E-newsletter of Investing for the Soul June 29, 2016
Top ethical investing news for June 2016
Links may only be valid a limited time Commentaries by Ron Robins
Twitter allows me to cover more--and breaking news--to help you do better!
Has ESG morphed to become just a box-ticking exercise? "The recent moves to assess environmental, social and governance (ESG) performance within fund portfolios are attempting to answer an important question: how do you tell if your asset manager is taking ESG seriously? Difficulties in accurately measuring such an output should not be underestimated."
[COMMENTARY] This article reminds me of a related discussion. Some recent surveys of the use of ESG metrics in investment analysis has shown that though it's now widely used, many analysts believe it doesn't lead to increased alpha. I've commented how this can be so when the preponderance of studies shows that corporate excellence in ESG usually leads to financial and stock outperformance.
Well my theory is this. It is poorly applied by such analysts. Perhaps
they resent the extra work and that it's often non-mathematical in
nature so it's 'foreign' to these mostly pure number crunchers. What do
CEOs Urged to Talk ESG, Though Wall Street Wants EPS. "CEOs need to ramp up communications about environmental, social and governance (ESG) issues even when Wall Street is more concerned with short-term financial performance like earnings per share (EPS), according to a new report from the Conference Board."
Conference Board believes that CEOs need to be much more proactive in
talking about their sustainability issues as it is now one of the top
five concerns of CEOs, says the Conference Board. As we know, most
analysts are primarily concerned with short-term, quarterly financial
reporting, so sustainability activities which are mostly long-term in
nature, aren't often brought-up.
Canada's RIA Guide to Responsible Investment. Not only great for
Canadian investors, but insights into RI for investors anywhere.
The (UK) Guide to Sustainable Investment.
This is a good guide for UK ethical investors produced by a very
Allianz: investor attitudes towards ESG. "45% of respondents
incorporate environmental, social and governance factors into their
investment decision-making. Ethics was cited as the top reason for ESG
integration (38%), followed by corporate policy at 31% and minimizing
reputation and litigation risk at 19%.
find the latter statistic that only 26% of respondents believe ESG
implementation into the investment process will lead to higher risk
adjusted returns strange. So why do most respondent do it if they don't
believe it'll improve performance? Is the way they think about ESG and
how they go about integrating it a factor? Their belief also runs
counter to most ESG research showing it generally positive for improving
returns -- risk adjusted or otherwise.
World Federation of Exchanges releases second annual sustainability survey. "More than 90% of responding exchanges have an ESG, or sustainability, programme in place, primarily focused on education initiatives for issuers and/or investors, but also including products such as 'green bonds';
Nearly 100% of respondents believe they should monitor the long-term sustainability of their listed companies, and actively participate in developing better ESG reporting metrics;
Growing number of respondents (over 50% compared with 30% in 2014) are including ESG disclosures as part of their own reporting framework."
anyone still needs convincing of the value of corporate ESG reporting
they need look no further than what global stock exchanges are requiring
from their listed companies! ESG reporting has made it.
FTSE Russell launches green revenue benchmark. "According to a press statement, the FTSE Russell Green Revenues Index Series – based on the low carbon economy (LCE) data model – measures the green revenues of 13,400 public companies, which represent 98.5% of total global market capitalisation...
FTSE Russell touts its framework as comprehensive, one which allows analysts and investors to gauge the environmental impact of the goods and services from which companies derive revenue."
history making in the field of corporate ESG measures, this is the first
index to actually determine the real environmental value of the goods
and services of a company. Now, for instance, this will ensure tobacco
and fossil fuel companies who often rate highly on various ESG indices,
will unlikely be so rated in this new FTSE Russell index!
Green Bonds: A Surging Market for Socially Responsible Investing. "The green bond market could double in size this year, boosted by issuance from China and U.S. corporations like Apple."
last ethical investors will see a great increase in green bond offerings
that they might incorporate into their portfolios. However, my
continuing concern is still the lack of standardization of what
describes a green bond. Until those standards are in place, the
'greenness' of a bond will always be suspect.
New Study from Calvert Investments Highlights the Alpha-Generating Potential and Value of Integrated ESG Analysis. "Calvert Investment Management, Inc., a leading responsible investment manager, has partnered with Professor George Serafeim of the Harvard Business School to publish “The Financial and Societal Benefits of ESG Integration: Focus on Materiality.” This study, which is the second paper in the Calvert-Serafeim series, explores how systematic analysis of material environmental, social and governance (ESG) data may be able to help portfolio returns without adding additional risk."
is a great new study demonstrating the potential alpha when
incorporating ESG into investment analysis.
Best 50 Corporate Citizens in Canada. "Following Vancity on the list is WestJet, a leader in the airline industry on resource productivity and taxes paid. Third place went to the Co-operators group, the insurance provider and perennial contender that finished first in 2011. It performed particularly well on its pension and tax scores, and maintained one of the lowest CEO to average worker pay ratios among the Best 50."
producers of this review also create Newsweek's green corporate
rankings. They are very good at what they do, so this annual review is
worth reviewing by investors.
