Major investors have increased the demand for investment research identifying businesses involved in Sudan after worldwide attention on alleged genocide in the Darfur region. On Friday August 26, New York City Pension Funds began urging a shortlist of companies in their portfolio to review business ties to Sudan. Media coverage has included Time’s September 5 US edition “Who Speaks for Her? Rape is the weapon of choice in Darfur, but Sudan's government doesn't want to hear about it” and CBS television news magazine 60 Minutes on Sunday August 28 reporting on Darfur crisis in a segment titled “The Killing In Sudan”.
Dedictaed blog The Passion of the Present has logged more coverage of the issue and a number of NGO websites have sprung up specifically on the issue.
In New York, a judge on Tuesday August 30 permitted the Talisman Energy genocide case to proceed despite warnings from Canada and the US .In the lawsuit, Talisman Energy Inc. and the Sudanese government are accused of working on a plan for the security of oil fields as Talisman hired its own advisers to coordinate military strategy with the government. The oil giant is accused of participating in ethnic cleansing, confiscation of property, kidnapping and rape, according to LARRY NEUMEISTER Associated Press Writer, August 30, 2005.
In the US, pressure had been building on states to divest holdings in businesses active in the Sudan. Illinois was the first state to act, passing legislation in May of this year baring the state’s five pension systems from investing in companies that do business in the Sudan . At the time, two of the state’s five pension systems had approximately $1 billion invested in 32 companies doing business in Sudan. New Jersey, Maryland and California have also been active on the issue, with New Jersey becoming the second state after Illinois to act - and with a much faster exit strategy. The NGO Divest Sudan has identified 81 public pension portfolios with over $91 billion in assets exposed to the Sudan.
Harvard University decided to sell $4.4 million of PetroChina Co., a company engaged in oil exploration in the Sudan, in April 2005. Similar to the divestment movement targeting South Africa in the 1980’s and Burma in 1990’s, divestment from the Sudan is seen as an economic lever to bring about change in a troubled regime. Additionally, investors do not want to be seen to profit from the misery of others. Student-led divestment campaigns have begun on campuses including Stanford , University of California , Duke University and the University of Pennsylvania.
SRI firms are now scrambling to meet demand. Conflict Securities has positioned itself as a key player with its research in this niche with a product called Sudan Corporate Monitor. But questions are being asked about their ability to offer excellent information sourced only from public documents. Firms involved are not US-based because in 1997 Congress instituted economic sanctions against the Sudan due to its support of terrorism. The sanctions remain in force.
Wednesday, August 31, 2005
Thursday, August 04, 2005
Cox gets appointed; SRI community has doubts
I am watching with interest the first “live” appointment of SEC Chair when I am on board. It is a powerful position to replace William Donaldson and so the political forces have battled. I find it a little bewildering to try and identify the right traits in these "confirmation hearings". Wonderful to see democaracy in action, and especially where investor rights will be affected. But similar to the other hearings and Supreme Court justices hearings, how does the interviewing help. I guess like anbything we judge on past performance. Ironic in an industry where by law any description of investment performance must come with its "past performance is not predictive of future performance" caveat!
The good news is the winner seems to be politically astute. After being sworn in on Wednesday, 3 Aug. Cox managed to send a signal early: he said his first meeting with SEC staff was with Linda Thomsen, director of the enforcement division. Reuters headlined with “New SEC chief backs investors, plain-English push” Reuters News 4 August 2005 10:50 WASHINGTON. "She and her entire division will have my unstinting support," Cox told hundreds of SEC employees in a packed auditorium at agency headquarters appealed to SEC staffers to put investors' interests first, saying, "If investors ain't happy, ain't nobody happy." U.S. Securities and Exchange Commission Chairman Chris Cox, in his first speech as head of the agency on Thursday, said he would put investors first, renew a push to put SEC rules and disclosures in plain English and be tough on enforcement.
Lobbyists for industries affected by these issues will weigh in on them, but Cox warned: "No one is entitled to line jump and press their issues to the forefront."
Addressing speculation since his nomination weeks ago about whether as chairman he would be "pro-business or pro-investor," Cox said the U.S. Department of Commerce serves the business community and the SEC serves investors. It isn't necessary for the interests of investors and business to be in conflict."
On Monday, July 25, a number of SRI, public interest and labor pension groups had participated in joint media to bring attention to the confirmation hearings for 3 SEC Commissioners, including Rep. Chris Cox who has been nominated for the chairmanship. A prelim list of reporters that were on the call is below. The event featured Damon Silvers of the AFL-CIO, Joan Claybrook, head of Public Citizen, and Shelley Alpern of Trillium Asset Mgmt. The speakers focused on Cox's record, the urgent work still to be done by the SEC, and why these appointments are so crucial to maintaining the health of the US markets.
According to Tracey Rembert, Coordinator of Investor and Corporate Engagement Service Employees International Union Capital Stewardship Program, both Damon and Shelley were clear to say that most union funds and the SRI community in general have not opposed the candidate, but wait to hear what he has to say at the hearing, but that we were all troubled by media reports and a glance at his voting record over the years that seemed to run counter to investors' best interests. “Senate Banking Committee and staffers were interested in the diverse group of investors signing on”, she said.
The SRI effort ended up getting 42 signatories, as Domini and Ceres joined the action today. Public Citizen also released its report looking at Cox's voting record going back to 1989 www.citizen.org/documents/PC_Cox_Rpt.pdf
On the Media call:
American Banker Amy Thompson, Bloomberg Larry Arnold, Washington Post Carrie Johnson, BusinessWeek Amy Borrus, Los Angeles Times John Peterson, U.S. News and World Report Danielle Knight, Business Ethics Magazine Marjorie Kelly, New York Times Steve Labaton, BNA Rachael McTake, Congress Daily Molly Peterson, Common Cause Suzanne Goodman, Laborer Journal Linda Pricilla, Talk Radio News Kate, The Bond Buyer Lynn Hume, Dow Jones Judy Burns, Wall Street Journal Deborah Soloman, The Hill Alana Shore, Marketwatch Rob Schroeder.
