May 2016 Newsletter

May 2016 Newsletter

News & Commentaries by Ron Robins


Bloomberg Financial Services Gender-Equality Index (BFGEI). “For investors who prioritize gender equality, new market data tools are emerging to help them assess a company′s efforts on this front. This week, Bloomberg launched an index that scores financial-service companies on how well they treat women and whether they are promoting gender equality.”

[COMMENTARY]We all know that more women on boards and in management help companies perform better. Thus, this index could be useful in determining which financial firms are better investments for ethical investors.
Bloomberg Financial Services Gender-Equality Index (BFGEI), by Bouree Lam, May 5, 2016, The Atlantic, USA.

2016 Country Sustainability Ranking by RobecoSAM and Robeco. “The country sustainability score is based on 17 environmental, social and governance indicators, which receive a weight of 15%, 25% and 60% of the total score, respectively. The score ranges from 1 to 10 and should be interpreted as a grade, with the highest grade being 10 and the lowest 1. The purpose of the score is to compare countries on the basis of ESG indicators that we consider to be relevant for investors.”

[COMMENTARY]The top three countries are who you might expect — Sweden, Switzerland and Norway. Amazingly, the UK is rated fourth! The ratings and detailed country ESG analysis are useful for ethical investors when assessing sovereign bonds, particularly, from rated countries.
Country Sustainability Ranking, April 2016, by RobecoSAM and Robeco, Switzerland.

BlackRock, World Bank team with scientists to assess climate risk (for investors). “Norwegian scientists have teamed up with some of the world’s leading investment firms to assess the financial risks associated with global warming.

The new Centre for International Climate and Environmental Research (CICERO) Climate Finance initiative will bring together climate scientists and investors, including BlackRock and the World Bank, to develop tools to help investors more effectively incorporate climate risk into long-term investment decisions.”

[COMMENTARY]The establishment of CICERO with major institutional investors could present a new era for investors wanting to know how to assess investments in light of climate change risk. Hopefully, the results of their findings will not be proprietary but open for all to use. Perhaps with the involvement of the World Bank that will be ensured.
BlackRock, World Bank team with scientists to assess climate risk, by Madeleine Cuff, May 25, 2016, BusinessGreen, USA.

Influencing climate policy. “The British non-profit Influence Map has released new research quantifying how much money is spent each year by leading oil majors and trade associations attempting to block climate change policy. It found that ExxonMobil spent an estimated $27 million (U.S.) in 2015, followed by Shell at $22 million. The American Petroleum Institute and two other key trade organizations spent a combined $74 million during the same year.

When extrapolated out to encompass oil majors and other trade associations, Influence Map estimated that global spending could be as high as $500 million a year.”

[COMMENTARY]Actually, it’s unsurprising that the fossil fuels’ industry is spending such sums attempting to protect their profits. It is also good that Influence Map has done the sums. Investors can now make more informed opinions about fossil fuel investments, particularly as many of thesecompanies are now starting to increase their activities in renewables.
Influencing climate policy, May 19, 2016, Corporate Knights, Canada.

Managers score weak on ESG despite more signing up to PRI. “Half of managers that are signatories to the United Nations backed Principles for Responsible Investment (PRI) in reality have a weak responsible investment rating, according to research.”

[COMMENTARY]The inference from the research is that many PRI signatories signed-up for public relations reasons and not for the genuine implementation of the six PRI ESG principles. However, I believe that the PRI is planning significant steps to encourage its members to be more aggressive with their ESG commitments. This must be done if the PRI are to be respected. They should even throw-out those signatories that are not serious about their implementation.
Managers score weak on ESG despite more signing up to PRI, by Kristian Brunt-Seymour, April 29, 2016, Professional Pensions, UK.

When markets ignore vital warning signs. “MSCI was not the only company highlighting governance concerns about VW at the time. At Sustainalytics, which rates companies based on ESG factors, VW ranked in the bottom quartile of businesses globally when it came to governance. Vigeo, the French agency that provides corporate responsibility analysis to investors, also ranked VW far below its peers before the scandal broke.”

[COMMENTARY]The information here demonstrates the importance of governance and ESG ratings in helping ethical investors avoid possible disasters in their portfolios.
When markets ignore vital warning signs, by Attracta Mooney, May, 8, 2016, FT, UK.

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