E-newsletter of Investing for the Soul                               December 30, 2015

 

Ron Robins, Editor. E-mail /289-271-0873            Latest news at: http://investingforthesoul.com/

Top ethical investing news for December 2015

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Largest-ever analysis of ESG investment studies sees ‘well-founded’ relation to profit. "The analysis of more than 2,200 academic studies and more than 60 review studies published since the early 1970s concludes that investment based on ESG criteria has a positive effect on corporate financial performance (CPF) that is ‘stable over time’.

The authors, including Timo Busch of the University of Hamburg, Alexander Bassen of the University of Reading and Gunnar Friede of Deutsche Asset and Wealth Management, say that 90 percent of the studies they reviewed showed a non-negative relationship between ESG investment and corporate financial performance. They also say the ‘large majority’ report positive findings."

[COMMENTARY] This is a phenomenal study and should put-to-rest any argument about ESG being unimportant to corporate profits. It might well win next year's Moskowitz SRI Prize! (Download study ESG & Corporate Financial Performance, PDF.)
Largest-ever analysis of ESG investment studies sees ‘well-founded’ relation to profit, by Adam Brown, December 24, 2015, IR Magazine, UK/USA.

Climate Bonds releases new Standard V2.0 - post COP21 global guidance for green bond market participants. "Climate Bonds Initiative has released the Climate Bonds Standard V2.0, the next iteration of an overarching multi-sector standard that allows investors and intermediaries to easily assess the environmental integrity of bonds claiming to be green and funding the low carbon and climate resilient future.

Standard V2.0 has been built on consultation with market actors, incorporates the latest amended Green Bond Principles and is a key part of Climate Bonds’ work to mobilise debt capital markets and develop sound and sustainable international green bond frameworks."

[COMMENTARY] As the market for green bonds escalates, it's imperative that some standards be incorporated in their structure, issue and marketing. I greatly welcome the Climate bonds initiative in this direction.
Climate Bonds releases new Standard V2.0 - post COP21 global guidance for green bond market participants, by Sean Kidney, December 22, 2015, Climate Bonds Initiative, UK.

Pension funds agree ESG is vital to investment returns. "The vast majority of pension funds (93%) say that environmental and social governance (ESG) issues are linked to investment returns, a significant increase since 2013, when only 81% viewed the link.

The Pensions and Lifetime Savings Association has released its annual survey which also found that there is near universal agreement that pension funds have stewardship responsibilities (98%)."

[COMMENTARY] Again, more evidence of the rise of ESG in the investment community. The massive belief of the surveyed fund managers that they have stewardship responsibilities for their investments is also highly encouraging to the hearts of ethical investors.
Pension funds agree ESG is vital to investment returns, December 21, 2015, Funds Europe, UK.

IBE Survey Highlights Key Public Concerns in Business Ethics. "The Institute of Business Ethics (IBE) recently released the findings of its latest survey on the British public’s opinion about business behavior. The survey revealed that the people’s general opinion about ethical business conduct has not shown any improvement over the last three years, with nearly 40 percent of the respondents still saying they believe British business behaves unethically."

[COMMENTARY] Possibly the percentage of people behaving unethically -- in some manor -- is probably similar to the 40% of UK public thinking that business behave unethically. After all, since businesses employ the majority of adults, they must largely reflect the ethics of those it employs.
IBE Survey Highlights Key Public Concerns in Business Ethics, by Vikas Vij, December 11, 2015, Justmeans, USA.

50 Best (US) Workplaces for Diversity. "Fortune and Great Place to Work partnered with Essence and People en Español to survey companies that make inclusiveness a top priority. Rankings were determined by employee feedback and the representation of racial and ethnic minorities and women."

[COMMENTARY] Among public companies, the top three are: Camden Property Trust (which was ranked #1 over all); Ultimate Software (#4); and Workday (#6). This is a must see list for those ethical investors who rate diversity highly when selecting investments.
50 Best (US) Workplaces for Diversity, Forbes, December 2015, USA.

Two contradictory studies! (Are they looking at the same parameters CSR versus ESG?)

