Ethical Investing News/Commentaries
Commentaries by Ron
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Clicking Clean: How Companies are Building the
Green Internet. "Here′s who hosts some of the
internet′s most popular sites and services in their
data centers – and whether those companies are using
dirty or clean energy."
[COMMENTARY] Greenpeace has
researched and rated internet related companies
concerning their green energy usage. Google, Apple
and Facebook do best. Amazon, eBay and Microsoft
don’t do so well.
Your Online World: #ClickClean or Dirty? April
2014, Greenpeace, USA.
Australia: reporting ‘misrepresents′ business
sustainability. "Analysis undertaken for
Catalyst Australia found inconsistencies between how
companies ranked their application of widely-used
sustainability guidelines and publicly available
information used to verify this... mining giant Rio
Tinto and biotechnology firm CSL had the most
inconsistencies in their reporting, with 50% of Rio
Tinto′s report based on information that was either
missing or unexplained."
[COMMENTARY] Without external,
independently audited ESG/CSR reports, such
reporting inconsistencies are not uncommon. This is
a good article on the difficulties posed for
companies as well as what stakeholders want
concerning these reports.
Reporting ‘misrepresents′ business sustainability:
study, by Kylar Loussikian, March 30, 2014, The
CFAs Poll: Which ESG Factors Are You Most Able to
Include in Your Investment Decisions? "When
we asked subscribers of the CFA Institute Financial
NewsBrief which type of issues they are most capable
of including in their investment decisions,
governance issues topped the list... (which 45% of
respondents chose) tend to apply to companies
regardless of the type of business they are in, and
they seem to be easier to relate to than
environmental issues (which 16% of respondents
chose) and social issues (which 6% of respondents
chose). But a third of our 509 respondents reported
that they do not include ESG issues in investment
decisions at all. It is not clear why."
[COMMENTARY] Usman Hayat, the
author of this piece speculates that because CFAs
are quantitatively based and usually with a short-term orientation, that such an analytical framework
doesn’t work well for ESG issues which are usually
long-term in nature. This reminds me of economists
with their economic modelling. Trying to put human
action--the buying of stocks, etc.--into
quantitative modeling and forgetting about all other
factors, is absurd. How many of these quant types
forecast the 2008/9 financial crises!
As remarked here some weeks ago, for CFAs to be
really useful in our new era, their training needs
to incorporate much about how to analyze and measure
Poll: Which ESG Factors Are You Most Able to Include
in Your Investment Decisions? By Usman Hayat,
March 27, 2014, Blogs/CFA Institute, USA.
World′s Largest Investors Launch Effort to
Engage Global Stock Exchanges on Sustainability
Reporting Standard for Companies.
"Sustainability advocacy group Ceres, in
collaboration with BlackRock and other major
institutional investors, today announced an
initiative to engage global stock exchanges via the
World Federation of Exchanges (WFE) on a possible
uniform reporting standard for sustainability
reporting by all exchange members."
[COMMENTARY] Ceres is doing all
ethical investors a terrific service by
getting-on-board the likes of Blackrock and other
major institutional investors to coax exchanges to
higher sustainability standards. We can only wish
them well in this endeavour.
World′s Largest Investors Launch Effort to Engage
Global Stock Exchanges on Sustainability Reporting
Standard for Companies, press release, March 26,
2014, Ceres, USA.
Canadian proxy voting survey produces
encouraging signs for investors. "SHARE′s
annual proxy voting survey resulted in the highest
response rate and highest average score since 2005,
suggesting that investment managers and proxy voting
services are more willing to vote against
management′s recommendations when they believe it is
in the best interests of investors."
[COMMENTARY] ’Say-on-pay’ proxies at
shareholder meetings are big. Hopefully, these proxy
proposals will continue to gain in number and
strength so that companies take much more seriously
Proxy voting survey produces encouraging signs for
investors, by Doug Watt, March 26, 2014, SRI
World Federation of Exchanges (WFE) Launches
Sustainability Working Group. "The World
Federation of Exchanges (WFE) has formed a new
sustainability working group at its Working
Committee meeting in Mumbai last week. The new
Sustainability Working Group is comprised of
representatives from a diverse array of global stock
exchanges with a mandate to build consensus on the
purpose, practicality, and materiality of
Environmental, Social, and Governance (ESG) data."
