February 2012 Newsletter

February 2012 Newsletter

News & Commentaries by Ron Robins


Osmosis, A UK Investment Manager, Provides More Evidence That Optimizing Resources Improves Corporate Financial & Stock Performance.– [COMMENTARY] Osmosis pulls together information on how companies use energy, waste and water. It has compiled a basket of more than 1,200 global companies, which it monitors monthly. The basket has outperformed the MSCI World index by more than 5 percentage points a year over the past seven years…

As the mainstream investment industry understands that sustainably oriented companies can outperform, look for them to invest ever-greater funds in sustainably focused companies. This will further the gains for sustainable stocks.
Resource strategy put to the test, by Ruth Sullivan, February 19, 2012, Financial Times, UK.

Corporate Knights 2012 Canadian Responsible Investing Mutual Funds Rankings. – [COMMENTARY] “The 10th annual RI fund ranking is a resource designed to help investors make an educated judgement on which funds have done the best job of fusing the social, environmental, and financial values they bring to the table. Investors can best utilize our chart by making their own assessment based on each fund’s characteristics.” There is good information here for Canadian ethical investors.
The 2012 Responsible Investing Guide, February 23, 2012, Corporate Knights, Canada. For discussion by James Daw, see:Responsible Investing: weighing the impact?

Bombay Stock Exchange To Launch New Green Index.– [COMMENTARY] “The Bombay Stock Exchange will launch a new index, BSE Greenex, on Wednesday. The index will track companies which are friendly to the environment based on a methodology provided by IIM-Ahmedabad. The index will also track companies that have minimum carbon footprint. BSE will also launch a guideline for investors which will help them understand the relationship between the amount of carbon footprints of each company and the respective short-term and long-term impact on its investment and returns.”

It’s great to see the developing world stock exchanges doing this. It makes it easier for developed world ethical investors to invest in emerging markets.
BSE to launch Greenex, the green index, February 22, 2012, Business Standard, India.

New Europe-US Partnership To Spur Organic Food Sales.– [COMMENTARY] “Under a deal announced yesterday by trade representatives for each region, products certified as organic by either the U.S. Department of Agriculture or the E.U.’s Agriculture and Regional Development department are authorized for sale in either Europe or the U.S.” US and European organic products now have the ability to grow their sales significantly!
Europe-US Partnership Creates Huge New Market for Organic Foods, by Matthew Wheeland, February 17, 2012, GreenBiz, USA.

New US Sustainable Utility Index Launched. – [COMMENTARY] “Target Rock Advisors, LLC today released the results of its first proprietary U.S. utility sustainability rankings and related stock indexes. The company has identified 15 ’high performance’ domestic energy utilities that excel in sustainable operations. The top 5… are: 1. Sempra Energy (NYSE: SRE); 2. Xcel Energy Inc. (NYSE: XEL); 3. PG&E Corporation (NYSE: PCG); 4. Edison International (NYSE: EIX); and 5. Avista Corporation (NYSE: AVA).”

For ethical investors, this will be an interesting index to follow. I’m not aware of any other indices specifically covering purported ’sustainable’ US utilities.
New Sustainable Utility Index Launched, press release, February 14, 2012, Target Rock Advisors, USA.

Ceres Says Its Shareholder Resolutions Are Successful.– [COMMENTARY] “The short report, Proxy Power: Shareholder Successes on Climate, Energy & Sustainabiity, looks at what successes resulted from 233 sustainability-focused resolutions filed by Ceres’ network of investors. Just under half of those resolutions — 111, or 48 percent — were wins, where companies agreed to address the investors’ concerns and the resolutions were withdrawn. And once companies agree to address shareholder resolutions, they are good to their word.” This report is very encouraging for shareholder activism, which will please many ethical investors.
Ceres Shines a Light on the Power of Shareholder Proxy Votes, by Matthew Wheeland, February 13, 2012, GreenBiz, USA.

Portfolio Managers Doing Poorly In Integrating ESG Issues, Says Mercer. – [COMMENTARY] “Only 9 per cent of more than 5,000 ESG strategies analysed gained top ratings in the three years to the end of 2011 in Mercer′s study. The ratings are based on the extent to which portfolio managers integrate ESG into the investment process and follow good stewardship practice, such as engaging with investee companies… Emerging markets and Asia-Pacific showed the highest proportion of top ratings, Canada the least.”

Just when we thought that ESG was becoming mainstream in portfolio management, Mercer shows it is not so–yet. It will be interesting to see if the London firms that recently fired their dedicated ESG analysis teams are able to successfully integrate–as they say–ESG factors into the work of their other investment management teams!
Managers fail on ESG integration, by Ruth Sullivan, February 12, 2012, Financial Times, UK.

Companies Falling Short On CSR Promises, Study. – [COMMENTARY] “Whether eliminating child labor, creating environmentally friendly technology or working against all forms of corruption, many corporations fail to become socially responsible despite promises to change, a new University of Michigan study found.”

Concerning government coaxing, developing countries’ governments have more clout, says the study. The authors want more government action so that CSR is more than PR for many companies.
Many companies fall short of social responsibility promises. Study authors are Alwyn Lim and Kiyoteru Tsutsui, University of Michigan. Reporting by Jared Wadley, February 8, 2012, University of Michigan News Service, USA.