The good news is the winner seems to be politically astute. After being sworn in on Wednesday, 3 Aug. Cox managed to send a signal early: he said his first meeting with SEC staff was with Linda Thomsen, director of the enforcement division. Reuters headlined with “New SEC chief backs investors, plain-English push” Reuters News 4 August 2005 10:50 WASHINGTON. "She and her entire division will have my unstinting support," Cox told hundreds of SEC employees in a packed auditorium at agency headquarters appealed to SEC staffers to put investors' interests first, saying, "If investors ain't happy, ain't nobody happy." U.S. Securities and Exchange Commission Chairman Chris Cox, in his first speech as head of the agency on Thursday, said he would put investors first, renew a push to put SEC rules and disclosures in plain English and be tough on enforcement.
Lobbyists for industries affected by these issues will weigh in on them, but Cox warned: "No one is entitled to line jump and press their issues to the forefront."
Addressing speculation since his nomination weeks ago about whether as chairman he would be "pro-business or pro-investor," Cox said the U.S. Department of Commerce serves the business community and the SEC serves investors. It isn't necessary for the interests of investors and business to be in conflict."
On Monday, July 25, a number of SRI, public interest and labor pension groups had participated in joint media to bring attention to the confirmation hearings for 3 SEC Commissioners, including Rep. Chris Cox who has been nominated for the chairmanship. A prelim list of reporters that were on the call is below. The event featured Damon Silvers of the AFL-CIO, Joan Claybrook, head of Public Citizen, and Shelley Alpern of Trillium Asset Mgmt. The speakers focused on Cox's record, the urgent work still to be done by the SEC, and why these appointments are so crucial to maintaining the health of the US markets.
According to Tracey Rembert, Coordinator of Investor and Corporate Engagement Service Employees International Union Capital Stewardship Program, both Damon and Shelley were clear to say that most union funds and the SRI community in general have not opposed the candidate, but wait to hear what he has to say at the hearing, but that we were all troubled by media reports and a glance at his voting record over the years that seemed to run counter to investors' best interests. “Senate Banking Committee and staffers were interested in the diverse group of investors signing on”, she said.
The SRI effort ended up getting 42 signatories, as Domini and Ceres joined the action today. Public Citizen also released its report looking at Cox's voting record going back to 1989 www.citizen.org/documents/PC_Cox_Rpt.pdf
On the Media call:
American Banker Amy Thompson, Bloomberg Larry Arnold, Washington Post Carrie Johnson, BusinessWeek Amy Borrus, Los Angeles Times John Peterson, U.S. News and World Report Danielle Knight, Business Ethics Magazine Marjorie Kelly, New York Times Steve Labaton, BNA Rachael McTake, Congress Daily Molly Peterson, Common Cause Suzanne Goodman, Laborer Journal Linda Pricilla, Talk Radio News Kate, The Bond Buyer Lynn Hume, Dow Jones Judy Burns, Wall Street Journal Deborah Soloman, The Hill Alana Shore, Marketwatch Rob Schroeder.
Rousseau helping CSR in 2005: McKinsey MD weighs in on CSR andshareholder value
The Product Group intern projects explored the McKinsey article this week What is the business of business? By building social issues into strategy, big companies can recast the debate about their role in society. Ian Davis, The McKinsey Quarterly, 2005 Number 3., It made the SIF discussion list by Thursday afternoon. It is worth reading, originally published in The Economist May 26, 2005.
I think it is material to SRI professionals ongoing discussions re. materiality, the role of CSR, and language to describe issues in analyzing corporate value. Read together with the recent Morgan Stanley/Oxford Analytica paper July 2005, my takeaways impacting SRI research philsophy and process are:
1. Exploring drivers for corporate behaviour and actions in a way that understands the tension of competitive companies in a dynamic market, legal and social structure.
2. Tension within a sector/industry as firms compete against each other, while being held to deliver for the common good.
3. Connection to innovation in trying to capture future opportunities.
4. Developing a lexicon that translates to a mainstream investment analysis audience.
The phrasing of the challenge to the firm and the need to address the social issues as strategic business issues is refreshing in an article written by a thought leader at a strategic consulting firm, and in the same week that Jeff Immelt is on the front page of Forbes "making money cleaning up the world" 08.15.05 Current Issue. The response by companies should be interesting.
Using some of this framework, perhaps re-stated in a way that corporates can better appreciate, may be some part of the next steps to presenting SRI-type research on CSR issues to the mainstream audience, and money managers in particular.
At the very least, it is another step in making investor relations personnel more sensitive to our analysts and their research questions. Hopefully we can develop the right products to capture some opportunities.
I think it is material to SRI professionals ongoing discussions re. materiality, the role of CSR, and language to describe issues in analyzing corporate value. Read together with the recent Morgan Stanley/Oxford Analytica paper July 2005, my takeaways impacting SRI research philsophy and process are:
1. Exploring drivers for corporate behaviour and actions in a way that understands the tension of competitive companies in a dynamic market, legal and social structure.
2. Tension within a sector/industry as firms compete against each other, while being held to deliver for the common good.
3. Connection to innovation in trying to capture future opportunities.
4. Developing a lexicon that translates to a mainstream investment analysis audience.
The phrasing of the challenge to the firm and the need to address the social issues as strategic business issues is refreshing in an article written by a thought leader at a strategic consulting firm, and in the same week that Jeff Immelt is on the front page of Forbes "making money cleaning up the world" 08.15.05 Current Issue. The response by companies should be interesting.
