August 2012

Goldman Sachs Invests In First U.S. Social Impact Bond. – [COMMENTARY] “Goldman Sachs has signed on as the investor in the U.S.′s first social impact bond, a new public-private financing structure that asks investors to bear at least partial risk for the outcomes of government-funded social programs. While Goldman′s risk has been somewhat attenuated by Bloomberg Philanthropies, the investment suggests that a proper social impact bond market might not be too far away.” This is something that must be encouraged.

Such bonds could save governments significant sums of money while earning decent returns for ethical investors. It’s great that a big investment firm is getting engaged in this. Hopefully, it’s not only about improved public relations for Goldman Sachs that it’s getting involved! Thanks to Benefits and Pensions Monitor for this lead.
Goldman Sachs Invests in First U.S. Social Impact Bond, by Katie Gilbert, August 29, 2012, Institutional Investor, USA.

Trends In ESG Integration In Investments, Useful Report. – [COMMENTARY] “In this report, we assess current trends around environmental, social, and governance (ESG) integration in mainstream investments and provide specific recommendations for companies to attract investors with long-term investment perspectives.” This is a good overview of the present situation.
Trends In ESG Integration In Investments, August 2012, BSR, USA.

SEC’s Conflict Minerals Vote Comes Under Fire. – [COMMENTARY] “Humanitarian groups said they were disappointed with the final rule, which included a provision allowing companies to report that they couldn’t determine the origin of their products. ’It′s a huge loophole that undermines the rule,’ said Corinna Gilfillan, head of the U.S. office at Global Witness, of the clause. ’The SEC seems more interested in protecting the bottom line of these companies rather than helping the citizens of the Congo.’”

I agree there shouldn’t be such a loophole. Many companies are likely to choose the easy way out and say they couldn’t determine where the minerals came from. I don’t know if this is the case with the rule, but it would only be valid to me if a company using the loophole were able to show documentation that their search as to the source of the minerals revealed it was impossible to discover.
SEC’s conflict minerals vote comes under fire, by Alison Moodie, August 23, 2012, GreenBiz, USA.

Hedge Fund Firms Accepting Screens To Get Faith-Based Business. – [COMMENTARY] “Hedge fund managers hungry for institutional assets are increasingly willing to incorporate exclusionary screens into their investment approaches to keep portfolios in line with the socially responsible investment values of church-affiliated investors.” Acceptance of ethical investment principles keeps growing.
Hedge fund firms accepting screens to get faith-based business, by Christine Williamson, August 23, 2012, Pensions & Investments, USA.

Use Of Corporate Governance Ratings Demonstrates Superior Investment Returns. – [COMMENTARY] “Over the 10-year period ended July 1, 2012, a portfolio of companies with top-decile AGR ratings would have outperformed the lowest-decile portfolio by 55%… AGR reflects a broad spectrum of accounting irregularities and weaknesses in corporate governance statistically associated with an elevated risk of anomalous events likely to cause precipitous contractions in equity value.”

This is most interesting. Very few ratings organizations consider only governance-litigation risk. It’s fascinating to see that by screening for that alone investors can outperform. Ethical investing just got another plus!
GMI Ratings′ Accounting and Governance Risk (AGR) Ratings Can Help Investors Significantly Improve Equity Returns, press release, August 22, 2012,, USA.

Prestigious China Association of Public Companies Urges Listed Companies To Issue CSR Reports. – [COMMENTARY] “The move would allow companies to timely release operational information, focus on investors’ returns and boost market confidence, the association said. By the end of April, 586 companies listed on the A-share market had released 592 corporate social responsibility reports. The figure increased 11.49 percent compared with a year earlier. However, those companies only accounted for 25 percent of the total A-share companies.” This is great news for ethical investors interested in Chinese companies.
Companies asked to report on social responsibility, by Chen Jia, August 20, 2012, China Daily, China.

Another Study Finds SRI-Ethical Funds Performing Positively. – [COMMENTARY] “The empirical results show that SRI funds outperformed conventional funds in EU and U.S. In addition, the results of EU are among the top-performing categories. Environmentally friendly funds do not perform as well as SRI, but perform in manners equal or superior to conventional funds. These results show statistically significant in some cases.” This study adds an interesting twist in its statistical analysis. Read about it in the link below.
Performances of Socially Responsible Investment and Environmentally Friendly Funds, by Yutaka Ito, Shunsuke Managi, and Akimi Matsuda, August 15, 2012, Tohoku University, Japan.

UK Investment Advisors Ignorant Of Islamic Products. – [COMMENTARY] “Close to two-thirds of UK investment advisers surveyed admitted their limited knowledge of Islamic fund providers has prevented them from recommending products, according to a new report from Islamic asset manager BLME… Nigel Denison, head of asset management at BLME, said: ’Focusing on the parallels between ethical and Islamic investing may help to bridge the knowledge gap that currently exists and overcome some of the common misconceptions about Islamic investments.’”

I’m guessing that the numbers would be worse in the USA and similar in the rest of Europe.
New study claims IFAs ‘overlook′ Islamic investments, by Donia O’Loughlin and Michael Trudeau, August 16, 2012, FT Advisor, UK.

Nigeria: Islamic Index Underlies Potential For Huge Investment. – [COMMENTARY] “In a bid to attract Sharia/ethical investors to Nigeria’s budding stock market, Islamic wealth manager Lotus Capital and the Nigerian Stock Exchange (NSE) on Monday launched a debut index of NSE-listed companies that comply with Islamic investment principles.” Though this is a relatively minor event it represents a trend that ethical investors might want to be aware of. Islamic finance is growing rapidly worldwide and with it is its demand for higher ethical investment principles.
Nigeria: Islamic Index Underlies Potential for Huge Investment, by Kayode Ogunwale, August 12, 2012, AllAfrica, Nigeria.

Gallup Survey Reveals A Different Way To Think About Corporate Social Responsibility. – [COMMENTARY] “Specifically, these data suggest that the socially responsible corporate activities that resonate most strongly with customers are those that are local and community-based. And lost in the shuffle among all of the competing activities people tend to discuss is perhaps one of the most important, but often overlooked, socially responsible actions companies can take: creating jobs.”

What this says to me is that economic issues are still foremost in people’s minds. It’s probably also an issue of semantics: what is really meant by the term ’corporate social responsibility?’
A Different Way to Think About Corporate Social Responsibility, by John Fleming, August 10, 2012, Gallup, USA.

Australian Investors Push Companies For Impact Of ESG Issues. – [COMMENTARY] “The Australasian Investor Relations Association′s (AIRA) biannual survey of IROs finds two thirds of respondents have fielded more questions on ESG issues in the last 12 months than before. Almost three quarters also say they have received requests for more information on the ‘broader impact′ of company operations and governance.”

This is the kind of push many companies need to take seriously ESG issues. So many studies have found that companies that excel on ESG do better financially and have relatively higher stock prices. It amazes me how many companies still resist the benefits of an ESG focus.
Australian investors push companies for impact of ESG issues, by Tim Human, August 2, 2012, Inside Investor Relations, Australia.

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