E-newsletter of Investing for the Soul June 29, 2012
Top ethical investing news for June 2012
Links may only be valid a limited time Commentaries by Ron Robins
Twitter allows me to cover more--and breaking news--to help you do better!
Toyota, Johnson & Johnson and Honda
Are The Top Global Green Brands, Says Interbrand.
- [COMMENTARY] "After
evaluating the world’s top brands on the basis of their performance as
well as the public’s perception of their green credentials, Interbrand
and Deloitte have carefully ranked—and wholeheartedly applaud—the 50
Best Global Green Brands that are featured in this report. These strong,
highly innovative brands are paving the way to a new era of stability,
prosperity and confidence—and they embody our greatest hopes for the
future." This list and analysis could prove useful for ethical
Fitch Says Standard Equity Analysis Mustn't Be Forgotten In Socially Responsible Investing. - [COMMENTARY] "SRI is no protection to poor or average investment processes and Fitch highlights that SRI in itself has not improved the average risk/return profile of a European equity fund in the recent past. Even on a longer term basis, including 2008, downside protection is not statistically proven. By contrast, European SRI bond funds have delivered better returns with lower risk in the past three years."
Fitch is of course correct. Just because you like the moral values of a
company doesn't necessarily make the company a good investment.
Unfortunately, particularly for many novice ethical investors, they
often disregard fundamental financial analysis. Perhaps it's also
because they don't understand financial analysis. It's often easier to
understand a company's moral compass than it is their financial ratios!
UK To Give Shareholders Power Over Executive Pay. - [COMMENTARY] "Britain will legislate to give shareholders the power to reject company director pay deals in a bid to improve the link to performance and calm public anger over soaring executive earnings, Business Secretary Vince Cable said on Wednesday. The move puts Britain in the vanguard of a clampdown on corporate pay that has seen investors voicing their disapproval at FTSE 100 boardroom pay levels which have quadrupled over the past decade, far exceeding the performance of share values."
This is precedent setting and timely! It is likely this could catch on
throughout the EU and some parts of Asia too. Inward, 'old boy'
networking boards have for far too long aided each other in bumping-up
executive compensation even while their employees see marginal or no
An 'SRI' Fund That Invests In Companies Which Support 'Free Market Institutions & Principles.' - [COMMENTARY] "It turns out that when management believes in creative destruction, it translates into business success over the long term. One of the best ways to determine which companies really believe in the free markets is to look at which ones donate to free market organizations... From that research, I decided to launch The Hayek Fund."
This is a very novel approach to SRI. However, it'll be most interesting
to watch. Since its inception in September 2010, the fund claims to have
outperformed the S&P 500 by gaining 37.7% vs. 27.7% for the S&P. The
economist Friedrich Hayek was a co-winner of 1974 Nobel Prize in
Economics. His thinking re-energized the concept of Austrian economics,
which many would say is the antithesis of Keynesianism as practiced
today by most western economic and political leaders.
Corporate Reporting On Water Use Improves But Data Still Lacking, Says Ceres. - [COMMENTARY] "Overall corporate disclosures of water-related risks have increased since 2009, but most reporting remains weak and inconsistent according to Clearing the Waters: A Review of Corporate Water Risk Disclosure in SEC Filings, a new report issued today by Ceres. Since 2010, the Securities and Exchange Commission has required companies to disclose financially material risks from climate change to their investors. These risks include 'significant physical effects of climate change, such as effects on the severity of weather (for example, floods or hurricanes), sea levels, the arability of farmland, and water availability and quality.'”
Congratulations to those companies who are taking water usage seriously.
However, with increasing scarcity of fresh water and rapidly rising
demand--and prices--for it, many companies appear to be choosing to
avoid the future problems associated with water usage. Long-term
investors should keep a weary eye on investing in companies with huge
water demands--even if those companies make the ethical-socially
Deutsche Bank’s Climate Change Advisors Finds Academic Studies Demonstrate Stock Market Outperformance Of Companies Favouring Sustainability. - [COMMENTARY] "The findings, from a report called Sustainable Investing: Establishing Long-Term Value and Performance, were drawn up after researchers examined over 100 academic studies into sustainable investment. Every paper studied was in agreement that high ratings for corporate social responsibility (CSR) and environmental, social and corporate governance (ESG) would see a company’s capital costs be significantly lower. Meanwhile, 89% of the studies had evidence for 'market-based outperformance' for these companies."
This study demonstrates the power of 'meta-analysis'--of examining
multiple studies related to a few variables. Too often, critics of CSR/ESG
refer to only one study. Now, reviewing over 100 studies related to CSR/ESG,
this study should convince even the most sceptical that all portfolios
must incorporate this analysis for optimal results. Ethical investors
are again vindicated!
Stock Exchanges Commit To Promoting Sustainability Reporting. - [COMMENTARY] "A core group of five stock exchanges - NASDAQ OMX, BM&FBOVESPA, the Johannesburg Stock Exchange (JSE), the Istanbul Stock Exchange (ISE) and The Egyptian Exchange (EGX) - today announced a commitment to promote long-term, sustainable investment in their markets."
