Ethical Investing News/Commentaries
Commentaries by Ron
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Study: Educated Dutch women favouring
SR/ethical investing more relaxed about returns.
"Investors with a large proportion of educated
female members have extra reason to take socially
responsible investing seriously, but can possibly
relax about poor returns. That is a fascinating
finding of Rachel Pownall, an associate professor of
Tilburg University, who has published groundbreaking
work on the nuances of responsible investing."
Would this be the same for American, Canadian,
or British women? This would be an interesting
question to ask them. If the answer was similar, it
might change the way the SR/ethical funds industry
in those countries market to women. However, as many
studies demonstrate there really is no need to
expect lower returns from SR/ethical funds or
A new understanding of responsible investing
preferences, by Dan Billingham, November 27,
2013, Top 1000 Funds, Australia.
New index says GlaxoSmithKline and Unilever
among most sustainable investments. "Swiss
sustainability rating agency Inrate has released a
new index that ranks Stoxx Europe 50 companies on
their environmental and social performances."
As usual with these ratings, one must understand
the methodology underlying them--then decide whether
they make sense according to your values.
New index says GlaxoSmithKline and Unilever among
most sustainable investments, by Ilaria Bertini,
November 24, 2013, Blue & Green Tomorrow, UK.
License to Ill: The Effects of
Corporate Social Responsibility and CEO Moral
Identity on Corporate Irresponsibility. "They
[the study authors] found firms that engaged in
prior socially responsible behavior are more likely
to then engage in socially irresponsible behavior
and that this tendency is stronger in firms with
CEOs who attempt to put forth a moral image."
What an extraordinary finding! The study by
researchers Elaine Wong at the University of
California and Margaret Ormiston of the London
School of Economics, examined the CEO comments and
subsequent actions of Fortune 500 companies from
2002. What ethical investors should know is that
company actions are more important than the
comments of their executives.
Ill, by Sean Nealon, November 20, 2013, UCR
Lawmakers Want Feds to Have Socially
Responsible Retirement Investment Options.
"Federal employees and retirees should be able to
invest their retirement savings in socially
responsible companies, according to a new bill
proposed by a group of Democratic lawmakers."
I love the following quote as to why a previous
attempt failed to have such an offering for US
Federal workers, "As the board members, we are
responsible only for the participants' best
interest, not for the best interest of the United
States," Andrew Saul, then-chairman of the board
[The Federal Retirement Thrift Investment Board],
said at the time. "You're not wearing the hat of a
United States citizen; you're wearing the hat of
a fiduciary for the plan." Note the section
underlined! Again, as I said in the piece directly
below, these fund managers have their fiduciary
understanding completely screwed-up. Of course
federal workers should have SRI/ESG plan options!
Lawmakers Want Feds to Have Socially Responsible
Retirement Investment Options, by Eric
Katz, November 21, 2013, Government Executive, USA.
Callan: One-fifth of institutional investors
incorporate ESG into investing. "Only about
one-fifth (22%) of U.S. institutional investors
incorporate environmental, social and governance
strategies into their investment decision-making,
with only an additional 7% considering it, according
to a new survey conducted by Callan Associates... By
asset owner type, 35% of foundations incorporate ESG
strategies; 22% of endowments; 15% of public pension
funds; and 14% of corporate pension funds."
Notice that only 14% of US corporate pension
fund managers incorporate ESG strategies! Many
pension fund managers (as well as other asset
managers) wrongly believe that they can't legally
incorporate ESG strategies into their pension
management activities as it is not a fiduciary
responsibility. In fact, there's evidence they have
it backwards. Not accounting for ESG performance in
companies they invest in could expose them to legal
action by clients if losses occur due to the manager
ignoring ESG factors. In time, the vast majority of
asset managers will have to incorporate ESG analysis
in their stock selections.
Callan: One-fifth of institutional investors
incorporate ESG into investing, by James Comtois,
November 21, 2013, Pensions & Investments, USA.
Big US Banks Lag in Social-Responsibility
Scores: Report. "Bank of America (BAC), Bank
of New York Mellon (BK), Citigroup (NYSE: C),
Goldman Sachs (GS), JPMorgan Chase (JPM), Morgan
Stanley (MS) and Wells Fargo (WFC) all scored 60 or
below out of a possible 100 points in a study by the
Interfaith Center on Corporate Responsibility. The
study measured the seven banks’ performance in
responsible lending, risk management, executive
compensation and political contributions."
No surprises from this study. As US companies
significantly lag their European counterparts in CSR
activities, it's unsurprising that America's major
financial institutions also score poorly in this
Big Banks Lag in Social-Responsibility Scores:
Report, by Sarah Todd, November 20, 2013,
American Banker, USA.
European Parliament votes for Sustainable
Investment 'Label.' "MEPs [Members of the
European Parliament] supported a Green proposal to
create a sustainable investment label. This would be
a crucial provision: setting basic standards as
regards what can be considered as a sustainable
investment, ensuring consumers who want to invest in
sustainable and ethical products can be sure they
are doing so. Greenwashing in the investment market
will become much more difficult. Clear standards
will give the ethical investment market a boost."
The idea of a 'green label' for appropriate
investment products is a good one. I'm keenly
looking forward to seeing the criteria for it! I'll
post further information here whenever it's
available. If Europe does this, other
non-European developed nations may well follow suit.
Investment products MEPs vote for sustainable
investment label and better consumer information,
press release, November 20, 2013, Greens/EFA group
in the European Parliament, Belgium.
