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Ethical Investing News/Commentaries:
May 2010 |
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Commentaries by Ron
Robins
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70% Of Executives Say Climate
Change Initiative Spending In Their Companies To Increase in 2010-2012.
-
[COMMENTARY]
"Executives are acting on climate change
initiatives because their customers expect it and
because they believe they can make money, save money
and manage risk. They understand that transforming
their key processes makes good business sense."
This the new perspective on companies reaction to
climate change. The bottom line is that it makes
money for them to engage in climate change
initiatives. It is win win for everyone.
Action amid uncertainty,the business response to
climate change, May 2010, Ernst & Young.
Ethical Funds In UK Defined
Contribution Plans Struggle. -
[COMMENTARY]
"When even charities are ignoring their ethical
principles when it comes to DC investment, what
chance has SRI with the broader workforce, asks Paul
Farrow." In most developed countries
SRI/ethical funds are only about 2 to 3%
of total mutual funds assts--though in recent years
their asset growth has outpaced that of conventional
funds in general. But total assets are still
relatively tiny.
However, if you include all equity portfolios
including that of private investors, it might jump
to over 11% as the Social Investment Forum says in
their most recent reports. Clearly, as the financial
crises rolls on, ethics are likely to play an ever
larger role and we should see the uptake of
SRI/ethical funds continue to increase relative to
conventional funds.
The value of virtue, by Paul Farrow, June 1,
2010, Fund Advisor, UK
How Addressing Climate Change Can
Improve The Bottom Line. -
[COMMENTARY]
"WWF’s Climate Savers program, though, is a great
example of what can be achieved when businesses and
non-profit organizations decide to work together to
achieve common goals."--Andrew Crane, George R.
Gardiner Professor of Business Ethics, Schulich
School of Business, York University, Ontario,
Canada. Though this report is focused on Canada, all
businesses can profit from applying the lessons
learned and revealed in this new publication.
Rethink Business: How Addressing Climate Change Can
Improve The Bottom Line, by WWF Climate Savers
Program, Canada.
Shale Gas Promise--And Risks.
-
[COMMENTARY]
"Shale gas extraction presents significant risks,
however, and concern is growing that the methods
that make it viable are polluting drinking water
sources with toxics. As companies prepare to
intensify shale gas extraction in Canada and the
U.S., investors need to look into the risks that the
extraction process presents, and the steps they can
take to mitigate those risks." This is a
detailed report for investors interested in shale
gas.
Hydraulic fracturing and water pollution: Investor
risks from North America’s shale gas boom, by
Paula Barrios, May 2010, SHARE, Canada.
Green Bond Sales Increasing.
-
[COMMENTARY]
"Skandinaviska Enskilda Banken is on the hunt for
partners to help increase distribution of the World
Bank’s 'green' bonds. The first World Bank green
bond was issued more than two years ago, but demand
has picked up rapidly this spring. Since February,
the total sum invested has risen by 60 per cent from
$1bn to $1.6bn (£1.1bn, €1.3bn)." Given the
increasing interest in climate change and the rush
to 'safe' bonds, it is not surprising to see green
bond sales increasing. With broader distribution,
such bond sales could become much bigger.
Swedish bank seeks partners to market green bonds,
by Caroline Liinanki, May 23, 2010, Financial
Times, UK.
Unitarian Universalist
Association Drops Fidelity Due To Sudan Holdings.
-
[COMMENTARY]
"The Unitarian Universalist Association said it
will replace Fidelity Investments as recordkeeper on
its retirement plan, citing "disappointment" with
the Boston mutual fund company's record on human
rights, including its holdings in companies that do
business in Sudan. Discussions are still happening,
but the group likely will offer funds from Wells
Fargo & Co and some lifecycle funds from T Rowe
Price Group Inc, said Tim Brennan, the Unitarians'
chief financial officer." Religious and mission
based groups should take a stand with regard to
their principles. Such actions can have significant
effects on the investment industry and corporate
activities.
Unitarian group drops Fidelity over Sudan, by
Ross Kerber, May 21, 2010, Reuters, USA.
