January 2010

How You Invest. – [COMMENTARY] “YOU′RE likely to feel more confident about the economy when your political party is in power… But a new study has found that your feelings probably affect the way you invest your stock portfolio. The study… found that when an investor′s favored political party held power in Washington, he or she generally increased holdings of risky stocks, shifted from foreign to domestic companies and traded less often. The opposite occurred when the preferred party was out of office. And the patterns held whether an investor was a Republican or a Democrat.” I wonder who are richer, Democrat or Republican investors? That would be an interesting line of research don’t you think? The results might show even more promise than those many market timing algorithms.
When a Portfolio Is Red or Blue, by Mark Hulbert, January 31, 2010, The New York Times, USA.

Covalence Issues 2009 Corporate Ethical Ratings. – [COMMENTARY] “IBM (Technology), Intel Corp (Technology) and HSBC Holdings (Banks) top Covalence ethical ranking among 581 multinationals within 18 sectors.” The Covalence ratings are worth a look at to find ethical stocks that are good to invest in. The ethical ratings of Swiss banks tumbled according to Covalence. Before making changes to your portfolio–check with your investment advisor.
Covalence Ethical Ranking 2009, January 26, 2010, Covalence, Switzerland.

IMF Proposes $100 Billion Green Fund For Developing Countries. – [COMMENTARY] “According to Dominique Strauss-Kahn, the IMF managing director, who made the proposal public Saturday, the capital will come from Special Drawing Rights – the IMF′s own currency — held by world′s central banks…  The central banks of developed countries would inject capital into the fund using some of their SDR allocations. The fund would then issue bonds to investors, including sovereign wealth funds that would be backed by the green fund′s capital.”

On the surface it sounds like a great idea. However, since China, according to the January 31 edition of The New York Time, is now the world’s largest and most efficient supplier of renewable energy equipment, it could mean that much of the spoils goes to them. But western-based companies who have a big presence in China, such as Vestas Wind Sytems, could benefit.
IMF Proposes $100 Billion ‘Green Fund,′ by Stephen Fidler, January 30, 2010, WSJ Blogs, USA.

Matthew Kiernan, Former Head Of Innovest Strategic Value  Advisors, Launches Inflection Point Capital Management (IPCM). – [COMMENTARY] “IPCM has backing from strategic partners Global Currents Investment Management, a subsidiary of Legg Mason, which will provide the infrastructure for the investment boutique, and Phoenix Global Advisors, which provides the technology to integrate sustainability research into mainstream financial analysis. ’Historically, sustainability has been a standalone asset class, but it seems to me it′s an investment philosophy – either you buy it or you don′t,’ said Mr Kiernan. He intends to apply the philosophy across all asset classes and hopes this will differentiate IPCM from other sustainable investment managers.”

Having personally known Mr. Kiernan and his great attributes and accomplishments, I am sure he will succeed admirably in his new venture.
Sustainable investing behind new manager, by Sophie Grene, January 30, 2010, FT.com, UK.

UK Ethical Goods & Services Grow 3-Fold In Decade. – [COMMENTARY] “Expenditure on ethical goods and services has grown almost three-fold in the past 10 years according to The Co-operative Bank’s Ethical Consumerism Report published today (30 December). The report, which has been acting as a barometer of ethical spending in the UK for a decade, shows that overall the ethical market in the UK was worth GBP36 billion in 2008 compared to GBP13.5 billion in 1999.The authoritative report analyses ethical sales data for various sectors including food, household goods, eco-travel and ethical finance.” It is likely that such growth of ethical goods and services also occurred in other developed countries too. This holds continued promise for ethical stocks and bonds over the longer term.
Ethical sales grow 3-fold in decade says The Co-operative Bank, January 28, 2010, media release, The Co-operative Financial Services Press Office, UK.

