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.
from Reuters Investigates:
Oil under ice
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.
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 can gain exposure to biofuel via its flagship project Jatropha Plantation in West Africa. Jatropha, a toxic wild plant, is resistant to drought and pests, and produces seeds containing 27-40 percent oil. Recently cited by Goldman Sachs as one of the best candidates for future biodiesel production, Jatropha grows fast in poor-quality soil, has a high yield per hectare and a long lifecycle.
Greenleaf estimates returns from its Jatropha plantation to be around 12 percent per annum, which compares favourably with return on cash and bonds around 3 percent.
Investors wary of BP oil spill cost estimates
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.
In 2005, when an explosion at BP’s Texas City refinery killed 15 workers, BP initially scoffed at analyst estimates the cost of repairs, lost profits and damages could hit $1 billion. Spokespeople predicted the impact would be a fraction of that. In the end, compensation claims cost over $2 billion while repair costs and lost profits cost over $1 billion more.
Investors may have this in mind when they pushed BP’s shares down around 3 percent in the past 2 days, wiping over $5 billion off the company’s market capitalisation, despite the company reporting a forecast-busting first quarter earnings rise.
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.
The amount of environmentally 'sinfull' concrete poured over the last decade is ncalculable. Billboards lauding the benefits of solar power look like a bit of an after thought.
Climate change was just beginning to take hold as an issue for property developers when the economic downturn struck and put paid to nascent environmental ambitions. "Green is not cheap," says Markus Giebel, chief executive of Dubai property group Deyaar Development. "Dubai was on the right track, but there's no money now. People are thinking about survival."
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".
The report argues that fund managers "could dramatically reduce the carbon footprints of their funds through stock selection without the need to alter sector weightings or their overall investment strategy".
It also encourages them to engage with companies in their portfolios and calls on them to support mandatory reporting requirements for corporate greenhouse gas emissions.
The research says climate change is of "little importance in fund managers' investment decisions", with the main reason cited for this "a lack of confidence in government policies to address greenhouse gas emissions".
WWF wants fund managers to see there are financial incentives for pension funds and other institutional investors to consider carbon risk. If nothing else, it has learned to speak their language.
Must everything be viewed through the myopic window of economics? It would seem that capitalism is the one world religion. Until we lose it, nothing will change for the good.
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.
Some of the selected comments:
“ESG only plays a role to the extent that it is an overhang on the stock. There is no moral component to investing. We are value neutral when it comes to our investment decisions, but we are not value neutral in our lives. We have a fiduciary duty to our clients, to the people who give us money to manage to maximize returns, which means that we can not be limited by our own personal morality. If I see a cigarette company that looks interesting I may invest in it even though I might not like it personally.” – U.S. Hedge Fund Investor
“I am convinced that companies that follow the philosophy of social and economic responsibility are performing better in the long-term than those that do not.” – European Core Growth Investor
The report dovetails with Tuesday’s push by U.S. President Barack Obama to push for tougher industrial standards aimed at lowering greenhouse gas emissions.
Obama ordered the U.S. auto industry, where the hand of government is firmly in control (GM and Chrysler, but not Ford) to make more fuel-efficient cars to cut emissions and increase gas mileage.
European industry feels the heat of high oil prices
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.
Industry says tax cuts and energy market reform is needed. Big energy users also want an easing in EU plans for tough CO2 emissions cuts, arguing the measures will simply put them out of business and shift production to places like China which have less efficient and more environmentally damaging production processes.
So, are governments doing enough to support the continent’s core industrial base?
Should certain sectors of the economy be singled out for special support?
Oil is closing on $150/barrel this morning. Wasn’t it in the $130′s yesterday, and just breaking the $100/barrel glass ceiling only a few weeks ago?
Simultaneously, aren’t FNMA and FHLMC with their $5.3 TRILLIONS of mortgage debt going to have to be bailed out by the U.S. government (which doesn’t have the money to bail them out, and which is already in debt to the tune of $6 TRILLIONS)? Isn’t the world in a recession, while $15 billion/month is being borrowed by the United States government to pour into an unwinnable counterinsurgency in SW Asia that sits atop an ocean of oil that cannot get produced…oil that cannot get to nonexistent refineries?
Nothing these days can be viewed in isolation, i.e., all of the preceding is intermingled with European industry…with global industry. It’s a financial and fiscal swamp!
You’ve heard of a “glut of oil”, I’m sure…well…now we’re talking about a “glut of oil profits” instead. One can also say that we’re dealing with a “glut of oil greed” as well.
What can those Saudi, Russian, American, Venezuelan, Nigerian, Mexican, Canadian et al oil producers be thinking, Mr. & Mrs. Reader?
Naturally, I’m NOT talking about the workers who work the oil fields. They work very hard for their money. Nor am I talking about the poor people who populate energy producing (and using) countries. They remain poor.
I’m addressing those who pocket oil profits. Just how much money can a rich man spend? Or better yet, just how much money can a rich man invest–and where can he invest it, i.e., in industrialized nations that can no longer “affordably run” on the oil that the rich man produces? It’s an economic cycle that is simply breaking down.
There comes a saturation point on all of this.
It reminds me of the cartoon character, Scrooge McDuck, who “swam” in his $millions and moved it around with bulldozers and cranes. That was about the only use he had for his money, there was such a glut of it.
I generally don’t borrow biblical stuff. However, isn’t there an adage that goes something like this, “…I tell you the truth, it is hard for a rich man to enter the kingdom of heaven. Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God?”
Therefore, I find it baffling that the privileged classes and super privileged classes UNNECESSARILY wallow in profits from $150/barrel oil. I tell you this, Mr. & Mrs. Oil User, that (contrary to popular belief) these oil barons could PRODUCE more oil from existing fields and could BUILD more gasoline refineries to process existing oil supplies–if they wanted to.
Is what they do logical? Does what they do benefit the tiny blue planet that we all reside on…that we all are clinging to as it hurdles through the universe? No, of course not. However, GREED (like LUST) is not logical. Greed blinds human beings to the reality that is swirling all around them.
OK Jack
Cost of expensive gasoline measured in SUV sales drop
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.
Not a surprising news. Considering the condition of the nation’s economy, many people are shifting towards smaller cars and others are minimizing on the use of vehicles. I hope that there will fuel-efficient and reliable SUvs that will be massproduced.
