March 2010 Newsletter

March 2010 Newsletter

News & Commentaries by Ron Robins


Ethisphere Announces Its 2010 Rankings Of The World’s Most Ethical Companies. [COMMENTARY]“The World′s Most Ethical Companies designation recognizes companies that truly go beyond making statements about doing business ’ethically’ and translate those words into action. WME honorees demonstrate real and sustained ethical leadership within their industries, putting into real business practice the Institute′s credo of ’Good. Smart. Business. Profit.’”

Most noteworthy is that stocks of the 2010 World′s Most Ethical Company honorees have outperformed the S&P 500 and FTSE since 2005. Whether you agree with their criteria or not, it is great to see this superior stock performance.
2010 World’s Most Ethical Companies, March 2010, Ethisphere Magazine, USA.

Including ESG Analysis Delivers Financial Benefits, Says Study. [COMMENTARY]“A landmark study strengthens the position of ESG advocates. The results reveal that a focus on ESG (environmental, social and corporate governance) factors can significantly reduce portfolio risk or enhance returns. The study by risklab [a division of Allianz Global Investors] is the first systematic quantitative analysis explicitly examining ESG risk in a portfolio context.”

This is exactly the kind of work that needs to be done to convince investors and analysts everywhere that accounting for ESG factors can potentially improve returns!
Study Finds ESG Delivers Financial Benefit, by risklab. See study:E.S.G. Risk Factors in a Portfolio Context. A good discussion on the results can be seen at:Quant study shows significant, long-term ESG risk reduction and return boost, by Hugh Wheelan, March 24, 2010, Responsible Investor, UK.

S&P, Toronto Stock Exchange (TSX) Launch S&P/TSX Clean Technology Index. [COMMENTARY]“The S&P/TSX Clean Technology Index draws companies from the investable universe of public companies whose activities provide value-added solutions to environmental problems. S&P and TSX chose Jantzi-Sustainalytics, one of the world’s leading providers of environmental, social, and governance research and analysis, to develop and maintain the Clean Technology Classification System.”

More welcome news on the clean tech index front. Congratulations to Michael Jantzi, Kevin Ranney, and all those at Jantzi-Sustainalytics in developing this new index.
S&P, TSX Launch S&P/TSX Clean Technology Index, news release, March 25, 2010, Standard & Poors/TMX Group, Canada.

American Companies Lag In CSR.[COMMENTARY]“U.S. businesses are lagging behind their counterparts in Europe, Australia and South Africa in taking seriously their corporate social responsibility or CSR, according to a new study released today by Echo Research,
the global specialists in reputation audit and analysis. While, major U.S. multinationals still lead in philanthropy, they have a blind spot that misses the growing importance of CSR to socially responsible investing around the world, the study found.”

This study mirrors what other studies have found, namely that when compared to Europe, Australia, etc., US companies lag in the implementation of corporate social responsibility policies.
Most U.S. Companies Revealed as Corporate Social Responsibility Deadbeats by New Echo Research Study – Socially Responsible Investing a Blind Spot in US Even as Importance of CSR Grows Worldwide, by Barbara Burns, Barbara Burns & Associates, USA.

Questions Raised About Corporate Social Responsibility (CSR) Ratings. [COMMENTARY]“’As a result, making the List [100 Best Corporate Citizens] is worth millions or even billions in increased shareholder and brand value.’ This should be good news for Citigroup, Goldman Sachs, ExxonMobil, Chevron and Monsanto which, despite their notoriety, have been counted as ’Best Citizens’ by Corporate Responsibility numerous times. ’When someone
asks you to define corporate transparency, show them this list,’ touts the magazine. But
to an increasing number of observers, the transparency seems elusive … as does a clear indication of what the CSR industry stands for.”

I could not agree more. That is why I always suggest when viewing such lists to try and understand how they do the rankings–and who pays for them to be assessed!
Are corporate social responsibility rankings irresponsible? By Christine Arena, March 17, 2010, The Christian Science Monitor, USA.

UK ISA (Tax Free Savings Accounts) To See 1,000% Rise In Ethical Investments This Year Says The Co-operative.[COMMENTARY]“Ethical investments currently have a 1% share of the ISA market, but The Co-operative predicts that this could increase thirteen-fold later this year as savers use their increased ISA allowance for more eco-friendly investments. The Co-operative′s study found that 13% of investors would like to put money into an ethical fund.” The UK continues to be a leader in ethical investing.
Ethical investments could increase 1000% this year, by David Masters, March 17, 2010, Finance Markets, UK.

