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"Thirty-eight percent of financial advisors express strong interest in recommending sustainable investments to their clients; 72% express some interest."
--
Calvert Foundation
   
(USA) June 2012

"Canadian investors are generally favourable towards SRI. A third (32%) said they are 'very' or 'somewhat' interested. [Another] 55 per cent indicated that they would consider SRI if the return was 'as good or better' than other investments... The majority of investors surveyed view SRIs as 'futuristic' (78%) and 'a win-win for the individual and society' (77%)."
--
Ipsos Reid/
    Standard Life
   
(Canada) October 2011

"78 per cent of UK investors are more likely to invest in a company with ethical practices, and 64 per cent are planning to invest in ethical funds in the next few years."
--
TD Direct Investing
   
(UK) October 2014

 
 

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        Links may only be valid for a limited time                                            October 31, 2014

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Europe retail market for socially responsible investing up 18 pct. "The European retail market for funds focused on socially responsible investing grew 18 percent to 127 billion euros ($161.82 billion) in the 12 months to June 2014, a report on Wednesday showed. The number of funds also rose, to 957 from 922 in the year earlier period, the report by Vigeo, which evaluates corporate responsibility, and fund analyst firm Morningstar said."

[COMMENTARY] France and the UK led the growth. It's great to see the SR-ethical retail funds significantly outpacing conventional funds in asset growth rates. This is a further sign that ethical investing is moving into the mainstream investing arena.
Europe retail market for socially responsible investing up 18 pct., October 29, 2014, Reuters, UK.

Are Canada's Corporate Giants Re-engineering US Politics? "Canadian corporations helped raise significant amounts of money for political parties in the United States and spent big bucks on lobbying efforts, according to a paper released Wednesday.

The report, from the Shareholder Association for Research and Education (SHARE), details involvement of Canadian corporations in Political Action Committees (PACs) and lobbying in the U.S. this year. The group is an advocate for ethical investment."

[COMMENTARY] It seems anyone, whether you are American or of some other nationality, can provide 'influence money' to US politicians. Though, when you read the actual numbers provided for this endeavour by Canadian companies, it's quite small. SHARE estimates it's about $1.2 million for the 60 large Canadian companies it investigated. A further $15 million was spent on their lobbying efforts. However, SHARE believes it's a lot more than the publicly available information provides and suggests Canadian laws need to be changed to make full disclosure of these sums. Investors should have the right to know this information too!
Are Canada's Corporate Giants Re-engineering US Politics? By Jeremy J. Nuttall, October 30, 2014, The Tyee, Canada.

Good for Harvard, good for the world: Why HMC embraced ESG with a passion. "Harvard Management Corporation (HMC) signed up to the UN-supported Principles for Responsible Investment (PRI) less than a year ago, but the company that manages the $36 billion Harvard University endowment is already moving rapidly to build environmental, social and governance (ESG) factors into every investment decision it makes."

[COMMENTARY] Harvard's endowment fund integrating ESG into all its investment decisions sends a strong message to all asset managers that they should do it too! For ethical investors, it means more money flowing into the stocks and bonds they're already invested in. It's good news ethical investors.
Good for Harvard, good for the world: Why HMC embraced ESG with a passion, by Simon Hoyle, Top 1000 Funds, USA.

Green bonds to exceed $40 billion in 2014. "The market for green bonds has existed in one form or another since about 2007, but only recently exploded. According to Bloomberg, $18 billion of green bonds has been issued as of early August 2014. That already matches, in seven months, the total volume done from the inception of the market in 2007 to the end of 2013, a six-year period. At this pace, the market will exceed $40 billion this year."

[COMMENTARY] This article provides a good overview of what's happening with the green bond market.
Green bonds to exceed $40 billion in 2014, by Suzanne Buchta, October 27, 2014, GreenBiz, USA.

Survey: half of surveyed financial professionals have offered SRI options to clients. "But Major Perception "Gender Gap" About SRI Seen Among Brokers, Investment Advisors; Broad Agreement Found that 'Millennial Investors' Will Require Major Changes by Financial Industry."

