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Morgan Stanley Survey Finds Sustainable
Investing Poised for Growth. " Over seventy
percent of active individual investors (71%)
describe themselves as interested in sustainable
investing, and nearly two in three (65%) believe
sustainable investing will become more prevalent
over the next five years, according to a new survey
published today by the Morgan Stanley Institute for
Sustainable Investing."
[COMMENTARY]
These are among the highest numbers I've seen on
such a survey. They roughly correlate with the
percentage of the public concerned about climate
change. Notwithstanding the potential negative
effects of our unresolved economic problems, such numbers bode
well for the future of sustainable-socially
responsible-ethical investing -- however you define
these terms.
Morgan Stanley Survey Finds Sustainable Investing
Poised for Growth, press release, February 27,
2015, Morgan Stanley, USA.
Global RI (responsible investing) assets grew
61% from 2012 to 2014 to reach $ 21.4 trillion.
"Assets employing RI strategies have risen from
21.5 percent to 30.2 percent of the professionally
management assets across in the regions covered...
The majority of the identified global RI assets
discussed in the Review— 64% —are in Europe.
Together, Europe, the United States and Canada
account for 99% of global RI assets identified in
the Review."
[COMMENTARY]
This is terrific growth! The report finds that
negative/exclusionary screening is still the most
used aspect of RI, followed by ESG analysis and corporate engagement and
shareholder actions. Europe -- as in the adoption of
CSR by companies -- still leads!
Global RI assets grew 61% from 2012 to 2014 to reach
$ 21.4 trillion, press release, February 24,
2015, Responsible Investment Association, Canada.
Young investors aim to make money responsibly.
"'Anyone (who) has strong spiritual or religious
beliefs would not want to see their investment
support activities that are against those beliefs,'
he said. 'I don’t give advice on what they should
buy. What I do in a very general way is help them
assess their personal values and then apply them to
investments.'”
[COMMENTARY]
That's a quote from me in an excellent article that
also extensively quotes Dustyn Lanz, director of
research and communications at the Responsible
Investment Association of Canada. This is a good
article to introduce the subject of
ethical-responsible investing to those beginning to
think about the subject, no matter their age."
Young investors aim to make money responsibly,
by Ruane Remy, February 21, 2015, The Catholic
Register, Canada.
Investors are driving increased adoption of
ESG policies, report finds. "Institutional
investors are increasingly demanding that private
equity firms adopt ESG policies in their investment
processes, according to new research conducted by
the London Business School’s Coller Institute of
Private Equity and supported by Adveq, the private
equity investor. The study, based on responses from
42 private equity firms with collective assets under
management of more than $640 billion, reveals that
ESG is now a core value creation strategy at private
equity firms."
[COMMENTARY]
To me, what's most interesting about this study's
findings relate to ESG moving out of the compliance
and risk mitigation area in private equity and into
it being seen as a value creation formulae used
throughout their management organizations. ESG
analysis is being inherently recognized for
providing an opportunity to increase returns.
Growing pressure from LPs moves ESG from a
compliance function to the heart of the investment
process, February 23, 2015, London Business
School, UK.
University of California announces progress on
sustainable investment strategy. "The
University of California today (Feb. 19) announced a
series of steps it has taken to combat global
climate change by investing in sustainability,
including becoming the first university in the world
to sign the Montreal Carbon Pledge... The university
also recently joined... Ceres and its Investor
Network on Climate Risk (INCR)... [and] The Carbon
Disclosure Project (CDP)."
[COMMENTARY]
The University of California is providing a great
example of how educational institutions globally can
assist in creating a better, sustainable world. One
of it commitments is to "profitably invest at
least $1 billion over the next five years in
solutions to climate change."
University of California announces progress on
sustainable investment strategy, press release,
February 19, 2015, University of California, USA.
Hospitality workers name responsible,
irresponsible private equity managers. "UNITE
HERE, the union of hospitality workers throughout
North America, is for the first time releasing its
List of Responsible and Irresponsible Private Equity
Managers in the Hospitality Industry (below) to help
staff and trustees of pension funds and other
institutional investors make smart decisions...
