October 2009 Newsletter

October 2009 Newsletter

News & Commentaries by Ron Robins


Big Majority Of Institutional Investors Say ’Moral Hazard’ Has Increased. [COMMENTARY]“More than 90% of institutional investors questioned in a unique survey of market participants believe financial markets are now threatened by increased ‘moral hazard′ … the belief that banks and other investors will take excessive risks based on implicit government guarantees… However, just under a third of these same investors (28%) are pessimistic that the right lessons from the crisis have been learnt to avoid future market blowouts. And 80.5% said the response of regulators has so far fallen short of what is needed to fix the system.”

The only real way to solve our current dilemma is for us to realize that real inner happiness can arise from within and be relatively independent of whatever material possessions we may have. Until this realization comes and actions taken to create it, this current crisis may well morph from crises to crises. (See my Enlightened Economics blog post,The Missing Ingredient In Economics—Consciousness!)
86 per cent of institutional investors say they share blame for crisis: NSFM/AQ/RI survey, by Hugh Wheelan, October 25, 2009, Responsible Investor, UK.Download survey.

Most Portfolio Managers Shun Their Funds. [COMMENTARY]“According to a series of recent studies by Morningstar Inc., funds whose managers invest $1 million or more of their own money in their fund ranked in the 42nd performance percentile, on average, over the five-year period through July. That means they outperformed 58% of their peers. Funds whose managers own no shares ranked, on average, in the 54th percentile.” The message here for ethical investors is look to see if the managers of the funds you own or are about to buy, actually own some themselves!
Most portfolio managers shun their own funds, by Dan Jamieson, October 25, 2009, Investment News, USA.

Company Online CSR Reports Found Wanting. [COMMENTARY]“Lundquist evaluated how well 91 members of the Dow Jones Sustainability Index use their corporate websites as a platform for CSR communication. Each website was assessed using a set of 76 evaluation criteria, drawn up on the basis of a survey conducted by Lundquist of 184 CSR
professionals and sector experts from 30 different countries. The consultancy reports that most of the companies studied provided only a limited range of pertinent information online and fail to use the web to anything like its full potential.”

Apparently, Italian oil and gas company Enl, together with UBS and Shell, have the best online reports. If companies are to maximize the advantages of using corporate social responsibility it behooves them to optimize their web presence, especially for ethical investors.
Damning report into online sustainability reporting, by Jo Confino, October 22, 2009, The Guardian, UK.

New Site For Canadian Social/Ethical Investors. [COMMENTARY]“Socialfinance.ca is an online community for all issues related to social finance in Canada and internationally. It will serve as a central online platform for the community of the people and organizations that are advancing the development of a social finance marketspace in Canada.” The site’s sponsors include academic, government, and private organizations. Its content will appeal particularly to ethical investors with social and community interests.
Social Finance, Canada.

Disney & Microsoft Top Boston College-Reputation Institute’s 2009 CSR Index. Financial Companies Fall.[COMMENTARY]“Companies in the financial sector tumbled to the bottom of the Boston College-Reputation Institute 2009 CSR Index while top consumer brands perceived to be strong in the area of ethics, citizenship and workplace practices dominate the top 50… Released today by the Boston College Center for Corporate Citizenship and Reputation Institute, the index shows the Walt Disney Company in the top position followed by Microsoft, Google, Honda of America, Johnson & Johnson, PepsiCo., General Mills, Kraft Foods, Campbell Soup Company and FedEx, rounding out the top 10.”

Good research underscores their analysis. Ethical investors would be wise to review the findings of this study.See full list.
Disney and Microsoft Top List of 50 U.S. Companies Recognized as Leaders in Corporate Social Responsibility, October 15, 2009, press release, Boston College, USA.

KLD, One Of The Great Names In SRI, In Talks To Be Purchased By RiskMetrics. [COMMENTARY]“RiskMetrics Group, the New York-listed US risk management and corporate governance group is readying itself to make its second major acquisition this year in the ESG (environmental, social and governance) research space by buying Boston-based KLD Research & Analytics.” It seems the consolidation and globalization of ESG/SRI firms continues apace. I believe that this is good for ethical investors as they will find greater competencies available to them.
RiskMetrics primed to buy KLD, by Hugh Wheelan, October 13, 2009, Responsible Investor, UK.

