Ethical Investing News/Commentaries
Commentaries by Ron
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Directors Beat Men-Only Boards In Company Stock
"Shares of companies with a market capitalization of
more than $10 billion and with women board members
outperformed comparable businesses with all-male
boards by 26 percent worldwide over a period of six
years, according to a report by the Credit Suisse
Research Institute, created in 2008 to analyze
trends expected to affect global markets."
This study adds to a body of research that women
are invaluable corporate board members. There are a
few ethical funds that specifically favour investing
in companies where women are significantly
represented on corporate boards. It's about time
that women played a much more pronounced role in
finance. I even believe we would see fewer financial
Women as Directors Beat Men-Only Boards in Company
Stock Return, by Heather Perlberg, July 31,
2012, Bloomberg, USA.
Is Corporate Carbon Data?
"Max Horster joined South Pole Carbon Asset
Management two years ago to design climate-neutral
investment portfolios. But there was a problem: Only
3,000 of the world’s 40,000 listed companies
published emission figures, and most of those
weren’t trustworthy. It’s not that companies are
purposely hiding the correct numbers, he said. They
just don’t put much effort into it."
I've been saying for years that all
sustainability and CSR reporting for public
companies should be independently audited and
verified, similarly to financial statements. How
else can you trust them? How else can you know who's
doing best in their industry? Ethical investors
ought to be vociferous in demanding such rules.
Tracking companies' carbon emissions using public
data, by Kelli Barrett, July 26, 2012,
Environmental and Social Investment Implications In
The Food Sector, Survey.
"World food prices have reached record levels and
show few signs of abating. Low-income consumers in
the developing world have been hit especially hard,
with ripple effects spreading around the globe. The
long-term food outlook is no better. Water stress,
resource scarcity, waste management and climate
change are having a further destabilizing effect on
agriculture, food sourcing and production."
The food sector might well be an outstanding
long-term investment option for many ethical
investors--as well as helping to feed the world. Be
careful though. Know what you're doing!
Environmental and Social Investment Implications in
the Food Sector, by Martina Macpherson, July
2012, MSCI ESG Research, Credit Suisse and WWF, USA.
Lacking Sustainable Values Face Destabilizing Risk:
"If the 2008 financial crisis laid bare
nearsightedness in global financial markets, then
the way to prevent future shocks is to give
participants 'wider and better quality lenses,'
according to a new report published by the
International Institute for Sustainable Development
When people lack a sense of inner fulfillment
they tend to crave immediate gratification. Those
who most fall into this mindset are in the
investment/banking business. It's a direct
reflection of societal values. Society has to look
and change from within first before anything
meaningful will happen to investment/banking
Banks Lacking Sustainable Values Face Destabilizing
Risk: Report, by Peter Green, July 27, 2012,
India Index Outperforms Its Benchmark Index Since
"The S&P ESG India has returned about 19 per cent,
compared with Nifty’s 14.40 per cent this calendar
year so far. Since January 2008, the index gained by
17.10 per cent, compared with the Nifty’s negative
15.79 per cent." This type of performance is
what will make most companies engage in ESG matters.
And it's happening even in the developing world!
Good corporate citizens perform well on markets,
by Ravi Ranjan Prasad, July 24, 2012,
Study Shows US Companies Lagging Europe, Japan, On
" According to a new study by The Conference Board,
the overall disclosure rate of this type of
information by U.S. companies in the Russell 1000 is
10 percent, compared to 19 percent for a global
sample of 3000 business organizations tracked by
Bloomberg's Environmental, Social, and Governance (ESG)
It's almost boring the number of such reports
that have appeared in recent months. What will
encourage US companies to engage more in ESG issues?
I suspect it'll really happen when companies realize
it's more profitable to incorporate ESG factors into
their business practices and investors cite
increasing preference for companies with outstanding
ESG performance. We're almost there!
U.S. Companies Continue to Underperform European and
Japanese Businesses in Environmental and Social
Disclosure, press release, The Conference Board,
July 25, 2012, USA.
Misunderstood, Rarely Used,
In US University & College Endowments, Says IRRC
"The endowment community, on the whole, exhibits a
very weak understanding of ESG investing strategies,
trends, opportunities, and language." This is
quite a damning report on a community of investors
one would think might be in the vanguard of applying ESG principles. I have no doubt that this will be a
wake-up call to many university and college
communities to re-think their endowment investment
practices--especially now it's been shown that an
ESG focus in portfolios usually means better
Environmental, Social and Governance Investing by
College and University Endowments in the United
States, July 18, 2012, The IRRC Institute, USA.
Unethical Behaviour In the Financial Industry--Hedge
Funds Polling Analysts.
"They are supposed to be among Wall Street’s most
closely guarded secrets: changes in research
analysts’ views, up or down, of a company’s
prospects. But some of the nation’s biggest
brokerage firms appear to be giving a handful of top
hedge funds an early peek at these sentiments —
allowing them to trade on the information before
other investors get the word."
Given the revolving door between regulators and
those they regulate and that the regulatory agencies
are underfunded and understaffed, is it any wonder
that the financial industry in its many guises
gets-away with mass illegality? Politicians have
been helpless to do anything about this since they
rely so much on financial industry funds for their
election campaigns. What a mess.
