E-newsletter of Investing for the Soul December 30, 2013
Top ethical investing news for December 2013
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!
New science-based study looks at who's really leading on climate. "A new study [by Climate Counts], released today, analyzed the greenhouse gas emissions of 100 companies against science-based targets that seek to limit climate change to 2 degrees Celsius above the levels prevailing in the pre-industrial period... 49 of the 100 companies studied rated sustainably in the study, with Autodesk, Unilever and Eli Lilly earning three top spots in the ranking... The companies were chosen from among those that submitted data voluntarily through sustainability reports and through organizations such as CDP and the Climate Registry.
[COMMENTARY] Climate Counts
is a good organization, and this study is a great step forward in really
understanding if companies are moving towards sustainability for
themselves and for the planet. Ethical investors might want to review
the study for insights into what companies they believe warrant
Impact investment: ESG practices increase risk-adjusted returns in the long-term. "A new report by the World Economic Forum has outlined the possibilities and strengths of impact investment, suggesting that integrating environmental, social and corporate governance (ESG) in the investment process reduces risks on long-term returns."
[COMMENTARY] As ethical
investors know--and based on massive empirical evidence--applying ESG
performance measures to investment decision making improves portfolio
performance. It's great that the World Economic Forum has come to this
The Carbon Time Bomb in Your Retirement Account--And Bloomberg's Carbon Risk Valuation Tool for investors. "Now Wall Street is starting to take seriously the prospect that a carbon-constrained economy could put fossil fuel companies in the red. Bloomberg terminals... have quietly added a function called the Carbon Risk Valuation Tool, or CRVT in Bloomberg-speak. The CRVT for the first time allows investors to view the impact of say, declining oil prices due to carbon regulations, on companies’ stock prices, or how a carbon tax would affect the value of a portfolio."
[COMMENTARY] This is a
brilliant idea by Bloomberg. I've written before that many corporate
carbon assets could become worthless if those assets--particularly due
to potential future government regulations to reduce carbon use--do
Study: Firms with a Social Conscience Are More Stable Investments. "The researchers found the level of risk was significantly lower for firms with higher CSR scores, especially during economic downturns, as loyal customers kept sales higher during hard times than firms that did not practice CSR initiatives. That revenue and stock price stability led to lower equity costs, reducing firm risk further and making the stock even more attractive to buyers... The study also finds that timing is important, as the first firm to start using CSR practices in an industry gets a larger market share, leaving less for its competitors that adopt CSR later on."
[COMMENTARY] All those CEOs
stalling about increasing their CSR activities should read this study.
It supports our long-standing contention--and continuously supported by
research-- that companies implementing strong CSR/ESG programmes have
better financial and stock performance. Furthermore, the lead is
greatest for those who are among the first in their industry to
implement CSR. However, I would contend that even if a company is a real
laggard in adopting CSR, that simple internal cost-benefit analysis of
various CSR activities can be greatly beneficial. Think energy
efficiencies and environmental risks, for instance.
Why are CEOs struggling to prove sustainability value to investors? "A recurring challenge faced by businesses looking to become more fundamentally sustainable is how to demonstrate the value of their initiatives to shareholders and investors. This problem was highlighted by the triennial CEO study [PDF] conducted by Accenture and the UN Global Compact (UNGC), which examined the views of more than 1,000 CEOs. In 2007, just 18 percent of CEOs reported a failure to link sustainability to business value. In 2010, this figure rose to 30 percent. By 2013, 62 percent of CEOs said they couldn't accurately quantify the business value of their sustainability initiatives."
[COMMENTARY] The fact that
CEOs are having difficulty linking sustainability to 'business value' is
troublesome indeed! It would seem that companies simply aren't using and
implementing the right metrics to assess the financial value of
sustainable initiatives. This article starts to show them how to do it.
Ethical investors need to encourage the companies they invest to
implement sustainable metrics. It'll not only help a company's financial
performance--but could spur its stock price as well.
Three-quarters of investors want sustainable investment, says Dutch survey. "A new study has found that three-quarters of Dutch investors are willing to give up a portion of their pension income if it means their investments are in line with their environmental and social values. However, [the authors], also found some inconsistencies in the way investors make financial decisions. Over a third of survey respondents reported inconsistencies and the authors linked this to low levels of financial understanding."
[COMMENTARY] To me, the
findings of this study by Arian Borgers and Rachel Pownall of
Tilburg University, reinforce the requirement that financial advisors
should be required to truly understand the personal values of their
clients. Only by knowing a client's values can they really satisfy the
client's goals. Of course, any really good advisor is already doing
this--but the majority in the industry clearly don't. Not in The
Netherlands or anywhere else for that mater.
Large Companies Prepared to Pay Price on Carbon. "More than two dozen of the nation’s biggest corporations, including the five major oil companies, are planning their future growth on the expectation that the government will force them to pay a price for carbon pollution as a way to control global warming."
[COMMENTARY] This is a good
sign that even some oil companies are preparing for eventual carbon
taxes. However, as per my previous comments, carbon based extraction
companies are still counting their reserves at 'full value.' It's quite
likely that much of their reserves will prove of little value as they'll
be restricted from being used.
Novethic 2013 Survey - ESG Strategies of European Asset Owners. "This unique survey assesses the views of 165 long-term investors (pension funds, insurance companies…) in 12 countries who between them hold assets worth over €5 trillion... Awareness of ESG approaches is rising... ESG integration in practice is running out of steam... Responsible investment policies remain abstract commitments... New asset classes, new obstacles."
[COMMENTARY] The above quotes
are their key findings. Nothing too unusual in the survey results.
Novethic is an excellent French SR/ethical investment research firm.
This survey is worth reading for all SR/ethical investors. Download it
Islamic finance to sustain double-digit growth in next 2 years: S&P. "The growth of the Islamic finance market globally has continued unabated this year, undeterred by the uncertain recovery elsewhere in the world’s financial markets, according to rating agency Standard & Poor’s. In its report ‘Islamic finance 2014: We expect double digit growth and a push for regulation and standards’, the agency said that worldwide, Sharia-complaint assets estimated at more than $1.4 trillion were expected to sustain double digit growth in the next two to three years."
[COMMENTARY] The western
financial world is slowly coming to the realization that Islamic finance
is becoming a major financial force around the globe. Together with
SR/ethically oriented financial/investments products, mainstream finance
will change, adopting a SR/ethical approach. The growing influence of
Islamic finance is good news for ethical investors.
New Research Study
Social Norms in Pension Funds, by Arian C.T. Borgers and Rachel A. J. Pownall, Tilburg University, November 2013, Netherlands.
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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 © 2013 Ron Robins. All rights reserved.