November 2015

Companies with greater carbon efficiency outperform markets. “According to a new report published by the world′s largest asset manager BlackRock, businesses that have been at the forefront of improving their carbon efficiency for the last three years have dramatically outperformed the ones that have been laggards in this area.

The report analyzed the stock market performance of over 1,850 companies that have joined the CDP (formerly, Carbon Disclosure Project). It includes companies across sectors, ranging from energy and auto giants such as BP and General Motors to technology leaders such as IBM.”

[COMMENTARY] A study like this from the world’s largest asset manager is likely to influence corporate boards globally. Blackrock is clearly showing that ethical investors positioned in companies with carbon reducing strategies — especially compared to their peers — offers the opportunity for superior financial returns.
Companies with greater carbon efficiency outperform markets, by Vikas Vij, November 30, 2015, Justmeans, USA.

Stronger Focus Needed on Business Ethics and Whistleblowing Arrangements: IBE Survey. “The Institute of Business Ethics (IBE) has published its Ethics at Work Surveys for Britain, France, Germany, Italy and Spain. The survey shows that about half of employees who aware of misconduct do not voice their concerns. According to Philippa Foster Back, Director of IBE, weak speak-up arrangements leave companies vulnerable. If managements do not know what is going on, they cannot protect their businesses against crisis.

The survey showed that 61 percent of those who did speak up said they were dissatisfied with the outcome. This percentage has more than doubled when compared with 2012.

[COMMENTARY] Unsurprising that ethics is still an issue at most companies. Generally, businesses reflect the ethics of the society where they operate. It’s obvious that only in a highly ethical society will the majority of businesses behave with high ethics. I believe ethics is largely a societal issue. However, that’s not to say that individual businesses should not attempt to be more ethical.
Stronger Focus Needed on Business Ethics and Whistleblowing Arrangements: IBE Survey,  by Vikas Vij, November 26, 2015, Justmeans, USA.

(Benefits) Consultants adding ESG factors to decision mix. “According to research from Cerulli Associates, consultants are finding that they need to incorporate ESG factors into their manager selection decision-making process. More than half (53 percent) of consultants polled by Cerulli have dedicated resources for ESG manager research, and another 20 percent are considering adding resources.”

[COMMENTARY] Interest in ESG continues to spread — with this report that benefits consultants in their choice of investment managers are now largely taking managers’ perspectives on ESG into account.
Consultants adding ESG factors to decision mix, by Marlene Satter, November 25, 2015, Benefits Pro, USA.

Decarbonizer: The first planetary investment tool… answers the question – ’Does it pay to decarbonize?’ Created by Corporate Knights and powered by carbon data from South Pole Group, the Clean Capitalist Decarbonizer is a free interactive tool that shows the financial implications of divesting high carbon companies in favour of those that derive at least 20% of their revenues from environmental markets or new energy.

The Clean Capitalist database covers 7,000 securities (comprising more than 85% of global market capitalization), including all primary public equity securities with a market cap over $2 billion and/or listed on major national and global indices. A professional version of the Clean Capitalist tool for the investment community will be launched at the upcoming Paris Climate Conference.”

[COMMENTARY] Congratulations to Corporate Knights and the South Pole Group for creating an extraordinarily useful tool for investors wanting to know how portfolios would do were they to rid themselves of carbon related assets!
Decarbonizer, by Corporate Knights and South Pole Group, 2015.

Institutional Investors Increasingly Consider ESG Factors. “The number of U.S. institutional investors that incorporate environmental, social and governance (ESG) factors into investment decision making increased from 22% in 2013 to 29% in 2015, according to results of a Callan survey. The investment consultant′s 2015 ESG Interest and Implementation survey found that, by fund type, foundations (39%) and endowments (37%) have the highest rates of ESG adoption. Public fund usage of ESG factors has nearly doubled in the past two years, from 15% in 2013 to 27% in 2015.”

[COMMENTARY] I really wonder if I should continue posting these surveys. They’re all so repetitive — but in a great way! The only remarks I’ll make about this survey is that it demonstrates how far ahead foundations and endowments are relative to others and it would’ve been good to compare them to European equivalents.
Institutional Investors Increasingly Consider ESG Factors, by Rebecca Moore, Asset International, USA.

Stranded assets may add up to $2.2 trillion — blame COP21? “U.S. fossil fuel companies and their shareholders are exposed to $412 billion in potentially unusable assets from oil, coal and gas projects on their books that may never be needed, according to a report released today.

That vast U.S. exposure is part of $2.2 trillion globally in excess in fossil fuel drilling or mining projects that could well become stranded assets on the books of various private and state-run companies, according to Carbon Tracker.”

[COMMENTARY] Carbon Tracker has produced a fascinating study on this subject. All investors have to be aware that their portfolios often contain expose to many investments that could be hit hard due to asset write downs, etc. Fortunately, many ethical investors are ahead of the game.
Stranded assets may add up to $2.2 trillion — blame COP21? By Barbara Grady, November 24, 2015, GreenBiz, USA.

Low level of climate integration into investments. “Only a minority of major European investors, found in a sample of asset owners that invests €7.3 trillion, integrate climate change into their investment policies.

However, research into these asset owners also found that 53% consider climate change to be a top priority. Nearly 90% of those surveyed use one of three recognised methods of responsible investment: stock screening; shareholder engagement; or selecting stocks based on environmental, social and governance criteria. Novethic says this shows investors are strengthening their responsible investment practices.

