February 2011

Deutsche Bank Releases Climate Change Investing Report. – [COMMENTARY] “A DB Climate Change Advisors (DBCCA) report released today, ’Investing in Climate Change 2011’, examines the risks associated with climate change investing across different asset classes and provides a framework to understand how asset managers can manage these risks. In the report, DBCCA argues that a major shift in investor attitudes is taking place: leading institutional investors around the world to undertake this analysis because of a growing realization of the potentially profound impact climate change may have on their existing portfolios.” More good reading for ethical investors on the subject of climate change investing.
Investing in Climate Change 2011: The Mega-Trend Continues – Exploring Risk & Return, February 2011, Deutsche Bank, UK.

US Green Chamber Of Commerce Launched. – [COMMENTARY] “The U.S. Green Chamber, launched last weekend, is the evolution of the Green Chamber of San Diego, a spinoff of a Chamber of Commerce chapter in San Diego County. Now, with a national focus and an ever-expanding membership roster, the group hopes to take its successes, and its membership of about 250 companies — mostly in Southern California, but with some members across the country — and scale them up to the national level.” I think the idea of such an organization on the national and even international level is long overdue. Ethical investors might want to pay attention to the membership of this organization. It might just offer clues as to whom they favour for their investments.
US Green Chamber Launches as a Complement to Chamber of Commerce, by Matthew Wheeland, February 24, 2011, GreenBiz, USA.

Ceres Critical Of Weak Corporate Climate Reporting Suggests How Such Reporting Should Be Done. – [COMMENTARY] “The Ceres report, developed with input from its 90-plus member Investor Network on Climate Risk, outlines generally weak climate disclosure to date by businesses and steps for improving such disclosure, especially in annual 10-K financial filings that are next due from companies by March 31, 2011. It comes just a week after the consulting firm Mercer issued a new study warning that climate change could increase investment portfolio risk by 10 percent over the next 20 years.”

This type of positive commentary and encouragement for better climate change reporting is greatly needed. Unless climate change reporting is of a high standard, how can ethical investors and other stakeholders understand what companies are really doing? Well done Ceres.
New report outlines what companies should be disclosing on climate change risks and opportunities, press release, February 25, 2011, Ceres, USA.

Shareholders In US Companies Have Lodged 360 Resolutions. – [COMMENTARY] “… the As You Sow foundation [reports] nearly 290 proposals are still pending meaning that they will usually go to an AGM vote. Of the total filed resolutions, 131 are either on environmental issues or requests for sustainability reports. A further 84 cover political contributions. Two other major issues —each with about 45 resolutions—are calls for workplace and corporate board diversity reforms and labour and human rights actions.” Shareholder activism is growing and companies have to be more responsive to their demands.
Shareholders in US companies have lodged 360 resolutions, February 25, 2011, Responsible Investor, UK.

The State of Engagement Between U.S. Corporations And Shareholders. – [COMMENTARY] “There′s both ’consensus and dissonance’ between investors and companies in the US, according to a new study for the Investor Responsibility Research Center Institute conducted by ISS.” This is a useful report for ethical investors interested in engaging with companies.
The State of Engagement between U.S. Corporations and Shareholders, February 25, 2011, Responsible Investor, UK.

Investors Maintain Support For Annual Pay Votes. – [COMMENTARY] “Investors continue to support annual advisory votes on executive compensation by a 2-to-1 margin over a triennial frequency, according to ISS data as of Feb. 23, which includes vote results from 13 S&P 500 and 40 Russell 3000 companies.” Personally, I agree with the annual review.
Investors Maintain Support for Annual Pay Votes, by Edward Kamonjoh, February 24, 2011, ISS, USA.

Bloomberg Announces Its Islamic Finance Platform (ISLM) & Malaysian Ringgit (MYR) Sukuk (Bond) Index. – [COMMENTARY] “Today, Bloomberg‘s Professional division announced the launch of a Bloomberg Islamic Finance Platform (ISLM), which will provide tools and services for investors who want to be compliant with Shariah law. It also announced the launch of a Malaysian Ringgit (MYR) sukuk index to provide a benchmark for MYR sovereign sukuk investments, in conjunction with the Association of Islamic Banking Institutions Malaysia (AIBIM).”

