December 2010

Bombay Stock Exchange To Launch Shariah-Compliant Stock Index. – [COMMENTARY] “The Bombay Stock Exchange Ltd (BSE) and Taqwaa Advisory and Shariah Investment Solutions (TASIS) will launch the BSE TASIS Shariah 50 index from Monday, December 27.” This index has great potential, considering that India has over 133 million Muslims representing about 14% of its population. It might also be of interest to ethical investors everywhere too.
BSE to launch Shariah-compliant Index to promote fin inclusion, December 24, 2010, The Economic Times, India.

Jantzi-Sustainalytics Issues New Report On Nanotechnology For Investors. – [COMMENTARY] “Current understanding of the potential risks of
nanotechnology is limited and regulations lag behind technological development. Given this uncertainty, how can investors address this new
area? This brief offers investors a roadmap to navigate the potential risks and opportunities of this emerging industry.” The debate around nanotechnology is going to be every bit as big as that about GMOs! This is an important report for ethical investors.
Brave New World: Investors and Nanotechnology, by Stephanie LeNguyen, Jantzi-Sustainalytics, Canada.

Wealthy Middle Eastern Women Investors Increasingly Favour Socially Responsible Investments. – [COMMENTARY] “Dubai: Wealthy women in the Middle East are increasingly choosing to pour their money into social investments, according to financial advisers. They controlled 22 per cent, or around $700 billion (Dh2.57 trillion) of the region’s assets under management (AUM) last year, according to a study by Boston Consultancy Group (BCG). Popular among women investors are sustainable development projects in the environment, construction and retailing, said Shimi Shah, former chief executive of Forsa and Chairman of Carousel Solutions.” This is good news for socially responsible/ethical investing in the region. Are women, as compared to men, generally more likely to choose ethical investments?
Women investors target corporate responsibility, by Deena Kamel Yousef, December 22, 2010,, UAE.

Shariah-Compliant Hedging Derivative Products Begin In Malaysia. – [COMMENTARY] “Standard Chartered, the U.K. bank that earns most of its profit from emerging markets, will begin selling contracts in the first quarter that provide protection from fluctuations in the cost of items such as rice and oil, according to an e-mailed reply to questions yesterday. Bank Islam Malaysia, the country′s oldest Islamic lender, will offer swaps that allow two parties to exchange different forms of payments from an underlying asset.”

The article continues, “Asia Pacific overtook North America as the biggest market for derivatives in the six months through June and accounted for 38 percent of the global total, according to data from the Washington-based Futures Industry Association published in September. That compares with North America′s 33 percent market share.”

In principle, the idea of being able to hedge risk is great. In practice, if unregulated and with negligible reserves/collateral by issuers, they can be ’weapons of financial mass destruction’ as we have seen in the past two years–and as Warren Buffett has called them.
Shariah-Compliant Hedging Derivatives Start in Malaysia: Islamic Finance, by Soraya Permatasari and Suryani Omar, December 22, 2010, Bloomberg, Malaysia/Singapore.

EIRIS Study Shows Investors Exposed To Biodiversity Risks. – [COMMENTARY] “Research firm EIRIS has put forward five recommendations to enable investors to help them address failings by corporations on biodiversity. It suggests investors understand, be aware of, encourage, engage and collaborate on the issue.” This is a unique report that investigates a subject that is not well known even to sophisticated ethical investors.
EIRIS research points to biodiversity risk for investors, by Daniel Brooksbank, December 20, 2010, Responsible Investor, UK.

The Royal Society Of Canada Issues Report On Environmental & Health Impacts Of Canadian Oil Sands. – [COMMENTARY] Useful reading for any ethical investor concerned with energy investing.
Environmental and Health Impacts of Canada’s Oil Sands Industry, (PDF) December 2010, The Royal Society of Canada, Canada.

SEC Calls For Mandatory Reporting Of Payments By Extractive Industries. – [COMMENTARY] “The Securities and Exchange Commission, the US financial regulator, is to clamp down on payments by extractives companies, mine safety and conflict minerals. The proposals are among a raft of measures put forward by the SEC under the Dodd-Frank Act.” All I can say it is about time that such payments be revealed so that stockholders, especially, can gauge how well company management deals with these issues.
SEC to clamp down on extractives payments, mine safety and conflict minerals, by Daniel Brooksbank, December 16, 2010, Responsible Investor, UK.

Survey Shows US Consumers Demand Companies Engage In Cause Marketing & Support Charities. – [COMMENTARY] “Two new public opinion surveys released today by Do Well Do Good, LLC indicate that consumers demand that companies should engage in cause-marketing and corporate social responsibility programs. Over 88% of consumers think companies should try to achieve their business goals while improving society and then environment and 83% of consumers think companies should support charities and nonprofits with financial donations.” Good to see this especially at this time of year.
New Study: Consumers Demand Companies Should Engage in Cause-Marketing & Corporate Social Responsibility Initiatives, press release, December 15, 2010, Do Well Do Good, USA.

Dow Jones Launches New Index That Helps Generate Funds To Fight AIDS, Tuberculosis and Malaria. – [COMMENTARY] “The Dow Jones Global Fund 50 Index is the flagship of a new index series, which will include indexes with overlaying strategies and additional themes. The index has been licensed to db X-trackers, the leading ETF platform of Deutsche Bank, to serve as a basis for a financial product, the db x-trackers Global Fund Supporters ETF. The ETF begins trading today on the Frankfurt stock exchange.”