[COMMENTARY] This survey continues the trend — found in countless other surveys too — that responsible investment/ESG factors are increasingly a concern for investors.
Low level of climate integration into investments, November 23, 2015, Funds Europe, UK.

How your pension can change the world. “According to BNY Mellon research millennials would allocate an average 42% of their investment portfolio to social finance products, with those in the UK keen to invest in projects that focus on crime prevention and homelessness.

However, they feel that the pension industry is not listening to them as 95% said that pension funds and insurers only provide limited, poor or no options for investing in social finance initiatives.”

[COMMENTARY] The pension industry is generally slow to adapt to new opportunities — though there are some outliers such as Canada’s Canada Pension Plan. It has used a responsible investment approach for many years. However, it too, I believe, hasn’t gotten into investments related to the areas mentioned above: crime prevention and homelessness.
How your pension can change the world, by Michelle McGagh, November 21, 2015, citywire money, UK.

Individual Investors Can Now Divest From Fossil Fuels with One ETF. “A San Francisco investment firm today launched on the New York Stock Exchange what it touted as the world′s first diversified, socially responsible and fossil-free, exchange-traded fund (ETF) based on a climate leadership index.”

[COMMENTARY] It’ll be interesting to watch how this ETF performs financially compared to other fossil fuel free funds. It appears unique in its methodology.
Individual Investors Can Now Divest From Fossil Fuels with One ETF, by Jim Pierobon, November 19, 2015, TriplePundit, USA.

Investors use technology as tool to dissect ESG portfolios. “Institutional investors increasingly turn to new ways of deploying technology and data to up their ESG game. Environmental, social and governance issues have been moving up on the agenda in recent years. Now they are coming to a head with the onset of regulatory demand; new guidance from the Department of Labor stating that investors can consider ESG factors in their investment without fear of repercussions; student protests; and general pressure from investors across the globe.”

[COMMENTARY] This is a fascinating article on how technology is aiding portfolio integration of ESG criteria.
Investors use technology as tool to dissect ESG portfolios, by Sophie Baker, November 16, 2015, Pension & Investments, USA.

S&P 500 companies up their game on climate: Report. “Corporate board level responsibility for climate change has soared to 95 percent in 2015 from 67 percent five years ago, according to a 2015 climate change report from the CDP, formerly the Carbon Disclosure Project. Among the other findings, S&P 500 companies actively working to reduce their greenhouse gas emissions have increased to 96 percent from 52 percent.”

[COMMENTARY] These are dramatic numbers and bode well for adaptation by business to not only climate change but for all issues related to ESG. It seems the ESG message to companies from SR-ethical investors over all these years is finally taking root!
S&P 500 companies up their game on climate: Report, by Heesun Wee, November 16, 2015, CNBC, USA.

Is this a tipping point? Business action moves past the ’climate A-list.’ “The influential not-for profit CDP released the latest figures in its annual report on corporate carbon emissions disclosures on behalf of 822 investors representing $95 trillion worldwide…

The report indicates that corporates have passed an important business tipping point with 89 percent of companies having activities to reduce GHG emissions. This is compared to less than 50 percent five years ago, before the ill-fated COP15 in Copenhagen.”

[COMMENTARY] What great findings! As I’ve previously commented, it looks like the wind is at the back for a successful COP21 Paris conference. Long-term, ethical investors are likely big winners.
Is this a tipping point? Business action moves past the ’climate A-list,’ by Michael Mathres, November 11, 2015,, USA.

SRI Research Prize Winner: The Market Places Significant Monetary Value On Greater Transparency. “The market values better corporate disclosure of greenhouse gas (GHG) emissions and these effects appear strongest among firms in carbon-intensive industries. That conclusion is drawn by Professor Philipp Krüger in a major study that was awarded the 2015 Moskowitz Prize for Socially Responsible Investing during a special ceremony last night at the 26th annual SRI Conference in Colorado Springs, Colorado.”

[COMMENTARY] The good news is the continuing and rapidly growing market of acceptance of GHG reporting due to the kind of research of Professor Philipp Krüger. Congratulations Professor Krüger on winning the 2015 Moskowitz Prize! (See study.)
SRI Research Prize Winner: The Market Places Significant Monetary Value On Greater Transparency, press release, November 5, 2015, First Affirmative Financial Network, LLC/The SRI Conference, USA.

World Exchanges Agree Enhanced Sustainability Guidance. “The WFE Guidance & Recommendations identifies material ESG metrics which exchanges can incorporate into disclosure guidance to companies listed on their markets. Specifically, the enhanced guidance highlights 34 key performance indicators, including energy consumption, water management, CEO pay ratio, gender diversity, human rights, child and forced labour, temporary worker rate, corruption and anti-bribery, tax transparency in addition to other corporate policies.”

[COMMENTARY] More great news for ethical investors. Soon all stock exchanges will have ESG guidelines for their listed companies, making the task of promoting ESG and SR-ethical investing that much easier.
World Exchanges Agree Enhanced Sustainability Guidance, press release, November 4, 2015, World Federation of Exchanges, UK.

The ‘Sin Stock′ Premium: A Neat Illusion Dismantled. “Two scholars associated with the University of Reading′s ICMA Centre, in a new paper, take on the notion that the so-called “sin stocks” (chiefly: stocks of companies whose business plan is tied to highly addictive behaviors) outperform other stocks in an actionable alpha-generating way.”

[COMMENTARY] This is a fine article about an important study. The study counters the notion of sin industries outperformance! (See study.)
The ‘Sin Stock′ Premium: A Neat Illusion Dismantled, by “cfaille,” November 3, 2015, UK.

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