October 2011 Newsletter

October 2011 Newsletter

News & Commentaries by Ron Robins


HP, Apple, Intel & Motorola Ranked Best Tech Companies In Managing Supply Chain ESG Issues. – [COMMENTARY] “The study [by Det Norsk Veritas] looked at 26 companies in the IT industry, each of which submitted Global Reporting Initiative (GRI)-compliant sustainability reports detailing their supply chain activity. Fourteen of those companies were members of the Electronics Industry Citizenship Coalition (EICC), an industry trade group dedicated to social and environmental responsibility.”

Investors might recall that in 2010, 14 workers committed suicide at Foxconn’s Chinese plants making parts for the above-mentioned companies. Their suicides were related to working conditions at Foxconn’s plants. It’s great that these high-tech companies are now leading the charge to improve the working conditions for workers at these and other similar plants.
HP, Apple Show Strong Leadership on Supply Chain Transparency, by Matthew Wheeland, October 28, 2011, GreenBiz, USA.

Canadians View SRIs As Futuristic & Win-Win For Individuals & Society, Says Ipsos Survey. – [COMMENTARY] “the majority (54%) of Canadians who have discussed socially responsible investments (SRIs) with their advisor raised the topic themselves… Canadian investorsare generally favourable towards SRI. A third (32%) said they are ’very’ or ’somewhat’ interested. [Additionally] 55 per cent indicated that they would consider SRI if the return was ’as good or better’ than other investments… The majority of investors surveyed view SRIs as ’futuristic’ (78%) and ’a win-win for the individual and society’ (77%).”

Again, it’s clear that it is financial and investment advisors who are restricting the growth of ethical investing.
Socially responsible investing consumer driven: Ipsos survey, press release, October 27, 2011,Ipsos Reid/Standard Life, Canada.

76% Of Americans Worried About “nation′s lack of progress on energy efficiency and development of renewable energy sources,” Says University Of Texas Poll. – [COMMENTARY]“The vast majority of Americans believe the country is headed in the wrong direction when it comes to energy policy and want more leadership when it comes to dealing with future needs, according to a new poll.In survey of 3,406 Americans conducted by researchers at the University of Texas at Austin, less than 14 percent of respondents said they think the country is headed in the right direction on energy… “

US polls continually show how totally out-of-touch is the US Congress with how its electorate thinks. And this poll can only bolster the support for renewable energy supporters and for ethical investment.
Americans Think U.S. Headed Wrong Way on Energy, New Poll Finds, October 20, 2011, Environment 360, Yale University, USA.

Ron Robins Interviewed About SRI On Financial Impact Factor Radio (FIFR).– [COMMENTARY] “The main problem as Mr. Robins pointed out was the lack of recommendation [of SRI] by the financial services industry.” This 60-minute programme is one of the best of its type. The attentive and knowledgeable hosts were Paul Petillo and Dave Kittredge.
On the Radio with Ron Robins, October 24, 2011, Financial Impact Factor Radio, USA.

New Meta-Analysis Of SRI Studies Says SRI & ’Conventional’ Returns Are Similar. – [COMMENTARY]“21 academic studies are reviewed. Seven studies conclude that SRI have similar performance relative to their conventional peers. Five studies report that SRI outperforms conventional investment. Three studies find that SRI generates inferior performance relative to its conventional peers. Finally, six studies report mixed results. We can conclude that results point in all different directions, and that there is no clear link between SRI and financial performance. Our results implicates that it would be unwise to make general statements about the performance of SRI based on only one or a few studies.”

The term SRI is a huge ’catch-all.’ I believe that SRI studies should be sub-divided and studied in a thematic way. For instance, those that are purely ’ethical’ might be divided from those where ESG or sustainability dominates. I suspect that purely ESG studies might have an edge on returns too. What do you think?
The Performance of Socially Responsible Investment – A Review of Scholarly Studies Published 2008-2010, by Emma Sj…str…m, October 17, 2011, Stockholm School of Economics; Nuwa AB, Sweden.

