Vermont is green with rolling mountains, a cross between Switzerland and South West England, with Ben + Jerry’s celebrating its colour and quirkiness. But once again this year for the Green Mountain Summit, leaden skies. That makes it 2 for 2 for grey & rainy skies at this conference for me, not sure about the other 4 years it has been running.
While last year I was excited to make my debut in front of a US audience speaking of my Pension Fund trustee paper for Villanova University's Center for Responsible Leadership and Governance, this year was less ambitious but more corporate. I was supporting Peter Kinder and Tom Kuh. Peter opened on Monday with the keynote of his Fiduciary Responsibility paper while Tom covered index issues on Tues afternoon.
The lack of buzz around the conference was palpable. SRI itself seems to have reached a plateau, with a Presentation Tues on the “Language of SRI” leading Steve Viederman to suggest banishing the words “socially responsible investing”. The SRI “brand” has become conflicted lately as the definition of what CSR and SRI means, more players entering the industry and how they each have a slightly different take on it. For me SRI has always been a wide umbrella: what does an environmental activist, a Catholic nun or gay rights activists have in common? Now with increasing mainstream investor interest in non-financial issues, and companies pushing back by challenging the investor impacts of the SRI agenda, the industry is reaching to distinguish between the values and the value side of the debate.
I see the industry segmenting into 2 categories:
1. those that want to include the widest range of stakeholder opinions into the corporate investment assessment; and
2. those with a narrower shareholder view of the company, but see the inclusion of a limited range of extra-financial issues as a way to identify hidden value or protect against unseen risks.
I was pleasantly surprised to see the paragon of US business has moved a long way in considering Corporate Governance and CSR. Business Week's April 14 Good Governance, Good Buys? argued for CG as an investment indicator, while May 23, 2005 editorial, cautioned against what they see as “cultural wars” that may engulf US corporations When Business Bows To Activists. They reference a recent Microsoft difficulty around legislation in its home Washington state about gay rights, and directs “corporate America to make decisions for business, not for religious or emotional reasons”. In the same item, they make the argument for diversity as being to the economic advantage. On the same editorial page they reference good work being done about labour rights Stamping Out Sweatshops by the Joint Initiative on Corporate Accountability & Worker’s Rights. This matches their positive coverage in A Major Swipe At Sweatshops with the teaser line: "If a project in Turkey succeeds, long-sought global labor standards could emerge."
So even as SRI seeks to understand what they do and do not stand for, it seems corporate America is being forced to interpret “business values”. Perhaps the flat feeling at Green Mountain fairly reflects a “gestation” period for both CSR and SRI.
Tuesday, May 31, 2005
Tuesday, May 24, 2005
Green Mountain Summit: Bob Monks speaks out on SEC re XON
I had the pleasure of watching corporate governance legend Robert "Bob" Monks speak over lunch on Tues at the Summit. He is a good reason to visit Maine! Bill Baue The Ghost of a Shareholder Resolution Haunts ExxonMobil Annual Meeting does a good job of covering Bob's major issue covered, his dissatisfcation with SEC's "capricious" dispatching of his resolution, even though it was an exact replica of the one from 2004 that received votes.
Good news at XON annual general meeting ( AGM) was an unprecedented 28.4 percent vote for a first-year climate change resolution and support for seven others. The first year resolution by ICCR + Ceres asked for disclosure of plans for complying with greenhouse gas (GHG--the primary culprit behind global warming) reductions targets in countries participating in the Kyoto Protocol.
In conversation with Bob afterwards we explored the role of pensions consultants and their complicity in enhancing the status quo without really adding value. The coverage of SRI issues and global climate change risks have been weak, with exceptions by Jane Ambachtsheer of Mercer. I pointed to the recent SEC investigation media reports covering SEC finds bias in pension consultants: An SEC survey of 24 pension consulting firms finds significant conflicts of interest on May 14. The SEC found that a majority of the pension consultants have affiliations with money managers, the major issue SEI Investments identified in their business model, and what I faced in the employee benefits industry in South Africa through 2002.