Risk Management Main Reason For
German Institutional Investors When Choosing
Sustainable Investments. -
[COMMENTARY]
"The need to optimise risk management, rather
than to boost investment returns, is the main reason
German institutional investors consider sustainable
investments, according to a study by Union
Investments. Almost three quarters (74%) of
institutional investors surveyed cited this as the
main driver, a year-on-year increase of 4 percentage
points. It was particularly important for insurers,
of whom 92% stated this as the main factor, compared
to 87% of foundations, 84% of banks, 73% of pension
funds and 30% of large companies." Everywhere in
portfolio management the concept of sustainability
is coming into play. This in turn encourages public
companies to more comprehensively embrace
sustainability practices. It is win win for
everyone.
Risk, not returns, drives German sustainable
investments, by Nina Röhrbein, May 21, 2010,
Investment & Pensions Europe, Germany.
(Subscription, which is free, required to access
article.)
Call For Papers: The 2010
Moskowitz Prize for Socially Responsible Investing.
-
[COMMENTARY]
"The Center for Responsible Business at UC
Berkeley's Haas School of Business has announced a
call for papers for the 2010 Moskowitz Prize for
Socially Responsible Investing. To be considered for
the $5,000 prize, studies must be submitted by June
30, 2010." This is the pre-eminent SRI prize
today. Anyone publishing anything related to SRI
should submit their paper to the Haas School of
Business.
Call for papers for the 2010 Moskowitz Prize for
Socially Responsible Investing. May 20, 2010,
Haas School of Business, University of California
Berkeley, USA.
French SRI Assets Jump 70% In One
Year. -
[COMMENTARY]
"SRI assets in France rose by 70% during 2009 to
pass the €50bn mark, a rise of €20.8bn from the end
of 2008 to the end of 2009, despite the fallout of
the market crisis, according to the latest market
survey by Novethic, the French sustainable
investment research group." In SRI sales, France
had been a laggard compared to other developed
countries. Apparently big banks and labour are
getting behind them now.
French SRI assets jump by 70% in one year, by
Hugh Wheelan, May 19, 2010, Responsible Investor,
UK.
Canadian Forestry Firms Agree To
Curb Boreal Forest Logging. -
[COMMENTARY]
"Forestry companies announced Tuesday a pact with
environmentalists to stop logging huge swathes of
Canada's boreal forest and protect caribou herds in
exchange for suspending protests."
The
companies were clearly concerned of a consumer
backlash against boreal forest logging. But it is a
win for everybody anyhow.
Canadian forestry firms agree to curb boreal forest
logging, May 18, 2010, Grist, USA.
UK Charity Workers Back Ethical
Investing. -
[COMMENTARY]
"Research from multi-employer occupational
pension fund The Pensions Trust, in association with
Queen Mary, University of London, 72 per cent of
charity workers think investing ethically is
critically important." With this kind of result
it is amazing that many of the charities these
people work for do not have ethically screened
portfolios. It seems that day will not be too far
off.
Charity workers back ethical pensions, by
Simoney Girard, May 20, 2010, FT Advisor, UK.
European Financial Analysts Call
For More Formalized ESG Reporting. -
[COMMENTARY]
"European financial analysts’ group EFFAS and its
German counterpart DVFA have called for companies to
'formally orient' their environmental, social and
governance (ESG) reporting towards International
Financial Reporting Standards." This is a very
strong call for full corporate ESG/CSR reporting.
I feel sure we will eventually have government
mandated ESG/CSR reporting for companies.
European analysts call for ESG reporting link to
IFRS, by Daniel Brooksbank, May 14, 2010,
Responsible Investor, UK.
Ceres Says Canadian Oil Sands
Have Significant Financial & Environmental Risks.
-
[COMMENTARY]
"While public attention is focused on widespread
environmental and financial damage from the Gulf of
Mexico oil spill, a new Ceres report released today
shows that the environmental and financial risks of
producing oil in Canada's vast oil sands region may
be even greater." This is an important study of
oil sands risks. The risks cited in this report add
fuel to much higher oil in future years, which in
turn will help focus our attention on alternative
fuel and energy.
Canada's Oil Sands Face Significant Financial and
Environmental Risks as Great as Those in BP Spill,
May 17, 2010, Ceres/RiskMetrics, USA.