Harvard Researchers Report On Relevance Of Corporate Nonfinancial Information To Investors, Others. – [COMMENTARY “During the past two decades, there have been many ideas for improving business reporting of nonfinancial information such as on a company’s environmental, social, and governance (ESG) performance. Using data from Bloomberg, authors Robert G. Eccles, Michael P.Krzus, and George Serafeim provide insights into market interest in nonfinancial information at a level of granularity not available until now. They identify exactly what information is of greatest interest, contrasting both the global and U.S. market across the full spectrum of ESG information and for each component of ESG, as well as Carbon Disclosure Project metrics.”

Some key findings, “there is a large market interest in the level of a company′s degree of transparency around ESG performance and policies… at the aggregate market level, interest in Environmental and Governance information is greater than interest in Social information… the highest market interest is shown for greenhouse gas (GHG) emissions and other climate change data, such as CO2 emissions. However, this is not true for the US market where the interest in these data is very low… “

This is an interesting read, though I believe that for most of us engaged in ethical investing these findings aren’t revolutionary. However, it’s good to see the data back-up what we believe to be true.
Market Interest in Nonfinancial Information, by Robert G. Eccles, Michael P. Krzus, and George Serafeim, Harvard Business School, USA.

Global Cleantech 100 2011 List Now Available. [COMMENTARY] This list is always useful to review, especially for ethical investors. You need to register to read their full report. Registration is free.
Global Cleantech 100 2011 List, Cleantech Group, US/UK.

Campbell’s, GE, HP, Nike Are Among Top Green-Minded Firms, Says Report. – [COMMENTARY] “A new report from Two Tomorrows tries to pierce the veil of greenwash claims and identify which companies are best adding value and stability to their brands with their sustainability efforts — and which are likely to disappoint in the long-term. The Tomorrow’s Value Rating 2011 report from Two Tomorrows looks at the sustainability performance of 92 companies and ranks them into eight groups. Only 11 firms made the top-level cut to a triple-A rating.”

I’m increasingly seeing studies that try to wean out the greenwash in corporate products, services and activities. This study is along those lines. Such studies are always useful for ethical investors to read, though one must always be aware of their biases and financial backers.
Campbell’s, GE, HP, Nike Rank Among Top for Green-Minded Firms, by Matthew Wheeland, October 19, 2011, GreenBiz, USA.

Ford, Toyota and Volkswagen Have Best ESG Practices, Says Calvert Investments Study. – [COMMENTARY] “Three automakers – Toyota Motor Corporation, Ford Motor Company and Volkswagen AG – were recognized today by U.S. sustainable and responsible investment (SRI) firm Calvert Investments for their leadership in environmental policies and practices, human rights and supply chain impacts through the development of strong workplace policies and programs, and leading product safety policies and practices, respectively.” This is good news for these companies. Furthermore, it adds impetus to all auto companies to focus on ESG issues since investors are taking increasing notice of them.
Ford, Toyota and Volkswagen Recognized for Best ESG Practices, press release, October 17, 2011, USA.

Most Oil & Gas Companies Shunning Sustainability Goals.– [COMMENTARY] “Green Research, a New York-based corporate sustainability research and advisory firm, today released its latest benchmark of corporate environmental sustainability goals, this one analyzing the oil and gas industry. The study found that the industry is distinguished by its reluctance to set specific sustainability goals.”

This is not surprising to me as long as the consumer’s thirst for oil continues unabated, then oil and gas companies have a relatively free reign!
Most Oil and Gas Companies Shunning Sustainability Goals, by Frank Came, October 18, 2011, GreenBiz, USA.