Using some of this framework, perhaps re-stated in a way that corporates can better appreciate, may be some part of the next steps to presenting SRI-type research on CSR issues to the mainstream audience, and money managers in particular.
At the very least, it is another step in making investor relations personnel more sensitive to our analysts and their research questions. Hopefully we can develop the right products to capture some opportunities.
Friday, June 17, 2005
Day 17
Running the summer intern cohort project has been eating my time since we kicked off 1 June, with our first meeting 3 June. This morning 7:30 we meet again, our third.
It has been wonderful meeting different people interested in SRI. It has been challenging trying to balance the politics of an ongoing business and the demands of mission and business, with opening eyes and doors foir the cohort. I am feeling tirted. I hope this morning the cohort comes toward me, not goes away from me.
I wonder what the cohort thinks of this opportunity. Do the value it? Some do. Others I am not sure about. Bright spots for me will be a good meeting this morning, with the input from Liz Umlas and Steve Lydenberg.
It has been wonderful meeting different people interested in SRI. It has been challenging trying to balance the politics of an ongoing business and the demands of mission and business, with opening eyes and doors foir the cohort. I am feeling tirted. I hope this morning the cohort comes toward me, not goes away from me.
I wonder what the cohort thinks of this opportunity. Do the value it? Some do. Others I am not sure about. Bright spots for me will be a good meeting this morning, with the input from Liz Umlas and Steve Lydenberg.
Tuesday, May 31, 2005
Green Mountain Summit Plateau; Business Values
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.
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 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...
Wednesday, April 27, 2005
Amy Domini's 15 minutes: It Matters to SRI in the USA
Amazing how Amy Domini's placing in the Time 100 Influential People has presented an opportunity to raise the level of discussion of SRI. You can hear Amy Domini and Ethical Investing Story aired: Tuesday, April 26, 2005 on Here & Now on NPR.
Of all the American things I love, from Ben & Jerry's to The Simpsons to Puget Sound, both NPR, and its TV cousin PBS, are true modern day treasures for Americans. Sad though that PBS has to pitch annually to its federal overseers for 15% of its budget, and to raise the remainder from its listeners. Can it be far from a subscriber model on Sirius or XM radio, available around the world?
As a South African I would differ with Ms Domini re the power of SRI to change events in South Africa. growing up there as a privileged middle class White African, I was aware how businesses thrived. Like with the recent experience in Serbia and Iraq - the only thing that sanctions achieve is to create a very powerful balc market, because at the end of the day, at the individual level, each of us is dominated by the demands of the market and the money that drives it.
Most of the abnormal society I discovered was not through the lack of certain goods, but in understanding the political and cultural history, the lack of international sport and cultural entertainment brands. It was more important to young SA that the Springboks could not tour, and U2 played in Mbabane and Harare not Durban or Cape Town (check their Rock 'n Roll Hall of Fame induction). Economic sanctions did play a role. But political and cultural sanctions deserve a major share of the limelight.
Good to see Tim Smith finds a mention again (see An Activist Returns to South Africa Published, Fall 2001) ! Still no acknowledgement of the role of KLD, even though Amy founded it with Steve Lydenburg and Peter kinder in the garage of the latter's married home in 1988! Things must really be bad for KLD-Domini relationship. It seems to me that more effort should be made to present the stories of Peter Kinder and to hear from Steven Lydenburg about the future of SRI. In comparison, the website gives ample attribution to KLD:
Creation of the Domini 400 Social IndexSMThe index was created by the social research firm of KLD Research & Analytics, Inc.(KLD). KLD began work on the Domini 400 Social IndexSMin late 1989. It started officially tracking the Index on May 1, 1990 and has monitored the Index's performance since then. The Index was created to fill four primary needs:
· To answer the question of whether social screening carries an inherent financial "cost";
· To provide a socially screened equity benchmark;
· To communicate the standards of mainstream social investors to corporations and the general public in a viable format;
· To provide the basis for a screened, indexed investment vehicle for investors.
· In creating the Index, KLD employed a combination of exclusionary and qualitative social screens.
2 points from Amy's discussion:
1. The simplification of the SRI question into the questions like those by Rev Sullivan in the early 1980's (the Sullivan principles) - for example, how many employees in senior positions in SA are not white - points to the classic simplification that all investors enjoy intuitively. This ties into the point from my blog 19 Apr: is the future of SRI in the "Dummies Guide" approach, simplifying so it can be understood quickly by hurrying and avaricious traders?
2. No mention of how companies choose to reflect the Domini stamp of approval. I have tracked two companies lately that reference the listing on the Dow Jones Sustainability Index and FTSE4Good, but not Domini 400. I wonder what better marketing of the brand could have achieved more? While clearly famous in the Boston area where Here & Now is presented, the plain distribution power of the media- and financial-information based indices is ultimately more persuasive in the marketplace, and frankly may have bigger brand power.
Of all the American things I love, from Ben & Jerry's to The Simpsons to Puget Sound, both NPR, and its TV cousin PBS, are true modern day treasures for Americans. Sad though that PBS has to pitch annually to its federal overseers for 15% of its budget, and to raise the remainder from its listeners. Can it be far from a subscriber model on Sirius or XM radio, available around the world?
As a South African I would differ with Ms Domini re the power of SRI to change events in South Africa. growing up there as a privileged middle class White African, I was aware how businesses thrived. Like with the recent experience in Serbia and Iraq - the only thing that sanctions achieve is to create a very powerful balc market, because at the end of the day, at the individual level, each of us is dominated by the demands of the market and the money that drives it.