EIRIS (Update 1). 90% Of Wealth Managers Surveyed Said Responsible Portfolios Performed As Well Or Better Than Other Investments. [COMMENTARY]“Based on a survey of the global readership of WealthBriefing and featuring comment and analysis from a panel of prominent RI experts, the report explodes the performance myth that responsible investments under-perform. It identifies a growing awareness of
environmental, social and governance issues amongst HNW individuals and finds that the financial crisis has had a positive effect on the view that wealth managers take towards RI. Over half of wealth managers included in the survey reported that the current financial situation has lead to them taking governance issues and a potentially tighter regulatory framework into account within their clients′ portfolios.”

The EIRIS survey again supports the view that responsible or ethical investments continue to gain ground, promising better returns for ethical stocks and bonds over the longer term.
Responsible Investing and Wealth Management: Opportunities for the future, October 12, 2009, EIRIS, UK.

UK Survey Cites Lack Of Demand For Green Investments Among Fund Managers. [COMMENTARY]“FairPensions, the campaign group, found that while 89% of respondents regard climate change as an ’important’ or ’very important’ investment issue, they say they are prevented from taking action by short-term analysis and ’lack of demand’ from pension funds and other clients.” Have things changed at all in the investment world? This survey of fund managers still shows that short-termism dominates in regard to investment decisions.
UK fund managers cite lack of client demand as green investing barrier … survey, by Daniel Brooksbank, October 12, 2009, Responsible Investor, UK.

Canadian Companies Increase Carbon Related Management Efforts. [COMMENTARY]
“Canada’s largest publicly traded companies are preparing for anticipated climate change policies by increasing their carbon management efforts each year, according to the Carbon Disclosure Project 2009: Canada 200 Report. The Canadian findings of the global Carbon Disclosure Project (CDP) initiative are being released today at Conference Board of Canada events in Toronto, Montreal and Calgary. ’Canadian companies now see more opportunities than risks from climate change, a significant change in sentiment since the Conference Board first conducted the CDP in Canada in 2006.’”

For a list of Canadian companies said to be making the best efforts at carbon disclosure and reduction, seeCanadian companies increase climate change activities in anticipation of future policies, October 8, 2009, press release, Conference Board of Canada, Canada.

EIRIS Says 65% Of UK Wealth Managers Have Less Than 5% Of Client Funds In Socially Responsible Investments.[COMMENTARY]“The financial crisis has increased wealth managers′ awareness of responsible investing, according to new research. A third
of wealth managers are more likely to offer responsible, or ’ethical’, investments to their richest clients as a result of the credit crunch, according to a report to be published on Monday by independent researchers Eiris.”
The UK’s FT seems to have a scoop on a new report by EIRIS to be published on Monday. I will look for it and keep you posted on its contents.
Responsible investing: Ethical dilemma, by Alice Ross, October 9, 2009, FT.com, UK.

Increasing Number Of Companies Measuring Their Carbon Footprint. [COMMENTARY]“Over 300 global companies, including 31 specialized carbon companies that act as carbon market intermediaries, responded to a survey published recently by EcoSecurities, ClimateBiz, and Baker & McKenzie, which sought to identify corporate trends in carbon management and offsetting. The survey, entitled Carbon Management and Offsetting Trends Survey Results 2009, is the second published by the organizations, and the first since the global economic crisis. Despite the effects of the crisis, the number of respondents to the survey increased by more than 400% since its predecessor was published in early 2008, with a marked increase in participation of North American companies noted.” Companies increasingly realize that for good stakeholder relationships they need to be proactive in managing their carbon usage.
Survey Finds a Majority of Corporate Respondents Measuring Their Carbon Footprints, by Robert Kropp, October 7, 2009, SocialFunds, USA.

Global Investment In Renewable Energy Down Near 40% In 2009 Over 2008. [COMMENTARY]“United Nations Industrial Development Organization Director General Kandeh Yumkella said annual investments in renewable energy, especially hydroelectric projects, soared more than fourfold to $155 billion between 2004 and 2008, but have dropped in 2009. ’Due to the current economic crisis we have seen almost a 40 percent decline in 2009 alone in these investments,’ Yumkella told the opening a of a global conference on green energy in the central Mexican city of Leon.” With oil prices increasing and government green stimulus funding just getting started the outlook for 2010 may well be brighter.
UN says renewable energy investment down in 2009, October 7, 2009, Reuters, Mexico.