SEC Says Public Companies Should Warn Investors Of Global Warming Risks To Their Businesses. – [COMMENTARY] “The commission said that companies could be helped or hurt by climate-related lawsuits, business opportunities or legislation and should promptly disclose such potential impacts. Banks or insurance companies that invest in coastal property that could be affected by storms or rising seas, for example, should disclose such risks, the agency said.” Better late than never, as ethical investor groups have been demanding such transparency in reporting for many years. Large numbers of companies who could be severely impacted by climate change have so far chosen to ignore the issue. This means that investors in these companies are taking on significant financial risk which they might not be aware of.
S.E.C. Adds Climate Risk to Disclosure List, by John M. Broder, January 27, 2010, The New York Times, USA.

Boston College Center For Corporate Citizenship Releases A ’How To’ Guide To Understand Corporate Social Reporting. – [COMMENTARY] “This guide is intended to help those approaching CSR reporting for the first time, as well as those looking to deepen their understanding of what makes for a thorough CSR report. It will help readers, whatever their interests or experience, to identify quickly and easily the most valuable parts of these reports. Its focus is on CSR reporting as practiced by North American companies, but it is applicable to CSR reporting more generally as well.” To obtain the guide you need to register with the College. Registration is free.
How to Read a Corporate Social Responsibility Report: A user′s guide, January 26, 2010, Boston College Center for Corporate Social Responsibility, USA.

Index Of Greenest Property Companies Launched. – [COMMENTARY] “Three of the largest European institutional investors, Dutch pension management giants APG and PGGM and the Universities Superannuation Scheme in the UK, have clubbed together to set up a global benchmark of the greenest listed property management companies to gee up poor reporting levels in the sector. The index creation comes after a survey of 688 property managers – of which 198 responded – commissioned by the funds and carried out by the European Centre for Corporate Engagement (ECCE) at Maastricht University, revealed a ’strikingly low’ number able to provide meaningful data on environmental factors.” Such an index should prove useful to ethical investors. This index will no doubt have a European focus.
APG, PGGM and USS create index of greenest property companies, by Hugh Wheelan, January 28, 2010, Responsible Investor, UK.

Corporate Knights Announces Its Global 100 List Of Most Sustainable Corporations. – [COMMENTARY] “The 2010 Global 100 tapped intelligence from the world’s largest sustainability research alliance put together by Legg Mason’s Global Currents Investment Management to isolate the top ten per cent of companies from a universe of 3000 global stocks, which were then transparently ranked based on 10 indicators, with data sourced from ASSET4, a Thomson Reuters business, and The BLOOMBERG PROFESSIONAL® service.”

The top three companies are GE, PG & E, and TNT. I see Matthew Kiernan, formerly head of the leading global ESG firm, Innovest Strategic Value Advisors, had a hand in this. He has a new company called Inflection Point Capital Management. This is a list to take seriously.
2010 Global 100: The Definitive Corporate Sustainability Benchmark, January 27, 2010, Global 100, Canada.

Mercer Finds Discrepancy Between Companies With CSR Policies And Incorporation Of A CSR Strategy In Their Defined Contribution (DC) Plans. – [COMMENTARY] “… (71%) of those respondents that currently have a global CSR strategy (whether they are aware of the strategy or not) have not considered actively reflecting this strategy in the management of their DC plans. This speaks to potential gaps in how companies are implementing their CSR strategies, highlighting a possible ’pension inconsistency risk.’… [which] refers to the negative potential impact that could result from employees′ dissatisfaction with their pension plans, or from external scrutiny of the plan in the context of overall corporate strategy (including CSR).” As companies realize this discrepancy, ethical investing could receive a further boost from DC plans.”

As companies realize this discrepancy, ethical investing could receive a further boost from DC plans.
DC plan management and pension inconsistency: Are you at risk? By Jane Ambachtsheer and Katherine Burstein, January 26, 2010, Mercer, Canada.

Middle East ESG Index To Be Launched. – [COMMENTARY] “The first environmental, social and governance (ESG) index of Middle Eastern and North African companies is due to be launched later this year – two years after it was first announced. The Dubai-based Hawkamah Institute for Corporate Governance, index and ratings provider Standard & Poor′s (S&P), and Credit Rating and Information Services of India Ltd. (Crisil) are developing the index, which will be based on constituents′ ESG performance.” This is excellent news. It now means most of the globe will be covered by both regional and global ESG based financial indexes.
Middle East ESG index finally to be launched this year, January 21, 2010, Environmental Finance, UK.