[leading] the Responsible list is Blackstone Group
LP; [leading] the Irresponsible list is Dallas-based
Lone Star Funds."
[COMMENTARY]
UNITE HERE is perhaps paving the way for other
unions to offer their best and worst companies to
work for. Actually, I believe such information would
be useful for ethical investors, the 'rated'
companies, and markets generally. So I hope that
other unions come out of their shells and provide
similar information!
UNITE HERE: Hospitality workers name responsible,
irresponsible private equity managers, press
release, February 18, 2015, UNITE HERE, USA.
New White Paper from Breckinridge Capital
Advisors Examines the Value of Corporate Bond ESG
Analysis. "Breckinridge Capital Advisors, a
Boston-based high-grade fixed income manager with
over $20 billion under management, has released a
new white paper that examines its environmental,
social and governance "ESG" analysis efforts on
corporate bond investments. Breckinridge's white
paper findings include:
1) Integrating ESG into its research process has
been additive to its efforts to mitigate and
appropriately price risk; 2) ESG analysis exhibits a
low positive correlation with credit agency ratings;
3) ESG research is enhanced through engagement calls
with corporate borrowers; 4) A company that works to
manage its material ESG risks may be a more stable
credit and a better investment."
[COMMENTARY]
In short, Breckenridge finds ESG analysis is helpful
in assessing bond risks and motivating issuers to
higher ESG standards. For those managing or
investing in fixed income assets, this is a most
helpful paper. Download
here.
New White Paper from Breckinridge Capital Advisors
Examines the Value of Corporate Bond ESG Analysis,
press release, February 11, 2015, Breckinridge
Capital Advisors, USA.
New global 'ratings agency' ranks the 500
institutions with power to end deforestation by
2020. "The Global Canopy Programme has
identified, assessed and ranked 250 companies, with
total annual revenues in excess of US $4.5 trillion;
150 investors and lenders; 50 countries and regions;
and 50 other influential actors in this space.
Together, these 500 control the complex global
supply chains of key 'forest risk commodities' such
as soya, palm oil, beef, leather, timber, pulp and
paper that have an annual trade value of more than
US $ 100 billion and are found in over 50% of
packaged products in supermarkets.
Assessed against dozens of policy indicators,
only seven of the Forest 500 scored the maximum
number of points - companies Groupe Danone (France),
Kao Corp. (Japan), Nestle S. A. (Switzerland),
Procter & Gamble (US) and Reckitt Benckiser Group
(UK), Unilever (UK) and banking and financial
services giant HSBC (UK)."
[COMMENTARY]
Many ethical investors will be interested in these
findings. However, some of the 'better' companies
cited in this study do have other ESG issues. For
instance, Nestle's promotion of baby formula over
breast-feeding has angered many, while HSBC legal
woes continue with the latest being possible
criminal charges for allegedly helping US clients
evade taxes.
New global 'ratings agency' ranks the 500
institutions with power to end deforestation by
2020, press release, February 11, 2015, Global
Canopy Programme, UK.
Clean tech loses power in energy portfolios.
"Last year, global clean-tech funds raised $2.9
billion, compared to $42.4 billion for global energy
private equity funds, according to London-based
alternative investment research firm Preqin. So far
this year, clean-tech funds have raised $400 million
vs. $2.9 billion for traditional energy funds."
[COMMENTARY]
The thesis is obvious that low fossil fuel prices
reduces the attractiveness of clean energy. Also, it
seems that in recent years returns clean tech
investments haven't matched those related to fossil
fuels, according to some studies cited in this
article.
Nevertheless, in reports by
Ceres and many others, climate change will
induce increasing government actions that negatively
impact the growth and profitability of fossil fuel
investments. Asset write-downs and stranded assets
will likely feature prominently in future
discussions concerning fossil fuel energy
investments.
Furthermore, according to reliable sources such
as
Arthur Berman, US shale oil reserves and returns
on those investments are way overblown.
Clean tech loses power in energy portfolios, by
Arleen Jacobius, February 9, 21015, Pension &
Investments, USA.
