(1) Risky management. “85 per cent of the world′s largest global asset owners are climate ’laggards’ that have taken little to no action to insulate themselves from the growing risks presented by climate change, says a new report by the Asset Owners Disclosure Project (AODP).”
Risky management, April 29, 2015, Corporate Knights, Canada.
(2) G20: fossil fuel fears could hammer global financial system. “Top energy watchdog says two thirds of all assets booked by coal, oil and gas companies may be worthless under the ’two degree’ climate deal… World leaders are increasingly concerned that a $6 trillion wave of investment into the nexus of oil, gas, and coal since 2007 is based on false assumptions, leaving companies with an overhang of debt and ’stranded assets’ that cannot easily be burned under CO2 emission limits…
The G20 has asked the Financial Stability Board in Basel to convene a public-private inquiry into the fall-out faced by the financial sector as climate rules become much stricter. All member countries have agreed to co-operate or carry out internal probes, including the United States, China, India, Russia, Australia, and Saudi Arabia.
G20: fossil fuel fears could hammer global financial system, by Ambrose Evans-Pritchard, April 29, 2015, The Telegraph, UK.
[COMMENTARY for (1) & (2)] We all know how most money managers — particularly those in North America — are fossil fuel diehards. Yet, as the world awakens to the fact that the burning of fossil fuels has to be significantly reduced the portfolio losses could be immense. And the wake-up call could come in December from the 2015 United Nations Climate Change Conference in Paris.
Research Documents Positive Link Between Corporate Human Resources Policies & Investment Outcomes. “Of the many studies of human capital policies, the new paper examines 92 that focus on the links to corporate financial performance. The authors find that a large majority of the studies – conducted over several decades and encompassing dozens of countries and industries – reported positive correlations…
However, investors face significant challenges in attempting to incorporate human capital metrics into investment analyses. For example, there are no standard metrics or definitions and there is no clear consensus about which HR policies in what combinations have the most impact on financial outcomes.”
[COMMENTARY] Intuitively, we know that properly managed human resources and their development are significant to a company’s progress. This report is the first to correlate human resources policies to investment outcomes. What this report could do is to encourage investors/fund managers to ask companies for much more detail about their human resource policies, training etc., to try to understand the potential links between good and bad human resource policies with respect to corporate financial performance.
The report also opens-up a new field of academic enquiry into these linkages.
Research Documents Positive Link Between Corporate Human Resources Policies & Investment Outcomes, press release, April 23, 2015, Investor Responsibility Research Center Institute & Harvard Law Labor & Worklife Program, USA.
Canada′s greenest employers help the Earth – and their bottom lines. “As environmental leaders, they′ve put their strategy into action through multiple initiatives, both formal and informal, both corporate and employee-led. For many organizations, building sustainability isn′t a trendy thing to do, but has evolved to become a part of how they operate, notes Richard Yerema, managing editor of Mediacorp Canada.”
[COMMENTARY] We know that corporate sustainability has a long way to go, so it’s good that attention — and awards — is creating a competitive atmosphere to encourage it while raising its profile corporately. Many of the initiatives cited could clearly demonstrate a corporate financial benefit. It would have been great if such benefits could’ve been ascertained and made public.
Canada′s greenest employers help the Earth – and their bottom lines, by Diane Jermyn, April 22, 2015, The Globe and Mail, Canada.
Malaysia and Saudi facing Iran′s rising finance power — Iran’s entire banking system is Shariah-compliant with $482bn (2014) in assets, the largest in the world by far. “[Iran’s Shariah compliant banking assets are] almost a quarter of total global Islamic finance assets, more than Malaysia′s, Saudi Arabia′s and the UAE′s Islamic assets combined.”
[COMMENTARY] Should an agreement transpire between the Iran and the rest of the world concerning it’s nuclear programme and Iran re-enter the global finance industry, it’ll have an enormous influence in global Islamic finance. It might also influence global banking, generally. This is one area that ethical investors will want to particularly watch.
Malaysia and Saudi facing Iran′s rising finance power, by Arno Maierbrugger, April 22, 2015, Gulf Times, Qatar.
Meet the Best for the World (of Certified B Corporations) Overall Honorees for 2015. “The Best for the World Honorees are recognized for creating the most positive social and environmental impact. These companies have earned an overall score in the top 10% of all Certified B Corporations on the B Impact Assessment, a rigorous and comprehensive assessment of a company’s impact on its workers, community, and the environment.”
[COMMENTARY] This is a fascinating list to review when considering the first major B corp. listing on the NASDAQ last week, that of Etsy, an online and offline marketplaces to buy and sell handmade items, vintage goods, and craft supplies.
Best for the World Overall Honorees for 2015, April 21, 2015, B Lab, USA.
The World’s Most Reputable Companies In 2015. “The Global RepTrak list stands out from other corporate lists… because it aims to quantify the way companies are perceived by consumers… rather than looking at how companies manage their internal affairs… According to RI′s data, 83% of consumers say they would definitely buy products sold by companies with top reputations while only 9% want to buy from companies with poor reputations… Google scores No. 2 on the list, just behind BMW and above Daimler.”
[COMMENTARY] The Forbes article covering the Global RepTrack 100 list is highly informative. It refers to Google’s problems with anti-competition regulators in Europe and why they’re having zero effect on its reputation and that no oil and gas producers are on the list as they’re perceived as being polluting and unethical!
The World’s Most Reputable Companies In 2015, by Susan Adams, April 21, 2015, Forbes, USA.