Some Israeli Companies Continue To Be Divested Or Barred From Fund Holdings. – [COMMENTARY] “Africa Israel Investments and Elbit Systems have been added to Danske Bank′s list of companies that fail to adhere to its Socially Responsible Investment policy.” Some fund managers are continuing to divest or barr holdings in Israeli companies that help construct the dividing wall between Israel and the West Bank, or help build settlements on disputed territory.
Israeli companies excluded from bank′s investments, January 25, 2010, The Copenhagen Post, Denmark.

RiskMetrics, Who Recently Purchased KLD & Innovest, Up For Sale Says Wall Street Journal. – [COMMENTARY] “A number of media companies and private-equity firms have been contacted about a potential acquisition of the New York provider of risk analysis, financial research and corporate-governance services for investors such as pensions and hedge funds. The company could fetch a premium of about 30% to its current value, said one person involved in a potential transaction. That would value the company, which has about 1,100 employees, all in New York, at around $1.3 billion, based on where its shares traded Friday.” If this is correct, on wonders, why now?
RiskMetrics Puts Itself Up for Sale, by Jeffrey McCracken and Peter Lattman, January 23, 2010, Wall Street Journal, USA.

Canadian Executives Believe The Return On Investment In Socially And Environmentally Responsible Practices Justifies The Expenditure. – [COMMENTARY] “When executives were asked what they viewed as the potential benefits of investing in or pursuing socially and environmentally responsible practices, their top three responses were a positive organizational reputation, higher or sustained employee engagement, and eliminating waste/reducing their impact on the environment.” This Hewitt Associates survey adds continued support as to the advantages of using corporate social responsibility in advancing employee morale, corporate performance, and profitability.
Research from Best Employers in Canada Study Builds Business Case for Investment in Corporate Social Responsibility, media release, January 25, 2010, Canada.

65% Of US SRI Funds Outperformed Market Benchmarks In 2009. – [COMMENTARY] “A review of 160 socially responsible mutual funds from 22 members of the Social Investment Forum (SIF) finds that the vast majority of the funds — 65 percent — outperformed their benchmarks in calendar year 2009, most by significant margins. These SRI funds topped benchmarks across nearly all asset classes, including balanced, large cap, small cap and global funds, as well as bonds.” The evidence speaks for itself.
Performance of Social Investment Forum Member Mutual Funds as of December 31, 2009, media release, January 21, 2009, USA.

FairPensions Coordinating 140 Pension Funds To Grill Royal Dutch Shell On Its Oil Sands Investments At Its AGM May 18. – [COMMENTARY] “The resolution was filed on December 31, and the company has confirmed that it will be on the AGM agenda. The resolution raises concerns over the long-term success of the company arising from the risks associated with oil sands. It points to expected carbon price rises, oil price volatility, expected fluctuations in demand, regulation of greenhouse gas emissions, and the legal and reputation risks arising from environmental damage and impairment of traditional livelihoods. Thirty percent of Shell′s total reserves is estimated to be represented by oil sands developments.” Investors in energy companies with oil sands developments have to be worried about future outcomes.
Institutional shareholders to quiz Shell board over Canadian oil sands at AGM, by Daniel Brooksbank, January 18, 2010, Responsible Investor, UK.

Investors With $13 Trillion In Assets Call For Strong Government Climate Change Policies. – [COMMENTARY] “On the heels of international climate treaty talks in Copenhagen, the world′s largest investors today released a statement calling on the U.S. and other governments to move quickly to adopt strong national climate policies that will spur low-carbon investments to reduce emissions causing climate change. Private-sector investors will likely be responsible for financing more than 85 percent of the global transition to a low-carbon economy… [The meeting included] 450 global investors at the United Nations… UN Secretary General Ban Ki-Moon, United States Special Envoy for Climate Change Todd Stern, billionaire investor George Soros and former Vice President Al Gore.”