A New First: Mining Company
Sponsors & Supports An Independent Human Rights
Assessment Of Major Mine. -
[COMMENTARY]
"Ethical Funds is announcing its support for the
findings and recommendations of the Human Rights
Assessment of Goldcorp's Marlin Mine in Guatemala.
The Marlin Mine... is operated by Montana
Exploradora de Guatemala S.A., a wholly-owned
subsidiary of Goldcorp Inc., based in Vancouver,
Canada... Bob Walker, Vice President, Sustainability
for Ethical Funds [said], 'We believe this report
sets the bar. Not only does Goldcorp deserve full
credit for taking this on but also for agreeing to
release the full content of the report - the first
time this has ever been done.'"
Well done Goldcorp. Wherever human rights and/or the
environment are of a concern, such assessments need
to be done. Finally, one of the world's largest gold
mining companies is taking a very responsible stand.
It sets a great precedent for all other natural
resource companies.
Ethical Funds Announces Support for Human Rights
Assessment of Goldcorp's Marlin Mine, press
release, May 17, 2010, Canada News Wire, Canada.
Invest In Retail? Interested In
Their Green Activities? Read This Report. -
[COMMENTARY]
"A new report from Five Winds International --
the third in a series published by GreenBiz.com --
examines the activities of 25 of the world's largest
and most high-profile retailers to determine if they
are taking significant steps to increase the number
of greener products on their shelves."
How the World's Largest Retailers are Stocking
Shelves with Green Goods, May 17, 2010,
GreenBiz, USA.
New Trend: Large Pension Funds
Engaging Companies Directly On ESG Issues. -
[COMMENTARY]
"Stichting Shell Pensioenfonds, the €15bn scheme
for the oil giant’s Dutch employees, engaged with
117 companies on corporate governance and
responsible investment issues in the first three
months of this year."
It is
a hopeful sign that large pension funds are
themselves asking companies directly about ESG
issues. Not only will pension funds likely find
better investments through such a process, but they
will greatly encourage companies to take ESG/CSR
issues very seriously.
Shell’s Dutch pension fund engages with 117
companies, by Daniel Brooksbank, May 13, 2010,
Responsible Investor, UK.
Unethical Conduct By Eight Big US
Banks? Did They Dupe Rating Agencies? -
[COMMENTARY]
"The New York attorney general has started an
investigation of eight banks to determine whether
they provided misleading information to rating
agencies in order to inflate the grades of certain
mortgage securities, according to two people with
knowledge of the investigation... [The banks] are
Goldman Sachs, Morgan Stanley, UBS, Citigroup,
Credit Suisse, Deutsche Bank, Crédit Agricole and
Merrill Lynch, which is now owned by Bank of
America."
I believe the investigation of
unethical conduct in the US financial system is
pathetic. Despite the odd probe into illegality, the
US administration and regulatory authorities are
still trying to protect the financial system from
serious harm. The 'tradition' in these
investigations is that even if a party is deemed
guilty, the guilty party gets-off with a
relatively small fine--in relation to their
revenues--and a statement of 'no admission of
guilt,' so further civil lawsuits against them are
limited. It is really no justice at all.
Prosecutors Ask if 8 Banks Duped Rating Agencies,
by Louise Story, May 12, 2010, The New York
Times, USA.
Defined Contribution, Faith-Based
Investment Funds Being Offered To Employees Of US
Non-Profits. -
[COMMENTARY]
"Defined contribution retirement plans are
becoming increasingly popular with nonprofit
organizations such as churches and charities, and
represent a rapidly growing segment of the
retirement savings market for The Hartford Financial
Services Group, Inc. Now, The Hartford... is
introducing investment options from three
faith-based investment fund families."
I do not know if this is the first
time such an option has been offered, but I hope it
represents a trend. Employees at churches and other
mission based-based groups should have the option in
their DC plans to invest according to their personal
values.
The Hartford Adds Faith-based Investment Options to
Spur More Growth in Sales of Retirement Plans to
Charities, Religious Organizations, press
release, May 12, 2010, Business Wire, USA.