[COMMENTARY] It’s clear that stock
exchanges prefer to act in unison with regards to
sustainability reporting for their listed companies.
This is good in that companies can decide where to
list their stock on factors other than reporting
requirements. However, this also means that exchange
company sustainability reporting requirements might
be only as robust as are acceptable to the largest
number of exchanges.
World Federation of Exchanges (WFE) Launches
Sustainability Working Group, press release,
March 25, 2014, USA.
Thomson Reuters release Islamic Social Finance
Report. "The report is the first of its kind
study covering Islamic social finance across
countries in South and Southeast Asia with sizeable
Muslim populations including Indonesia, India,
Pakistan, Bangladesh, Malaysia, Singapore and Brunei
The report studies the historical trends, legal and
regulatory environment, supporting infrastructure,
success stories, good practices and potential of
Islamic social finance by key players in Zakah and
According to the report, Islamic social funds could
potentially meet resource shortfalls to alleviate
widespread poverty in South and Southeast Asia."
[COMMENTARY] The Thomson Reuters
report is a landmark study on Islamic social
finance. It provides insight as to how Islamic
social finance could bring countless millions of
people out of poverty.
Thomson Reuters release Islamic Social Finance
Report, by Matthew Amlôt, March 25, 2014, CPI
A Ranking of Top Executives by Their
Employees. "The chief executives of LinkedIn,
Ford Motor Company, Northwestern Mutual, Goldman
Sachs and Intuit were among the top scorers this
year in Glassdoor′s ranking of the leaders at 51 big
companies. Yahoo and General Electric anchored the
bottom of the list."
[COMMENTARY] Such a ranking could be
useful in assessing what companies to invest in.
When a company’s employees think highly of their
executives you know that company has a loyal and
likely motivated work force. Employees like that are
usually innovative and highly productive. And
profits usually follow.
A Ranking of Top Executives by Their Employees,
by Elizabeth Olson, March 25, 2014, Dealbook, The
New York Times, USA.
More than two-thirds of (UK) firms say
sustainability is a key driver for growth.
"The Verdantix survey comprised 150 executives from
20 industry sectors including retail and consumer
products, consumer services, manufacturing, business
and financial services, oil and gas, utilities and
mining. It found that although 70% of businesses
identified sustainability as a key driver for
growth, only 51% believe that sustainability issues
will impact their firm′s financial performance over
the next two years."
[COMMENTARY] Measuring sustainability
initiatives on financial performance is a
problem--and often a long-term one. Hence, it could
be a factor why 71% of those executives believing in
sustainability as key to growth see it not impacting
their firms’ financial performance in the next two
years. Also, the survey notes continuing and
increasing spending on sustainability, which is
wholly positive for British industry. Alas though,
the actual spending is still well below where it
needs to be for companies and humanity to create a
real sustainable future.
More than two-thirds of firms say sustainability is
a key driver for growth, by ClickGreen staff,
March 24, 2014, ClickGreen, UK.
Speaking of Corporate Social Responsibility.
"This paper suggests that the way in which
corporations use language is a strong predictor of
their CSR and sustainability practices."
[COMMENTARY] Many experts believe
that language shapes our thoughts and behaviour.
This is an extension of that. Perhaps companies,
particularly multi-nationals, might adopt the
language or languages that best suit their corporate
missions? However, I suspect it’ll take a lot more
research before companies act on that idea. It is
interesting research though.
Speaking of Corporate Social Responsibility, by
Hao Liang, Christopher Marquis, Luc Renneboog, and
Sunny Li Sun, March 21, 2014, Harvard Business
America’s 100 Most Trustworthy Companies.
"To develop the ranking, GMI reviews the
accounting and governance behaviors of more than
8,000 publicly-traded companies in North America. In
assessing each company, GMI considers factors
including high risk events, revenue and expense
recognition methods, SEC actions, and bankruptcy
risk as indicators of a company′s credibility."
[COMMENTARY] GMI’s methodology is
good and covers large, mid and small cap companies.
America’s 100 Most Trustworthy Companies, by
Kathryhn Dill, March 18, 2014, Forbes, USA.
