December 2014 Newsletter

December 2014 Newsletter

News & Commentaries by Ron Robins


Climate report reveals which companies have been naughty or nice. “Thomson Reuters this week released its latest report (PDF) on the greenhouse gas emission patterns of the global 500, which reveals a mixed bag of environmental efforts and encompasses companies in diverse industries. The biggest emitters include household names concentrated in the energy and manufacturing fields.”

[COMMENTARY] This article is a good one to read. Ethical investors might want to review some of their holdings in light of this report.
Climate report reveals which companies have been naughty or nice, by Lauren Hepler, December 25, 2014, GreenBiz, USA.

Study Finds Institutional Investors, Proxy Advisors Fail to Use Economic Value Creation as Major Factor in Say-on-Pay Voting. “Economic value creation is not a major factor in institutional investors’ Say-on-Pay voting, nor in the recommendations of the two largest proxy advisors that counsel investors how to vote. The research reveals that there is no material difference between institutional investors’ Say-on-Pay voting for those companies that create economic value as compared to those that destroy value.”

[COMMENTARY] I’m not surprised by this finding as those promoting say-on-pay mostly want to restrain executive compensation, no matter the company’s financial position. However, the underlying premise of this report seems to be that executive compensation should be related to the company’s underlying economic/financial position both now and in the future. I agree with both points of view.
Study Finds Institutional Investors, Proxy Advisors Fail to Use Economic Value Creation as Major Factor in Say-on-Pay Voting, press release, December 22, 2014, IRRC Institute, USA.

Bloomberg Markets Strategies: Finding Value in Good Governance.“Stoxx Europe 600 companies with higher-than-average female representation on their boards have outperformed the overall index by 13 percentage points since 2008. Global oil companies with leading safety records returned 63 percent in the five years through September 2014, double those with higher incident rates. Those examples highlight why investors and executives are embracing the importance of environmental, social and governance issues and how they can affect a company′s reputation and performance. “

[COMMENTARY] That last sentence says it all. But I’ll continue to harp about the majority of financial/investment advisors who are blind to this information and not representing their clients’ interests!
Bloomberg Markets Strategies: Finding Value in Good Governance, by Lee O′Dwyer, December 17, 2014, Bloomberg, USA.

New York fracking ban reverberates nationally. (Bans fracking due to health and environmental risks!) “New York′s Department of Environmental Conservation Commissioner Joe Martens recommended the ban Wednesday after reviewing the results of Acting Health Commissioner Howard Zucker′s long-awaited report on the potential health effects of fracking. ’I asked myself, would I let my family live in a community with fracking? The answer is no,’ Zucker said in a statement. ’I therefore cannot recommend anyone else′s family to live in such a community either.’”

[COMMENTARY] Finally, some reputable public health authority has reviewed the respective environmental and health risks related to fracking. And they’ve considered it too risky. Many European countries also have come to the same conclusion. It’ll be informative and unfortunate to see the resultant health and environmental problems from fracking in the states that have so vigorously promoted it. Furthermore, as everyone realizes, should the low prices of oil and gas continue, the growth of the fracking industry is likely to stall or even decline in the years ahead.
New York fracking ban reverberates nationally, by Peter Moskowitz, December 17, 2014, Aljazeera America, USA.

State of Corporate Citizenship Finds Executive Support for Corporate Citizenship. “The Carroll School of Management Center for Corporate Citizenship at Boston College… finds that executives believe that corporate citizenship contributes to success, and plan to increase their investment in the future…

The 2014 State of Corporate Citizenship key findings include:
… The majority of executive respondents, across all business types and industries, confirm that corporate citizenship helps them successfully achieve strategic goals, ultimately improving performance.
… For the first time in over a decade, the majority of executives anticipate resources for every corporate citizenship dimension to increase over the next three years.”

[COMMENTARY] Executives are increasingly finding that CSR pays. Aside from ESG/CSR actions taken internally frequently showing demonstrable financial benefits, such actions also enhance a company′s overall reputation, benefiting all aspects of its operations — including its stock price. Thank you Boston College for this insightful research.
State of Corporate Citizenship Finds Executive Support for Corporate Citizenship, December 2014, Carroll School of Management Center for Corporate Citizenship at Boston College, USA.

Green Investors Flunk Fracking Industry on Impact Management. “ExxonMobil, Chevron, and WPX Energy are ranked among the worst fracking companies in a new report by a coalition of green investment firms that scores major oil and gas firms on their efforts to reduce the negative impacts of their operations.”

