July 2011 Newsletter

July 2011 Newsletter

News & Commentaries by Ron Robins


Toyota, 3M, Siemens Top List Of Best Green Brands. – [COMMENTARY] “At the top of a list that focuses on both are Toyota, 3M and Siemens. Each of these firms have managed to align how they walk the green walk with how they talk the talk, according to ’Best Global Green Brands 2011,’ the inaugural ranking from consultancy Interbrand.” What is really interesting and probably unique about this study is that it linked a company’s green reputation with its real green/sustainability performance. The rankings are interesting, but probably unremarkable to those in the SRI ratings industry.
Toyota, 3M, Siemens Top List of Best Green Brands, by Tilde Herrera, July 28, 2011, GreenBiz, USA.

Sustainability Tied To Mining Companies Shareholder Value, Says Report. – [COMMENTARY] “A new study by Sustainalytics finds strong links between sustainability performance and shareholder value for companies in the mining sector. Sustainability and Materiality in the Natural Resource Sector: Mining looks at whether environmental and social practices impact competitiveness for companies within the mining sector. The study finds that effective management in four key areas of sustainability was positively linked to shareholder value.”

This is the kind of study that needs to be done, most especially, in the resource sector. Ethical investors who have avoided mining stocks might possibly reconsider their views after reviewing this report.
Sustainability Performance Linked to Competitiveness in Mining Sector, July 28, 2011, Sustainalytics, Canada.

Country’s Sustainability Linked To Their Sovereign Bonds’ Performance. – [COMMENTARY] “The performance of government bonds issued by countries living within their ecological means has been better than those pursuing unsustainable policies, according to research by Bank Sarasin.” This is intriguing information for ethical investors! How many investors have considered a country’s sustainability in reference to their bonds?
Sovereign bond returns linked to sustainability … Sarasin, by Mark Nicholls, July 25, 2011, Environmental Finance, UK.

Nasdaq To Launch Water Based Equity Indexes. – [COMMENTARY] “The Nasdaq OMX Global Water Index will track companies worldwide that produce products that conserve and purify water. A separate index, the Nasdaq OMX US Water Index, will do the same for US-listed water sector companies.” These indexes are timely and likely to be widely followed by environmentally oriented investors.
Nasdaq to launch water indexes, by Charlotte Dudley, July 22, 2011, Environmental Finance, UK.

France Requiring Large Companies To Report Their Carbon Footprint & Planned Carbon Reduction Measures. – [COMMENTARY]“Originally outlined in the 2009 Grenelle 2 bill, the GHG reporting law requires companies with more than 500 employees to disclose their carbon footprint and outline emission reduction measures by 31 December 2012. The new piece of legislation will support France′s long-term goal of achieving a 75% reduction in GHG emissions below 1990 levels by 2050.”

Congratulations to France on this move! Hopefully, all countries will follow France’s lead. Such disclosure is important to investors too, for they need to know how exposed to the problems–both financially and environmentally–the companies they invest in are to carbon related matters.
Large organisations subject to mandatory carbon reporting in France, July 27, 2011, Hydrocarbons, Belgium.

Is The US Chamber of Commerce A Friend Or Foe To Ethical Investors?– [COMMENTARY] Two items crossed my screen today on the Chamber. One indicated the Chamber’s successful court challenge to abolish the proposed SEC rule that would have given investors the power to nominate individuals to company boards–clearly an unfriendly act towards ethical investors. SeeUS court overturns proxy-access rule, by Raquel Pichardo-Allison, July 25, 2011, Global Pensions, USA.

The other, which is more positive, is that the Chamber is getting a little proactive on corporate sustainability. See5 Reasons Why the Chamber of Commerce Can Be a Force for Green, by Alex Hahn, July 19, 2011, GreenBiz, USA.

Environmental Protection Agency (EPA) Mandates New Direction ForUS Utilities. – [COMMENTARY] “New rules on sulphur dioxide (SO2) and nitrogen oxide (NOx) emissions from US power plants are set to drive a substantial shift from coal to natural gas, shutting down coal plants and having a ’significant impact’ on US power, gas and coal markets from next year, according to research from Bank of America-Merrill Lynch (BoAML).”

As the US government is ’missing in action’ on the environmental front, the US is lucky to have the EPA be its real environmental guardian. Investors in US utility stocks might want to see how the EPA rulings could affect companies they are invested in.
EPA emissions rule ‘a game changer′ for US gas, coal, power markets … analysts, by Mark Nicholls, July 20, 2011, Environmental Finance, USA.

A New Trend? Swiss Bank Offers Investors Carbon Offsets For Their Portfolios. – [COMMENTARY] “Customers of Swiss bank Julius B…r will be able to calculate the carbon footprint of their equity portfolio and offset the emissions using carbon credits, through a service launched this week.” This is an approach that many ethical investors might welcome. It will be interesting to see if other investment firms begin offering such benefits.
Swiss bank to help investors offset portfolio emissions, by Jess McCabe, July 14, 2011, Environmental Finance, UK.

