How socially responsible is your investing?
Is your investment ethically sound and socially responsible?
A new survey by consulting firm Mercer finds that only 9% of more than 5,000 investment strategies achieve the highest environmental, social and governance (ESG) ratings.
Socially responsible investing (SRI) involves buying shares in companies that manage ESG risks. For example, firms that make clean technologies are favoured, while businesses which pollute the environment, are complicit in human rights abuses or nuclear arms production are shunned. All this sounds good, but the performance of such investments has been somewhat mixed — meaning being good doesn’t always mean doing well. But the SRI industry is hoping that greater involvement of funds, especially long-term ones such as pension funds and sovereign wealth funds — may generate flows into the sector and lead to better performance.
Of the 5,175 strategies assigned ESG ratings, 57% are in listed equities, 20% fixed income and the remaining 23% across real estate, private equity, hedge funds and others.
Private equity has the highest proportion of highly rated ESG strategies, while hedge funds and fixed income had the fewest. From a geographic perspective, emerging markets and Asia-Pacific have the highest proportion of top ratings, while Canada — and this may come as a surprise to some — has the least.
Deutsche’s investment themes for 2012
We just finished our three-day Reuters 2012 Global Investment Outlook summit in London, New York and Hong Kong, where prominent money managers have discussed their outlook for next year. (For more click here)
Deutsche Bank Private Wealth Management (whose official was also a guest at the summit) is telling its clients the following 10 investment themes for next year.
1. Safe may not be safe Don’t react to uncertainty by automatically taking refuge in traditional safe havens such as cash, sovereign bonds, real estate or precious metals as they may prove less safe than they appear.
2. Walk before you run Build up holdings gradually, first focusing on “equity lite” type holdings
3. Ready, steady… go? When we get some clarity on euro zone resolution, not only equities and bond markets will start to have a different momentum.
4. Be nimble, but with a safety net Consider resorting to regular, dynamic portfolio rebalancing to adjust to economicand market developments.
5. Reason should dominate emotion Avoid an emotion-driven response that is likely to result in wrong investment decisions, andwrong timing, and make sure that reason always dominates the decision-making process.
Funding stress in the FX swap market
Signs of the wholesale funding stress are cropping up in the FX swaps market, with the premium for swapping euro LIBOR into dollar LIBOR over 3 months (so-called cross currency swap) rising to 141.5 basis points, which is the post-Lehman Brothers high.
The premium has skyrocketed in the past six months (back in May it was only 16.5bps) because European banks needing funds are forced to turn to the FX swap market, and other banks are reluctant to lend to European companies in the United States.
And it looks like the situation is going to get worse from here, because of weak dollar bond issuance by euro zone companies.
JP Morgan says companies across the euro zone are not issuing very much — the average issuance over the past two months stands at only $1.3 bln, compared with a $4.5bln per week pace seen over the first half of the year, when dollar funding conditions were less stressed.
“The fact that dollar issuance is so subdued even for euro area non-financials is worrying as it suggests investors do not differentiate between euro area issuers. This is reinforced by the fact that dollar issuance by European companies outside the euro area appears relatively unaffected,” JP Morgan writes.
Bosses in the dark
Business bosses, it seems, are as much in the dark as the investors who buy stocks in their companies.
That is the worrying conclusion of a new survey from Booz & Co.
After quizzing more than 800 senior managers, it found 40 percent doubted that their company’s leadership had a credible plan to address the economic crisis and an even higher number – 46 percent – were not sure that their top management could carry out the plan, credible or not.
Alarmingly, even at the CEO and board level, one third of those responding were sceptical of their own plans.
“It appears that the speed with which the crisis hit and the subsequent volatility has left many senior leaders uncertain of how to move forward and whether they should be in survival or opportunity mode,” says Booz partner Jake Leslie Melville.
But despite not being sure what to do, senior managers are clinging on hopefully. More than half of those questioned thought the crisis would ultimately have a positive impact on the competitive position of their companies.
I agree. I find it odd that so many people that I talk to who are in positions to formulate plans for operating in a recession appear to be simply denying it.
