January 2009 Newsletter

January 2009 Newsletter

News & Commentaries by Ron Robins


PNC Wealth Management Survey Found 71% Of US Wealthy Have Socially Responsible & Green Investments. [COMMENTARY]“The survey of 1,263 wealthy Americans, all of whom had at least $500,000 in investable assets, revealed that 71 percent have socially responsible and green investments in their portfolio, while 57 percent say they have up to 25 percent of their portfolio in such investments, while nine percent have between 25-50 percent. One quarter (25 percent) believe that green investments will gain in 2009.” These are impressive figures. Increasingly, stocks that are good to invest in could have a green colour. Obama’s new stimulus package will also help in this regard.
Wealthy Americans Go Green: Most Support Environmentally-Friendly Choices and Policies, January 29, 2009, The Energy Daily, USA.

Covalence Publishes Its Updated Ethical Rankings List Of Multinationals. [COMMENTARY]“Geneva-based Covalence is publishing today its annual ethical ranking covering an enlarged universe of 541 multinationals within 18 sectors and based on a renovated calculation methodology combining popularity and diversified performance… Leaders are HSBC, Intel, and Unilever… The following companies enter the top 10: Xerox (5th), General Electric (8th), and DuPont (10th), replacing IBM (14th), Hewlett-Packard (30th), and Toyota (34th).” It is always useful for ethical investors to review these rankings.
Covalence Ethical Ranking 2008, January 2009, Covalence SA, Geneva, Switzerland.

US Poll Finds Investor Interest In Green Investments Undiminished.[COMMENTARY]About 78%, said they believed that there will be more policies encouraging investment in the environment in the next year than under the Bush administration and that environmental technology could be the ’next great American industry’… 48%, said that it is likely that they will make an investment this year to capitalize on the environmental trend… [yet] 85% of the investors surveyed said that advisers had made no recommendations to them about environmental investing.”

This survey for Allianz Global Investors demonstrates again a great disconnect between what investors would like to do and what most mainstream advisors advise them to do. Certainly, the advisors fiduciary duty is to show caution concerning their clients’ investments. However, by not even discussing green/environmental investment opportunities with their clients they run the risk of losing them! (See my editorial,Advisor: KNOW Your Client. Know their values!)
Mass-affluent investors are still optimistic about green investing, by Sue Asci, January 21, 2009,Investment News, USA.

Consumer Survey Says Ethics In UK Financial Sector Badly Lacking. [COMMENTARY]“Only 2 per cent of the 852 adults questioned said their bank was ethical, while 4 per cent said it was trustworthy, and 5 per cent said it was transparent, according to the study by communications firm Cohn & Wolfe.” It is no wonder that Triodos and other socially conscious banks are gaining in the UK when public perception of the mainstream financial industry is so pitiful.
Lenders fail to pass on mortgage interest rate cuts, by Myra Butterworth, January 23, 2009, Telegraph.co.uk, UK.

F&C Reports On Factory Labour Standards In Emerging Markets From An Investors’ Perspective. [COMMENTARY]A fascinating read for ethical and socially responsible investors. One key point that many economists have also stressed is that it will be rising incomes from factory workers in the developing world who will help lead the world to greater future prosperity.
Factory Labour Standards in Emerging Markets: An Investor Perspective, January 2009, by F&C Investments. Courtesy of Responsible Investor,UK.

Views On How Downturn Is Affecting Corporate Social Responsibility (CSR) & Green Corporate Behaviour.[COMMENTARY]FORTUNE magazine describes how Intel and other companies continue to grow their CSR activities despite the downturn. Meanwhile, a Booze & Company survey reveals, “… that 40% of respondents expect ’green’ and other corporate social responsibility initiatives to significantly slow due to the downturn. The pullback will be especially pronounced in transportation and energy industries, with, respectively, 51% and 47% of respondents in those industries saying CSR agendas will be delayed.”

Studies show that carefully thought-out and implemented CSR/green initiatives can reduce costs and/or become revenue generators for companies. Thus, this is not the time to cut them. Ethical investors might want to see how companies in their portfolios are reacting in this recession in regards to their CSR/green activities.
Surprising survivors: Corporate do-gooders, by Lawrence Delevingne, January 20, 2009, FORTUNE,USA.Why Companies Are Making the Wrong Moves, January 20, 2009, press release, Booze & Company, USA.

Singapore Launches First Islamic Bond Programme. [COMMENTARY]“Singapore
launched its first Islamic bond programme, worth a total of S$200 million ($134 million), to promote Islamic finance in Southeast Asia’s financial capital. The bonds, also known as sukuk, are backed by the sale and lease-back of real estate assets, or Al-Ijarah structured, and will be treated at par with government securities.”
This is the first such deal by a non-Muslim majority country. Singapore hopes to attract petro-dollars from the Gulf States, where Islamic finance is growing fast. When companies issue such bonds, they do not pay interest. Instead, bondholders receive a share of company profits.
Singapore launches first Islamic bond plan, January 19, 2009, Reuters, Singapore.

Report Raises Concerns Regarding Investment Analysts’ Research.[COMMENTARY]If you read analysts investment reports or studies, you should read this! It cites inadequacy and bias in many investment studies.
For commentary on the report, seeThree simple steps to improve sell-side broker research, by Hugh Wheelan, January 19, 2009, Responsible Investor, UK. To download actual report clickSell side research, three modest reform proposals, by Michael Mainelli, Jamie Stevenson and Raj Thamotheram.

