March 2010

Consumers Continue To Prioritize Social Responsibility Across Business Sectors, Despite Recession. [COMMENTARY] “The second annual Corporate Social Responsibility Perceptions Survey, conducted by research-based consultancy Penn Schoen Berland in partnership with brand consulting firm Landor Associates and strategic communications firm Burson-Marsteller, analyzed consumer views of companies operating across 14 industries ranging from Apparel to Telecommunications. The survey finds that more than 75 percent of consumers say that it is important for companies in each of the industries tested to be socially responsible.” As much as I like the outcomes of such surveys, you cannot help but wonder who would say that they like to support socially irresponsible firms.
Consumers Continue to Prioritize Social Responsibility across Business Sectors, Despite Recession, press release by Penn Schoen Berland in partnership with brand consulting firm Landor Associates and strategic communications firm Burson-Marsteller, March 29, 2010, USA.

CRO Magazine Awards To Best Responsible Companies Questioned. [COMMENTARY] “How do you compare HP (No. 1 on the list) with Kimberly-Clark (5), Wal-Mart (21), Nike (23), Green Mountain Coffee Roasters (39), Duke Energy (43), Citigroup (57) and Ford (88). They’re in disparate businesses, with different issues.” Read the article, the introduction about Google is especially telling.
CRO Awards Spotlight What’s Wrong with Awards, by Marc Gunther, March 24, 2010,, USA.

Over One-Third Of UK DC Pension Schemes Now Offer Ethical Fund Choices, Towers Watson. [COMMENTARY] “… over a third of schemes now offer ethical funds, up from a quarter last year, and the number of schemes offering Shariah funds has doubled in the same period.” The march towards ethical investing continues apace in the UK. It shows that investors are increasingly concerned with ethics, illustrating a higher consciousness occurring not only in the UK, but we see it globally as well.
FTSE 100 DC poll reveals shift towards smaller fund ranges, by Jonathan Stapleton, March 29, 2010, Professional Pensions, UK.

S&P, Toronto Stock Exchange (TSX) Launch S&P/TSX Clean Technology Index. [COMMENTARY] “The S&P/TSX Clean Technology Index draws companies from the investable universe of public companies whose activities provide value-added solutions to environmental problems. S&P and TSX chose Jantzi-Sustainalytics, one of the world’s leading providers of environmental, social, and governance research and analysis, to develop and maintain the Clean Technology Classification System.”

More welcome news on the clean tech index front. Congratulations to Michael Jantzi, Kevin Ranney, and all those at Jantzi-Sustainalytics in developing this new index.
S&P, TSX Launch S&P/TSX Clean Technology Index, news release, March 25, 2010, Standard & Poors/TMX Group, Canada.

IMF Members Reject $100 Billion Green Fund. [COMMENTARY] “International Monetary Fund member countries have rejected an idea supported by IMF chief Dominique Strauss-Kahn to create a green fund to help developing nations pay for the impact of climate change. The IMF made no public acknowledgment of the rejection by the board and instead published the proposal on Thursday as a staff paper, emphasizing it did not represent the views of IMF member countries. Board officials privately told Reuters the paper was the subject of much disagreement at an informal meeting earlier in March, where many members argued the IMF had no expertise or mandate to address climate change.” Yes, this should fall under the domain of the UN Environmental Program.
IMF member countries reject green fund plan, by Lesley Wroughton, March 25, 2010, Reuters, USA.

Ethisphere Announces Its 2010 Rankings Of The World’s Most Ethical Companies. [COMMENTARY] “The World′s Most Ethical Companies designation recognizes companies that truly go beyond making statements about doing business ’ethically’ and translate those words into action. WME honorees demonstrate real and sustained ethical leadership within their industries, putting into real business practice the Institute′s credo of ’Good. Smart. Business. Profit.’”

Most noteworthy is that stocks of the 2010 World′s Most Ethical Company honorees have outperformed the S&P 500 and FTSE since 2005. Whether you agree with their criteria or not, it is great to see this superior stock performance.
2010 World’s Most Ethical Companies, March 2010, Ethisphere Magazine, USA.