The SEC concluded that some of the relationships may exist as a way for money managers to "curry favor with the pension consultant" and thus get business from the pension plans that the consultants are advising. The pension plans were frequently unaware of such relationships. ANother situation where Brandeis's "daylight as best antiseptic" would be useful.
The SEC study surveyed 24 of the nation's 1,700 pension fund consultants and found:
• More than half of the consultants surveyed provided services to pension funds and money management firms, raising the potential for conflicts of interest. For example, 10 sold software to money management companies to analyze clients' portfolios. The software cost as much as $70,000 a year.
More than half of the consultants offered investment conferences free for clients, but charged money managers a fee. Money managers weren't required to go but might have felt pressured to do so.
• Many consultants required money managers to direct a portion of their stock and bond trades to a broker affiliated with the consultant. By doing so, the consultant's fees were buried in the cost of brokerage. Also, the fund might pay more for trades than they would elsewhere, which means lower returns for investors.
• Many consultants provided services, such as investment management, to pension plans through affiliates. That's not wrong, but the consultant has to disclose potential conflicts.
• Many pension consultants don't consider themselves to be fiduciaries. Fiduciaries have a legal obligation to act in their clients' best interests.
This makes me angry: selling fear andgreed. It also reminds me of a role I could play as an unconflicted professional trustee. Matthew Hutcheson had approached me to the advisory board of erisa-fiduciary.com, an indpendent institutional investor serivce, now building out to a Fiduciary Guild. I am also surprised Eliot Spitzer did not hone in on this one as he has in othe rindustry with known but never confessed poor practices.
Good news at XON annual general meeting ( AGM) was an unprecedented 28.4 percent vote for a first-year climate change resolution and support for seven others. The first year resolution by ICCR + Ceres asked for disclosure of plans for complying with greenhouse gas (GHG--the primary culprit behind global warming) reductions targets in countries participating in the Kyoto Protocol.
In conversation with Bob afterwards we explored the role of pensions consultants and their complicity in enhancing the status quo without really adding value. The coverage of SRI issues and global climate change risks have been weak, with exceptions by Jane Ambachtsheer of Mercer. I pointed to the recent SEC investigation media reports covering SEC finds bias in pension consultants: An SEC survey of 24 pension consulting firms finds significant conflicts of interest on May 14. The SEC found that a majority of the pension consultants have affiliations with money managers, the major issue SEI Investments identified in their business model, and what I faced in the employee benefits industry in South Africa through 2002.
The SEC concluded that some of the relationships may exist as a way for money managers to "curry favor with the pension consultant" and thus get business from the pension plans that the consultants are advising. The pension plans were frequently unaware of such relationships. ANother situation where Brandeis's "daylight as best antiseptic" would be useful.
The SEC study surveyed 24 of the nation's 1,700 pension fund consultants and found:
• More than half of the consultants surveyed provided services to pension funds and money management firms, raising the potential for conflicts of interest. For example, 10 sold software to money management companies to analyze clients' portfolios. The software cost as much as $70,000 a year.
More than half of the consultants offered investment conferences free for clients, but charged money managers a fee. Money managers weren't required to go but might have felt pressured to do so.
• Many consultants required money managers to direct a portion of their stock and bond trades to a broker affiliated with the consultant. By doing so, the consultant's fees were buried in the cost of brokerage. Also, the fund might pay more for trades than they would elsewhere, which means lower returns for investors.
• Many consultants provided services, such as investment management, to pension plans through affiliates. That's not wrong, but the consultant has to disclose potential conflicts.
• Many pension consultants don't consider themselves to be fiduciaries. Fiduciaries have a legal obligation to act in their clients' best interests.
