September 2012 Newsletter

September 2012 Newsletter

News & Commentaries by Ron Robins


Investors With $2 Trillion In Assets Say Executive Remuneration, Climate Change & Labour Standards Most Important Issues For Future Company Engagement.– [COMMENTARY] “Institutional investors managing more than $2 trillion in assets have identified executive remuneration, climate change and supply chain labour standards as priority areas for engagement with companies in their portfolios over the coming year, according to a new survey by the United Nations-backed Principles of Responsible Investment Initiative (PRI).”

The news that mainstream fund managers are increasingly interested in what are in effect ESG issues is gratifying for all ethical investors.
Institutional investors managing $US2 trillion prioritise executive remuneration, climate change and labour standards for future company engagement activity, press release, September 5, 2012, UNPRI, UK.

Global Islamic Finance Set To Double By 2015, Says Standard And Poor’s. – [COMMENTARY] “Global Islamic Finance is set to double in size between 2011 and 2015 with the sector increasingly viewed as a real alternative to conventional finance, according to Standard & Poor’s (S&P)… Sukuk [Islamic bonds] issuance looks set to cross the $100bn threshold in September 2012, and is projected by S&P to grow 25% [annually] over 2012-2015 to reach about $200bn a year in 2015.”

This means the Islamic finance market reaching $2.5 to $3.0 trillion by 2015. As I’ve mentioned in the past, Islamic finance and investment is something ethical investors should become aware of and some might even want to see what it offers them.
Global Islamic finance set to double by 2015, says Standard and Poor’s, press release, September 20, 2012, Standard & Poor’s, Saudi Arabia.

SRI Funds And Rivals So Alike, Says Study. – [COMMENTARY] “A study published this month by AfU Investor Research on the ESG Performance of European Investment funds concludes SRI funds are no more sustainable than their peers. While socially responsible investing funds are not “conventional funds in disguise”, their ESG records are similar to those of their traditional rivals.”

This is a common criticism of many SRI funds–and it’s largely correct for a lot of them. I’ve always said that for people who have the means to create a diversified portfolio with say, 12-15 stocks and some fixed income assets, might be better off in being able to find stocks that really mirror their values while significantly lowering their long-term costs thus improving their chances for better long-term returns.
SRI funds and rivals so alike, by Ellen Kelleher, September 23, 2012, Financial Times, UK.

CDP: Extreme Weather Events Drive Climate Change Up Boardroom Agenda In 2012.– [COMMENTARY] “Following increasing incidents of extreme weather events which disrupted business operations and supply chains around the world, climate change has climbed the boardroom agenda, according to the Carbon Disclosure Project (CDP) Global 5001 Climate Change report released today. With the hottest US summer on record, fires in Russia and flooding in the UK, Japan and Thailand, among other events, 81% of reporting companies now identify physical risk from climate change, with 37% perceiving these risks as a real and present danger, up from 10% in 2010.”

Finally, corporate boards of major companies believe, and are hopefully acting on, climate change. This is good news–especially for ethical investors.
Extreme weather events drive climate change up boardroom agenda in 2012, press release, September 12, 2012, Carbon Disclosure Project (CDP), UK.

Sustainable Investing … We Need A Bigger Boat, Study By Towers Watson/Oxford University.– [COMMENTARY] “Asset owners and asset managers around the world are struggling with what it means to be a sustainable investor. Here we consider sustainable investing in its broadest sense, incorporating ESG but also looking at the large inter-generational issues that institutional funds need to take into account. We draw on research undertaken in collaboration with Oxford University that was designed to help investors overcome the challenge of sustainable investing by exploring practical solutions and processes to enable investors to become sustainable investors.” This is a useful read for ethical investors and fund managers.
Sustainable investing … we need a bigger boat, (abstract) andstudy (download) September 2012, Towers Watson/Oxford University, UK.

SRI As Part Of Decision-Making Expected To Increase, Survey Finds.– [COMMENTARY] “Some 61.8% of SRI investment professionals expect institutional investor acceptance of socially responsible investing and integration of environmental, social and governance in the investment decision process to increase over the next 12 months, according to survey results released Wednesday.” Mind you, the survey respondents were a pretty biased group–all SRI investment professionals. Nonetheless, it’s good to see them so encouraged.
SRI as part of decision-making expected to increase, survey finds, by Barry B. Burr, September 5, 2012, Pensions & Investments, USA.

Shell To Test Capturing Of Carbon In Canada. – [COMMENTARY] “In a bid to make oil sands production less polluting, Royal Dutch Shell announced on Wednesday that it would go forward with the first carbon capture and storage project ever tried in the fields of western Canada… The Shell project, with an estimated cost of about 1.35 billion Canadian dollars ($1.36 billion), will be heavily subsidized by the Canadian federal government and the provincial government of Alberta, which together are putting in 865 million Canadian dollars (about $874 million) over more than a decade.”

Will it work? I doubt if this will encourage many ethical investors to go overboard to invest in the oil sands.
Shell to Test Capturing of Carbon in Canada, by Clifford Krauss, September 5, 2012, The New York Times (blog), USA.

Prominent USEconomists & Financial Industry Leaders Advocate New Financial Industry Fiduciary Standards. – [COMMENTARY] “The rationale for an Institute for the Fiduciary Standard is straightforward: The fiduciary standard is important, representing ideas central to our form of government and free market economy; it is under significant pressures from market forces that could sharply limit its reach; no other entity is solely focused on preserving and promoting the fiduciary standard.”

This is a very promising endeavour. However, the fact that it just came to my attention even though the Institute has been operational for about a year, indicates to me how little the real financial and political leadership wants it publicized. Thanks to Joe Killoran for informing me of this Institute.
Institute for the Fiduciary Standard, USA.

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