Ethical Investing News/Commentaries
Commentaries by Ron
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Asia Sustainable Investment Review 2012.
"The Association for Sustainable & Responsible
Investment in Asia (ASrIA), the region′s
professional membership association for the
sustainable and responsible investment industry,
today released the Asia Sustainable Investment
Review 2012, a baseline study of sustainable
investment strategies and practices by investors
based in Asia. ASrIA reports that over 130
investment managers use sustainable investment
approaches, with US$74 billion of identified
sustainable investment assets under management (AUM)
in the region." For ethical investors interested
in investing in Asia, this is a useful read.
Asia Sustainable Investment Review 2012,
December 21, 2012, ASrIA, Hong Kong.
Engaging Companies On Their ESG Issues
Generates Company Benefits & Profits, Say
"We analyze an extensive proprietary database of
corporate social responsibility engagements with US
public companies over 1999–2009. Engagements address
environmental, social, and governance concerns. They
are followed by a one-year abnormal return that
averages 1.8%, comprising 4.4% for successful and
zero for unsuccessful engagements. We document
outperformance following environmental/social, as
well as governance, engagements. Firms are more
likely to be engaged, and engagements are more
likely to be successful, if the target firm is
concerned about its reputation and if it has higher
capacity to implement corporate social
responsibility changes. After successful
engagements, companies experience improvements in
operating performance, profitability, efficiency,
What a great study! Now we know that when
companies are engaged by SRI funds and others on ESG
issues, there is a pay-off for both the companies
and shareholders. This could encourage much more
stockholder activism! The study authors were awarded
the prestigious Moskowitz Prize.
Active Ownership, by Elroy Dimson (London
Business School and University of Cambridge - Judge
Business School); Oguzhan Karakas (Boston College -
Department of Finance); and Xi Li (Temple University
- Fox School of Business and Management), UK/USA.
Study Finds Dramatic Rise In Sustainability
"Sustainability reporting is becoming more popular
among publicly-traded companies, according to an
analysis from New York-based Governance &
Accountability Institute. In 2011, 53% of S&P 500
companies reported on their environmental, social
and governance (ESG) impacts, up from just 19% the
previous year, the study found. Similarly, 57% of
Fortune 500 companies reported on their
sustainability effort in the latest analysis,
compared with 20% in the prior year. The majority of
companies that report in the S&P 500 and the Fortune
500 use the GRI framework."
The significantly increased reporting on
corporate sustainability efforts is good news. I
just wish I could be as happy concerning independent
auditing of their efforts.
Study finds dramatic rise in sustainability
reporting, by Doug Watt, December 18, 2012, SRI
SRI AS Emergent Risk Prevention In Post
"Globalization and socio-economic changes heralded
attention to Financial Social Responsibility. Ever
since socio-economic crises have steered social
conscientiousness; yet in the aftermath of the
2008/09 World Financial downturn, the interest in
understanding social responsibility in the interplay
of financial markets and the real economy has
reached unprecedented momentum." Research of
this kind needs to be expanded. It just might help
the wider world of investors to incorporate ESG
factors in their investment selections.
Socially Responsible Investment (SRI) as Emergent
Risk Prevention and Means to Imbue Trust in the Post
2008/09 World Financial Crisis Economy, by Julia
M. Puaschunder, Harvard University, USA.
Banking Scandals Have Increased Investments’
Ethical Component, Ecclesiastical Finds.
"Recent banking scandals have made investors
conscious of the ethical impact of their
investments, and 53% of them wants to ensure that
their investments go to companies which make a
positive difference, according to a [poll] run by
Ecclesiastical Investment Management." Here is
another welcome poll supporting interest in
ethical investing in the UK.
Banking scandals have increased investments’ ethical
component, Ecclesiastical finds, by Chiara
Albanese, December 12, 2012, Investment Europe, UK.
Asset Owners Using ESG For Long-Term Risk
Management – Survey.
"Nearly one-third of investors in the annual survey
by environmental, social and corporate governance (ESG)
research centre Novethic cite long-term risk
management to justify their integration of ESG
criteria." The case for incorporating ESG into
long-term risk assessment seems so obvious! How
could any analyst not consider the long-term impacts
that the environment, social
milieu, and quality of corporate governance might
have on corporate profits?
Asset owners using ESG for long-term risk management
– survey, by Nina Röhrbein, Investment &
Pensions Europe, December 11, 2012, UK.
Fund Managers Focus On ESG Factors.
"Ninety per cent of equity and fixed-income fund
managers polled, with about £4tn of combined assets
under management, recognised the importance of ESG
to end owners and consultants although a smaller
percentage, 79 per cent, said they were likely to
embed the strategy in all mainstream funds in the
future." There’s little doubt now that ESG is
going mainstream. The real question is how well
it’ll be done!
Fund managers focus on ESG factors, by Ruth
Sullivan, December 9, 2012, The Financial Times, UK.
Angry Investors Give Ethical Funds The Boot.
