Ethical Investing News/Commentaries:
Commentaries by Ron
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UK Markets Value Corporate Social
"In this paper, using corporate social
responsibility (CSR) measures constructed from EIRIS
data and mapped onto Environment, Employee and
Community dimensions, as well as a Composite
indicator, we show that all two out of the three
dimensions of CSR, together with the Composite
measure, are positively valued by markets...
Overall, our results are consistent with CSR
engagement enhancing shareholder value."
This study is further confirmation that companies
that score highly on CSR engagement (and incorporating
it), perform better financially and
in financial markets.
Do Markets Value Corporate Social Responsibility in
the United Kingdom? By Graham Buckingham, Alan
Gregory, and Julie M. Whittaker, December 2011,
University of Exeter, UK.
Socio-Psychological Motives Of Socially
Responsible Investors--A New Harvard Study.
"In the aftermath of the 2008/09 World Financial
Crisis, SRI is an idea whose time has come. Socially
conscientious asset allocation styles add to
expected yield and volatility... The pursuit of
crisis-robust and sustainable financial markets
through strengthened Financial Social Responsibility
targets at creating lasting societal value for this
generation and the following." It is great to
see researchers getting around to this type of study.
Socio-Psychological Motives of Socially Responsible
Investors, by Julia M. Puaschunder, December 30,
2011, Harvard University, USA.
Harrington Investments Files Resolutions With
Citigroup, Bank of America, and JP Morgan Chase, To
Stop Indemnifying Directors Against Civil &
"’The next time one of these banks commits a crime,
their directors would not automatically have their
defense paid for with shareholder funds... It is the
fiduciary responsibility of corporate directors to
ensure that publicly traded corporations have
adequate oversight and legal compliance measures in
place. Failure to do so is negligence and should be
considered criminal neglect,’ said John Harrington,
President/CEO of Harrington Investments."
Harrington is right. If directors were not so
wholly indemnified, those that take on such
directorships would no doubt ensure that unbridled
speculation which can take them and their firms
down, would end. It is the freedom from adverse
repercussions on their speculative activities and
wrongdoings that has given directors, managements,
traders, etc., the motivation to take imprudent
Unfortunately, I fear that until the next
financial crisis comes along--which may well be far
worse than that of 2008--not much will change.
Portfolio Manager′s Message to Citigroup, Bank of
America, & JP Morgan: "Stop Protecting Director
Misconduct." December 28, 2011, Harington
Investments, Inc., USA.
Most UK Investors Interested In Discussing
Ethical Investments With Advisors.
"Research from Ecclesiastical Investment Management
has found investors would consider ethical
investments with the right education and advice.
Over six in 10 of the non-ethical investors said
they would be more likely to consider ethical
investments if their IFA discussed it with them. The
research also showed 24 per cent of investors would
buy ethical products for health reasons and 29 per
cent would buy for the ‘feel good′ factor."
It is the same story in every country: most
investment advisors unwilling to discuss ethical
investments with their clients. These advisors fail
their most important rule, ’know thy client!’
Interest in ethical investment on the rise, by
Sarah Marquer, December 22, 2011, FT Advisor, UK.
IT Industry Generally Poor On Sustainability &
Social Policies, Says Oekom Research AG.
"With the exception of Ricoh, Intel and Motorola
Mobility, the IT industry earns dismal grades when
it comes to sustainability and social practices,
averaging about a D+, Oekom Research AG says in a
new report." These are some findings
green-ethical investors might want to pay attention
IT Industry Gets a D+ for Green Policy, Labor
Practices, by Leslie Guevarra, December 19,
2011, GreenBiz, USA.
Church Of England Bans Investing In Payday
"Now the Church of England, which has investments
worth over £8bn, has decided to extend its ban on
investing in doorstep lending to cover the booming
online payday loan industry. A Church spokesman
said: ’The policy draws on Christian theology on the
need for the greatest care to ensure that lending to
poorer members of society is not exploitative.’"
