California Requiring Companies To Disclose Supply Chain Policies. – [COMMENTARY] “SB 657 requires major retail sellers and manufacturers doing business in California to disclose their voluntary efforts to eradicate slavery and human trafficking from its direct supply chain for tangible goods offered for sale.” Well done California! Should this become prevalent, it should help ethical investors in their search for the most ethical and socially responsible companies.
Gov. Schwarzenegger Signs Legislation to Combat Human Trafficking, press release, September 30, 2010, Office of the Governor, California, USA.
Islamic Finance Needs Scholar Standardization & Reform. – [COMMENTARY] “Islamic finance is toughening supervision of its powerful religious advisers as shareholders worldwide demand increasing accountability from directors, but key reforms may do little to boost independence and transparency.”
Islamic finance is growing globally but will only make major inroads into Western finance if it can provide two things: (1) full transparency of both money flows and the scholars on Islamic advisory boards; and (2), some standardization of Islamic scholar credentials. For my recent discussion of Islamic finance see, The Rise of Islamic Finance.
Analysis: Islamic finance seems overwhelmed by scholar reforms, by Liau Y-Sing and Frederik Richter, September 28, 2010, Reuters, Malaysia/Bahrain.
NASDAQ Launches Array Of Indexes To Track Green Economy. – [COMMENTARY] “The company, which owns the NASDAQ and bills itself as the world’s largest exchange company, unveiled the first four in a family of indexes tracking companies operating in 13 sectors, including energy efficiency, renewable energy and healthy living. NASDAQ OMX said it will launch more green economy indexes in the coming months.” The proliferation of green indices is an obvious indicator of global investor sentiment towards investing in greener businesses. Ethical investors should be continually encouraged by these developments.
NASDAQ Launches Indexes to Track Green Economy, September 24, 2010, GreenBiz, USA.
Canadian Mutual Funds Less Supportive Of Company Management Says Proxy Analysis. – [COMMENTARY] “Funds rejected a significant 20-30% of compensation resolutions put forward by management… SHARE released its third annual survey of proxy voting by Canadian mutual funds. The report examines four years of data on votes cast by 258 funds managed by 21 fund companies in connection with the shareholder meetings of more than 200 senior Canadian issuers.”
It seems that Canadian mutual funds are starting to get more active in engaging company management! This is important if we are to get companies to be more ethical, transparent, and proactive on environmental, social and governance (ESG) issues.
Support by Canadian mutual funds for corporate management declining: SHARE, by James Langton, September 27, 2010, Investment Executive, Canada.
NYSE Calls For Probe Into Proxy Advisory Firms. – [COMMENTARY] “Citing the ’increased level of concern’ about advisory firms, NYSE has called on the Securities and Exchange Commission to ’engage in a study of the role of proxy advisory firms to determine their potential impact on, among other things, corporate governance and behaviour and consider whether or not further regulation of these firms is appropriate.’” I believe this is welcome news and ultimately may just bring more democracy and accountability to company management and boards.
NYSE calls for probe into proxy firms, by Daniel Brooksbank, September 27, 2010, Responsible Investor, UK.
US Social Investment Forum (SIF) Praises Bill Allowing US Federal Government Employees An SRI Retirement Option. – [COMMENTARY] “The introduction of the Federal Employees Responsible Investment Act (FERIA) is a significant milestone for socially responsible and sustainable investing (SRI), proposing to grant federal employees the opportunity to select an SRI option in their Thrift Savings Plan (TSP).” While so many corporate retirement plans have such an option while Federal government employees do not–is extraordinary. Hopefully, the bill will pass and further help spur socially responsible-ethical investing.
Social Investment Forum Applauds Introduction of Bill Allowing Federal Employees to Select Socially Responsible Investment (SRI) Retirement Option, news release, September 22, 2010, Social Investment Forum, USA.
Canada’s Institutional Investors Increasingly Using ESG Info. Say Accountants. – [COMMENTARY] “A new publication from the Canadian Institute of Chartered Accountants (CICA) finds that mainstream institutional investors are beginning to incorporate environmental, social and governance (ESG) factors into their decision making.” This is more good news to encourage full disclosure and transparency in corporate environmental, social and governance (ES) reporting. Ethical investors continue to benefit from this trend.
