October 2013

SRI Research: CSR-Related Shareholder Wins Get Bottom-Line Results. “Adopting corporate social responsibility (CSR) shareholder resolutions leads to large increases in shareholder value and operating performance, according to the study winning the 2013 Moskowitz Prize for Socially Responsible Investing… Specifically, Flammer’s [the award winner] results show that the stock market reacts positively to the passage of close call CSR proposals (e.g., reducing CO2 emissions, implementing equal employment opportunities policies, etc.).”

[COMMENTARY] The Moskowitz Prize is the most respected award in the socially responsible-ethical investing arena. The 2013 winner highlights something very important and should encourage company shareholders and management to respond positively to shareholder proxies that involve environmental, social and governance (ESG) issues. This is a landmark study. Congratulations to Caroline Flammer!
SRI Research: CSR-Related Shareholder Wins Get Bottom-Line Results, press release, October 29, 2013, First Affirmative Financial Network, USA.

UK PM Cameron to announce Islamic index on LSE. “The London Stock Exchange will launch an index to identify investment opportunities compliant with Islamic principles, aiming to capitalise on strong growth in the sector, Britain’s Prime Minister David Cameron will tell a conference… Cameron will also reiterate Britain’s intention of launching its own Islamic bond worth around 200 million pounds ($323 million) as early as next year, making it the first Western country to do so, according to the text of his speech distributed by his office.”

[COMMENTARY] There is one thing about the UK–and most especially about the City (London’s financial centre)–is its willingness to continuously reinvent itself over the centuries and thereby maintain its global banking leadership. In the case of Islamic finance, London is well ahead of New York. Can you even imagine New York trying to become the global leader in Islamic (Sharia) finance!

Providing the doubts can be overcome about the mandated distribution of profits to charities in Islamic financial products–and the fears that some of the profits might fund terrorist groups–Islamic finance has a great future in western financial centres. Many of its principles are strongly ethically based and western ethical investment products could benefit a lot from some of the principles employed in Islamic finance
UK PM Cameron to announce Islamic index on LSE, by Shadi Bushra, October 29, 2013, Reuters, UK.

Investors ask fossil fuel companies to assess how business plans fare in low-carbon future. “Coalition of 70 investors worth $3 trillion call on world′s largest oil & gas, coal and electric power companies to assess risks under climate action and ‘business as usual′ scenarios.”

[COMMENTARY] This follows on the ’stranded assets’ item below. How will fossil fuel companies react to a low-carbon future? Investors must get answers from these companies. Should companies have no plan or seen to be irresponsible, investors must take note of that!
Investors ask fossil fuel companies to assess how business plans fare in low-carbon future, press release, October 24, 2013, Ceres, USA.

Stranded assets and the fossil fuel divestment campaign. “There are a wide range of current and emerging risks that could result in ‘stranded assets′, where environmentally unsustainable assets suffer from unanticipated or premature write-offs, downward revaluations or are converted to liabilities. These risks are poorly understood and are regularly mispriced, which has resulted in a significant over-exposure to environmentally unsustainable assets throughout our financial and economic systems.”

[COMMENTARY] You might have heard Al Gore speaking on this subject recently. Though these issues are very real and I fully agree with the premise underlying them, unfortunately, the time frame for them becoming the issue could still be years away. Note the US consumer’s fury when gas prices rise! The following recently released document is important reading for all investors.
The Stranded Assets Programme, Smith School of Enterprise and the Environment, University of Oxford, UK.

UK financial advisors wake up to ethical and sustainable investment. “According to research in the Voice of Advisors Report, conducted by Blue & Green Tomorrow in partnership with Matrix Solutions, private investors are increasingly expecting their IFA to be able to provide advice on how they can take advantage of ethical and sustainable investments:
* Three quarters (74%) of IFAs say their clients are asking for advice on green and ethical investments.
* 8% of clients expect IFAs to be able to advise them on how green/ethical issues may shape their investments.
* Nearly two-thirds of IFAs (61%) believe that requests for ethical advice are growing.”

