December 2010 Newsletter

December 2010 Newsletter

News & Commentaries by Ron Robins


Trucost Finds 40% Lower Carbon Intensity & Outperformance In US SRI Funds. [COMMENTARY] “The Responsible funds analyzed are on average 40% less carbon intensive than the Traditional funds… all eight Responsible funds in this study outperformed their Median Peer Group [Traditional funds] over a one-year period. Seven of eight outperformed their Median Peer Group over a three-year period, while five of eight outperformed over a five-year period.”

To me, these results are not unexpected, since SRI-ethical funds do not usually contain carbon intensive heavy manufacturing or mining companies. SRI-ethical funds are frequently heavily weighted with technology, financials, health, drugs, etc. Nonetheless, it is great to see such performance.
Carbon footprints, performance and risk of US equity mutual funds, November 29, 2010, Trucost, UK. (Registration required, which is free, to view study.)

EthicalFunds Performed Better than Non-Ethical Funds In Downturn Says Study. [COMMENTARY] “the results indicated that the ethical funds are different from the non
ethical funds with regards to the performance and put in evidence that the ethical funds governed the financial crisis triggered by subprime in a better way than the non ethical funds. Consequently we argue that it is important that the interests of the financial community are addressed to the development and promotion of ethically oriented finance and of its instruments.”
This is one more study indicating that ethical funds performed better than non-ethical funds during the downturn.
The Ethical and Non Ethical Mutual Funds Comparison, by Rosa Adamo, Angela Coscarelli, Domenica Federico and Antonella Notte, American Journal of Economics and Business Administration, Volume 2, Issue 4, USA.

Jantzi-Sustainalytics Issues New Report On Nanotechnology For Investors. [COMMENTARY] “Current understanding of the potential risks of
nanotechnology is limited and regulations lag behind technological development. Given this uncertainty, how can investors address this new
area? This brief offers investors a roadmap to navigate the potential risks and
opportunities of this emerging industry.”
The debate around nanotechnology is going to be every bit as big as that about GMOs! This is an important report for ethical investors.
Brave New World: Investors and Nanotechnology, by Stephanie LeNguyen, Jantzi-Sustainalytics, Canada.

EIRIS Study Shows Investors Exposed To Biodiversity Risks. [COMMENTARY] “Research firm EIRIS has put forward five recommendations to enable investors to help them address failings by corporations on biodiversity. It suggests investors understand, be aware of, encourage, engage and collaborate on the issue.” This is a unique report that investigates a subject that is not well known even to sophisticated ethical investors.
EIRIS research points to biodiversity risk for investors, by Daniel Brooksbank, December 20, 2010, Responsible Investor, UK.

The Royal Society Of Canada Issues Report On Environmental & Health Impacts Of Canadian Oil Sands. [COMMENTARY]Useful reading for any ethical investor concerned with energy investing.
Environmental and Health Impacts of Canada’s Oil Sands Industry, (PDF) December 2010, The Royal Society of Canada, Canada.

SEC Calls For Mandatory Reporting Of Payments By Extractive Industries. [COMMENTARY] “The Securities and Exchange Commission, the US financial regulator, is to clamp down on payments by extractives companies, mine safety and conflict minerals.
The proposals are among a raft of measures put forward by the SEC under the Dodd-Frank Act.”
All I can say it is about time that such payments be revealed so that stockholders, especially, can gauge how well company management deals with these issues.
SEC to clamp down on extractives payments, mine safety and conflict minerals, by Daniel Brooksbank, December 16, 2010, Responsible Investor, UK.

Survey Shows US Consumers Demand Companies Engage In Cause Marketing & Support Charities. [COMMENTARY] “Two new public opinion surveys released today by Do Well Do Good, LLC indicate that consumers demand that companies should engage in cause-marketing and corporate social responsibility programs. Over 88% of consumers think companies should try to achieve their business goals while improving society and then environment and 83% of consumers think companies should support charities and nonprofits with financial donations.” Good to see this especially at this time of year.
New Study: Consumers Demand Companies Should Engage in Cause-Marketing & Corporate Social Responsibility Initiatives, press release, December 15, 2010, Do Well Do Good, USA.