Institutional investors increasingly seeking environmental, social and governance information: Canada′s CAs, news release, September 23, 2010, The Canadian Institute of Chartered Accountants (CICA), Canada.
United Nations Conference On Trade & Development (UNCTAD) Wants All Institutional Investors To Articulate Their Responsible Investment Policies. – [COMMENTARY] “UNCTAD found almost half the world′s largest funds disclose at least one or more indicators based on the United Nations Principles for Responsible Investment. But no evidence could be found of RI practices at 51 of the top 100 funds, representing $3.4trn assets (or 39%) of the 100 funds′ total AUM.” Such disclosure should absolutely be the rule. By doing this, they will encourage greater ethical behaviour in their own investing activities and for the financial markets generally.
UN body calls on all institutional investors to disclose RI stance, by Daniel Brooksbank, September 21, 2010, Responsible Investor, UK.
Sustainable Stock Exchanges Dialogue in Xiamen. – [COMMENTARY] “The event′s main focus was to review the recent challenges that exchanges have experienced with the introduction of sustainability indices and ESG (environment, social and governance) disclosure regulation, and discuss whether it was even possible to pursue mandatory reporting with such large differences in the materiality of reporting indicators across each industry.”
The main point I got from reading this overview was that the large for-profit and private stock exchanges are hesitant on an individual basis to go to fast mandating environmental, social and governance reports from their listed companies. They are afraid of losing those listings to other exchanges not requiring such reporting.
Conference report: Sustainable Stock Exchanges Dialogue in Xiamen: “One destination, many journeys, by Lucy Carmody, September 22, 2010, Responsible Investor, UK.
IMF Issues Working Paper On Financial Crisis Comparing Its Effects On Islamic & Conventional Banks. – [COMMENTARY] “Factors related to IBs‘ [Islamic banks] business model helped contain the adverse impact on profitability in 2008, while weaknesses in risk management practices in some IBs led to larger decline in profitability compared to CBs [conventional banks] in 2009. In particular, adherence to Shariah principles precluded IBs from financing or investing in the kind of instruments that have adversely affected their conventional competitors and triggered the global financial crisis.”
Ethical investors may want to acquaint themselves with Islamic finance due both to its increasing global importance and some similarities to ethical finance and investing. The Effects of the Global Crisis on Islamic and Conventional Banks: A Comparative Study, September 2010, International Monetary Fund (IMF), USA. (Conclusions are on page 33.) Also, see my September 16 alrroya column, The Rise of Islamic Finance.
Siemens, Deutsche Post, BASF, Bayer and Samsung Electronics Lead In Carbon Management, Says Carbon Disclosure Project (CDP). – [COMMENTARY] “This year, CDP, backed by 534 institutional investors overseeing more than $64 trillion in assets, sent inquiries to more than 4,700 companies… Some 82 percent of Global 500 companies responded to the questionnaires, compared to 70 percent of S&P 500 companies, illustrating a trend that has been playing out for several years: North American companies lag their European counterparts in both climate disclosure and performance.” The data is interesting, and indicates the trend is in the right direction.
More Companies Report Data to CDP Despite Uncertain Climate, September 19, 2010, ClimateBiz, USA.
China Launches Its First Sustainability Index. – [COMMENTARY] “The CSI ECPI China ESG 40 Equity Index, made up of 40 domestic companies in mainland China, is a collaboration between Chinese Securities Index Company, a Chinese index provider backed by the Shanghai and Shenzhen stock exchanges, and ECPI, a European ESG research and indices company.” Welcome China!
China in ESG index joint venture, by Ruth Sullivan, September 19, 2010, FT.com, UK. For source information, see CSI ECPI ESG China 40 index To Be Launched, China Securities Index co.Ltd.
Justmeans Releases Its Global 1000 Best CSR Companies List. – [COMMENTARY] “Justmeans released its Global 1000, a list produced in conjunction with the relatively new ESG ratings firm CRD Analytics. As with the various CSR rankings we have explored in this blog in the past, the list contains many of the usual suspects. So what distinguishes this selection from those made by CRO, Ethisphere, Corporate Knights, legacy KLD and legacy Innovest products?” The discussion article raises concerns about various CSR rankings’ methodologies. This short article is worthwhile reading.
CSR Rankings Revisited… Again, by Madeline Ravich, September 17, 2010, Justmeans, USA.
