Ethical Investing News/Commentaries
Commentaries by Ron
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Underperform, Boards Less Diverse New Study Finds.
"The study finds that controlled companies
generally underperformed non-controlled firms over
all periods reviewed in terms of total shareholder
returns, revenue growth, and return on equity."
firms refer to companies controlled by a major
stockholder. The study suggests that diversity of
boards and ownership provides better governance and
lower CEO pay, among many other findings.
Controlled Companies Underperform, Boards Less
Diverse New Study Finds, press release, March
29, 2016, Investor Responsibility Research
Center Institute (IRRCi)/Institutional Shareholder
Services Inc. (ISS), USA.
Rolex, Disney, Google Top World’s Largest Survey of
"The RepTrak® System measures the general public’s
perception of the world’s top companies on the seven
key rational dimensions of reputation: products and
services, innovation, workplace, governance,
citizenship, leadership and performance."
ethical investors might query some of the top names
on this list. However, it's all about perception and
perception influences markets -- and stock prices.
This is always a noteworthy list to peruse.
Rolex, Disney, Google
Top World’s Largest Survey of Corporate Reputations,
Catalyst Investors, March 22, 2016, USA.
90% of (global) retail investors have
trust in financial services: Survey.
"Investors expect higher levels of transparency than
ever before, holding their investment managers to
the highest ethical standards, and are laser-focused
on returns, according to a recent study from CFA
Institute, the global association of investment
it's the CFA Institute who compiled the survey it is
useful reading for all in the investment industry.
Compared to other surveys of trust in the
investment/financial industry, this one paints a
relatively rosy picture. (For CFA's actual report,
90% of retail investors have trust in financial
services: Survey, March 29, 2016, Moneycontrol,
New investors' site analyses UK
funds for their SRI styles and policies. "We
fill a gap in the market by helping (mainly)
financial advisers to understand and meet their
clients’ green and ethical investment goals more
easily. The recently revamped sriServices Fund
EcoMarket database tool is a comprehensive, ‘whole
of market’ database."
the site founders focus on its applicability for
advisors, I can see many individual UK ethical
investors using the site.
investors' site analyses UK funds for their SRI
styles and policies, March 2016, Fund EcoMarket,
The study of socially responsible
investing. "'It seemed like institutional
investors don’t necessarily care about a company
having a good rating on an environmental or social
parameter. But, they do care if the company has a
poor rating.' [Quoting Associate Professor Abhishek
Varma, Illinois State University]."
study looks interesting, but I have few details on
it so far. The article cited is worth reading by
ethical investors as it might provide additional
information they might consider in their stock and
portfolio selection process.
The study of socially responsible investing, by
Molly Hartrup, March 24, 2016, Illinois State
University News, USA.
G&A Institute & Trust Across
America Partner to Examine Trustworthiness for S&P
500® Companies Not Reporting on Sustainability.
"Results Show Higher Trust for Firms Reporting on
Their Sustainability Journeys."
results of this survey are unsurprising to me. In
fact, I'm surprised that the data didn't show an
even larger difference of trust between those
companies reporting on sustainability compared to
those that didn't. Nonetheless, it still makes a
good case for non-reporting companies to report on
sustainability and I congratulate the survey
sponsors for conducting the study and making the
G&A Institute & Trust Across America Partner to
Examine Trustworthiness for S&P 500® Companies Not
Reporting on Sustainability, press release,
March 24, 2016, Governance & Accountability
Global Islamic Wealth Management
Industry Faces Trust Deficit. " A global
survey on the Knowledge, Attitude and Practices (KAP)
of the Global Islamic Wealth Management Industry
conducted by Edbiz Consulting, a London-based think
tank, revealed that the global Islamic wealth
management industry is facing a trust deficit that
is hampering the growth of the industry.
'48% of the respondents said they
have never used any Islamic wealth management
products and services, citing lack of understanding,
lack of trust and preference to manage own wealth as
reasons for not subscribing,' said Dr Sofiza Azmi,
Group CEO of HD-Edbiz Group of Companies.