I have written in The Rise of Islamic Finance about how Bloomberg has aimed to be no. 1 in Islamic finance reporting. Well, this proves it!
Bloomberg Introduces Shariah-Compliant Investment Products, by Teresa Rivasry February 22, 2011, Barron’s, USA.

Dow Jones Islamic Market Global Finance & Takaful Index To Be Launched. – [COMMENTARY] “Dow Jones Indexes, a leading global index provider, today announced it will expand its Dow Jones Islamic Market Indexes series by launching the Dow Jones Islamic Market Global Finance & Takaful Index, which measures the performance of financial services stocks that pass rules-based screens for Shari′ah compliance. (Insurance stocks that pass such screens are known as Takaful.)” This is continuing evidence of the growth and rising importance of Islamic finance in the world today. It is another sign of investors desiring more ethical investing products.
Dow Jones Indexes to Launch Dow Jones Islamic Market Global Finance & Takaful Index, press release, February 22, 2011, Dow Jones Indexes, UK.

Resource Companies Concerned About New US SEC Anti-Corruption Rules. – [COMMENTARY] “Western energy and mining companies are under increasing pressure to ensure their projects in developing countries do not become cesspools of corruption and bribery – the so-called resource curse. But those companies are also facing new competition from aggressive state-owned corporations, many of which do not have the same pressure for reporting overseas activity.” Perhaps SRI-ethical rating organizations and ethical investors will favour those resource companies that do stop paying bribes. Thus, their stock prices might benefit!
Resource curse puts miners, oil companies in crosshairs, by Shawn McCarthy, February 21, 2011, The Globe & Mail, Canada.

Almost 40% Of Novartis Shareholders Vote Down Board Pay Package. – [COMMENTARY] “Almost 40% of shareholders at Novartis, the giant Swiss pharma company, today (February 22) voted against the company′s board pay after a vocal investor campaign against the CHF25m (€19.4m) market value of the package handed last year to board chairman, Daniel Vasella, and the CHF13 million paid to CEO, Joe Jimenez. This year is the first time that investors have been able to vote on the pay of many Swiss companies, including Novartis, after Swiss investors campaigned to have an advisory say-on-pay vote at the annual general meeting (AGM).”

Such a high negative vote against this pay package acts as a warning shot to all companies about compensation packages to boards and management, generally. This is good news for ethical investors who have long been concerned about the difference between the pay scales of boards and executives relative to their employees.
Almost 40% of shareholders vote down Novartis board package at AGM after first ever say-on-pay, by Hugh Wheelan, February 22, 2011, Responsible Investor, UK.

66+ Climate & Environmental Issue Based Proxies Against 40 US Energy Companies Planned For 2011. – [COMMENTARY] “This is a new high for such resolutions aimed at the energy sector, and a 50 percent increase over the number filed last year, according to the Ceres investor network, whose more than 90 members manage some $9 trillion in assets.” It will be interesting to watch as the corporate annual general meeting season heats up!
Shareholders Offer a Spate of Climate and Environmental Resolutions, by Tom Zeller Jr., February 18, 2011, The New York Times, USA.

LOHAS (Lifestyles Of Health And Sustainability) Spending In Asia Tops $300 Billion. – [COMMENTARY] “In January 2010 LOHAS Asia partnered with The Natural Marketing Institute in pioneering LOHAS Consumer Research in Asia-Pacific, conducting an online survey across 10 countries. More than 18,000 consumers were surveyed, to provide in-depth research on the LOHAS consumer and marketplace across the following countries: Australia, China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand. Some of the highlights show very real desire for sustainably-made products in Asia, with Indonesia, China and India leading the way.”

It seems that developing countries are very keen to have healthy and sustainable lifestyles which translate into extraordinary marketing opportunities for green companies there. Perhaps ethical investors might want to see if their favourite green companies are also adequately tapping Asian markets?
How LOHAS is changing business in Asia, press release, February 17, 2011, LOHAS Asia, Singapore.