This makes me angry: selling fear andgreed. It also reminds me of a role I could play as an unconflicted professional trustee. Matthew Hutcheson had approached me to the advisory board of erisa-fiduciary.com, an indpendent institutional investor serivce, now building out to a Fiduciary Guild. I am also surprised Eliot Spitzer did not hone in on this one as he has in othe rindustry with known but never confessed poor practices.
Monday, May 23, 2005
Green Mountain Summit: here come the lawyers...
Day 1 of the Green Mountain Summit at the Stoweflake Inn and it seems an age since I arrived here last year filled with apprehension and hope ahead of my presentation as an MBA student on Pension Fund Trustee attitudes to SRI issues. The weather is the same however: overcast, and rained most of the way up from Woodstock VT.
It was goods to see a number of friendly faces, and interesting to see who was holding out their shingles. Booth technology does not seem to have penetrated the SRI community, and while some have the space-frame boards system, there was no particular wow factor.
Maybe Peter Kinder leading off with his Fiduciary paper Pensions and the Companies They Own should have given me forewarning, but browsing through the booths I was struck by how many more lawyers were here. Last year Glass & Eisenhofer sponsored the Land's End backbacks, making a substantila effort. This year a number of other law firms have emerged, including one from the old suburbs, Schiffrin & Barroway LLP, from Radnor PA around the corner from the Templeton Foundation. I am intrigued that the business card is for "European Investor relations". Has someone spotted a bridging opportunity that I missed? The legal market is less the class action type suit that G&E are offering, and seem to be more like shareholder activism and corporate governance research.
While they play an important role, it really does make the summit seem more issue focused than investment focused.
An interesting conversation with the rep. from Sierra Club Mutual Funds, managed by Forward Management. Garvin, indicated that just half of the 800,000 members of Sierra Club invest in the mutual fund offering, and no mention of what percentage of assets. In talking about the fund, he did jump first to speak of performance, especially the run-up in oil in Q1 which hurt all SRI funds light on the sector and such dark-siders as ExxonMobil.
Hank Boerner from Rowan & Blewitt, an Interpublic Company based in NYC approached me with his web tool from ICCR whihc is used to track the resolutions sponsored by the network's disparate membership. It should go live in September, and he is looking for feedback on his Beta, and even wants advice on his pricing. Interesting if it may fit with any existing vendor products, like onereport or Socrates.
Wind site developer Western Wind Energy is back, and feeling bullish now that the Renewable Portfolio Standard (RPS) for NY State is set at 25%, higher even than leader California's 20%. With this capital looking for investment, the opportunity window for wind is huge. They have developments in Arizona and New Brunswick, Canada, where they are listed. It was good to see the market-aware behaviour from a listed company: checking the stock price only to find Toronto closed for a bank holiday, Victoria Day. A statistic I appreciated was GE's ecomagination has ramped turbine revenue from 300m two years ago to $2bn in FY2005. But still, they have no answer to the age-old question: are windmills considered beautiful by beautiful people?!
It was goods to see a number of friendly faces, and interesting to see who was holding out their shingles. Booth technology does not seem to have penetrated the SRI community, and while some have the space-frame boards system, there was no particular wow factor.
Maybe Peter Kinder leading off with his Fiduciary paper Pensions and the Companies They Own should have given me forewarning, but browsing through the booths I was struck by how many more lawyers were here. Last year Glass & Eisenhofer sponsored the Land's End backbacks, making a substantila effort. This year a number of other law firms have emerged, including one from the old suburbs, Schiffrin & Barroway LLP, from Radnor PA around the corner from the Templeton Foundation. I am intrigued that the business card is for "European Investor relations". Has someone spotted a bridging opportunity that I missed? The legal market is less the class action type suit that G&E are offering, and seem to be more like shareholder activism and corporate governance research.
While they play an important role, it really does make the summit seem more issue focused than investment focused.