Australia Launches First Global Standard For Responsible Investment Training. – [COMMENTARY] “It is backed by the United Nations Principles for Responsible Investment (UNPRI) and includes web-based courses on UNPRI compliance and the integration of ESG factors in finance decisions across pensions and investment organisations.” This is exciting news. Such training needs to become commonplace, particularly among investment professionals. Congratulations to Responsible Investment Association Australasia (RIAA) for establishing this and to the Australian government for funding its creation.
Australia launches first global standard for RI training, by Hugh Wheelan, September 15, 2010, Responsible Investor, UK.
83% Of US Consumers Want More Products & Services Related To Cause Marketing. – [COMMENTARY] “Eighty-three percent of U.S. consumers want more of the products, services and retailers they use to benefit causes, according to the new 2010 Cone Cause Evolution Study. The report also finds that 41 percent of consumers have purchased a product in the past year because it was associated with a social or environmental cause (41 percent), a two-fold increase since Cone first began benchmarking cause marketing in 1993.” Another, in a continuing stream of such surveys that show US consumers want companies and their products/services to be socially and environmentally responsible.
83% of U.S. Consumers Want More Products, Services Related to Cause Marketing, September 16, 2010, Environmental leader, USA.
32 Investment Firms Call On California Governor To Support Supply Chain Transparency Bill. – [COMMENTARY] “… [investment firms] sent a letter to California Governor Arnold Schwarzenegger encouraging him to sign SB 657, a bill that, if enacted, would require retailers and manufacturers doing business in California to disclose their efforts to eradicate slavery and human trafficking from their direct supply chain. Human rights, slavery and human trafficking are key issues for CBIS, which supports transparency and disclosure of supply chain risks.”
History would be made were California to pass this legislation. It could probably encourage similar legislation in many other US states too. Ethical investing would receive a boost from both the enactment of such bills and associated media coverage. Also, such legislative action might encourage retailers to demand improved human rights and better work conditions, etc., for suppliers’ workers.
Eurosif Says Financial Crisis Aids Sustainable Investments. – [COMMENTARY] “A study carried out by the European Sustainable Investment Forum, found that 75 per cent of high net-worth investors and 94 per cent of their wealth managers believe the global financial crisis had a positive effect on the performance of their sustainable investments… more than €729bn (£599bn) has now flowed into the European sustainable investment market – a rise of 35 per cent over the past two years.” This is good news for ethical investors and for our world.
Crisis aids sustainable investment, says study, by Simoney Girard, September 16, 2010, FT Advisor, UK.
European Survey Found 90% Of Buy Side Firms Plan To Increase SRI & Sustainability Asset Allocation In Next Year. – [COMMENTARY] “The 2010 Survey represents the views of over 450 investment professionals from 16 countries, making it the most extensive assessment of socially responsible investing (SRI) in the European investment community. Voting was conducted from 20 March to 03 June 2010. It reflects a contribution from 254 buyside firms and 42 brokerage firms/research houses.”
When will North America get a survey like this? It ranks SRI analysts and firms on several variables.
Thomson Reuters and UKSIF 2010 Socially Responsible Investing & Sustainability Survey Results, pres release, September 17, 2010, UK.
Two New Surveys Show CSR Important To Consumers. – [COMMENTARY] The first surveys Hispanics and African Americans while the other covers Canadians. They again underscore the value of CSR to brand image, sales and profits.
The Hispanic/African American survey sees the “importance of a company’s presence in the community, through corporate social responsibility (CSR) and cause related marketing (CRM) programs, as more significant in their buying decisions than do Non-Hispanic Whites.”
It’s Confirmed — Social Responsibility Weighs Higher for Hispanics and African Americans Than Other Groups When Deciding to Buy According to VanguardComm, September 14, 2010, VanguardComm, USA.
Quoting the Canadian survey, “Two thirds of Canadians say that corporate reputation significantly impacts their brand choice… ”
Two thirds of Canadians say corporate reputation significantly impacts their brand choice, September 14, 2010, ILSTV.com, Canada.