At least this stuff is coming out into the open
now, and hopefully, a growing disdain for these
practices might create an environment for real
change. We'll see. It might sound harsh, but I believe that a country gets the government it
deserves! Good luck America.
Surveys Give Big Investors an Early View From
Analysts, by Gretchen Morgenson, July 15, 2012,
The New York Times, USA.
Misconduct Pervades The New York Fed, Most Financial
Industry Regulators & Financial Institutions.
- [COMMENTARY] In a series of
articles in The New York Times it's revealed how the
elites in the financial industry--in London and New
York most particularly--are overwhelmed by greed
that totally subsumes any trace of ethical
behaviour. I suggest that this is not only a problem
for the financial industry, but for society in
But on a hopeful note, it is interesting that
these problems are coming to light now. Perhaps on
some level there's some type of 'phase transition'
in 'collective consciousness' that is bringing this
about? I believe it really could be the case.
New York Fed Knew of False Barclays Reports on
New Fraud Inquiry as JPMorgan’s Loss Mounts, and
Once-Stodgy World of London Banking Losing Its
Old-School Ways, July 13, 2012, USA.
Investment Portfolios Significantly Outperform
Averages, Says Study.
"Oekom Research looked at companies in its Prime
Portfolio Large Caps (PPLC) – a group of 300 major
firms with sustainability accreditations – over a
seven-year period between 2004 and 2011, and
compared their performance against the MSCI World
Total Return Index. The results are encouraging.
After being weighted by market capitalisation, the
PPLC displayed a 30.9% cumulative return on
investment. Over the same timescale, the MSCI World
achieved 26.8%. This 4.1 percentage point difference
equates to a 15.3% higher return for the PPLC."
Yet another confirmation that investing in
companies where ESG matters, pays-off. It's still
surprising to me why there is still so much
resistance to ethical investing within the
mainstream financial industry. Perhaps too many in
the industry are more interested in making money by
manipulating markets and cheating than caring about
offering sound investment advice based on hard data!
Analysis shows the ‘superior performance’ of
sustainable investment, by Alex Blackburne, July
13, 2012, Blue & Green Tomorrow, UK.
Thomson Reuters Extel/UKSIF Socially Responsible
Investing & Sustainability Survey Results Announced.
"Leading Brokerage Firm(s) for SRI & Sustainability
Overall: 1) CA Cheuvreux, 2) Bank of America
Securities - Merrill Lynch and 3) UBS." It's a
good list to review for ethical investors.
Thomson Reuters Extel and UKSIF 2012 Socially
Responsible Investing & Sustainability Survey
Results, press release, July 12, 2012, UK.
Scandal Could Be Enormously Costly To Participating
"Dozens of lawsuits filed by municipalities, pension
funds and hedge funds have been consolidated into a
few related cases against more than a dozen banks
that are involved in setting Libor each day,
including Bank of America, JPMorgan Chase, Deutsche
Bank and Barclays... Darrell Duffie, a professor of
finance at Stanford, said he expected that their
lawsuits alone could lead to the banks’ paying out
tens of billions of dollars, echoing numbers from a
recent report by analysts at Nomura Equity
Research." In most ethical funds financial
stocks are heavily weighted. Ethical fund investors
should be concerned about this.
Rate Scandal Stirs Scramble for Damages, by
Nathaniel Popper, July 10, 2012, New York Times
Financial Industry Employees Would Commit Insider
Trading, Says Survey.
"16% of those surveyed said they would engage in
insider trading if they could make $10 million and
not get caught. Only 55% said they 'definitely'
would not, leaving the remaining 29% apparently on
the fence about committing crimes. Though in some
slightly encouraging results, 94% of those surveyed
said they’d be willing to report wrongdoing and 86%
said they are putting their clients first."
If 16% admit that they would do it, how many in
the survey wouldn't admit that they would do it? My
guess is the answer is substantially higher than
16%! Unfortunately, the financial industry is
probably more representative of society generally,
than most of us would admit.
Survey after survey, study after study, shows
that people today are more likely to cheat and lie
than in previous generations. Is it any wonder that
the 'West' is in relative decline compared to the
'East?' However, I believe we're near a point where
society will adopt measures that will reverse such
decay in morals. Longer-term this will add to
ethical investing returns.
Financial Industry Survey: 16% Would Commit Insider
Trading, by David Benoit, July 10, 2012, The
Wall Street Journal blogs, USA.
Banks Pushing Customers To Ethical Banking &
Investors to Funds Devoid Of Financial Stocks.
- [COMMENTARY] Two stories caught me
eye, one from the UK and the other from the US. But
at what point will this become a mass movement?
Ethical Banking: Big Increase In Applications,
July 3, 2012, Sky News, UK, and
Why This Investor Won't Ever Buy Banks or Insurers,
by Chris Gay, July 3, 2012, US News & World Report,
Study Shows US Companies Lagging European Firms In
"US companies are lagging far behind their
counterparts in the European Union on transparency
of environmental and social practices, with the
accuracy of information often unverified, according
to a report* by the Conference Board."
Generally, I think that most people would agree that
European culture is more attuned to environmental
and social concerns than in the US. Until the
cultural dynamics in the US changes towards those of
the Europeans, Europe will continue to lead.
US groups lag behind on ESG, by Ruth Sullivan,
July 1, 2012, Financial Times, UK.
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