Hindus & Jews Denounce Church Of England’s Stand On Supporting Hedge Funds. [COMMENTARY]“Rajan Zed, acclaimed Hindu statesman; and Rabbi Jonathan B. Freirich, prominent Jewish leader in Nevada and California in USA; in a statement in Nevada today, asked how the funds which Church termed as ’bank robbers’ in the past had suddenly become saviors, and the mighty Church had become lobbyist for these ’former robbers’”.

If you read the Church’s statement they are saying that in the new EU proposal entitled, Alternative Investment Directive, EU investors will only be allowed to invest in hedge funds that are domiciled in the EU. Presently around 90% of them are ’headquartered’ outside the EU. However, the fact that the Church has been so critical of institutions like hedge funds and then turns around to seemingly support them, does sound hypocritical.
Church of England’s new mission: to save hedge funds -Times Online by Ruth Gledhill, October 7, 2009, Timesonline, UK. Also seeHindus & Jews denounce Church of England for blessing hedge funds, October 8, 2009, Punjab Newsline, India.

Sovereign Wealth Funds Comprising Near 10% Of Global Stocks Favour Ethical Investing. [COMMENTARY]“And greater involvement of sovereign wealth funds (SWFs),
who already own nearly 10 percent of global stock markets, might create a virtuous cycle for the SRI industry, boosting performance and encouraging other investors to follow suit.”
Well what more can I say! The long term prospects for ethical stocks and bonds are bright. However, though I have not written about this lately, the short to medium term outlook for developed world economies and their stock markets could be very, very, bumpy.
Sovereign funds to boost ethical investing andSWFs and ethical investing: serving multitude of objectives, by Natsuko Waki, October 5, 2009, Reuters, UK.

Global Accounting Body Issues Follow-Up Discussion Paper For Fund Fiduciaries Regarding Incorporating Climate Change In Their Mandate. [COMMENTARY] This is important reading for any fund manager.
Pension Fund Trustees and Climate Change: One-Year On, October 2009, Association of Chartered Certified Accountants, UK.

Steelcase & Whirlpool Are Sector Leaders In Addressing Climate Change, Says Climate Counts. [COMMENTARY]“The two companies took top honors in the latest Climate Counts Company Scorecards, meant to give concerned consumers an idea of corporate climate commitments to inform their purchasing decisions.” Ethical investors looking for green stocks that are good to invest in might want to review this report.
Steelcase and Whirlpool Emerge as Sector Climate Leaders, September 30, 2009, ClimateBiz, USA.

The Ten Leading Green Brands According To Consumers. [COMMENTARY]“Last summer, a group of agencies owned by the giant marketing and communications company WPP — the PR firm Cohn & Wolfe, branding experts Landor Associates and pollster-consultants Penn, Schoen & Berland Associates (PSB) — joined with Esty Environmental Partners, a consulting firm run by Yale prof and author Dan Esty, to survey about 5,000 consumers around the world about green products, companies and brands.” Well here are the brands consumers chose: 1. Clorox Green Works; 2. Burt’s Bees; 3. Tom’s of Maine; 4. SC Johnson; 5. Toyota; 6. P&G; 7. Wal-Mart; 8. Ikea; 9. Disney; and 10. Dove.
America’s 10 Greenest Brands? By Marc Gunther, September 29, 2009, GreenBiz, USA.

New Global SRI/Ethical Investing Portal Established. [COMMENTARY]“The Global Impact Investing Network is a not-for-profit organization dedicated to increasing the effectiveness of impact investing. Impact investments aim to solve social or environmental challenges while generating financial profit.” This portal has big money philanthropists behind it such as the Bill and Melinda Gates Foundation and Calvert Foundation. Click Global Impact Investing Network.

Investors Returning to Green Tech Sector. [COMMENTARY]“Deloitte’s Cleantech Group said Wednesday that third-quarter investment in the sector totaled $1.6 billion in 134
companies in North America, Europe, China and India. The amount was 42 percent less than the year-ago total but was 10 percent more than the previous quarter. North American companies received $1.1 billion, which was about 42 percent less than the third quarter of 2008 but up 8 percent from the previous quarter.”
With oil prices increasing, the green tech/energy sector is likely to see continued growth.
Deloitte: Investors return to ’cleantech’ sector, by Fabian Pattberg, October 1, 2009, Sustainability Forum, USA.

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