Canadian Shareholders Voting on ’Say On Pay’ Resolutions Supporting Management. [COMMENTARY] “Four of the country′s major banks have held their shareholder meetings, and all four have received roughly 90 per cent or more support for their compensation practices. More than 99 per cent of Laurentian Bank shareholders voted “yes” on the bank′s pay plan. Adds Gary Hawton, CEO of Meritas, a mutual fund family owned by several Mennonite groups that promotes its products as socially responsible investments: ’I can see measures of success not in the vote but in changes to compensation that have already occurred at companies.’ Namely, Mr. Hawton said, compensation that vests, or becomes payable, over a longer period of time, rather than significant short-term pay tied to short-term gains.”

Mr. Hawton is right. The intent of these resolutions is largely to help tie management compensation practices to longer term results. Were that they case in the US much of the inordinate bonuses paid to investment industry employees would likely have been moderated. Well done to Mr. Hawton and to all those, not only in Canada, but in the US, UK, and elsewhere for proposing such measures.
Shareholders overwhelmingly endorse exec pay, by David Milstead, March 24, 2010, CTV News, Canada. Also see: Meritas Mutual Funds delivering shareholder ’say on pay’ in Canada, press release, March 24, 2010, Meritas Mutual Funds, SHARE, Canada.

After The News ’Leaked’ Out Days Ago, Finally The UK Government Formally Announces Its £2 billion ($3 billion) Green Bank. [COMMENTARY] “The bank will be funded half from the British government and half from private entities. To pay for its half, the UK government could sell rail lines leading to the Chunnel, a toll road near London, or a betting company, Tote, according to Reuters. The new bank will concentrate on green transportation infrastructure and offshore wind, according to the Guardian, which called the measure merely ’pale green.’”

Considering all the hype about this over the past week–and I did not want to report it until it was formally announced–this is a very, very, modest effort. Also, I may get into trouble with some readers in saying this, but I hope it is not government bureaucrats who make the investment decisions on this.
UK to Start $3 Billion “Green” Investment Bank, by BC Upham, March 25, 2010, Triplepundit, UK.

Including ESG Analysis Delivers Financial Benefits, Says Study. [COMMENTARY] “A landmark study strengthens the position of ESG advocates. The results reveal that a focus on ESG (environmental, social and corporate governance) factors can significantly reduce portfolio risk or enhance returns. The study by risklab [a division of Allianz Global Investors] is the first systematic quantitative analysis explicitly examining ESG risk in a portfolio context.”

This is exactly the kind of work that needs to be done to convince investors and analysts everywhere that accounting for ESG factors can potentially improve returns!
Study Finds ESG Delivers Financial Benefit, by risklab. See study: E.S.G. Risk Factors in a Portfolio Context. A good discussion on the results can be seen at: Quant study shows significant, long-term ESG risk reduction and return boost, by Hugh Wheelan, March 24, 2010, Responsible Investor, UK.

S&P Launches First Egyptian Environmental, Social & Governance (ESG) Index. [COMMENTARY] “Standard & Poor’s, the world’s leading index provider, today announced the launch of the S&P/EGX ESG Index, the first index designed to track the performance of companies listed on the Egyptian Stock Exchange that demonstrate leadership on environmental, social and corporate governance (“ESG”) issues.” This is really good news as it shows that ESG continues to gain favour in the Middle East.
S&P Launches ESG Index for Egypt, press release, March 23, 2010, S&P, UK.

American Companies Lag In CSR. [COMMENTARY] “U.S. businesses are lagging behind their counterparts in Europe, Australia and South Africa in taking seriously their corporate social responsibility or CSR, according to a new study released today by Echo Research, the global specialists in reputation audit and analysis. While, major U.S. multinationals still lead in philanthropy, they have a blind spot that misses the growing importance of CSR to socially responsible investing around the world, the study found.”

This study mirrors what other studies have found, namely that when compared to Europe, Australia, etc., US companies lag in the implementation of corporate social responsibility policies.
Most U.S. Companies Revealed as Corporate Social Responsibility Deadbeats by New Echo Research Study – Socially Responsible Investing a Blind Spot in US Even as Importance of CSR Grows Worldwide, by Barbara Burns, Barbara Burns & Associates, USA.

US Social Investment Forum Welcomes Dodd Steps On Corporate Governance Reform, SEC Self-Funding. [COMMENTARY] “We [the SIO] welcome the progress reflected in Senator Dodd′s bill on the major fronts of corporate governance reform and SEC self funding, but we have concerns about provisions in the bill that could compromise the functional independence of the proposed consumer protection entity.”

