UK Ethical investing sector held back by
lack of awareness, says new survey.
"More than half of the UK population want their
wealth to have a positive impact on society but are
unsure where to turn to for help, highlighting a
knowledge deficit in the area of ethical investing.
The survey, conducted by positive savings
platform Ethex, shows lack of knowledge,
understanding and confidence in what is on offer is
holding many investors back from investing in
50 percent of those asked did not feel they
know enough about positive investment and savings,
although 45 percent were willing to learn more. In
addition, 39 percent did not know whether to expect
a stronger or weaker financial return from positive
investments when compared to traditional ones and 55
percent did not think they were wealthy enough to
make positive investments."
Most investors in the developed
world have for over two decades wanted to be
invested in ethical, socially responsible, and
sustainable companies. It's always been the vested
interests in the mainstream financial industry that
never got the message -- until quite recently.
It's peculiar how an industry priding itself in its
marketing and customer relations has been so
out-of-touch with its clients -- and for such a long
time. I've always asked, whatever happened to the
'know thy client' rule.
Ethical investing sector held back by lack of
awareness, says new survey, by Miranda Wadham,
May 25, 2017, The Investment Observer, UK.
Key ESG Trends. "From a
geographic perspective, the GSIA data showed that
European and Canadian assets were more diversified
across different implementation strategies: in
addition to negative screening, there were a higher
proportion of assets using norms-based screening,
corporate engagement, and integration approaches.
Within the United States, the primary forms of
implementation were integration, negative screening,
and corporate engagement."
This post has some fascinating charts on ESG
investing globally. However, one figure that stands
out -- and I believe questionable -- is the
proportion of sustainable assets vs total managed
assets in Europe at 58.896%. There is an explanatory
note but to me, it seems to obfuscate the issue.
Key ESG Trends, by Blake Pontius, May 23, 2017,
William Blair Blog, USA.
27% of asset managers doubt future of
ethical investing as costs rise, survey, BNP Paribas
Securities Services. "A further 28% of
asset managers admitted they were concerned they
didn’t have the ability to meet the demand for ESG
investments from clients currently, and worried they
wouldn’t in the future. The research report, titled
‘Great Expectations: ESG – What’s next for asset
owners and managers’, also found more than half
(55%) of those surveyed felt the lack of robust data
on ESG investments was the biggest barrier to its
adoption in strategies."
What should've been the headline is that 55% of
those surveyed felt the lack of robust ESG data as
the biggest barrier to fully implementing ESG
managers doubt future of ethical investing as costs
rise, by Louise Hill, May 24, 2017, Portfolio
New Report Reveals 86% of Americans
Expect Companies to Take Action on Social,
Environmental Issues. "Most
interestingly, the study considers consumer behavior
in light of today’s political climate and shows that
67 percent of Americans believe progress on social
and environmental issues will slow in the absence of
government regulation — and their confidence in
organizations to drive change is low. As a result,
43 percent of consumers believe individuals present
the greatest potential to solve social and
environmental issues, followed by nonprofits (18
percent), government (17 percent) and business (13
President Trump needs to tread carefully on social
and environmental regulations, or he risks a
considerable public and political backlash. This
survey by Cone Communications illustrates that the
majority of Americans want their government active
in social and environmental change.
New Report Reveals 86% of Americans Expect Companies
to Take Action on Social, Environmental Issues,
by Libby MacCarthy, May 18, 2017, Sustainable
UK Savers clueless about what their banks
do with their money. "Triodos: The
sustainable and ethical bank surveyed 2,003 people
who have some savings. The research reveals that the
transition to a low-carbon economy is the top
priority for savers wanting to make a positive
difference. Nearly half (47 per cent) said they
would like their money to be used to help develop
renewable energy, while four out of ten (41 per
cent) wanted to support energy efficiency.
