E-newsletter of Investing for the Soul August 30, 2014
Top ethical investing news for August 2014
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!
U.S., int’l equities show greatest ESG growth potential. "Most asset managers believe that investors’ heightened focus on environmental, social and governance (ESG) strategies is a long-term 'secular' trend, according to a new report. Cerulli Associates discloses this finding in its August 2014 edition of 'The Cerulli Edge: U.S. Monthly Product Trends.' Asset managers surveyed by Cerulli have observed a moderate (65 percent) or significant (13 percent) increase in demand among clients and prospects for the United Nations-supported Principles for Responsible Investment (PRI) Initiative."
[COMMENTARY] The latter comment is
most interesting as it displays significant and growing interest in
matters pertaining to ESG among investors. This suggests companies
excelling in ESG might outperform peers with regard to stock prices. And
as readers here know, much research supports this view.
Is Sin Always a Sin? The Interaction Effect of Social Norms and Financial Incentives on Market Participants’ Behavior, Research Study. "Our results show that social norms and financial incentives have a powerful interaction effect in determining the behavior of market participants, suggesting that social norms can be crossed when motive and opportunity exist."
[COMMENTARY] What the findings of
these researchers suggest is that given sufficient financial incentives,
even ethical investors could succumb to investing in companies producing
products/services opposed to their personal values. This is an
interesting new area of research. It might also explain a lot about
investor motivation--where they always say they want to invest
ethically--yet only rarely invest in ethical investment products.
Trends in corporate social responsibility 2014, by Grant Thornton. "Businesses report an increase in drivers to move towards more environmentally and socially sustainable business practices. Cost management is the main driver globally, followed by customer demand and because it’s the ‘right thing to do’. How a business is perceived to be operating is also important in many countries, especially China."
[COMMENTARY] The report is useful
reading for ethical investors. It provides a glimpse as to how
executives currently see the utility of CSR in their own firms. You need
to register--which is free--to get the report.
Conflict minerals reports are filed, but what do they say? "The supply chain complexities will make it very difficult for most companies to ever definitively determine the conflict mineral status of their products. For those that eventually do, it may take years of due diligence efforts before they can credibly reach such determination."
The US SEC requirement that companies file Conflict Mineral Reports for
tantalum, tin, tungsten and gold is proving to be a bit of a sham at the
moment. According to this article, it seems companies aren't taking this
reporting too seriously at the moment. Part of it is that companies have
two years to come-up with answers. Another part is that suppliers are
frequently uncooperative. We'll have to see each year what progress is
being made. Ethical investors will need a lot of patience with this. At
least this subject is coming into the open and with investors and
consumers becoming more vocal on this subject, companies will have to
eventually take notice.
Generation Y's savings shortage may hit green investment. "Scepticism about the financial industry means 18-34 year olds are keeping savings as cash, reducing pot for much-needed green infrastructure funding."
As this article states, it's important that generation y understands and
makes green investing a priority or the future of the planet becomes
increasingly hazardous. Investment returns would suffer as well.
(Subscription required, free for first 4 weeks.)
Female clients' unique approach to investing. "As they do with most things, men and women think about investing differently. Heather Locus, principal at Balasa Dinverno Foltz, points to a meeting she had with a brother and sister to highlight those differences. Both had inherited funds, and while the brother said, 'Give me what's going to do the very best,' the sister sought out socially responsible investments for a good portion of the money."
[COMMENTARY] In every
survey I've seen concerning SR-ethical investing, women are more
favourably inclined towards it. This is something that investment
advisors seeking to maximize their 'book' might want to emphasize in the
marketing of their services. They should also note that, "According
to the Center for Talent Innovation, women control $11.2 trillion, or
39%, of the investible assets in the U.S." (Subscription
required—which is free.)
Pension beneficiaries prepared to sacrifice returns in favour of responsible investing. "Forty percent of pension participants are willing to forfeit part of their retirement income if the fund’s investment strategy matches their view on responsible investment, a survey has suggested."