Most of the abnormal society I discovered was not through the lack of certain goods, but in understanding the political and cultural history, the lack of international sport and cultural entertainment brands. It was more important to young SA that the Springboks could not tour, and U2 played in Mbabane and Harare not Durban or Cape Town (check their Rock 'n Roll Hall of Fame induction). Economic sanctions did play a role. But political and cultural sanctions deserve a major share of the limelight.
Good to see Tim Smith finds a mention again (see An Activist Returns to South Africa Published, Fall 2001) ! Still no acknowledgement of the role of KLD, even though Amy founded it with Steve Lydenburg and Peter kinder in the garage of the latter's married home in 1988! Things must really be bad for KLD-Domini relationship. It seems to me that more effort should be made to present the stories of Peter Kinder and to hear from Steven Lydenburg about the future of SRI. In comparison, the website gives ample attribution to KLD:
Creation of the Domini 400 Social IndexSMThe index was created by the social research firm of KLD Research & Analytics, Inc.(KLD). KLD began work on the Domini 400 Social IndexSMin late 1989. It started officially tracking the Index on May 1, 1990 and has monitored the Index's performance since then. The Index was created to fill four primary needs:
· To answer the question of whether social screening carries an inherent financial "cost";
· To provide a socially screened equity benchmark;
· To communicate the standards of mainstream social investors to corporations and the general public in a viable format;
· To provide the basis for a screened, indexed investment vehicle for investors.
· In creating the Index, KLD employed a combination of exclusionary and qualitative social screens.
2 points from Amy's discussion:
1. The simplification of the SRI question into the questions like those by Rev Sullivan in the early 1980's (the Sullivan principles) - for example, how many employees in senior positions in SA are not white - points to the classic simplification that all investors enjoy intuitively. This ties into the point from my blog 19 Apr: is the future of SRI in the "Dummies Guide" approach, simplifying so it can be understood quickly by hurrying and avaricious traders?
2. No mention of how companies choose to reflect the Domini stamp of approval. I have tracked two companies lately that reference the listing on the Dow Jones Sustainability Index and FTSE4Good, but not Domini 400. I wonder what better marketing of the brand could have achieved more? While clearly famous in the Boston area where Here & Now is presented, the plain distribution power of the media- and financial-information based indices is ultimately more persuasive in the marketplace, and frankly may have bigger brand power.
Monday, April 25, 2005
So you want to work in SRI in 2005?
Hiring a crop of talented interns for the summer has me wondering what advice I will give when asked the inevitable question: where should I launch my career? Having been in the roles of pensions consultant, pension fund vendor, investment manager, and now on the socially responsible research side of the business, I hope my answer is honest and valuable. I'll be quick to point out that SRI is only a half-step from being in a NGO, but the higher-risk, higher-reward clean technologies field may offer more. Or rolling out hybrids, up 81% last year according to CNBC this morning. There are 2 questions you should answer:
1. Do you actually want to manage money?
2. How do you feel about working in Europe?
My first question is: Do you actually want to manage the money?
Does the ebb and flow of the market and the investors who lean on you sound like the right fit? If you prefer researching and presenting the ideas, then the analysis side is your bets fit. Sometimes you may flow between the two roles, but most often the tracks and the qualifications lead in to parallel but separate paths.
In SRI in particular the majority of SR investment analysts are from non-financial backgrounds, as a quick review of the SIRAN listserv bio's can attest. On the money management side, a key requirement is that the investor has confidence in your "numbers" ability. Evidence of this comes in the form of the new Chief Investment Strategist at Trillium Asset Management here in Boston. Adam Seitchik joined Trillium Asset Management in 2004 as Chief Global Strategist for Deutsche Asset Management in London, where he led a team responsible for over £40 billion in client assets. He also has experience as an analyst and portfolio manager at Wellington Management, and was the Director of Strategic Research for John Hancock’s Investment and Pension Group. More SRI is going to demand an interpretation into a financial answer.
As Jeff MacDonagh at Loring Woolcott said to me at the Net Impact SRI panel at MIT recently, too few SRI analysts have CFA qualifications. Steve Lydenburgh mentioned his efforts to get more SR into the CFA curriculum. I have suggested finding the alternative qualification in Europe and pursuing them on the basis of their greater affinity and sophistication around SRI/sustainability issues.
That leads me to the second major question: do you want to necessarily work in the US?
If not, then why not follow the leading thinkers in SRI and move to Europe. The City of London, while having some paroxsyms about CSR as evidenced in The Economists's recent diatribe "The Good Company: A sceptical look st CSR" in January 2005 is far more involved in the CSR/SRI debate. Developments like the second generation of SiRi company formed from a network of SRI analyst firms across Europe and North America suggests that the industry is growing and developing. The London Stock Exchange has developed CSR data-gathering software London Stock Exchange to launch Corporate Responsibility Exchange. After all, France has mandated CSR be considered by companies in their reporting, the largest Dutch Pension fund ABP owns a stake of a leading SRI research firm, and the Greens are politically relvant in Germany while the UK has a minister level post for CSR or "corporate responsibility" as Nigel Griffiths, MP likes to call it Nigel Griffiths MP replaces Stephen Timms MP as minister with responsibility for CSR
28/09/04.
Your other option to change corporate behaviour is in - it pains me to suggest we need more of them - law!. If I was just now coming out of Law School and not 10 years ago, I would be carrying the bag for Eliot Spitzer, attorney general of New York and highly effective scourge of corporate malefactors. What he has achieved has been remarkeable, and yes, not without incident or controversy. It has just lately been interesting to see the pressure ratcheted up on him, including some pasty looking publisher of CEO Magazine on CNBC. I smiled as I watched him try to convince SqwuakBox's Mark Hains that Eliot SPitzer had done something wrong by doing his job and simultaneously announcing himself as candidate for NY Governor.