Savers also identified social housing (41 per
cent), community/society groups (28 per cent), human
rights and labour rights (28 per cent), urban
regeneration (24 per cent) and sustainable business
(23) as areas they would like their money to be
invested in... "
Of course the savers were talking about their bank
deposits here and how they should be used. At the
ethical UK bank, Triodos, they actually publish the
details of who they make loans too.
UK Savers clueless about what their banks do with
their money, by Marina Gerner, May 12, 2017,
Money Observer, UK.
Advisor Interest In SRI Nearly Doubles
Since Last Year, Survey Says. "Forty
percent of advisors now report that socially
responsible investing is important to them and their
clients, compared to only 21 percent who said that
This is wonderful news. Soon SRI-ethical investing
will be quite normal for advisors and investors
alike. Perhaps a day might come when nearly all
investing is SRI-ethical-ESG compliant!
Advisor Interest In SRI Nearly Doubles Since Last
Year, Survey Says, by Karen Demasters, May 11,
2017, FA Magazine, USA.
Fostering Long-Termism in Investing.
"Khan, Serafeim, and Yoon (KSY)9: found that
portfolios made up of companies with high KLD10
sustainability scores weighted by SASB11 materiality
scores outperformed portfolios of companies with low
KLD sustainability scores weighted by SASB
materiality scores by average annual return gaps
ranging from 3.1%/yr. to 8.9%/yr. over 20+year
observation periods, depending on the degree of
portfolio concentration.12 They observed their
results were notably different from the mixed
results of previous ESG studies that did not include
the materiality dimension."
I've used the above quote as a leader to encourage
all my readers to read this extraordinarily
insightful piece that strongly argues for long-term,
participatory, sustainable, and focused investing!
Fostering Long-Termism in Investing, by Keith
Ambachtsheer, May 9, 2017, Benefits & Pensions
6 benefits to companies that issue green
bonds. "Last year, almost twice as many
green bonds as expected were issued, and in the
first quarter of 2017, issuance stood at $21.76
billion, up nearly 42 percent from the same period
last year. What's more, a new report by the
Organization for Economic Co-operation and
Development (OECD) estimated that the green bond
market could increase to $4.7 trillion to $5.6
trillion in outstanding bonds by 2035, with annual
issuances of $620 billion to $720 billion."
With investors appetite for green bonds rising
sharply and outstripping demand, green bond yields
often command relatively lower yields. As lower
yields frequently mean reduced interest costs to
companies it increases the attractiveness for
companies to issue them vis a vis regular bonds.
It's a win for companies and a win for ethical
6 benefits to companies that issue green bonds,
by Rochelle J. March, May 5, 2017, GreenBiz, USA.
10 reasons Wealth Managers are following
investor demand to ESG. "But investors
are even more attuned to ESG than advisors are,
which makes ESG savvy a competitive advantage in
today’s managed money world."
The reasons given for advisors to engage in ESG
issues with their clients are many had the key ones
are covered in this post. Furthermore, surveys and
studies back the reasons discussed.
10 reasons Wealth Managers are following investor
demand to ESG, by TruValue Labs. May 2, 2017,
Finally – A Meaningful Deciphering of
what “ESG Integration” Really Means.
"The problem, however, is that 'integrating ESG' has
become a meaningless mantra. Firms were using
'integrating ESG' to mean everything from mandatory
consideration of the most sophisticated analysis to
Sustainalytics, an independent ESG research
firm, [has] developed a typology of how
organizations use ESG. Do they use centralized staff
or distribute ESG analysis responsibilities to the
portfolio teams? Is ESG considered on a
portfolio-company-by-portfolio-company basis, or
more thematically, for instance looking at potential
investments in the water sector? Is ESG research
mandated to be considered, or just made available to
the investment teams? Do the organizations modify
external research or use it as is?"
The Investor Responsibility Research Center
Institute (IRRC) commissioned Sustainalytics for
this research and Sustainalytics has now shone a
light on how ESG criteria are used by asset owners
and managers. The results are fascinating and
important for all responsible-ethical investors to
Finally – A Meaningful Deciphering of what “ESG
Integration” Really Means, by Jon Lukomnik, May
1, 2017, HUFFPOST.