European apathy spells end for corporate
social responsibility rules. "A pledge made
by heads of state and government this summer to beef
up corporate social responsibility (CSR) reporting
for European companies is to be ditched because too
few member states are prepared to support it,
EurActiv has learned."
It seems that there was an attempt to have small
and medium size enterprises comply with the proposed
regulations but various business groups and
officials believed it'll be to costly to do so. Oh
well, they should at least have the larger companies
European apathy spells end for corporate social
responsibility rules, by Jeremy Fleming,
November 19, 2013, The Guardian, UK.
Ceres campaigns that fossil fuel companies
bear enormous financial risks due to climate change.
"As the world moves toward a low-carbon future,
these [increasing] energy reserves [of fossil fuel
companies] could actually become a financial
liability for both the fossil fuel companies and
their investors - meaning billions of dollars of
carbon assets could be stranded in the ground."
This is a theme getting increasing play
now--especially with some US companies boasting of
their hugely growing oil reserves due to fracking,
etc. But what some experts are saying is that
because future governments will likely have to
impose significant restraints on fossil fuel usage,
that much of these new reserves will not be used.
Thus, these reserves are probably bogus with hugely
negative financial implications for the firms
Ceres campaigns that fossil fuel companies bear
enormous financial risks due to climate change,
press release, November 13, 2013, Ceres, USA.
PwC Poll Shows Increasing Focus on
Sustainability Factors in Dealmaking.
"Environmental, social and governance (ESG) matters
are becoming increasingly important in the deal
market, according to a recent poll of over 300
professionals conducted by PwC US. The poll,
conducted during PwC's recent webcast, Integrating
environmental, social and governance (ESG) issues in
deals and valuing their impact, found that 68
percent of participants who are planning a
divestiture, acquisition, merger or IPO in the next
12 months plan to evaluate ESG considerations when
planning their transactions."
It's the recognition that all stakeholders are
increasingly aware that ESG issues play an important
role in valuing companies and assets. For instance,
who wants to buy an asset that might have
significant environmental problems--and costs!
PwC Poll Shows Increasing Focus on Sustainability
Factors in Dealmaking, press release, November
13, 2013, PwC's Sustainable Business Solutions, USA.
Stock exchanges at forefront of developing
sustainability initiatives. "Stock exchanges
across the world, in both developed and emerging
markets, are increasingly at the forefront in
developing sustainability initiatives, according to
a new report. EIRIS, a global provider of research
into corporate environmental, social and governance
(ESG) performance, interviewed 11 stock exchanges
for the report."
It's interesting that some stock
exchanges believe that they first must deal with
their own sustainable issues before tightening ESG
regulations for the companies they list. It's good
stock exchanges are creating new ESG rules for their
listed companies, but they can only do so much. They
don't want to make ESG rules so strict that they
frighten away companies to other exchanges. In the
end, it's up to investors to demand that companies
improve their performance on ESG issues, and nothing
will work better than stock prices exhibiting
premiums for companies that excel on ESG.
Stock exchanges at forefront of developing
sustainability initiatives, by Charlotte Malone,
November 11, 2013, Blue & Green Tomorrow, UK.
Survey reveals sustainability is stalled at
most companies. "The findings, from the '2013
BSR/GlobeScan State of Sustainable Business Survey,'
tell us two things: Sustainability professionals
recognize that integrating sustainability across the
business is a critical priority; but the vast
majority of companies are still some distance from
Chris Coulter, the author of this survey and
article--and who I know--has given us great insight
into this area. Sustainability for most company
managers is 'nice to have, but not really important
to me.' Until the public demands governments act
more on sustainability issues and for companies to
see a premium stock price as a result of increasing
their sustainability practices, most companies
are unlikely to make sustainability a true core
issue. It all comes down to public perception and
the need for action concerning climate change.
In the US, for instance, the public is evenly
split between those that believe in human-caused
climate change and those that don't.
Survey reveals sustainability is stalled at most
companies, by Chris Coulter, November 5, 2013,
UBS: China can make ‘generational leap’ in
responsible investment. "Socially responsible
investment (SRI) has the potential to grow rapidly
in China, according to a report from finance giant
UBS. Despite the concept of social enterprise sill
being nascent in the country, the younger generation
is driving growth in the sector."
It wouldn't surprise me in the years ahead to
see China overtake all developed countries in the
development of SRI/ethical investing. I say this for
several reasons: their desire to rid themselves of
pollution that'll lead to an emphasis on
sustainability; that China is already outspending
all developed countries on sustainable
infrastructure; and their desire for higher ethical
business conduct after so many scandals.
UBS: China can make ‘generational leap’ in
responsible investment, by Charlotte Malone,
November 6, 2013, Blue & Green Tomorrow, UK.
Carbon tax revenues could dwarf fossil fuel
losses. "Fossil fuel companies stand to miss
out on $9 trillion to $12 trillion in profits by the
end of the century if carbon emissions are taxed at
a high enough level to meet international climate
goals... That’s because demand for coal, oil, and
natural gas would fall as prices are pushed higher,
leading companies to leave vast volumes in the
ground, according to a new study."
You may recall my posts a few days ago about how
fossil fuel companies might have to take big hits to
their earnings and the value of their reserves in
the years ahead. This study provides some great
background as to how that might play out.
Carbon tax revenues could dwarf fossil fuel losses,
by John Upton, November 5, 2013, grist, USA.
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