April 2010 Newsletter

April 2010 Newsletter

News & Commentaries by Ron Robins


Vatican Backs First Christian Stock Index–Stoxx Europe Christian Index. [COMMENTARY]“The Stoxx Europe Christian Index comprises 533 European companies that only derive revenues from sources approved ’according to the values and principles of the Christian religion’… A committee, which Stoxx says includes representatives of the Vatican, screens shares, which are drawn from the Stoxx Europe 600 Index.”

I have been wondering for sometime when something like this this might happen. We should note that Islamic investments have from their inception religious oversight. I believe the Vatican involvement is positive for ethical investing generally, as it brings more attention to ethics in finance.
Vatican backs new equities index, by Phil Craig, April 26, 2010, Financial News, UK.

Major Pension Funds Pressuring Companies To Reveal Their Policies Concerning Bribery & Corruption. [COMMENTARY]“A coalition of 20 pension fund investors and fund managers with assets of $1.7 trillion … all signatories to the United Nations Principles for Responsible Investment … is pressuring major companies, notably in the defence and construction sectors, to reveal their management policies on bribery and corruption.” I fear that what these companies say, versus what they actually do, might not be the same. For ethical investors, this poses a real dilemma.
Huge investor coalition demands bribery policy clarity from 21 major companies, by Hugh Wheelan, April 28, 2010, Responsible Investor, UK.

55% Of US Advisors Allocating Portion Of Client Portfolios To Green Investments. [COMMENTARY]“’To think, not five years ago, probably fewer than 10% of the financial advisors stewarding America′s private and institutional wealth even knew what it meant to invest in alternative and clean fuel solutions,’ said Richard Bookbinder, Managing Member of TerraVerde Capital Management and author of Fund of Funds Investing: A Roadmap to Portfolio Diversification.”

Finally, advisors are getting the message to invest in green. This is good news for ethical investors as it may mean that advisors will give more consideration to their concerns.
The “Greening” of America′s Investment Portfolios: Financial Advisors Embrace Renewable Energy Investments, TerraVerde Capital Survey Shows, press release, Business Wire, April 26, 2010, USA.

US States Begin Offering Legal Protections For Socially Responsible Companies. [COMMENTARY]“When Ben Cohen and Jerry Greenfield sold Ben & Jerry’s to Unilever (UN) for $326 million a decade ago, they did so reluctantly. They liked the payout but feared the new owners would ignore the social goals famously embraced by the ice cream maker. The board, though, felt it had no choice but to accept Unilever’s offer. ’The legal advice was that the primary concern for the directors was the financial interests of the shareholders,’ says Greenfield.”

It seems that some US states are likely to offer “benefit corporations” which would have greater legal protections from the type of suit that Ben & Jerry were concerned about in the above quote.
New Legal Protections for Social Entrepreneurs, by John Tozzi, April 22, 2010, Bloomberg/Businessweek, USA.

Oxford University Says Investing In Arms Is Fine. [COMMENTARY]“Oxford University released documents this week showing it believes its investment in the arms trade is ‘socially responsible’.” I have known ethical investors to be on either side of this issue. Where do you stand?
University: now arms investment is ’ethical, by Sophie Core & Natalya Segrove, April 22, 2010, Cherwell.org, UK.

New Site: Climate Bonds Initiative.[COMMENTARY]“… the Climate Bonds Initiative is an international network which promotes the development and use of Climate Bonds. These bonds provide for large scale issuance of long-term debt to overcome medium term investment barriers preventing the achievement of economies of scale in low-carbon industry sectors. The bonds can thus finance that global transition at speed and at scale.”

I just came across this site, courtesy ofResponsible Investor. Anyone interested in green or climate related debt should research this site.Climate Bonds Initiative.

ConocoPhillips and ExxonMobil Next Targets Of Oil Sands Campaigners. [COMMENTARY]“An institutional investor campaign which is challenging oil giant BP (AGM) to improve its reporting on financial, environmental and social risks associated with oil sands investments in Canada at today′s (April 15th) annual general meeting, is being extended to similar resolutions at oil majors, ConocoPhillips and ExxonMobil. The investors have already lodged a resolution at Shell′s AGM on May 18th in a campaign that is gathering momentum, but seriously dividing shareholder opinion.”