[COMMENTARY] This surveys findings are valuable reading for all financial professionals. What is also interesting is that most of the financial professionals who offered SRI options did so because clients requested it. Again, it's the market (clients) who lead and not the mainstream investment industry! In any case, it's great that it is happening regardless of the reticence exhibited by most investment professionals.
Survey: half of surveyed financial professionals have offered SRI options to clients, press release, October 23, 2014, First Affirmative Financial Network, USA.

Insurer Climate Risk Disclosure Survey Report & Scorecard: 2014 Findings & Recommendations. "Amid growing evidence that climate change is having wide-ranging global impacts that will worsen in the years ahead, Insurer Climate Risk Disclosure Survey Report & Scorecard: 2014 Findings & Recommendations, ranks the nation's 330 largest insurance companies on what they are saying and doing to respond to escalating climate risks. The report found strong leadership among fewer than a dozen companies but generally poor responses among the vast majority."

[COMMENTARY] Anyone who invests in insurance companies or who has insurance policies (probably everyone) might want to read this review. Obviously, if a costly climate event occurs and the company can't payout your policy, you might want to know the financial preparedness of the insurer before continuing to pay their premiums!
Insurer Climate Risk Disclosure Survey Report & Scorecard: 2014 Findings & Recommendations, Ceres, USA.

Mark Carney (Governor of the Bank of England): most fossil fuel reserves can't be burned. "The governor of the Bank of England has reiterated his warning that fossil fuel companies cannot burn all of their reserves if the world is to avoid catastrophic climate change, and called for investors to consider the long-term impacts of their decisions. According to reports, Carney told a World Bank seminar on integrated reporting on Friday that the 'vast majority of reserves are unburnable' if global temperature rises are to be limited to below 2C."

[COMMENTARY] I just saw (October 23) this report courtesy of The Responsible Investment Association (Canada). As one of the world's top central bankers, this is truly astonishing! Can anyone imagine Janet Yellen, Chair of the Board of Governors of the Federal Reserve, ever making a remark like that! She'd be 'fried alive.' As readers here know, I've long argued that many fossil fuel companies could have significant write-downs and losses as the affects of climate impact government policies entailing the reduction of our carbon footprint.
Mark Carney: most fossil fuel reserves can't be burned, by Jessica Shankleman, October 13, 2014, The Guardian, UK.

SRI in Latin America: early stages. "The financial world of socially responsible investing (SRI) is gaining support in Latin America. Governments, banks and investors are beginning to understand the importance of shifting assets into activities which support the triple bottom line. Sustainalytics, a sustainability research and analysis firm, recently published Inversión Responsabley Sostenible, a report that describes the context, growth and opportunity for SRI in Latin America, dividing it into three levels of involvement: Brazil as the first group, Chile, Colombia, Perú and México as the second, and the remaining countries in the third."

[COMMENTARY] Latin America could be become a significant area for ethical investing. This is a brief overview of the current state of affairs there for SR-ethical investing.
SRI in Latin America: early stages. By Julie Fahnestock, October 21, 2014, 3BL Media and Just Means, USA.

Good Money Week: 83% of young Brits not familiar with sustainable investment. "A poll commissioned by the UK Sustainable Investment and Finance Association (UKSIF) has revealed that the majority of 18-24 year olds do not know what sustainable investment is – with 37% even unsure of what a bank actually is."

[COMMENTARY] A mammoth hole in developed countries' education is that of money management. It's truly startling that one of the most important areas of life is not taught in school. Mind you, where money education exists, the curriculum is hugely influenced by establishment interests such as banks! Thus, though I'm in favour of money education, I'm not if it's a one-sided viewpoint promoting establishment interests.
Good Money Week: 83% of young Brits not familiar with sustainable investment. By Ilaria Bertini, October 20, 2014, Blue & Green Tomorrow, UK.

The 2014-2015 Ethics In Finance - Robin Cosgrove Prize For People Under 35. "The global Prize aims to promote greater awareness of the importance of ethics in finance among young people with an interest in accountancy, banking and financial services. This is the fifth edition of the Prize, originally launched in 2006, well before the topic of 'ethics in finance' became fashionable. The global financial crisis has since shown the relevance of the theme and the significance of the Prize. The Prize for Innovative Ideas for Ethics in Finance is open to young people, aged 35 years or younger, from throughout the world."

