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"Almost three-quarters of investors (74 percent) would be more likely to work with an advisor who could give them competitive investment returns from investments that also made a positive impact on society and 65 percent of investors would be more likely to stay with an advisor who could discuss responsible investing with them."
--
TIAA Global Asset
    Management
(USA)
    May 2016

"92% of Canadians say that it's important to choose investments that are aligned with their values. By contrast, only 14% of advisors raised the topic of RI [responsible investing] with their clients."
--
Deb Abbey referring
    to 2014 NEI study
    Investment
    Executive
   
(Canada) April 2015

"70% of people [in UK] want to invest ethically but the financial services industry is failing to respond." Referencing research by Abundance.
--
Acquisition
    International
   
(UK) June 2015

 

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Commentaries by Ron Robins  E-mail us your feedback

Links may only be valid for a limited time   March 24, 2017

***List your event on our Events Page***

ESG-oriented millennials may have too-high hopes. "Citing the 2016 Schroders Global Investors Survey, Waterman told attendees at the ALFI European Asset Management Conference that investors aged 35 and under expected an average of 10.2% per year in returns, compared to a global stock market performance of 3.75% at the time of the survey...

Waterman noted a general trend toward 'short-termism' as investors planned to hold their investments for an average of just 3.2 years. Among all respondents, just 18% said they would hold their investment for more than five years. Zero in on millennials, and the statistic shrinks to just 8%, while 41% said they would invest for under a year."

[COMMENTARY] Despite all the good things being said about millennials interest in ESG-focused investing, their expectations on investment returns and holding periods are troubling.
ESG-oriented millennials may have too-high hopes, by Leo Almazora, March 24, 2017, Wealth Professional, Canada.

Think tank questions PRI signatories' ESG capacity. "Dedicated ESG specialists are rare at institutions signed up to the Principles for Responsible Investment (PRI), in particular at asset owners, according to analysis carried out by climate and energy think tank E3G... E3G said this meant that over 500 PRI signatories directly employed one or no ESG staff. There are more than 1,700 signatories to the PRI."

[COMMENTARY] Many people, myself included, wonder how many of the PRI dignitaries take ESG seriously and how much is for PR purposes. Now E3G has provided some insight into that. It's clear that a large number of those institutions who signed the PRI aren't too serious about implementing ESG.
Think tank questions PRI signatories' ESG capacity, by Susanna Rust, March 21, 2017, IPE, UK.

ESG factors can indicate overall stock risk, says AQR. "In AQR Capital Management’s new paper – 'Assessing Risk through Environmental, Social and Governance Exposures' – the firm said it found a strong positive relationship between companies’ ESG exposures and the statistical risk of their equity."

[COMMENTARY] In surveys where investment managers are asked about why they use ESG criteria, they frequently say to manage future risk. Now, AQR provides confirmation of that belief. With research appearing almost daily supporting the application of ESG in investment decisions, it seems that investors everywhere should be applying it. (To read the actual study, click here.)
ESG factors can indicate overall stock risk, says AQR, by Rachel Fixsen, March 20, 2017, IPE, UK.

Webinar--Mission-Aligned Investing: What New Positive Deviance Research Can Tell Us About What Moves Institutional Investors to Action. "Presenter Abigail Abrash Walton, Ph.D, will share: Research findings related to mission-aligned investing, leadership, and the decision-making process to divest from fossil fuels by philanthropic organizations with assets under management from $5 million to $1 billion; what factors supported decision makers in moving to mission-aligned investing while simultaneously exercising their fiduciary duty to steward institutional assets; how the divestment decision affected the decision makers personally and their organizations."

[COMMENTARY] The information presented in this webinar -- now online to view anytime -- is useful information for anyone interested in mission-aligned investing.
Webinar: Mission-Aligned Investing: What New Positive Deviance Research Can Tell Us About What Moves Institutional Investors to Action, March 2017, Intentional Endowments Network, USA.

Are Sustainable Funds More Expensive? "Funds with an ESG mandate tend to be a bit more expensive than other funds, but the differences are not large. There are reasonable explanations for this pattern. Most ESG funds are not very large, so they are not able to benefit from the economies of scale found in funds with huge asset bases; as ESG funds gather more assets, more of them should be able to lower costs for shareholders.

Also, funds with an ESG or impact mandate usually have extra costs for shareholder advocacy and similar activities that aim to move companies in a positive direction... There are plenty of cheap ESG options for investors who seek them out, including a growing number of sustainable index funds and exchange-traded funds."