European Pension Funds Increasingly Request Their Fund Managers To Be United Nations Principles For Responsible Investment Signatories. – [COMMENTARY] “Some 17% of requests for proposals by European pension funds in the first half of this year asked whether asset managers were signatories to the United Nations Principles for Responsible Investment [UNPRI], a survey by Aberdeen Asset Management has found.” As the realization grows that environmental, social and governance (ESG) factors have profound implications for corporate viability and profits, more asset managers will see it in their interests to join UNPRI.
European pension funds increasingly including ESG in RFPs – survey, by Daniel Brooksbank, September 14, 2010, Responsible Investor, UK.
French Study Showed Ethical Funds Provided No Protection From Market Downturn, But Over Long-Term Green Funds Outperformed With Higher Risk. – [COMMENTARY] “… the focus on the financial crisis reveals that SRI funds provided no protection from market downturns during this period, as illustrated by the considerable increase of extreme risks borne by these funds. Finally, the comparison of best-in-class funds and green funds, reveals, over the long term, higher alpha for green funds, with higher risks, including higher extreme risks.”
The study focused on French funds, though probably somewhat applicable to most other regions as well. Nothing remarkable here and not already known by most of us who closely follow ethical investing. For a brief discussion on this study and others, see No proof SRI outperforms traditionals, by Ruth Sullivan, September 12, 2010, Financial Times, UK.
See the study at: The Performance of Socially Responsible Investment and Sustainable Development in France: An Update after the Financial Crisis, by Noël Amenc and Véronique Le Sourd of the EDHEC-Risk Institute, September 2010, France.
Security Analysts Favouring Firms With Good CSR, Says Study. – [COMMENTARY] “Security analysts are increasingly awarding more favorable ratings to firms with corporate socially responsible (CSR) strategies, according to this paper by Ioannis Ioannou and HBS professor George Serafeim.”
This is an important study! It is one of the few links indicating that mainstream analysts are taking CSR seriously AND that CSR benefits stock prices.
The Impact of Corporate Social Responsibility on Investment Recommendations, by Ioannis Ioannou (London Business School) and George Serafeim (Harvard Business School), September 10, 2010. For a quick review see, Study: More Wall Street Analysts Buy Corporate Social Responsibility, by Michael Connor, September 10, 2010, Business Ethics, USA.
CSRHUB, A New CSR Research Site Could Be Valuable Resource For Ethical Investors.
“CSRHUB gives our users the information they need to evaluate corporate social values and sustainability. Once armed with ratings based on their own values, users can take action to both change their behavior and to change the world.”
CSRHUB, September 11, 2010, USA.
United Steelworkers Of America Files Trade Complaint Against Alleged Illegal Chinese Subsidies Of Renewable Energy Products. – [COMMENTARY] “The United Steelworkers union filed a trade complaint with the U.S. government against renewable- energy products from China, urging an investigation of subsidies and preferences given by that nation.
Illegal export credits, preferences in bidding, restrictions on the export of minerals used in production and discrimination against foreign firms give Chinese producers an unfair advantage over competitors, the union said.”
Unfortunately, we could be in the early stages of a tit-for-tat trade war between US and China. It may soon extend to their respective currencies too. Investors might want to review their holdings to determine how such a trade war would affect them.
China Clean-Energy Aid Triggers Trade Complaint From U.S. Union, by Mark Drajem, September 9, 2010, Bloomberg, USA.
New MSCI ESG Indices Launched. – [COMMENTARY] “MSCI Inc. (NYSE: MSCI)… announced today the launch of a family of MSCI ESG Indices. With over 40 years of expertise in index construction and maintenance, MSCI aims to set new standards for ESG indices — allowing clients to more effectively benchmark their ESG investment performance, issue index-linked ESG investment products, as well as manage, measure and report on their compliance with ESG mandates.”
Generally, it is great that there are so many new ESG indices out there for ethical investors today. However, I am not sure that it is necessary to report on new ones anymore. One difference here though is that they are offering some 23 different indexes under their MSCI ESG index umbrella.
MSCI Launches ESG Indices, press release, September 7, 2010, MSCI, UK.
South Africa Proposes A Sustainable Investment Code For Institutional Investors. – [COMMENTARY] “In June of this year, the Johannesburg Stock Exchange (JSE) began requiring its more than 450 companies to produce integrated reports, and announced its collaboration with four other South African organizations in forming the Integrated Reporting Committee (IRC) to issue guidelines on good practice in integrated reporting… the Committee on Responsible Investing by Institutional Investors in South Africa has issued a Draft Code for Responsible Investing by Institutional Investors in South Africa. The only other country with a code for institutional investors is the UK, where the U K Stewardship Code was adopted in July of this year.”
