May 2012

’Saints’ & ’Sinners’ Investing. Sinners Win? – [COMMENTARY] “Money Observer′s latest analysis of the performance of the Saints and Sinners of the FTSE 100 index reveals that, once again, it′s the bad guys that have romped home. Over the past year, the Saints – or the FTSE 100 members that are also included in the FTSE4Good index of corporate social responsibility – turned £100 into £93.35 in terms of share price returns (excluding dividends). However Money Observer′s Sindex – which is made up of FTSE 100 members that don′t qualify for the FTSE4Good (30 companies in total) – still lost money but the £100 became £98.12, 5 per cent better than the Saints.”

This article describes what’s in each index. One significant reason the Saints index falls down is because of its heavy weighting in banks… “The Saints, on the other hand, have been severely handicapped by the banks and insurance companies. Royal Bank of Scotland and Lloyds Banking Group have lagged the Footsie by 96 per cent, Barclays by more than 60 per cent and HSBC by around 30 per cent.”

In reading this article I believe the Saints index should be reconstructed according to ESG criteria. The results might well turn around their findings and the Saints index might win handsomely.
The profits of sin, by Heather Connon, May 30, 2012, MoneyObserver, UK.

CSR Really Important Say Corporate Executives. – [COMMENTARY] “Nearly 200 senior-level corporate real estate and workplace executives at Fortune 1000 companies worldwide participated in the Industry Leaders Opinion Poll. Four out of five respondents categorize corporate social responsibility as urgent to extremely urgent. Many of the respondents have direct day-to-day impact in the area and often help inform the so-called ’Triple Bottom Line’ along which many publicly traded companies report performance results today.”

Yes, company executives at the world’s largest companies now realize that for optimal financial results, quality CSR practices pay well.
Fortune 1000 Leaders Reveal Key Issues to CoreNet Global, May 31, 2012, CityBiz, USA.

Ethical Investing Does Better In The UK & Europe Than In the USA, Says Study. – [COMMENTARY] “Thus in the US & Global context a passive ethical index investor has to pay a price for being ethical. In the UK & EU context, they pay no such price.” This study is unusual in its design and seems controversial in its findings. Unfortunately, except for a few people, it’s not available before April 14, 2014.
Performance of ethical equity investing in the UK: active, passive and criteria, Ph.D thesis by Nitin Deshmukh, Middlesex University, UK.

New Report Says That Religious Institutions Can Influence Corporate Policies With Their Share Ownerships. – [COMMENTARY] “Religious institutions can influence corporate behaviour by being active in the ownership of their shares, according to new research carried out by the International Interfaith Investment Group 3iG, along with ESADE Business School in Spain and Vlerick Leuven Gent Management School in Belgium… Religious institutions are widely considered to be the pioneers of responsible investment, and make up the third largest demographic of investors globally.”

If religious institutions became proactive with their stock ownership the world would become a better place and ethical investments would benefit greatly.
Believers in the Boardroom, press release, May 30, 2012, Vlerick Leuven Gent Management School, ESADE Business School in Spain, and the International Interfaith Investment Group 3iG, Spain.

Major SRI Organizations Supporting Natural Capital Declaration In Advance Of Rio+20. – [COMMENTARY] “With three weeks to go before its launch at Rio+20, the Natural Capital Declaration is now being supported by Eurosif (the European Sustainable Investment Forum) and SIF Japan (Social Investment Forum Japan). The Natural Capital Declaration is a commitment by financial institutions to work towards developing a methodology to integrate natural capital considerations into financial products and services.”

Continuing, “It has 24 endorsers so far, in Australia, Brazil, China, Ecuador, Italy, Mexico, the Netherlands, New Zealand, Paraguay, the British Isles and the US. Although the NCD can only be signed by the CEOs of financial institutions, Eurosif and SIF Japan join a growing number of other organisations that are also expressing their support for the NCD, including US SIF and UKSIF.”