Swiss bank Sarasin Wins Important Sustainability Awards. – [COMMENTARY] ” – [COMMENTARY] “Bank Sarasin & Co. Ltd has been awarded two prizes at the Sustainable City Awards in London. The Farsight Award recognized a sustainability study, ’The world in dilemma between prosperity and resource protection – Sustainability rating of sovereign bonds 2010’, published in March 2010. Bank Sarasin was also voted ’Sustainable City Awards 2010/2011 Overall Winner’, reinforcing Bank Sarasin′s pioneering role in the field of sustainable investment.” Not many ethical investors know about Bank Sarasin’s work. They should, as the bank is a leader in ESG corporate analysis.
Bank Sarasin wins two Sustainable City Awards: Farsight Award and Overall Winner 2010/11, press release, February 16, 2011, Bank Sarasin, Switzerland.

New Report Shows Private Investments In Green Sectors Top $2 Trillion. – [COMMENTARY] “Ethical Markets Media (USA and Brazil) released their February 2011 GREEN TRANSITION SCOREBOARD® tracking private investments since 2007 in green companies and technologies globally, now totaling more than $2 trillion… Hazel Henderson, D.Sc.Hon., FRSA, former US government technology advisor and president of Ethical Markets Media said, ’this new total is remarkable in spite of economic uncertainty. It indicates that the global transition away from the 300-year fossil-fueled Industrial Era is accelerating toward the cleaner, greener, information-rich economies of the 21st century.’”

Hazel Henderson, a real pioneer in alternative energy and ethical investing, deserves great commendation in her efforts to help move us into a sustainable future.
New Report Shows Private Investments In Green Sectors Top $2 Trillion, press release, February 17, 2011, Ethical Markets, USA.

US Chemical Companies’ Credit Ratings Face Possible Downgrade As EPA Evaluates Their Carbon Outputs. – [COMMENTARY] “The credit ratings of companies in the US chemicals sector could be affected if the country′s Environmental Protection Agency tightens up on greenhouse gas (GHG) emissions regulations, according to a significant report by the Washington D.C.-based World Resources Institute (WRI) and credit rating agency, Standard & Poor′s, with financial backing from APG, the Dutch asset manager that runs the investments of the €237bn ABP pension fund.” Lower credit ratings would lead to higher cost of capital. As I have repeatedly said, companies who perform best on ESG criteria will outperform others.
Credit ratings of US chemical firms could be hit by EPA emissions moves: WRI/S&P/APG report, by Hugh Wheelan, February 16, 2011, Responsible Investor, UK.

NYC Pension Funds Calls On Four Companies To Rein In Executive ’Golden Parachutes.’ – [COMMENTARY] “Comptroller John C. Liu and the New York City Pension Funds called on four corporations to rein in excessive payments to executives resulting from corporate mergers and acquisitions… Comptroller Liu said, ’The shareholders suffer when these parachutes get out of control. It’s adding insult to injury when taxpayers are ultimately forced to foot the bill for these bloated executive payouts and then cover the executives′ tax bill…’ The request was made in shareholder proposals submitted to Anadarko Petroleum Corp. (NYSE: APC), NewAlliance Bancshares, Inc. (NYSE: NAL), R.R. Donnelly & Sons Co. (NASDAQ: RRD), and WellPoint, Inc. (NYSE: WLP).” Well done comptroller Liu for taking this stand.
LIU, NYC PENSION FUNDS CALL FOR END TO GOLDEN PARACHUTES, press release, February 10, 2011, New York City Comptroller, USA.

Environment Investment Organization (EIO) Publishes Carbon Rankings On Top 100 UK Companies. – [COMMENTARY] “Topping the ET UK 100 Carbon Ranking are insurers Amlin, followed closely by financial services giant Aviva, with respective carbon intensities of 1.21 and 1.36 (MtCO2e/$M turnover). Investment managers Man Group rank third, with an intensity of 6.29, followed by British broadcasting giants BSkyB with an intensity of 6.69. Energy consultancy company AMEC come in fifth with an intensity of 8.31.”

