European Banking Ethics Study Notes Challenges For Banks. – [COMMENTARY] “Ethics is seen as reputational risk but is not included in risk management of organisations as such. Financial institutions have ethics policies in place but lag behind in setting targets and objectives implying that the level of integration and progress cannot be evaluated. Most financial institutions do not have a separate business function or dedicated person in place to manage ethics. Financial institutions are facing difficulties in finding the balance between ethical and commercial matters.”

Clearly, European banks need to do better. Recent history suggests banks and other financial institutions have a long way to go. It’s well known that European banks’ leverage is horrendous. I read a recent report indicating it’s 26:1! Can one be ethical with other people’s money when you take on such leverage?
CSR Europe and KPMG publish report on the challenges of implementing and managing ethical values in the European banking and insurance industry, October 30, 2012, CSR Europe, Belgium.

First Study Of ESG Portfolio Risk & Performance In China. – [COMMENTARY] “While the report shows significant investment opportunities using Chinese ESG criteria within the Chinese markets, the alpha is generally lower when using Western ESG criteria for Chinese listings. Additionally, research has not yet shown a potential for ESG on Chinese stocks that are listed internationally.” At last we’re beginning to see how Chinese companies’ stock performance behaves in relation to ESG factors. From this report it seems that ESG factors are just beginning to play a role in their stock valuations.
First Study Of ESG Portfolio Risk & Performance In China, October 30, 2012, Green Investment Resource Center, USA.

BSR Survey: Investors Don′t Read CSR Reports. – [COMMENTARY] “Sustainability has traveled lightyears in the last two decades, but is not yet woven into the fabric of the American corporation, according to this year′s BSR/Globescan State of Sustainable Business 2012 survey of 550 member companies. The survey, looking at the last 20 years in honor of BSR′s 20th anniversary, shows that transparency and reporting have been the greatest area of progress, but that this increased knowledge has not yet changed the behavior of investors, R&D and product design, or government affairs.”

What an interesting analysis. One can see the consciousness of Americans in the recent Presidential debates: discussion of climate change didn’t rate a mention. Is it any wonder that most investors don’t yet take it seriously too?
BSR Survey: Investors Don′t Read CSR Reports, by Hannah Miller, October 24, 3012, TriplePundit, USA.

US Consumers More Likely To Purchase Products/Services Of Companies Who Practice & Promote CSR. – [COMMENTARY] “86 percent of consumers are more likely to trust a company that reports its CSR results; 82 percent say they are more likely to purchase a product that clearly demonstrates the results of the company’s CSR initiatives than one that does not; 40 percent say they will not purchase a company’s products or services if CSR results are not communicated.” This report is useful for both ethical investors and companies.
Consumers Demand More Than CSR “Purpose,” by Cone Communications, October 23, 2012, heraldonline.com, USA.

Newsweeks 2012 Green Rankings. Top 3: Santander Brasil (Brazil), Wipro (India), and Bradesco (Brazil). – [COMMENTARY] “We compared the world′s largest 500 companies according to their environmental footprint, management (policies, initiatives, controversies), and transparency. We partnered with Trucost and Sustainalytics, two leading research companies. The methodology was developed in consultation with an advisory panel of experts in corporate sustainability. The resulting ranking is the most comprehensive available on the topic.”

It’s interesting that two of the top three are Brazilian companies! There are separate rankings for the US and for a number of different segments. Considering the companies involved in doing the assessing, this listing and analysis must be taken seriously. Newsweeks green rankings are a must read for ethical investors.
Newsweek green rankings, October 22, 2012, Newsweek, USA.

Funds With $2 Trillion In Assets Say Oilsands Companies Must Cut Environmental Risks. – [COMMENTARY] “’But (we) are concerned that the current approach to development, particularly the management of the environmental and social impacts, threatens the long-term viability of the oilsands as an investment.’ The statement is signed by 49 funds. Some are controlled by labour and church groups, such as the United Church of Canada and the Canadian Labour Congress. There are also public-sector pension funds from both sides of the border and private funds from Canada, the U.S. and Europe.”