Japanese automotive companies take the lead in
new CDP auto league. "This research focuses
on the [environmental] regulation in the EU, US and
China with the ranked companies, which responded to
CDP's questionnaire, accounting for around 83% of
the global auto market by sales volume... General
Motors and FCA risk significant penalties in both
the EU and US potentially equating to US$1.7bn (33%
of EBIT) and US$574m (15% of EBIT) respectively.
Ford is also at risk of a penalty in the US of
US$889m (or 16% of EBIT)."
[COMMENTARY]
This is a fascinating analysis of how prepared auto
companies are for the regulatory environment in the
near future. American companies are generally the
least prepared and could suffer financially as a
consequence. No doubt many ethical investors will
want to consider the CDP analysis in their investing
decisions. This is the first of many such reviews of
different industries that CDP (formerly the Carbon
Disclosures Project) is undertaking.
Japanese automotive companies take the lead in new
CDP auto league, press release, February 5,
2015, CDP, UK.
RepRisk Releases Report on Most Controversial
Companies of 2014. "Six out of the ten most
controversial companies of 2014 are located in Asia
and three are based in the United States."
[COMMENTARY]
Uber, GM and the exclusive Neiman Marcus Group
department store chain are #5, 8 and 10
respectively, on the list. Uber's problems included
assaults by drivers on passengers; GM had to recall
30 million cars due to defects; and Neiman Marcus
had a major data privacy breach plus allegations of
child labor among its suppliers. There were other
serious ESG issues with each of these and the other
companies listed.
RepRisk Releases Report on Most Controversial
Companies of 2014, report, February 4, 2015,
Switzerland.
Health sector should divest from fossil fuels,
medical groups say. "The health sector should
get rid of its fossil fuel investments on moral
grounds, as it previously did with its tobacco
investments, according to a report by a coalition of
medical organisations... The members of the British
Medical Association have already voted to divest
from fossil fuels, the first health organisation in
the world to do so."
[COMMENTARY]
How soon will fossil fuel companies be held in the
same esteem as tobacco companies? Those invested in
fossil fuel entities will have to keep a close eye
on such developments. Presently, many investors are
excited that potential lows have been seen in the
oil price and that as the price moves higher
there'll be big financial gains in related
investments. However, for long-term gains, both
ethically and financially, fossil fuel investments
remain fraught with danger.
Health sector should divest from fossil fuels,
medical groups say, by Damian Carrington,
February 4, 2015, The Guardian, UK.
Growing ESG Investment Leading to
Transformation of Japanese Companies.
"Japanese companies are currently experiencing
revolutionary upheaval in the field of CSR
activities. This social earthquake comes from major
changes in the public expectations of companies.
Society is urging companies to make clear statements
or disclosures of their efforts to create long-term
value and sustainable development... In December
2014, the Tokyo Stock Exchange and the Financial
Service Agency jointly released a draft of the
Corporate Governance Code."
[COMMENTARY]
Clearly, the global momentum towards greater CSR/ESG
disclosure gathers apace. When individuals go
unpunished for misdeeds that result in enormous
financial losses and human suffering (for instance,
today, S&P getting only fined for their MBS ratings
shenanigans that in part nearly brought-down the
financial system), businesses have to be more
proactive in their CSR/ESG efforts.
Growing ESG Investment Leading to Transformation of
Japanese Companies, by Toshihiko Goto, January
28, 2015, Japan for Sustainability, Japan.
Responsible investing: which (UK) fund groups
fall short? "The fourth annual ShareAction
responsible investment report looks under the bonnet
of the country’s 33 biggest fund management
companies and ranks asset managers on how they use
their investment power to encourage good practice in
the companies they invest in, and place emphasis on
ethical, social and governance (ESG) issues. The
companies invest a combined £13.8 trillion of assets
for pension savers, charities, universities and
individuals.
While all the companies publicly commit to the ‘FRC
UK Stewardship Code’, which aims to ‘enhance the
quality of engagement between asset managers and
companies to help improve long-term risk-adjusted
returns to shareholders’, a number are falling short
of these aims in practice."
