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Shareholder Values

"Forty-five percent of U.S. households prefer an environmental, social and governance (ESG) approach to investing… Among those between the ages of 30 and 39, this increases to 64%, and for those younger than 30, it is 67%."
-- Cerulli Associates
    October 2018

"The vast majority of Canadian investors are interested in responsible investments (RI) that incorporate environmental, social and governance (ESG) issues, and they would be more likely to choose responsible investments if their financial advisor suggested suitable RI options for them."
-- Responsible
    Association (RIA)
    June 2017

"70% of people [in UK] want to invest ethically but the financial services industry is failing to respond." Referencing research by Abundance.
-- Acquisition
(UK) June 2015


Ethical Investing News/Commentaries
July 2017


Commentaries by Ron Robins

If a link does not work, please e-mail us. Link may only be valid a limited time.

New study suggests screening for SRI costs 4.8% annually in stock performance. Is this an outlier?
"Using a sample of 1000 firms from the U.S., Europe, and Asia, between 2005 and 2014, we find evidence for the taste effect [for SRI] and estimate the associated under performance at 4.8% annually. Our results are robust against different model specifications and test assets."

[COMMENTARY] This study reminds me of one or two others that also show that screening for SRI/CSR delivers poor relative stock performance. My concern with these few studies is how they define SRI/CSR. Studies looking at ESG -- as distinct from SRI/CSR -- almost universally indicate positive or outperformance in regards to stock or portfolio performance. It’ll be good for the academics to have a public debate on these studies!
The Price of Taste for Socially Responsible Investment, by Rocco Ciciretti University of Rome II, Ambrogio Dalo University of Rome, and Lammertjan Dam University of Groningen, CEIS Working Paper No. 413, July 2017, Italy.

Integrated Reporting: The South African Experience. "Few countries can claim that integrated reporting (IR) is common among domestic companies. An exception is South Africa, with many listed and public organizations having produced integrated reports for over six years. The emergence of IR as the dominant form of corporate reporting in South Africa has produced a significant number of internal and external benefits for the companies that have adopted it."

[COMMENTARY] I’ve been observing and writing about the development of ESG and IR in South Africa for some time.(See Ethical Investing Shines in Africa As Economy Grows, June 18, 2010.)

This CPA Journal article illustrates the benefits of IR to companies and investors. Hopefully, South Africa’s beneficial experience with IR will hasten its adoption globally.
Integrated Reporting: The South African Experience, by Leigh Georgia Roberts, July 2017, The CPA Journal, USA.

Current State of Assurance on Sustainability Reports. "Corporate sustainability reporting is becoming more widespread with each passing year, and with that growth comes the need for companies to back up their sustainability claims. The author surveyed sustainability assurance reports from 2013, and the subsequent analysis provides advice for professionals and users.

63% of the world′s 250 largest companies by revenue get their sustainability reports assured, and 70% of those choose a major accounting firm to do so (KPMG Survey of Corporate Responsibility Reporting 2015.)"

[COMMENTARY] It’s good to see so many companies getting their sustainability reports assured. Hopefully, sustainable reporting assurance will become universal in the not-so-distant future. However, in the current deregulatory environment, this might be a challenge. Nonetheless, companies wanting to see their stock outperform will need to satisfy the rapidly growing and large ESG analyst community!
Current State of Assurance on Sustainability Reports, by Sunita Rao, July 2017, The CPA Journal, USA.

Passive managers are increasingly interested in ESG. "Passive managers are no longer treating stewardship responsibilities as a ‘box-ticking′ exercise, but are actively looking to influence investee companies and help improve environmental, social and governance (ESG) standards across the board. They vote and engage directly with firms on prominent issues such as executive pay, board diversity and climate change."

[COMMENTARY] Many investment industry professionals have been concerned about the effects of passive funds on the health of stock markets. In particular, their indiscriminate buying stocks -- whether a stock is ’good or bad.’ Incorporating ESG in defining a passive fund goes some way in resolving this concern.
Passive managers are increasingly interested in ESG, by Passive managers are increasingly interested in ESG Hortense Bioy, July 24, 2017, FT Advisor, UK.

Are Sustainability Rankings Consistent Across Ratings Agencies? "As more and more companies begin to devote serious attention to sustainability reporting, many different systems of rating the depth and effectiveness of sustainability efforts have arisen. The authors compare three leading sustainability rankings, examining their methodologies and results. Unfortunately, a lack of consistency and transparency from these rating agencies currently exists, impeding greater efficiency in the capital markets."

[COMMENTARY] The studies findings will not surprise most ethical investors. Nonetheless, it’s good to see such academic support for what we know.
Are Sustainability Rankings Consistent Across Ratings Agencies? By Beixin (Betsy) Lin, PhD, Silvia Romero, PhD, Agatha E. Jeffers, PhD, CPA, Laurence DeGaetano, CPA and Frank Aquilino, CPA, July 2017, The CPA Journal, USA.