[COMMENTARY] This is a very worthy endeavour and I encourage those under 35 with an interest in this subject to submit their ideas. See press release: Global Ethics Prize Builds on Success. Website: Robin Cosgrove Prize.

(UK) ‘Ethical’ funds still pouring money into coal, oil and gas, new report finds. "Report by advisers Barchester Green names winners and sinners of ethical and environmental funds industry."

[COMMENTARY] I suspect this is the same in most countries. Ethical funds do this sometimes because some energy companies are diversifying into renewable/alternative energies and also by holding shares ethical funds may have some influence on how these companies operate. However, with the fossil fuel divestment movement growing, the potential for carbon taxes or caps as climate change advances, and the possibility of balance sheet write-down's due to 'stranded assets,' fossil fuel investments might become problematic for many ethical funds.
‘Ethical’ funds still pouring money into coal, oil and gas, new report finds, by Rupert Jones, October 18, 2014, The Guardian, UK.

Why clean energy might be cheaper than you think. "Wind and solar power often get a bad rap for being more expensive than energy produced from fossil fuels. But what happens when you factor in, say, the health costs of people breathing smoggy air? Or the financial impact of climate change’s effect on ecosystems and precious resources like water?

Those are some of the questions the European Commission sought to answer. A new report written for the EC includes those environmental costs and more in calculations of the total costs of producing electricity from various renewable and nonrenewable sources. The result? Wind and water are the best bargains for making megawatts."

[COMMENTARY] It's great that a major governmental body has finally produced these calculations! Of course, the input data will be controversial, but the discussion has to start somewhere. This study provides governments with some firepower for renewable energy. Incidentally, in their calculations, solar is not that much expensive than wind. Gas and coal powered plants are much more expensive.
Why clean energy might be cheaper than you think, by Sam Bliss, October 14, 2014, grist, USA.

Are Companies Still Committed to Sustainability? "New Business Models: Shared value in the 21st century, commissioned by Enel Foundation, finds that 66 percent of companies believe there is a link between sustainability and long-term financial performance (see chart). More managers also understand the wider importance of sustainability and increasing efforts to embed it into their strategies.

The report also shows an increasing minority of business managers who do not believe there is a link between sustainability and long-term financial performance. This is up to 11 percent — an increase from 6 percent in a similar survey carried out in 2011."

[COMMENTARY] The article's headline gives the impression that many or most companies were committed to sustainability, but now might be faltering in that commitment. I would argue that it is only a small percentage of companies that have ever been really committed to sustainability and that number is growing, but not nearly as fast as is necessary to help mitigate or stem the problems of climate change. In the US particularly, among corporate leaders--who are mostly Republican--only a minority believe in climate change.
Are Companies Still Committed to Sustainability? October 14, 2014, Environmental Leader, USA.

Fortune 500 companies spend more than $15bn on corporate responsibility. "The research, carried out by economic consulting firm EPG, found that there was a clear difference in how US and British companies approached CSR, but that on both sides of the Atlantic spending was dominated by only a handful of groups. In-kind donations, such as donating free drugs to health programmes or giving free software to universities, accounted for 71 per cent of the $11.95bn US spending on CSR.

In the UK, while donating goods and services in kind was the largest component of the $3.25bn CSR activity, it totalled just 46 per cent of the total. Employee volunteering and fundraising made up 34 per cent and cash contributions 20 per cent."

[COMMENTARY] This study had a very narrow definition of CSR: mostly how much companies and employees give to outside groups. I don't think the researchers nor the FT should've used the term CSR, but rather, 'philanthropic contributions' would've been a more appropriate term. There are many definitions of CSR, but one that is frequently used is from Mallenbaker. Quote, "CSR is about how companies manage the business processes to produce an overall positive impact on society."

Though CSR spending using this definition would be extraordinarily difficult to calculate, it will be hugely greater than the $15bn mentioned in this study!
Fortune 500 companies spend more than $15bn on corporate responsibility, by Alison Smith, October 12, 2014, The Financial Times, UK.