New Study Claims Integrating ESG
Into Investment Selection Criteria Improves
Portfolio Diversification & Reduces Risk. -
[COMMENTARY]
"We develop a simple theoretical model based on
the three main drivers of portfolio diversification
((1) number of stocks, (2) correlation of stocks,
(3) average specific risk of stocks) and recent
robust evidence on the significantly negative
relationship between a firm’s ESG rating and its
specific risk.
... Our theory argues that while the inclusion of
ESG criteria into investment processes likely
worsens portfolio diversification via the first and
second driver, it similarly likely improves
portfolio diversification through a reduction of the
average stock’s specific risk. This positive effect
of ESG criteria probably leads best-in-class ESG
screened funds to be better diversified than
otherwise identical conventional funds."
This type of study will do much to
get mainstream investment firms to integrate ESG
into their securities analysis.
Portfolio Diversification and Environmental, Social
or Governance Criteria: Must Responsible Investments
Really Be Poorly Diversified? By Andreas G. F.
Hoepner, University of St. Andrews - School of
Management, Principles for Responsible Investment,
United Nations.
CSR Gains Ground in Middle East.
-
[COMMENTARY]
"The winners of Emirates, Abu Dhabi and Arab
world for corporate social responsibility awards
were honoured. The Arab Corporate Social
Responsibility Award was issued to Emirates World
Mobile Humanitarian Hospital, Shell Company and
World Topcon Company, while Emirates Corporate
Social Responsibility Award was issued to the
Ministry of Interior, Du Company and Emirates
Transport Corporation. Abu Dhabi Corporate Social
Responsibility Award was issued to Abu Dhabi Media
Company and Economic Development Department."
Corporate social responsibility
(CSR) appears to be gaining acceptance in the Middle
East. I believe the primary values behind CSR are
almost universal so it is not surprising to see it
making gains in non-western cultures.
Hamdan bin Zayed honours philanthropists, launches
world charity campaign to treat needy children,
May 9, 2010, WAM Emirates News Agency, UAE. Also,
Participate in the Middle East’s Biggest Corporate
Responsibility Survey.
Mainstream Investors Vote
Compensation Restrictions For Goldman Sachs
Employees. -
[COMMENTARY]
"The resolution received the support of 25% of
shareholders at today's May 7th annual shareholder
meeting, even though management urged a 'no' vote.
RiskMetrics Group supported the HII resolution...
'Given that over 11% of Goldman's stock is owned by
insiders, 72% is owned by institutional investors
and most individual investors don't vote their stock
by proxy, the large number of votes for the proposal
indicates a vote of no confidence by 'main street'
shareholders incensed by compensation practices at
the firm,' said John Harrington, CEO of Harrington
Investments."
I wonder how many institutional
fund managers did not support the proposal because
they are afraid of their own salaries being cut! It
is an old 'boy's club' in the financial fraternity.
The policy of 'too big to fail' must, must,
change--or nothing will change.
Socially Responsible Investment Firm Wins Big Vote,
May 7, 2010, NewsBlaze, USA.
Twelve Members of The Interfaith
Center On Corporate Responsibility Will File Five
Proxy Resolutions At Goldman Sachs May 7 AGM.
-
[COMMENTARY]
"When the management of Goldman Sachs meets
Friday (May 7th) with its shareholders, it will face
five major proxy resolutions filed by a delegation
of over 12 members of the Interfaith Center for
Corporate Responsibility (ICCR). The broad range of
concerns reflected in these resolutions from
religious and other socially responsible
institutional shareholders will send a stark message
to Wall Street regarding abuses that are very far
removed from 'Main Street values.'"
Ethical investing is receiving a
big lift from the antics of Goldman Sachs and Wall
Street. It concurs with my belief that over time,
those who hold ethics high and apply their values to
their investments, may well enjoy superior returns
as markets invariably recognize the value of ethics
in the marketplace.
C O R R E C T I O N -- Interfaith Center on
Corporate Responsibility, NYC, May 5, 2010,
press release, The Interfaith Center On Corporate
Responsibility, USA.
