January 2012

Sweden’s Largest Institutional Investors Slam Many Swedish Companies For Inadequate Sustainability Planning. – [COMMENTARY] “Sweden′s largest institutional investors have slammed almost a third of the country′s leading companies for failing to address sustainability issues in their business plans. A group of 14 investors, made up of pension funds and asset managers, said a survey answered by 82 of the largest 100 Swedish companies showed 32% of them were failing to sufficiently create and implement guidelines on sustainability.”

Actually, this just shows how high Nordic standards are in comparison to the rest of the world! If the rest of the world’s companies had a 68% buy-in to sustainability, we would all be rejoicing!
European Investors Slam Sustainability ‘Stragglers,′ by Elizabeth Pfeuti, January 27, 2012, AI-CIO, UK.

US Retail Industry Reports On Its Green Activities. – [COMMENTARY] “RILA’s 2012 Retail Sustainability Report, released this morning, offers an interesting look at the evolving philosophy on sustainability within an industry that has the largest energy bills and the second largest amount of greenhouse gas emissions in the commercial sector of the U.S. economy, according to the Environmental Protection Agency.” It’s great that US retailers are getting the sustainability message. Though in this regard they are still way behind European retailers. Read this report to see which ones you like.
Retail Group’s First Sustainability Report Puts Green Lens on Industry, by Leslie Guevarra, January 26, 2012, GreenBiz, USA.

Monsanto Shareholders Vote Against GE Crop Study. – [COMMENTARY] “Tuesday was Monsanto’s annual shareholder meeting at the biotech company’s headquarters in St. Louis, MO, where corporate changes were voted on – including a proposal to study the financial risks and impacts of Monsanto’s genetically engineered crops. The proposal was submitted last August by Harrington Investments Inc. (HII), a socially responsible investment advisory firm and minority shareholder of Monsanto. The study was rejected, however, with most shareholders in attendance voting against it.”

That outcome was not surprising. What is unfortunate, just as for the nanotech industry that I write about below, is how society and companies involved in these industries are largely ’flying blind’ as to their potential future risks to humankind and our environment.

It’s just plain sad and speaks of short-termism. The same thing that got us into our present financial mess. Only GMOs and nanotechnology, to name just two areas of risk, have the potential for incredible harm to our very existence. Most ethical investors are aware of these concerns.
Monsanto Shareholders Vote Against GE Crop Study, by Sarah Damian, January 25, 2012, Food Integrity Campaign, USA.

Nanomaterials Need Further Study For Health & Environmental Risks, Says US National Academy of Sciences. – [COMMENTARY] “Tiny substances called nanomaterials have moved into the marketplace over the last decade, in products as varied as cosmetics, clothing and paint… nanotechnology market… represented $225 billion in product sales in 2009 and is expected to grow rapidly in the next decade.”

I’m totally astonished how the protectors of our health and environment have let nanomaterials grow to such a mammoth industry without any real oversight! I’ve been warning for years that letting nanotechnology run amok might be as harmful to us as letting a deadly flu virus out of the lab. Ethical investors might want to review the products in some of the companies they own that use nanotechnology and really ask themselves if they want to own stock in such companies.
With Prevalence of Nanomaterials Rising, Panel Urges Review of Risks, by Cornelia Dean, January 25, 2012, The New York Times, USA.

Corporate Knights Lists Its Top Global 100 Sustainable Companies. – [COMMENTARY] “The Global 100 is an annual project initiated by Corporate Knights Inc., the company for clean capitalism. The Global 100 is the most extensive data-driven corporate sustainability assessment in existence, and inclusion is limited to a select group of the top 100 large-cap companies in the world. Launched in 2005, the annual Global 100 is announced each year during the World Economic Forum in Davos.”

The top three companies are, Novo Nordisk A/S, Natura Cosmeticos SA, and Statoil AS. Most of the best companies are European. The highest-ranking US company, Life Technologies Corp., comes in at 15th.
2012 Global 100 Most Sustainable Companies, January 25, 2012, Corporate Knights, Canada.

Canada’s RBC Makes $20 Million Commitment To Impact Investing. – [COMMENTARY] “RBC today announced a $20 million commitment to a new social and environmental initiative aimed at facilitating solutions to social and environmental problems. ’Impact finance’ describes a range of financial vehicles and services that use private capital to finance solutions to social and environmental challenges while generating financial return, and is expected to help drive the next wave of innovation and productivity growth in the global economy.”