Ron Robins appeared on America Meditating radio show, interviewed by Sister Jenna. In the show I discuss the relevance of spirituality and Transcendental Meditation® to investing and economics. I emphasize that gaining individual inner fulfillment is the only means to solving our individual and collective financial and economic difficulties.
Ron Robins on America Meditating radio show, October 7, 2014, USA.

Impact investing market grows 132% from 2011-2013. "Responsible investment strategies grew at a much faster rate than the European market as a whole between 2011 and 2013, according to research by the European Sustainable Investment Forum (EUROSIF)."

[COMMENTARY] The study is useful reading for everyone in the investment industry. Though you might want to read it on the weekend! It's a large and extensive report. I find it particularly interesting that portfolio strategies excluding particular stocks or industries involve "41% (€7 trillion) of European professionally managed assets." Many people might think it's tobacco and alcohol stocks that are the largest excluded segments, but no, its cluster munitions and anti-personnel landmines that are. It'll be interesting to follow how fossil fuel divestments gain traction in future years.
Impact investing market grows 132% from 2011-2013, by Stephanie Baxter, October 9, 2014, Professional Pensions, UK.

Japanese Investors Adopting New Stewardship Code (Principles for Responsible Institutional Investors). "Japanese Financial Service Agency (FSA) launched a Japanese version of 'Stewardship Code' in February 2014, inviting institutional investors to sign up. Modeled on the British Stewardship Code adopted in 2010, these Principles for Responsible Institutional Investors were set out as a code of behavior for institutional investors who hold corporate stocks...

As of May 2014, three months after it was launched, 127 institutional investors had announced their intention to adopt it. The number of the investors increased to 160 as of August 2014. The Government Pension Investment Fund (GPIF), managing about 130 trillion yen (about U.S.$1.29 trillion), is the biggest among them."

[COMMENTARY] Unlike some other 'stewardship codes' the Japanese version does not explicitly cover environmental or sustainability issues. Nor is the code legally binding. Nonetheless, it does codify important governance factors regarding corporate behaviour that should be helpful for ethical investors.
Japanese Investors Adopting New Stewardship Code (Principles for Responsible Institutional Investors), by Junko Edahiro, October 6, 2014, Japan for Sustainability, Japan.

War – a minefield for ethical investors. "'The world is changing,' says Ron Robins, a Niagara Falls, Ont.-based analyst who founded an ethical investing advice website called Investing for the Soul. 'Investors in sin industries may see their returns suffer due to government austerity programs,' he says.

Governments facing deficits, unfunded pension liabilities and rising health-care costs find it irresistible to boost taxes on the sin industries, particularly tobacco, alcohol and gaming, he says, eventually driving away consumers. Meanwhile, more socially responsible portfolios typically include sectors that are on the rise in the 21st century, he adds – finance, technology, medical equipment, clean energy, consumer gadgets and so on."

[COMMENTARY] I was pleased the writer, David Israelson, used these quotes of mine, especially because I believe most conventional investors seriously underestimate the ramifications of most governments' mammoth unfunded liabilities as well as the financial impacts of required adjustments concerning climate change. Thus I suggest that ethical investors are in a superior position to 'sin' or conventional investors with regards to long-term investment returns.
War – a minefield for ethical investors, by David Israelson, October 6, 2014, The Globe & Mail, Canada.

New Numbers Show Increased Profits from ESG, Climate Action, and Sustainability Communications. "A recent study by New Amsterdam Partners finds that stocks with higher ESG ratings deliver superior returns and lower price volatility... CDP, formerly the Carbon Disclosure Project, has released a study that shows... an 18 percent higher return on equity by companies addressing climate change over their peers, and a 67 percent higher return than companies that do not disclose on climate change. Dividends to shareholders were also higher, by 21 percent."

[COMMENTARY]  With report after report showing that companies rated highly on ESG factors perform better financially and offer superior stock returns, when will mainstream investors wake-up and fully integrate ESG criteria for picking stocks? This demonstrates how structurally impaired is the mainstream investment world. Ethical investors can now enjoy their 'superiority'.
New Numbers Show Increased Profits from ESG, Climate Action, and Sustainability Communications, by John Howell, October 2, 2014, 3BL Media, USA.

