Ethical Investing News/Commentaries
Commentaries by Ron
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New EU rules require companies to report
social impact. "Member states today approved
a compromise deal with MEPs that would require large
listed companies to file annual reports on their
corporate social responsibility, detailing their
policies and activities on issues such as human
rights, corruption and protecting the environment."
This is great news and demonstrates leadership
by the EU in CSR concerns. Though companies grumble
about all the new reporting requirements, the fact
is stakeholders, especially investors, have a right
to this information. Such information might be vital
in assessing the ethics of a company--and hence its
long-term financial performance as well.
New EU rules require companies to report social
impact, by Nicholas Hirst, February 26, 2014,
European Voice, Belgium.
Pricking The 'Bubble' Of Banking By Calling
The Sector To Account. "Last month the
Sustainability Accounting Standards Board (SASB) and
the International Integrated Reporting Council (IIRC)
signed a memorandum of understanding to more closely
collaborate to 'advance the evolution of corporate
disclosure and communicate value to investors.' It
was a very important statement of intent, cutting
across the factionalism that sometimes dogs a sector
intent on sustainability and corporate social
responsibility (CSR). It also lifted CSR,
sustainability and Environmental, Social and
Governance (ESG) risk out of their individual niches
and brought them together into a very ‘real’ world
of accounting for better, more strategic corporate
Will banks adopt these recommendations? I
believe they will--in time. It'll only take a few
top banks to do it and all the others will follow. And it'll be ethical investors that'll
lead the fight forward. Banks and financial
institutions will want to incorporate these
reporting standards so as to benefit their
reputations which will assist in enhancing all
aspects of their business activities. The ones who
do it first might also reap benefits in their stock
prices. Studies show the pioneers in CSR activities
have better financial and stockholder returns than
those that come later.
Pricking The 'Bubble' Of Banking By Calling The
Sector To Account, by Dina Medland, February 24,
2014, Forbes, USA.
Example for all university finance
students--University of Pittsburgh students score
with SRI portfolio. "After managing a
theoretical portfolio of socially responsible stocks
for a few years, the students invested $100,000 in
real money Feb. 4, 2013, from a grant they received
from business school dean John T. Delaney. Over the
next year, their 30-stock portfolio earned 23.6
percent, outperforming the S&P 500, which returned
19.8 percent over the same period."
Many finance students at colleges and
universities get to 'play' with hypothetical
investment portfolios--but few are able to use an
SRI orientation. The results of the University of
Pittsburgh students are great and I wish them
continued success as they set a wonderful example to
Heard Off the Street: Pitt student investing club
teaches the value of ethical conduct, by Len
Boselovic/Pittsburgh Post-Gazette, February 22,
2014, Pittsburgh Post-Gazette, USA.
Environmental profit and loss: The new
corporate balancing act. "Current corporate
accounting has a significant omission that creates a
blind spot for corporate risks in terms of
understanding impacts (and dependencies) on natural
systems. The consequence of this omission starkly
was highlighted by the recent TEEB for Business
Coalition's commissioned Trucost report, which
identified $7.3 trillion in environmental
externalities for certain businesses globally."
It's about time that companies began financially
accounting for possible externalities related to ESG
factors. One excuse has always been that such
externalities are difficult to financially measure.
Well, that's fine--just simply provide a range and
show how financial accounts could be impacted.
That's a lot better than shareholders getting
hit-over-the-head with surprising costs! (Actually,
there could even be instances of surprising upsides
to revenues too.)
The main point is to be ethical and honest in
financial accounting. Everyone familiar with
financial accounting knows how subjective it all is
and that companies keep different sets of books for
tax purposes, for operations management, etc. I'm
just suggesting one more set. I know it's the set
that I'd take most seriously too.
Environmental profit and loss: The new corporate
balancing act, by David Meyers and Sissel Waage,
February 18, 2014, GreenBiz, USA.
GlobeScan and SustainAbility publish survey,
Rate the Raters. "As with the 2012 survey,
NGOs are again most trusted by experts to judge
corporate sustainability performance, but ratings
are catching up. Governments and journalists remain
least trusted. The five most credible ratings
remained the same as in 2012, although the order
shuffled. The top five in 2013 are CDP, the Dow
Jones Sustainability Index, Access to Medicines
Index, the FTSE4Good Index Series and oekom
Those who perform sustainability ratings are a
mixed group. It's great that GlobeScan and the firm
Sustainability surveyed the experts who really know
and study the output of the sustainable/ESG rating
groups. You can download the study at the following
The 2013 Ratings Survey: Polling the Experts,
Church of England vows to fight 'great demon'
of climate change. "The Church of England has
said that it will, as a last resort, pull its
investments from companies that fail to do enough to
fight the "great demon" of climate change and ignore
the church's theological, moral and social
If followed through, the Church of England will
be setting a great example to all institutions whose
values marry with social and environmental causes.
