August 2011

Corporate UK Pension Funds Lagging In Responsible Investment Policies Says UKSIF. – [COMMENTARY] “Too few UK pension funds are adopting responsible investment approaches, according to the UK Sustainable Investment and Finance Association, including some funds sponsored by companies in the forefront of driving sustainable business policy.” The UK Stewardship Code requires fund managers to explain their responsible investment policies, so it’s surprising that more funds are not adopting responsible investment policies.
Sustainability ranks low with funds, Ruth Sullivan, August 28, 2011, Financial Times, UK.

Is China About To Invest In US SRIs? – [COMMENTARY] “Zuo Xiaolei, chief economist at China Galaxy Securities Co Ltd, said that China’s foreign-exchange reserves are likely to be invested in US projects for clean energy and automobiles and a technological upgrade, all of which would boost the US industrial sector. ’China can use the money to buy the stock of US companies, facilitate merger and acquisition projects and increase socially responsible investment,’ Zuo said.” China could easily begin selling a small part of its huge hoard of US treasuries and invest the proceeds in the US, and as some are speculating, a good portion could go into US socially responsible-ethical investments!
Greater US investment encouraged, by Chen Jia, August 26, 2011, China Daily, China.

Israeli Study Says Corporate CSR Has Little Impact On Stock Prices. – [COMMENTARY] “Stocks of companies that are committed to corporate social responsibility (CSR) policies perform statistically similarly to those corporations that do not have these programs, according to a new study by Ben-Gurion University of the Negev… [However] they believe that greater importance is being placed on these [CSR] policies and that investors will ultimately seek out companies with these initiatives.”

Interesting, but what I believe they did not do was to compare how CSR programs affected stock prices of companies within individual industry sectors. Instead, they compared the “U.S. Dow Jones Sustainability Indexes from 2004 to 2009 and 19 companies listed on the Israeli MAALA CSR Index from July 2010.”
Corporate Social Responsibility Programs Have Little Impact On Stocks, August 24, 2011, Science Daily, USA.

Sustainable Investment Challenges For Africa. – [COMMENTARY] “Commissioned by IFC, the study surveys private equity investors, asset owners and asset managers, and other key stakeholders on the environmental, social, and corporate governance issues (ESG) that would be important for investing in Africa. Overall, the study found, ’As an investment destination, the continent’s numbers are compelling.’” This is an insightful article for anyone interested in sustainable investing in Africa.
AfricaSIF Co-Founder Describes Challenges to Sustainable Investment in Africa, by Robert Kropp, August 24, 2011, SocialFunds, USA.

South Africa Taking More Steps To Promote Sustainable Investing. – [COMMENTARY] “So far, 2011 has been a banner year for sustainable investing among South Africa’s institutional investors. In March, the National Treasury issued a revamped version of Regulation 28 of the Pension Funds Act, which regulates R 1.1 trillion (USD 152.5 billion) in private pension funds and R 1 trillion (USD 138 billion) in the Government Employees Pension Fund (GEPF), South Africa’s first signatory to the international Principles for Responsible Investment (PRI).” South Africa continues to be a world leader in promoting sustainable investing. There is no doubt that many other countries will follow this path too in the years ahead.
CRISA and Regulation 28: South Africa Boosts Sustainable Investing, by Reynard Loki, August 21, 2011, Justmeans, USA.

New York State Subpoenas Three Natural Gas Producers For Possible Investor Misrepresentation. – [COMMENTARY] “New York State′s attorney general has sent subpoenas to three large energy companies as part of a broad investigation into whether they have accurately described to investors the prospects for their natural gas wells, according to several sources familiar with the inquiry… Subpoenas were sent to the three companies — Range Resources, Cabot Oil and Gas, and Goodrich Petroleum — according to the sources, who have direct knowledge of the investigation.” The concerns around natural gas deposits and extraction are heating-up. Investors in such companies–often excited about the opportunities for natural gas–should be aware of the possible problems!
New York Subpoenas Energy Firms, by Ian Urbina, August 18, 2011, The New York Times, USA.

Financial Pressures Making Canadians Buy Fewer Green Products. – [COMMENTARY] “’The majority of Canadians think it is too expensive to make choices that will benefit the environment in the face of personal pocketbook pressures,’ said Jack Bensimon, president of Bensimon Byrne, the Toronto-based advertising agency that put out the Consumerology Report…”

This might well be true for consumers in many other developed countries as well. Thus, ethical investors investing in green consumer product companies should take note. Long term trends generally indicate consumers becoming increasingly green in their purchases. But short term, particularly in uncertain economic times, green products might become a difficult sell if not priced competitively.
Environment taking back seat to pocketbook issues: survey, by May Jeong, August 27, 2011, The Globe & Mail, Canada.