Pension funds still concerned activist stance could damage returns. "Two-thirds of the pension funds surveyed – 35 in total, with nearly €1.2trn in combined assets – agreed that the greatest ESG risk facing a board was that of underperformance due to ethical investment decisions."

[COMMENTARY] This is the central issue for getting pension funds onside for ESG-ethical investing. And it goes back to fiduciary duties and how they're interpreted. If they invest for ethical reasons and the investment turns sour, the pension fund boards feel they could be found irresponsible in their fiduciary duties. So, the real point is--and it depends upon jurisdiction and whom they're managing the funds for--they must be able to demonstrate financially sound reasons when investing with an ESG-ethical investing focus. And that, in most cases, should not be too hard to do. Let's face it, many boards are just too conservative and don't want to 'rock-the-boat' to reorient themselves even to potentially higher returns by investing with an ESG-ethical orientation.
Pension funds still concerned activist stance could damage returns, by Dominic Gane and Jonathan Williams, October 1, 2014, IPE, UK.

Will There Be Enough ESG Opportunities To Meet Demand? "But even as 87% of asset managers surveyed in the report, The Cerulli Edge: U.S. Monthly Product Trends (August 2014), said they viewed the growing awareness about ESG investing as a secular trend, the vast majority of them said it’s only somewhat important to offer it. Does that mean they’ll be slow to roll out products or invest in the space?"

[COMMENTARY] It seems a strange headline, but what they're saying is that if most asset managers go for ESG screened portfolios, there might not be enough ESG eligible stocks around. Well, what a great day that'll be! I think the study authors might be overlooking the fact that when company's see their peers with higher ESG ratings and higher stock prices, they will gravitate to improve their own ESG performance. Ideally, the majority of companies would then also become high ESG performers. True, this would likely have the effect of lowering ESG stock premiums--but hey, it'll mean higher profits too for most companies, and thus, higher stock prices everywhere.
Will There Be Enough ESG Opportunities To Meet Demand? October 1, 2014, FA Magazine, USA.

How solar can become the world’s largest source of electricity. "One, with the right policies in place, solar could be the largest provider of global electricity by 2050.... The second interesting bit is that IEA [International Energy Agency] has gotten much more bullish on PV [photovoltaic], even since May. The agency now sees it providing 16 percent of total global electricity by 2050 (in the 2DS scenario), up from less than 1 percent today."

[COMMENTARY] The fact that the establishment's energy agency, the IEA, is now so very bullish on solar should say to all the doubters that they should give up their doubts. The IEA observes that, "Based on its competitive advantage in distributed applications, PV is unbeatable by any generation technology, distributed or not." Still, ethical investors have to be careful. In any burgeoning technology there are always winners and losers. But this is great news for the environment.
How solar can become the world’s largest source of electricity, by David Roberts, September 29, 2014, grist, USA.

Ethiquette: New interactive responsible investment Web platform. "Fabien Durif, professor at UQAM's School of Management and director of the latter's Responsible Consumption Observatory (RCO), and Brenda Plant, senior consultant at Ellio, proudly announce the launch of Ethiquette, a new, independent, interactive, educational Web platform dedicated to responsible investment (RI). The new tool follows in the wake of the findings of a study entitled 'Québecers and Socially Responsible Investment: Portrait for 2014' , published in February of this year. According to this study, individual investors were found to be little aware of responsible investment (RI), and information available to them insufficient to elucidate the complexity of RI financial products."

[COMMENTARY] This new ethical investing tool for Québecers could be most helpful to furthering ethical investing in Quebec and Canada, generally. I wish the venture every success.
Ethiquette: New interactive responsible investment Web platform, press release, September 26, 2014, Ethiquette, Canada.

Launch of Solactive CK Low Carbon Indices. "The Solactive CK Low Carbon Index family is the first in the industry to use the Sustainable Industry Classification System™ (SICS®), established by the Sustainability Accounting Standards Board® (SASB®) to categorize industries based on resource intensity, sustainability impact, and sustainability innovation potential.