Natural capital considerations–for instance, natural resources depletion and amortization costs–aren’t generally factored into product costs. Thus, we have the situation today where the earth’s natural resources are mostly used-up without cost. Water use is a prime example in the developed world where water is comparatively free for companies to use. And who pays for the pollution of the air? Somehow these costs have to be factored into production costs.

The real question is how these costs can be factored into the costs of goods and services. Many argue for all encompassing public management of resources, others–libertarians for instance–that if all ground resources were privately owned, then private owners wouldn’t allow their resources to be given freely and therefore such resources would be better managed. We all know that these questions must be dealt with if humanity is to survive. Furthermore, we know that ethical investors will be in the forefront of many of the solutions that will be highly profitable.
Eurosif and SIF Japan express support for Natural Capital Declaration, press release, May 28, 2012, Natural Capital Declaration, UNEP, Switzerland.

European CEOs Take Aim At Shareholder Advisory Firms. – [COMMENTARY] “European CEOs are so angered by the rise of opposition to gold-plated executive payouts that they have taken the unusual step of pushing for more red tape, calling for regulation of the advisory groups who advise fund managers on how to vote on issues such as executive pay.” This is not a surprising tactic when many  individuals in senior management believe they have the God given right to exemplary compensation packages.
European CEOs push back against investor activism, by Tom Bergin, May 25, 2012, Reuters, UK.

Businesses Say Sustainability Vital To Long Term Growth, But Many Say It Pressures Margins & Profits Short Term. – [COMMENTARY] “The vast majority of businesses say that sustainability is vital to their future growth, but almost half say that margins are currently lower on sustainable products and services, according to new research by Accenture. The survey of 250 senior executives in eight leading mature and emerging economies reveals that 44 percent think sustainability is critical to their business and 78 percent say it is vital to their future growth.”

There are interesting insights for ethical investors in this survey. One that stands-out for me is that though companies realize consumers are reluctant to pay more for green products and services–companies usually charge more for them anyway.
Businesses Say Sustainability is Vital to Long Term Growth, but Can Weaken Margins and Increase Short Term Costs, Accenture Study Finds, press release, May 22, 2012, Accenture, UK.

70% Of Global CEOs Would Take Action On Global Sustainability Challenges. – [COMMENTARY] “Seven out of ten CEOs in a global PwC business poll say they would take more ambitious action on issues related to the Millennium Development Goals including issues of energy, water and sustainable development if progress is made at Rio+20.” Note the ’if’ here. What business wants is a global level playing field and certainty of enforcement. Then they’ll have the confidence to take the measures they need and seek, knowing that competitors cannot take environmental and social shortcuts to undercut their efforts.
Seven in 10 CEOs Would Take Action on Global Sustainability Challenges, by Michelle Remo, May 24, 2012, InAudit, Switzerland.

New STOXX ESG Indices. – [COMMENTARY] “The new blue-chip indices complement the existing STOXX Global ESG Leaders Index family. STOXX has also become a signatory to the United Nations Principles for Responsible Investment (PRI) as a professional service partner. The PRI is a global initiative which supports the integration of environmental, social and governance (ESG) issues into investment decision-making and ownership practices.” The growth in the number of ESG related stock indices is indicative of growing awareness that companies embracing ESG–and their related stocks–perform better.
STOXX launches ESG leaders blue-chip indices, May 24, 2012, The Asset, UK.

US Stockholders Filing Over 30% More Political & Lobbying Disclosure Proxies in 2012 over 2011. – [COMMENTARY] “The transparency push, playing out at shareholders meetings from coast to coast this spring, has received cheers from campaign finance reformers and some corporate governance experts. It has drawn ridicule from critics such as the U.S. Chamber of Commerce, who see the effort as an attempt by liberal groups to squelch the voice of the business world.”

I find it difficult to believe how anyone could be opposed to such a fundamental right as shareholders knowing where the funds of the companies they invest in are being spent! Yes, it’s about time for complete transparency on this issue.
More shareholders call on companies to disclose their political spending, by Tom Hamburger and Brady Dennis, May 21, 2012, Washington Post, USA.