SRI or Corporate Law, those are pretty much your options. CSR seems too compromised right now, although I'm watching it carefully, especially the Investor Relations side. Only two important figures in personal finance were named to Time magazine's recent list of 100 most influential Americans; TIME's list of the men and women whose power, talent or moral example is transforming the world. One was Eliot Spitzer. The other was Amy Domini, a founding mother in socially responsible investing. "I never knew I had influence," she joked. "My son was very impressed because some rapper singer was in there. He couldn't believe I was in there with them." She founded the Domini 400 social index, the conscience-driven equivalent of the S&P 500, and a set of mutual funds that also bears her name. She now manages investments totaling about $2 billion. And much to the chagrin of KLD, failed to mention the pivotal role that KLD and its 2 partners had in launching both the industry and her role in it.
1. Do you actually want to manage money?
2. How do you feel about working in Europe?
My first question is: Do you actually want to manage the money?
Does the ebb and flow of the market and the investors who lean on you sound like the right fit? If you prefer researching and presenting the ideas, then the analysis side is your bets fit. Sometimes you may flow between the two roles, but most often the tracks and the qualifications lead in to parallel but separate paths.
In SRI in particular the majority of SR investment analysts are from non-financial backgrounds, as a quick review of the SIRAN listserv bio's can attest. On the money management side, a key requirement is that the investor has confidence in your "numbers" ability. Evidence of this comes in the form of the new Chief Investment Strategist at Trillium Asset Management here in Boston. Adam Seitchik joined Trillium Asset Management in 2004 as Chief Global Strategist for Deutsche Asset Management in London, where he led a team responsible for over £40 billion in client assets. He also has experience as an analyst and portfolio manager at Wellington Management, and was the Director of Strategic Research for John Hancock’s Investment and Pension Group. More SRI is going to demand an interpretation into a financial answer.
As Jeff MacDonagh at Loring Woolcott said to me at the Net Impact SRI panel at MIT recently, too few SRI analysts have CFA qualifications. Steve Lydenburgh mentioned his efforts to get more SR into the CFA curriculum. I have suggested finding the alternative qualification in Europe and pursuing them on the basis of their greater affinity and sophistication around SRI/sustainability issues.
That leads me to the second major question: do you want to necessarily work in the US?
If not, then why not follow the leading thinkers in SRI and move to Europe. The City of London, while having some paroxsyms about CSR as evidenced in The Economists's recent diatribe "The Good Company: A sceptical look st CSR" in January 2005 is far more involved in the CSR/SRI debate. Developments like the second generation of SiRi company formed from a network of SRI analyst firms across Europe and North America suggests that the industry is growing and developing. The London Stock Exchange has developed CSR data-gathering software London Stock Exchange to launch Corporate Responsibility Exchange. After all, France has mandated CSR be considered by companies in their reporting, the largest Dutch Pension fund ABP owns a stake of a leading SRI research firm, and the Greens are politically relvant in Germany while the UK has a minister level post for CSR or "corporate responsibility" as Nigel Griffiths, MP likes to call it Nigel Griffiths MP replaces Stephen Timms MP as minister with responsibility for CSR
28/09/04.
Your other option to change corporate behaviour is in - it pains me to suggest we need more of them - law!. If I was just now coming out of Law School and not 10 years ago, I would be carrying the bag for Eliot Spitzer, attorney general of New York and highly effective scourge of corporate malefactors. What he has achieved has been remarkeable, and yes, not without incident or controversy. It has just lately been interesting to see the pressure ratcheted up on him, including some pasty looking publisher of CEO Magazine on CNBC. I smiled as I watched him try to convince SqwuakBox's Mark Hains that Eliot SPitzer had done something wrong by doing his job and simultaneously announcing himself as candidate for NY Governor.
SRI or Corporate Law, those are pretty much your options. CSR seems too compromised right now, although I'm watching it carefully, especially the Investor Relations side. Only two important figures in personal finance were named to Time magazine's recent list of 100 most influential Americans; TIME's list of the men and women whose power, talent or moral example is transforming the world. One was Eliot Spitzer. The other was Amy Domini, a founding mother in socially responsible investing. "I never knew I had influence," she joked. "My son was very impressed because some rapper singer was in there. He couldn't believe I was in there with them." She founded the Domini 400 social index, the conscience-driven equivalent of the S&P 500, and a set of mutual funds that also bears her name. She now manages investments totaling about $2 billion. And much to the chagrin of KLD, failed to mention the pivotal role that KLD and its 2 partners had in launching both the industry and her role in it.
Friday, April 22, 2005
NetImpactBoston has left the building!
35 professionals and soon to be professionals from all sectors joined Thrusday 21 April from 7pm at Le Zygomates to launch Boston's professional chapter of Net Impact. We had a fine turn-out. Even the barkeep, Jason, said he welcomes us back - presumably we add style to changing the world.
I secured a handful of Steven Lydenburg's newly published book Corporations and the Public Interest : Guiding the Invisible Hand http://www.amazon.com/exec/obidos/tg/detail/-/1576752917/qid=1114006057/sr=1-1/ref=sr_1_1/102-3141046-7787355?v=glance&s=books
as a freebie and we used as a "prize" for a business card draw. The winners (Mark, Kristen & Priya) were applauded. I have tried to drive value back to Steve by having the winners comment on www.Amazon.com; I will do the same.