An interesting conversation with the rep. from Sierra Club Mutual Funds, managed by Forward Management. Garvin, indicated that just half of the 800,000 members of Sierra Club invest in the mutual fund offering, and no mention of what percentage of assets. In talking about the fund, he did jump first to speak of performance, especially the run-up in oil in Q1 which hurt all SRI funds light on the sector and such dark-siders as ExxonMobil.
Hank Boerner from Rowan & Blewitt, an Interpublic Company based in NYC approached me with his web tool from ICCR whihc is used to track the resolutions sponsored by the network's disparate membership. It should go live in September, and he is looking for feedback on his Beta, and even wants advice on his pricing. Interesting if it may fit with any existing vendor products, like onereport or Socrates.
Wind site developer Western Wind Energy is back, and feeling bullish now that the Renewable Portfolio Standard (RPS) for NY State is set at 25%, higher even than leader California's 20%. With this capital looking for investment, the opportunity window for wind is huge. They have developments in Arizona and New Brunswick, Canada, where they are listed. It was good to see the market-aware behaviour from a listed company: checking the stock price only to find Toronto closed for a bank holiday, Victoria Day. A statistic I appreciated was GE's ecomagination has ramped turbine revenue from 300m two years ago to $2bn in FY2005. But still, they have no answer to the age-old question: are windmills considered beautiful by beautiful people?!
Monday, May 16, 2005
Investing in SR Companies is a Must for Public Pension Funds
There is no better alternative, according to Prof. S. Prakash Sethi of Baruch College in NYC, who just had his paper published in the Journal of Business Ethics (56:99-129, 2005). I originally saw Sethi (a kindly man in the manner of C.K. Pralahad who wrote The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits) give a verison of this at the AEI seminar in June 2004, hosted by longtime anti-SRI researcher Jon Entine (US Pension funds, Social Investing and Fiduciary Irresponsibility, January 2004 and
The Myth of Social Investing: A Critique of Its Practice and Consequences for Corporate Social Performance Research).
As I was new to the intricacies of US politics and the history of AEI, I realised only over lunch when a horribly researched paper whose name I forget flailed at SRI with all the subtlety of a Rottweiler consuming a hotdog after 2 nights on guard duty. It was a kind of "into the lion's den" for the likes of Tim Smith and Peter Kinder (who gave a fine perfroamnce, provoking some tightly wound Professor to froth at the mouth!). I left D.C> feeling a lot more clear about the political landscape and how that informs SRI. Sethi covers some of this where he discusses the "failed" experiment of economically targeted investments ETI's in the early Clinton years 1993/4.
With US$1.0 trillion in AUM, Sethi points out the powerful place as investors that public pension funds get to play. It is something I have identified as both strength and a weakness for SRI.
The strength comes assets Public Pension funds bring to the argument. The New York State Common Fund ($115.7bn), New York State teachers ($72.4bn), Texas teachers ($76.60bn), CALPERS ($168 bn), CalSTRS ($100.53bn), TIAA-CREF ($307bn) and the funds from North Carolina have all been representative in increasing the heat on corporate governance and SRI issues. In fact it was a coterie of public investment figures that helped push Grasso off his comfortable perch at the NYSE.
The weakness is that the public scrutiny can reverse the positive attitude of trustees to SRI because the funds are so political by their very nature, and a subsequent election can remove a trustee who appears outspoken, with the simple hammer of poor investment performance over the immediate past period. As the funds become more successful as activist investors, so business hypes up any arguments they can, including looking for anti-business (in their eyes anything union e.g. AFL-CIO). They allege Calpers Chairman Sean Harrigan put the screws to Safeway, he was serving as the executive director of the very food workers' union striking against the grocer. Eleven of the 13 Calpers board members had union ties, including Democratic State Treasurer Phil Angelides. Harrigan was fired.
I appreciate that Sethi uses both formal and practitioner definitions as he defines SRI. SRI is dogged by an elastic brand – it is more umbrella than pigeonhole, many sub-definitions can run in and outside of the definition, depending on the positive or negative view of the observer.
