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Ethical Investing News/Commentaries
April 2015 |
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Commentaries by Ron
Robins
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(1) Risky management. "85 per cent of
the world’s largest global asset owners are climate
'laggards' that have taken little to no action to
insulate themselves from the growing risks presented
by climate change, says a new report by the Asset
Owners Disclosure Project (AODP)."
Risky management, April 29, 2015, Corporate
Knights, Canada.
(2) G20: fossil fuel fears could hammer global
financial system. "Top energy watchdog says
two thirds of all assets booked by coal, oil and gas
companies may be worthless under the 'two degree'
climate deal... World leaders are increasingly
concerned that a $6 trillion wave of investment into
the nexus of oil, gas, and coal since 2007 is based
on false assumptions, leaving companies with an
overhang of debt and 'stranded assets' that cannot
easily be burned under CO2 emission limits...
The G20 has asked the Financial Stability
Board in Basel to convene a public-private inquiry
into the fall-out faced by the financial sector as
climate rules become much stricter. All member
countries have agreed to co-operate or carry out
internal probes, including the United States, China,
India, Russia, Australia, and Saudi Arabia.
G20: fossil fuel fears could hammer global financial
system, by Ambrose Evans-Pritchard, April 29,
2015, The Telegraph, UK.
[COMMENTARY for (1) & (2)]
We all know how most money managers -- particularly
those in North America -- are fossil fuel diehards.
Yet, as the world awakens to the fact that the
burning of fossil fuels has to be significantly
reduced the portfolio losses could be immense. And
the wake-up call could come in December from the
2015 United Nations Climate Change Conference in
Paris.
Research Documents Positive Link Between
Corporate Human Resources Policies & Investment
Outcomes. "Of the many studies of human
capital policies, the new paper examines 92 that
focus on the links to corporate financial
performance. The authors find that a large majority
of the studies - conducted over several decades and
encompassing dozens of countries and industries -
reported positive correlations...
However, investors face significant challenges
in attempting to incorporate human capital metrics
into investment analyses. For example, there are no
standard metrics or definitions and there is no
clear consensus about which HR policies in what
combinations have the most impact on financial
outcomes."
[COMMENTARY]
Intuitively, we know that properly managed human
resources and their development are significant to a
company's progress. This report is the first to
correlate human resources policies to investment
outcomes. What this report could do is to encourage
investors/fund managers to ask companies for much
more detail about their human resource policies,
training etc., to try to understand the potential
links between good and bad human resource policies
with respect to corporate financial performance.
The report also opens-up a new field of academic
enquiry into these linkages.
Research Documents Positive Link Between Corporate
Human Resources Policies & Investment Outcomes,
press release, April 23, 2015, Investor
Responsibility Research Center Institute & Harvard
Law Labor & Worklife Program, USA.
Canada’s greenest employers help the Earth –
and their bottom lines. "As environmental
leaders, they’ve put their strategy into action
through multiple initiatives, both formal and
informal, both corporate and employee-led. For many
organizations, building sustainability isn’t a
trendy thing to do, but has evolved to become a part
of how they operate, notes Richard Yerema, managing
editor of Mediacorp Canada."
[COMMENTARY]
We know that corporate sustainability has a long way
to go, so it's good that attention -- and awards --
is creating a competitive atmosphere to encourage it
while raising its profile corporately. Many of the
initiatives cited could clearly demonstrate a
corporate financial benefit. It would have been
great if such benefits could've been ascertained and
made public.
Canada’s greenest employers help the Earth – and
their bottom lines, by Diane Jermyn, April 22,
2015, The Globe and Mail, Canada.
Malaysia and Saudi facing Iran’s rising
finance power -- Iran's entire banking system is
Shariah-compliant with $482bn (2014) in assets, the
largest in the world by far. "[Iran's Shariah
compliant banking assets are] almost a quarter of
total global Islamic finance assets, more than
Malaysia’s, Saudi Arabia’s and the UAE’s Islamic
assets combined."