Steve's book looks again at the issue of power handled from the boardroom and tools that investors, large and small, may apply to keep them accountable. The recent Business Ethics article (Spring 2005, CSR in the Cross-Hairs: A broad counter-attack against corporate reform is growing.(Could that be a sign of progress?) by Tracey Ramebert) pointed to the often vociferous attacks on activist shareholders - including Tim Smith of Social Investment Forum being sued for a 2003 "slander" of a company. In a rather belated recognition of what Robert Monks had identifed in the 1980's when reflecting on the influence of pension funds, the attack by Schwarzenegger’s ally, Grover Norquist of Americans for Tax Reform, made clear the attempt to break public pension funds into 401k's, is very deliberate. “Just 115 people control $1 trillion,” he said. “We want to take that power and destroy it.” Nationally in the USA, public funds control $2.7 trillion, with union-managed funds overseeing another $400 billion.
Now we try and get things solidified here in Bston. Anne, Erika and I will meet 9 May to plan the way forward. We need to sign up members in Boston, add members to the email distribution via NetImpactBoston@gmail.com and plan next steps. Our first next step is building a website and connecting to other NI professionals + final year MBA's in the Boston area.
We've opened the door for people with skills and strength to add. We could do with about 3 more to work with Anne, Erika and I to guide this ship along. The roles we may need include:
Membership
Technology
Community Outreach
Corporate Outreach
Events
Treasurer
Marketing
We really hope that this small be impactful chapter can help play a small role in fchanging the world. Maybe we can succeed in with NetImpactBoston, truly making us New Leaders for Better Business.
I secured a handful of Steven Lydenburg's newly published book Corporations and the Public Interest : Guiding the Invisible Hand http://www.amazon.com/exec/obidos/tg/detail/-/1576752917/qid=1114006057/sr=1-1/ref=sr_1_1/102-3141046-7787355?v=glance&s=books
as a freebie and we used as a "prize" for a business card draw. The winners (Mark, Kristen & Priya) were applauded. I have tried to drive value back to Steve by having the winners comment on www.Amazon.com; I will do the same.
Steve's book looks again at the issue of power handled from the boardroom and tools that investors, large and small, may apply to keep them accountable. The recent Business Ethics article (Spring 2005, CSR in the Cross-Hairs: A broad counter-attack against corporate reform is growing.(Could that be a sign of progress?) by Tracey Ramebert) pointed to the often vociferous attacks on activist shareholders - including Tim Smith of Social Investment Forum being sued for a 2003 "slander" of a company. In a rather belated recognition of what Robert Monks had identifed in the 1980's when reflecting on the influence of pension funds, the attack by Schwarzenegger’s ally, Grover Norquist of Americans for Tax Reform, made clear the attempt to break public pension funds into 401k's, is very deliberate. “Just 115 people control $1 trillion,” he said. “We want to take that power and destroy it.” Nationally in the USA, public funds control $2.7 trillion, with union-managed funds overseeing another $400 billion.
Now we try and get things solidified here in Bston. Anne, Erika and I will meet 9 May to plan the way forward. We need to sign up members in Boston, add members to the email distribution via NetImpactBoston@gmail.com and plan next steps. Our first next step is building a website and connecting to other NI professionals + final year MBA's in the Boston area.
We've opened the door for people with skills and strength to add. We could do with about 3 more to work with Anne, Erika and I to guide this ship along. The roles we may need include:
Membership
Technology
Community Outreach
Corporate Outreach
Events
Treasurer
Marketing
We really hope that this small be impactful chapter can help play a small role in fchanging the world. Maybe we can succeed in with NetImpactBoston, truly making us New Leaders for Better Business.
Wednesday, April 20, 2005
Make Your Career (& Life) Make a Difference
Great Socially Responsible Investing panel today presented by Net Impact student chapters, met at MIT Sloan jointly hosted by Bason College and The Fletcher School of International Law & Diplomacy Make Your Career (& Life) Make a Difference. Tim Smith (Walden/SIF), Jeff McDonagh (Loring Woolcot Coolidge/SIRAN), Steve Lydenburg (Domni CIO/author) and moderated by Patricia Roach (US Trust New York). We covered some good ground on misconceptions on SRI, current & future challenges and career paths into SRI.
Two of the interesting questions covered the ability to sell research, and the opportunity for Venture Capital (VC) funds in the SRI context. I look forward to more discussions.
The vibe for Thursday's launch of NetImpactBoston - the professional chapter for NI in Boston at Le Zygomates. You can email to us for more
Two of the interesting questions covered the ability to sell research, and the opportunity for Venture Capital (VC) funds in the SRI context. I look forward to more discussions.
The vibe for Thursday's launch of NetImpactBoston - the professional chapter for NI in Boston at Le Zygomates. You can email to us for more
Tuesday, April 19, 2005
Is Less More
Where is the sweet spot for SRI information to investors?An intriguing paper out from sustainable investment specialists on the quantitative team of Geneva-based private bank Pictet & Cie presents an argument tha " Less Can Be More..." (Christoph Butz, Pictet & Cie, March 2005). The paper is controversial, but honest enough to offer a foreword by Phillipe Spicher, Executive Chairman of SiRi Company (the consortium of SRI research firms which includes KLD in the US). The foreword sets the intrigue as Spicher references "an honour and a challenge" before pointing out "I cannot fully subscribe" to the arguments Pictet make. What is the storm in a teacup?
SiRi's comments are important because of the role they play as the most global SRI house. SiRi Company Ltd. (Sustainable Investment Research International) was launched in November 2003, after having served as an informal network between leading analysis companies for socially responsible investments in eleven countries: Sweden, Germany, Switzerland, Italy, the Netherlands, Spain, Belgium, the United Kingdom, Canada, Australia and the United States. Together, the SiRi Companies have over 100 analysts, which makes SiRi Company Ltd. the world's largest independent analysis group within SRI. Through the partnership in SiRi, independent local expertise on the world's most important financial markets is made available. KLD cover the USA.
