Ethical Lapses on Wall Street. – [COMMENTARY] “The second annual survey of Wall Street ethics (or the lack thereof) from the law firm Labaton Sucharow generated much interest but few surprises for me. Did you really believe Wall Street changed for the better since 2010 when the Dodd-Frank Act was passed by Congress?”
The results of the Labaton Sucharow survey serve a good purpose: they remind us that for all the ’high ethical’ talk of Wall Street leaders, their industry is plagued with unethical behaviour requiring significant regulatory oversight. However, what is also a pity is that the regulators are often ’in bed’ with those they regulate and the regulatory agencies are purposely starved of funds by their political masters who rely on Wall Street for their campaign funds.
Ethical Lapses on Wall Street, by Daniel Solin, July 25, 2013, US News & World Report, USA. For the Labaton Sucharow report, click here.
’Comply or explain’ urged for manager research on long-term investing. – [COMMENTARY] “UK – Asset managers that fail to allocate money to long-term investment research should be forced to explain their lack of commitment, a UK parliamentary committee has argued.”
This is good news for UK ethical investors with implications for us all. Asset managers, despite their management of long-term funds, all too often focus only on short-term results. This psychology forces companies to think short term profits–often at the expense of long-term, more profitable opportunities. I hope that Britain’s Financial Conduct Authority (FCA) moves on this issue as do other regulatory agencies globally.
’Comply or explain’ urged for manager research on long-term investing, by Jonathan Williams, July 25, 2013, Pensions & Investments Europe, UK.
Intel, Microsoft And Kohl′s Top EPA′s Green Power List. – [COMMENTARY] “Intel again topped the EPA’s Green Power lists of partner organizations using renewable electricity. As the most aggressive private-sector partner, the tech giant uses more than 3.1 billion kilowatt-hours (kWh) of renewables annually. On the EPA’s National Top 50 List, Intel was followed in order by Microsoft, Kohl’s, Whole Foods Market, Wal-Mart, the Department of Energy (DOE), Staples, the city of Houston, Starbucks and Apple. First-timers to that ranking, released Tuesday, include Unilever, JPMorgan Chase and EMC Corporation.”
If companies aren’t part of EPA’s Green Power Partnership program–they’re not covered. Hence, companies not part of EPA’s program such as IKEA and Google–and all doing great things in green energy–aren’t included in the rankings.
Intel, Microsoft and Kohl′s top EPA′s Green Power list, by Christina DesMarais, July 24, 2013, GreenBiz.com, USA.
Non-Financial Reporting Falls Short, Investors Say. – [COMMENTARY] “Corporate non-financial reporting by European companies is not transparent or adequate enough for investors, according to a survey conducted by the European Sustainable Investment Forum and the Association of Chartered Certified Accountants… Some 93 percent of investors surveyed believe non-financial disclosure is insufficient to assess materiality.”
As I’ve said on many occasions, until ESG reporting is in a standardized format and independently audited by regulated auditors–much like financial reporting–we will continue to have this problem.
Non-Financial Reporting Falls Short, Investors Say, July 23, 2013, Environmental Leader, USA.
Sustainable Investment Organization Releases Guide For Retail Investors To Address Climate Change. – [COMMENTARY] “Today the US SIF Foundation released Investing to Curb Climate Change: A Guide for the Individual Investor. This guide seeks to meet the increasing interest of a wide range of investors in using their investment dollars to address the risks of climate change and to help generate solutions… The US SIF Foundation will also release a Guide for Institutional Investors on July 29.” I haven’t had the chance to review this guide yet, but I’m sure it’ll be worthwhile reading! Apparently, it’s the first of a series of guides for socially responsible/ethical investors.
Sustainable Investment Organization Releases Guide for Retail Investors to Address Climate Change, press release, July 22, 2013, US SIF, USA.
Obama Enters Impact Investing Arena With New Program. – [COMMENTARY] “At the G8 Social Impact Investing Forum last month, the Obama Administration announced an initiative to spur economic growth and job creation through enterprises that reflect the triple bottom line of social, economic and environmental performance.” This is a good article outlining the Obama administration’s first real program for encouraging impact investing.
Obama enters impact investing arena with new program, by Michael Kramer, July 22, 2013, GreenBiz.com, USA.
Finance Giant UBS: ‘Sustainable Investment Has Entered The Mainstream.′ – [COMMENTARY] “Leading financial services firm UBS has released a report that outlines its commitment to sustainable investment – which it says “has entered the mainstream”. The report uses research projects that have been carried out within the firm. It draws upon the conclusions of these to reiterate the significance of sustainability and the value that such practices can bring to the business.” This is what all ethical investors have been waiting for!
Finance giant UBS: ‘sustainable investment has entered the mainstream,′ by Nicky Stubbs, July 22, 2013, Blue & Green Tomorrow, UK.
Social Responsibility Most Important To Generation Y Investors, Says Survey. – [COMMENTARY] “Younger investors are more concerned about making socially and environmentally responsible investments, according to a survey by investor website Millionaire Corner. Its study found that in 49% of millionaire investors from Generation Y, also known as the Millennial Generation, social responsibility is a factor in their investment decisions.” This is good news for the future of ethical investing. As these youngsters move into management, it may indicate a keener interest in the future for really dealing with issues such as sustainability and equity on a wider scale.
Social responsibility most important to Generation Y investors, says survey, by Tom Revell, July 12, 2013, Blue & Green, UK.