Well, we have credit cards that give a portion of their proceeds to charities and good causes, now we are getting indexes/ETFs doing the same. It is certainly a good step for charities.  Constituent companies in this index will be those who provide funds to help eradicate AIDS, TB and malaria.
Dow Jones Indexes and The Global Fund Launch The Dow Jones Global Fund 50 Index, press release, December 13, 2010, Dow Jones Indexes Press Room, USA/Switzerland.

First Global Christian ETF Launched. – [COMMENTARY] “Db X-trackers, Deutsche Bank′s exchange-traded funds (ETF) platform, claimed it has launched the world′s first ETF for Christians who wish to invest in line with their faith… Companies are chosen from the broader Stoxx Europe 600 index, with suitability for inclusion determined by an independent Christian faith commission.” This may well be the start of a trend of global faith/ethically-based ETFs. They could be attractive to many ethical investors.
World’s first ETF for Christians from Deutsche Bank, by Cara Waters, December 13, 2010, Financial Times, UK.

Many Reasons Cited By Asset Managers For Integrating ESG Issues, Says Survey. – [COMMENTARY] “The survey [by Novethic, the French SRI research and media company]… received responses from 251 asset owners, was carried out in partnership with the European Sustainable Investment Forum (Eurosif). It found that 59% of French asset owners and 68% of their German peers believe the main incentive for ESG integration is to contribute to a more sustainable development model for investment. But only a minority of Danish (21%) or UK (17%) investors share this opinion. Instead, most UK investors (57%) say ESG integration is dictated by financial performance.” No matter the reasons given, the fact that environmental, social and governance (ESG) issues are being incorporated into asset management is the real story.
Asset owners reasons for ESG integration vary markedly across Europe: survey, by Hugh Wheelan, December 10, 2010, Responsible Investor, UK.

Thesis Finds It Difficult To Evaluate Effects Of CSR On Corporate Financial & Stock Performance. – [COMMENTARY] “’On the one hand, companies engaging with CSR might be viewed as high-risk players because they’re either committing substantial resources to unnecessary CSR activities or because CSR is used as a distraction from unflattering corporate behaviour, and are, therefore, earning higher returns. On the other hand, good performance can be viewed as a surprise that can be attributed to the company’s CSR engagement, previously not taken into account, a kind of mispricing. Mispricing is found as the more prevalent explanation, because the CSR premium has decreased in recent years, perhaps also because most companies are now communicating their CSR activities better.’” The fact that most companies are doing better with CSR is good news.
Hard to tell whether CSR has a positive effect on profitability or not, by Cristiana Manescu, December 6, 2010, University of Gothenburg, Sweden.

3M, Nike, Suzlon Among Winners Of Gigaton Awards At COP16. – [COMMENTARY] “CANCUN, Mexico — At the unveiling of the first annual Gigaton Awards, six companies were recognized as leaders in their respective industries. The Gigaton winners and their sectors are: Suzlon (Energy), Vodafone Group (Telecommunications), Reckitt Benckiser Group (Consumer Staples), Nike (Consumer Discretionary), 3M (Industrials) and GDF Suez (Utilities).”

Continuing, “The Gigaton Prizes were developed and awarded by the Carbon War Room, a non-profit organization that harnesses the power of entrepreneurs to implement market-driven solutions to climate change. The awards ceremony took place during the World Climate Summit and was co-hosted by Sir Richard Branson and José María Figueres and sponsored by ECCO2, in partnership with Fuseproject and Televisa.”

The Carbon War Room and its activities will be well worth watching considering who its backers are.
3M, Nike, Suzlon Among Winners of Gigaton Awards at COP16, December 4, 2010, GreenBiz, USA.

Mexico To Launch ESG Index At Cancún Climate Conference. – [COMMENTARY] “The Bolsa Mexicana de Valores′ (Mexican Stock Exchange, MSE) sustainability index will be formally launched at this week′s United Nations Climate Change Conference in Cancún. Thus far in 2010, the Istanbul Stock Exchange (ISE) and the Brazilian Stock Exchange (BM&FBOVESPA) have signed the UNPRI and several stock exchanges have launched SRI/Sustainability indices including the Indonesia Stock Exchange (the KEHATI-SRI Index), the Shanghai Stock Exchange (Social Responsibility Index), and the Egyptian Exchange (S&P/EGX ESG Index)”

Sustainable-ethical investing is clearly catching on in the emerging markets too. This offers opportunities for ethical investors to invest ethically, globally.
Mexico joins ESG index rush with Cancún launch, by Lisa Hayes, December 2, 2010, Responsible Investor, UK.

Canadian Impact Investing Could Reach $30 Billion. – [COMMENTARY] “Social finance offers an unprecedented opportunity for Canada′s charities, non-profits, and social purpose businesses (collectively referred to as social enterprise) to open new sources of financing. Many non-profits are trapped in a cycle of short term subsistence funding that diverts attention from their mission and impact and many social purpose businesses face a
lack of options for patient capital.”

The idea of non-profits and charities running ’for profit’ businesses that further their causes is great in theory. However, though I like this concept I do have great concern that precious donated dollars might be sometimes diverted to failing businesses, particularly when the businesses are run by non-profits with little business experience and when 90% of all new businesses fail in five years. Perhaps there should be a ’Chinese wall’ between the donations received by the charity and the business it sponsors.
Mobilizing Private Capital for Public Good, Summary Report, December 2010, Canadian Task Force on Social Finance, Canada.

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