UAE Among States Instituting
Corporate Governance Codes That Require Chairman Not
Have Managerial Role. -
[COMMENTARY]
"The United Arab Emirates’ new corporate
governance code has come into force, stipulating
that chairmen of listed firms are not allowed to
have managerial roles. Another requirement is that a
third of listed firms’ administrative boards should
be independent. The new code has been brought in by
the Emirates Securities and Commodities Authority
(Esca). Shareholders will also be able to veto board
bonuses."
Separating the chair's role from
active management and stipulating some independence
of and for board members are issues that are front
and centre in ethical corporate management practices
today. The Unite Arab Emirates needs to be
congratulated for taking such a stand.
The United Arab Emirates’ new corporate governance
code, weekly round-up, May 6, Responsible
Investor, UK.
Green Investments Could Benefit
From Gulf Oil Spill. -
[COMMENTARY]
"While the oil rig disaster in the Gulf of Mexico
is pounding BP PLC's (BP, BP.LN) stock and
reputation and hammering local industries and real
estate values, the long-term impact could be more
choice for individuals who want green investments.
Demand for these funds and stocks have soared in
recent years, especially from foundations, pensions
and socially-minded investors."
Nuclear reactor building came to a
halt in the US after the Three Mile Island nuclear
accident in the 1970s. We may well see the same for
deep water drilling for oil after BP's Gulf
accident. It can only mean enhanced prospects for
green energy.
WEALTH ADVISER: BP Crisis Could Help Green
Investments, May 5, 2010, The Wall Street
Journal, USA.
Canadian Study Says Green
Investments Good For Climate But Yield Less.
-
[COMMENTARY]
"A new study says Canadian governments can expect
an economic return on seed money spent on green
technology, just not as much as would be expected
from more traditional investments. The study by the
Conference Board suggests investments under
government programs will total $11.8 billion in the
next four years."
An age old problem is revealed in
this study. How do you value environmental benefits
from an investment? I suspect if some determination
of lower environmental impact compared to
'traditional' investments were included in the
Canadian study, their conclusion of lower yield for
green investments might be altered.
Green investments good for climate, but get less
bang for buck economically, May 5, 2010, The
Canadian Free Press, Canada.
Pension Funds Join Growing List
Of Suits Against Goldman Sachs.
-
[COMMENTARY]
"MPERS said the hair-trigger response of top
Goldman Sachs officers in responding to the SEC
complaint was particularly troubling: 'The SEC
charges were scarcely an hour old, when they caused
company to issue a press release baldly stating,
'The SEC’s charges are completely unfounded in law
and fact and we will vigorously contest them and
defend the firm and its reputation.' These officers
issued this release without conducting an
investigation, without appointing a special
committee, and without taking any steps to form a
good-faith analysis of the claims.'"
What Goldman has been doing is
probably not much different from the industry as a
whole. Double standards and conflicts of interest
are the norm for much of the industry. I like what
the UK is planning to do. They plan on making
investment/financial advisors fee-based, barring
them from receiving trading commissions and trailer
fees. That will be a good start.
But much more will need to be done
before this greed obsessed, anything goes, casino
industry, is brought to some semblance of
rationality. Unfortunately, barring another
financial panic and due to the industry's power over
lawmakers in Washington, not much is really likely
to change for sometime.
Pension funds file Goldman suits, by Shanny
Basar, May 4, 2010, Financial News, UK.
NASDAQ Promoting CSR Reporting
Initiative. -
[COMMENTARY]
"The Global Reporting Initiative (GRI) will ring
the closing bell at NASDAQ, as part of headline
participation in sustainable investment roundtable,
New York, May 14. The Global Reporting Initiative
(GRI) – pioneering developer of the world’s most
widely used sustainability reporting framework –
will be the featured guest at a prestigious event at
New York’s NASDAQ OMX Exchange on 14 May 2010,
titled: ‘Sustainable Investing: What’s at Stake for
Investors & Public Companies?’"
This is the kind of support
required to get mandated corporate social
responsibility/sustainability reporting in front of
investors. I am confident such mandated reporting
will become reality in the years ahead as the desire
for higher ethics, greater corporate transparency
and environmental concerns merge.
GRI to Headline NASDAQ Sustainable Reporting Event,
press release, May 3, 2010, Global Reporting
Initiative, Netherlands.
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