Sethi outlines the debate with the 2 oft-cited arguments against SRI:
1. Fiduciary responsibility
2. Financial returns on SR investments
And adds two of his own, namely:
3. Types of SRI included in public pension plans
4. Increased size of public pension plans and the ability to change investment portfolio
Sethi makes the argument first floated by Robert Monks, that large pension funds – especially where they are invested in passive portfolios (which most of them are to reduce expenses and maximize diversification, most definitely need to consider SRI because of the long-term risks and returns; “concerned with long-term survival and growth of the corporation”. Monks wrote in November 1996 about “the need for shareholder activism value added and legitimacy”. He cited a Wilshire Associates study where Wilshire, for many years a consultant to the Public Employees’ Retirement System of the State of California (“CalPERS”), concluded that its principal’s highly publicized activism was value adding.
He demonstrates that the current measurement of future risk assessment “invariably understates, and quite often completely overlooks, these long-term risks because of the inherent bias toward short-run on the part of financial intermediaries whose own compensation depends greatly on short term results”.
This focus on the role of intermediaries is something I tried to identify in last year’s study at Villanova University into pension fund trustee attitudes to social, environmental and corporate governance factors. As a former pension consultant for 6 years in South Africa’s sophisticated $100bn retirement fund industry as the market raced in the 1990’s, I have seen first-hand the pressures to identify performance. Both trustees and consultants are to blame where their agenda is separated from the “greater good”.
The blame goes both ways: the consultant fearing for his appointment and the competition from the next consultant offering “better returns”, feels the pressure to take out the least powerful player at the table – the investment managers actually doing the job. The pressure comes from trustees always driving for returns, and they in turn may feel pressure from their members and the roles of authority to demonstrate actions to protect their position. I have returned to wonder if the wizened old trustee asking point-blank questions of bright young twenty-something market “experts” is not the best model, quite like Warren Buffet’s assertion that he never invests in businesses he doesn’t understand, so insulating him from the market’s biggest bubble of this century.
The most important element that Sethi can help to bring to this debate, aside from the virtues of using qualitative assessment and investor discretion to factor in all risks – including extra-financial risk – is to expose industry practice. While maybe not fraudulent or criminal, it may certainly not be in the best interests of all retirement fund members. Boston lawyer Louis Brandeis wrote in his ‘Other People’s Money” (1914) that “daylight is the best antiseptic” as he argued for securities and banking regulation, which his future position as Supreme Court Justice allowed him to observe as Roosevelt enacted in the early 1930’s.
In this I could not agree more. I hope the debate is joined, for the benefit of all investors.
The Myth of Social Investing: A Critique of Its Practice and Consequences for Corporate Social Performance Research).
As I was new to the intricacies of US politics and the history of AEI, I realised only over lunch when a horribly researched paper whose name I forget flailed at SRI with all the subtlety of a Rottweiler consuming a hotdog after 2 nights on guard duty. It was a kind of "into the lion's den" for the likes of Tim Smith and Peter Kinder (who gave a fine perfroamnce, provoking some tightly wound Professor to froth at the mouth!). I left D.C> feeling a lot more clear about the political landscape and how that informs SRI. Sethi covers some of this where he discusses the "failed" experiment of economically targeted investments ETI's in the early Clinton years 1993/4.
With US$1.0 trillion in AUM, Sethi points out the powerful place as investors that public pension funds get to play. It is something I have identified as both strength and a weakness for SRI.
The strength comes assets Public Pension funds bring to the argument. The New York State Common Fund ($115.7bn), New York State teachers ($72.4bn), Texas teachers ($76.60bn), CALPERS ($168 bn), CalSTRS ($100.53bn), TIAA-CREF ($307bn) and the funds from North Carolina have all been representative in increasing the heat on corporate governance and SRI issues. In fact it was a coterie of public investment figures that helped push Grasso off his comfortable perch at the NYSE.