Pictet suggests "current sustainability research is at a crossroads". Sustainability covers investment research looking to the fundamentals of a firm and how the environmental and social and corporate governance factors demonstrate whether the company has the ability to exist into the future with a business moidel that can succeed in a world of diminishing resources and increasing social demands.
Pictet points to companies' "questionaire fatigue" suggesting that too many questions are being asked of firms, questions that add nothing new to an analysis, and may instead introiduce noise to analysis. They push for retaining "a few relevant indicators", while admitting "we do not pretend to have found the holy grail ...fully-fledged research methodology". They want to "through the first stone" in the debate.
The argument about a marginal cost vs marginal utility of information makes for a neat economic underpin to their argument. Intuitively the concept is appealing. It is reasonable to expect that as more information is discovered and presented, the cost of reaping that information starts to outweigh the utility of that information, paired with the actual value of that information in informing the decisions.
Pictet has a dig at analysts, suggesting the educational foundation is weak and the ongoing evolution of curricula is poor, that few have the experience, and may well be replaced by students and/or sophisticated software! I agree that this new field has attracted many non-financial types, but I do not think they are educationally weak. Firstly, the pool has partly to be explained by the rigid thinking of the financial analysis students and frankly the blinders that any SEE factors have some impact on analysis or a place at the table. Secondly, as SRI research analysts evolve in small firms fighting for legitimacy, the ability to glide while upping the education of analysts is not necessarily a viable opportunity. Thirdly, with the same mobility as financial analysts and portfolio managers, as SRI firms try to differentiate, they have not resolved how to develop talent without empowering competitors because they may not have the cash incentives to hold onto the analyst after they have been so well trained. In terms of moving educational standards forward, I have opened discussions with CFA Institute, the home of the CFA designation and the leader in investment accreditation. They were decidedly cool. I am currently seeking other accredited investment standards bodies to engage in discussions, mindful over the flop that followed the drive to "Certified MBA" while aware of the success of the "Six Sigma blackbelts".
From a methodology point of view, Pictet points not just to the cost of generating this information, but how it is used by investors. Pictet suggests that because the information is aggregated into some rating which can then be implemented into one rating, inflating the number of indicators diminshes the weight of any one of them. This fight for survival should be replaced by an increased experimentation with weightings and by knocking off superfulous ratings.
Pictet went about looking at the Automobile and Aviation industries in more detail and leaning heavily on their quantitative/statistical roots they look at different proxies for proxies, coming to factors like fuel efficiency and job creation as markers that they feel generate sufficient utility of information. While their analysis is interesting, they dodge the dichotomy produced by their "job creation" proxy as giving the best indicator for sustainability (at least over three years) but the failure in financial markets, and walk away with a shrug of " of course, much more research is needed to confirm or refute this finding".
I like the idea of the average fuel consumption of a car manufacturing firm as being its best indictor - the senstitivity of Detroit to US Federal minima for miles per gallon signal that this may be a material signal. But I am unconvinced on the job creation proxy.
In Pictet's search for "a more pragmatic and practicable proxy for a company's sustainability performance by way of specifying sector-specific key impact factors" remains more lost than found. Intriguing, some good concepts, but as a business leader I would not change my SRI analysis on these grounds. Yet!
SiRi's comments are important because of the role they play as the most global SRI house. SiRi Company Ltd. (Sustainable Investment Research International) was launched in November 2003, after having served as an informal network between leading analysis companies for socially responsible investments in eleven countries: Sweden, Germany, Switzerland, Italy, the Netherlands, Spain, Belgium, the United Kingdom, Canada, Australia and the United States. Together, the SiRi Companies have over 100 analysts, which makes SiRi Company Ltd. the world's largest independent analysis group within SRI. Through the partnership in SiRi, independent local expertise on the world's most important financial markets is made available. KLD cover the USA.
Pictet suggests "current sustainability research is at a crossroads". Sustainability covers investment research looking to the fundamentals of a firm and how the environmental and social and corporate governance factors demonstrate whether the company has the ability to exist into the future with a business moidel that can succeed in a world of diminishing resources and increasing social demands.
Pictet points to companies' "questionaire fatigue" suggesting that too many questions are being asked of firms, questions that add nothing new to an analysis, and may instead introiduce noise to analysis. They push for retaining "a few relevant indicators", while admitting "we do not pretend to have found the holy grail ...fully-fledged research methodology". They want to "through the first stone" in the debate.
The argument about a marginal cost vs marginal utility of information makes for a neat economic underpin to their argument. Intuitively the concept is appealing. It is reasonable to expect that as more information is discovered and presented, the cost of reaping that information starts to outweigh the utility of that information, paired with the actual value of that information in informing the decisions.
Pictet has a dig at analysts, suggesting the educational foundation is weak and the ongoing evolution of curricula is poor, that few have the experience, and may well be replaced by students and/or sophisticated software! I agree that this new field has attracted many non-financial types, but I do not think they are educationally weak. Firstly, the pool has partly to be explained by the rigid thinking of the financial analysis students and frankly the blinders that any SEE factors have some impact on analysis or a place at the table. Secondly, as SRI research analysts evolve in small firms fighting for legitimacy, the ability to glide while upping the education of analysts is not necessarily a viable opportunity. Thirdly, with the same mobility as financial analysts and portfolio managers, as SRI firms try to differentiate, they have not resolved how to develop talent without empowering competitors because they may not have the cash incentives to hold onto the analyst after they have been so well trained. In terms of moving educational standards forward, I have opened discussions with CFA Institute, the home of the CFA designation and the leader in investment accreditation. They were decidedly cool. I am currently seeking other accredited investment standards bodies to engage in discussions, mindful over the flop that followed the drive to "Certified MBA" while aware of the success of the "Six Sigma blackbelts".