With increasing environmental and water costs, oil sands producers may not be as profitable as many hitherto thought.
Oil sands campaign targets ConocoPhillips and ExxonMobil ahead of today′s BP showdown, by Hugh Wheelan, April 14, 2010, Responsible Investor, UK.

A ’Data Engine’ To Analyze Corporate Social Impacts. [COMMENTARY]“A new group [GIIN] is aiming to revolutionise the standard maths used to select investments for billions of dollars worth of assets by constructing a data engine that contrasts … and quantifies … the tangible social benefits of investing opportunities… A formidable array of organisations joined forces last year to form GIIN and propel the effort, including the Rockefeller Foundation, Deloitte, PwC, Hitachi, Citigroup, Deutsche Bank, JPMorgan, and the Bill & Melinda Gates Foundation.”

The value I see in these efforts is that they are likely to bring huge new funds into ethical investments. The problem with such efforts is like that of economists trying to model the economy–there are just too many variables to model and account for. Nonetheless, it is wonderful they are attempting to create such a model.
Architects of a ‘social investment data engine′, by Tom Stabile, April 11, 2010, Financial Times, UK.

New Global Sustainability Ratings Initiative. [COMMENTARY]Global Initiative for Sustainability Ratings (GISR), is a swipe at the profusion of sustainability ratings providers and the ’proliferation of tools and methods’ which GISR says has created confusion for the market. The founders say the rapid consolidation of the ratings field and the proliferation
of new raters are undermining confidence and trust in the quality of ’available ratings frameworks’. It′s argued that it′s not uncommon for a single company to annually
complete a dozen or more disparate questionnaires … with equally disparate outcomes.”

The desire to create a single ratings system to analyze corporate sustainability efforts on the surface seems good. However, just as two analysts can evaluate a single income statement and arrive at different conclusions as to a company’s prospects, so, I’m sure will there be continued variability in assessing outcomes using a system such as the one proposed by GISR.
New global sustainability ratings initiative set to launch, by Daniel Brooksbank, April 12, 2010, Responsible Investor, UK.

$16 Trillion Investor Coalition Quizzing Companies On Water Use. [COMMENTARY]“A group of 137 financial institutions globally with a combined $16trn (…11.9bn) in assets have sent out questionnaires to more than 300 of the world′s largest companies on their water use as part of the Carbon Disclosure Project′s Water Disclosure initiative. The institutions include names such as Allianz Group, CalSTRS, HSBC, ING, Mitsubishi UFJ Financial Group (MUFG) and National Australia Bank.”

Water is fast becoming the new oil in terms of importance to economic activity. It will be rewarding for investors to follow which companies use extraordinary amounts of water and how they are able to reduce its usage. It just might significantly affect their bottom line in the future as water becomes increasingly more costly.
$16trn investor coalition to quiz companies on water, by Daniel Brooksbank, April 9, 2010, Responsible Investor, UK.

German Investors Favour Ethical Investing. [COMMENTARY]“Almost two thirds of German retail investors would prefer investing in ethical SRI products rather than other, potentially more profitable, opportunities, according to a survey commissioned by German asset management firm Union Investment. The survey, carried out by market research institute Forsa, revealed that investors between 20-29 years old were also the most likely to opt for a sustainable investment with 45% of them considering it an attractive option.”

The news continues to be positive for ethical investing. However, and I am not aware of the exact figures for Germany, but in North America and the UK, ethical/SRI mutual funds have less than three per cent of the mutual funds market. This is the perennial problem for the ethical/SRI industry–how to get retail investors putting their money where their values are.
German retail investors value SRI over profit, by Atholl Simpson, April 8, 2010, Citywire, UK.

Global Renewable Energy Market Predicted To Grow Seven Fold Within Five Years: KPMG. [COMMENTARY]“The global renewable energy market is set to grow seven times over the next five years to about US$560 billion. This is according to an expert from KPMG, who was speaking at the sidelines of Eco World 2010.” Predictions for renewable energy growth are bright indeed.
Global renewable energy market to grow seven-fold to US$560b: KPMG expert, April 8, 2010, channelnewasia.com, Singapore.

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