'This finding resonates with
interviews conducted with more than 50 leading
industry practitioners and experts. About 18% of
them said that convincing Muslim HNWIs to invest in
Sharia-compliant way is very difficult. There is
certainly a trust deficit when it comes to managing
wealth in a Shariah-compliant way,' she added."
trust is an issue for Islamic wealth managers -- and
we know is not a major issue for the socially
responsible-ethical investment industry -- may offer opportunities for SR-ethical
investment managers to manage funds for Muslim HNWI
Global Islamic Wealth Management Industry Faces
Trust Deficit, press release, March 24, 2016,
Top Index Funds Showing
Significant Interest In ESG. "Top index funds
are showing significant interest in environmental,
social and governance issues, said Bob McCormick,
chief policy officer for Glass Lewis, the large
proxy advisory services... He added a reason index
funds have a greater incentive to consider ESG
issues than other investors is because they can’t
sell their shares short term so they have to focus
on long-term environmental and governance matters
that could impact the value of their holdings."
interesting perspective is suggested here that as
index funds generally have a longer-term time
horizon than most other funds, they could be more
amenable to engaging with companies on ESG issues.
Top Index Funds Showing Significant Interest In ESG,
by Ted Knutson, March 21, 2016, Financial Advisor,
Ratings Now Available to Individual Investors
Globally. "The new Morningstar Sustainability
Rating™ for funds is now available on its North
American and European websites as well as in
Morningstar® Advisor WorkstationSM, the company's
web-based practice management platform for
it has come to pass! It will be fascinating to watch
the reaction of individual investors to this option.
Will they gravitate to higher rated sustainable
Morningstar Sustainability Ratings Now Available to
Individual Investors Globally, press release,
March 17, 2016, The Netherlands.
Sustainable Funds Are Walking the
Walk. "The results are impressive, if not
surprising, and clearly support the notion that ESG
funds are investing in companies with strong
sustainability performance to a much greater degree
than funds in the overall universe.
Nearly half of the ESG
funds--45%--received the highest Sustainability
Rating. That compares with only 10% of funds in the
overall universe (the ratings are normally
distributed within each Morningstar Category, with
10% receiving the highest--and lowest--ratings). And
80% of intentional ESG funds have ratings of High or
Above Average, compared with only a third of the
is a relief for most ethical fund managers! As
mentioned before, it could give these fund managers
a new advantage as investors noting the differences
in ESG fund scores possibly begin switching to funds
with higher ESG scores.
Sustainable Funds Are Walking the Walk, by Jon
Hale, March 17, 2016, Morningstar, USA.
Is Your Mutual Fund a Climate
Change Denier or Climate Champion? "Among 42
mutual fund companies whose voting we analyzed, nine
companies, including the world’s largest mutual fund
company Vanguard, failed to support a single
climate-related shareholder resolution in 2015. The
other eight are American Funds, American Century,
Blackrock, Fidelity, ING (Voya), Lord Abbett,
Pioneer and Putnam."
data that Rob Berridge and Jackie Cook present is
not surprising, though somewhat disappointing that
some of the world's largest mutual fund companies
are so disengaged in the climate issue. However,
with the growing interest among investors in ESG and
that Morningstar and MSCI have fund rankings
according to ESG criteria it's likely that such fund
companies will need to change their perspective --
or risk losing clients and assets.
Is Your Mutual Fund a Climate Change Denier or
Climate Champion? By Rob Berridge and Jackie
Cook, March 15, 2016, EcoWatch, USA.
Eighty One Percent (81%) of
the S&P 500 Index Companies Published Corporate
Sustainability Reports in 2015.
charted the rapid and significant uptake in
corporate sustainability reporting among the 500
companies -- over the years, sustainability
reporting rose from just 20% of the companies
reporting in 2011 to 81% in 2015."
obvious that companies have gotten the message that
CSR strategies can pay dividends. Not only has CSR
become the norm, but ESG analysis in stock selection
and portfolio construction is fast becoming the norm
too. We have come a long way since I started
advocating for ethical investing over forty years
Eighty One Percent (81%) of the S&P 500 Index
Companies Published Corporate Sustainability Reports
in 2015, press release, March 15, 2016,
Governance & Accountability Institute, USA.