Canadian SR-Ethical Funds Outperform Conventional Funds. – [COMMENTARY] “One of the continuing perceptions held by many advisors is that socially responsible investment funds underperform the market. These advisors believe that, by screening out certain companies or industries, investment opportunities are reduced and therefore risk is increased. The result –  lower returns than funds invested in a conventional way… The Social Investment Organization recently did an in-depth analysis of returns for socially responsible investment (SRI) funds in Canada across major asset classes. Using the most recent performance numbers provided by Fundata 1 (to March 31, 2012) a portrait is emerging of a strongly performing industry with outperforming funds in every major fund category.”

Over the long term I’m convinced that such outperformance will become even more pronounced, not only in Canada but for SR-ethical funds globally.
Socially Responsible Investment Funds Perform Strongly, by Doug Watt, May 18, 2012, SRI Monitor, Canada.

$1 Trillion SRI Coalition Tell Shale Energy Companies To Clean Up Their Act. – [COMMENTARY] “The coalition, led by Boston Common Asset Management, the Investor Environmental Health Network and the Interfaith Center on Corporate Responsibility, includes companies such as Dexia Asset Management, Domini Social Investments and Pax World Funds. In a statement released Wednesday, the socially responsible investing (SRI) asset managers said they wanted energy companies to adopt 12 best practices regarding risk management and reporting that members of the coalition drew up last December.”

US shale energy extraction is becoming a huge issue, both for its promise of dramatically reducing energy imports, but also for its potential to cause serious environmental and health problems. Somehow the ’excitement’ has to turn from carbon-based energy to renewable energy!
SRI Investor Coalition Tells Shale Energy Companies to Clean Up Their Act, by Gil Weinreich, May 17, 2012, Advisor One, USA.

New Type Of Sustainable Global ETF Launched. – [COMMENTARY] “This is brilliant. AdvisorShares is launching next week a new exchange-traded fund that will support sustainability themes globally. A portion of the assets will support a charitable foundation co-founded by Philippe Cousteau, grandson of the famous explorer Jacques.” This is an interesting new concept for ethical investors. It will be well worth watching.
A global ETF to support sustainable development, by Thomas Kostigen, May 18, 2012, MarketWatch, USA.

Calls To End Corporate Secrecy In US Shell Companies. – [COMMENTARY] “A group of 41 businesses and nonprofits sent a letter to every member of Congress pressing them to pass legislation that would reveal the beneficial owners of shell companies. ’Investigations continue to reveal that American and foreign terrorists, narco-traffickers, arms dealers, corrupt foreign officials, tax evaders, individuals targeted for financial sanctions and other criminals easily and regularly set up U.S. shell companies, without providing any information about who owns or controls such companies,’ the letter says.” What is being called for here I believe sounds more than reasonable!
Nonprofits, Businesses Call For End To Corporate Secrecy, by Samuel Rubenfeld, May 16, 2012, WSJ blogs, USA.

Morgan Stanley Embraces Impact Investing. – [COMMENTARY] “Morgan Stanley, a global financial services firm with 1500 offices around the world, just announced they were offering a new set of investment options for clients interested in the triple bottom line. The ’Investing with Impact Platform’ is the first, to my knowledge, impact investment portfolio option for investors offered by one of the ’too big to fail’ banks that received a bailout from the U.S. government.”

This is important news as it demonstrates that large mainstream US financial institutions are beginning to recognize the importance of investing in companies that specifically incorporate ESG into their core activities.
Impact Investing Goes Mainstream–Morgan Stanley Jumps on Board, by Scott Cooney, May 15, 2012, Triple Pundit, USA.

New Human Rights Based ETF Planned. – [COMMENTARY] “The iShares Human Rights Index Fund takes a different approach to the category of SRI funds. The underlying index aims to exclude companies that provide material support for controversial regimes or governments that are subject to widespread sanctions based on human rights violations. At this time, governments in three countries—Sudan, Iran and Burma—meet those standards, according to MSCI, which created the index for BlackRock in November 2011.”

