GMI Ratings′ Study Finds That Only Ten Percent of S&P 500 Companies Disclose Specific Sustainability Targets in Executive Compensation Plans. “Energy and utility companies lead the way in tying sustainability metrics to executive compensation, while telecommunications, technology and cyclical consumer goods and services companies trail behind.”
[COMMENTARY] Actually, compared to just a few years ago this is good progress. No-doubt the numbers will continue to increase. As sustainability targets become common for executives, it’ll mean greater interest by them in sustainability and a by product of that will be more sustainably oriented companies–and better investment choices for ethical investors.
GMI Ratings′ Study Finds That Only Ten Percent of S&P 500 Companies Disclose Specific Sustainability Targets in Executive Compensation Plans, press release, April 30, 2014, GMI Ratings, USA.
Fossil Free Indexes Releases “The Carbon Underground” Ranking the World’s Top 200 Public Fossil Fuel Companies. “Report identifies the top public coal, oil and gas companies globally based on potential climate impact of their reserves. Research shows growing reserves and embedded emissions. Updated list supports fossil fuel divestment movement and new ESG index products.”
[COMMENTARY] For ethical investors it might be useful to know who are the largest fossil fuel companies as well as those with the least fossil fuel exposure, if only to get an idea of the relationship between them. But this report also mentions it will aid the fossil fuel divestment movement and promote new types of ESG indices as well. It’ll be interesting to see how this report is received and used.
Fossil Free Indexes Releases “The Carbon Underground” Ranking the World’s Top 200 Public Fossil Fuel Companies, press release, April 29, 2014, Fossil Free Indexes, USA.
Why TNC and JPMorgan Chase are investing $1 billion in nature. “’The number is intentionally big because we think the marketplace is big,’ said Bill Ginn, chief conservation officer at The Nature Conservancy. ’We want investors to say, I have an environmental component in my portfolio because that′s a smart place to invest these days… That means they have to make money in order to be willing to put their capital at risk here.’”
[COMMENTARY] This is a fascinating and timely concept. Just as impact investing is beginning to reap returns for investors from social projects, so the idea here is to produce returns on environmental projects–from fisheries to water projects. Initially, the funders of these projects will be wealthy investors and institutions. However, eventually, I’m sure that small investors will be able to participate. I’m going to really watch this!
Why TNC and JPMorgan Chase are investing $1 billion in nature, by Elsa Wenzel, April 29, 2014, GreenBiz, USA.
Greenwashing – the extent to which companies meet their CSR promises depends on national attitudes to competition and individualism says Oxford academic. “The assumption that corporations say one thing and do another when it comes to Corporate Social Responsibility (CSR) is not far from the truth, but just how much they follow through on their promises depends on cultural interpretations of the principles of liberal economics and the perceived role and strength of the government, says Thomas Roulet, Research Fellow at Saïd Business School, University of Oxford.”
[COMMENTARY] The researchers found that in countries with strong competitive values, firms were more oriented towards ’greenwashing,’ while in countries emphasizing liberal and individualistic values, firms leaned towards concrete actions. This study provides insight as to how different cultures and countries view CSR–and therefore the nuanced approaches required for implementing CSR activities within companies, particularly multinationals.
Greenwashing – the extent to which companies meet their CSR promises depends on national attitudes to competition and individualism says Oxford academic, press release, April 28, 2014, Saïd Business School, University of Oxford, UK.
Deloitte′s Third Annual Core Beliefs & Culture Survey Says Focus on Purpose, Not Profit. “In business a successful organisation has always been interpreted as one driven by profit. Well, not anymore. Deloitte′s third annual Core Beliefs & Culture Survey reveals that organisations with a strong sense of purpose—described as a focus on making a positive impact on customers, employees and the society in general—are more confident in growth prospects and are more likely to invest in initiatives that lead to long-term growth, and enjoy higher levels of confidence among key stakeholders.”
[COMMENTARY] Deloitte’s study confirms the fact that companies with a strong mission and sound ethics outperform those companies driven predominantly by profits.
Deloitte′s Third Annual Core Beliefs & Culture Survey Says Focus on Purpose, Not Profit, by Sangeeta Haindl, April 22, 2014, Justmeans, USA.
These 50 Companies Are The Champions Of The World. “The list was compiled by having all of Citi’s analysts contribute candidates, before a “selection committee” whittled the list down to 50. Among the well-known names on the list: eBay, Apple, American Express, inBev, Gilead, Starbucks, and Schlumberger.”
[COMMENTARY] Though I haven’t analyzed who is on the list, I suspect the majority of these companies are in most ethical portfolios. Still, it might be interesting for some ethical investors to review the list. It’s likely that the companies listed are also the ESG leaders in their respective industries.