[COMMENTARY] There's been little in-depth objective analysis comparing the costs of buying and holding ESG funds versus those of conventional funds. Morningstar has done a great service here in delving into them. This is an important article for all investors to review.
Are Sustainable Funds More Expensive? By David Kathman, March 17, 2017, Morningstar, USA.

‘Climate is King’ Says BlackRock; Companies Must Now Address Risk. "The world’s largest asset manager is stepping up pressure on companies to address how climate risk will affect its portfolios. In a recent post on its website, BlackRock said it believes climate risk is a “systemic issue” and that corporations should be compelled to develop disclosure standards."

[COMMENTARY] Such remarks from the world's largest asset manager are bound to influence corporate climate change policies globally. Furthermore, Blackrock is backing-up its remarks with actions as it seeks to discuss these issues with the companies it invests in.
‘Climate is King’ Says BlackRock; Companies Must Now Address Risk, by Jan Lee, March 16, 2017, TriplePundit, USA.

ESG growing in importance, ERM survey reveals. "Over 95% of investors believe their company portfolios contain untapped environmental, social and corporate governance (ESG) opportunities, according to a recent survey by London-headquartered global environmental consultancy ERM." 

[COMMENTARY] The article reviews the results of a survey that show extraordinarily positive views among private equity managers regarding the importance of integrating ESG in investment decisions.
ESG growing in importance, ERM survey reveals, March 15, 2017, Environmental-Analyst, UK.

Ethisphere Announces 124 Companies to Make the 2017 World’s Most Ethical Companies List. "Ethisphere’s notion that the financial value and ethics are inexorably tied together has been explained through an analysis of how the stock price of publicly-traded 2017 honorees compare to the S&P 500 over the last two years. The analysis demonstrates a 6.4% premium Ethisphere refers to as an ‘ethics premium.’"

[COMMENTARY] I like Ethisphere's work. Their list is always worth a review.
Ethisphere Announces 124 Companies to Make the 2017 World’s Most Ethical Companies List, press release, March 13, 2017, Ethisphere, USA.

Why and How Investors Use ESG Information: Evidence from a Global Survey. "Survey data from more than 400 senior investment professionals provides insights into why and how investors use environmental, social, and governance (ESG) information as well as the challenges in using this information. This study also documents what investors believe will be important ESG styles in the future...

The primary reason survey respondents consider ESG information in investment decisions is because they consider it financially material to investment performance. ESG information is perceived to provide information primarily about risk rather than a company’s competitive positioning."

[COMMENTARY] A study concerning ESG co-authored by Harvard's George Serafeim is always an important read. The co-author Amir Amel-Zadeh of Oxford University's Saïd Business School has impressive credentials as well.
Why and How Investors Use ESG Information: Evidence from a Global Survey, by Amir Amel-Zadeh and George Serafeim, March 13, 2017, Harvard Business School Working Knowledge, USA.

The World’s Leading Companies on Human Rights. "One clear leader, as mentioned throughout the study, was Marks and Spencer (M&S). The U.K. retail giant...  Ranking slightly behind M&S were H&M and Adidas."

[COMMENTARY] This article details important research for everyone particularly interested in the 'S' of ESG in many of the world's largest companies. The study cited in the article was compiled by Aviva Investors, the Human Rights Resource Center (BHRRC), and various non-profits and European governments.
The World’s Leading Companies on Human Rights, by Leon Kaye, March 13, 2017, TriplePundit, USA.

How 'Responsible' Are Europe's Mega-Managers Investing $22.4 Trillion? "Research conducted by ShareAction, a non-profit group in the U.K. that campaigns for responsible investment, ranks the 40 mega-managers who, between them, invest over €21 trillion ($22.4 trillion) ... The top five performers (scoring out of a possible 90 points) are: Schroder Investment Management (82), Robeco Group (81), Aviva Investors (80), Amundi (77.5), and Standard Life Investments (76.5).

[COMMENTARY] It's informative for all of us in the ethical investment world to see how managers are ranked using criteria related to responsible investment. Now, where are similar rankings for North American or Asian managers?
How 'Responsible' Are Europe's Mega-Managers Investing $22.4 Trillion? By Dina Medland, March 12, 2017, Forbes, USA.