Clearly, global investors who take climate change seriously feel adrift after Copenhagen. Without broad agreement by leading governments on this issue, companies and investors are somewhat adrift as to what steps they can take. Nonetheless, many investors and companies will pioneer initiatives that ethical investors will be keen to participate in.
Investors Representing $13 Trillion Call on U.S. and Other Countries to Move Quickly to Adopt Strong Climate Change Policies, media release, January 14, 2010, Investor Network on Climate Risk, USA.

Large UK Firms Making Progress On Nat’l Climate Goals, Intensive Sectors Lag. – [COMMENTARY] “Although the U.K.’s 100 largest companies are making headway toward the country’s climate change goals as a whole, its most carbon-intensive industries are lagging with emissions reduction targets that fall short of national goals.” Though this report is focused on UK companies, it offers insight as to how these and similar firms operate in other developed countries. The report is an interesting read for anyone interested in ethical investing.
Large UK Firms Making Progress on Nat’l Climate Goals, Intensive Sectors Lag, January 7, 2010, ClimateBiz, UK. See actual report, by the Carbon Disclosure Project.

Asset Managers Ignoring Climate Change Risk Analysis–Update. – [COMMENTARY] We now have access to the Ceres report: “Nearly half of the respondents – 44 percent – said they do not consider climate risks at all because they do not believe that climate change is financially ’material’ to investment decision-making… half of the respondents – nearly 49 percent – said they did not analyze climate risks because their investor clients did not ask them to. Another shortcoming… incentive structures and benchmarks that asset owners use for evaluating asset managers are heavily weighted towards short-term performance focusing primarily on quarterly returns where climate risks are far less likely to show up.”

Most of the problems cited above–as well as mentioned here many times–are due to the short-termism orientation of the investment industry itself! The consciousness of the investment and financial industries must change. However, I fear it will be another meltdown, perhaps of the ’bail-out’ bubble, before these industries do change.
New Report: Investment Managers Still Lagging in Response to Climate Change Risks and Opportunities, press release, January 6, 2010, Ceres and Investor Network on Climate Risk (INCR), USA.

Global Greentech Venture Capital Down 33% In 2009 Over 2008. – [COMMENTARY] “Worldwide venture capital investment in green technology companies fell 33 percent in 2009 to $5.6 billion during the global financial turmoil, according to a survey by Cleantech Group and Deloitte.” This was expected.
Venture money in green cos off 33 pct in ’09-report, by Poornima Gupta, January 6, 2010, Reuters, USA.

A Huge US Pension Fund, The TIAA-CREF, Sells Shares In Companies Working With Sudanese Government. – [COMMENTARY] “TIAA-CREF, the giant $402bn (€315bn) US pension plan and investment fund group for US teachers and researchers, has sold its shares in four Asian companies: PetroChina, CNPC Hong Kong, Oil and Natural Gas Corporation and Sinopec, in protest at their business links to the Sudanese government presiding over genocide in Darfur.” Most ethical investors applaud moves such as this one. As ethical investing increases in popularity, companies, in order to protect their stock prices, will become increasingly wary of working with tarnished regimes.
TIAA-CREF sells PetroChina and Sudan-linked companies in Darfur protest, by Hugh Wheelan, January 5, 2010, Responsible Investor, UK.

Most Large Asset Managers Ignore Climate Change Risk Analysis. – [COMMENTARY] “… the vast majority of the world’s largest investment managers are not analyzing climate-related risks and opportunities in their short- and long-term investment decision-making. So concludes a new Ceres report that will be the subject of a phone-based press conference at 11 a.m. EST Wednesday, January 6.” It will be interesting to get the details when the report is released tomorrow. One would have thought that all the discussion on climate change should have produced some changes in the way asset managers assess their investments.
Investment managers ignoring climate: report, January 4, 2010, HazMat, USA.

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