The 2017 100 Best Corporate Citizens.
"Compiling the 18th annual list of the 100 Best
Corporate Citizens began with our research team
documenting 260 data points of disclosure and
performance measurements for the entire Russell
1000. The data was gleaned from publicly available
information and each company was ranked in seven
This is a great list compiled by people who really
know the subject. Hasbro, Inc,; Intel Corp; and
Microsoft Corporation are the top three. See the
The 2017 100 Best Corporate Citizens, April 21,
2017, CR Magazine, USA.
The Ethics & Trust in Finance Prize --
Formerly Ethics in Finance, Robin Cosgrove Prize.
"[The prize] promotes greater awareness among
young people throughout the world concerning the
benefits of ethics in finance, and encourages
high-quality management of banking, insurance and
financial services based on trust and integrity.
Launched in 2006 and now in its 6th Edition,
the global competition for the Prize for Innovative
Ideas for Ethics & Trust in Finance is open to young
people, aged 35 years or younger, from throughout
the world. The competition invites creative papers,
which may be submitted in English or French, setting
out analyses or proposals for innovative ways to
promote ethics & trust in finance. The Jury
allocates the prize money of USD 20,000 among the
I've been promoting this prize almost since it's
inception. It's a very worthy endeavour and I
encourage those under 35 with an interest in this
subject to submit their ideas! The fact that
Christine Lagarde, IMF's Managing Director has been
involved, demonstrates the importance of what the
prize is attempting to do. For entering the
competition or information on the prize, go to
Trust in Finance Prize.
Hermes finds 'clear relationship' between
ESG and credit spreads. "Companies with
the weakest ESG credentials, as captured in low QESG
scores, tended to trade with the widest CDS [credit
default spreads] spreads, Hermes found – indicating
a higher risk of default."
It makes sense that companies with bad ESG
characteristics are poor credit risks. And
that's why their financing costs are higher too. As
companies understand that good ESG performance means
lower financing and human resources' costs with
potentially higher prices for their shares,
they'll increasingly strive to improve their ESG
Hermes finds 'clear relationship' between ESG and
credit spreads, by Susanna Rust, April 19, 2017,
Investment & Pensions Europe, UK.
US companies rank miserably low on the
UN’s new corporate responsibility rankings.
"The SDG Commitment Report 100... is the
first-ever analysis to use annual reports as the
sole metric to assess corporate commitments to the
UN’s 17 sustainable development goals. Analysts
argue that the corporate annual report, a
legally-required document, is a higher—and
better—standard to judge a company’s commitment to
sustainability than any voluntary corporate
... Apple is joined at the bottom of the
gilded heap by more than a dozen companies who also
ignored sustainable development in their annual
reports, including Disney, Walmart, and General
This report is deeply embarrassing for those
multi-national corporations priding themselves in
their good social and environmental activities.
Obviously, the UN wants to shame these corporations
to significantly engage in their Sustainable
US companies rank miserably low on the UN’s new
corporate responsibility rankings, by Dan
Morrison, April 19, 2017, OrbMedia, USA.
ESG increasingly important in global
shift towards sustainable economy. "In
a bid to better understand the mindset of investors
globally, EY recently
surveyed, for its 'Is your nonfinancial performance
revealing the true value of your business to
investors?' report, part of the global investment
community, which included 320 participants, of which
one-third have more than $10 billion under
This EY survey is revealing in showing how far
the investment community has come concerning the
importance of climate change and sustainability in
assessing potential investments. For instance, the
concept of stranded assets -- unknown just a few
years ago -- has become a major concern to
ESG increasingly important in global shift towards
sustainable economy, April 13, 2017,
Green Bonds Awards, Environmental
Finance. They cover banks,
underwriters, companies, etc.
An interesting list, particularly for those in the
investment industry. Provides good insight into the
growing importance of the green bond market.
Green Bonds Awards, Environmental Finance, press
release, April 13, 2017, Environmental Finance, USA.