Scoping Paper: Mining and Metals in a
Sustainable World, World Economic Forum. "The
stakeholder landscape for mining and metals
companies is becoming increasingly diverse, with
growing expectations for companies to operate in a
responsible and sustainable manner. But what defines
[COMMENTARY] For many ethical
investors, mining is probably a necessary evil. If
you want cars, a nice home, etc.--and like you
billions more people desire them--mining has
to be done. It just has to be done in accordance
with optimal ESG policies. This scoping paper is
helpful in that debate and might provide insights as
to what to look for if you want to invest in ethical
Scoping Paper: Mining and Metals in a Sustainable
World, World Economic Forum, Switzerland.
The Most Ethical Companies In The World.
"In an effort to honor those companies that are
leading their industries in compliance, corporate
governance, and social responsibility, the
Ethisphere Institute released its eighth annual list
of the World′s Most Ethical Companies. Thousands of
companies from around the globe were nominated for
this year′s list. A total of 144 companies were
ultimately selected, representing 41 industries in
[COMMENTARY] This list of the world’s
most ethical companies is predominantly American. Of
the 144 that make the list on the Yahoo! Finance
site, I count 105 are American and only 21 European.
Yet, European companies consistently outperform
American companies in CSR reporting. It’s
inconceivable that American companies are that much
more ethical than those in Europe, or Japan, for
To be considered for the list companies first
have to be nominated. Then Ethisphere does its work
in assessing them. I believe Ethisphere needs to
revise its process of how companies get to be
considered. Despite that, it’s a good list for
ethical investors to peruse.
The Most Ethical Companies In The World, by
Jacquelyn Smith, March 21, 2014, Business Insider,
Combine ESG and ‘smart′ beta, says AXA IM.
"Combining smart beta strategies with a
consideration of environmental, social and
governance (ESG) requirements can generate higher
risk-adjusted returns, according to AXA Investment
Managers. AXA IM conducted a back test of portfolio
performance over almost five years and found a
combined beta smart ESG strategy portfolio would
have outperformed both the MSCI world index as well
as a smart beta strategy on its own."
[COMMENTARY] This is an interesting
approach designed to reduce portfolio volatility
(’smart’ beta) and only includes ESG stocks in the
portfolio. Some analysts argue that the best ESG
stocks have a naturally lower beta. Nonetheless,
such research further supports ethical investing.
Combine ESG and ‘smart′ beta, says AXA IM, March
19, 2014, Investor Daily, Australia.
Mark Carney boosts green investment hopes.
"Green party MP Caroline Lucas... told the Financial
Times that because the BoE [Bank of England] could
be willing to broaden its range of asset purchases,
the government [UK] should agree to allow the Green
Investment Bank to issue bonds so that any future QE
programme could include the purchase of such assets
by the BoE."
[COMMENTARY] The hope is that should
there be any new BoE QE program that it is
able to buy green bonds issued by the (UK)
government’s Green Bank. In particular, given the
government’s determination to build green
infrastructure to be more resilient to future
potential flooding devastation, the financing via
green bonds could help greatly to accomplish that.
Most especially if it could be paid for by money
printing from the BoE!
Mark Carney boosts green investment hopes, by
Pilita Clark and Chris Giles, March 24, 2014, The
Financial Times, UK.
Minority of (UK) savers invest ethically, but
majority want banks to be more ethical.
"While 28 per cent stated they wanted to be more
socially responsible in their own savings and
investments, just 6 per cent actually saved with an
ethical bank, with only 4 per cent investing in
socially responsible pensions or investment funds."
[COMMENTARY] As with many other
surveys of investors, this survey finds large
numbers of investors want to invest ethically. The
difficulties investors have are that mainstream
investing institutions almost everywhere are still
largely oblivious and uninterested in ethical
investing. Though these institutions profess to care
about an investor’s values, this and similar surveys
demonstrate what a sham that professed interest is.
Minority of savers invest ethically, but majority
want banks to be more ethical, by Kevin White,
March 14, 2014, FT Advisor, UK.
Indian Government Clarifies CSR Regulations.
"The activities that can be undertaken by a
company to fulfil its CSR obligations include
eradicating hunger, poverty and malnutrition,
promoting preventive healthcare, promoting education
and promoting gender equality, setting up homes for
women, orphans and the senior citizens, measures for
reducing inequalities faced by socially and
economically backward groups, ensuring environmental
sustainability and ecological balance... "
What companies can do under India’s new CSR law
is extensive. See the link below for a great
explanation of the law. Personally, though I’m
terrifically in favour of CSR, I have doubts about
legislating it this way. Companies that do CSR right
excel in the marketplace and in their stock prices.
