November 2011

Solar Spat Threatens US-China Trade War. – [COMMENTARY] “China is hitting back at the US by launching its own probe into the US government′s support for renewable energy. This comes just weeks after US federal officials announced they would investigate a complaint by domestic solar companies accusing the Chinese solar sector of unfair trade practices.”

When it comes to trade and economic policies, China has ’checkmated’ the US long ago. China lured US manufacturers to its shores, got their technology, and then created its own companies to outcompete them. Meanwhile, China buys US treasuries with its huge foreign exchange dollar surpluses to eventually ’indenture’ the US. China thinks long-term; the US–just until the next election.

Now China has also overtaken the US in renewable and alternative energy spending. And a huge chunk of a new $1.7 tn spending programme over the next five years is going towards those sectors.
Solar spat threatens US-China trade war, by Gloria Gonzalez, November 30, 2011, Environmental Finance, UK.

CSR Reports Often Mislead, Say Researchers At The University Of Leeds & Euromed Management School. – [COMMENTARY] “After examining more than 4,000 CSR reports, rankings and surveys published by companies worldwide, researchers conclude reports often feature unsubstantiated claims, holes and inaccurate figures.”

I have long advocated for standardized and audited CSR reports. Auditing means that an outside-regulated entity following codes of conduct comparable to certified accountants performs the audit and provides a statement in the CSR report as to the validity of what is found. Otherwise, how is it really possible to know that what the company is saying is true, and how can investors compare companies? My ’hats off’ to these researchers!
Quality of CSR reports ’appalling at times,’ by Clare Harrison, November 28, 2011, CorpComms, UK.

NYSE Euronext, Bloomberg New Energy Finance Launch Clean Energy Indices. – [COMMENTARY] “NYSE Euronext and Bloomberg New Energy Finance have announced the launch of three clean energy indices. Regionally-focused, the indices will cover the Americas, Europe, Middle East and Africa and Asia and Oceania. These are just the first of indices that will be published over the next few months, allowing for tracking of the listed companies’ shift to alternative energy.” It’s difficult to keep track of the number of such indices now. However, they do indicate a continuing strong interest in renewable and alternative energy sectors despite the stock market gyrations in such company stocks.
NYSE Euronext, Bloomberg New Energy Finance launch clean energy indices, press release, November 29, 2011, FierceEnergy, USA/UK.

India Takes Steps To Mandate CSR Reporting. – [COMMENTARY] “In order to assess fulfillment of the environmental, social and governance responsibilities of listed entities, it has been decided to mandate listed entities to submit Business Responsibility Reports, as a part of their Annual Reports, describing measures taken by them along the key principles enunciated in the ’National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business′ framed by the Ministry of Corporate Affairs (MCA). To start with, the requirement will be applicable to top 100 companies in terms of market capitalisation and would be extended to other companies in a phased manner.”

Despite my concerns about the general quality of CSR reporting, this is still a huge step forward for India, and futher spurs the creation of a CSR reporting framework for both developing and developed countries.
SEBI Board meeting, November 24, 2011, Securities & Exchange Board of India, India.

Judyth Piazza Interviews Ron Robins On Sustainable-Green Country Bonds & Green Jobs, – [COMMENTARY] In a time when there is so much concern about sovereign bonds (bonds-debt issued by countries), I discuss exciting new research that compares and ranks them from a green-environmental-social perspective. The interview is about 15 minutes long. The first two minutes are ads. The discussion of the bonds is midway through the interview. November 27, 2011, SOP Radio, USA.

Swedish Study Says Ethical Mutual Fund Investors Look At Returns First & Then Social, Ethical, & Environmental (SEE) Performance. – [COMMENTARY] “Based on these results, it is argued that although SEE quality is important to customers, marketers of pro-socially profiled products should primarily focus on conventional quality attributes, as a good SEE record unlikely to generate customer satisfaction alone.” I suspect that these results apply to investors in most countries. This study is especially important reading for fund managers, but ethical investors might find it interesting as well.
Determinants of customer satisfaction with socially responsible investments: Do ethical and environmental factors impact customer satisfaction with SRI profiled mutual funds? By Jonas Nilsson, Johan Jansson, Sofia Isberg and Anna-Carin Nordvall, Umeå School of Business at Umeå University, November 24, 2011, Sweden.

Climate Bond Standard Created To Assure Integrity Of Green Claims For Investors, Governments. – [COMMENTARY] “The Standard is a screening tool for investors and governments to support investment in delivering a Low Carbon Economy. Bonds complying with the Standard will be certified as ‘Climate Bonds′— a mark that assures their contribution to the delivery of a Low Carbon Economy… The finalized text was approved by the Climate Bond Standards Board, a group of institutional investors and leading environmental NGOs consisting of the California State Teachers′ Retirement System(CalSTRS); the Natural Resources Defense Council; the California State Treasurers′ Office; the Investor Group on Climate Change (IGCC); the Carbon Disclosure Project; and the Ceres Investor Network on Climate Risk (INCR).”