Arabesque Combines Big Data and AI to
Launch Unique Corporate Transparency Tool.
"A new tool that allows investors, regulators,
NGOs, corporates, and consumers to monitor the
sustainability of over 4,000 of the world’s largest
corporations has been launched today. Arabesque
S-Ray™ is designed to streamline vast amounts of
environmental, social, and governance (ESG)
information into one easy-to-use, smart application.
Its unbiased diagnostic technology processes
countless data points to evaluate companies in three
Arabesque S-Ray™ is the first tool of its
kind to score corporate performance on the normative
principles of the United Nations Global Compact:
Human Rights, Labor Rights, the Environment, and
Another great analytical tool for ethical investors.
However, the free version is pretty basic.
Arabesque Combines Big Data and AI to Launch Unique
Corporate Transparency Tool, press release,
April 11, 2017,
Academic Research Based on RepRisk Data
Shows That Negative ESG News Increases Credit Risk.
"A new academic study shows that negative news
linking a company to environmental, social, or
governance (ESG) issues increases credit risk. The
study used data from RepRisk, a leading provider of
ESG risk analytics and metrics. Researchers at ETH
Zurich, MIT Sloan, and the University of Hamburg
performed the research which was published by the
prestigious peer-reviewed journal 'Strategic
These findings aren't surprising. After all, if a
company has ESG issues creditors less likely to
continue lending to that company as if there are no
problems. Anyway, it's good to see these findings as
it further incentivizes companies to perform better
on ESG issues. And that benefits companies and
Academic Research Based on RepRisk Data Shows That
Negative ESG News Increases Credit Risk, press
release, April 5, 2017, RepRisk, Switzerland.
2017 Future 40 Responsible Corporate
Leaders in Canada ranking. "Shifting
the spotlight to medium-sized corporate
sustainability leaders across Canada."
An interesting and useful list, particularly for Canadian
ethical investors. It includes many
Future 40 Responsible Corporate Leaders in Canada
ranking, April 6, 2017, Corporate Knights,
This Man Will Purify Your Portfolio.
"Portfolios were far from [Michael] Jantzi's
ambitions when he landed degrees from Canadian
universities in economics and international affairs.
He was going to help humanity via a career in the
foreign service. But those jobs were scarce. He was
partway through the process of getting licensed in
securities sales when he had a revelation. If he
must sell out to Wall Street, why not feed its less
avaricious appetites? He would do research on
This is a terrific overview of the career to-date of
Michael Jantzi, one of the world's true pioneers in
ethical investing and presently CEO of
Sustainalytics, a global leader in ESG ratings.
Under Mr. Jantzi's direction,
Sustainalytics has recently made a great
breakthrough in bringing their individual ESG
company ratings directly to the investor through
Scotia iTRADE, the large Canadian discount broker.
It's likely only a matter of time before many more
brokers offer this service and the retail public
finally has direct inexpensive access to quality
individual company ESG ratings and research.
This Man Will Purify Your Portfolio, by William
Baldwin, April 3, 2017, Forbes, USA.
Sustainable strategies on growth track in
U.S. "Assets under management in U.S.
mutual funds and exchange-traded funds using an
environmental, social and governance-only approach
reached $200 billion at the end of February, up 5.8%
from Dec. 31 and up 17% from year-end 2015,
Morningstar Inc. data show. The data do not include
institutional separate accounts or ESG assets
managed internally by U.S. pension plans."
Good overview by Mr. Diamond of US funds utilizing
ESG criteria. Also, it's great to see Morningstar
collecting and publishing fund/ESG data since they
have a such a terrific database to mine for it.
Their benchmarking will be particularly useful.
Sustainable strategies on growth track in U.S,
by Randy Diamond, April 3, 20-17,
Pensions&Investments, USA. (Subscription
President Trump & Congress get a letter:
One thousand companies and investors have signed the
Business Backs Low-Carbon USA statement.