Unfortunately, the growth of these lenders is a sign
of the times. Many ethical investors might want to
review their mutual fund portfolios and see if such
lenders appear in those portfolios.
Church of England ban on payday investments, by
Nick Summerland, December 19, 2011, Mirror.co.uk,
Over 75% Of CFAs See No Prospect Of Improved
Market Ethics In 2012.
"The CFAs also trained their negativity on the
securities industry itself. More than three-quarters
of respondents said there was no prospect of
improved integrity in the markets in 2012 despite
efforts to tighten regulation and ward off abuses
such as those that contributed to the financial
crisis in 2007-08. And the worry that financial
advisers are mis-selling products has become the
most-cited ethical concern, unseating opaque
derivatives markets as the top ethical issue facing
These are troubling findings of the CFAs survey.
As you know, markets need confidence to move higher.
Until the ethical conduct of market participants
improves, markets are unlikely to attract much new
Financial Analysts Dim on 2012, Survey Shows, by
Brendan Conway, December 15, 2011, Wall Street
76% Of UK Investors Say Financial Advisors
Never Mention Ethical Investments.
"The research findings indicate that there is
disparity between consumers who like the idea of SRI
but don′t know enough about it. Independent
Financial Advisors (IFAs) are assuming lack of
interest in SRI and so they are not providing
information or gathering knowledge about this very
high growth investment arena."
This is perhaps the one reason why generally
throughout the developed world only about 2-4% of
total mutual funds or unit trusts sold at the retail
level are in identifiable ethical investments. It is
clear that advisors are breaking what I argue should
be their most important rule: to ’KNOW THEIR
IFAs are Ignoring Ethical Investing, December
15, 2011, The Investor Review, UK.
Dow Jones Indexes Named ’Best Islamic Index
Provider’ By Islamic Finance News For Fifth
"The Dow Jones Islamic Market Indexes were the first
gauges intended to measure the global universe of
investable equities that pass screens for Shari’ah
compliance. With hundreds of indexes, the series is
the industry’s most comprehensive family of Islamic
market measures and includes regional, country, and
industry indexes, all of which are subsets of the
Dow Jones Islamic Market Index. An independent
Shari’ah Supervisory Board counsels Dow Jones
Indexes on matters related to the compliance of
Congratulations to Dow Jones. As Islamic finance
grows, it’s important to have quality measures of
that growth. Such measures also inspire confidence
in the products measured. I believe that some
aspects of Islamic finance, such as avoidance of
non-asset based speculation and the use of
ethical-spiritual oversight boards, might be
incorporated in some future conventional finance
Dow Jones Indexes Named ’Best Islamic Index
Provider’ by Islamic Finance News for Fifth
Consecutive Year, press release, December 15,
2011, Dow Jones, UK.
America Lags On ESG. ’Legal & Fiduciary Red
"’There′s no question in my mind that Northern
Europe has got sustainable investing in its sights,’
Roger Urwin, global head of investment content for
consultancy firm Towers Watson, told attendees of
the ESG USA 2011 conference in New York on Tuesday.
Australia and the UK look to be next to jump on the
ESG bandwagon, but there are ’big and very ugly
roadblocks in the US’ to sustainable investing, he
I take a different slant. In the US, the degree
of scepticism about human induced climate change is
much greater than it is in Europe. Just look at what
the Republican presidential hopefuls say on this
issue! Thus, such attitudes influence American’s
beliefs of the relevance of ESG issues.
Meanwhile, we all know that companies who lead in
responding most effectively to ESG issues are
generally ’best of sector,’ both financially and in
comparative stock performance.
US lagging on ESG due to legal, fiduciary red
herrings, by Gloria Gonzalez, December 15, 2011,
Environmental Finance, UK.
US Wind Investment To Fall Two-Thirds If
Production Tax Credit Not Extended, Says The
American Wind Energy Association (AWEA).
