News & Commentaries by Ron Robins

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(A controversial headline!) Is it Time to Drop the ‘ES′ from ESG?“By using the most comprehensive data set available, gathered from its in-house advisory Equity Ownership Services, Hermes found while investing in companies with good—and improving—governance made good returns, selecting companies based on an environmental or social basis had a negligible or even negative effect.”

[COMMENTARY] This survey’s 5-year time frame is too short to answer the questions posed. In particular, many governance decisions arefocused on short-term actions to specifically increase a company’s share price. For instance, the management of the more profitable S&P 500 companies have and are spending huge sums buying back their own stock to raise earnings per share so as to increase their stock price. Is this a good long-term use of company profits? Or, would spending on long-term cost-effective sustainability and social issues be a more profitable use of funds? I question both the findings and the methodology of this Hermes study.
Is it Time to Drop the ‘ES′ from ESG? By Elizabeth Pfeuti, May 22, 2014, ai Chief Investment Officer, USA.

Worldwide study shows religious investors can ally faith and finance.“Religious investors, in economic terms the third largest group to invest on the world′s stock markets, can post high placement profits and remain faithful to their religious creed. This is the message of the third biennial world report on religious investors, the only report of its kind.”

[COMMENTARY] These periodic reports by 3iG and spearheaded by its Secretary General, Katinka C. van Cranenburgh, are a must read for those involved in managing funds for religious organizations. They illustrate how all religious organizations can manage their foundation and endowment funds, etc., in a way that not only meets with their religious convictions–but also can provide as good or superior returns by investing in conformity with their religious ideals. If most religious orders did this, they can remake the investment landscape into one that has elements of true spiritual values, is much more ethical, sustainable and long-term focused. Seefull report.
Worldwide study shows religious investors can ally faith and finance, press release, May 21, 2014, 3iG, Spain.

Companies becoming more sensitive to sustainable investment concerns … survey. “US companies are becoming more receptive to the environmental, social and governance (ESG) concerns of shareholders, according to a new survey of socially responsible investing (SRI) experts. Nine out of the 11 experts quizzed in a new study from Monitor Global Outlook, a research service of the Christian Science Monitor, say that companies have been more sensitive to ESG issues this year than in the previous five years.”

[COMMENTARY] Despite the small sample size of this survey, but taken together with many other surveys there’s little doubt that US companies are increasingly interested in ESG parameters. But they still lag European companies in this regard.
Companies becoming more sensitive to sustainable investment concerns … survey, by Tom Revell, May 21, 2014, Blue and Green Tomorrow, UK.

Corporateregister.com publishes the winning entrants for its 2014 corporate responsibility (CR) reports awards. “As CR reporting continues to develop the CRRA [CR Reporting Awards] serves to identify the ‘best′ reports, those our community of global CR stakeholders judges to be most effective. Different regions and sectors develop their own specific reporting approaches and despite the application of global frameworks, there′s always the danger of reporting becoming fragmented. The CRRAs encourage our global online audience to evaluate, compare and contrast a wide range of reports, and we hope this helps develop and support a sense of cohesion and shared direction in CR reporting.”

[COMMENTARY]The best CR report this year goes to Coca-Cola Enterprises Inc., followed by BMW AG, Co-operative Group Limited and H & M Hennes & Mauritz AB. Corporateregister has nine different award categories including: first time report, best-integrated report and best for carbon disclosure. If you aren’t already registered with corporateregister, you’ll need to register with them–which is free–before downloading the full report. It’s a great service for anyone doing CR report research.
The CR Reporting Awards 2014, May 2014, Corporateregister.com, UK.

The expert view: top corporate sustainability leaders of 2014. “What companies are leading the way on sustainability? Unilever, Patagonia, Interface and Marks & Spencer are leading the pack, according to the 2014 Sustainability Leaders Report, which is based on a survey of 887 stakeholders from business, government, NGOs and academia across 87 countries.”

[COMMENTARY]As the years pass, what is viewed as sustainable also changes. In the present climate “advocacy and action aimed at systems change” by companies receives the most favourable approval by those in the sustainability field. Ethical investors might want to review this article.
The expert view: top corporate sustainability leaders of 2014, by Chris Coulter and Chris Guenther, May 14, 2014, The Guardian, UK.

The 10 companies with the best corporate cultures. “Rakesh Khurana, a professor of leadership development at Harvard Business School, told me [Mark Hulbert] that ’large-scale statistical studies have failed to find any direct causal link between CEOs and firm performance.’ He said that a corporation′s internal culture ’exerts a far greater longer-term influence on the company′s success.’”

[COMMENTARY]It’s fascinating that prestigious studies fail to show a statistical link between the CEO and the firm’s financial performance. So why are CEO’s are paid so much? The top ten companies are from GMI Ratings, and include Progressive Corp., Range Resources and American Electric Power, LinkedIn and Whole Foods.
The 10 companies with the best corporate cultures, by Mark Hulbert, May 13, 2014, MarketWatch, USA.