"We want the US economy to be energy efficient
and powered by low-carbon energy. Cost-effective and
innovative solutions can help us achieve these
objectives. Failure to build a low-carbon economy
puts American prosperity at risk. But the right
action now will create jobs and boost US
competitiveness. We pledge to do our part, in our
own operations and beyond, to realize the Paris
Agreement’s commitment of a global economy that
limits global temperature rise to well below 2
Clearly, a good number of American companies support
a low-carbon economy. Despite President Trump's
present anti-climate rhetoric, a broad-based
business case for low-carbon initiatives might
eventually reduce the President's antipathy towards
Business Backs Low-Carbon USA, press release,
More Catholic capital flows toward impact
investing. "Pope Francis may be only
the world’s third-greatest leader (behind Theo
Epstein and Jack Ma, according to Fortune), but his
2014 endorsement of impact investing was still a big
deal. Last year, the Vatican doubled down at a
second conference to explore how the church and
faith-based institutions can 'harness the power of
impact capital to attain and sustain their social
Religious leaders of almost all faiths are
increasingly promoting the importance of private
capital in assisting in their faith's social,
economic, and environmental goals. This account of
Catholics' increasing impact investing investments
demonstrates what is happening today.
More Catholic capital flows toward impact investing,
by Marina Leytes, Impactalpha, USA.
Clearing the Deck For ESG Integration.
"Advisors are rapidly running out of excuses to
avoid, environmental, social and governance
investing (ESG)... A recent survey by State Street,
voluminously titled The
Investing Enlightenment: How Principle and
Pragmatism Can Create Sustainable Value through ESG,
casts light on the increasing client demand of ESG
investments and financial viability of integrating
ESG factors into active investment strategies.
It questioned almost 600 institutional
investors and 750 individual investors about
incorporating ESG factors into investing and
business decisions. In doing so, it also identified
a single major sticking point preventing widespread
acceptance of ESG analytics — 'a lack of
transparent, standardized and quality data.'"
This article is a great, brief read on the results
of an important and extensive study by Robert Eccles
(Chairman, Arabesque Partners) and Mirtha Kastrapeli
(Head of Sustainable Investment Research, State
Street). There are some surprising statistics in
their study for the responsible-ethical investment
industry to digest!
Clearing the Deck For ESG Integration, by David
H. Lenok, March 27, 2017, Wealth Management, USA.
Global RI assets surpass US$22.89
trillion, a 25% increase from 2014.
"The largest responsible investment strategy
globally is negative/exclusionary screening
(US$15.02 trillion), followed by ESG integration
(US$10.37 trillion) and corporate
engagement/shareholder action (US$8.37 trillion).
Negative screening is the largest strategy in
Europe, while ESG integration leads in the United
States, Canada, Australia/New Zealand and Asia ex
Japan’s primary RI strategy is corporate
engagement and shareholder action. The fastest
growing strategy, although also the smallest in
absolute dollar terms, was impact/community
The continuing rapid growth of RI assets is great
news. It's interesting to see that globally
negative/exclusionary screening comprises 65.62% of
these assets! I suspect that ESG integration and
engagement/shareholder actions will rise as a
proportion of RI assets in the years ahead.
RI assets surpass US$22.89 trillion, a 25% increase
from 2014, press release, March 27, 2017, The
Global Sustainable Investment Alliance.
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."
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
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."
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."
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,
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."
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."
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
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."
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
‘Climate is King’ Says BlackRock; Companies Must Now
Address Risk, by Jan Lee, March 16, 2017,
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
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.’"
I like Ethisphere's work. Their list is always worth
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."
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."
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).
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."
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,
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."
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
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
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."
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."
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."
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
The race is on for socially responsible investing in
Japan, by Seiji Kawazoe, February 20, 2017, FT
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
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
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
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)."
Such developments are welcome news. Developments
like this make sustainable investing -- in this
particularly for institutions -- a
little bit easier.
Global financiers launch green investment criteria,
by Jonny Bairstow, February 16, 2017, Energy Live
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."
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."
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."
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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