[COMMENTARY]
The ShareAction report provides keen insight into
how -- if not backed by penalties -- that much of
the UK fund industry will not voluntarily report on
ESG matters. The same situation probably applies to
the US, Canada, and other jurisdictions as well.
However, as below, aside from possible future
regulations and penalties, it could be the fund
clients eventually forcing the fund managers to
disclose such information.
Responsible investing: which fund groups fall short?
By Michelle McGagh, February 2, 2015, citywire
Money, UK.
Institutional Investors Demand SRI/ESG
Mandates. "US asset managers are receiving
more requests for socially responsible investing
(SRI) and environmental, social, governance (ESG)
mandates from institutional clients, according to
new research from global analytics firm, Cerulli
Associates. More than 50% of asset managers surveyed
by Cerulli said they had received institutional
client requests for SRI or ESG mandates."
[COMMENTARY]
Finally, the word is getting out to asset managers
that SRI/ESG
mandates might improve returns! This is one main
reason for such interest in these mandates. But it's
also great to see that clients want this for a
myriad other positive reasons as well. These demands
will force all companies to be increasingly more
proactive on ESG matters. And that's what we all
want.
Institutional Investors Demand SRI/ESG Mandates,
February 2, 2015, Funds Europe, UK.
Universities score poorly on climate change
risk investment. "While climate science has
been a prominent concern of many university based
researchers, these same venerable education
institutions have failed to walk the talk in regard
to applying climate change science to climate risk
investment of their financial assets. A new global
survey of universities has found that the
overwhelming majority are financially exposed to the
risk of stranded assets and physical impacts of
climate change."
[COMMENTARY]
The data is unsurprising. The university boards are
usually stuffed with conservative business leaders
who go by the advice of their fund managers that
still don't believe in the idea of fossil fuel
divestment and the impacts of climate change.
Universities score poorly on climate change risk
investment, by Takver, January 28, 2015, SF Bay
Area Indymedia, USA.
Helena Morrissey, Aiming at Britain’s Glass
Ceilings, Gets Results. "Ms. Morrissey has
directed her steely focus on Britain’s most powerful
men. Working behind the scenes, she has persuaded
120 of the country’s top chairmen that they want
what she wants: more diverse boards that will
produce better company returns.
The approach has produced some remarkable results.
Since 2010, the percentage of women on Britain’s top
boards has nearly doubled, to 23 percent, while in
the United States, the figure has crept up a few
percentage points to 17 percent."
[COMMENTARY]
There's a powerful case for including more women and
minorities on company boards. Many studies show they
improve board performance and corporate results.
It's for those reasons as well as for equity rights
-- and most likely Ms. Morrissey's own impeccable
character and credentials -- as to why she's been so
successful.
Helena Morrissey, Aiming at Britain’s Glass
Ceilings, Gets Results, Jenny Anderson, January
26, 2015, Dealb%k, The New York Times, USA.
The (Corporate) Sustainability Yearbook 2015
by RobecoSAM. "A record number of companies
participated in RobecoSAM’s Corporate Sustainability
Assessment. Out of more than 3,000 companies that
were invited, 830 companies from 42 different
countries participated. RobecoSAM views this as a
positive development in corporate sustainability.
For investors, the Sustainability Yearbook
identifies companies that are strongly positioned to
create long-term shareholder value."
[COMMENTARY]
Another good review of the most sustainably oriented
companies globally. European companies take top
spot, followed by Asian, then American companies.
What's good here are the industry profiles. Ethical
investors might want to review them.
The
(Corporate) Sustainability Yearbook 2015 by
RobecoSAM, January 23, 2015, Switzerland.
American High Income Women and Social
Responsibility. "Only 15 percent of high
income women do not consider social
responsibility in their investment decisions."
[COMMENTARY]
It's generally observed that relatively more women
than men favour socially responsible-ethical
investing. It's good to see that among rich American
women the interest in socially responsible-ethical
investing is so high.
High Income Women and Social Responsibility, by
Kent McDill, January 23, 2015, Millionaire Corner,
USA.