[COMMENTARY]
Should an agreement transpire between the Iran and
the rest of the world concerning it's nuclear
programme and Iran re-enter the global finance
industry, it'll have an enormous influence in global
Islamic finance. It might also influence global
banking, generally. This is one area that ethical
investors will want to particularly watch.
Malaysia and Saudi facing Iran’s rising finance
power, by Arno Maierbrugger, April 22, 2015,
Gulf Times, Qatar.
Meet the Best for the World (of Certified B
Corporations) Overall Honorees for 2015. "The
Best for the World Honorees are recognized for
creating the most positive social and environmental
impact. These companies have earned an overall score
in the top 10% of all Certified B Corporations on
the B Impact Assessment, a rigorous and
comprehensive assessment of a company's impact on
its workers, community, and the environment."
[COMMENTARY]
This is a fascinating list to review when
considering the first major B corp. listing on the
NASDAQ last week, that of Etsy, an online and
offline marketplaces to buy and sell handmade items,
vintage goods, and craft supplies.
Best for the World Overall Honorees for 2015,
April 21, 2015, B Lab, USA.
The World's Most Reputable Companies In 2015.
"The Global RepTrak list stands out from other
corporate lists... because it aims to quantify the
way companies are perceived by consumers... rather
than looking at how companies manage their internal
affairs... According to RI’s data, 83% of consumers
say they would definitely buy products sold by
companies with top reputations while only 9% want to
buy from companies with poor reputations... Google
scores No. 2 on the list, just behind BMW and above
Daimler."
[COMMENTARY]
The Forbes article covering the Global RepTrack 100
list is highly informative. It refers to Google's
problems with anti-competition regulators in Europe
and why they're having zero effect on its reputation
and that no oil and gas producers are on the list as
they're perceived as being polluting and unethical!
The World's Most Reputable Companies In 2015, by
Susan Adams, April 21, 2015, Forbes, USA.
Why Gender Matters to Investors. "A
2014 Credit Suisse study of 3,000 companies
assessing the level of women in senior management
found that more diversity in management coincides
with better corporate performance and higher
stock-market valuations."
[COMMENTARY]
The writer also cites several other studies that
include those by Thomsen Reuters and McKinsey, which
all find that women on boards leads to greater
financial performance and increased stock values!
With results like this it behoves ethical investors
to consider gender/diversity screening in stock
evaluations if they do not already do so.
Why Gender Matters to Investors, by Joseph F.
Keefe and Sallie L. Krawcheck, April 21, 2015. (This
article originally appeared in the April 2015 issue
of
Green Money Journal on “Women and Investing”),
TriplePundit, USA.
Fossil-Free Portfolios Outperform Those With
Coal, Gas, Oil. "MSCI Inc. calculates that
portfolios without coal, gas and oil earned 1.2
percent more since 2010. Average fossil-free returns
have been 13 percent a year, as opposed to 11.8
percent for conventional investors, reports The
Guardian. Sure, during this period the price of oil
tanked, driving down shares of companies, but
fossil-free indexes outperformed before this
happened, said MSCI. And the volatility of oil
shares is another reason to get out of these
stocks."
[COMMENTARY]
These results should be a wake-up call to all those
fund managers who say their returns will suffer
going fossil fuel-free. With such data and today's
oil and gas prices -- plus renewables becoming
increasingly competitive -- we might finally be
witnessing the beginning of the relative decline of
the entire fossil fuel industry. Many ethical
investors have longed for this moment.
Fossil-Free Portfolios Outperform Those With Coal,
Gas, Oil, April 13, 2015,
SustainableBusiness.com News, USA.
The Type of Socially Responsible Investments
That Make Firms More Profitable, Harvard Business
Review. "We find that firms making
investments and improving their performance on
environmental, social, and governance (ESG) issues
exhibit better stock market performance and
profitability in the future...