Morningstar, MMI Launch Sustainable Investing Initiative. "The Money Management Institute (MMI) announced today a joint initiative with Morningstar called The MMI/Morningstar Sustainable Investing Initiative, aimed at educating advisors about sustainable investing and how to better incorporate it into their practices."

[COMMENTARY] Most financial advisors need some training in ESG related investing. This is one of many initiatives now happening globally. Well done Morningstar and MMI.
Morningstar, MMI Launch Sustainable Investing Initiative, by David H. Lenok, July 17, 2017, WealthManaghement.com, USA.

Green not the only colour for ethical bond investors. "The green bond market has boomed in the past decade but now a host of other financial products have begun to emerge, promising to tackle social issues including homelessness, access to education, clean water, crime prevention and helping disadvantaged children."

[COMMENTARY] A good review of the market and growth of social bonds. This will interest many ethical investors.
Green not the only colour for ethical bond investors, by Kate Allen, July 17, 2017, Financial Times, UK.

Transition risk for oil & gas in a low carbon world. "This new analysis provides a way of understanding whether the supply options of the largest publicly traded oil and gas producers are aligned with demand levels consistent with a 2 degree Celsius (2D) carbon budget. By allocating the carbon budget to potential oil and gas projects, through applying the economic logic of a carbon supply cost curve, it is possible to identify which companies have the highest exposure to potential capital expenditure (capex) to 2025.

This report provides a snapshot of the potentially unneeded capex spend for 69 global oil and gas companies – highlighting for the first time, the wide-ranging degree of exposure amongst companies in the sector."

[COMMENTARY] This is an important report for investors! The above quotes provide the explanation of what’s in it. Well done Carbon Tracker and PRI!
Transition risk for oil & gas in a low carbon world, press release, July 2017, UK.

ESG Reports and Ratings: What They Are, Why They Matter. "Report and ratings methodology, scope and coverage, however, vary greatly among providers. Many providers encourage input and engagement with their subject companies to improve or sometimes correct data. Third party ESG report and ratings providers include: (i) Bloomberg ESG Data Service; (ii) Corporate Knights Global 100; (iii) DowJones Sustainability Index (DJSI); (iv) MSCI ESG Research; (v) RepRisk; (vi) Sustainalytics Company ESG Reports; and (vii) Thomson Reuters ESG Research Data. This memorandum provides an overview and analysis of these providers."

[COMMENTARY] Davis Polk provides a good overview of ESG raters and their methodologies. The review also covers ESG ETFs and portfolios.
ESG Reports and Ratings: What They Are, Why They Matter, by Davis Polk, July 12, 2017, 7 Davis Polk & Wardwell LLP, USA.

10 studies that show how and why ESG investing works. "How do ESG, or environment, social, and governance investments, perform? When do these strategies work, and why? Here′s a look at the circumstances under which ESG-related investing works the best, across different asset classes such as stocks and bonds."

[COMMENTARY] Great compilation of studies relating the benefits of ESG to corporate financial performance and stock prices.
10 studies that show how and why ESG investing works, by TruValue Labs, July 10, 2017, USA.

CDP launches first climate impact fund rating platform. "The platform lists 2,500 European funds – equal to €2.5 trillion – and aims at helping investors in their investment decision-making taking the climate change impact of the funds into account."

[COMMENTARY] A terrific new fund rating product for European investors! It’s ground-breaking in that it rates funds specifically on aggregate climate impacts of their holdings. Hopefully, this type of ratings’ service will develop for funds globally.
CDP launches first climate impact fund rating platform, press release, July 7, 2017, UK.

PRI finds disconnect between investors, ratings agencies on ESG factors. "’Investors and (rating agencies) struggle to agree on what is a reasonable time horizon to consider,’ said the report. ’Investors tend to align their time horizons with their investment objectives: some buy and hold long-term bonds until maturity (while) others trade more frequently.’"

[COMMENTARY] An interesting point is raised here. Should ratings agencies assign to companies different ratings over varying time periods? Would you like to see how the agencies rate a company over, say, one, three, five or ten years? It certainly would provide a fuller picture for investors. I know ratings agencies read this site so I wonder if any of them have an opinion on this? Let me know!
PRI finds disconnect between investors, ratings agencies on ESG factors, by Sophie Baker, July 5, 2017, Pensions & Investments, USA

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Disclaimer: This website does not make investment recommendations. Nothing in this site should be interpreted as a recommendation or solicitation to buy/sell any securities or investments. Investing for the Soul is a source of general information and resources for ethical investing and socially responsible investing (SRI). Investors should consider their actions thoroughly and consult their financial advisers and other professionals, prior to taking any investment action. This website does not necessarily agree with the opinions expressed in articles on its pages or offered on the web pages to which it might be linked. Such opinions are the responsibility of the writers themselves. Furthermore, this site does not offer or provide any warranties, representations, guarantees, implied or otherwise, as to the accuracy, legality, copyright compliance, timeliness or usefulness of the information, materials or services on this, or other sites, to which it is linked. Also, Mr. Ron Robins is not an investment advisor, nor is he licensed with any professional investment related body, and thus is not able to, nor does he make, any investment recommendations.


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