These 50 Companies Are The Champions Of The World, by Joe Weisenthal, April 20, 2014, Business Insider, USA.
European Parliament approves green reporting rules for 6,000 firms. “Large businesses across Europe will soon have to report on a raft of non-financial metrics, including their environmental performance and human rights policies, after the European Parliament overwhelmingly approved long-awaited new corporate reporting rules.”
[COMMENTARY] Again, Europe leads the US in CSR! This time large European companies are now mandated to report their CSR activities and results. Again though, as I understand the legislation and the various reporting vehicles that can be used by companies, there’s no requirement for outside independent verification of exactly what any individual company reports. Furthermore, with the variety of reporting frameworks that can be used, there’s no standardization in reporting either. Despite these substantial concerns, I welcome this legislation wholeheartedly. Furthermore, since most of these companies operate in the US, Japan, etc., and many large US companies have huge European operations, this legislation will have enormous spill over effects to numerous non-European headquartered multi-national companies.
European Parliament approves green reporting rules for 6,000 firms, by James Murray, April 16, 2014, BusinessGreen, UK.
UK Legal opinion on ethical investing (for local government pension funds) is welcome but confusion remains. “Can pension funds accommodate ethical concerns when making investment decisions? For many years this question has concentrated the minds of lawyers, investment advisors and trustees. In advice published this week, Nigel Giffin QC confirmed that as long as there would be no financial disadvantage in doing so, local government pension funds could ditch particular holdings, like tobacco, on ethical grounds.”
[COMMENTARY] As in many jurisdictions, basing pension fund investment decisions on ethical grounds runs into questions concerning fiduciary duty which is usually understood to mean that financial returns are what matters and ethical concerns don’t really count. For the UK, at least as regards to local government pension funds, the situation is clarified somewhat. But challenges to such a fund using ethical criteria might still be made if the ethical investments don’t make appropriate returns! That’s still a big issue for these fund’s trustees.
Legal opinion on ethical investing is welcome but confusion remains, by David Clarke, April 16, 2014, Pensions Insight, UK.
Green Bond Principles Governance Framework Announced. “The governance framework of the recently-created Green Bond Principles was released today, with the support of 25 international financial institutions. The voluntary guidelines will allow for diverse stakeholder input into the Principles, provide effective oversight, and support their further development, the International Capital Markets Association, which will provide administrative duties for the project, said in a release.”
[COMMENTARY] This is a terrific development. Green bonds are going to be huge in the years ahead and it’s important that they incorporate some standardization. For instance, when can you call a bond a green bond? What defines that? Anyhow, with so many green bonds about to be issued in the future it’s good that these standards are coming out now. It’s really good news too for ethical investors who would like to replace some portion of their fixed income portfolios with green bonds.
Green Bond Principles Governance Framework Announced, April 14, 2014, Doug Watt, SRI Monitor, Canada.
RepRisk: The Most Controversial Companies of 2013. “In the course of 2013, RepRisk has detected news on thousands of companies across the globe in relation to their environmental, social and governance (ESG) risks. This report analyzes documented negative incidents, criticism and controversies related to the 10 firms that received the highest Reputational Risk Index (RRI) in 2013… The information has been captured and systematically analyzed from a wide range of third-party sources including online and print media, NGOs, government agencies, blogs and more.”
[COMMENTARY] Their most controversial companies include: HSBC Holdings PLC, GlaxoSmithKline PLC, BNP Paribas SA and Samsung Group. Ethical investors might want read what RepRisk says about each of the ten worst companies they write about.
The Most Controversial Companies of 2013, April 2014, RepRisk, Switzerland.
More institutional investors consider ditching fossil fuel stocks. “Investors have been continuing the trend toward environmental activism during the current proxy season, with more shareholder resolutions on environmental issues being filed in 2014 than any previous year.”
[COMMENTARY] At the margin, I expect continued momentum towards disinvestment in fossil fuel companies. I say ’at the margin’ because until the average voter starts to demand that their politicians legislate carbon taxes, trading and or caps, not much of significance is going to happen. Paralleling this would be the average consumer being happy with paying much higher gas prices for their vehicles and homes. It’s going to require many more extreme weather events to convince them of that! But it will happen, but who knows when. Consider this too. Look at America’s euphoria concerning shale gas and oil and then realize the enormous uphill battle disinvestment faces!
More institutional investors consider ditching fossil fuel stocks, by Glen Yelton, April 9, 2014, GreenBiz, USA.