The SIO’s media release highlights the issues it agrees and disagrees with. Among those proposed changes it agrees with are ’say on pay’ and improved proxy access by shareholders who desire to put forward directorship nominations. I welcome and largely agree with the SIO’s recommendations.
Social Investment Forum Welcomes Dodd Steps on Corporate Governance Reform, SEC Self-Funding, media release, March 18, 2010, Social Investment Forum, USA.

Pembina Institute Issues First Ever Canadian Oil Sands Environment Report. [COMMENTARY] “Today, the Pembina Institute released Drilling Deeper: The In Situ Oil Sands Report Card. It is the first comparative environmental assessment of in-situ oilsands projects. Scores among the nine Canadian operating projects surveyed ranged from 25 to 60 per cent, with five of nine projects scoring less than 50 per cent. The average score of 44 per cent demonstrates substantial room for improvement across the sector.”

Suncor shows the overall best performance. Hopefully, this study will spur oil sands extractors to do better on their environmental performance. Ethical investors might want to study these results.
First ever report card on deep oilsands reveals significant room for improvement, media release, March 17, 2010, The Pembina Institute, Canada. (As an aside, SHARE recently issued a report on Reclamation Risks in the Oil Sands.)

Questions Raised About Corporate Social Responsibility (CSR) Ratings. [COMMENTARY] “’As a result, making the List [100 Best Corporate Citizens] is worth millions or even billions in increased shareholder and brand value.’ This should be good news for Citigroup, Goldman Sachs, ExxonMobil, Chevron and Monsanto which, despite their notoriety, have been counted as ’Best Citizens’ by Corporate Responsibility numerous times. ’When someone asks you to define corporate transparency, show them this list,’ touts the magazine. But to an increasing number of observers, the transparency seems elusive – as does a clear indication of what the CSR industry stands for.”

I could not agree more. That is why I always suggest when viewing such lists to try and understand how they do the rankings–and who pays for them to be assessed!
Are corporate social responsibility rankings irresponsible? By Christine Arena, March 17, 2010, The Christian Science Monitor, USA.

UK ISA (Tax Free Savings Accounts) To See 1,000% Rise In Ethical Investments This Year Says The Co-operative. [COMMENTARY] “Ethical investments currently have a 1% share of the ISA market, but The Co-operative predicts that this could increase thirteen-fold later this year as savers use their increased ISA allowance for more eco-friendly investments. The Co-operative′s study found that 13% of investors would like to put money into an ethical fund.” The UK continues to be a leader in ethical investing.
Ethical investments could increase 1000% this year, by David Masters, March 17, 2010, Finance Markets, UK.

Swiss Investors Going Green. [COMMENTARY] “The financial crisis may have persuaded more Swiss investors to return their money to sustainable funds with an ethical focus, according to market specialists. Research shows that sustainable funds grew at a faster pace than traditional vehicles last year, leading to the conclusion that investors may be searching for safer prospects after having their fingers singed.”

No-doubt the continuing–yes I say continuing–financial crises will spur increasing numbers of investors everywhere to critique the ethical behaviour of companies and their management. Companies demonstrating higher ethics and sustainability will likely outperform those that don’t.
Ethical investing emerges from ruins, by Matthew Allen, March 16, 2010, Swisssinfo., Switzerland.

UK Investors Buying Green Funds. [COMMENTARY] “One in every eight investors intending to beat the 5 April deadline to use their 2009/10 ISA [a tax free savings/investment account] allowance claimed ethical funds would be a big part of their thinking, a survey from The Co-operative Investments has revealed. The share of the ISA market enjoyed by sustainable and ethical investments has grown almost two and a half times in size over the last decade.”

Linking sustainability to ethical investing has added to the appeal of ethical funds. However, one cannot but wonder how much interest would there be for purely ethical funds if there were not this linkage? Anyone have any thoughts on this?
ISA investors set to go green, March 12, 2010,, UK.

CSR Increasingly Important In Outsourcing Contracts Says International Association of Outsourcing Professionals. [COMMENTARY] “On a five point scale, both outsourcing providers and buyers rated the importance of CSR at 3.9. In addition, 70 percent of outsourcing customers and providers said they plan to increase their CSR activity in the next three years, with small- and medium-size providers having the strongest intentions to increase CSR.” The advantages of using corporate social responsibility are becoming self-evident to all companies. However, what ethical investors need, as well as all stakeholders, is Mandatory Corporate Social Responsibility Reporting.
IAOP Survey Finds Corporate Social Responsibility Increasingly Important in Outsourcing Contracts, media release, March 10, 2010, EIN Presswire, USA.