Is the finance sector really equipped to assess climate risks? "10 years after the sub-prime mortgage crisis that triggered a global financial crash, analysts are still largely ignoring long-term financial risks, such as those from climate change, the energy transition and disruptive low carbon technologies...

Although most asset owners analyzed in the report, such as pension funds and insurers, have long-term liabilities of 20 years or more, those managing these assets are far more short-term in their thinking, turning over these portfolios every 21 months on average."

[COMMENTARY] As many of you will agree, a short-term focus concerning portfolio performance may not be compatible with long-term liability management. Although the financial community is starting to embrace ESG, ESG is mostly about long-term performance and so requires a different mindset.
Is the finance sector really equipped to assess climate risks? By Michael Holder, March 9, 2017, GreenBiz, USA.

Responsible Investing Growing in Importance Driven by Ethical Principals, Institutional Investor Demands, and Business Opportunities, Says New Survey from CAIA and Adveq. "More than three quarters (77%) of respondents to the survey agree Responsible Investing1 is more important than it was three years ago, while 78 percent anticipate it will be more important three years from now. Adoption of industry standards (71%), pressure from institutional investors (67%), and positive investment return outcomes (64%) will be the largest drivers of greater adoption of Responsible Investing and ESG approaches, according to survey respondents."

[COMMENTARY] Again, we see more good news regarding the adoption of ESG in the investment industry. However, mentioned in this survey by 69% of respondents, was again the need for "standardized comparable data." When this is finally available ESG will finally take its place at the helm of investment analysis.
Responsible Investing Growing in Importance Driven by Ethical Principals, Institutional Investor Demands, and Business Opportunities, Says New Survey from CAIA and Adveq, press release, March 9, 2017, The CAIA Association and Adveq, USA.

Dalbar: Active Investors Do Better Long-Term; Passive Investors Do Better Short-Term. "The study concludes that the choice of active or passive investing should be based largely on the needs and preferences of the investor and the cost of providing asset allocation and capital preservation strategies that are not available in passive fund."

[COMMENTARY] The predominant trend in recent years has favored passive funds. In fact, active management has been widely ridiculed even by the likes of Warren Buffet. Now comes Dalbar, a highly distinguished research authority on these matters, adding fuel to the debate of active versus passive investing.
Dalbar Announces Active versus Passive Analysis, press release, February 27, 2017, Dalbar, USA.

Socially Responsible Funds Underperform. (Is this true?) "In a new paper that will appear in the April 2017 issue of the Journal of Banking and Finance, a top scholarly journal, the authors study over 2,000 funds. They argue that prior studies on SRI or CSR funds are flawed because those studies simply categorized funds as being either socially-responsible or conventional. This categorization leads to too many other differences between funds, and it ignores the fact that firms can have varying degrees of social responsibility.

So, in the new study, they compare low-CSR funds to high-CSR funds. They find that high-CSR funds underperform relative to low-CSR funds. Their evidence is both compelling and robust."

[COMMENTARY] We'll have to wait til the study is out to truly critique it. Initially, my reaction is how the term 'CSR' is defined. Are the researchers only concerned with social issues? Even with that, how is it defined? Do the researchers include environmental and governance factors? One thing is for sure, it'll likely be quite controversial!
Socially Responsible Funds Underperform, by Kenneth A Kim, February 28, 2017, FA Magazine, USA.

The Evolution of Corporate Social Responsibility Assurance – A Longitudinal South African Study. "Although the extent to which companies have provided independent assurance over their CSR disclosures has steadily grown, the study also revealed that the majority still did not. Although the pool of CSR assurance providers has widened to become more inclusive, contrary to the expectation that the dominance of the Big 4 audit firms would gradually be eroded, the study found that the Big 4 audit firms were actually consolidating their position in this area."

[COMMENTARY] I've long held that CSR disclosures should be independently audited -- as per financial statements -- and the results available to all stakeholders. Though the above study was South African based, it provides some insight into the possible state of CSR auditing today. Hopefully, similar studies will be done, particularly in the USA, Europe, and Japan.
The Evolution of Corporate Social Responsibility Assurance – A Longitudinal South African Study, by Barry Ackers, February 25, 2017, Social and Environmental Accountability Journal, UK.

The race is on for socially responsible investing in Japan. "The Japanese market is finally moving towards an ESG environment, similar to the mature markets of the US and Europe."