What Motivates Companies to
Do Good—Altruism, or Guilt?
analysis suggested that most CSR programs are
implemented as a matter of good management practice,
or to atone for past bad behavior. The researchers
found that for many companies, investing in CSR
because they think it’s the right thing to do or a
good move for the business overall pays off by
improving the overall financial performance of the
When looking at market-based measures of
performance, firms that made decisions to
incorporate these programs into their business
strategies saw a boost. That gives some credence to
the theory that firms can in fact 'do well by doing
chalk this one up as another plus for CSR! This
study -- by researchers at respectable universities
reviewing the CSR activities of 4,500 companies over
19 years -- has credibility. (See it
What Motivates Companies to Do Good—Altruism, or
Guilt? By Gillian B. White, March 14, 2016, The
Does CSR create shareholder
wealth? "In our recent study, we attempt
to answer this question that has troubled managers
and scholars for the better part of the last four
decades. And what we observe after rigorously
analyzing data from a large sample of 1725 firms in
the United States for the years 2000-2009, is that
the answer is a characteristically academic one –
findings are worth a read by all ethical investors.
They truly make some fascinating observations,
particularly the role of marketing departments in
promoting key corporate efforts to certain key
However, I wonder if their findings
would've been any different if they looked at the
years 2010 to 2014 inclusive (five full years)? The
outperformance of companies leading with ESG in that
period has been generally noteworthy. Also, consider
that the largest review ever compiled -- on
2200 individual ESG studies -- found a
significant positive impact of ESG on corporate
Does CSR create shareholder wealth? By Saurabh
Mishra, McGill University, Canada, and Sachin Modi, Iowa State University, USA, March 7, 2016, LSE
Review, London School of Economics and Political
Ethisphere Announces the
2016 World’s Most Ethical Companies®.
"The World’s Most
Ethical Companies program honors companies that
excel in three areas – promoting ethical business
standards and practices internally, enabling
managers and employees to make good choices, and
shaping future industry standards by introducing
tomorrow’s best practices today. Honorees have
historically out-performed others financially,
demonstrating the connection between good ethical
practices and performance that’s valued in the
In 2016, 131 honorees were named spanning 21
countries and five continents and representing over
45 industries. In its 10th year, the list includes
14 ten-time honorees and 13 first-time honorees."
is a good list with a great pedigree. However, I do
wonder why the vast majority of companies honoured
are American! It could be that not many companies
outside the USA bother completing Ethisphere's
Ethics Quotient questionnaire. If they don't
complete it they don't appear considered for the
World’s Most Ethical Companies® Honorees, press
release, March 7, 2016, USA.
Introducing MSCI ESG Fund
Metrics. "We leverage our ESG Ratings
coverage of more than 6,000 companies (11,000 total
issuers including subsidiaries) and more than
350,000 equity and fixed income securities globally
to create ESG scores and metrics for approximately
21,000 multi-asset class Mutual Funds and ETFs
seems that MSCI is determined to create competition
to the new Morningstar/Sustainalytics company/fund
ratings' system. This is great news for investors
and fund managers. They'll be able to compare funds'
ESG performance using these two different
Introducing MSCI ESG Fund Metrics, March 2016,
Bond Market Asking `What Is
Green?' Curbs Climate-Friendly Debt.
second guessing whether to participate in green-bond
markets as scrutiny by environmental groups raises
the bar on what constitutes a climate-friendly
After quadrupling in size from 2012 to 2014, lifted
by investors tracking environmental performance in
addition to yield, the green bond market is expected
to slow for a second consecutive year, according to
Bloomberg New Energy Finance. Growth moderated to 28
percent last year and in 2016 may nudge ahead just 4
percent, to $50 billion, the London-based researcher
not sure if this is happening, but perhaps groups
like Friends of the Earth, Banktrack, and other
environmental groups should work with the Climate
Bonds Initiative and Green Bond Principles to decide
acceptable environmental criteria for green bonds.
So far, it seems this hasn't happened. Until it
does, the green bond market is restrained in
attaining its potential. Perhaps there could be
different grades of green bonds depending on their
Bond Market Asking `What Is Green?' Curbs
Climate-Friendly Debt, by Anna Hirtenstein,
March 5, 2016, Bloomberg, UK.
Third of ethical funds fail
Morningstar’s top sustainability rating.
"Any fund with
more than 50 per cent of its assets covered by a
company-level ESG score from Sustainalytics will be
rated, with the portfolio score then giving an
asset-weighted average of the ratings. Deductions
will be made to this score for companies involved in
The fund’s Morningstar portfolio sustainability
score is then ranked relative to at least 10 peers,
with the funds evenly distributed across the rating
– from one globe, or low, to five, or high."
not too surprised by the headline. It's also
important to understand Morningstar's criteria for
their ESG ratings.
Third of ethical funds fail Morningstar’s top
sustainability rating, by Laura Suter, March 1,
2016, Fund Strategy, UK.
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