"Investment in the US wind sector will drop by
nearly two-thirds to $5.5 billion in 2013 if the
production tax credit (PTC) for wind projects is not
extended, according to a Navigant Consulting study.
Annual installations would fall to 2GW in 2013, down
from more than 8GW in 2012... Jobs supported by the
wind industry would decline from 78,000 in 2012 to
41,000 in 2013, the study found."
I believe that all preferential tax credits and
deductions given to energy in all its forms should
be eliminated. Oil/gas/ethanol/nuclear producers
receive mammoth market distorting government tax and
indirect subsidies. With Bloomberg and others
reporting that wind is close to parity to gas in kWh
electrical generating costs in many geographic
areas, wind and other renewables would get an
US wind investment to fall $10 billion in 2013
without PTC, by Gloria Gonzalez, December 13,
2011, Environmental Finance, UK.
Impact Investing Gaining Traction Says J.P.
Morgan & Global Impact Investing Network (GIIN).
"The report finds that the majority of the 52
surveyed impact investors have tempered optimism
about the impact investing industry: they believe it
is ’in its infancy and growing.’ The investors plan
to invest almost USD 4 billion over the next year,
and most expect that 5-10 percent of overall
portfolios will be allocated to impact investments
in ten years."
Impact investing aims to solve social and
environmental problems while generating profits to
Though presently small, it’s an area that will
be of increasing interest to ethical investors--and
governments. For governments, it might offer them a
way of improving social and environmental conditions
without the use of governments’ funds. That is
increasingly attractive to them in today’s era of
Insight into the Impact Investment Market, press
release, December 14, 2011, J.P. Morgan and the
Global Impact Investing Network (GIIN), USA.
Investment Group With $130 Bn In Assets Urges
Fracking Companies To Be More
"Companies such as Exxon Mobil Corp. should identify
the chemicals used and consume less water in
fracturing to free gas trapped in rock, according to
a report released today from the Investor
Environmental Health Network and the Interfaith
Center on Corporate Responsibility."
The EPA released a report on December 8 showing
chemicals used in fracking were found in a drinking
water aquifer in west-central Wyoming. This article
states that one-third of US natural gas production
now comes from fracking. Many responsible investors
and funds invest in companies engaged in fracking.
They just might want to review those investments.
Investors Press Natural-Gas Drillers to Cut Fracking
Risks, by Jim Efstathiou Jr., December 13, 2011,
UK Firms Lacking In Ethical Performance
"A study conducted by the Chartered Institute of
Internal Auditors showed that 91 per cent of FTSE
100 firms referred to business ethics and integrity
in their annual statements, yet only 8 per cent
provided a specific metric of their company′s
Clearly, if there are no measures of ethical
performance, companies are not taking ethics
seriously. This problem is universal. It is
gratifying that the UK Chartered Institute of
Internal Auditors has conducted this study and
illuminated a major problem in the way
ethics are probably promoted in most large
Firms keep investors in dark about ethics, by
Ellie Duncan, December 12, 2011, WhatInvestment, UK.
Mexican Stock Exchange Launches Sustainability
"BMV’s new sustainability index is based on the 70
most liquid shares on the Mexican Stock Exchange.
Companies eligible for inclusion on the index are
assessed according to their performance, impact and
responses to emerging environmental, social and
governance (ESG) issues. These include climate
change, human rights and policies and systems to
counter bribery. BMV selected EIRIS, and its local
research partner in Mexico, Ecovalores, as lead
partners to develop the methodology and assessment
framework behind the new sustainability index."
We may soon have more countries with sustainable
stock indexes than those that don’t.
Mexico launches sustainability index with EIRIS
research, press release, December 8, 2011,
Unilever, AstraZeneca, Nike & Siemens, Are
Tops In Climate Counts Ratings.