With such backing, this is a great step forward and could encourage significant growth and interest in green bonds!
Climate Bond Standard launch backed by investors and NGOs; Goal to Assure Integrity of Green Claims for Investors, Governments, by Sean Kidney, November 24, 2011, Climate Bonds Initiative, UK.

US Millionaires Significantly Lower Their Expectations For Socially Responsible-Green Investment Gains In 2012, Says Survey. – [COMMENTARY] “According to a study from PNC Wealth Management, only one in ten millionaires are optimistic about the U.S. economy – the lowest since the survey started in 2006, and even below the 2008-2009 crisis levels. Fully 9% [are] invested in gold. When asked where they see the biggest growth for stocks in 2012, most said technology (54%), energy/utilities (49%), health-care (44%) and financial stocks (19%). They are followed by socially responsible investments (11%) [down from 21% in 2011], manufacturing (11%) and transportation (7%). Retail ranked dead last, at 7%.”

I have been following this survey since its inception. After reading this review of the 2011 survey, I suspect there is an important dynamic at play here. I believe the reason for such a lowering of expectations for socially responsible-green investments has to do with their belief that the perceived hard times will push oil prices lower and thus interest in alternative energy lower as well. Also, that companies will downshift ESG as a priority to save money.

Personally, I never believe in short-term forecasts, but for the long-term I strongly suspect that oil prices will go much higher, and that corporate ESG activities to continue strong as they frequently relate to reducing costs and improving stock prices.
How to Invest Like a Millionaire in 2012, by Robert Frank, November 21, 2011, The Wall Street Journal, USA.

UK Survey Finds Only 5% Invest Ethically & 63% Don’t Know What An Ethical Investment Is. – [COMMENTARY] “Ethical investments are growing investments, but awareness amongst consumers is still surprisingly low, according to new research commissioned by Emerald Knight… While 16 per cent of British people would only ever invest for personal profits, only 30 per cent think that you can have both profits and principles when it comes to a socially responsible approach to investment.” In developed countries everywhere, there is still the wrong perception that profits have to be sacrificed to invest ethically.
Low ethical investment awareness, despite recent growth, by Millie Dyson, November 21, 2011,, UK.

Shariah-Compliant Interbank Funding Rate Set To Launch. – [COMMENTARY] “A group of 16 banks resolved a quandary that dogged the $1 trillion Islamic financing market for nearly three decades: how to represent rates on interbank funding when Islamic moral principles prohibit firms from charging interest. The banks say the solution lays in considering money flowing between banks as investments that depend on the performance of underlying assets, rather than as interest-bearing loans.” This is a major development in the world of Islamic finance. However, reading about how it is planned to work makes me wonder exactly how far it might be straying from Shariah edicts.
Shariah-Compliant Interbank Funding Rate Set To Launch, by Katy Burne, November 22, 2011, Dow Jones Newswires, USA.

More Women In Management Improves Corporate CSR & Profitability. – [COMMENTARY] “A new study conducted by researchers at Catalyst and Harvard Business School (HBS) suggests that what′s good for women is good for business and also for society as a whole. According to Gender and Corporate Social Responsibility: It′s a Matter of Sustainability, companies with more women at the top may be better practitioners of corporate social responsibility (CSR). Prior Catalyst research has shown that such companies also financially outperform, on average, those with fewer women in senior leadership roles.”

There are one or more US mutual funds that only invests in companies with high ratios of women in management! Ethical investors might want to incorporate gender ratios when they are reviewing the managements of the companies they invest in.
New Catalyst Study Links More Women Leaders to Greater Corporate Social Responsibility, press release, November 16, 2011, Catalyst, USA.

France’s Vigeo Hands Out CSR/SRI Awards To Vivendi, Rhodia, Unilever. – [COMMENTARY] “Vivendi is the inaugural winner in the CAC 40 category of the Vigeo Socially Responsible Investment Prize. Established for the first time this year during the Socially Responsible Investment Week in France, the prize was awarded Jean-Bernard Levy, chairman of Vivendi, in the presence of sustainable development minister Nathalie Kosciusko-Morizet. There were two other winners, Rhodia in the SBF 120 companies’ category and Uniliver in the Stoxx Europe 50 division.”