This is good news that such funds are finally speaking to oilsands companies to reduce their environmental risks for the sake of long-term viability for these companies.
Investor group says oilsands industry must cut environmental risks, by Bob Weber, October 21, 2012, Canadian Press, Canada.

UK Investors Act On Carbon Control. – [COMMENTARY] “A grouping representing investors from UK charities and pension funds plans to target FTSE 350 companies… The investors are focusing on utilities companies and those in the extractive industries that have scored badly in a carbon reduction survey. They plan to file a series of shareholder resolutions at annual general meetings in 2013-14 if the companies do not improve… CCLA, which is leading the initiative said it was part of a long-term engagement programme … The group includes the Local Authority Pension Fund Forum which represents £100bn in assets under management and the Church of England′s Ethical Investment Advisory Group, which looks after £8bn.”

It’s good to see powerful and large asset managers get involved in such initiatives. They may have considerable influence over the companies they lobby for change.
Investors act on carbon control, by Ruth Sullivan, October 21, 2012, The Financial Times, UK.

Research Claims Non-Sustainable Funds Perform Similarly To SRI Funds. – [COMMENTARY] “Traditional funds often behave similarly to funds with clear environmental, social and corporate governance in terms of reputational risk, research claims.” The research was conducted by AfU Investor Research GmbH and RepRisk AG. This is interesting. Unfortunately, it is true that many SR-ethical funds are almost indistinguishable from conventional funds.
Research claims non-sustainable funds perform similarly to SRI funds, by Naomi Rainey, October 18, 2012, Professional Pensions, UK.

UK Charities Move Gradually Towards Ethical Investments. – [COMMENTARY] “Following research published by UK Sustainable Investment and Finance Association reporting that three in five adults with investments want charities to take a leadership role in responsible investment of assets, Charity Finance Group have released findings from a survey of its members showing that 51% of charities now have an ethical investment policy. This figure, from the survey for National Ethical Investment Week, is an increase from 46% in a similar survey carried out in 2009.”

It’s a pity we don’t see surveys like this in North America. I suspect similar progress is being made there too. For charities to fear lower returns through ethical investments demonstrates a lack of understanding of the data–or rigidity to change.
Charities are adopting ethical investment policies, but concerns over returns remain, says CFG, by Andrew Holt, October 18, 2012, Charity Times, UK.

BMO Tops 2012 Carbon Disclosure Project Canadian Rankings. – [COMMENTARY] “Only one company scored high enough to make the 2012 Canada 200 Carbon Performance Leadership Index (CPLI) – Bank of Montreal. Performance is grouped into 6 bands A, A-, B, C, D and E. The CPLI includes only Performance band A, which this year was achieved only by Bank of Montreal.” It’s clear that large Canadian companies have a long way to travel in reducing their carbon use and reporting of it.
BMO tops 2012 Carbon Disclosure Project rankings, by Sucheta Rajagopal, October 17, 2012, SRI Monitor, Canada.

59% Of UK Investors Want Charities To Lead on ’Stewardship’ (Ethical) Issues. – [COMMENTARY] “The YouGov survey of 1,291 investors, released as part of National Ethical Investment Week, which began on Monday, found that 59 per cent felt it was the job of charities to take a lead on ‘stewardship′ issues by engaging with companies to make sure their environmental, social and governance policies were sufficiently ethical. And 56 per cent of respondents said they believed that charities should measure the social impact of their investments to the same extent that they measured that of their charitable activities.”

Other data show that charities in the UK and around the world have far to go in aligning their goals with their investments. It just shouldn’t be this way. Charity boards are ’missing-in-action’ on this.
Charities should set an example on ethical investment, survey of investors finds, by David Ainsworth, October 17, 2012, The Third Sector, UK.

The Environment Is The Top Issue Among Ethical Investors. – [COMMENTARY] “The latest results from Worldwise Investor suggest that the environment is the biggest ethical issue amongst ethical investors and highlights why new fund launches have tended to come with minimal social screens, but instead focus on the positive impact investment can have.” The results of this survey are unsurprising. It is useful reading for ethical investors though.
Our survey says – the environment is the top ethical issue! By Arabella Murphy, October 15, 2012, Worldwise Investor, UK.