For many such organizations there's still an
enormous gulf between what they attempt to do and
how they invest their funds. Ethical investors might
want to contact the various charities and
philanthropic organizations they know and point-out
what the Church of England is doing, so encourage
them to similarly invest ethically.
Church of England vows to fight 'great demon' of
climate change, by Sam Jones, February 12, 2014,
The Guardian, UK.
Fracking is depleting water supplies in
America's driest areas, report shows.
"America's oil and gas rush is depleting water
supplies in the driest and most drought-prone areas
of the country, from Texas to California, new
research has found. Of the nearly 40,000 oil and gas
wells drilled since 2011, three-quarters were
located in areas where water is scarce, and 55% were
in areas experiencing drought, the report by the
Ceres investor network found."
It'll be interesting to see if the US droughts
begin impinging on the fracking boom. Then there are
the mounting environmental problems too. Add to that
future concerns about restricting carbon-based
fuels' use and the subsequent possibility of large
write-downs of such assets. You see where I stand. I
think that's where most ethical investors stand as
Fracking is depleting water supplies in America's
driest areas, report shows, by Suzanne
Goldenberg, February 5, 2014, The Guardian, UK.
Majority of non-Muslim UK consumers believe
that Islamic finance is relevant to all faiths.
"The survey was conducted by independent research
company, 2Europe, on behalf of Islamic Bank of
Britain, in August 2013 through telephone
interviews. 300 British Muslim and non-Muslim
consumers across the UK were questioned: a third of
all respondents (i.e. 100) were non-Muslim and a
third of all respondents were a combination of
Muslim and non-Muslim customers of IBB."
Perhaps many UK consumers equate Islamic finance
with ethical finance. The two do have many
similarities. Nonetheless, it's an interesting
finding. The findings would probably be quite
different had the the same survey been done in the
Majority of non-Muslim UK consumers believe that
Islamic finance is relevant to all faiths, by
Matthew Amlôt, February 6, 2014, CPI Financial, UK.
Royal London: sustainable investors should
consider health and safety. "Royal London
Asset Management (RLAM) has pointed out the benefits
of taking health and safety issues into
consideration when selecting investments. The firm’s
Review of Sustainable Investing looks at the steps
the firm has taken to ensure sustainability over the
last year and trends in the area."
Royal London's report cites how BP's stock lost
54% and suspended dividends after its Gulf oil
spill. Also, their report cites the lack of
standardization in reporting health and safety
issues. Unfortunately, this is a problem everywhere.
So, though one would like to take health and safety
issues into account when investing--the lack of
reliable and standardized data makes this
challenging. Where data is reported though, it's
still worth reviewing to see if it might affect your
Royal London: sustainable investors should consider
health and safety, by Charlotte Malone, Blue &
Green Tomorrow, February 5, 2014, UK.
Consider this article from an ethics
standpoint. It's titled: "Dumb Investment Of The
Week: Socially Responsible Investing."
The principle concern of this article is that
many 'ethical' funds have ideals that their
investments don't mirror. I've been long concerned
about this. I can understand it if in the mission
statement of the fund it is purposely investing in
companies so that they might have a real say in
improving a company's CSR/ESG performance.
However, if that isn't there and they invest in
firms contravening the funds principles--it's
something investors in that fund should worry about.
I still believe that if an investor has the ability
to invest in a diversified portfolio of 10-15
companies which truly mirror their values, then
they'll be ethically better served to do that. Also,
depending on how often they trade, substantial sums
might be saved in trading and management fees. Over
the long-term those fees can reduce the value of
your holdings by over 50%!
Dumb Investment Of The Week: Socially Responsible
Investing, by Ben Strubel, February 3, 2014,
Seeking Alpha, USA.
Exciting new index: The Natural Capital
Leaders Index. "The Natural Capital Leaders
index is designed to recognize companies
demonstrating natural capital leadership – and in
addition, break new ground by identifying those
companies that are truly ‘moving the needle’ by
decoupling growth from natural capital impact.
The Natural Capital Leaders Index features two
categories of leaders: Natural Capital Efficiency
Leaders used natural capital most efficiently to
generate revenue over the past year; Natural Capital
Decoupling Leaders increased revenue while
decreasing natural capital impacts over the most
recent five year period."
It'll be fascinating to see how these
indices perform. I would be interesting to know if
they 'back-tested' these indices and to know those
results. Looking through the constituents of these
indices one sees many recognizable names.
The Natural Capital Leaders Index, Trucost, UK.
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