Big American Pension Fund Reportedly Suing Goldman Sachs Over ’Excessive’ Payouts. [COMMENTARY] “A US labour union pension fund has reportedly filed a lawsuit against Goldman Sachs, the US investment bank, over claims of excessive executive pay. The Philadelphia-based International Brotherhood of Electrical Workers Local 98 Pension Fund has lodged the writ at Delaware Chancery Court, according to Thomson Reuters.” It is about time that institutional funds challenged the extraordinary payouts of Goldman and others in the investment industry. What other industry allocates around 40% of its profits as bonuses?
US pension fund adds to exec comp lawsuits against Goldman Sachs, by Daniel Brooksbank, March 10, 2010, Responsible Investor, UK.

US Companies Based In More Religious Environments Take Fewer Financial Risks. [COMMENTARY] “Gilles Hilary and Kai Wai Hui of Hong Kong University of Science & Technology say researchers have long demonstrated the link between religion and an aversion to risky behavior among individuals. Rates of gambling, alcohol abuse and crime, for instance, are lower on average in communities where church attendance and religious affiliation are high. Their study in a recent Journal of Financial Economics — ’The Influence of Corporate Culture on Economic Behavior: Does Religion Matter in Corporate Decision Making in America?’ — now shows that religion has a similar effect within for-profit companies by deterring business activities that place corporate assets at risk.”

The results of this study should not surprise anyone. It simply highlights that communities with strong spiritual and religious values are less likely to engage in potentially reckless activities. It has been my contention for decades that individuals imbibing higher spiritual and community values, such as the ’Cultural Creatives’ as described by sociologist Paul Ray, is the only way the world will be able to free itself from its problems.
A new study reveals that U.S. companies are less likely to accept financial risks when they are based in communities where religion is important, by David Villano, March 7, 2010, Miller-McCune, USA.

Australian Study Examines Use Of Terms Related To Responsible Investing On The Web. [COMMENTARY] “The study explored the level of support for responsible investment and consumer motivation to invest responsibly. The three terms attracting the most positive association were: responsible investment (74%), cleantech (69%) and sustainable investment (62%). The term ’ethical investment’ attracted cynicism, because, the report said, the concept of ’ethical’ can vary significantly between individuals and lacks clarity.”

I concur with the findings of this study. The word ’ethical’ in relation to investing has always been a difficult one to explain. It will be fascinating to watch the evolution of the above mentioned terms.
Blogosphere survey says RI has yet to tap financial crisis potential, March 8, 2010, by Daniel Brooksbank, Responsible Investor, UK.

HP, Intel, General Mills Top List Of Best Corporate Citizens. [COMMENTARY] “Corporate Responsibility Magazine today released its 11th annual Best Corporate Citizens list… the full list this year includes a number of shakeups, including that Bristol-Myers Squibb, last year’s top firm, fell to the seventh position in the rankings. Coca-Cola, which appears in eighth place this year, was ranked 56 last year.” As ethical investors, such lists may provide us with ideas on what to hold, or sell, depending on our values and how it fits with our investment strategy.
HP, Intel, General Mills Top List of Best Corporate Citizens, March 2, 2010, GreenBiz, USA.

News From Responsible Investment Association Australasia (RIAA), March 8, 2010
“ESG Research Australia hosted their inaugural broking awards last night in Sydney. Citi Investment Research and Analysis was recognised as the Best ESG Broking Firm as voted by investment managers. Andrew Gray from Goldman Sachs JBWere took out the award for Best Piece oF ESG Research by an individual analyst or team for a report on how good ethics can translate into good returns.

Last week in Melbourne, at the annual Melbourne Financial Services Symposium awards dinner, the Investment Stewardship Award was given to Cbus for the superannuation category and Aviva for the investment manager category. UCA Funds Management was highly commended by the judging panel for outperforming the benchmark in a tough year.

Cbus, Aviva and UCA are all members of RIAA and we congratulate them for these achievements.