TIAA Exec: ESG Investing A Big Draw With Millennials. "Millennial investors are far more familiar with responsible investing than others. Some 90 percent say they want their investments to make a positive impact on society compared to 74 percent of boomers and Gen Xers."
Furthermore, "61 percent of investors say their advisors did not bring up responsible investing in the past 12 months, 46 percent of advisors say they have never offered responsible investing products to their clients, 35 percent think their clients aren’t interested in responsible investing and 36 percent of advisors don’t know how to accurately evaluate responsible investments."
data in this article tell me that not only are the millennials wise with
regard to responsible investing, but the number of advisors discussing
and offering RI-ethical investing products has risen greatly over the
years. Years ago the vast majority of advisors hadn't even heard of
ethical investing -- let alone selling associated products!
The 2016 SustainAbility Leaders. "Unilever continues to be regarded as the global corporate leader on sustainability. It has further increased its leadership margin and was named as a leader by 43% of polled experts. Patagonia, Interface, IKEA and Tesla are also among the top-rated leaders."
are also seen as leaders with governments coming in last. The survey is
extensive and informative on how and what companies and industries are
leading in sustainability.
2016 Newsweek Green (Corporate) Rankings. "The Newsweek Green Rankings are one of the world’s most recognized assessments of corporate environmental performance. Based on research from Corporate Knights and HIP (Human Impact + Profit) Investor Inc., the 2016 iteration of the project features eight key performance indicators that are used to assess and measure the environmental performance of the world’s largest publicly traded companies."
is another really good annual ranking. The top three global companies
are Shire PLC, Reckitt Benckiser Group PLC, and BT Group PLC.
Is Competition Between Sustainability Reporting Standards Healthy? "This question has acquired even more relevance with the announcement of the Exposure Draft of the GRI Standards to 'compete' with the existing standards of the Sustainability Accounting Standards Board, SASB, and the Integrated Reporting Framework of the International Integrated Reporting Council, IIRC."
investors, I believe it's important there be only one recognized
standard. Otherwise, we'll continue to be bewildered in attempting to
understand the nuances and complexities of each 'standard' and still
largely unable to genuinely compare reports from companies using
Costs Of Fossil Fuel Divestment – Billions Of Dollars For Endowment Funds. "That transaction and management costs related to divestment – what he refers to as 'frictional costs' – have the potential to rob endowment funds of as much as 12 percent of their total value over a 20-year timeframe. This includes the onetime immediate transactions costs an endowment must endure, as well as ongoing annual management fees to stay in line with the changing definition of “fossil free.”
research. I'm sure the fossil fuel industry loves it! It absolutely
needs to be replicated by others to see if they find similar divestment
Investors and Their Financial Advisors Need More Education, More Communication about Responsible Investments -- TIAA Global Asset Management Survey. "Over three quarters (77 percent) of affluent US investors say that they want their assets to have a positive impact on society. Many may see investing as an extension of their focus on social issues, with 86 percent of respondents tending to recycle every day, 71 percent preferring reusable bags, and 61 percent shopping for brands that adhere to sustainable business practices.
Yet with interest in social impact growing, and the availability of more responsible investment options than ever before, greater than one in three investment advisors (36 percent) concede that they are not able to adequately evaluate performance of responsible investments, and two in five affluent investors (40 percent) report they are unsure if they currently own responsible investments within their portfolios."
good to have the numbers but there's nothing really new here. All of us
engaged in ethical investing have understood for many years the reality
described by this survey. Thank you, TIAA for providing the numbers
New Book Focus
The New Grand Strategy: Restoring America’s Prosperity, Security and
Sustainability in the 21st Century, by Mark Mykleby, Patrick Doherty
and Joel Makower, St. Martin’s Press 2016
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Disclaimer: Neither The Soul Investor nor Ron Robins make investment recommendations. Nothing in this newsletter should be interpreted as a recommendation or solicitation to buy/sell any securities or investments. The Soul Investor is a source of general information and resources for spiritual investing, ethical investing, and socially responsible investing (SRI). Investors should consider their actions thoroughly and consult their professional advisers prior to taking any investment action. The Soul Investor does not necessarily agree with the opinions expressed in articles in its newsletter or offered on the web pages to which it might be linked. Such opinions are the responsibility of the writers themselves. Furthermore, The Soul Investor does not offer or provide any warranties, representations, guarantees, implied or otherwise, as to the accuracy, legality, copyright compliance, timeliness or usefulness of the information, materials or services in this e-newsletter, or other sites, to which it might be linked. Also, Mr. Ron Robins is not an investment advisor, nor is he licensed with any professional investment related body, and thus is not able to, nor does he make, any investment recommendations.
The Soul Investor is a publication of Investing for the Soul, a registered business name in Ontario, Canada. Copyright © 2016 Ron Robins. All rights reserved.