Big American Pension Fund Reportedly Suing Goldman Sachs Over ’Excessive’ Payouts. [COMMENTARY]“A US labour union pension fund has reportedly filed a lawsuit against Goldman Sachs, the US investment bank, over claims of excessive executive pay. The Philadelphia-based International Brotherhood of Electrical Workers Local 98 Pension Fund has lodged the writ at Delaware Chancery Court, according to Thomson Reuters.” It is about time that institutional funds challenged the extraordinary payouts of Goldman and others in the investment industry. What other industry allocates around 40% of its profits as bonuses?
US pension fund adds to exec comp lawsuits against Goldman Sachs, by Daniel Brooksbank, March 10, 2010, Responsible Investor, UK.

US Companies Based In More Religious Environments Take Fewer Financial Risks. [COMMENTARY]“Gilles Hilary and Kai Wai Hui of Hong Kong University of Science & Technology say researchers have long demonstrated the link between religion and an aversion to risky behavior among individuals. Rates of gambling, alcohol abuse and crime, for instance, are lower on average in communities where church attendance and religious affiliation are
high. Their study in a recent Journal of Financial Economics — ’The Influence of Corporate Culture on Economic Behavior: Does Religion Matter in Corporate Decision Making in America?’ — now shows that religion has a similar effect within for-profit companies by deterring business activities that place corporate assets at risk.”

The results of this study should not surprise anyone. It simply highlights that communities with strong spiritual and religious values are less likely to engage in potentially reckless activities. It has been my contention for decades that individuals imbibing higher spiritual and community values, such as the ’Cultural Creatives’ as described by sociologist Paul Ray, is the only way the world will be able to free itself from its problems.
A new study reveals that U.S. companies are less likely to accept financial risks when they are based in communities where religion is important, by David Villano, March 7, 2010, Miller-McCune, USA.

HP, Intel, General Mills Top List Of Best Corporate Citizens. [COMMENTARY]“Corporate Responsibility Magazine today released its 11th annual Best Corporate Citizens list… the full list this year includes a number of shakeups, including that Bristol-Myers Squibb, last year’s top firm, fell to the seventh position in the rankings. Coca-Cola, which appears in eighth place this year, was ranked 56 last year.” As ethical investors, such lists may provide us with ideas on what to hold, or sell, depending on our values and how it fits with our investment strategy.
HP, Intel, General Mills Top List of Best Corporate Citizens, March 2, 2010, GreenBiz, USA.

UK’s F&C Wins Best Ethical Investing Manager Awards. [COMMENTARY]“At the Global Pensions Awards ceremony held in London on Wednesday March 2nd, leading asset
manager F&C was awarded the prestigious accolade of ’SRI Provider of the Year’. This follows on from F&C winning the ’Socially Responsible Investment Programme’ Award from Funds Europe in December 2009.”
Congratulations to everyone at F&C!
F&C wins SRI Provider of the Year Award, press release, March 2010, F&C, UK.

MSCI Buys RiskMetrics For $1.55bn.[COMMENTARY]“MSCI, the index and risk group is buying RiskMetrics, the New York-listed risk management and corporate governance firm, in the latest twist to consolidation in the ESG research and governance space. It is paying approximately $1.55 billion in a cash and stock transaction that values RiskMetrics at $21.75 per share. RiskMetrics last traded at $18.69 and its highest ever share price was $25.50 during 2008… In November 2009, RiskMetrics finalised the $10m buy-out of Boston-based KLD Research & Analytics, which also gave it a foothold in the SRI index business via deals with FTSE and Canada′s Jantzi Sustainalytics. That came after a February, 2009, $16m buy-out of Toronto-based Innovest.”

Cost savings are the purported rationale for this transaction. What it means for ethical investors will be unclear for sometime. So do I welcome this merger? I do not have an answer at this point.
MSCI buys RiskMetrics for $1.55bn, March 1, 2010, by Hugh Wheelan,Responsible Investor, UK.

Vodafone, Nokia & HP Ranked Highest In New Sustainability Rankings. [COMMENTARY]“The companies subjected to this Tomorrow′s Value Rating were the 20 largest ICT companies according to the Fortune Global 500 list, which ranks the world′s largest companies by revenue.” I find when looking at rankings like this, it is good to check out how companies do on several different ranking systems.
Tomorrow’s Value Rating of world’s largest information and communications technology companies, March 1, 2010, Tomorrows Value Rating, UK.

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