Brits plan to up socially responsible investment in new financial year. “Just over a quarter of Brits want their savings and investments to be more socially responsible this year, according to a survey from ethical bank Triodos.”
[COMMENTARY] For those of you who don’t know Triodos, it’s one of the few UK banks that specialize in ethical loans and investments. It is a pioneering bank in many ways and it’s good to see them engaged in so many surveys of this kind. This survey demonstrates the growing interest by UK investors in ethical investing.
Brits plan to up socially responsible investment in new financial year, Charlotte Malone, April 10, 2014, Blue & Green Tomorrow, UK.
Citigroup says the ‘Age of Renewables′ has begun. “Investment banking giant Citigroup has hailed the start of the ’age of renewables’ in the United States, the world′s biggest electricity market, saying that solar and wind energy are getting competitive with natural gas peaking and baseload plants – even in the US where gas prices are said to be low.”
[COMMENTARY] For Citigroup to come out and say this indicates that big finance is realizing the days of carbon-based energy utilities are closing. Furthermore, with their huge and unpredictable fixed costs etc., nuclear energy is going nowhere. Even China and India are switching massively to renewables. This suggests that carbon-free portfolios could outperform in future years–even in Canada. See below.
Citigroup says the ‘Age of Renewables′ has begun, by Giles Parkinson, reneweconomy, USA.
Carbon-free portfolios can outperform, even in Canada: study. “The returns of a carbon-free portfolio can closely mimic – even outperform – the returns of a broad market index, according to a study by Aperio Group. Annualized returns of Aperio′s hypothetical carbon-free portfolio in Canada were 9.23% over a 13-year period between 2000 and 2013, compared with 8.38% for the S&P/TSX Composite Index.”
[COMMENTARY] Constructing a broad market carbon-free index in Canada is a real challenge, given the huge weightings of carbon-based companies in most Canadian broad market indices. Yet, Aperio found it could be done and still able to outperform the major Toronto Stock Exchange’s S&P/TSX Composite Index! It’s very reassuring for Canadian ethical investors who want to invest primarily in their home market.
Carbon-free portfolios can outperform, even in Canada: study, by Doug Watt, April 8, 2014, SRI Monitor, Canada.
European study finds no performance differences in SRI portfolios. “A study by European asset manager Amundi concludes that incorporating SRI to the investment process produces no significant underperformance or over-performance. In addition, the study says, the inclusion of SRI criteria does not produce a significant cost on either the European or global investment universes. ’Furthermore, some SRI factors are likely to become more important in the future, with differences in corporate practices having considerable impacts on profitability. SRI management can therefore be a relatively cost-free way to benefit from this evolution.’”
[COMMENTARY] I think the last part of the above quote is significant. Many SR-ethical investors are going to be much better positioned to ride the growing wave of investment industry interest in ESG/CSR matters.
European study finds no performance differences in SRI portfolios, by Doug Watt, April 3, 2014, SRI Monitor, Canada.
Affluent Investors to Socially Responsible Investing: We’re Just Not That into You. “Just three-in-ten of households with a net worth between $1 million and $4.9 million (not including primary residence) consider social responsibility to be a primary investment factor. It is even less of a consideration for high net worth investors with a net worth between $5 million and $24.9 million (25 percent). Socially responsible investing is a higher priority among non-Millionaires with a net worth of a least $100,000.”
[COMMENTARY] These survey findings are unsurprising to me. I’ve seen several studies that show the very wealthy tend to be a little bit more selfish and willing to cheat a bit more for material gains–than those less well-off. However, even at 25% of the high net worth investors being interested in SRI are very significant! Were they to actually follow through with their values, SR-ethical investing would get a terrific lift.
Affluent Investors to Socially Responsible Investing: We’re Just Not That into You, April 4, 2014, Millionaire Corner, USA.
Norway wealth fund to ramp up renewable energy investments. “Norway’s $860 billion oil fund should scale up its investments in renewable energy and weigh the risk to future returns posed by climate change, the finance ministry said on Friday, a shift green groups said was insufficient. The switch is part of government reforms of the fund – the biggest of its kind in the world – that also include changes to its ethical guidelines and a review of its activities in emerging markets.”
[COMMENTARY] This unique fund has been a great example of applying ethical investing principles to it its assets. Now, the new right wing veering Norwegian government is scraping the committee that had that responsibility and that ethical decisions will now be made by the fund itself. It remains to be seen if they’ll uphold the previous ethical principles. Furthermore, less than 1% of the funds assets are to be invested in renewable energy. That’s just plain pitiful!
UPDATE 3-Norway wealth fund to ramp up renewable energy investments, April 4, 2014, Reuters, Norway.