A defining feature of these Low Carbon Indices is that they ensure a minimum 50% reduction in carbon intensity against the market benchmarks, as verified by South Pole Carbon."

[COMMENTARY] These new indices represent a unique and interesting approach for sustainable investing. Congratulations to the sponsors. Though launched September 25, I couldn't find a link to them for current values and holdings.
Launch of Solactive CK Low Carbon Indices, press release, September 25, 2014, Corporate Knights Capital and Solactive, September 25, 2014, Canada/Germany.

Socially Responsible Investments Can Match Broader Market Gains: TIAA-CREF. "A recent TIAA-CREF white paper authored by Lei Liao and Jim Campagna found that investors with a conscious don’t have to sacrifice gains to put their money where their beliefs are. Liao and Campagna analyzed the performance of several leading equity-focused SRI indexes–the Calvert Social Index, Dow Jones Sustainability U.S. Index (DJSI U.S.), FTSE4Good US Index, MSCI KLD 400 Social Index, and MSCI USA IMI ESG Index–in relation to the performance of broader benchmarks. They found 'no statistical difference' in the SRI index’s returns when compared to the broader market."

[COMMENTARY] Well designed studies on SRI vs conventional investment portfolios consistently demonstrate that there's no performance loss by applying SRI screens. In fact, the majority of studies using ESG criteria demonstrate superior stock returns. TIAA-CREF has over $500 billion in assets.
Socially Responsible Investments Can Match Broader Market Gains: TIAA-CREF, by Teresa Rivas, September 25, 2014, Barron's, USA.

Montreal Carbon Pledge Attracts Large Institutional Investors. "A group of large institutional investors have signed on to the Montreal Carbon Pledge, agreeing to measure and publicly disclose the carbon footprint of their investment portfolios on an annual basis. Overseen by the UN-backed Principles for Responsible Investment, the pledge hopes to attract $3 trillion of portfolio in time for next year’s UN climate change conference."

[COMMENTARY] The pledge is good news for those of us interested in this issue. One concern though: how smaller listed companies have the resources to gather such information.
Montreal Carbon Pledge Attracts Large Institutional Investors, by Doug Watt, September 25, 2014, SRI Monitor, Canada.

US Sustainable Investment Association calls for US Government to demonstrate leadership in climate crisis and set price for carbon. "National governments and multilateral organizations must create the framework to enable the additional trillions of dollars in investments needed in low-carbon technologies and climate change adaptation. We urge the US government to demonstrate leadership by supporting multilateral efforts to impose a meaningful price on carbon and to stop subsidizing carbon pollution. With these policy signals, investors can fully rise to the challenge of building the low-carbon future."

[COMMENTARY] Though I agree with the above sentiment I first believe that there has to be a global understanding of what are the real total societal costs of different types of energy production--and Britain's Carbon Trust has hit this nail on the head.

From a Carbon Trust September 23, 2014, press release, "The redefinition of the electricity cost calculation from the most prominently used Levelised Cost of Electricity (LCoE), to Society’s Cost of Electricity (SCoE), means additional factors not normally accounted for are included which presents a more complete picture on the cost-benefit of energy. Additional factors include subsidies, grid access costs, variability costs, social costs, economic benefits and geopolitical impact."

Were this new definition adopted, many renewable and alternative energy sources would demonstrate superior long run financial returns and beneficial societal and climate impacts. Then, governments will be able to more easily regulate in ways that favour renewable and alternative energy. Until then, it's an uphill battle to convince the likes of US Republicans!
US Sustainable Investment Association calls for US Government to demonstrate leadership in climate crisis and set price for carbon, press release, September 22, 2014, US SIF: The Forum for Sustainable and Responsible Investment, USA.

Site of interest: Climate Bonds Initiative. "The Climate Bonds Initiative is an international, investor-focused not-for-profit. It's the only organisation in the world focusing on mobilizing the $80 trillion bond market for climate change solutions."