This is the first such initiative in Canada–probably even in North America. Hopefully, other financial institutions will follow. Ethical investors will want to carefully watch this fund’s activities!
RBC Announces $20 Million in Commitments to New Social and Environmental Initiative, press release, January 24, 2012, RBC, Canada.

UK Holden & Partner’s Show No Significant Difference In Capital Appreciation Between An Ethical And ’Conventional’ Portfolio. – [COMMENTARY] “Over the last five years Holden & Partners have worked with a charity client who have strict ethical screens, including animal testing, intensive farming, tobacco and human rights (among others)… One of the main concerns for the charity trustees has been the long term impact on performance that such a screen would have…  from a capital perspective an active manager in the UK market can perform in line with the broader market, even with an ethical screen which excludes almost half of the market.”

Another broker study showing that even excluding half of the companies in a given stock market, an ethical investment portfolio does not mean lower returns.
Holden & Partners analysis suggest that ’ethical screens’ do not necessarily impact on performance, by Mark Hoskin, January 19, 2012, Holden & Partners, UK.

Green Bond Bankers In Japan, Sweden Beat US. – [COMMENTARY] “Five of the 10 top underwriters on about $7 billion of the bonds issued by international finance institutions were drawn from the two countries, according to a ranking by Bloomberg New Energy Finance released today. London-based HSBC Bank Plc and JPMorgan Chase (JPM) & Co. of New York took third and fourth place.” We are just in the early stages of green bond issuance. I believe that they will become a major force in debt finance in the years to come.
Green Bond Bankers in Japan, Sweden Beat U.S. to $7 Billion, by Sally Bakewell, January 24, 2012, Bloomberg, UK.

Some CSR Activities Slowing Says Report. – [COMMENTARY] “The fifth annual State of Green Business report, published today by Joel Makower and the editors of GreenBiz.com, finds that while progress is still happening in some areas, for the first time corporate sustainability has slowed, stopped and in some places even reversed. ’What′s to blame? Simply put, sustainable business is suffering a recessionary hangover,’ writes Joel Makower, Executive Editor of GreenBiz.com and principal author of the report.”

This report provides useful reading for ethical investors and may provide additional investing guidance for them.
’Recessionary Hangover’ Slows Corporate Sustainability’s Momentum, by Matthew Wheeland, January 18, 2012, GreenBiz, USA.

Major US Investors Seek Disclosure Of Company Lobbying Activities. – [COMMENTARY] “Investors today announced the filing of shareholder resolutions at 40 corporations, for votes at 2012 shareholder meetings; the resolutions urge the corporations to report on lobbying expenditures, including indirect funding of lobbying through trade associations.” To me, it would seem that such reporting should be part of the annual management’s review of company operations. It should be enforced by auditors as full and fair disclosure.
Investors Announce New Shareholder Initiative Seeking Disclosure of Company Lobbying Activities, press release, January 19, 2012, American Federation of State, County and Municipal Employees, USA.

Giant Fund Group Calls For Veto On Executive Pay In The UK. – [COMMENTARY] “Fidelity fund managers are calling for the right to veto excessive pay packages for company executives. The group said that reform is needed to tackle complex pay structures and allow shareholders to reign in generous bonuses for company management. Dominic Rossi, chief investment officer of equities at Fidelity made the statement in an open letter to the government as the average pay of FTSE executives has increased four-fold from 1998 to 2010.”

It’s about time that the big fund managers stood-up against the excessive remuneration of many executives–especially since it lowers profits and possible stock market returns!
Fidelity calls for veto on executive pay, by Caelainn Barr, January 19, 2012, Citywire Money, UK.

Global Mining Industry Focusing On Sustainable Development, Says Report. – [COMMENTARY] “The global metals and mining industry is rapidly changing priorities to closely focus on achieving sustainable development, operational efficiencies, cost reduction and innovation. Environmental remediation, securing resource supply, energy conservation and protection of natural mineral reserves form the core areas of interest in today’s intensely competitive mining environment.” The extractive industries generally are being forced to consider sustainability as the communities in which they operate demand that their environmental, social and numerous other concerns are accounted for.
Global Mining Industry Shifts Gears to Focus on Sustainable Development, According to a New Industry Report by Global Industry Analysts, Inc., press release, January 19, 2012, Global Industry Analysts, Inc.