Greenpeace Rates Google, Cisco, Fujitsu Tops In Green IT Rankings.– [COMMENTARY] “Overall, the latest rankings show a steep decline from the fourth round of scores, which were published in December 2010, during the Cancun climate talks. Cisco led the prior round’s pack with a score of 70, while Google held down fourth place with a score of 47. The decline in overall scores reflects what Greenpeace calls a lack of steady progress in the greening of IT, even as demand for IT services, particularly in cloud computing, is rapidly increasing.”

Ethical funds often invest a high percentage of their assets in IT companies. You might want to see how the IT companies in your fund(s) are rated by Greenpeace.
Greenpeace Puts Google, Cisco, Fujitsu at Top of Green IT Rankings, by Matthew Wheeland, February 8, 2012, GreenBiz, USA.

US States Requiring Insurers To Disclose Climate Risks.– [COMMENTARY] “Widespread corporate noncompliance with SEC requirements triggered by material ESG issues may cause many SEC filings to be materially misleading, inaccurate, or even fraudulent, finds the first independent, comprehensive technical study of how the SEC regime applies to ESG issues, conducted by CSR Insight(TM) LLC.”

It’s about time that governments everywhere started requiring insurance companies to produce such information. The hidden potential losses from climate change impacts are too great for any of us to ignore. For some time now many ethical investors have been greatly concerned about this problem and frequently avoided investing in insurers for lack of information on their climate change exposure.
Three States to Require Insurers to Disclose Climate-Change Response Plans, by Felicity Barringer, February 1, 2012, The New York Times, USA.

Widespread SEC Disclosure Noncompliance Triggered by Material ESG Issues. – [COMMENTARY] “Widespread corporate noncompliance with SEC requirements triggered by material ESG issues may cause many SEC filings to be materially misleading, inaccurate, or even fraudulent, finds the first independent, comprehensive technical study of how the SEC regime applies to ESG issues, conducted by CSR Insight(TM) LLC.”

I suspect that companies that don’t comply with ESG disclosure policies–whether SEC regulated or not–will face market penalties, including that of stock prices. However, this study suggests that SEC noncompliance penalties could be significant too.
Widespread SEC Disclosure Noncompliance Triggered by Material ESG Issues, press release, February 6, 2012, CSR Insight(TM) LLC, USA.

Higher Stock Prices Result From Corporate Press Releases On Sustainability. – [COMMENTARY]“Using voluntary disclosures made through the CSR newswire service, we find that managers′ disclosure decisions involving greenhouse gas emissions produce positive returns to shareholders. This response varies negatively with company size and public information availability. For small companies in a limited public information environment, we find that mean adjusted share price increases significantly by 2.32 percent over days -2 to 2 around the CSR newswire release date.”

Again, more reasons for companies to go green. This is the first study that I’m aware of that looks at stock prices from the point of view of press release impact.
Going Green: Market Reaction to CSR Newswire Releases, by Paul A. Griffin and Yuan Sun, University of California, USA. For a good review of their study see,Companies Get a Boost in Stock from Reporting Greenhouse Gas Info, by Jonathan Bardelline, February 6, 2012, GreenBiz, USA.

Egyptian Officials Want Islamic Index. – [COMMENTARY] “Egypt′s newly-elected Islamists say they want to introduce an index of companies that comply with sharia law as part of a wider move towards an Islamic economy. Officials from Freedom and Justice, the political arm of the Muslim Brotherhood, and from Nour, a party of ultraconservative Salafi Islamists, argue that such an index would encourage a slice of investors who, they allege, have shunned the bourse for fear that it might somehow contravene religious law.”

It is possible that Egypt could become a major player in Islamic finance. Ethical investors will want to keep an eye open on what happens there, particularly for its potential repercussions on ethical finance globally.
Egyptian officials look to set up Islamic index, by Heba Saleh, February 1, 2012, Egypt.

US SRI Organizations Urge US Government House Leaders To Act On Transparency In Human Trafficking Bill. – [COMMENTARY] “Christian Brothers Investment Services (CBIS), a leader in socially responsible investing; the Interfaith Center on Corporate Responsibility (ICCR); US SIF: The Forum for Sustainable and Responsible Investment; and Calvert Investments are among 80 signatories to a letter sent Jan. 26, 2012, to Rep. John Boehner, R-Ohio, Speaker of the House of Representatives, and Rep. Eric Cantor R-Va., House Majority Leader, calling on them to take the steps necessary to quickly bring the Business Transparency on Trafficking and Slavery Act (H.R. 2759) before the full House for a vote.”

This appears to be an important piece of social legislation. It remains to be seen if the Republicans back it.
COALITION OF SOCIALLY RESPONSIBLE INVESTORS URGE HOUSE LEADERS TO ACT ON BUSINESS TRANSPARENCY ON HUMAN TRAFFICKING BILL, press release, February 2, 2012, Christian Brothers Investment Services/Interfaith Center on Corporate Responsibility (ICCR)/Calvert Investments, Inc., USA.

New Book

Evolutions in Sustainable Investing: Strategies, Funds and Thought Leadership, by Cary Krosinsky, Nick Robins, Stephen Viederman, Wiley 2011.
“A genuinely comprehensive account…a clear road map for beginners and experienced investment practitioners alike.”—Ethical Corporation.

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