Investors Representing More Than $1 Trillion In Assets Win Better Sustainability Disclosure And Performance From Emerging Market Companies. – [COMMENTARY] “The Emerging Markets Disclosure Project (EMDP) released its final report today, Lessons Learned: The Emerging Markets Disclosure Project, 2008 – 2012, documenting a five year initiative championing greater transparency among emerging market companies on key environmental, social and governance (ESG) issues.”

The group comprises: the US SIF (The Forum for Sustainable and Responsible Investment); the Boston Common Asset Management, LLC; Calvert Investments; and the United Nations (UN) Principles for Responsible Investment (PRI) Secretariat. The work of this group is helping to significantly improve the opportunities for ethical investors in emerging markets.
Investors Representing More Than $1 Trillion in Assets Win Better Sustainability Disclosure and Performance from Emerging Market Companies, press release, October 15, 2012, The Emerging Markets Disclosure Project, USA.

Companies′ Sustainability Improves – But Reputations Worsen, Says Brandlogic and CRD Analytics Survey. – [COMMENTARY] “AXA, Coca-Cola, Deustche Bank, EADS, General Electric and L′Oreal – companies that last year were not getting enough credit for their actual environmental, social and governance performance – have now earned reputations that match their relatively high sustainability achievements, according to a report by Brandlogic and CRD Analytics… [but] corporations face growing skepticism among professional investors, supply chain officials and recent higher education graduates.” Interesting, is it that companies are failing to properly communicate their sustainability successes or is it part of the growing distrust in business?
Companies′ Sustainability Improves – But Reputations Worsen, October 15, 2012, Environmental Leader, USA.

Half Of Investors Expect IFAs (Independent Financial Advisors) To Offer ‘Green′ Advice. – [COMMENTARY] “IFAs must be prepared to discuss environmental investment issues post-Retail Distribution Review according to the UK′s ethical investment trade body, which has published data showing 58 per cent of adults expect IFAs to be able to advise on green issues that might shape their choices.” The data in this YouGov survey will not surprise most investors. It provides further confirmation that many investment advisors don’t know the interests of their clients.
Half of investors expect IFAs to offer ‘green′ advice, by Donia O’Loughlin, October 15, 2012, FT Advisor, UK.

Investments In Emerging Markets Up Almost 30% Since 2009, Says EIRIS. – [COMMENTARY] “The total AUM [assets under administration] of the 2012 survey respondents came in at a figure of nearly USD 2.4tn. Of the USD 2.4tn around USD 161bn, approximately 7%, was allocated to emerging markets. The respondents to the 2009 survey reported that they had around USD 125bn allocated to emerging markets. This means that emerging market AUM in 2012 is almost 30% higher than the 2009 figure, despite the respondent group being smaller.”

EIRIS’s views regarding ESG in emerging markets are that, “It is clear that there are a number of strong currents within emerging markets that are carrying forward ESG disclosure and performance by companies. These currents include; the continuing process of the integration of emerging markets into the global economy with increasing inflows of investment into emerging market companies; the growing determination of investors to include ESG factors in their investment decisions as evidenced by the expansion of responsible investment organisations such as the PRI; and the significant materiality of ESG issues in emerging markets.”

It’s good to see the figures and get EIRIS’s survey results on ESG in emerging markets.
Evolving markets: what′s driving ESG in emerging economies? October 2012, EIRIS, UK.

Reaching £806 Million, Responsibly Invested Assets In UK Now 18% Of European Total. – [COMMENTARY] “The survey [by YouGov] found a 50% rise in the number of investors UK-wide who want their bank or financial adviser to tell them about ’impact investing’ – investments that produce both a financial and a social or environmental benefit – up from 36% a year ago to 55%.” This week, the UK begins its National Ethical Investment Week.
Half of Scottish savers prefer green or ethical investments, by Simon Bain, October 13, 2012, HeraldScotland, UK.

Interesting Research At UK University On Difference in Ethical and Islamic Funds. – [COMMENTARY] “the average efficiency of socially responsible funds is slightly higher than that of Islamic funds. Although this result is robust across the state-of-the-art methods considered to measure mutual fund performance, further testing indicates that the differences are, in general, not statistically significant. When they are significant, it only happens for some particular quantiles of the distribution of efficiencies. When geographical focus is considered, their research shows that on average, investing in the West yields higher returns, and lower in the MENA region including the GCC.”