[COMMENTARY] The ethical investment industry in the UK is well organized and proportionately appears to receive much greater media coverage than in any other developed country. As for the above survey results, they speak for themselves. Again, those advisors that really understand their clients’ personal values will be the ones that excel in the future.
IFAS wake up to ethical and sustainable investment, press release, Blue & Green Tomorrow & Matrix Solutions, UK.

Societe Generale offers more proof of how ESG analysis can provide stock price outperformance. See, SRI: Beyond Integration. Q4 2013.

Report indicates US impact investment potential. “Leading US social and environmental investment firm Sonen Capital has launched a new report which suggests that impact investment can outperform traditional asset class strategies. The report, Evolution of an Impact Portfolio: From Implementation to Results, was launched by Sonen Capital in partnership with the KL Felicitas Foundation (KLF) on Monday, coinciding with the UK′s National Ethical Investment Week.”

[COMMENTARY] The study mentioned measures the performance of various ’impact portfolios’ (money market, fixed income, equities, etc.) of the KL Felicitas Foundation and compares them to benchmarks of those asset classes. The foundation’s use of the term impact investing is a little broader than the way some use it, as it includes ’traditional’ socially responsible investments. The study is a great read and highly encouraging to any charity or philanthropical organization wanting to go the route of ensuring their endowments and other funds are used only for societal good, yet while achieving above market returns!
Report indicates US impact investment potential, by Nicky Stubbs, October 15, 2013, Blue & Green Tomorrow, UK.

Survey: environmental issues concern ethical investors the most. “Environmental issues remain the key driver for investors who want to invest their money ethically or sustainably, according to an ongoing survey by Blue & Green Investor ahead of National Ethical Investment Week [UK].”

[COMMENTARY] This was a survey conducted on the site of Blue & Green Tomorrow. Naturally, those going to that site are mostly ethical investors attracted to that sites’ great content–and the site’s name might bias who views the site too. Hence, it’s unsurprising that most survey participants chose issues related to sustainability and the environment as being the most important to them. Were such a survey conducted on another ethical investing site–such as mine–the results might have been skewed differently. Nonetheless, the survey results are interesting and speak to the concern about the environment.
Survey: environmental issues concern ethical investors the most, by Alex Blackburne, October 11, 2013, Blue & Green Tomorrow, UK.

70% of UK investors don′t know if their investments are ethical. “Some 70% of investors are potentially seeing growth and returns from companies and sectors, which, when prompted, they are ethically opposed to…  fewer than one in eight are aware it′s possible to invest ethically in mainstream companies… only 17% of investors believe in investment return at all costs and saying that achieving the highest possible return is more important than being ethical.”

[COMMENTARY] These findings would likely be similar for most developed countries. It continues to surprise me how investment/financial advisors, not only in the UK, but pretty much everywhere, continue to make a mockery of the most basic rule in their practice: the ’know thy client’ rule! It just shows how most advisors put their preferences ahead of that of their clients. In most cases it’s not malicious but an attitude that ’I’m not that interested in what the client thinks’ and that ’I know better’ than them. The above survey results’ reveal that the advisor who really understands their client is likely to win-out over those that don’t!
70% of investors don′t know if their investments are ethical, by Charlotte Malone, October 11, 2013, Blue & Green Tomorrow, UK.

Cambridge University project to ‘put the value of sustainable investment beyond doubt.′ “The University of Cambridge has announced it is to join forces with leading asset managers and owners to advance the value of sustainable investing, ahead of National Ethical Investment Week (NEIW). The three-year project is designed to promote understanding of how managing environmental and social factors can improve positive long-term returns.”

[COMMENTARY] An institution as renowned as Cambridge University getting behind ethical investing/ESG analysis will add further prestige to the subject. Increasingly, it is getting ever more difficult for naysayers of ethical investing to convince others of their case.
Cambridge University project to ‘put the value of sustainable investment beyond doubt,′ by Charlotte Malone, October 9, 2013, Blue & Green Tomorrow, UK.