This is a good start. Hopefully we'll see many other exchanges taking
this position soon. Among the big exchanges, nobody wants to jump out in
front on this issue for fearing their listings will move to other
exchanges with less demanding listing requirements.
2012 FT/IFC Sustainable Finance
- [COMMENTARY] "The Financial Times and
IFC, a member of the World Bank Group, today announced the winners of
the 2012 FT/IFC Sustainable Finance Awards, with Bridges Ventures of the
UK winning the Award for Excellence in Sustainable Finance, Standard
Chartered named as Global Sustainable Bank of the Year, and Kilimo
Salama of Kenya taking the prize for Technology in Sustainable Finance."
Congratulations to the winners. These and similar awards help to
publicize and promote sustainable investing. Thanks to the UK's
Financial Times and IFC for sponsoring them.
CA Cheuvreux Named Leading Pan-European Brokerage
Firm for Sustainability Research In Thomson Reuters Extel Survey.
- [COMMENTARY] "The 2012
Thomson Reuters Extel Survey... Voting was conducted primarily online
and ran from 19 March to 4 May 2012. It reflects the contribution of
over 2,100 buy-side firms, 2,500 analysts from 270 brokerage
firms/research houses and nearly 800 of Europe's largest quoted
companies worldwide - over 14,000 individual voters in total, casting
over 950,000 votes. All data, votes received and methodology applied
were independently checked and verified by Deloitte." Why nothing
similar in North America? Runners-up were Bank of America Securities -
Merrill Lynch and UBS.
Canada's Top 50 Corporate Citizens, Corporate Knights. - [COMMENTARY] "Corporate Knights’ 11th annual Best 50 Corporate Citizens in Canada is a reflection... be it evidence of increasing diversity in the boardrooms of the nation or more efficient use of energy, water and the natural resources that are the pillars of our economy. The meaning of corporate citizenship has evolved from philanthropy as a side project to how corporations can change the world for the better through their individual core competencies."
The top three are: Desjardins Group Diversified Financials, Vancouver
City Savings C.U., and Co-operators Group. Interesting how all three are
involved in the financial industry--as are many of the top performers.
72% Of US Financial Advisors Express Some Interest In Recommending Sustainable Investments To Their Clients. - [COMMENTARY] "Thirty-eight percent of financial advisors express strong interest in recommending sustainable investments to their clients; 72% express some interest. The advisors who express strongest interest in advising their clients on sustainable investment strategies tend to be female, have advanced certifications, are affiliated with national registered investment advisor (RIA) firms, have average client assets under management (AUM) between $1 million to $10 million, and have less than 10 years of tenure as advisors."
The study also found that, "advisors are willing to place 2.5% of
their total assets under management in sustainable investments for a
market potential of $650 billion." In reality, considering that
around 2 to 3% of US retail mutual fund/ETF assets are already in
ethical-socially responsible investments, it seems that financial
advisors are still reluctant to really promote them.
'Saints' & 'Sinners' Investing. Sinners Win? - [COMMENTARY] "Money Observer’s latest analysis of the performance of the Saints and Sinners of the FTSE 100 index reveals that, once again, it’s the bad guys that have romped home. Over the past year, the Saints – or the FTSE 100 members that are also included in the FTSE4Good index of corporate social responsibility – turned £100 into £93.35 in terms of share price returns (excluding dividends). However Money Observer’s Sindex – which is made up of FTSE 100 members that don’t qualify for the FTSE4Good (30 companies in total) – still lost money but the £100 became £98.12, 5 per cent better than the Saints."
This article describes what's in each index. One significant reason the Saints index falls down is because of its heavy weighting in banks... "The Saints, on the other hand, have been severely handicapped by the banks and insurance companies. Royal Bank of Scotland and Lloyds Banking Group have lagged the Footsie by 96 per cent, Barclays by more than 60 per cent and HSBC by around 30 per cent."
In reading this article I believe the Saints index should be
reconstructed according to ESG criteria. The results might well turn
around their findings and the Saints index might win handsomely.
The Business Case for Sustainable Finance, by Iveta Cherneva,
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Disclaimer: Neither The Soul Investor nor Ron Robins make investment recommendations. Nothing in this newsletter should be interpreted as a recommendation or solicitation to buy/sell any securities or investments. The Soul Investor is a source of general information and resources for spiritual investing, ethical investing, and socially responsible investing (SRI). Investors should consider their actions thoroughly and consult their professional advisers prior to taking any investment action. The Soul Investor does not necessarily agree with the opinions expressed in articles in its newsletter or offered on the web pages to which it might be linked. Such opinions are the responsibility of the writers themselves. Furthermore, The Soul Investor does not offer or provide any warranties, representations, guarantees, implied or otherwise, as to the accuracy, legality, copyright compliance, timeliness or usefulness of the information, materials or services in this e-newsletter, or other sites, to which it might be linked. Also, Mr. Ron Robins is not an investment advisor, nor is he licensed with any professional investment related body, and thus is not able to, nor does he make, any investment recommendations.
The Soul Investor is a publication of Investing for the Soul, a registered business name in Ontario, Canada. Copyright © 2012 Ron Robins. All rights reserved.