Attitudes Of Religious Organisations Towards Responsible Investment, Survey. – [COMMENTARY] “Religious organisations are major investors… An important question for them is how to make investments in, and to earn returns from, companies and activities that are consistent with their religious beliefs or that even support these beliefs. Religious organisations have pioneered responsible investment… Although our results cannot be generalised because of the non-random character of our sample, six main characteristics of faith consistent investing are drawn: investing is not perceived as being in contradiction with religious values… “

Everyone interested in faith-based investing should review this important survey.
From Preaching to Investing: Attitudes of Religious Organisations Towards Responsible Investment, by Céline Louche, Daniel Arenas and Katinka C. van Cranenburgh, Journal of Business Ethics, DOI 10.1007/s10551-011-1155-8.

FORTUNE Magazine Lists Top 100 US Companies To Work For. – [COMMENTARY] “Call it a hat trick: for the first time in the 15-year history of Fortune′s Best Companies to Work For list, we have a three-time champion, as Google reclaims the top spot for workforce happiness (it debuted on our list at no. 1 in 2007, and stayed there in 2008). We′ve had a couple double headers before — Container Store, SAS and Edward Jones have all clinched the no. 1 spot twice — but Google this year marks the first three-peat.”

Such top companies often outperform in the stock market too. Is that a co-incidence? I don’t believe so. Ethical investors might want to review this year’s top one-hundred companies.
The Best Companies to Work For, by Leigh Gallagher, January 19, 2012, FORTUNE, and 100 Best Companies To Work For, FORTUNE, USA.

Efficiently Weighted Indices Can Lead To SRI Outperformance – EDHEC. – [COMMENTARY] “Investors can achieve outperformance with socially responsible investment (SRI) indices if they use efficient weights, says financial research centre EDHEC-Risk Institute, despite its earlier studies suggesting SRI funds produced little alpha.” This article should be read by all ethical investors, as it offers an interesting perspective on how to perhaps construct outperforming ethical investment portfolios.
Efficiently weighted indices can lead to SRI outperformance – EDHEC, by Nina Röhrbein, January 17, 2012, IPE, France.

American Socially Responsible Investors Don’t Want to Sacrifice Returns, Wharton Study. – [COMMENTARY] “Investors interested in socially responsible investing do not necessarily expect to sacrifice a portion of their gains. Thus, to encourage socially responsible investing, its returns should be comparable to returns for conventional investing.”

Fortunately, the conclusion generally drawn from the dozens of studies indicate that over the long term, socially responsible-ethical investors don’t have to sacrifice returns. However, this study does contradict many surveys that show SR-ethical investors would tolerate lower returns if they are invested in industries and companies that relate to their values.

It could be that many newly converted SR-ethical investors, investing in green-sustainable companies, don’t really share the same values of the more traditional SR-ethical investors.
Socially Responsible Investing, by Olivia S. Jung, January 12, 2012, Wharton, University of Pennsylvania, USA.

Sustainability Nears A Tipping Point, Says MIT Sloan Survey. – [COMMENTARY] “In our survey, we found that more respondents than ever before say their companies are putting sustainability on their management agendas. Our survey this year involved 2,874 managers and executives from 113 countries… According to the respondents, 70% of companies that have placed sustainability on their management agendas have done so in the past six years; 20% have done so in just the past two years.”

These findings are welcome news and should warm the hearts of ethical investors.
Sustainability Nears a Tipping Point, by David Kiron, Nina Kruschwitz, Knut Haanaes and Ingrid von Streng Velken, December 2012, MIT Sloan Management Review, USA.

Record Breaking Greentech Investment Seen In 2012. – [COMMENTARY] “The clean-tech sector is primed for a record-setting year of investments in 2012, following robust growth in 2011 despite difficult conditions, according to the Cleantech Group. Global clean technology venture and corporate investments totalled $9 billion in 2011, a 13% increase over 2010, according to the analysis firm′s preliminary 2011 data. This is just shy of 2008′s record of $9.5 billion.” The increasing realization that going green can make money should continue to propel greentech.
2012 seen breaking record for clean-tech investment, by Gloria Gonzalez, January 10, 2012, Environmental Finance, UK.

Companies Adopting Sustainability Outperform Financially. – [COMMENTARY] “Companies that adopted environmental, social and governance policies in the 1990s have outperformed those that didn’t.” One wonders how much more effort it takes to convince companies–and particularly investment advisors–that sustainability pays! Most investors realize this. It’s a pity that their advisors usually don’t.
Is sustainability now the key to corporate success? By Robert Eccles, Ioannis Ioannou, and George Serafeim, January 6, 2012, The Guardian, UK.

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