Should it be launched, it will be most interesting to see how this fund fares. One probable premise of the fund is that companies engaged with such regimes might see relatively lower stock prices. Hence, by avoiding such companies, this fund could benefit. Perhaps though, the main reason this fund could succeed is that from an ethical perspective it simply avoids such problem companies.
IShares files to launch human rights ETF, by Virginia Munger Kahn, May 11, 2012, FA News, USA.

Businesses Say They Are Better At Delivering Social Change Than Charities. – [COMMENTARY] “More than 90 per cent of businesses said they were equally or better equipped than charities to deliver social change, according to a snapshot survey.” This is an interesting perspective. Are the businesses just being pompous or are they simply being factual? With the growth of CSR there could be some substance behind this claim.
Most businesses in a survey say they are better equipped than charities to deliver social change, by Chloe Stothart, May 10, 2012, Third Sector, UK.

Prior To London Olympics, Religious & Ethical Investors Ask Corporations To Step Up Anti-Trafficking & Slavery Efforts. – [COMMENTARY] “Christian Brothers Investment Services (CBIS), a leader in socially responsible investing, and a coalition of U.S. and U.K. investors and NGOs have united to call on corporations to strengthen their focus against human trafficking and modern slavery in advance of the 2012 Summer Olympic Games taking place in London from July 27 to August 12. The initiative focuses on the London tourism industry and key sponsors of the Olympic Games that may be at a higher risk for on-premise child and labor trafficking and that have the potential to help raise public awareness of these crimes.”

At first glance, it might be difficult to link human trafficking and slavery to the Olympics. Nonetheless, there’s never not a good time to raise those issues.
In Advance of London Olympics, U.S. and U.K. Investors Ask Corporations to Step Up Anti-Trafficking and Slavery Efforts, press release, May 8, 2012, Christian Brothers Investment Services (CBIS), Interfaith Center on Corporate Responsibility (ICCR), The Ecumenical Council for Corporate Responsibility (ECCR), and Fair Pensions, UK/USA.

EIRIS Reports On The Most Sustainable Companies. – [COMMENTARY] “This research paper provides a global snapshot of corporate sustainability performance on the 2063 companies from the FTSE All World Developed (AWD) Index. It presents the 10 current sustainability leaders as well as insight on the sustainability performance of 50 of the world′s largest companies (by market cap). Our analysis reveals some surprising differences in the extent to which leading companies are prioritising and responding to sustainability.”

EIRIS is one to the most respected organizations in the ESG-ethical analyst space. This is worth the read for any SR-ethical investor.
UK and continental European companies are outstripping their US and Asian counterparts, according to a EIRIS’ latest report, & EIRIS Sustainability Report, April 2012, EIRIS, May 1, 2012, UK.

2012 Sustainability Leaders Survey. Rankings & How They’re Assessed. – [COMMENTARY] “The 2012 Sustainability Leaders Survey… asked respondents in February to name up to three specific companies that they consider to be leaders in integrating sustainability into their business strategy. Unilever, which launched its Sustainable Living Plan in late 2010, was mentioned most frequently for the second year in a row, while Interface was the next most frequently mentioned, followed by GE, Patagonia, and Walmart… A number of criticisms are routinely levelled at the poll.”

This is a good review of what’s required to understand the various methodologies of these polls.
What puts companies on top of the Sustainability Leadership list? By Eric Whan, May 4, 2012, GreenBiz, USA.

MSCI, Barclays Launching ‘ESG′ Bond Indexes. – [COMMENTARY] “The so-called Environmental, Social ’ Governance (ESG) fixed-income indexes, which will be co-branded, cater to asset managers and owners who need to integrate ESG mandates into their fixed-income investments, the companies said in a joint press release. The indexes could eventually be used to benchmark ETFs.” This is good news. We have many SR-ethical equity investing raters, but few on the debt side.
MSCI, Barclays Plan ‘ESG′ Bond Indexes, by Cinthia Murphy, May 4, 2012,, USA.

Leave a Reply

Your email address will not be published. Required fields are marked *