Ron
      Robins
        MBA

    Founder
   & Analyst

Media Coverage of
Investing for the Soul

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• The Financial Post

• Rogers Television's Money Line

• CBC Radio One's Metro Morning

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• New Directions Magazine

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Editorials

• See All
• 'Best In Class' Focus Provides Premium Returns
• Blogs for Ethical Investors
• Voluntary Simplicity? An Ethical Investing Perspective
• Can SRI Ratings Predict Stock & Portfolio Performance?
• Can SRI Ratings Predict Corporate Behaviour?
• Investing Returns: Virtue vs. Sin
• We Need Mandatory Corporate Social Responsibility (CSR) Reporting
• Top Ethical Investing Indices: A Global Overview
• Advisor: KNOW Your Client. Know their values!
• LOHAS - opportunities for ethical investors
• Everyone becoming a Cultural Creative
• Retiring the GDP (Gross Domestic Product)
• The Media & Government Statistics
• Unethical US Job Numbers?
• Unethical Statistics – the US consumer price index?

Shareholder Values

 
"Of the 1,003 investors surveyed, nearly half (49%) said that over the next 12 months they were likely to invest in a company or mutual fund looking to provide solutions for environmental problems."
-- Allianz Global Investors
    (USA) January 2008

"The survey finds that three-quarters of those interested in finding out more about the ethical credentials of a financial product or service said they are likely to take this into consideration when next buying a financial product or service."
-- Ipsos MORI/EIRIS
    (UK) November 2009

"... nearly half of all [Canadian] advisors said their clients had initiated discussions about ESG [environmental, social and governance] investments."
-- VenGrowth Assset
     Management Inc.
    (Canada) October 2008

December 22, 2009

‘Best In Class’ Focus Provides Premium Returns

by Ron Robins*

A research study released this past summer suggests that for optimal returns ethical investors need to include ‘best in class’ stocks in companies that they might usually shun. As we know, ethical investors usually ignore companies because they are involved in activities, products, or services they deem unethical or harmful—even if they have ‘high’ ethical or ESG ratings.

Published in the July/August 2009 edition of the Financial Analysts Journal, the study authors Meir Statman and Denys Glushkov made the following comment about their research, “[That] analyzing 1992–2007 returns of stocks rated on social responsibility... found that this tilt gave such investors an advantage over conventional investors. The advantage from tilting toward stocks of companies with high social responsibility scores is largely offset by the disadvantage from the exclusion of stocks of shunned companies.

[And, therefore,] socially responsible investors can thus do both well and good by adopting the best-in-class method in constructing their portfolios: tilting toward stocks of companies with high scores on social responsibility characteristics but refraining from shunning stocks of any company.” [Underlining added].

Now it is my belief that as a higher ethics and consciousness permeates society there will gradually be relatively fewer companies engaged in obviously destructive behaviours. Thus, there will eventually be a reduced need for negative screening and fewer companies to shun.

Yes, I know this sounds rather utopian to some readers. But especially in the spirit of a dawning new year, I remain an unflagging optimist about the direction of humanity. Hence, over the very long term I predict it will be possible for ethical investors to enjoy superior returns by only investing in the companies that sit well with their values.

* Ron Robins, MBA, is founder, Investing for the Soul, (http://investingforthesoul.com/), Huntsville, Canada. He advocates, writes and teaches on the subject of ethical investing. To contact him, e-mail to Ron Robins or call 705-635-3034.

© Ron Robins, 2009.