Corporate Knights 2015 Global 100 Most
Sustainable Corporations. "The Global 100
index (which is equally weighted) commenced on
February 1, 2005. From inception to December 31,
2014, it delivered a total return of 90.76%,
compared to 96.98% for its benchmark, the MSCI All
Country World Index. This is the first year-end that
the Global 100 Index has fallen behind its
benchmark, in large part due to the rising U.S.
dollar, as 81 per cent of Global 100 constituents
trade in non-US denominated currencies, versus
approximately 50% for the MSCI ACWI. The Global 100
is calculated by Solactive, the German index
provider. It is available on Bloomberg under the
ticker <CKG100 Index> and on Reuters under the
ticker <.CKG100>."
[COMMENTARY]
The top ten rated firms are: Biogen Idec, Allergan,
Keppel Land, Kesko, Adidas, BMW, Reckitt Benckiser
Group, Centrica, Schneider Electric and Danske Bank.
This is always a good review for ethical investors.
For full results,
click here.
2015 Global 100 results, January 22, 2015,
Corporate Knights, Canada.
Canadian Responsible Investments Surpass $1
Trillion says 2014 Trends Report.
"Responsible investing (RI) is experiencing rapid
growth in Canada, according to the 2014 Canadian
Responsible Investment Trends Report. The biennial
report, released today by the Responsible Investment
Association (RIA) and RBC... suggest that 31 per
cent of invested assets under management in Canada
involve some aspect of RI."
[COMMENTARY]
A quick look at the figures suggests continuing
great growth for responsible-ethical investments in
Canada. What I'm especially pleased about is that
retail responsible-ethical mutual fund assets are
growing almost twice as fast as 'conventional'
fund assets. This probably indicates a growing percentage
of Canadian investors moving into responsible-ethical
funds.
Canadian Responsible Investments Surpass $1 Trillion
says 2014 Trends Report, press release, January
22, 2015, Responsible Investment Association,
Canada.
Canadian MP who Championed Tougher Warnings on
Prescription Drugs now wants Tougher Warnings on
Cell Phones. "Conservative MP Terence Young
will announce today that he has multi-party support
from MP's across Canada for his Private Member's
Bill requiring warning labels on cell phones and
Wi-Fi routers wherever they are sold.
The Oakville MP was successful last year in passing
a law requiring clearer warnings on pharmaceuticals.
He's now introduced a Bill that will require safety
warnings on all microwave emitting wireless devices
sold in Canada.
'The World Health Organization places wireless
radiation on the same cancer warning-list as DDT,
lead and car exhaust,' said Young. 'Canadians have a
right to know this.'
[COMMENTARY]
Some 50 to 70 years ago concerns began to emerge
about the detrimental health effects of smoking. I
believe we're at the beginning stages of
understanding the negative health effects of
excessive electro-magnetic and wireless radiation.
As concern grows, this could negatively impact huge
swaths of the tech industry. Ethical investors might
want to avail themselves of the latest findings with
respect to this issue so that they aren't
sideswiped by market developments and possible
portfolio losses.
Canadian MP who Championed Tougher Warnings on
Prescription Drugs now wants Tougher Warnings on
Cell Phones, press release, January 19, 2015,
Canada.
Ethical Questions of Investing in Pot.
"Public pension funds and university endowments are
increasingly shying away from putting their money in
so-called sin industries and focusing on more
“socially responsible” investments, but it’s unclear
where marijuana falls on this spectrum. Is marijuana
closer to the health care industry, given its
benefits for certain ailments, or should it be
lumped into the same category as cigarettes,
alcohol, gambling, guns and, in some quarters,
fossil fuels and sugary soda?"
[COMMENTARY]
This is one of those issues that ethical investors
are beginning to vigorously debate. From my side, I
believe every investor should make up their own mind
on this issue. For ethical investors I've long
advocated that to truly reflect their personal
values it might be more appropriate to invest, where
possible, in individual stocks than mutual funds/ETS
-- if such products don't really reflect one's
values. However, for those managing other peoples'
assets such as pension funds -- it's a big dilemma
and one that I believe will never be really
resolved.
Ethical Questions of Investing in Pot, by Andrew
Ross Sorkin, January 12, 2015, DealB%k, The New York
Times, USA.