Blacklist Of Least Transparent Companies Includes DreamWorks, NASDAQ and Madison Square Garden. – [COMMENTARY] “DreamWorks, NASDAQ and Madison Square Garden are among the well-known American brands that have appeared on a ’black list’ of companies with poor transparency and corporate citizenship. The Black List, by Corporate Responsibility magazine, comprises 58 Russell 1000 companies that tie for bottom ranking on these measures.” Companies that hide things need to be exposed. Corporate Responsible magazine is performing an important service in exposing them.
DreamWorks, Nasdaq ‘Black Listed′ for Lack of Transparency, July 13, 2011, Environmental Leader, USA.

Study Finds Screening Intensity Has No Effect On Fund Returns, But Does Effect Risk. – [COMMENTARY] “… screening intensity has no effect on returns but has a curvilinear (inverted-U-shaped) effect on risk. This means that funds with the least amount of screens have lower risk; this risk increases with the number of screens but then again decreases at high screening intensity. My findings suggest that the performance debate will continue to go on as inconclusive.” This study adds some new insights into ethical fund returns and risks, but I prefer meta analysis–that of compiling the data from many studies–before I would draw anyconclusions.
Socially Responsible Investments in Europe: The Effects of Screening on Risk and the Clusters in the Fund Space, by Daniela Laurel, July 11, 2011, Politecnico di Milano, Italy.

Fossil Fuel Producers’ Stock Valuations At Risk, Says Study. – [COMMENTARY] “The world′s stock markets are over-exposed to fossil fuels, putting investors at risk of a ‘carbon bubble′, according to a report by research group Carbon Tracker Initiative which calls for an overhaul of the way capital markets value risk. The report looks at how fossil fuel reserves held by listed companies are assessed by the market and argues that up to 80% of the world′s fossil fuel reserves will be unusable if average global temperatures are to be limited to a 2…C rise, the level at which scientists believe global warming can be stablised.”

This study’s findings are important to investors everywhere. However, it might take extreme weather events to force governments to act on climate change–such as the recent experience in Australia.
Fossil fuel-heavy stock market a risk to investors … report, by Charlotte Dudley, July 11, 2011, Environmental Finance, UK.

Indian Government Likely To Mandate Companies Disclose CSR Spending If More Than 2% Of Net Profit. – [COMMENTARY] “Indian companies may have to collectively spend close to $2 billion (about Rs 8,700 crore) a year on CSR programmes if the government makes it mandatory for them to spend 2% of profits on social responsibility programmes, a study said today… The [Indian] government last week said it would be mandatory for corporates to disclose to shareholders whether they have made a contribution of 2% of net profit toward corporate social responsibility activities.”

Though I strongly believe that well designed and implemented CSR programmes are integral and necessary to enriching corporate activities and expanding profits, I do not believe mandating a certain percentage of profits to CSR is the way to go.
Mandatory CSR spend to cost India Inc Rs 8,700 cr a yr., Press Trust of India, July 11, 2011, Business Standard, India.

Water Shortages Threaten Renewable Energy Production, Says Study. – [COMMENTARY] “The study shows the reliance on large amounts of water to create biofuels and run solar thermal energy and hydraulic fracturing – a technique for extracting gas from unconventional geological formations underground – means droughts could hamper their deployment.” Ultimately, societies everywhere will come to accept the hard truth that energy and resource conservation is by far the best way forward. Otherwise, we’ll be like lemmings going over the cliff!
Water shortages threaten renewable energy production, experts warn, by Suzanne Goldenberg, June 27, 2011, The Guardian, UK.

Thomson Reuters & IdealRatings Create Islamic Finance Index. – [COMMENTARY] “Thomson Reuters IdealRatings Islamic Indices will be available on Thomson Reuters Eikon and some of the company’s other services. The joint venture will cover over 60 countries and global equity markets in nine regions, as well as individual sectors. The index will be reviewed on a quarterly basis to ensure Sharia-compliant standards, which will be assessed using proprietary algorithmic searches run by a team of dedicated researchers.”

Islamic finance has much in common with ethical finance and investments. Whereas ethical investments are common in the Western world, the rough equivalents in the Muslim world are Shariah-compliant investment products.
Thomson Reuters and IdealRatings Team for Islamic Finance Index, by James Rundle, July 5, 2011, Waterstechnology, UK.

ESG Criteria Found To Improve Investing Performance. – [COMMENTARY] “’Research conducted by CFSGAM revealed that the top-rated ESG stocks in its global listed infrastructure portfolio outperformed the bottom-rated stocks by more than 20 per cent over
a three-year period to May 2010, demonstrating the connection between ESG factors and performance,’ CFSGAM chief executive Mark Lazberger said at the launch of the company’s responsible investment report yesterday.”
The research concerning ESG continues to show its utility in investment analysis.
Top-rated ESG stocks outperform: Colonial by Walter Klijn, July 1, 2011, Investor Daily, Australia.

Ron Robins Interviewed OnThe Green Leader Radio Show by Robert Thompson concerning green investing on July 25, 2011. It’s a great interview on a great show. I hope you can listen to it!

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