Shareholder Resolutions Concerning Nanotechnology Use And Policies Growing. [COMMENTARY]“… companies that use nanomaterials will increasingly be asked by shareholders to disclose the presence of nanomaterials in their personal care and food products and to describe their policies for dealing with nanomaterials. Socially responsible investment firms and advocacy organizations are targeting such companies, and resolutions have been filed for the 2009 annual meetings of Avon Products, Kellogg Company, Kraft Foods, and McDonald’s Corporation.”

For those concerned about the environment, the use of nanotechnologies is going to be a huge issue in the years ahead. Though touted as potentially creating a new industrial revolution benefiting the whole world, its risks to humanity could be extraordinarily large.
Increase Expected in Shareholder Resolutions Urging Disclosure of Nanomaterials, Policies, by Pat Rizzuto, January 15, 2009, Meridian Institute, USA.

Ethical Bank Increasing Loans In 2009 Over 2008. [COMMENTARY]“While the rest of the banking sector is cutting credit lines and rebuilding balance sheets, Triodos Bank in the UK expects 2009 to be a record year for its lending to environmental businesses.” This is an example for the whole banking industry. Behave ethically! Ethical and socially conscious banks are likely to see big gains in business in the years ahead.
Triodos Bank bucks trend with lending expansion, January 15, 2009, Environmental Finance, UK.

European Socially responsible Investing Funds Outselling Mainstream Funds. [COMMENTARY]“Total sales for the SRI sector for November were …784.2m ($1bn) to take the overall value of the sector to …35.3bn. Sales of mainstream equity funds totalled …588.7m over the same period.” Is this a sign that the European investing public is taking ethics and the environment more seriously when investing? It will be interesting to see if this trend continues and replicated elsewhere.
SRI funds beat mainstream equity fund sales, by Hugh Wheelan, January 16, 2009, Responsible Investor, UK.

Denmark Mandates Corporate Social Responsibility Reporting (CSR) For All Large Public & Private Companies By 2010. [COMMENTARY]For a full appreciation of what’s going-on and for my views in this area, again, see We Need Mandatory Corporate Social Responsibility (CSR) Reporting. Companies too, are realizing the advantages of using corporate social responsibility programmes and initiatives in enhancing customer loyalty, long-term financial performance, and potentially higher stock prices.
Mandatory CSR Reporting for Denmark’s Largest Companies, January 8, 2009, Greenbiz.com, Denmark.

Norway’s Huge $300 Billion Pension Fund Ordered To Review Holdings In Palestinian Territories In Light Of Israeli-Hamas Conflict. [COMMENTARY]“The ethical guidelines prohibit the fund from investing in companies where there is an unacceptable risk of contributing to serious or systematic abuses of human rights or serious violations of individuals’ rights in war or conflict… At the end of 2007, the fund owned stocks in 12 Israeli companies and bonds from three Israeli issuers.” It remains to be seen if they find any companies in the region in which they have holdings violated their guidelines. Ethical investors investing in companies who may have activities in war or terrorist conflicts always have to be alert as to whether their own values are being compromised by holding such investments. Investors also have to be concerned of the potential effects on stock prices of affected companies.
Norway oil fund’s Israel holdings under scrutiny, by John Acher, Reuters, Norway.

US Green Tech Venture Capital Declines to $2.5 Billion From $2.9 Billion Between Q3 & Q4, 2008. [COMMENTARY]Evidence of a slowdown in green tech venture capital is mounting. However, with the Obama administration set to increase spending on green energy/tech, it is possible that this sector will not be as badly hit as many others will be in 2009.
A Record Year in Greentech Investing — $7.7B in 2008, by Eric Wesoff, January 5, 2009, Greentechmedia.blog, USA.

Dell Says Apple Not So Green. [COMMENTARY]“The broadside from Dell, which claimed its operations reached carbon-neutral status about six months ago, was launched by Bob Pearson, vice-president, in a company blog. In the blog he accused Apple of using environmentalism as a PR stunt.” Furthermore, this article says, “A survey by Gartner, the IT analysts and intelligence group, places the development of green policies in the top three of executives’ revenue-raising priorities for 2009.” Green is still in despite the recession.
Apple ’not green enough’, says Dell, by Bill McGee, January 4, 2009, Scotland on Sunday, UK.

New Book Release

Creative Capitalism: A Conversation with Bill Gates, Warren Buffett, and Other Economic Leaders, by Conor Clarke (Contributor), Michael Kinsley (Editor), Simon & Schuster 2008.

“… at the 2008 annual meeting of the World Economic Forum in Davos, Switzerland, [Bill] Gates advocated a creative capitalism in which big corporations, the distinguishing feature of the modern global economy, integrate doing good into their way of doing business…
This controversial new idea is discussed and debated by the more than forty contributors to this book.”
—Book description.

Just Released Research Paper

The wages of social responsibility, by Meir Statman, Glenn Klimek Professor of Finance, Santa Clara University, and Denys Glushkov, Barclays Global Investors, December 2008, USA.

We analyze returns during 1992-2007 of stocks rated on social responsibility by KLD and find that this tilt gave socially responsible investors a return advantage relative to conventional investors. However, typical socially responsible investors also shun stocks of companies associated with tobacco, alcohol, gambling, firearms, military, and nuclear operations. We find that such shunning brought to socially responsible investors a return disadvantage relative to conventional investors.”

(Continuing) “The return advantage… toward stocks of companies with high social responsibility scores is largely offset by the return disadvantage that comes from the exclusion of stocks of ‘shunned′ companies.”

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