August 2012 Newsletter

August 2012 Newsletter

News & Commentaries by Ron Robins


Use Of Corporate Governance Ratings Demonstrates Superior Investment Returns.– [COMMENTARY] “Over the 10-year period ended July 1, 2012, a portfolio of companies with top-decile AGR ratings would have outperformed the lowest-decile portfolio by 55%… AGR reflects a broad spectrum of accounting irregularities and weaknesses in corporate governance statistically associated with an elevated risk of anomalous events likely to cause precipitous contractions in equity value.”

This is most interesting. Very few ratings organizations consider only governance-litigation risk. It’s fascinating to see that by screening for that alone investors can outperform. Ethical investing just got another plus!
GMI Ratings′ Accounting and Governance Risk (AGR) Ratings Can Help Investors Significantly Improve Equity Returns, press release, August 22, 2012,, USA.

Trends In ESG Integration In Investments, Useful Report. – [COMMENTARY] “In this report, we assess current trends around environmental, social, and governance (ESG) integration in mainstream investments and provide specific recommendations for companies to attract investors with long-term investment perspectives.” This is a good overview of the present situation.
Trends In ESG Integration In Investments, August 2012, BSR, USA.

SEC’s Conflict Minerals Vote Comes Under Fire. – [COMMENTARY] “Humanitarian groups said they were disappointed with the final rule, which included a provision allowing companies to report that they couldn’t determine the origin of their products. ’It′s a huge loophole that undermines the rule,’ said Corinna Gilfillan, head of the U.S. office at Global Witness, of the clause. ’The SEC seems more interested in protecting the bottom line of these companies rather than helping the citizens of the Congo.’”

I agree there shouldn’t be such a loophole. Many companies are likely to choose the easy way out and say they couldn’t determine where the minerals came from. I don’t know if this is the case with the rule, but it would only be valid to me if a company using the loophole were able to show documentation that their search as to the source of the minerals revealed it was impossible to discover.
SEC’s conflict minerals vote comes under fire, by Alison Moodie, August 23, 2012, GreenBiz, USA.

Hedge Fund Firms Accepting Screens To Get Faith-Based Business. – [COMMENTARY] “Hedge fund managers hungry for institutional assets are increasingly willing to incorporate exclusionary screens into their investment approaches to keep portfolios in line with the socially responsible investment values of church-affiliated investors.” Acceptance of ethical investment principles keeps growing.
Hedge fund firms accepting screens to get faith-based business, by Christine Williamson, August 23, 2012, Pensions & Investments, USA.

Prestigious China Association of Public Companies Urges Listed Companies To Issue CSR Reports.– [COMMENTARY] “The move would allow companies to timely release operational information, focus on investors’ returns and boost market confidence, the association said. By the end of April, 586 companies listed on the A-share market had released 592 corporate social responsibility reports. The figure increased 11.49 percent compared with a year earlier. However, those companies only accounted for 25 percent of the total A-share companies.” This is great news for ethical investors interested in Chinese companies.
Companies asked to report on social responsibility, by Chen Jia, August 20, 2012, China Daily, China.

Another Study Finds SRI-Ethical Funds Performing Positively. – [COMMENTARY] “The empirical results show that SRI funds outperformed conventional funds in EU and U.S. In addition, the results of EU are among the top-performing categories. Environmentally friendly funds do not perform as well as SRI, but perform in manners equal or superior to conventional funds. These results show statistically significant in some cases.” This study adds an interesting twist in its statistical analysis. Read about it in the link below.
Performances of Socially Responsible Investment and Environmentally Friendly Funds, by Yutaka Ito, Shunsuke Managi, and Akimi Matsuda, August 15, 2012, Tohoku University, Japan.

Australian Investors Push Companies For Impact Of ESG Issues. – [COMMENTARY] “The Australasian Investor Relations Association′s (AIRA) biannual survey of IROs finds two thirds of respondents have fielded more questions on ESG issues in the last 12 months than before. Almost three quarters also say they have received requests for more information on the ‘broader impact′ of company operations and governance.”

This is the kind of push many companies need to take seriously ESG issues. So many studies have found that companies that excel on ESG do better financially and have relatively higher stock prices. It amazes me how many companies still resist the benefits of an ESG focus.
Australian investors push companies for impact of ESG issues, by Tim Human, August 2, 2012, Inside Investor Relations, Australia.

Women As Directors Beat Men-Only Boards In Company Stock Return. – [COMMENTARY] “Shares of companies with a market capitalization of more than $10 billion and with women board members outperformed comparable businesses with all-male boards by 26 percent worldwide over a period of six years, according to a report by the Credit Suisse Research Institute, created in 2008 to analyze trends expected to affect global markets.”

This study adds to a body of research that women are invaluable corporate board members. There are a few ethical funds that specifically favour investing in companies where women are significantly represented on corporate boards. It’s about time that women played a much more pronounced role in finance. I even believe we would see fewer financial scandals too!
Women as Directors Beat Men-Only Boards in Company Stock Return, by Heather Perlberg, July 31, 2012, Bloomberg, USA.

New Book

Low Fee Socially Responsible Investing … Investing in your worldview on your terms, by Tom Nowak, CreateSpace Independent Publishing Platform 2012.
“This book contains guidance on how to build a customized stock portfolio that reflects your worldview. The portfolio can be constructed, implemented and maintained inexpensively with a minimum of professional assistance. In a world where investment returns are less certain, lower investment fees are more and more important for the investor.”—Book description.

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