrade their plants to meet
increasingly tough and costly environmental and
pollution regulations. Furthermore, should this
transpire--what about the financial risks concerning
the huge investments in new electrical/smart grid
infrastructure if energy production becomes so
decentralized?
How Solar Will Destroy The Power Companies, In 5
Easy Steps, by Rob Wile, June 8, 2014, Business
Insider, USA.
Allergan, Adobe and Ball lead 2014 Newsweek
Green Rankings. "Those in the lead among the
top 500 U.S. companies are Allergan, famous for
Botox; Photoshop creator Adobe Systems; and Ball
Corporation, which manufactures beer cans and other
packaging (and formerly the iconic Ball Mason jars).
Compare that with two years ago. In 2012, IBM ruled
as No. 1, followed by Hewlett-Packard and
Sprint-Nextel. Today, IBM has plummeted to the 224th
spot, with HP at No. 38 and Sprint at No. 32."
[COMMENTARY] In the article linked to
here, GreenBiz does a good job in analyzing the
ratings. Here’s another list that’s useful for
ethical investors to review.
Allergan, Adobe and Ball lead 2014 Newsweek Green
Rankings, by Elsa Wenzel, June 5, 2014,
GreenBiz, USA. Review this too:
Do Newsweek′s Green Rankings still matter? By
Joel Makower, June 5, 2014, GreenBiz, USA.
Canada′s top 50 socially responsible
corporations: 2014. "As the Canadian public
becomes more aware of the impact of sustainability
issues on the world around them, they are looking at
the role of business in addressing these
challenges,” said Michael Jantzi, Sustainalytics CEO.
“Many of the world′s leading organizations have
already embedded sustainability into their business
models, and through the Top 50 feature Canadians can
become more informed about corporate Canada′s
efforts in this area.”
[COMMENTARY] Sustainalytics, the firm
responsible for the list, has a long, reputable
history in such analysis. Some ethical investors
might be surprised by the inclusion of gold miners,
but what Sustainalytics does is to provide best of
sector analysis across all key industry groups. This
is an excellent report for ethical investors to
review.
Canada’s Top 50 socially responsible corporations:
2014, June 6, 2014, McLean’s, Canada.
Thomson Reuters launches Indian ESG index.
"The Thomson Reuters CRI India 50 ESG Index,
[tracks] the performance of Indian companies with
high environmental, social and governance (ESG)
standards... the index will serve as a credible
reference for global investors seeking exposure to
Indian companies and investment portfolios with ESG
standards."
[COMMENTARY] Ethical investors
everywhere welcome ESG investing indices of
companies in the developing world. However, it is
particularly interesting in India since its former
government mandated CSR for its larger
companies--and the enormous potential for growth of
those companies.
Thomson Reuters launches Indian ESG index, by
Simon Smith, June 4, 2014, ETF Strategy, UK.
Seventy-Two Percent (72%) of the S&P Index
Published Corporate Sustainability Reports in 2013 —
Dramatically Up from 52% in 2012 & Just About 20% in
2011. "Previously (in 2012) Governance &
Accountability Institute’s research showed for the
first time the companies in the S&P 500 that were
not reporting were in the minority. Now, the latest
2013 data just released shows that in 2013 that
minority group has become even smaller."
[COMMENTARY] As I remark in my
editorial below, if companies didn’t believe that
engaging in CSR activities was not material to their
financial performance--they wouldn’t do it! Clearly,
CSR is mainstream now. But what still has to be done
is for regulators around the world to create and
enforce some common CSR reporting standards as well
as an independent auditing process to ensure honesty
and accuracy in CSR reports. Currently, many CSR
reports, particularly if they lack quantification of
CSR activities with goals and objectives clearly
delineated--might be more PR than factual.
Seventy-Two Percent (72%) of the S&P Index Published
Corporate Sustainability Reports in 2013, press
release, June 2, 2014, Governance & Accountability
Institute, USA.
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