1) How Ethical Compliance Affects Portfolio Performance And Flows: Evidence From Mutual Funds. "Using an asset-weighted composite CSR fund score based on firm-level ratings, we find that funds with high CSR scores display poor performance and strong performance reversal. Furthermore, high-CSR funds exhibit weaker performance-flow relationships and slightly stronger flow persistence."

[COMMENTARY] Well, funds with "high CSR scores display poor performance." Now go to 2).
How Ethical Compliance Affects Portfolio Performance And Flows: Evidence From Mutual Funds, Sadok El Ghoul, University of Alberta and Aymen Karoui, University of Quebec at Montreal (UQAM), December 4, 2015, Canada.

2) Responsible Investing Is Hot: ESG AUM Hits $21 Trillion. "According to HSBC, companies with significantly improving ESG indicators outperformed those who lagged by 26pp since 2008. So, by investing responsibly, you could also improve your returns."

[COMMENTARY] Furthermore, "HSBC’s analysis is in line with the broader academic literature, where 80% of studies have shown that prudent corporate sustainability programs tend to boost company performance."
Responsible Investing Is Hot: ESG AUM Hits $21 Trillion, by Rupert Hargreaves, December 10, 2015, Valuewalk, USA.

Northern Trust Survey: Majority of Institutional Investors Expect to Introduce Climate Risk Profiling Within Two Years. "Eighty percent of institutional investors surveyed at a recent event hosted by Northern Trust (Nasdaq: NTRS) in Stockholm expect their firm to introduce climate risk profiling within the next two years.

“The Nordic region has for many years had a strong emphasis on sustainable business, with many institutional investors demonstrating strong leadership addressing climate change risks.” More than 30 Nordic institutional investors were surveyed including some of the largest and most sophisticated asset owners in the world about their perspectives on sustainable investing and maintaining investment oversight."

[COMMENTARY] Scandinavia has a history of leading in CSR/ESG issues, so it's unsurprising that the survey got such good results. However, there's no doubt that ESG/climate change corporate initiatives are gaining ground. The COP21 Paris climate change talks are also infusing a new thrust for sustainability in corporations globally. The future is bright for ESG!
Northern Trust Survey: Majority of Institutional Investors Expect to Introduce Climate Risk Profiling Within Two Years, press release, December 8, 2015, Northern Trust, UK/Sweden.

Companies with greater carbon efficiency outperform markets. "According to a new report published by the world’s largest asset manager BlackRock, businesses that have been at the forefront of improving their carbon efficiency for the last three years have dramatically outperformed the ones that have been laggards in this area.

The report analyzed the stock market performance of over 1,850 companies that have joined the CDP (formerly, Carbon Disclosure Project). It includes companies across sectors, ranging from energy and auto giants such as BP and General Motors to technology leaders such as IBM."

[COMMENTARY] A study like this from the world's largest asset manager is likely to influence corporate boards globally. Blackrock is clearly showing that ethical investors positioned in companies with carbon reducing strategies -- especially compared to their peers -- offers the opportunity for superior financial returns.
Companies with greater carbon efficiency outperform markets, by Vikas Vij, November 30, 2015, Justmeans, USA.

Stronger Focus Needed on Business Ethics and Whistleblowing Arrangements: IBE Survey. "The Institute of Business Ethics (IBE) has published its Ethics at Work Surveys for Britain, France, Germany, Italy and Spain. The survey shows that about half of employees who aware of misconduct do not voice their concerns. According to Philippa Foster Back, Director of IBE, weak speak-up arrangements leave companies vulnerable. If managements do not know what is going on, they cannot protect their businesses against crisis.

The survey showed that 61 percent of those who did speak up said they were dissatisfied with the outcome. This percentage has more than doubled when compared with 2012."

[COMMENTARY] Unsurprising that ethics is still an issue at most companies. Generally, businesses reflect the ethics of the society where they operate. It's obvious that only in a highly ethical society will the majority of businesses behave with high ethics. I believe ethics is largely a societal issue. However, that's not to say that individual businesses should not attempt to be more ethical.
Stronger Focus Needed on Business Ethics and Whistleblowing Arrangements: IBE Survey,  by Vikas Vij, November 26, 2015, Justmeans, USA.

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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.

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