The weakness is that the public scrutiny can reverse the positive attitude of trustees to SRI because the funds are so political by their very nature, and a subsequent election can remove a trustee who appears outspoken, with the simple hammer of poor investment performance over the immediate past period. As the funds become more successful as activist investors, so business hypes up any arguments they can, including looking for anti-business (in their eyes anything union e.g. AFL-CIO). They allege Calpers Chairman Sean Harrigan put the screws to Safeway, he was serving as the executive director of the very food workers' union striking against the grocer. Eleven of the 13 Calpers board members had union ties, including Democratic State Treasurer Phil Angelides. Harrigan was fired.
I appreciate that Sethi uses both formal and practitioner definitions as he defines SRI. SRI is dogged by an elastic brand – it is more umbrella than pigeonhole, many sub-definitions can run in and outside of the definition, depending on the positive or negative view of the observer.
Sethi outlines the debate with the 2 oft-cited arguments against SRI:
1. Fiduciary responsibility
2. Financial returns on SR investments
And adds two of his own, namely:
3. Types of SRI included in public pension plans
4. Increased size of public pension plans and the ability to change investment portfolio
Sethi makes the argument first floated by Robert Monks, that large pension funds – especially where they are invested in passive portfolios (which most of them are to reduce expenses and maximize diversification, most definitely need to consider SRI because of the long-term risks and returns; “concerned with long-term survival and growth of the corporation”. Monks wrote in November 1996 about “the need for shareholder activism value added and legitimacy”. He cited a Wilshire Associates study where Wilshire, for many years a consultant to the Public Employees’ Retirement System of the State of California (“CalPERS”), concluded that its principal’s highly publicized activism was value adding.
He demonstrates that the current measurement of future risk assessment “invariably understates, and quite often completely overlooks, these long-term risks because of the inherent bias toward short-run on the part of financial intermediaries whose own compensation depends greatly on short term results”.
This focus on the role of intermediaries is something I tried to identify in last year’s study at Villanova University into pension fund trustee attitudes to social, environmental and corporate governance factors. As a former pension consultant for 6 years in South Africa’s sophisticated $100bn retirement fund industry as the market raced in the 1990’s, I have seen first-hand the pressures to identify performance. Both trustees and consultants are to blame where their agenda is separated from the “greater good”.
The blame goes both ways: the consultant fearing for his appointment and the competition from the next consultant offering “better returns”, feels the pressure to take out the least powerful player at the table – the investment managers actually doing the job. The pressure comes from trustees always driving for returns, and they in turn may feel pressure from their members and the roles of authority to demonstrate actions to protect their position. I have returned to wonder if the wizened old trustee asking point-blank questions of bright young twenty-something market “experts” is not the best model, quite like Warren Buffet’s assertion that he never invests in businesses he doesn’t understand, so insulating him from the market’s biggest bubble of this century.
The most important element that Sethi can help to bring to this debate, aside from the virtues of using qualitative assessment and investor discretion to factor in all risks – including extra-financial risk – is to expose industry practice. While maybe not fraudulent or criminal, it may certainly not be in the best interests of all retirement fund members. Boston lawyer Louis Brandeis wrote in his ‘Other People’s Money” (1914) that “daylight is the best antiseptic” as he argued for securities and banking regulation, which his future position as Supreme Court Justice allowed him to observe as Roosevelt enacted in the early 1930’s.
In this I could not agree more. I hope the debate is joined, for the benefit of all investors.
Monday, May 09, 2005
Just Imagination?
I stopped in my tracks when I saw the TV advert for GE's "ecomagination" campaign last Thursday, turned to my wife and asked aloud: was that really GE? The GE Wind advert with water skiing norsemen using wind in their sails to breeze by their competitors (pardon the pun) I noticed during my slow MBA days.