Stanford to Purge $18 Billion Endowment of Coal Stock. “Stanford University announced Tuesday that it would divest its $18.7 billion endowment of stock in coal-mining companies, becoming the first major university to lend support to a nationwide campaign to purge endowments and pension funds of fossil fuel investments.”

[COMMENTARY]The ’fossil free’ college and university divestment campaign has just got its first big success in getting Stanford on board. Congrats to Fossil Free Stanford, Stanford’s local group affiliated with the Fossil Free Campaign. Quite likely many more colleges and universities will follow Stanford’s lead. Most ethical investors will cheer this development.
Stanford to Purge $18 Billion Endowment of Coal Stock, by Michael Wines, May 6, 2014, The New York Times, USA.

U.S. firms lagging on sustainability issues, report says. “U.S. publicly traded firms are making some progress on sustainability issues, however the speed and scale of those changes are insufficient, according to a new report from Ceres and Sustainalytics.”

[COMMENTARY]Ceres and Sustainalytics provide great insight into the state of sustainability in US companies. Their survey provides a bit of a roadmap about where US companies have to go. This article by Doug Watt is a good overview of the survey’s findings.
U.S. firms lagging on sustainability issues, report says, by Doug Watt, May 2, 2014, SRI Monitor, Canada.

Framework emerges to build the business case for natural capital.“After months of consultation with stakeholders, the Natural Capital Coalition has published the first draft of a suggested framework to help businesses account for the value of natural resources such as water, soil, forests and even clean air in strategic decision-making.”

[COMMENTARY]The work by the Natural Capital Coalition will hopefully enable businesses to better assess, account for, and make, more efficient use of their natural capital. However, for society at large, it does not address one of the most important problems today in economics and for human sustainability: the non-valuation of natural resources in the selling prices of goods and services. To me, this has been an horrendous oversight globally and if we don’t start accounting for it soon our worst climate change fears could come true.

The relatively ’free’ use of most natural resources has vastly distorted our consumptive habits while greatly degrading and depleting our vital natural resources and habitat. Unfortunately, it’s the great difficulty of how to value and who should value natural resources that remains the big issue.
Framework emerges to build the business case for natural capital, by Heather Clancy, May 1, 2014, GreenBiz, USA.

GMI Ratings′ Study Finds That Only Ten Percent of S&P 500 Companies Disclose Specific Sustainability Targets in Executive Compensation Plans. “Energy and utility companies lead the way in tying sustainability metrics to executive compensation, while telecommunications, technology and cyclical consumer goods and services companies trail behind.”

[COMMENTARY]Actually, compared to just a few years ago this is good progress. No-doubt the numbers will continue to increase. As sustainability targets become common for executives, it’ll mean greater interest by them in sustainability and a by product of that will be more sustainably oriented companies–and better investment choices for ethical investors.
GMI Ratings′ Study Finds That Only Ten Percent of S&P 500 Companies Disclose Specific Sustainability Targets in Executive Compensation Plans, press release, April 30, 2014, GMI Ratings, USA.

Fossil Free Indexes Releases “The Carbon Underground” Ranking the World’s Top 200 Public Fossil Fuel Companies. “Report identifies the top public coal, oil and gas companies globally based on potential climate impact of their reserves. Research shows growing reserves and embedded emissions. Updated list supports fossil fuel divestment movement and new ESG index products.”

[COMMENTARY]For ethical investors it might be useful to know who are the largest fossil fuel companies as well as those with the least fossil fuel exposure, if only to get an idea of the relationship between them. But this report also mentions it will aid the fossil fuel divestment movement and promote new types of ESG indices as well. It’ll be interesting to see how this report is received and used.
Fossil Free Indexes Releases “The Carbon Underground” Ranking the World’s Top 200 Public Fossil Fuel Companies, press release, April 29, 2014, Fossil Free Indexes, USA.

Why TNC and JPMorgan Chase are investing $1 billion in nature. “’The number is intentionally big because we think the marketplace is big,’ said Bill Ginn, chief conservation officer at The Nature Conservancy. ’We want investors to say, I have an environmental component in my portfolio because that′s a smart place to invest these days… That means they have to make money in order to be willing to put their capital at risk here.’”

[COMMENTARY]This is a fascinating and timely concept. Just as impact investing is beginning to reap returns for investors from social projects, so the idea here is to produce returns on environmental projects–from fisheries to water projects. Initially, the funders of these projects will be wealthy investors and institutions. However, eventually, I’m sure that small investors will be able to participate. I’m going to really watch this!
Why TNC and JPMorgan Chase are investing $1 billion in nature, by Elsa Wenzel, April 29, 2014, GreenBiz, USA.

New editorial:How Ethics Benefits Corporate Profits, by Ron Robins.