Ethical Investing News/Commentaries
Commentaries by Ron
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Dalbar: Active Investors Do Better
Long-Term; Passive Investors Do Better Short-Term.
"The study concludes that the choice of active
or passive investing should be based largely on the
needs and preferences of the investor and the cost
of providing asset allocation and capital
preservation strategies that are not available in
The predominant trend in recent years has favored
passive funds. In fact, active management has been
widely ridiculed even by the likes of Warren Buffet. Now
comes Dalbar, a highly distinguished research authority
on these matters, adding fuel to the debate of active
versus passive investing.
Dalbar Announces Active versus Passive Analysis,
press release, February 27, 2017, Dalbar, USA.
Socially Responsible Funds Underperform. (Is
this true?) "In a new paper that will
appear in the April 2017 issue of the Journal of Banking
and Finance, a top scholarly journal, the authors study
over 2,000 funds. They argue that prior studies on SRI
or CSR funds are flawed because those studies simply
categorized funds as being either socially-responsible
or conventional. This categorization leads to too many
other differences between funds, and it ignores the fact
that firms can have varying degrees of social
So, in the new study, they compare low-CSR funds
to high-CSR funds. They find that high-CSR funds
underperform relative to low-CSR funds. Their evidence
is both compelling and robust."
We'll have to wait til the study is out to truly
critique it. Initially, my reaction is how the term
'CSR' is defined. Are the researchers only concerned
with social issues? Even with that, how is it defined?
Do the researchers include environmental and governance
factors? One thing is for sure, it'll likely be quite
Socially Responsible Funds Underperform, by Kenneth
A Kim, February 28, 2017, FA Magazine, USA.
The Evolution of Corporate Social
Responsibility Assurance – A Longitudinal South African
Study. "Although the extent to which
companies have provided independent assurance over their
CSR disclosures has steadily grown, the study also
revealed that the majority still did not. Although the
pool of CSR assurance providers has widened to become
more inclusive, contrary to the expectation that the
dominance of the Big 4 audit firms would gradually be
eroded, the study found that the Big 4 audit firms were
actually consolidating their position in this area."
I've long held that CSR disclosures should be
independently audited -- as per financial statements --
and the results available to all stakeholders. Though
the above study was South African based, it provides
some insight into the possible state of CSR auditing
today. Hopefully, similar studies will be done,
particularly in the USA, Europe, and Japan.
The Evolution of Corporate Social Responsibility
Assurance – A Longitudinal South African Study, by
Barry Ackers, February 25, 2017, Social and
Environmental Accountability Journal, UK.
The race is on for socially responsible
investing in Japan. "The Japanese market is
finally moving towards an ESG environment, similar to
the mature markets of the US and Europe."
This is good news for ethical investors globally. Historically,
Japanese companies have been reticent to disclose
much ESG information. This is now changing with Japan's
new corporate stewardship code and especially Japanese
institutional investors such as their huge Government
Pension Investment Fund demanding ESG data.
The race is on for socially responsible investing in
Japan, by Seiji Kawazoe, February 20, 2017, FT
How to solve the imbalance in ESG investing.
"Investors are actively demanding more information
about different components of environmental, social and
governance investments. As evidence of this, S&P Dow
Jones Indices, one of the world’s largest index
providers and a division of S&P Global, acquired Trucost
Plc, a carbon and environmental data provider, in
During a GreenBiz 17 program Wednesday, Dmitri
Sedov, vice president of innovation and digital strategy
at S&P Global, said the acquisition of Trucost will help
solve a gap between the demand for sustainable investing
and the supply of these investments."
We see many of the pioneer organizations associated with
ethical-ESG investing being acquired by mainstream
investment industry behemoths. In time, we will see if
these hookups truly benefit investors. Superficially,
this deal appears promising for ethical-ESG investors.
How to solve the imbalance in ESG investing, by
Keith Larsen, February 16, 2017, GreenBiz, USA.
Global financiers launch green investment
criteria. "Nearly 20 global banks and
investors have launched a set of criteria for
investments to be considered sustainable. The group,
which includes Société Générale and Hermes Investment
Management and totals around $6.6 trillion (£5.28tn) in
assets, outlined the Principles for Positive Impact
Such developments are welcome news. Developments like
this make sustainable investing -- in this instance
particularly for institutions -- a little
Global financiers launch green investment criteria,
by Jonny Bairstow, February 16, 2017, Energy Live News,
Nearly a Third of Non-Profit Institutional
Investors Say They Make "Mission-Related" Investments,
According to Cambridge Associates Survey.
"In a survey of 159 non-profit institutional investors
around the globe, 31% say they're currently engaged in
mission-related investing -- making investments designed
to align with or advance institutional goals or values
as well as provide financial returns. Of that group, 44%
say they have increased their mission-related allocation
over recent years, and 62% expect to grow their
mission-related allocation in the coming five years.
None of the institutions that currently make
mission-related investments expect to decrease their
We see continuing good
news that non-profit institutional investors are
increasingly aligning their investments with their
missions. It always surprised me how a charity invested
in companies that produced products or services
abhorrent to its mission. Often it was blamed on the
fund manager’s fiduciary responsibility. However, it was
often due to the timidity of the charity in properly
instructing their fund managers in what they expected
from them. See my editorial:
Unethical Investing by Charities.
Nearly a Third of Non-Profit Institutional Investors Say
They Make "Mission-Related" Investments, According to
Cambridge Associates Survey, press release, February
15, 2017, USA.
Ethical investment demand outstrips adviser
interest. "[UK] Fnancial advisers may be
seriously underestimating demand for responsible
investment, after research showed wide discrepancies
between adviser and consumer attitudes to investing
This is a problem everywhere and explains why the
percentage of ethical retail fund assets is only 2-4% of
all retail funds. It's an issue I've written about
numerous times over the years. This FT article should be
broadcast by all professional brokerage and financial
UK Ethical investment demand outstrips adviser interest.
by James Fernyhough, February 6, 2017, FT Advisor, UK.
Canadian RI Assets Surpass $1.5 Trillion, up
49% in two years: Canadian RI Trends Report.
"The 2016 Canadian Responsible Investment Trends
Report reveals that Canada’s responsible investment (RI)
market is continuing to experience rapid growth.
Responsible investment refers to the incorporation of
environmental, social, and corporate governance (ESG)
factors into the selection and management of
investments. This report provides a detailed overview of
recent trends in Canada’s responsible investment
These are terrific results! I'm particularly impressed
with the growth of 91% growth of assets among individual
Canadian RI Assets Surpass $1.5 Trillion, up 49% in two
years: Canadian RI Trends Report, press release,
February 2, 2017, RIA Canada, Canada.
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