So today's effort in the WSJ was impressive: third news short bullet on cover page "What's News?", p. 2 "General Electric Plans Broad Push on Green Issues" with advertising full page colour on eight (8) pages pushing locomotives to "clean coal". Based on the media work we did at the John Templeton Foundation in Jan/Feb this year, a full page colour advert in the WSJ costs
$275,089.98, making the 8 page spread across all editions - including the online edition - a $2.5m bet.
Meanwhile, reading from the p.2 article, we find (as wtih cover page bullet) GE restating its earnings for 2001-2004 and Q1 2005 'amid increased scrutiny over derivatives deals". The classic SRI analyst's dilemna: looking better on some policies related to extra-financial factors, while fumbling on the financial side. Think Royal Dutch Shell, even Enron's philanthropy record.
It really is conflicting. Amity Shlaes in the FT described it plainly: a bet. "On Monday afternoon in Washington DC, Jeffrey Immelt, GE's chairman and chief executive, will make a historic bet: that "what the world needs" today, as much as it once needed the light bulb, is green technology".
My first reaction is: should we believe it? If we believe it, is GE's initative too early or too late? GE since buying Enron Wind assets has always been interesting. I respect their strategic foresight, as you would expect from a leader in many businesses. But telling for me that the WSJ article was on the same page as GE restating earnings. I don't want GE to greenwash me, so I'm checking this slowly. While they tout their GE Scores Perfect 10.0 Rating from GovernanceMetrics International on the investor relations site, they're on the cover page re-stating earnings.
But it is positive. Now how do we capture it and hold the firms to the new model? The market reacted equally ambivalently: moving from $35.80's to $36.20's. You look, listen, and decide (to quote one of Stimela's best tracks) - check out the analyst call. The play on the "imagination" of the campaign does also scarily remind me of the catchy but thin track from the early 1980's by a high-pitched 2 boy band; "Imagination". Let's hope the GE campaign lasts longer...
So today's effort in the WSJ was impressive: third news short bullet on cover page "What's News?", p. 2 "General Electric Plans Broad Push on Green Issues" with advertising full page colour on eight (8) pages pushing locomotives to "clean coal". Based on the media work we did at the John Templeton Foundation in Jan/Feb this year, a full page colour advert in the WSJ costs
$275,089.98, making the 8 page spread across all editions - including the online edition - a $2.5m bet.
Meanwhile, reading from the p.2 article, we find (as wtih cover page bullet) GE restating its earnings for 2001-2004 and Q1 2005 'amid increased scrutiny over derivatives deals". The classic SRI analyst's dilemna: looking better on some policies related to extra-financial factors, while fumbling on the financial side. Think Royal Dutch Shell, even Enron's philanthropy record.
It really is conflicting. Amity Shlaes in the FT described it plainly: a bet. "On Monday afternoon in Washington DC, Jeffrey Immelt, GE's chairman and chief executive, will make a historic bet: that "what the world needs" today, as much as it once needed the light bulb, is green technology".
My first reaction is: should we believe it? If we believe it, is GE's initative too early or too late? GE since buying Enron Wind assets has always been interesting. I respect their strategic foresight, as you would expect from a leader in many businesses. But telling for me that the WSJ article was on the same page as GE restating earnings. I don't want GE to greenwash me, so I'm checking this slowly. While they tout their GE Scores Perfect 10.0 Rating from GovernanceMetrics International on the investor relations site, they're on the cover page re-stating earnings.
But it is positive. Now how do we capture it and hold the firms to the new model? The market reacted equally ambivalently: moving from $35.80's to $36.20's. You look, listen, and decide (to quote one of Stimela's best tracks) - check out the analyst call. The play on the "imagination" of the campaign does also scarily remind me of the catchy but thin track from the early 1980's by a high-pitched 2 boy band; "Imagination". Let's hope the GE campaign lasts longer...
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