[COMMENTARY] This is good news for ethical investors globally. Historically, Japanese companies have been reticent to disclose much ESG information. This is now changing with Japan's new corporate stewardship code and especially Japanese institutional investors such as their huge Government Pension Investment Fund demanding ESG data.
The race is on for socially responsible investing in Japan, by Seiji Kawazoe, February 20, 2017, FT Advisor, UK.

How to solve the imbalance in ESG investing. "Investors are actively demanding more information about different components of environmental, social and governance investments. As evidence of this, S&P Dow Jones Indices, one of the world’s largest index providers and a division of S&P Global, acquired Trucost Plc, a carbon and environmental data provider, in October.

During a GreenBiz 17 program Wednesday, Dmitri Sedov, vice president of innovation and digital strategy at S&P Global, said the acquisition of Trucost will help solve a gap between the demand for sustainable investing and the supply of these investments."

[COMMENTARY] We see many of the pioneer organizations associated with ethical-ESG investing being acquired by mainstream investment industry behemoths. In time, we will see if these hookups truly benefit investors. Superficially, this deal appears promising for ethical-ESG investors.
How to solve the imbalance in ESG investing, by Keith Larsen, February 16, 2017, GreenBiz, USA.

Global financiers launch green investment criteria. "Nearly 20 global banks and investors have launched a set of criteria for investments to be considered sustainable. The group, which includes Société Générale and Hermes Investment Management and totals around $6.6 trillion (£5.28tn) in assets, outlined the Principles for Positive Impact Finance (PPIF)."

[COMMENTARY] Such developments are welcome news. Developments like this make sustainable investing -- in this instance particularly for institutions  -- a little bit easier.
Global financiers launch green investment criteria, by Jonny Bairstow, February 16, 2017, Energy Live News, UK.

Nearly a Third of Non-Profit Institutional Investors Say They Make "Mission-Related" Investments, According to Cambridge Associates Survey. "In a survey of 159 non-profit institutional investors around the globe, 31% say they're currently engaged in mission-related investing -- making investments designed to align with or advance institutional goals or values as well as provide financial returns. Of that group, 44% say they have increased their mission-related allocation over recent years, and 62% expect to grow their mission-related allocation in the coming five years. None of the institutions that currently make mission-related investments expect to decrease their allocations."

[COMMENTARY] We see continuing good news that non-profit institutional investors are increasingly aligning their investments with their missions. It always surprised me how a charity invested in companies that produced products or services abhorrent to its mission. Often it was blamed on the fund manager’s fiduciary responsibility. However, it was often due to the timidity of the charity in properly instructing their fund managers in what they expected from them.  See my editorial: Unethical Investing by Charities.
Nearly a Third of Non-Profit Institutional Investors Say They Make "Mission-Related" Investments, According to Cambridge Associates Survey, press release, February 15, 2017, USA.

Ethical investment demand outstrips adviser interest. "[UK] Fnancial advisers may be seriously underestimating demand for responsible investment, after research showed wide discrepancies between adviser and consumer attitudes to investing ethically."

[COMMENTARY] This is a problem everywhere and explains why the percentage of ethical retail fund assets is only 2-4% of all retail funds. It's an issue I've written about numerous times over the years. This FT article should be broadcast by all professional brokerage and financial planning organizations.
UK Ethical investment demand outstrips adviser interest. by James Fernyhough, February 6, 2017, FT Advisor, UK.

Canadian RI Assets Surpass $1.5 Trillion, up 49% in two years: Canadian RI Trends Report. "The 2016 Canadian Responsible Investment Trends Report reveals that Canada’s responsible investment (RI) market is continuing to experience rapid growth. Responsible investment refers to the incorporation of environmental, social, and corporate governance (ESG) factors into the selection and management of investments. This report provides a detailed overview of recent trends in Canada’s responsible investment marketplace."

[COMMENTARY] These are terrific results! I'm particularly impressed with the growth of 91% growth of assets among individual investors.
Canadian RI Assets Surpass $1.5 Trillion, up 49% in two years: Canadian RI Trends Report, press release, February 2, 2017, RIA Canada, Canada.

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Disclaimer: This website does not make investment recommendations. Nothing in this site should be interpreted as a recommendation or solicitation to buy/sell any securities or investments. Investing for the Soul 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 financial advisers and other professionals, prior to taking any investment action. This website does not necessarily agree with the opinions expressed in articles on its pages or offered on the web pages to which it might be linked. Such opinions are the responsibility of the writers themselves. Furthermore, this site 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 on this, or other sites, to which it is 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.

 

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