IBM, HP, Sprint Take Top Spots In Newsweek’s Latest Green Rankings.– [COMMENTARY] “The annual Newsweek Green Rankings, which have become perhaps the most anticipating green ratings in the world, are published this morning, bringing a new methodology to bear, and bringing a few surprises with it. IBM has moved into the top spot from its third place finish last year, while Hewlett-Packard staysin second place. Dell moves down the list to fifth place after last year’s third place rank, and Sprint moves up to third from sixth place last year.”

Such ranking lists are always interesting, but you have to know who is ranking them and on what basis they are ranked. In this case Sustainalytics is doing the ranking, and this is a company I rate highly.
IBM, HP, Sprint Take Top Spots in Newsweek’s Latest Green Rankings, by Matthew Wheeland, October 17, 2011, GreenBiz, USA.

GMI Ratings Says Apollo Group, Comstock Resources & Discovery Communications Are Among 10 US Companies That Carry Significant ESG Risks. – [COMMENTARY] “The most important investing lesson of the 21st century is that traditional measures for evaluating risk are inadequate. Not only inadequate, but too often misleading and easily manipulated. In just over a decade, despite comprehensive market and regulatory responses and reforms, shocks and scandals have destroyed shareholder value and global confidence in what were once market leaders.” I agree with their analysis of the problem and encourage their research. Of course only time will tell if their analysis proves prescient.
The GMI Risk List, October 2011, GMI Ratings, USA.

38% Of UK Investors Interested In Green Or Ethical Financial Products Or Services, Says EIRIS. – [COMMENTARY] “Increased interest in ethical finance is backed up by the findings of EIRIS’ latest Ipsos MORI national consumer survey which explores consumer attitudes to ethical finance in Great Britain. The poll surveyed 1,030 adults and finds that 38% of the British public with a financial product or service are interested in green or ethical financial products and services with more women than men (41% versus 34%) expressing an interest. Of those interested, 90% said they would be likely to switch to a different provider if it offered green or ethical investment products.”

Let me repeat my earlier comment with regard to similar findings in the French EIRIS survey: “Investors want to invest ethically and responsibly, but financial/investment advisors aren’t versed in how to provide it. Often they aren’t interested to find out either, since they are easily able to thwart an investor’s desire for ethical funds by simply proclaiming the standard untruth that ethical funds don’t perform well.”
UK ethical investment hits record …11.3Bn high, press release, October 6, 2011, EIRIS, UK.

Baruch Index Of Corporate Political Disclosure Rates Goldman Sachs Group, Inc. & U.S. Bancorp Among Most Transparent. – [COMMENTARY] “Seven national companies were ranked as top corporations in political transparency according to the 2011 Baruch Index of Corporate Political Disclosure, produced by Baruch College′s Robert Zicklin Center for Corporate Integrity. ’Top tiered companies should take pride in their dedication and efforts with regards tosharing information about their political activity with their stakeholders and the general public.’ On September 15, 2011, the Zicklin Center presented the results from The Baruch Index, which rates the S&P 100 companies from ’transparent’ to ’opaque,’ with a system of 57 items measuring corporate political activity at all levels and branches of government.”

Most ethical investors would agree that it is terrifically important that public companies are completely open and transparent about their political contributions. The Zicklin Center needs to be encouraged in this endeavour, even though some of its findings might be controversial!
Seven Companies Rank among Top Tier in Baruch Index of Corporate Political Disclosure, press release, October 11, 2011, Robert Zicklin Center for Corporate Integrity, USA.

60% Of French Retail Investors Attach Importance To Environmental, Social & Ethical Factors. – [COMMENTARY] “The EIRIS consumer survey underlines the growing importance of SRI in France with 60% of survey respondents saying they attach either ‘great importance′ or ‘some importance′ to incorporating environmental, social and ethical issues when selecting financial products. However, the survey also identifies a lack of awareness of SRI financial products as a key barrier to SRI with 64% of respondents saying they have never heard of an SRI fund.”