However, not all such initiatives are equally
beneficial. My research, with Mozaffar Khan and
Aaron Yoon, suggests companies should stick to
social and environmental issues that are
strategically important for their business if they
want such efforts to contribute to the valuation."
[COMMENTARY]
The points made in this article are important for
both company managers and investors. The article is
written by one of the most well respected
researchers in this field.
The Type of Socially Responsible Investments That
Make Firms More Profitable, by George Serafeim,
April 14, 2015, Harvard Business Review, USA.
Clean Energy Investment Dips 15% In First
Quarter As Large Wind And Solar Projects Stall.
"About $50.5 billion was invested in the first
three months of this year, compared to $59.3 billion
a year earlier, the London research firm said. The
last period to show weaker investment was the first
quarter of 2013, when clean energy spending totaled
$43.1 billion.
Even so, last quarter’s results should resolve
investors’ questions over whether low oil prices,
down 50 percent from last year, would harm global
interest in wind, solar, biomass and other renewable
energy projects. 'These figures indicate the answer
is not so much,' Michael Liebreich, chairman of
BNEF’s advisory board, said in a statement."
[COMMENTARY]
There's no-doubt that cheap oil will have some
effect on renewable energy development. However, at
the utility level, renewables are becoming cost
competitive with gas or nuclear. Also -- as most of
us expect -- fossil fuel production will be
increasingly curbed by governments due to the
dictates of climate change.
Clean Energy Investment Dips 15% In First Quarter As
Large Wind And Solar Projects Stall, by Maria
Gallucci, April 10, 2015, International Business
Times, USA.
2015 Proxy Preview of 433 resolutions.
"Corporate political activity of all sorts and
environmental matters—predominantly climate
change—continue to vie for top billing with 26
percent and 27 percent of the total, respectively;
increasingly these are linked by investors who seek
corporate action to bypass some of the vitriol that
stymies government solutions. All told,
environmental and sustainable governance resolutions
combined represent 39 percent of the total so far,
as in 2014, while political activity accounts for
just over one-quarter of the total—down 4 percentage
points from last year’s mid-February share."
[COMMENTARY]
The survey is a compilation of three data sources:
As You Sow, Sustainable Investments Institute (Si2),
and Proxy Impact. As many ethical investors take a
keen interest in proxy voting, so I'm providing a
link to this survey
here.
Sweden tops in the EU in ESG ranking (for
government bonds). "Bond investors looking to
remain true to their environmental, social and
governance principles have a new tool: a ranking of
European Union member countries. The study, 'EU
Member States under the Spotlight,' ranked the 28
countries based on 67 human rights and 17
environmental indicators, including gender equality,
labor rights, freedom of expression, and protection
of the environment."
[COMMENTARY]
Such rankings for government bonds are becoming more
common. Incidentally, though not directly ranking
countries' bonds,
EIRIS Country Sustainability Ratings and
RobecoSAM's Country Sustainability Ranking both
offer useful insights for judging government issued
bonds on ESG issues.
Sweden tops in the EU in ESG ranking, by Sophie
Baker, April 6, 2015, Pension&Investments, USA.
Japan's 137 trillion yen ($1.1 trillion) GPIF
may consider ESG factors in stock investments.
"In a mid-term plan announced on Thursday, GPIF
said it would consider taking account of
'environmental, social and governance' (ESG) factors
in equity-investment decisions, while pursuing
profits."
[COMMENTARY]
When the world's largest pension fund says it's
considering integrating ESG factors into its stock
selection process, we know that ESG has truly
arrived! This fund -- which traditionally mostly
invested in Japanese government bonds -- is now
gearing up to be heavily invested in stocks. Should
they go ahead with the ESG focus, it could further
promote outperformance for global stocks with high
ESG ratings.
Japan's GPIF may consider governance in stock
investments, by Takashi Umekawa, April 2, 2015,
Reuters, Japan.
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