Indian Companies Lag Badly In Community Engagement, Survey. – [COMMENTARY] “Of 500 companies studied by independent think tank, only 10 were found to perform rigorous corporate social responsibility activities for the community.” This study was somewhat restrictive and might not reflect the full range of CSR activities among Indian companies.
Indian companies aren’t socially responsible, by Shailesh Bhatia, August 14, 2011, Mid-Day, India.

Large Multinationals Accused Of Duplicity In Their Climate Change Pronouncements & Actions. – [COMMENTARY] “Many companies have taken official stances on climate pollution, pledging to reduce their greenhouse footprint in order to reduce the threat of a destabilized climate. However, a number of these same companies are sponsoring toxic, far-right denial of climate science. The American Legislative Exchange Council (ALEC) pushes an extremist denier agenda throughout the United States, funded in secret by corporations. ThinkProgress has acquired a list of the sponsors of ALEC’s 2011 annual meeting, held last week in New Orleans.”

Continuing, “The radical anti-science agenda of ALEC stands in direct contravention to the official public policies of its funders, which include top health-care companies like Bayer, Merck, Pfizer, and Johnson & Johnson, and top energy companies like Chevron, ConocoPhillips, and Entergy.”

Ethical investor should review the list of companies mentioned in this article that are deemed duplicitous. Then determine whether to contact them–or sell their stock!
Companies claim concern for climate, but sponsor ALEC, by Brad Johnson, August 8, 2011, Grist, USA. See also, BP funds push for more offshore drilling in oil-soaked Louisiana, Brad Johnson, August 5, 2011, Grist, USA.

Major SRI Fund Groups Target Oil Companies Operating In Syria. – [COMMENTARY] “A group of social investment firms plans an e-mail campaign to urge 11 oil companies to either stop operations in Syria or communicate their condemnation of the violent crackdown on protesters to the government, said Maureen O’Brien, head of engagement at the Conflict Risk Network, which is spearheading the effort for the investors… The investors are Boston Common Asset Management, Calvert Asset Management, Domini Social Investments, GES Investment Services and Capricorn Investment Group.”

Some believe it was the international condemnation and boycott by multinationals against apartheid in South Africa that eventually brought down the racist regime there. Could it work with Syria? It’s worth a try!
Investment firms push oil companies on Syria, by Barry B. Burr, August 9, 2011, Pensions & Investments, USA.

US Asset Managers Trail European Counterparts In Implementing ESG Analysis. – [COMMENTARY] “Less than a quarter of US asset managers are using ESG risk analysis to inform their investment decisions, and European managers are considerably out-performing their American and global counterparts in integrating sustainability considerations, a report from MSCI ESG Research has revealed.” European asset managers, and especially those in the UK, have been leaders for years in applying ESG criteria in selecting investments.
US asset managers trail European counterparts in ESG, by Sam Riley, August 9, 2011,, Australia.

Mining Companies With Good Stakeholder Relations Perform Better Financially, Study. – [COMMENTARY] “Wharton Professor of Management Witold Henisz has found a way of measuring the benefits of stakeholder engagement activities to public mining companies that operate in risky environments. Henisz and two co-authors researched the role that stakeholder events played in companies′ efforts to maximize profits. The answer: huge.”

Continuing, “Professor Witold Henisz… notes in a paper entitled Spinning Gold: The Financial Returns to External Stakeholder Engagement (PDF 480KB): ’There is a powerful business case to win the hearts and minds of external stakeholders. We found in our research that the value of the relationship with politicians and community members is worth twice as much as the value of the gold.’”

This could be a landmark study for all mining companies! It clearly demonstrates that proper CSR policies can be of enormous benefit for all stakeholders while greatly enhancing the financial performance of the engaged companies.
Stakeholder engagement improves valuation: study, by Richard Ketchen, August 4, 2011, IR Web Report, USA.

Ethical Investments Surge Among Danish Pension Funds. – [COMMENTARY] “More than half of Denmark’s pensions industry now uses active share ownership methods to sway companies falling foul of ethical investment guidelines, with only 2% reacting by simply offloading problem stocks, a report reveals.” The move towards ethical investments is a common theme among pension and institutional funds throughout the developed world. This is great news for all ethical investors.
Interest in SRI surges among Danish pension funds, F&P study shows, by Rachel Fixsen, August 8, 2011, IPE, UK.

US Debt Deal May Gut Clean Energy Support, While China Increases It! – [COMMENTARY] “’I don′t see clean energy avoiding that hatchet,’ said Richard Caperton, policy analyst for progressive think tank the Center for American Progress. The House has already taken steps to cut the budgets for several federal agencies, including the EPA, a favourite target of conservative Republicans. In July, the House cut around $1.5 billion, or 18%, from the EPA′s budget, setting it at $7.4 billion for the 2012 fiscal year, which begins on 1 October.”