Congratulations to the winners, but also to Vigeo, a highly respected French CSR ratings agency, for beginning this award programme. Such awards act as an incentive for companies to do better in their CSR activities. In return, they command higher public respect and even the possibility of higher stock prices.
Vivendi, Rhodia, Unilever win responsible investment awards, press release, November 18, 2011, Vigeo, France.

Water Usage Of Increasing Concern To Companies And Investors. – [COMMENTARY] “Water represents a resource that poses many risks for companies now, not just later. Look no further than the drought in Texas to catch a glimpse of the consequences of not having enough water. Yet far fewer boards of directors have oversight of water-related issues compared to those for climate change, according to the CDP Water Disclosure Global Report 2011 released today.”

The part I like best about this report is that 63% of respondents see opportunities to reduce water usage and enhance efficient water utilization. For many companies, rising water costs could become a big drag on their profitability. Ethical investors realize this and it will not be long before the mainstream investing community understands this too. For the full CDP survey, click here.
CDP Report Shows Water Slowly Moving Up the Sustainability Agenda, by Tilde Herrera, November 16, 2011, GreenBiz, USA.

New Sustainable Corporate Bond Fund Launched By Bank Sarasin, Switzerland. – [COMMENTARY] “Bank Sarasin is this week to begin marketing its first sustainable corporate bond fund, amid growing institutional interest in sustainable fixed income and real estate offerings. The Swiss private bank has had ’a good response’ to a mixed corporate and sovereign bond fund it offers, where the investible universe is subject to Sarasin’s sustainability screening.”

A new investing paradigm is beginning with the launching of sustainable corporate bond funds. With so much interest in sustainability by investors worldwide, such funds could become sought after. Congratulations to Bank Sarasin for being in the vanguard of this new bond vehicle.
Sarasin launches sustainable corporate bond fund, by Mark Nicholls, November 14, 2011, Environmental Finance, UK.

Islamic Finance Assets Projected To Double To $1.8 Tn By 2016, Says Deutsche Bank. – [COMMENTARY] “The global debt crisis may help Islamic finance nearly double to $1.8 trillion in assets by 2016 as stagnant corporate lending pushes institutions to seek alternative financing to traditional methods, according to a report by Deutsche Bank. The bank forecasts that there is over $2 trillion of deleveraging in the United States and Europe, creating a financing glut for both struggling countries and countries in developed markets.”

I have remarked many times that Islamic finance, once it can overcome market suspicions of it being linked to terror groups, particularly, is a real contender to conventional finance. Furthermore, many of its tenets, i.e. bonds and derivatives that must be asset-based and use of ethical-spiritual screens, etc., might well be integrated into many conventional finance products too in the years ahead.
Islamic finance may double in assets by 2016-D.Bank, by Shaheen Pasha, November 15, 2011, Dubai, UAE.

’Free, Prior And Informed Consent’ Required From Indigenous Communities For Resource Extraction Projects, Says IFC. – [COMMENTARY] “In August 2011, the International Finance Corporation (IFC, an agency of the World Bank) released its revised Sustainability Framework, after 18 months of public consultation. Among the noteworthy revisions is a new requirement that clients obtain the free, prior and informed consent (FPIC) of indigenous communities under certain circumstances, including the exploitation of natural resources on lands traditionally owned by, or under the customary use of, indigenous peoples.”

This is a good step forward. One wonders why it has taken the World Bank and its agencies so long to come to this conclusion! Some extractive industry companies are increasingly taking this approach anyway. The following study is highly worthwhile reading for investors interested in mining industry ethics.
License to Operate. Indigenous Relations and Free Prior and Informed Consent in the Mining Industry, by Irene Sosa, October 2011, Sustainalytics, Canada.

China CSR Study Demonstrates Need To Understand How CSR Data Is Gathered & Interpreted. – [COMMENTARY] “Believe it or not, if there was no information on the CSR activities of a company, they scored that firm zero! And if their search of negative reports uncovered anything, then the company ended up with a negative score.” As I have said many times, when reading CSR/SRI rankings, it’s important to know the biases, methodology and financial backers of the pertinent study. This article makes it very clear as to how investors can be duped by such rankings.
China CSR Report: A New Low in Statistical Analysis, by Stan Abrams, November 9, 2011, Business Insider, USA.

Corporate Accountability Of Political Expenditures Improving In The US, Says The Investor Responsibility Research Center (IRRC) Institute. – [COMMENTARY] “Corporate accountability and disclosure of political expenditures is on the upswing, with the boards of 31 percent of S&P 500 companies now explicitly overseeing such spending, compared to 23 percent in 2010. However, this increased oversight and transparency does not necessarily translate into less spending, as companies with board oversight of political expenditures spent about 30 percent more in 2010 than those without such explicit policies.”