[COMMENTARY] It has several high level partners, but needs more of them to get off the ground in a big way. I'm sure it will happen. The site has some useful resources for ethical investors under the tab, 'Resources.'
Climate Bonds Initiative, UK.

Rockefellers, Heirs to an Oil Fortune, Will Divest Charity From Fossil Fuels. "John D. Rockefeller built a vast fortune on oil. Now his heirs are abandoning fossil fuels. The family whose legendary wealth flowed from Standard Oil is planning to announce on Monday that its $860 million philanthropic organization, the Rockefeller Brothers Fund, is joining the divestment movement that began a couple years ago on college campuses."

[COMMENTARY] This is significant! It brings into public awareness that despite the hoopla about shale gas and oil, the future for fossil fuels is growing dimmer. The Rockefellers are to be congratulated. Their precedent could set the stage for many others to divest themselves of fossil fuel investments. It could increase the funds moving towards alternative and renewable fuels. It's a good day for investors oriented to sustainable investing.
Rockefellers, Heirs to an Oil Fortune, Will Divest Charity From Fossil Fuels, by John Schwartz, September 21, 2014, The New York Times, USA.

Investment giants are demanding climate action, so why aren't corporates delivering? "As investors renew calls for climate action, a survey shows nine out of 10 investors see sustainability as a competitive advantage - so why are the firms they invest in not making faster progress?

Yesterday saw the latest intervention from many of the world's largest institutional investors, as more than 340 companies with over $24tr (£14.7tr) of assets under management issued a fresh declaration calling for world leaders to deliver 'stable, reliable and economically meaningful carbon pricing' and increased support for clean technologies."

[COMMENTARY] My impression is that most company CEOs believe they're performing better on sustainability issues, but except for some key outliers, investors don't see it. Thus, investors want regulatory changes to force companies to be more sustainable. This is a good article for ethical investors to read.
Investment giants are demanding climate action, so why aren't corporates delivering? By James Murray, September 19, 2014, BusinessGreen, UK.

New report (from UN Principles for Responsible Investment) shows that ESG can mitigate risk, provide value in debt capital markets. "Analysis of Environmental, Social and Governance (ESG) issues such as corruption and climate change should be considered as a natural fit for fixed income investors as it can help to manage risk and identify credit strength, according to a new report released by Principles for Responsible Investment (PRI).

The report is intended as a guide for fixed income investment managers and their clients on how to incorporate ESG into their investment strategies to gain the available information advantage."

[COMMENTARY] That latter point, "to gain the available information advantage," is really what will increasingly attract fund managers. Not only have we seem inordinate confirmation of higher returns when ESG analysis is applied to equities, but that same type of confirmation is coming with fixed income investments. Most ethical investors have only thought of applying ESG to their stocks. This is a prompt to them that they should also apply such values and analysis to their fixed income investments as well.
New report shows that ESG can mitigate risk, provide value in debt capital markets, September 18, 2014, KFW Group, Germany.

Shares prices boosted by corporate sustainability policies, says University of Oxford study. "The University of Oxford’s Smith School of Enterprise and the Environment and Arabesque Asset Management, a sustainable investor, carried out a so-called meta-study of more than 190 academic studies and other literature on the impact of environmental, social and governance (ESG) policies on performance.

They found that corporate sustainability helps to lower a business’s cost of capital and boosts a company’s operating performance.

In addition, 80pc of studies – 31 out of 39 – showed a “positive correlation” between sustainability and stock market performance."

[COMMENTARY] Send this (the full report) to all those advisors and fund managers still dubious of socially responsible-ethical investing! Their claims that such investing lowers returns are nonsense.
Shares prices boosted by corporate sustainability policies, by Ben Martin, September 15, 2014, The Telegraph, UK.

Shareholder pressure fails to promote sustainable practices – survey. "Barely one in 10 companies feel compelled to improve their sustainability record, despite pressure from institutional investors, a study by the UN-backed Principles for Responsible Investment (PRI) has found."

[COMMENTARY] The criticism seems to be that shareholder activism concerning corporate sustainability efforts is too diffuse, short-term in nature, and not focused on specific, identifiable actions that companies can undertake. One great finding: 80% of executives viewed sustainability as a key competitive advantage!
Shareholder pressure fails to promote sustainable practices – survey, by Jonathan Williams, September 12, 2014, IPE, UK.