- [COMMENTARY] "Unilever knocked
Nike from its three-year reign as the top-scoring
firm in the annual Climate Counts assessment of
major consumer brands and their work toward
corporate climate responsibility." What’s
encouraging, says Climate Counts, is the continuing
improvement in scores and the number of
Unilever Climbs to No. 1 in Climate Counts Ratings,
by Leslie Guevarra, December 7, 2011, GreenBiz, USA.
Norway’s Giant Fund Bans Investments In FMC &
"The $558 billion fund will no longer invest in
chemical and chemicals firm FMC Corporation and
fertiliser maker Potash Corporation because it says
they buy phosphate from Western Sahara, which it
deemed a ’particularly serious violation of
fundamental ethical norms’". Norway’s giant fund
is one of the few sovereign wealth funds with
UPDATE 2-Norway oil fund slams firms on ethics,
governance, by Balazs Koranyi and Gwladys Fouche,
December 6, 2011, Reuters, Norway.
Canadian Islamic Mortgage Lender’s Bankruptcy
Might Hamper Progress Of North American Islamic
"The insolvency of an Islamic mortgage lender in
Canada may hinder the growth of sharia-compliant
finance in North America, where the industry has
struggled to gain traction in the absence of a
supportive regulatory framework... Since Islam
forbids the use of interest, sharia-compliant
mortgages rely on a "diminishing musharaka" contract
to help Muslims finance homebuying. A lender and a
homebuyer share the costs of purchasing a home...
When the value of the house is eventually paid off,
full title is transferred to the homeowner... But it
is unclear who ultimately owns the home in the case
of a bankruptcy by the lender..."
Islamic finance globally is well over $1 tn., and
growing rapidly. Considering the size and growth of
North America’s Islamic population and the interest
of many non-Muslims in Islamic finance, Canadian and
US laws should become accommodative to it.
Canada bankruptcy may hurt Islamic finance in North
America, by Shaheen Pasha and Cameron French,
December 5, 2011, Reuters, Canada.
EIRIS Says Two-Thirds Of South African Listed
Companies Fulfil ’Base Requirements’ For
Johannesburg’s Stock Exchange’s (JSE) SRI Index.
"The announcement was made in Durban in parallel to
the 17th Conference of the Parties on climate change
(COP 17). JSE Director of Government and
International relations, Geoff Rothschild, commented
at the event that ’the JSE recognises climate change
as being one of the most significant sustainability
challenges facing us at this time.’” The JSE
continues to be a world leader in encouraging its
listed companies to take sustainability seriously.
South African Listed Companies Make Progress
Tackling Climate Change, press release,
Australia’s RIAA Reports Outperformance Of
Australian Ethical Funds.
"Responsible investment funds have outperformed
their benchmarks in every one of the 12 categories
covered in this report – over one, three, five and
seven years and across Australian shares,
international shares and balanced funds."
Obviously, Australian ethical funds have done
something right over the past few years. It seems
they’ve even outperformed ethical funds in many
other parts of the world too. Congratulations to the
RIAA′s Responsible Investment Benchmarking Survey,
December 5, 2011, RIAA, Australia.
European Asset Owners Diverge On Responsible
Investing, Share Concerns About ESG Issues.
"Novethic with the support of BNP Paribas Investment
Partners is releasing the results of its second
annual survey, ’European Asset Owners′ ESG
perceptions and integration practices’. In 2011,
more than 250 asset owners across 11 countries were
surveyed on the incorporation of Environmental,
Social and Governance (ESG) criteria into asset
management. Managing a total of EUR 4,540 billion,
these investors have gradually integrated the notion
of ESG risks, although responsible investment is
defined very differently from one country to
It’s interesting to read, country by country,
what they believe and how they understand and apply
terms such as responsible investing (RI). What can
be said though, is that European asset managers are
increasingly interested in RI and ESG.
Novethic: European Asset Owners′ Have Diverging
Views about Responsible Investment but Share a
Growing Interest in Environmental, Social and
Governance (ESG) Risks, press release, December
1, 2011, BusinessWire, France.
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