Personally, I’m dubious of any spending by corporations on political activities. The fact that only 31% of US corporate boards actually control such spending appears terribly negligent to me, as it is to probably most ethical investors.
New Study Finds Oversight and Disclosure of Corporate Political Spending Increasing, but Such Measures Do Not Necessarily Limit Spending, press release, November 10, 2011, IRRC Institute, USA.

HP, Dell & Nokia Lead New, Revised, Greenpeace Electronics’ Companies Rankings. – [COMMENTARY] “You also won’t find easy comparisons to previous editions of the report. ’That this really is a new day,’ Casey Harrell, an analyst and campaigner at Greenpeace, explained in an interview. ’We’ve added enough criteria that it’s not completely apples-to-apples to compare with previous versions of the report.’” This article provides a good overview of what Greenpeace has done in revising its just released rankings. Some of the findings might be surprising–but worthwhile for ethical investors to consider.
HP Leads Greenpeace’s Relaunched Green Electronics Rankings, by Matthew Wheeland, November 9, 2011, GreenBiz, USA.

82% Of Fund Managers Believe ESG Issues Important When Choosing New Investments, Says Clear Path Analysis. – [COMMENTARY] “82% of fund managers now believe that ESG issues are an important consideration when choosing new investments, however 43% remain unclear about the links between ESG and profits in the short to medium term. This is despite evidence from Allianz Global Investors which indicates that this type of investing can provide returns of up to 1.6% over traditional equities.” It should not be long before ESG considerations are built-in to all investment analysis, not only for stocks, but for all forms of debt as well.
Awareness of environmental and social governance among investors prompts fund managers to consider new investments, press release, November 8, 2011, Clear Path Analysis, UK.

High Sustainability Firms Outperform Financially & In Stock Prices, Says Harvard Study. – [COMMENTARY] “Using a matched sample of 180 companies, we find that corporations that voluntarily adopted environmental and social policies many years ago – termed as High Sustainability companies – exhibit fundamentally different characteristics from a matched sample of firms that adopted almost none of these policies – termed as Low Sustainability companies… we provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.”

This might be a landmark study and have powerful positive ramifications for companies and investors alike! Ethical investors can again take heart that theirs is not only the ethical path–but possibly one of the most profitable paths too.
The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance, by Robert Eccles and George Serafeim of the Harvard Business School and Ioannis Ioannou, London Business School, November 4, 2011. USA/UK.

LOHAS (Lifestyles Of Health And Sustainability) Markets To Grow From $200 Bn To $420 Bn In 3 Years. – [COMMENTARY] “18% of U.S. general population adults (43 million) are classified as LOHAS consumers. LOHAS consumers have strong attitudes regarding personal and planetary health, which are widely reflected in their behavior. They are heavy users of healthy and ’green’ products and exude a strong influence over others.” This is encouraging news for many ethical investors, who themselves are likely LOHAS consumers.
LOHAS Consumers… Beyond Healthy Food & Beverage Choices, November 2011,, USA.

US Firms Way Behind Europeans On Climate Change Disclosure. – [COMMENTARY] “More than half of European companies — 53.6 percent — analyzed in a new report publicly revealed complete data on their greenhouse gas emissions and took the extra step of getting the data verified. In comparison, a paltry 8.8 percent of North American companies did the same, as measured by the Environmental Investment Organisation (EIO).”

Politically in the US, a large percentage of American executives don’t believe climate change is a big deal. As climate change becomes increasingly pronounced, I believe that US firms will then fall in line. This will be especially true if investors are willing to pay more for stocks in companies that clearly make climate change a priority. And according to some research, that is a scenario that we are probably already seeing.
US Firms Barely Rank in Global Climate Change Disclosure Lists, by Tilde Herrera, November 1, 2011, GreenBiz, USA.

Corporate Reputation Equity Index Fund Launched. – [COMMENTARY] “RepuStars Variety Corporate Reputation Index Launches November 1… by Steel City Re, a pioneer in developing tools linking reputation, risk, and enterprise value. The RepuStars Variety Corporate Reputation Index tracks up to 57 company stocks that appear to be underpriced relative to their metrics as measured by Steel City Re′s proprietary Corporate Reputation IndexTM, which tracks 5500 companies weekly. In using the RepuStars Index as an investment strategy, investors can take advantage of this price disparity.”

Though not strictly an ethical index, the index may carry some credibility for ethical investors. RepuStars past numbers suggest potential market outperformance. It will be interesting to follow its progress.
RepuStars® Variety Corporate Reputation Index – Calculated by Dow Jones Indexes, press release, November 1, 2011, RepuStars, USA.

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