AUMs in Islamic finance reached $1.76 trillion in 2012, claims Markaz. “In the executive summary of its report on GCC Islamic Finance, Kuwait Financial Centre “Markaz” notes that at the end of 2012, assets under management (AUMs) in Islamic finance reached $1.76 trillion, growing at a CAGR of 24.8 per cent per annum in the preceding four years.”

[COMMENTARY] I’ve written several articles on and related to Islamic finance and its exceptionally high assets’ growth rate doesn’t surprise me at all. See, The Rise of Islamic Finance and Ethical & Sharia-Compliant Investing Takes Off.
AUMs in Islamic finance reached $1.76 trillion in 2012, claims Markaz, by Robin Amlôt, October 9, 2013, CPI Financial, UAE.

The Companies With the Best CSR Reputations. “To find which companies have the very best reputations, the consulting firm [Reputation Institute] invited more than 55,000 consumers across 15 markets to participate in a study between January 2013 and February 2013 that ranked the world′s 100 most reputable companies–all multinational businesses with a global presence… Microsoft, The Walt Disney Company, Google and BMW–tied for the No. 1 spot.”

[COMMENTARY] This is a great article for all ethical investors to read. It details exactly the Reputation Institute’s methodology as well.
The Companies With the Best CSR Reputations, by Jacquelyn Smith, October 2, 2013, Forbes, USA.

Americans Would Rather Remain Unemployed Than Work for Companies with Bad Corporate Reputations. “Corporate Responsibility (CR) Magazine, in conjunction with Allegis Group Services, today announced the findings of the publication’s annual corporate reputation survey, which found that 69 percent of Americans would not take a job with a company that had a bad reputation, even if they were unemployed. This is a six percent decrease from 2012.”

[COMMENTARY] Actually, superficially this sounds quite positive. Digging into the numbers though–when compared to its 2012 findings–suggests workers are increasingly likely to work for companies with bad reputations. One example, and quoting this article, “Subsequently the average percentage increase in salary that it would take to entice Americans’ decision to work for a company with a bad corporate reputation has decreased. While the majority in 2012 said they would require more than double their salary to consider the move, the majority in 2013 said they would require between a 50-100% increase.”

I suspect that American workers continue to struggle more than what government statistics say!
Americans Would Rather Remain Unemployed Than Work for Companies with Bad Corporate Reputations, press release, CR Magazine & Allegis Group Services, October 3, 2013, USA.

Churchgoers mostly favor socially responsible companies, study finds. “The research showed that companies in areas of high concentrations of people who practice religion engage in more environmental disclosure as opposed to social welfare disclosure. Companies also disclose more CSR information when the population near the corporate headquarters has more nonevangelical Christians than evangelicals. The authors reasoned that this might be because some evangelical organizations promote skepticism of climate change science and embrace more conservative social and political values than their nonevangelical counterparts.”

[COMMENTARY] From this study, one could perhaps argue that since more companies than ever are reporting on their CSR activities and that regulatory agencies are requiring companies to report more on them too, that nonevangelical congregations are growing??? Personally, I believe that it is higher consciousness and ethics that are growing and responsible for more CSR reporting and that whether congregations are nonevangelical or evangelical might be a secondary factor.
Churchgoers mostly favor socially responsible companies, study finds, press release, October 2, 2013, University of California, Davis, USA.

Huge investment needs temper Green bond hype. “Despite major advances in 2013, Green bonds look set to remain a niche product, unlikely to make a meaningful contribution towards the estimated USD6trn needed to support low-carbon energy projects by 2020.”

[COMMENTARY] For the green bond market to really take-off, ethical investors need to take much more interest in this sector. They should let potential issuers know of their interest.
Huge investment needs temper Green bond hype, by John Geddie, October 2, 2013, Reuters, UK.

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