Why Gender Matters to Investors. “A 2014 Credit Suisse study of 3,000 companies assessing the level of women in senior management found that more diversity in management coincides with better corporate performance and higher stock-market valuations.”
[COMMENTARY] The writer also cites several other studies that include those by Thomsen Reuters and McKinsey, which all find that women on boards leads to greater financial performance and increased stock values! With results like this it behoves ethical investors to consider gender/diversity screening in stock evaluations if they do not already do so.
Why Gender Matters to Investors, by Joseph F. Keefe and Sallie L. Krawcheck, April 21, 2015. (This article originally appeared in the April 2015 issue of Green Money Journal on “Women and Investing”), TriplePundit, USA.
Fossil-Free Portfolios Outperform Those With Coal, Gas, Oil. “MSCI Inc. calculates that portfolios without coal, gas and oil earned 1.2 percent more since 2010. Average fossil-free returns have been 13 percent a year, as opposed to 11.8 percent for conventional investors, reports The Guardian. Sure, during this period the price of oil tanked, driving down shares of companies, but fossil-free indexes outperformed before this happened, said MSCI. And the volatility of oil shares is another reason to get out of these stocks.”
[COMMENTARY] These results should be a wake-up call to all those fund managers who say their returns will suffer going fossil fuel-free. With such data and today’s oil and gas prices — plus renewables becoming increasingly competitive — we might finally be witnessing the beginning of the relative decline of the entire fossil fuel industry. Many ethical investors have longed for this moment.
Fossil-Free Portfolios Outperform Those With Coal, Gas, Oil, April 13, 2015, SustainableBusiness.com News, USA.
The Type of Socially Responsible Investments That Make Firms More Profitable, Harvard Business Review. “We find that firms making investments and improving their performance on environmental, social, and governance (ESG) issues exhibit better stock market performance and profitability in the future…
However, not all such initiatives are equally beneficial. My research, with Mozaffar Khan and Aaron Yoon, suggests companies should stick to social and environmental issues that are strategically important for their business if they want such efforts to contribute to the valuation.”
[COMMENTARY] The points made in this article are important for both company managers and investors. The article is written by one of the most well respected researchers in this field.
The Type of Socially Responsible Investments That Make Firms More Profitable, by George Serafeim, April 14, 2015, Harvard Business Review, USA.
Clean Energy Investment Dips 15% In First Quarter As Large Wind And Solar Projects Stall. “About $50.5 billion was invested in the first three months of this year, compared to $59.3 billion a year earlier, the London research firm said. The last period to show weaker investment was the first quarter of 2013, when clean energy spending totaled $43.1 billion.
Even so, last quarter′s results should resolve investors′ questions over whether low oil prices, down 50 percent from last year, would harm global interest in wind, solar, biomass and other renewable energy projects. ’These figures indicate the answer is not so much,’ Michael Liebreich, chairman of BNEF′s advisory board, said in a statement.”
[COMMENTARY] There’s no-doubt that cheap oil will have some effect on renewable energy development. However, at the utility level, renewables are becoming cost competitive with gas or nuclear. Also — as most of us expect — fossil fuel production will be increasingly curbed by governments due to the dictates of climate change.
Clean Energy Investment Dips 15% In First Quarter As Large Wind And Solar Projects Stall, by Maria Gallucci, April 10, 2015, International Business Times, USA.
2015 Proxy Preview of 433 resolutions. “Corporate political activity of all sorts and environmental matters—predominantly climate change—continue to vie for top billing with 26 percent and 27 percent of the total, respectively; increasingly these are linked by investors who seek corporate action to bypass some of the vitriol that stymies government solutions. All told, environmental and sustainable governance resolutions combined represent 39 percent of the total so far, as in 2014, while political activity accounts for just over one-quarter of the total—down 4 percentage points from last year′s mid-February share.”
[COMMENTARY] The survey is a compilation of three data sources: As You Sow, Sustainable Investments Institute (Si2), and Proxy Impact. As many ethical investors take a keen interest in proxy voting, so I’m providing a link to this survey here.
Sweden tops in the EU in ESG ranking (for government bonds). “Bond investors looking to remain true to their environmental, social and governance principles have a new tool: a ranking of European Union member countries. The study, ’EU Member States under the Spotlight,’ ranked the 28 countries based on 67 human rights and 17 environmental indicators, including gender equality, labor rights, freedom of expression, and protection of the environment.”
[COMMENTARY] Such rankings for government bonds are becoming more common. Incidentally, though not directly ranking countries’ bonds, EIRIS Country Sustainability Ratings and RobecoSAM’s Country Sustainability Ranking both offer useful insights for judging government issued bonds on ESG issues.
Sweden tops in the EU in ESG ranking, by Sophie Baker, April 6, 2015, Pension&Investments, USA.
Japan’s 137 trillion yen ($1.1 trillion) GPIF may consider ESG factors in stock investments. “In a mid-term plan announced on Thursday, GPIF said it would consider taking account of ’environmental, social and governance’ (ESG) factors in equity-investment decisions, while pursuing profits.”
[COMMENTARY] When the world’s largest pension fund says it’s considering integrating ESG factors into its stock selection process, we know that ESG has truly arrived! This fund — which traditionally mostly invested in Japanese government bonds — is now gearing up to be heavily invested in stocks. Should they go ahead with the ESG focus, it could further promote outperformance for global stocks with high ESG ratings.
Japan’s GPIF may consider governance in stock investments, by Takashi Umekawa, April 2, 2015, Reuters, Japan.