"This year Henderson axed six out of seven of its
staff working on its ethical funds and Aviva closed
its ethical business altogether. And this week F&C,
an investment house highly regarded for its ethical
approach to investing, has given the chop to its
head of governance and sustainable investment,
Karina Litvack. The move will bring the team down
from 16 to 15 as the company will not be replacing
her. Seb Belowe, partner at WHEB Asset Management,
an ethical fund provider, says the deterioration in
funds’ ethics is to be expected if providers are
scrimping on staff. ’Major providers don’t see
ethical investment as a long-term money maker but
they continue to run them cheaply because working
with such large funds, it is still lucrative.’"
The headline is a little graphic. Nonetheless,
the gist of the article is that UK ethical funds pay
lip service to really being ethical. But the
argument can also be made as Seb Belowe says that
ethical fund managers don’t spend enough money on
staff so that they can run their funds with a broad
ethical mandate. Again, I refer to what I stated
Is Ethical Investing Failing To Keep Up? Ethical
investors do really the choice to create their own
Angry investors give ethical funds the boot, by
Katie Morley, December 8, 2012, Investors Chronicle,
Mercer Investigates Loyalty Program For
"Mercer is exploring the concept of loyalty rewards
for long-term shareholders over concerns that
short-term decision making in the market could be
damaging the way corporations are managed. Such
rewards could include loyalty dividends, warrants or
additional voting rights, Mercer said in a news
release." Terrific news from Mercer! I really
hope this idea becomes reality. The short-term
focus, particularly of fund managers, creates
irresponsible financial management and potentially
lowers long-term results significantly.
Mercer investigates loyalty program for long-term
shareholders, December 9, 2012, SRI Monitor,
Is Ethical Investment Failing To Keep Up?
"If you are saving for your retirement in an ethical
pension fund you might well expect to have a say in
where your money goes. Our research shows that
almost two thirds of funds do not actually ask their
customers about their ethical preferences. This may
go some way towards explaining why traditional ’sin’
stocks like porn, gambling and alcohol continue to
be regularly screened out of ethical funds while
issues like human rights and environmental
protection are less likely to be addressed."
Yes, ethical funds should regularly survey their
investors about their ethical preferences. However,
I’m surprised that more ethical-SRI investors don’t
just simply analyse their personal values and then
with the help of a broker, find stocks that more
closely mirror those values. And you can get
reasonably good diversification with a portfolio of
10-15 stocks. Also, they’ll find their transaction
costs a pittance compared to the MERs of funds and
thus their long-term returns potentially higher.
(Note: ethical ETFs usually have similar holdings to
ethical funds, and have lower costs too.)
I believe what stops investors from doing this is
that they are afraid of their advisors--who often
can sell them only funds, not stocks--and they don’t
know where to begin. I can help them with that.
Is ethical investment failing to keep up? By
Matthew Butcher, December 8, 2012, FairPensions, UK.
Poll Maps Growth Of Ethical Investment
Understanding And Demand.
"The poll, conducted by Atomik on behalf of
sustainable investment consultancy firm Emerald
Knight, shows that nearly two-thirds of people (65%)
would like to know more about what their bank or
building society is doing with their finances. This
comes after an overwhelming 86% claimed they were
unaware of how their money is invested. But, in
results that will provide the industry with a
welcome boost, nearly half of respondents (47%) said
that they were likely to opt for ethical investments
rather than conventional ones in the future."
Polls throughout Europe, the US, and Canada, continue to
show high interest in ethical investing. Someday,
those saying they want to invest ethically might
actually do so!
Poll maps growth of ethical investment understanding
and demand, by Alex Blackburne, December 6,
2012, Blue&Green Tomorrow, UK.
Companies To Duck Stock Exchange ESG Guidance,
"During 2012 many stock exchanges globally announced
new rules for the disclosure of non-financial
information on environmental and social issues, but
weak enforcement mechanisms mean that most CFOs and
investor relations directors will opt out of
following the guidance, according to a report from
independent analyst firm Verdantix... Stock
exchanges covered in the report are the Australian
Securities Exchange, BM&FBOVESPA, Bombay Stock
Exchange, Bursa Malaysia, NYSE Euronext Paris, Hong
Kong Stock Exchange, Johannesburg Stock Exchange,
London Stock Exchange, Shanghai Stock Exchange and
Taiwan Stock Exchange."
Everyone in the ethical investment community was
extremely pleased with the actions of these stock
exchanges on ESG disclosure of their listed
companies. Could it be that the exchanges are afraid
companies might delist and move to other exchanges
should they enforce their rules?
Companies to Duck Stock Exchange ESG Guidance, Study
Says, December 5, 2012, Environmental Leader,
Unilever, UPS, Nike Lead Efforts To Address
"Five of the six highest-ranked companies --
Unilever, UPS, Nike, Levi Strauss and L’Oreal --
showed year-over-year revenue growth from 2010 to
2011 while reducing their total emissions across
some or all of their business units, according to
the Climate Counts 2012-2013 Annual Company
Scorecard report, released Wednesday. It ranks major
consumer brands on their efforts to address climate
change." This is a good article to read about
companies addressing climate change.
Unilever, UPS, Nike lead efforts to address climate
change, by Kristine A. Wong, December 5, 2012,
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