August 2015 Newsletter

August 2015 Newsletter

News & Commentaries by Ron Robins


Morningstar to launch ESG scores for funds. “Chicago-based Morningstar Inc. plans to launch environmental, social, and governance (ESG) scores for mutual funds and exchange-traded funds later this year… Morningstar says that it will use the ESG ratings provided by Sustainalytics on more than 4,500 companies to create asset-weighted composite ESG scores for the mutual funds and ETFs that it covers based on the company-level ESG ratings.”

[COMMENTARY]This is terrific news! It will mean greatly increased exposure of ESG-ethical investment products to investors and the investment industry. It could encourage many more advisors to place ESG-ethical funds/ETFs in their client portfolios. Congratulations to Michael Jantzi and Sustainalytics for their part in this endeavour!
Morningstar to launch ESG scores for funds, by James Langton, August 13, 2015, Investment Executive, Canada.

Doing Good Is Good Business, But Can You Prove It? “The latest evidence that the financial benefits of CSR are causal and not just correlated comes in the form of a study as hefty as a brick. ’Project ROI: Defining the Competitive and Financial Advantages of Corporate Responsibility and Sustainability’ is an effort to assess the business case for CR for the benefit of senior executives, boards of directors and even Wall Street.

According to the study, with proper design and sufficient investment, a company′s ’CR Assets’ can support returns related to share price and market value; reputation and brand; sales and revenue; human resources; and risk and license to operate.”

[COMMENTARY]Surely and gradually the financial case is being made for CSR! Companies who ignore developing good CSR strategies are likely being seen as dinosaurs and whose stock price and reputation taking increasingly bad hits.
Doing Good Is Good Business, But Can You Prove It? By Ryan Scott, August 26, 2015, Forbes, USA.

Companies that Care for Consumers Earn Higher Returns: New Study.“A new study called ’Meaningful Brands,’ conducted by global advertising agency Havas, shows that when companies invest the time and effort to connect with consumers, it pays. Such companies typically command increased sales, better brand recognition and higher annual returns than other companies.

The study surveyed 300,000 people in 34 countries and asked them how they felt about 1,000 brands across 12 industries. The findings showed that a meaningful brand has a 46 percent higher share of the consumer′s wallet, which refers to the amount a consumer spends on a particular product. Furthermore, the top 25 more meaningful brand outperformed the stock market by 133 percent.”

[COMMENTARY]This study results make sense. It’s good to have hard data to prove what we believe to be true.
Companies that Care for Consumers Earn Higher Returns: New Study, by Vikas Vij, August 20, 2015, Justmeans, USA.

Almost Three Quarters of Investment Professionals Use Environmental, Social & Governance Information When Making Investment Decisions. “Almost three-quarters of investment professionals worldwide (73 percent) take environmental, social, and corporate governance (ESG) issues into consideration in the investment process, according to the CFA Institute ESG Survey, a new survey of CFA Institute members created by CFA Institute and the Investor Responsibility Research Center Institute (IRRC Institute).

In addition, 64 percent of survey respondents consider governance issues, 50 percent consider environmental issues, and 49 percent consider social issues in investment decisions. Only 27 percent do not consider ESG issues.”

[COMMENTARY]Wow, these numbers are incredible. I just wonder how the survey questions were framed. At face value, it would seem the work of the responsible-ethical investment community has been accomplished. But is that really the case?
Almost Three Quarters of Investment Professionals Use Environmental, Social & Governance Information When Making Investment Decisions, press release, August 17, 2015, The Investor Responsibility Research Center Institute (IRRC)/CFA Institute, USA.

Why Putting a Number to C.E.O. Pay Might Bring Change.So why does anyone expect a different outcome from the Securities and Exchange Commission′s new rule requiring disclosure of the gap between what a company′s chief executive is paid and what its rank-and-file workers earn?

I put that question to some experts on executive pay… Their thinking goes like this: Because the rule will generate an easily graspable and often decidedly shocking number, it may energize a cadre of new combatants in the executive pay fight. And because these newcomers — company employees, state governments and possibly even consumers — will most likely be more vocal on the matter than institutional investors have been, the executive pay bubble might actually start to deflate.”

[COMMENTARY]This article is well worth reading for all ethical investors who’re concerned about excessive executive pay. Though I’m hopeful it could help bring down the pay gap between executives and their employees, I’m concerned that ways will be found to kill its implementation before it starts in 2017.
Why Putting a Number to C.E.O. Pay Might Bring Change, by Gretchen Morgenson, August 6, 2015, The New York Times, USA.

365 Companies and Investors Announce Support for EPA′s Clean Power Plan. “In an unprecedented show of business support for tackling climate change, 365 companies and investors sent letters today to more than two-dozen governors across the United States voicing their support for the Environmental Protection Agency′s Clean Power Plan for existing power plants and encouraging the state′s ’timely finalization’ of state implementation plans to meet the new standards… [Signatories include: General Mills, Mars Inc., Nestle, Staples, Unilever and VF Corporation.]”

[COMMENTARY]Actions like these from businesses of all sizes offer hope that Paris COP21 environmental conference might actually produce real carbon reduction agreements. Hitherto, business was acting as a retarding force to such agreements. So these actions really point in a very positive direction.
365 Companies and Investors Announce Support for EPA′s Clean Power Plan, press release, July 31, 2015, Ceres, USA.

SRI Investing Opens For 4.7 Million Government Workers. “For the first time, government workers and military personnel saving for retirement will have the option to invest in sustainable, responsible and impact investment funds, based on a vote this week by the Federal Retirement Thrift Investment Board. The board serves the government’s massive retirement system known as the Thrift Savings Plan or TSP.”

[COMMENTARY]It’s taken a long time, but finally, the US government is doing the right thing. There might well be an infusion of new funds into ethical investment products, providing further support for the sector.
SRI Investing Opens For 4.7 Million Government Workers, by Maureen Nevin Duffy, July 29, 2015, Financial Advisor, USA.

Featured New Book

The Power of Impact Investing: Putting Markets to Work for Profit and Global Good, by Judith Rodin and Margot Brandenburg, Wharton Digital Press 2014.
“In The Power of Impact Investing, Judith Rodin and Margot Brandenburg demonstrate that impact investing has the power to provide sustainable solutions to the world′s toughest problems. In addition to laying out the landscape of opportunity for different types of investors, they tell stories of impact investors who are creating social impact and of enterprises benefiting from the partnership. Both Judith and Margot′s voices are critical to this emerging field.”—Jacqueline Novogratz, CEO & Founder, Acumen.

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