And late last year, the Ethical Investor’s ’Sustainable Business Awards’ were announced. The Ethical Investor Fund of the Year was ING Sustainable Australian Share Trust, with HESTA taking out the sustainable super fund award and Elaine Prior of Citi Investment Research winning the category for sustainability research.

See Responsible Investment Association Australasia.

PRNews Names Its 2010 Winning Companies, Organizations and Individuals. [COMMENTARY] “With trust in business at a low ebb, many organizations have realized that goodwill toward stakeholders and their communities is a concept whose time has come—it′s crucial in rebuilding trust and lifting reputations. Indeed, corporate social responsibility is coming to the forefront, as witnessed by the millions of dollars in corporate donations for earthquake relief in Haiti.” One more list of great companies, etc., only this time it is from a PR/marketing perspective.
PR News CSR Award winners, March 1, 2010, PRNews, USA.

Dubai Islamic Bank (DIB) Wins First-Ever Pan-Arab emeafinance Award For Corporate Social Responsibility (CSR). [COMMENTARY] “… in acknowledgement of its sustained efforts to support individuals and communities in the UAE and across the Middle East, DIB has been named winner of the first-ever Pan-Arab emeafinance award for corporate social responsibility… For the second consecutive year, the bank′s wholly-owned investment banking subsidiary, DIB Capital, was named ’Best Investment Bank’ in the UAE by emeafinance, a leading international publication focused on financial markets in the Europe, Middle East and Africa regions.”

Despite the troubles in Dubai, it is great to see the emergence of CSR in the Middle East.
DIB Wins Best Investment Bank & Best CSR Program At Middle East Banking Awards, press release, March 6, 2010, Middle East Events, UAE.

UK’s F&C Wins Best Ethical Investing Manager Awards. [COMMENTARY] “At the Global Pensions Awards ceremony held in London on Wednesday March 2nd, leading asset manager F&C was awarded the prestigious accolade of ’SRI Provider of the Year’. This follows on from F&C winning the ’Socially Responsible Investment Programme’ Award from Funds Europe in December 2009.” Congratulations to everyone at F&C!
F&C wins SRI Provider of the Year Award, press release, March 2010, F&C, UK.

European Carbon Regulation Having Little Impact So Far On Firms Costs & Ability To Raise Funds. [COMMENTARY] “… respondents believe that carbon exposure could have a real impact on industry from 2012, when the more stringent Phase III of the EU Emissions Trading Scheme (ETS) comes into force.”

It will be important for investors to know the carbon data–and how it compares to their peer group–in companies they invest in. It is best not to wait for surprises that could be costly. In these columns I have reported on many sites and studies on this subject. Simply type ’carbon’ in the Google ’This Site’ search box on the left to see the many references. Good luck.
Carbon risk not incorporated into Europe′s funding decisions and financial statements, says S&P, March 3, 2010, NewNet, UK.

MSCI Buys RiskMetrics For $1.55bn. [COMMENTARY] “MSCI, the index and risk group is buying RiskMetrics, the New York-listed risk management and corporate governance firm, in the latest twist to consolidation in the ESG research and governance space. It is paying approximately $1.55 billion in a cash and stock transaction that values RiskMetrics at $21.75 per share. RiskMetrics last traded at $18.69 and its highest ever share price was $25.50 during 2008… In November 2009, RiskMetrics finalised the $10m buy-out of Boston-based KLD Research & Analytics, which also gave it a foothold in the SRI index business via deals with FTSE and Canada′s Jantzi Sustainalytics. That came after a February, 2009, $16m buy-out of Toronto-based Innovest.”

Cost savings are the purported rationale for this transaction. What it means for ethical investors will be unclear for sometime. So do I welcome this merger? I do not have an answer at this point.
MSCI buys RiskMetrics for $1.55bn, March 1, 2010, by Hugh Wheelan, Responsible Investor, UK.

Vodafone, Nokia & HP Ranked Highest In New Sustainability Rankings. [COMMENTARY] “The companies subjected to this Tomorrow′s Value Rating were the 20 largest ICT companies according to the Fortune Global 500 list, which ranks the world′s largest companies by revenue.” I find when looking at rankings like this, it is good to check out how companies do on several different ranking systems.
Tomorrow’s Value Rating of world’s largest information and communications technology companies, March 1, 2010, Tomorrows Value Rating, UK.

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