August 2016 Newsletter

August 2016 Newsletter

News & Commentaries by Ron Robins


Climate change is ‘overblown nonsense′ and not a material risk, says industry representative. “The latest Pensions Buzz poll – conducted by Professional Pensions between 22 August and 23 August among 101 trustees, scheme managers and pension professionals – found more than half (53%) did not see climate change as a financially material risk to their own or their clients’ portfolios.”

[COMMENTARY]The fact that in the same survey 36% said that climate change was a material financial risk and 16% didn’t know if it was one — are the numbers that impressed me. Go back a few years and this kind of survey would’ve not even been done.
Climate change is ‘overblown nonsense′ and not a material risk, says industry, by Michael Klimes, August 24, 2016, Professional Pensions, UK.

Deloitte Says Sustainability Reporting Adds Up To Real Numbers.“A recent CFA Institute Survey found that 69% of CFA Institute members globally believe it is important that ESG disclosures be subject to independent verification. Respondents, however, are split on what level of verification is necessary … 44% prefer a high level of assurance and 46% support limited verification. But it is clear that the movement toward ’investor-grade’ ESG disclosure is still evolving with only 63% of the responding Global 250 companies obtaining some form of assurance on sustainability reporting.”

[COMMENTARY]This is something I’ve been talking about for decades — the need for independent verification of ESG disclosures in corporate reports. I believe they warrant the same scrutiny as auditors provide for financial statements. Overall, this article is useful and informative for all investors.
Deloitte Says Sustainability Reporting Adds Up To Real Numbers, by Christopher P. Skroupa, August 23, 2016, Forbes, USA.

Demonstrating Ethical Conduct Is A Priority Throughout Investment Relationship. “The level of importance of ethical actions is another of the themes uncovered in the results of the joint CFA Institute/Edelman survey From Trust to Loyalty: A Global Survey of What Investors Want. An earlier blog noted several topline findings of the report, such as fee transparency and disclosure of conflicts of interest.

Although these are clearly elements in building trust, I wanted to see how retail and institutional respondents viewed a commitment to ethical conduct over the lifespan of the advisory arrangement…

An unwavering commitment to ethical conduct combined with transparent and consistent communications will be keys to both building and maintaining loyal clients.”

[COMMENTARY]When you read this article and the research it’s based on it’s clear that ethical conduct is the first requirement that investors demand of their advisors.
Demonstrating Ethical Conduct Is A Priority Throughout Investment Relationship, by Glenn Doggett, August 23, 2016, Seeking Alpha, USA.

Diversity makes dollars and sense. “Corporate boards and executive teams that lack gender and cultural diversity risk missing out on opportunities to generate long-term value.”

[COMMENTARY]Deb Abbey convincingly argues the case for board and senior management diversity! She provides the reasoning why diversity is among the primary investment screens for SR-ethical investors. Thank you Deb for compiling and writing about the specific research that demonstrates the benefits of how diversity in boards and management improves financial and stockholder returns.
Diversity makes dollars and sense, by Deb Abbey, August 18, 2016, Investment Executive, Canada.

ESG performing well and in demand, but a shortage of ETFs is holding back adoption. “There are not enough SRI/ESG ETFs for all the different asset classes. It′s all very well having a global equities SRI ETF but if it′s Emerging Markets equity exposure you are after that won′t help. In fixed income it would be good to see more offerings, such as in High Yield. There are corporate bond SRI/ESG ETFs but nothing in the lower credit rating/higher yield spectrum.” — Camilla Ritchie, UK.

[COMMENTARY]This concern in lack of diversity in ESG ETFs is common globally. Considering the growth of ESG ETFs, no doubt many ESG providers are planning to fill this void.
ESG performing well and in demand, but a shortage of ETFs is holding back adoption, by Rebecca Hampson, August 19, 2016, ETF Strategy, UK.

The Most Reputable Tech Companies In 2016. “Another takeaway from this year′s results is the importance of social responsibility to millennials — the 18- to 34-year-olds who are becoming the largest consumer base in the U.S. In fact, the most reputable tech companies are faring especially well with that age group. And to have a positive reputation among millennials, a company has to learn how to attach the critical issues that these young people care about to the company′s vision or strategy.”