Dow Jones Launches New Index That Helps Generate Funds To Fight AIDS, Tuberculosis and Malaria. [COMMENTARY] “The Dow Jones Global Fund 50 Index is the flagship of a new index series, which will include indexes with overlaying strategies and additional themes. The index has been licensed to db X-trackers, the leading ETF platform of Deutsche Bank, to serve as a basis for a financial product, the db x-trackers Global Fund Supporters ETF. The ETF begins trading today on the Frankfurt stock exchange.”

Well, we have credit cards that give a portion of their proceeds to charities and good causes, now we are getting indexes/ETFs doing the same. It is certainly a good step for charities. Constituent companies in this index will be those who provide funds to help eradicate AIDS, TB and malaria.
Dow Jones Indexes and The Global Fund Launch The Dow Jones Global Fund 50 Index, press release, December 13, 2010, Dow Jones Indexes Press Room, USA/Switzerland.

First Global Christian ETF Launched. [COMMENTARY] “Db X-trackers, Deutsche Bank′s exchange-traded funds (ETF) platform, claimed it has launched the world′s first ETF for Christians who wish to invest in line with their faith… Companies are chosen from the broader Stoxx Europe 600 index, with suitability for inclusion determined by an independent Christian faith commission.” This may well be the start of a trend of global faith/ethically-based ETFs. They could be attractive to many ethical investors.
World’s first ETF for Christians from Deutsche Bank, by Cara Waters, December 13, 2010, Financial Times, UK.

Thesis Finds It Difficult To Evaluate Effects Of CSR On Corporate Financial & Stock Performance. [COMMENTARY] “’On the one hand, companies engaging with CSR might be viewed as high-risk players because they’re either committing substantial resources to unnecessary CSR activities or because CSR is used as a distraction from unflattering corporate behaviour, and are, therefore, earning higher returns. On the other hand, good performance can be viewed as a surprise that can be attributed to the company’s CSR engagement, previously not taken into account, a kind of mispricing. Mispricing is found as the more prevalent explanation, because the CSR premium has decreased in recent years, perhaps also because most companies are now communicating their CSR activities
The fact that most companies are doing better with CSR is good news.
Hard to tell whether CSR has a positive effect on profitability or not, by Cristiana Manescu, December 6, 2010, University of Gothenburg, Sweden.

Fossil Fuels Gets 12 Times More Subsidies Than Clean Energy Worldwide. [COMMENTARY] “Energy from fossil fuel gets 12 times more in subsidies worldwide than sustainable energy, says a new report from the USC Marshall School of Business.” This is something that I have often criticised: the diabolical public financial subsidies that fossil fuels and nuclear for that matter, receive. My belief is that all these subsidies should be eliminated and then clean energy will be on a more level playing field.
Clean energy gets fewer subsidies, less investment than fossil fuels, report says, by Tiffany Hsu, November 30, 2010, LA Times, USA.

81.5% Of Investors Surveyed Plan To Increase Investments In Climate Change, EDHEC-Risk Institute. [COMMENTARY] “90% of respondents considered environmental protection an investment theme, and the same percentage planned to do more green investing in the future with climate change being the most popular green theme for 81.5% of respondents. Environmental themes such as water management, anti-pollution
measures and improvement of processes were also concerns for many respondents, the survey found.”
These are the highest interest levels of any survey I have seen to-date.
Green investing still misunderstood, by Jaishree Kalia, November 30, 2010, Global Pensions, UK.

Recent Commentaries by Ron Robins on

Ethical Investors Successfully Engage Companies and Governments, December 9, 2010.

New Bank Regulations Likely to Fail, December 15, 2010.

Severe Debt Scarcity Coming to US, December 26, 2010.

Book Release

What Investors Really Want: Know What Drives Investor Behavior and Make Smarter Financial Decisions, Meir Statman, McGraw-Hill 2010.
“We all share behavioural traits that are major roadblocks to intelligent financial decisions. Bottom line: if you really want to achieve investment success, understand yourself and eliminate or minimize these traits. This book will help you do exactly that.”—John C. Bogle, Founder, Vanguard Funds.

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