Barring high inflation that supports higher oil prices, and thus clean energy prices, the reduction in US government support for clean energy could be very significant for the US clean energy industry.
US debt deal likely to gut clean energy support, by Gloria Gonzalez, August 4, 2011, Environmental Finance, USA.

Regarding China, the reverse is happening! “China announced a national feed-in tariff (FiT) for solar power installations this week, possibly signalling a long-awaited boom in solar development in China.”
China surprises with solar tariff announcement, by Joshua Speckman, August 3, 2011, Environmental Finance, USA.

Eiris Ranks Sovereign Bonds On Sustainability. – [COMMENTARY] “The US, with the largest and most liquid sovereign debt market, comes only 34th in Eiris′ sustainability ranking of 73 major economies, which is headed by Sweden, Austria, Switzerland, Finland, Germany and the UK.” Ethical investors have been calling for such ratings for sometime. Finally, the SRI ratings community has gotten the message!
See also, Sovereign bond returns linked to sustainability – Sarasin.
Government bonds get ESG test, by Steve Johnson, August 7, 2011, Financial Times, UK.

US Cleantech Investment Plunges In 2Q2011. – [COMMENTARY] “The second quarter of 2010 was a record-breaking era for investment in clean technology companies, which makes this year’s numbers seem all the worse. According to just-published research from Ernst & Young, investment in clean technologies companies dropped by a whopping 44 percent in the second quarter of 2011, though there is still plenty of activity in the market.” Cleantech investment seems in some ways to mirror economic activity, hence this is not surprising.
Cleantech Investment Drops 44%, but Big Deals Suggest Future Growth, by Matthew Wheeland, August 3, 2011, GreenBiz, USA.

US Shareholder Voting On Environmental & Social Issues Continues To Increase. – [COMMENTARY] “Environmental and social issues were at the top of shareholders′ attention during the 2011 proxy season, according to Ernst & Young (E&Y). About 40% of all resolutions that proceeded to a vote revolved around environmental and social issues, up from 31% last year, marking the second year in a row that these resolutions comprised of the largest portion of shareholder proposals that came to a vote, according to the consultancy firm′s 2011 proxy season update.” This illustrates the increasing influence of green-ethical investors on corporate behaviour!
US shareholders fixate on environmental and social issues, by Gloria Gonzalez, August 2, 1022, Environmental Finance, UK.

German Institutional Investors Lead In Sustainable Investing. – [COMMENTARY] “On average German institutional investors apply sustainable factors to half their assets, but this rises to almost three quarters (73%) for foundations, according to the survey, by Union Investments of 218 large-scale investors managing about €1trn.” This is great news. However, if only circumstances could change so that individual Germans could invest similarly as well.
Institutional interest in sustainable investing grows in Germany, August 3, 2011, Global Pensions, UK.

CSR Often Promoted To Counter Corporate Social Irresponsibility, Study Says. – [COMMENTARY] “Economists Matt Kotchen of Yale University and Jon Jungbien Moon of Korea University suggest that an important reason companies do good is to paper over the bad stuff they′ve done.” One only needs to look at the CSR reports from tobacco companies to realize that this is, sadly, often the case.
Doing Good to Do Bad? By Justin Lahart, August 1, 2011, The Wall Street Journal, USA.

Shanghai Stock Exchange To Launch Sustainability Index. – [COMMENTARY] “This week, SSE announced that it will launch the SSE Sustainable Development Industry Index and the CSI Commodity Equity Index on August 22. According to the Exchange, the three themes of the Sustainable Development Industry Index will be Education and Publishing, Low Carbon Economy, and Cyclic Economy.” The Shanghai Stock Exchange has been a leader in requiring their listed companies to produce sustainability reports. The SSE Sustainable Development Industry Index demonstrates the Exchange’s continuing interest in sustainability.
Shanghai Stock Exchange to Launch Index for Low-Carbon Companies, by Robert Kropp, July 30, 2011,, USA.

ESG Investing Outperforms, Says RCM of Allianz Global Investors. – [COMMENTARY] “Introducing environmental, social and governance criteria into an investor′s stock selection process has no negative impact and is more likely to lead to outperformance over the longer term, research suggests. A study by RCM, a company of Allianz Global Investors, tested the impact of ESG issues on portfolio performance over the period 2006 to 2010. The evidence found investors could have added 1.6% a year over five years to their investment returns by allocating to portfolios that invest in companies with above-average ESG ratings.”

I read a critique of ESG-based investing by Mark Harrison, director of publications at the UK’s CFA Institute, in the FT today. He said, “Like conventional active managers, SRI/ESG funds are failing to beat similar benchmarks…” I suggest he needs to update his research!
ESG investment results in outperformance long term, by Chris Panteli, August 1, 2011, Professional Pensions, UK.

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