These are the factors that really propel CSR.
An overview of CSR Rules under Companies Act, 2013,
by Ekta Bahl, March 10, 2014, Business Standard,
Corporate Social Responsibility Reduces Stock
Price Crash Risk. "We find that firms’ CSR
performance is negatively associated with future
crash risk after controlling for other predictors of
crash risk. The result holds after we account for
potential endogeneity. Moreover, the mitigating
effect of CSR on crash risk is more pronounced when
firms have less effective corporate governance or a
lower level of institutional ownership. The results
are consistent with the notion that firms that
actively engage in CSR also refrain from bad news
hoarding behavior and thus reducing crash risk. This
role of CSR is particularly important when
governance mechanisms, such as monitoring by boards
or institutional investors, are weak."
This a great study demonstrating the importance of
CSR in reducing stock price crash risk. It might
even win the Moskowitz Prize--the most important
prize in SRI. Both management and stockholders now
have an armoury of studies demonstrating the
benefits of CSR for every company! See
excellent article on this study.
Corporate Social Responsibility and Stock Price
Crash Risk, by Yongtae Kim, Haidan Li, and Siqi
Li, all at Santa Clara University - Leavey School of
Journal of Banking and Finance (Forthcoming),
February 14, 2014, USA.
Shareholders File Record-Breaking Number of
Social, Environmental Resolutions. "Investors
have filed 417 social and environmental shareholder
resolutions so far this year at least 50 more than
the same time in 2013 and 20 percent more than in
February 2012, according to an analysis of proxies."
The growing number of these resolutions
indicates that more and more investors are concerned
about ESG issues and that companies are increasingly
taking notice of them. This is a good
development--though I believe it’s just really
starting to get going.
Shareholders File Record-Breaking Number of Social,
Environmental Resolutions, March 6, 2014,
Environmental Leader, USA.
Top 100 TSX-V (TSX Venture Exchange) miners
shows that the best performing miners place strong
emphasis on social management. "Annually,
MacCormick reviews PWC′s Top 100 Junior Mining
companies by market cap. listed on TSX′s Venture
Exchange. The review analyzes those Top 100
companies against MacCormick′s in-house CSR index
which consists of 10 CSR categories and a 3-tier
rating system for each category. Of MacCormick′s Top
20 CSR reporters: 8 were exploration, 10 in
development and 2 in production. The report also
dives into the financial performance of those Top 20
companies for a closer look at financial indicators
from which to correlate financial and social
This is terrific news. Many ethical investors
don’t relate to mining, but it’s a necessary and
important aspect of our global economy. It should
just be conducted with high ethics and a keen
awareness of ESG factors. MacCormick’s CSR index of
junior mining companies is revolutionary and will
encourage this. I’m really keen to see how it
Diamonds In The Rough, press release, March 4,
2014, MacCormick IMC, Canada.
Apple, eBay, Gap, Intel throw weight behind
Climate Declaration. "A group of 140
California firms have reiterated calls for
[California] legislators to deliver ambitious action
on climate change with the release of a new
declaration signaling their support for policies
that serve to cut emissions and drive investment in
clean tech... ’We, the California-based companies
below, are proud to sign the Climate Declaration in
recognition of the economic opportunities associated
with reducing our greenhouse gas emissions, the
development of renewable energy and alternative
transportation fuels and the preservation of clean
water for ourselves and for future generations.’"
This is good for the environment and good for
business. These companies see the opportunity and
want California to continue to lead among American
states in climate regulations. Judging by who are
among the signatories to the declaration, it might
even get a response from Washington!
Apple, eBay, Gap, Intel throw weight behind Climate
Declaration, by BusinessGreen staff, March 3,
2014, GreenBiz, USA.
Powerful global finance institute fails to
train future leaders on sustainability. "By
skimming over environmental and social factors, is
the Chartered Financial Analyst Institute [CFA]
failing to train tomorrow’s financial leaders for
today’s sustainability challenges?"
They’ve found a formula that works so
well--having become the global standard
qualification for financial analysts (140,000
students)--that they don’t want to change. They
argue that the course content is arrived at by
consulting with the investment community. One can
only guess exactly who it is they might be
Powerful global finance institute fails to train
future leaders on sustainability, by Jo Confino,
March 4, 2014, The Guardian, UK.
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