More interesting and insightful reading on carbon rankings–and the difficulties associated with it. It is a thorough study on the subject and the companies it covers.
ET UK 100 Carbon Rankings 2011 Report, (PDF) February 16, 2011, Environment Investment Organization, UK.

Mercer Provides Climate Change Report & Proposes New Asset Allocation Model. – [COMMENTARY] “On 15 February 2011 Mercer’s Responsible Investment (RI) team launched Climate Change Scenarios – Implications for Strategic Asset Allocation, a free public report. Mercer, together with 14 leading institutional investors and industry thought leaders around the world, has been working for over a year on this market-leading research into the implications of climate change for markets and investors.” This is a fascinating report. Useful reading for ethical investors.
The Climate Change Report, February 15, 2011, Mercer, USA.

Ontario Teachers′ Pension Plan Prefers ’Say On Pay’ Advisory Votes Every Three Years. – [COMMENTARY] “Ontario Teachers′ Pension Plan has told companies it would prefer them to hold a say-on-pay vote every three years because annual votes could lead to more short-termism.” It is a good point. The last thing we want is for companies to have another reason for looking only at short term considerations concerning their plans and activities.
Annual say-on-pay votes could lead to short-termism – Ontario Teachers, by Daniel Brooksbank, February 14, 2011, Responsible Investor, UK.

Proposed California Law Makes Sustainability ’Legal.’ – [COMMENTARY] “Under current law in California and most other states, companies can be sued by their shareholders or investors for taking environmental or social measures that negatively affect shareholders′ financial returns. The proposed bill would enable a new form of for-profit corporation, encouraging and expressly permitting companies to pursue other things besides simply making money.” How many Americans knew about such state laws? Little wonder that many US companies are laggards compared to European firms concerning sustainability issues.
California′s Bold Move to Legitimize Sustainable Business, by Joel Makower, February 14, 2011, GreenBiz, USA.

Fortune 1000 CEOs Say Sustainability Is A Moral Imperative. – [COMMENTARY] “… in a recent survey of senior leadership at Fortune 1000 firms commissioned by Schneider Electric, almost 90 percent admit to feeling a ’moral responsibility’ to addressing sustainability at their companies… 61 percent of those executives said that the single biggest driver for energy efficiency and other sustainability projects is the potential cost savings from increased efficiency.” What a turnaround this is from say ten, or even five years ago!
Top Execs Feel ’Moral Duty’ to Sustainability, ROI Still Main Driver, February 9, 2011, GreenBiz, USA.
See also, Study Reveals Gap Between Sustainability Leaders, Laggers, February 10, 2011, GreenBiz, USA.

MSCI To Consult On New SRI indices. – [COMMENTARY] “The proposed indices aim to support the benchmarking and other index related needs of investors who seek to invest in accordance with their values such as religious beliefs, moral standards or ethical views,” MSCI said in a statement. “The proposed indices will exclude companies that are inconsistent with specific values based criteria and will target companies with high ESG ratings relative to their sector peers.”

A few years ago there were just a handful of SRI-ethical indexes. Now there are too many to count. To me it indicates the full mainstreaming of ethical investing in the investment industry.
MSCI to consult on new SRI indices, February 10, 2011, SRI Monitor, Canada.

Total, The Huge French Oil Company Facing Proxy Resolution On Tar Sands Investment. – [COMMENTARY] “French activist investor PhiTrust Active Investors is to quiz Total SA on the tar sands issue at the oil major′s forthcoming annual shareholder meeting. PhiTrust says it will table a resolution on the risks involved in its tar sands operations in Alberta, Canada. Fellow oil firms BP and Shell have faced similar shareholder resolutions on the tar sands issue in the past, but PhiTrust claims it is the first such resolution in France. Total is set to hold its Annual Shareholders′ Meeting in Paris on May 13.” It will be interesting to see how French investors react!
French oil giant Total facing investor resolution on tar sands, by Daniel Brooksbank, February 9, 2011, Responsible Investor, UK.