It is a remarkably similar situation throughout the developed world: investors want to invest ethically and responsibly, but financial/investment advisors aren’t versed in how to provide it. Often they aren’t interested to find out either, since they are easily able to thwart an investor’s desire for ethical funds by simply proclaiming the standard untruth that ethical funds don’t perform well.
Ethical investment: are the French public interested? October 6, 2011, EIRIS, UK.

Investors Should Make Tax An Ethical Issue, Says Christian Aid.– [COMMENTARY] “‘Along with traditional concerns such as involvementin tobacco, weapons and environmental issues, a company should alsobe assessed on its tax practices,′ says Dr David McNair, Christian Aid′s Principal Adviser on Economic Justice.”

The main thrust of this article refers to companies avoiding paying taxes in developing countries. Not paying such taxes is certainly anathema to me.

However, also and related, a few months ago GE created waves by reporting handsome profits, yet proclaimed paying relatively little in taxes. Should companies be penalized for legally minimizing their tax burdens? Unfortunately, if companies don’t minimize their corporate tax burdens to what is legally permitted, it might even be possible for their executives to be sued or fired for mismanagement by disgruntled shareholders.

Some economists argue that if corporate taxes were abolished–they make-up about 9% of US federal taxes–that this could be a major way to spur job creation!? The issue of corporate taxes is just as much a political and economic issue as it is an ethical one.
Investors should make tax an ethical issue, press release, October 7, 2011, Christian Aid, UK.

Consumer Electronics Companies Lead Ratings of Corporate Social Responsibility, According to Pike Research. – [COMMENTARY] “Less than 10% of the companies contacted by Pike Research for an interview related to sustainable design were willing to talk about their processes. In addition, many issues integral to a holistic view of CSR, such as the social and environmental impacts of the extraction of basic raw materials feedstocks (e.g., mining of metal ores or refining of crude oil), remain to be addressed. Regardless, Pike Research’s analysis finds that electronics suppliers and manufacturers have relatively advanced understandings of CSR, compared to other sectors, and that sustainability is evolving from a program or a process to a corporate culture.”

This is interesting research. However, like all research of this nature one needs to dig deeper to really understand their parameters, biases and conclusions. But generally, it’s good that such research is getting done.
Consumer Electronics Companies Lead Ratings of Corporate Social Responsibility, According to Pike Research, press release, October 10, 2011, Pike Research, USA.

2011 Moskowitz Prize Awarded To Researcher Who Finds Cost Of Capital Lower For Companies With Good CSR! – [COMMENTARY] “The winning paper, announced tonight at SRI in the Rockies, finds that cost of equity capital is lowered for companies with good
corporate social responsibility practices… Every year since 1996, the Moskowitz Prize for Socially Responsible Investing, awarded for outstanding quantitative research in sustainable investing, is announced at the annual SRI in the Rockies conference, held this year in New Orleans.”
Ethical investors have long believed this to be true. Now this study should spur even greater corporate emphasis on CSR. The study is titled: “Does corporate social responsibility affect the cost of capital?” Congratulations to the study’s authors: Sadok El Ghoul, Omrane Guedhami, Chuck C. Y. Kwok, and Dev R. Mishra.
Winner of 2011 Moskowitz Prize for Socially Responsible Investing is Announced, by Robert Kropp, October 3, 2011, SocialFunds, USA.

European Pension Plans Embrace SR-Ethical Investing.– [COMMENTARY] “More than half (56%) of EU corporate pension fundsnow have an SRI policy in place while a quarter of those withoutintend to implement one within the next 12 months, research shows. Eurosif’s 2011 Corporate Pension Funds Study of 169 respondentsfrom 12 EU member states found 60% believed ESG factors affect pension funds’ long-term performance, while 66% felt having an SRI policy was part of their fiduciary duty.”

The evidence continues to mount that mainstream investment managers are incorporating ESG. It’s continuing good news for ethical investors.
European plans embrace SRI, by Chris Panteli, October 3, 2011, Global Pensions, UK.

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