Denmark Sets New Wind Power World Record.
"Denmark has long been one of the world’s leaders
in wind power. The country of 5.6 million has set a
goal of generating 50 percent of its power from
clean energy sources by 2020 and aims to be entirely
fossil fuel-free by 2050. Those goals, especially
the one for 2020, are well achievable: Denmark has
announced it scored 39.1 percent of its energy from
wind in 2014."
[COMMENTARY]
For all those naysayers that it's not possible to
have most of our energy from renewable sources,
Denmark's experience demolishes that argument! Now,
with solar and wind financially competitive with
fossil fuel energy in many markets, that argument is
even more spurious. The future for renewable energy
shines bright. However, as in any developing
industry, ethical investors know to be aware as
there'll be many more companies failing than
succeeding. But the ones that do succeed will likely
show exemplary profits.
Denmark Sets New Wind Power World Record, by
Leon Kaye, January 9, 2015, TriplePundit, USA.
Wealthy (UK) under-40s are more likely to make
social investments, Charities Aid Foundation says.
"CAF surveyed more than a thousand people with
average wealth of £7.5m and found that four-fifths
of those under 40 were socially conscious investors,
compared with 63 per cent of over-40s."
[COMMENTARY]
This is continuing good news for ethical investors.
It suggests that the younger generations of wealthy
will increasingly favour ethical investing. One
important difference between the younger and older
generation that might be at play here, is that the
younger generations’ greater concern for the
environment and climate change. After all, they are
the ones that are going to have deal with it.
Wealthy under-40s are more likely to make social
investments, Charities Aid Foundation says, by
Sam Burne James, January 9, 2015, Third Sector, UK.
Clean Energy Investment Jumps 16%, Shaking Off
Oil’s Drop. "New funds for wind, solar,
biofuels and other low-carbon energy technologies
gained 16 percent to $310 billion last year,
according to Bloomberg New Energy Finance. It was
the first growth since 2011, erasing the impact of
lower solar-panel prices and falling subsides in the
U.S. and Europe that hurt the industry in previous
years."
[COMMENTARY]
Much of the gain is attributable to a 32% rise of
renewables' spending in China and huge offshore wind
developments. Lower oil prices might have a
detrimental effect on transportation related growth
but it is unlikely to dampen the continuing growth
for renewables in electrical generation where they
are increasingly cost-competitive.
Clean Energy Investment Jumps 16%, Shaking Off Oil’s
Drop, by Louise Downing, January 9, 2015,
Bloomberg, UK.
75% of [South Western UK] savers keen to see
their cash invested more ethically. "More
than three quarters (78%) of savers and investors in
the South West [of UK] would like to see their money
invested in environmental and social sectors.
According to research from the ethical bank Triodos
Bank figures show that 14% of those planning to
invest over the next year are likely to choose the
social investment sector; an increase on last year’s
figure of 11%."
[COMMENTARY]
In the UK, the Triodos Bank is pioneering a new kind
of socially and environmentally sensitive banking
aimed at ethical investors. When reading this
article you should be aware that in the UK there's a
huge backlash against the enormous bonuses that many
bank bosses are paying themselves, especially as
many of these bank were rescued by UK taxpayers. A
spin-off from this is that people are increasingly
interested in ethical banking and investing.
75% of savers keen to see their cash invested more
ethically, by Olivier Vergnault, January 9,
2015, Western Morning News, UK.
Four in five Americans favor companies with
green behaviours. "Tiller Green Survey
conducted nationwide has revealed that 78 percent or
nearly four in five American consumers believe that
it is important to 'purchase products from a
socially or environmentally responsible company.' In
fact, 43 percent of the respondents said that they
have declined to buy a product over the last 12
months out of concern for the impact that the
product or its packaging might have on the
environment."
[COMMENTARY]
This is encouraging news for ethical investors. So
often people say one thing and do another. The
latter point about 43% of people declining to buy
something in the past year that they thought might
harm the environment is terrific.
Four in five Americans favor companies with green
behaviours, by Vikas Vij, January 2, 2015,
Justmeans, USA.
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