[COMMENTARY] According to this report,“Disclosing the Facts 2014: Risk and Transparency in Hydraulic Fracturing,” the fracking industry is getting away with massive un-reporting and misrepresentation concerning environmental degradation and destruction. America’s desire to be energy self-sufficient is allowing it to overlook the full health and environmental consequences of fracking. With low oil prices likely restraining fracking industry growth, perhaps some breathing room will be found to consider the potential health and environment effects of fracking. Meanwhile, most ethical investors stay clear of this industry for good reason.
Green Investors Flunk Fracking Industry on Impact Management, December 11, 2014, Environmental News Service, USA.

European investors stepping up responsible investment strategies.“European asset owners are increasingly moving towards responsible investment strategies, according to a new survey that shows 72% of investors have drawn up formal responsible investment policies, an increase of 7% on 2013.

Novethic published the survey at its annual event in Paris. It questioned 185 long-term investors, with over …6 trillion (…4.7tn) in assets in 13 European countries about their commitment to integrating environmental, social and governance (ESG) factors into asset management.”

[COMMENTARY] The survey’s findings are impressive and continue to point to mainstream asset managers accepting that ESG analysis adds to returns. If only investment advisors and brokers were so knowledgeable!
European investors stepping up responsible investment strategies, by Charlotte Malone, December 9, 2014, Blue & Green Tomorrow, UK.

Green Bonds to reach $100 billion in 2015. “Delegates from Spain, France, UK, Portugal and the Netherlands have gathered at the Green Bonds International Conference on yesterday in Madrid, organized by the sustainability experts SUST4IN. The number and variety of attendees at the conference can be explained by the fact that the market for green bonds has tripled this year to 35bn USD, including in Spain, and should reach 100bn USD in 2015, according to the forecasts of most of the speakers.”

[COMMENTARY] The issuance of green bonds is exploding. The above projection is made by an authoritative figure, Sean Kidney, CEO of the Climate Bonds Initiative. This is tremendous news for ethical investors who’ll now have many new fixed income investment options.
Green Bonds to reach $100 billion in 2015, December 4, 2014, SUST4IN, Spain.

Oil Investors at Brink of Losing Trillions of Dollars in Assets. Gore: It’s That Road Runner Moment. “A major threat to fossil fuel companies has suddenly moved from the fringe to center stage with a dramatic announcement by Germany′s biggest power company and an intriguing letter from the Bank of England… Bank of England Governor Mark Carney… instructed his staff to review whether sizable losses from stranded coal, oil and gas reserves could hurt banks, investors, insurance companies and the rest of the financial system.”

[COMMENTARY] When the Governor of the Bank of England is concerned about the potential for stranded (fossil fuel) assets to adversely impact the financial system, you know that the economic and political elites are worried. Actually, the stranded assets scenario–the writing-down of fossil fuel reserves–might also happen because of the current oil glut and very low oil prices!
Oil Investors at Brink of Losing Trillions of Dollars in Assets. Gore: It’s That Road Runner Moment, by Alex Morales, December 2, 2014, Bloomberg, USA.

Ontario requiring pension funds to report their ESG policies and practices. “The statement of investment policies and procedures shall include information as to whether environmental, social and governance factors are incorporated into the plan′s investment policies and procedures and, if so, how those factors are incorporated.”

[COMMENTARY] This is an important new step for ethical investing in Canada. It’s likely that all the other Canadian provinces and territories will follow Ontario’s lead.
Pension’s Benefits Act changes, November 26, 2014, Ontario, Canada.

Concordia becomes first Canadian university to begin divesting from fossil fuels. “However small or tentative this first step may be, Concordia University now has the distinction of saying it is the first university in the country to have initiated the process of divesting from fossil fuels… But while some student groups welcomed this as a step in the right direction, Divest Concordia has called it a ’flat-out rejection of student calls for full divestment from fossil fuels.’”

[COMMENTARY] Though small, it is a beginning. It could serve as ’wake-up’ call for other Canadian universities. The ’ice is broken’ so it’ll encourage other university divestment groups and campaigns.
Concordia becomes first Canadian university to begin divesting from fossil fuels, by Karen Seidman, December 2, 2014, Montreal Gazette, Canada.

Featured New Book

Low Fee Vegan Investing, Taking veganism to the next level, by Tom Nowak, CreateSpace Independent Publishing Platform, 2014.
“This book contains guidance for investing from a vegan perspective. Although the general area of sustainable investing has grown significantly in recent years, no mutual funds (low-cost or otherwise) exist to help vegans bring their investment dollars in alignment with their values. Vegans, vegetarians and meatless-Monday investors should find this book helpful.”—Book description.

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