More Than 45 US Companies To Face Proxy Initiatives On Disclosure & Accounting For Political Donations. – [COMMENTARY] “Since such resolutions were first filed in 2004, shareholders are increasingly inclined to support them. Last year saw an average 30 percent vote in favor of 28 resolutions on contribution disclosure resolutions; votes above 40 percent were reached at Coventry Health Care, CVS Caremark and Sprint Nextel. Proxy advisers, public pension funds and mainstream mutual funds are getting on the bandwagon. Even business leaders oppose secretive political spending, according to a recent poll.”

No companies should be able to make political donations unless approved by stockholders. And whatever donations they make–and the reasons for them–should be available for full public scrutiny.
Corporations Make Political Donations At The Risk Of Shareholders’ Wrath, by Jeff Cossette, February 4, 2011, Business Insider, USA.

GRI Opens US Office To Help American Companies Catch Up On CSR. – [COMMENTARY] “While companies around the globe have embraced CSR reports as a way to demonstrate transparency and articulate their effects on environmental, social, and governance issues, American companies generally lag behind. GRI estimates that 45% of the companies that use its reporting framework are from Europe. But with American companies only 12% of the organizations that have adopted GRI guidelines, the organization crossed the pond and set up shop in Lower Manhattan, the capital of American finance and commerce.” What more needs to be said!
With America Behind in CSR Reporting, GRI Opens Wall Street Office, by Leon Kaye, February 2, 2011, TriplePundit, USA.

Norway, New Zealand & Sweden, Most ’Shariah-Compliant’ Nations! – [COMMENTARY] “Think of two of the most common problems highlighted in today’s news: the state of the global economy and violence at the hands of Islamists. Here’s a possible remedy to both: a sovereign sukuk [Islamic bond] rating system.

This is not a news item, but it provides an insight into, and understanding of, Islamic finance principles and how they could be applied to rating sovereign debt. This is a useful piece for all ethical investors as shariah-compliant investing becomes more common.
Is your economy sharia compliant? By Imaduddin Ahmed, February 2, 2011, The Guardian, UK.

Eurosif Says EU Close To Making CSR Reporting Mandatory. – [COMMENTARY] “The European Commission (EC), the executive arm of the European Union (EU), is edging closer to making environmental, social and governance (ESG) disclosures mandatory for companies, according to the head of the European Sustainable Investment Forum (Eurosif), the SRI lobby group.”

Mandatory CSR reporting is something I have long advocated. It is all about transparency and honesty in reporting what is really happening in companies. See my posts: We Need Mandatory Corporate Social Responsibility (CSR) Reporting, and A Call for Mandatory Corporate Social Responsibility Reporting.
EU “close” to making corporate ESG disclosure mandatory – Eurosif, by Daniel Brooksbank, February 2, 2011, Responsible Investor, UK.

US Companies Making Bigger Investments In Sustainability. – [COMMENTARY] “In 2010, U.S. corporations continued to enhance their sustainable business efforts by making bigger, bolder, longer-term sustainability commitments. Today, GreenBiz issued its 4th annual State of Green Business report. The free, downloadable report measures the progress of U.S. business and the economy from an environmental perspective, and highlights key trends in corporate culture in regard to the environment.” Not only is this good news for the corporate America, but it is good news for ethical investors too.
Companies Made Bigger, Bolder Commitments to Green in 2010, February 1, 2011, GreenBiz, USA.

Powerful Japanese Union Federation Issues Formal ESG Guidance To Money Managers. – [COMMENTARY] “RENGO, the powerful Japanese trades union confederation whose members influence a significant part of the country′s institutional retirement savings, has issued one of the most far-reaching ‘guidelines′ by any union in the world outlining how domestic pension plans should incorporate ESG factors into their investment decisions. RENGO-linked pension plans account for almost half of the schemes in Japan′s corporate pensions sector, which as a whole manages more than JPY50 trillion (€450bn). The influence of RENGO in Japanese pensions could make the new guidelines a game-changer in the take up of ESG by retirement funds in the country.”

This is big news for ESG in Asia, and correspondingly, Asian interest in ethical investing.
Powerful Japanese union, RENGO, issues formal guidelines to pension funds and managers to adopt ESG, by Hugh Wheelan, February, 1, 2011, Responsible Investor, UK.

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