Global Investing

Waking up to sustainability karma

By Dasha Afanasieva

Management consultants often urge their clients to view setbacks or difficulties as opportunities. The cost of reducing environmental impacts are often cited as one such “opportunity”.

But a global study from consultancy BCG and MIT Sloan Management Review has shown that companies are increasingly putting this advice into practice and succeeding in getting the returns.

The study is based on a survey of 2,600 executives and managers from companies around the world and found that the number of companies achieving a profit from introducing changes aimed at making their business more sustainable rose 23 percent last year, to 37 percent of the total.

Nearly half of the companies have changed their business models to try to make the most of sustainability opportunities—a 20 percent jump over last year.

Nor is a preoccupation with sustainability the reserve of the developed world.

Companies in emerging markets change their business models as a result of sustainability at a far higher rate than those based in North America, the study found.

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.

from Reuters Investigates:

Oil under ice

Still there

Still there

BP's Macondo Gulf spill would be nothing compared to the effect of a drilling accident in the Arctic, Jessica Bachman reports from "the foulest place in all of Russia."  Scientists and Russian officials are just starting to wake up to the fact that "if something happens on the Arctic Barents Sea in November it would be, 'OK, we'll come back for you in March,'" Jessica says.

But quite what Russia would do about that is not at all clear. The Russian government gets more than 50 percent of its revenues from oil and gas and Prime Minister Putin's stated aim is to keep producing more than 10 billion barrels a day through 2020. Environmentalists aren't the only ones who are worried.

Going green in frontier markets

Frontier markets are one of the fastest-growing investment regions with high growth potential in resource-rich continents like Africa drawing investors who are keen to diversify their investment.

INDIA OILS JATROPHA

But one of the concerns has been that a speedy development would lead to environmental damage.

London-based alternative investment specialist Greenleaf Global is trying to mix frontier markets and environmentally friendly investment, saying that a changing global environment brings investment opportunities in biofuel, biomass and anaerobic digestion (generating electricity from renewable sources).

Investors wary of BP oil spill cost estimates

BP logo

BP’s CEO Tony Hayward reckons the $100 million cost of drilling a well to divert the flow from a leaking oil well in the Gulf of Mexico  is the biggest hit the oil major will take in the Deepwater Horizon tragedy.

The Deepwater Horizon rig exploded last week, and sank, with the loss of 11 workers, who are now presumed dead, while the well it was drilling is leaking 1,000 barrels of crude a day into the sea.

Investors will hope Hayward is right but BP’s record on estimating the costs of major accidents gives rise for concern.

from Chris Wickham:

Climate change is off the agenda in Dubai

The headline in the Gulf News English language daily reads 'UAE tops world on per capita carbon footprint'.

For a place so reliably bathed in sunlight, the Dubai property explosion seems to have generated enough construction noise to drown out the environmental debate raging elsewhere in the world.

For the first-time visitor, the scale of the global construction superlatives - The Palm, made from reclaimed land jutting out defiantly into the Gulf, the skyscrapers built in a region where there is no shortage of space - is staggering.

from Commentaries:

Are pension funds ignoring climate risk?

And are conservation groups moving into the business of giving investment advice?

It seems an unlikely path for environmentalists to take, but this WWF commissioned report warning that failure to take carbon risk into account could knock pension fund returns raises some interesting points.

"Carbon Risks in UK Equity Funds" by Mercer and Trucost "outlines how fund manager complacency on corporate carbon performance could put pension fund assets at risk as carbon-intensive companies face rising carbon costs and their company valuations fall in the short-term in anticipation of future carbon risk".

More than a nice-to-have, buy-side considers its actions

More than a “nice to have,” investor sentiment is running heavily on the side of environment, social and governance (ESG) factors, according to the latest Thomson Reuters Perception Snapshot.

Feedback from 25 global buy-side investors found that 84 percent evaluate ESG criteria to some degree when making an investment decision.

The remaining 16 percent say ESG issues are not considered until a company’s ability to generate high returns is hindered by these factors.

European industry feels the heat of high oil prices

Castle Cement furnace

European industry is suffering under soaring energy costs. Profit warnings are becoming more common and industry leaders predict plant closures and job losses may follow.

Companies say they are doing all they can to improve their game but want government help.

Britain’s Castle Cement, part of Germany’s Heidelberg Cement, is a case in point. Its cement furnace in Stamford, England, is replacing much of its coal with  alternatives  — tyres, bone meal, paper – as $140 a barrel oil sends all fuel costs skyrocketing.   

Cost of expensive gasoline measured in SUV sales drop

 

cars_suvs_3.jpg

Are high gas prices killing Americans’ love affair with gas-guzzling SUVs? Looks that way.

In April, SUVs and light trucks took their smallest share of total U.S. vehicle sales in nearly nine years, and dealers sold more new cars than trucks for the second month running — the first time that’s happened since 2001. While many factors have teamed up to torpedo sales of high-ticket vehicles like SUVs — tighter credit, a tough job market, slumping real estate values and a generally soft economy — the fact that pump prices have soared to a record aren’t helping, as the chart shows.

This trend might not easily reverse in May. Gas prices are up an average of 3 percent in the first two weeks of the month, with the latest weekly average pump price setting a fresh record of $3.72 a gallon, according to the Energy Department’s Energy Information Administration.