High-Frequency Trading Is Making A Joke Of The Markets. – [COMMENTARY] “Knowingly or not, the HFTs had discovered their quotes could blind other investors to the true market price, and this soon became one of their biggest weapons against the investing public. HFT firms could afford 10-gigabyte pipelines, microwave-transmission towers, even tunneling through Pennsylvania Mountains to ensure they could be the first to see and react to the “real” price of assets they were trading. The rest of us were left to trade on the equivalent of yesterday’s prices, as the HFTs’ nanosecond trading made a full second seem like a full day’s advantage!”
Nothing typifies the seeming corruptness of the regulatory agencies ’governing’ the US/European financial markets than not putting a leash on high frequency traders. This is a great article on the subject.
High-Frequency Trading Is Making a Joke of the Markets, by Jon Najarian, July 12, 2013, Yahoo! Finance, USA.
Q2 2013 Global Green Investment At $53.1B. – [COMMENTARY] “Bloomberg New Energy Finance reported that global green energy investment grew to $53.1 billion in the second quarter of 2013. That′s a 39 percent improvement from the first quarter′s four-year low of $43.6 billion, and was driven almost entirely by quarter-over-quarter growth in the United States ($9.5 billion, up 155 percent) and China ($13.8 billion, up 63 percent).” The overall numbers are good. They are blemished though, as European green investment slumped with the raising of German feed-in tariff rates, solar manufacturers there going bankrupt, and the EU recession impacting the industry.
Q2 2013 Global Green Investment at $53.1B, by Jeff St John, July 11, 2013, greentechmedia.com, USA.
Thomson Reuters Extel And UKSIF 2013 SRI & Sustainability Survey Results. – [COMMENTARY] “The 2013 Survey represents the views of over 500 investment professionals from 29 countries, making it the most extensive assessment of socially responsible investing (SRI) in the European investment community. Voting was conducted from 26 March to 3 May 2013. It reflects a contribution from 215 buy-side firms and 26 brokerage firms/research houses.” Checkout the results with the link below.
Thomson Reuters Extel And UKSIF 2013 SRI & Sustainability Survey, press release, July 12, 2013, Thomson Reuters Extel/UKSIF, UK.
Companies With Women Board Members May Have An Edge In Performance And Stock Price. – [COMMENTARY] “According to the study [’Mining the Metrics of Board Diversity’ by Thomson Reuters] on average, companies with mixed boards have marginally better, or similar performance to a benchmark index, such as the MSCI World, particularly over the past eighteen months. Companies with no women on their boards underperformed relative to organizations with women board members, and had slightly higher tracking errors, indicating potentially more volatility.” The Thomson Reuters study confirms what some other studies have also found–that women on boards add real value to boards, to their company’s and to stock values.
Companies with women board members may have an edge in performance and stock price, press release, July 10, 2013, Thomson Reuters, USA.
‘Ethical index′ Launched To Measure Italian Banks Against International Standards. – [COMMENTARY] “The Standard Ethics Italian Banks Index will monitor the stock market′s reaction to the organisations′ corporate governance, according to principles indicated by the UN, the EU and the Organisation for Economic Co-operation and Development (OECD). The index is the third in a series that will provide tools to scrutinise the sustainability of banks, starting from 2013. The other ones are the Italian Index and the Best in Class Index.”
To measure a bank’s CSR standards against internationally acceptable CSR standards is a great idea. I hope that this concept becomes widely adopted. It’s great for ethical investors.
‘Ethical index′ launched to measure Italian banks against international standards, by Ilaria Bertini, Blue & Green, UK.
Ratings And Rankings: How Competition Promotes Corporate Sustainability. – [COMMENTARY] “The field of ratings and rankings has grown significantly in the last decade. According to research by SustainAbility, the number of indices jumped from 21 ratings in 2000 to 108 in 2010. That′s more than a five-fold increase. Why the sudden explosion of “green” leadership tables and indices? The short answer is stakeholder pressure. Socially responsible investing has prompted many investors to look beyond balance sheets and earnings reports.” This is a good article on the subject.
Ratings and rankings: How competition promotes corporate sustainability, by Christopher Thomas and Sarah Corrigan, July 3, 2013, GreenBiz, USA.
SRI Remains Divided By Personal Opinion. – [COMMENTARY] “An Ethical Investment Research Service (Eiris) survey found that 82 per cent of UK customers want financial product providers to pay more attention to environmental, social and governance issues (ESG). Participants said they would be more likely to invest in a company if they consider things like climate change, environmental management, human rights and employee relations.”
There is tremendous interest among investors for ethical investments. It is also fine that what is ethical is different from person to person. However, some underlying traits such as environmental sustainability and ethical governance are common to most investors!
SRI remains divided by personal opinion, by Isabelle Sheldrake, July 4, 2013, FT Advisor, UK.
U.S. Investment Industry Groups Scuffle Over Ethics, Costs. – [COMMENTARY] “Wall Street’s brokerages would spend an average of $8 million each to implement a plan being considered by the U.S. Securities and Exchange Commission to impose higher ethical standards on brokers who give financial advice, according to estimates by the securities industry’s largest trade group.”
The core issue is that, “brokers are compensated by sales commissions and must only meet a ’suitability’ standard by suggesting investments that are suitable for their clients [and frequently exclude non-firm products]. But RIAs, typically paid by clients, must be fiduciaries – they must put their clients’ interests above their own at all times. The SEC is considering whether to streamline those standards through a new rule.”
It’s about time that US brokers put clients’ interests first–and not their own commissions!
U.S. investment industry groups scuffle over ethics, costs, by Suzanne Barlyn, July 3, 2013, Reuters, USA.