South Africa has become a world leader in implementing CSR/ESG mandates for its companies. Ethical investing there has major government and business support. See my column, Ethical Investing Shines in Africa as Economy Grows.
South Africa Proposes Code for Sustainable Investment by Institutional Investors, by Robert Krupp, September 7, 2010, SocialFunds, USA.
Global Insurers Call For Private-Public Plan For Climate Change Research & Costs. – [COMMENTARY] “Four initiatives representing more than 100 leading international insurance companies are today calling on governments worldwide to harness risk management techniques and insurance expertise to help implement climate change adaptation measures in the developing world as well as to firmly anchor insurance mechanisms as part of the future international climate change regime under the UNFCCC.”
It seems to me that insurers are very concerned about the rising insurance costs that climate change is bringing. Anyone investing in general insurance companies should be aware of the future problems of this industry. Read this report and keep-up-to-date on the industry’s challenges.
Global insurance industry statement: Adapting to climate change in developing countries, September 6, 2010, UNEP Finance Initiative, Switzerland. Also, a useful overview, see Insurers call for government backing on climate change: UNEPFI issues power sector water report, by Hugh Wheelan, September 7, 2010, UK.
Water Scarcity Becoming Problem For Power Generation Says UNEP Finance Initiative. – [COMMENTARY] “The Chief Liquidity Series inform risk analysts, portfolio managers and sustainability experts about financial risks and emerging opportunities associated with water challenges across a
range of particularly exposed sectors and hydrologically diverse geographies. Following the first issue on agribusiness, UNEP FI is releasing the second issue on the power generation sector, which focuses specifically on thermal and hydropower and, to a lesser extent, solar energy… The report finds that increasing water scarcity due to climate change and higher demand, are posing material challenges for financial institutions in exposed sectors, such as power generation in water-scarce areas.”
Investors relying on high utility stock yields for income purposes should keep track of developments here too. If utility companies–and other companies too–who rely on heavy water use, then water shortages or rising water costs might make them less profitable in the future.
Impact of Water Scarcity on Power Generation, September 6, 2010, UNEP Finance Initiative, Switzerland.
Eurosif Says Portfolios Of Europe’s Wealthy Increasingly Focus On Sustainability. – [COMMENTARY] “According to Eurosif estimates, the proportion of rich Europeans′ portfolios managed sustainably was 11 per cent at the end of 2009, up from 8 per cent two years earlier. That represents €729bn (£606bn, $936bn), more than a third higher than in 2007.” This is good news for ethical investors. As concerns for the environment grow, the numbers shown in the Eurosif survey are likely to continue to increase.
Sustainability draws the wealthy, by Sophia Grene, September 5, 2010, The Financial Times, UK.
Report Says China Ready to Invest $739 billion In ’Newly Developing Energy Industries” By 2020. – [COMMENTARY] “The government in China – concerned with issues of security, economic prosperity and keeping a growing population content – has made spending on green initiatives a top priority. China contributed US$200 billion of the $521 billion in stimulus money set aside for cleantech initiatives worldwide…with more on the way?”
China appears not to have the financially constrained problem of the West concerning green energy development. Green-ethical investors should read this special report, “Cleantech Innovation in China” by Cleantech.
The Chinese Cleantech Market, September 3, 2010, Cleantech, USA.
Study Says Over 19 Years Returns Of SRI & Conventional Funds Show Statistically Indistinguishable Results. – [COMMENTARY] “This article explores that topic through an analysis of those actively managed mutual funds categorized as “Socially Conscious” from 1990 to 2008 (19 calendar years) and finds that while SRI funds tend to slightly underperform their non-SRI peers (−17 bps per year), they tend to slightly outperform on a risk-adjusted basis (+1 bps year), but the results were neither statistically nor economically significant.” Here we have another study demonstrating the general equivalency of long term performance between SR/ethical and conventional funds.
Exploring the Cost of Investing in Socially Responsible Mutual Funds: An Empirical Study, by David M. Blanchett, Fall 2010, The Journal of Investing, USA.