Banks showing limited commitment to responsible investing. "Only 7% of banks surveyed by Sustainalytics report that the share of responsible assets is more than 5% of total assets under management. Nearly all of these institutions are from Europe, with three from North America and one from South America.

Another 96 institutions (27%) either have less than 5% of AUM dedicated to RI assets or do not disclose the value of their RI assets. Two hundred and forty-one institutions (67%) don’t provide any evidence of RI assets under management."

[COMMENTARY] The research findings of the Sustainalytics survey are quite an indictment of western banking. In comparison with the investment industry--which is increasingly applying ESG in stock and portfolio selection--banking institutions are way behind.
Banks showing limited commitment to responsible investing, by Doug Watt, September 12, 2014, SRI Monitor, Canada.

Global water availability 'could limit fracking developments'. "A new report that looks into the potential environmental effects of fracking has revealed that drilling and fracturing shale gas wells poses a 'significant risk' to freshwater supplies across the globe."

[COMMENTARY] I might add a huge risk to geological stability (earthquakes) as well. All the excitement in the US about what fracking means for their gas and oil supplies could be severely hampered as the environmental problems associated with fracking become known and the industry forced to become liable for environmental and human health damages and costs. Many companies in this industry will eventually have 'stranded assets.' That means, gas and oil assets that has to be written down, greatly impairing the financial results of many, many of these companies.
Global water availability 'could limit fracking developments,' September 9, 2014, edie newsroom, UK.

Swiss pension fund members willing to sacrifice returns for sustainability. "More than 70% of pension fund members in Switzerland want their schemes to apply sustainability criteria when selecting investments, according to a survey commissioned by RobecoSAM.

Approximately 40% of the 1,200 participants surveyed said they would be willing to sacrifice returns in exchange for sustainable investments, with 20% of that number willing to give up as much as half the return.

More than 70% of respondents said they were convinced the application of ESG criteria would lead to more cautious investment decisions and probably even better ones."

[COMMENTARY] Note the latter comment that plan participants actually expected possibly superior returns by investing sustainably! Too many times these types of questionnaires start with the premise that investing in sustainable, socially responsible, impact, or ethical investments, must lower returns. Now we see that not only in this survey, but in many such surveys, investors/plan participants probably expect better results from investing with ESG, etc., criteria. This is why we're seeing asset/fund managers everywhere beginning to incorporate ESG analysis in their portfolio selection criteria. It's about time too!
Swiss pension fund members willing to sacrifice returns for sustainability, by Barbara Ottawa, September 9, 2014, IPE, UK.

Study links high ESG ratings to positive investment portfolio performance. "Asset managers can create better-performing portfolios by excluding stocks with lower environmental, social and governance (ESG) ratings, according to new research. The study by New Amsterdam Partners used the Thomson Reuters Corporate Responsibility Ratings, which screens the ESG ratings of almost 5,000 companies."

[COMMENTARY] Of course, one needs to understand all the screening parameters and methodologies of this study to competently remark as to its conclusions. Nonetheless, at face value and considering the reputation of the study's sponsors, the study appears to offer further confirmation that screening companies for their ESG performance can be profitable.
Study links high ESG ratings to positive investment portfolio performance, by Tom Revell, September 5, 2014, Blue & Green Tomorrow, UK.

How to make Wall Street notice sustainability leaders. "As Joel Makower noted in August in 'Why sustainability leaders don’t impress Wall Street,' (GreenBiz) investors seem unconvinced that strong sustainability performance delivers shareholder value. More specifically, he argues that investors don’t have the data they need to connect the dots."

[COMMENTARY] This article harps on themes I've been talking about for many, many years. In particular, the lack of ESG reporting standardization, independent assessment of data, and direct relevance to corporate success and profits. Daniel Esty has done a good job in presenting this case. It's important reading for all concerned with ethical investing.
How to make Wall Street notice sustainability leaders, by Daniel C. Esty, September 2, 2014, GreenBiz, USA.

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