[COMMENTARY]Monica Wang’s article provides a good overview of the results of this fascinating index. It’s extraordinary that Google is eighth while Amazon, Samsung and Intel are the top three on the list.
The Most Reputable Tech Companies In 2016, by Monica Wang, August 18, 2016, Forbes, USA.

You Don’t Have to Sacrifice Returns for Sustainability. “The performance of socially responsible funds has been in line with conventional funds’ over time, writes Morningstar’s Jon Hale.”

[COMMENTARY]Using Morningstar owns database Jon Hale concludes that ESG oriented funds have performed similarly over the long haul to regular funds. This eliminates the argument that by limiting the universe of stocks that an ESG fund will do less well than the general fund universe.
You Don’t Have to Sacrifice Returns for Sustainability, by Jon Hale, August 18, 2016, Morningstar, USA.

The Carbon Clean 200. “The Clean200 is intended as the clean energy inverse of the Carbon Underground 200TM. Where the Carbon Underground 200TM (which evolved from the seminal Carbon Tracker Initiative report, Unburnable Carbon: Are the World′s Financial Markets Carrying a Carbon Bubble?), ranks the largest publicly listed companies by the carbon intensity of their coal, oil, and gas reserves…

The Clean200 ranks the largest publicly listed companies by their total clean energy revenues, with a few additional screens to help ensure the companies are indeed building the infrastructure and services needed for what Lester Brown and many others have called ’The Great Energy Transition’ in a just and equitable way.”

[COMMENTARY]Congratulations to Corporate Knights and As You Sow for creating this new useful innovative index! The link below provides not only a link to the index but to a great article describing it too.
The Carbon Clean 200, by Andy Behar, Michael Yow and Toby A.A. Heaps, August 15, 2016, Corporate Knights, Canada.

SEC Urged to Strengthen ESG Reporting Requirements. “Ceres organizes an investor coalition calling for regulations to strengthen corporate climate reporting, while US SIF and ICCR issue a joint press release urging mandatory sustainability reporting.”

[COMMENTARY]It’s important that ethical-SRI oriented organizations pressure the SEC to adopt more meaningful ESG disclosure since the SEC is getting huge pressure against expansion of ESG reporting from such entities as the US Chamber of Commerce!
SEC Urged to Strengthen ESG Reporting Requirements, by Robert Kropp, August 12, 2016, Social Funds, USA.

ESG is part of fiduciary duty, says new code of practice from UK Pensions Regulator … Responsible Investor. “’Trustees of UK pension funds should consider environmental, social and governance (ESG) factors when making investment decisions, where such factors are ’financially significant’, according to a new code of practice published by The Pensions Regulator, which sets out standards for trustee boards of defined-contribution (DC) scheme.”

[COMMENTARY]This is a huge development. Fund fiduciaries around the world will take notice of this. As a result we’ll likely see similar regulatory moves in numerous countries. It’s about time this happened. The stocks of companies excelling in ESG will continue to benefit from such moves.
ESG is part of fiduciary duty, says new code of practice from UK Pensions Regulator … Responsible Investor, by Laurie Havelock, August 2, 2016, UKSIF, UK.

America’s 50 Most Trustworthy Financial Companies. “To develop this list for Forbes, MSCI MSCI +% ESG Research reviews the accounting and governance behaviors of nearly 700 publicly-traded North American financial companies with market caps of $250 million or greater, for the year ending December 2015. In assessing each company, factors including high-risk events, revenue and expense recognition methods, SEC actions, and bankruptcy risk are all considered as indicators of a company′s credibility. Companies on this list also scored above a 5 out of 10 against criteria established by MSCI ESG to track governance considerations.”

[COMMENTARY]Most of America’s largest financial institutions don’t make the list. That’s not surprising considering how much most of them have had to pay in fines for unethical financial practices. This is a good list for ethical investors to review who want to invest in financial companies.
America’s 50 Most Trustworthy Financial Companies, by Kathryn Dill, August 2, 2016, Forbes, USA.

Featured New Book

Making Money Matter: Impact Investing to Change the World, by G. Benjamin Bingham, Prospecta Press, 2015.
“Ben Bingham is one of a small band of pioneer asset managers who brings in a long-term, whole systems view. This book belongs on every investor′s shelf.”—Dr. Hazel Henderson, author, Mapping the Global Transition to the Solar Age, President, Ethical Markets Media (USA & Brazil).

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