[COMMENTARY] The researchers at TIAS
Business School of Tilburg University, Netherlands, also found that
those with higher education and incomes, as well as women, were more
likely to be comfortable with lower returns if investments met with
their views on responsible investment. Of course, this whole
premise--that one has to sacrifice returns for ethics--is wrong to begin
with! It just shows how much education is needed, not only in the
Netherlands but everywhere, that investing ethically can actually
Head-To-Head Comparison Of Top Global Household Products Companies On Environmental, Social And Governance Metrics. "This blog provides environmental, social and governance (ESG) performance metrics for four global household products: Colgate-Palmolive (NYSE:CL), Kimberly-Clark (NYSE:KMB), Unilever (NYSE:UL) and Procter & Gamble (NYSE:PG). My contribution is to provide readers with current analytics that go beyond financial metrics, to evaluate how well these companies perform on comparable environmental, social and governance – or ESG – metrics, also known as sustainability metrics."
Besides providing great ESG analysis of these companies, this blog post
shows readers how some professionals conduct such research.
GEMS study uncovers leaders, laggards in environmental management. "Along with my data provider, IW Financial, I [Peter Soyka] have just released a newly updated and expanded study, '2014 GEMS Benchmarking Analysis of U.S. Corporate Environmental Practices.' It identifies the U.S. firms with the strongest reported environmental policies and infrastructure and finds that — notwithstanding noteworthy improvements during the past several years — many publicly traded companies have limited discernible capability with which to manage complex environmental and sustainability issues."
study evaluates all the companies in the Russell 3000 stock index.
Overall, companies are getting better at disclosing their environmental
practices. Also, it seems that the bigger the company, the better it's
reporting. This is a useful article for ethical investors to read.
The socially responsible corporation? It’s a myth argues researcher. "Question of whether corporations could be socially responsible when you looked at all the components of the value chain or the individuals underlying this – the workers, the investors, and the managers. Whether you could have a socially responsible corporation when, in fact, the natural tendencies of the individuals in the corporation were, in the value chain of the corporation, were themselves not going to be prepared to sacrifice for their conscience, in some sense."
[COMMENTARY] Timothy Devinney, leadership chair in international business at Leeds University, UK, found that consumers, investors, and corporate employees will not always act socially responsibly or ethically and that there really isn't an 'ethical consumer.'
I believe what Professor Devinney is really describing has been observed many times in recent years: that individuals are only partly ethical and happy to cheat if it suits them. And it goes all the way back to their years at school. For instance, in a 2011 post, Free Markets Need Higher Consciousness of Participants, I wrote that, "Cheating by students has grown alarmingly in US schools, colleges and universities in recent decades. The highly respected US Educational Testing Service says that 'while about 20 per cent of college students admitted to cheating in high school during the 1940s, today between 75 and 98 per cent of college students surveyed each year report having cheated in high school.'" Cheating and poor ethics are everywhere!
Hence, we need a new, higher consciousness in society
before true CSR is possible. Nonetheless, I believe gains are being made
in this direction and am thus hopeful for the future for CSR.
(Unfortunately, the article linked to below might not be available to
Why sustainability leaders don’t impress Wall Street. "Investors don’t have the data they need, or understand how sustainability connects to creating shareholder value. And companies don’t know how to tell a story that’s relevant to Wall Street. What we have here is a multi-trillion-dollar failure to communicate."
[COMMENTARY] This is a great article
focusing on the soon to be published work of Sheila Bonini and Steven
Swartz at McKinsey & Company. Their research highlights ways in which
mainstream Wall Street and investors can connect on corporate
sustainability and how it relates to shareholder value.
McKinsey: company leaders rallying behind sustainability. "Some 43% said their companies are seeking to align their sustainability with their overall goals, mission or value, compared to the 30% that said this in 2011. McKinsey links this trend to business leaders themselves placing more importance on sustainability, the number of CEOs that described it as their top priority was double that seen two years ago."
[COMMENTARY] Survey results like this from a firm such
as McKinsey are credible. Also, indirectly, these results support
ethical investing. As more companies take sustainability to heart they
perform better on ESG issues, subsequently improving their
attractiveness to ethical investors.
The carbon taxes we're already paying. "The world's 3,000 biggest companies, according to a U.N. Environment Program report, cause $2.15 trillion in annual environmental costs, most of which are not accounted for in their profit/loss statements."
[COMMENTARY] This is a good article
describing the carbon 'taxes' that we're already paying and asks who
should pay them!
Featured New Book
Invest, Feel Good, Make a Difference: Breaking the Myths about
Sustainable and Responsible Investing, by Richard Essex, CreateSpace
Independent Publishing Platform, 2014.
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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 © 2014 Ron Robins. All rights reserved.