There is nothing earth shattering here, but is a useful read for those ethical investors interested in this subject.
New Research Findings on Ethical Funds, October 8, 2012, University of Leicester, UK.

WWF Publishes Guide To Responsible Investment In Agricultural, Forest, and Seafood Commodities. – [COMMENTARY] “Providing distilled guidance based on leading industry practice, The 2050 Criteria is designed to serve as a field guide for investors to access mainstream agricultural, forest, and seafood commodities in a responsible manner.” This type of investment could be really interesting to many ethical investors!
Guide to Responsible Investment in Agricultural, Forest, and Seafood Commodities, October 2012, WWF Global, Switzerland.

Major Investment Consultants Lag In Efforts To Integrate Environmental, Social and Governance Factors Into Investment Practices, Says Ceres. – [COMMENTARY] “A new Ceres report shows that investment consultants retained by major asset owners such as pension funds, foundations and endowments have generally not considered environmental, social and governance (“ESG”) risks and opportunities as they advise their investor clients on their portfolios. Of the 13 U.S. and international consulting firms surveyed for the report, few have developed expertise in ESG investing, fewer than half believe environmental and social factors can impact long-term financial risk and reward, and only one integrates ESG into its risk/return and asset allocation modeling.”

These findings will come as shock to most ethical investors! When we consider all the studies saying how companies with high ESG scores outperform financially and in relative stock prices, these investment consultants have a lot to answer for to their clients. I can only conclude that their clients are ignoramuses for retaining consultants that don’t regard ESG as important in stock and portfolio selection!
Major Investment Consultants Lag in Efforts to Integrate Environmental, Social and Governance Factors into Investment Practices, by Peyton Fleming, October 5, 2012, press release, Ceres, USA.
Socially Responsible/Ethical Investments Growing Rapidly In Europe. – [COMMENTARY] “The European SRI Study 2012 shows that all responsible investment strategies surveyed have outgrown the market, and four out of six have grown by more than 35% per annum since 2009. The combined growth of all strategies at European level continues to outpace the overall investment market, demonstrating the continuous appetite by investors to take into account Environmental, Social and Governance factors, despite (or maybe due to) the ongoing economic and market turmoil.” We have continuing good news with this report. Not sure this study adds too much to what we already know. However, it does provide good detail and perspective on the subject.
European SRI Study, October 2012, Eurosif, Belgium.

Public Pension Plans More Than Twice As Likely To Implement SRI/ESG Strategies Than Corporate Plans, Says BNY Mellon. – [COMMENTARY] “35% of public pension funds have adopted SRI/ESG strategies, compared to 27% of foundations & endowments, and 16% of corporate pension plans. Concerns around ERISA [Employee Retirement Income Security Act] weigh on U.S. corporate clients, with debate about their role as a fiduciary when integrating ESG investing.”

Those US fund managers concerned about ERISA restricting stock selection on ESG grounds are probably not considering that by leaving out ESG considerations they could be also liable for possible ’imprudent’ stock selection.
Public Pension Plans More Than Twice As Likely To Implement SRI/ESG Strategies Than Corporate Plans, Says BNY Mellon, press release, October 2, 2012, BNY Mellon Asset Servicing, USA.

Winners Of 2012 Moskowitz Prize For Sustainable, Responsible, Impact Investing Study Announced. – [COMMENTARY] “Using 10 years of privately compiled data, three leading academics have tied positive market performance to corporate social responsibility (CSR) activities at major publicly traded U.S. companies. Their research has netted them the Moskowitz Prize for Socially Responsible Investing, the only global prize recognizing outstanding quantitative research in the field of sustainable, responsible, impact (SRI) investing.”

This prize performs an admirable function in helping recognize legitimate academic research that advances our understanding of the interplay of human values and its impact on the world of corporate behaviour and investing.
Winners of 2012 Moskowitz Prize for sustainable, responsible, impact investing study announced, press release, October 3, 2012, Center for Responsible Business at The Haas School of Business, UC Berkeley, USA.