From a methodology point of view, Pictet points not just to the cost of generating this information, but how it is used by investors. Pictet suggests that because the information is aggregated into some rating which can then be implemented into one rating, inflating the number of indicators diminshes the weight of any one of them. This fight for survival should be replaced by an increased experimentation with weightings and by knocking off superfulous ratings.
Pictet went about looking at the Automobile and Aviation industries in more detail and leaning heavily on their quantitative/statistical roots they look at different proxies for proxies, coming to factors like fuel efficiency and job creation as markers that they feel generate sufficient utility of information. While their analysis is interesting, they dodge the dichotomy produced by their "job creation" proxy as giving the best indicator for sustainability (at least over three years) but the failure in financial markets, and walk away with a shrug of " of course, much more research is needed to confirm or refute this finding".
I like the idea of the average fuel consumption of a car manufacturing firm as being its best indictor - the senstitivity of Detroit to US Federal minima for miles per gallon signal that this may be a material signal. But I am unconvinced on the job creation proxy.
In Pictet's search for "a more pragmatic and practicable proxy for a company's sustainability performance by way of specifying sector-specific key impact factors" remains more lost than found. Intriguing, some good concepts, but as a business leader I would not change my SRI analysis on these grounds. Yet!
Friday, April 15, 2005
The Body Shop back into the rinse of CSR
The 2005 Ceres Conference "Building Equity, Reducing Risk" presented current examples of efforts by companies to improve their web-based reporting. In Thursdays last session, the persevering few were able to act as the most intimate of user-groups for Gap, Baxter International and GM as their respective officers presented their CSR/sustainability reports.
Rikke Jarvad Netterstrom is ethical policy manager at The Body Shop. The Body Shop International Plc is a retail franchise with an established network of franchisees that own and operate approximately 70% of TBS stores worldwide. It has an (overshadowing) presence of a founder Anita Roddick who is regarded as a leader in SRI, but recently suffered a stagnant business phase. TBS Franchisees and their business partners are required to live up to the values of The Body Shop International Plc as described in our trading charter and mission statement. Franchisees are also expected and encouraged to participate in global values campaigns.
While halting sustainability reporting seven years ago due to disinterest, TBS has revised the approach going back to reporting in Oct. 2003 Body Shop finances go back to ethical roots. The revised site is trying to figure out:
1. How to drive traffic to the sustainability site and who the audience is
2. What the audience wants
3. How to stay fresh and relevant without costing an arm & a leg.
Apparently still in beta format, we were not able to see the new website. It is interesting to know how the revised site and its role will fit TBS targets for 2005-2006 year for their many franschisees (although the US stores were bought back)
1. Review all ethical policies hierarchy and indicate franchisee responsibilities - Feb 2005
2. Consult franchisees on the development of global KPIs on our values performance - Feb 2005 3. Develop and offer a "service package" on values (e.g. training, publications, values for a), in consultation with franchisees - Feb 2006
4. Explore and consult with franchisees on appropriate Franchisee governance system, e.g. elected advisory committees/boards or Ombudsman function - Feb 2006
Until we see the new site with its indicators for demonstrating performance, the US specific site references the approach of bringing the SR factors directly to the consumer at the point of sale. The current US site references the current campaign against violence in the home. TBS Australia offers the direct link of CSR to business model with the (self-reported) national in-store survey during June 2004 which led to donating $1 to state/territory domestic violence support organisations for every completed customer survey received by TBS Australia. Based on an updated web page TBS reported 3844 customers returned surveys in 2004 resulting in donating $3844 to refuges around Australia. TBS Australia is "one of very few companies in Australia to conduct a stakeholder-driven social auditing process that is independently audited and publicly disclosed". In 2004 TBS Australia commenced their fourth auditing cycle which will be published in May 2005.
For SRI analysts the real test of relevance will be in the quality and quantity of CSR indicators and the authentication of whatever reports are made by a third party.
Wednesday, April 13, 2005
The peak of Mt Kilimanjaro as it has not been seen for 11,000 years
Sad news from my home continent. Hemingway's feted Mt Kilimjaro is getting buck-naked. I remember hearing an Australian professor from Wharton speaking to our ELP associates class last year reference the Great Barrier Reef being GONE by 2050 - in his lifetime. It shocked me into paying attention. It has got the attention of hikers, even as first reports of it in 2002/3 including in National Geographic created something of an express to get people to the top and back. Certainly in South Africa it became much more popular even de rigeur amongst the Johannesburg professional set.
Maybe this can bring it home hard for people I come into contact with. At least the saddest news gives me an solid start to my presenation to young MIT & Babson College students this Tuesday "A Spring Symposium: “Make your Career (& Life) Make a Difference”. I am hoping I can deliver to the students the real life - secrest of my success - type look at the world inside, a bit of humour, and a way to open doors.
Some of my comments will rest on the current goings on at Nestle'. After some scathing comments on the merits of CSR, Thursday sees the vote coming with the pressure from the Swiss Pension Funds grouping aiming to prevent the CEO from taking the vacating chair. Ethos - Swiss Investment Foundation for Sustainable Development and five other shareholders (collectively Ethos Group) have submitted this proposal to amend Nestle's articles of association to include a clause that "The Chairman cannot simultaneously hold an exclusive function within the executive management." Two groups, including a Swiss investment fund, Ethos, and ACTARES, a group of smaller shareholders campaigning for ethical business practices, have announced that they intend to submit motions to ensure the two posts remain separate. ISS has backed the pension funds ISS Supports Nestle Shareholder Proposal to Split Chairman and CEO. Ethos chief Dominique Biedermann said he was expecting about 20 percent of votes in support of the move. Two other groups representing institutional investors reportedly were lining up behind the call.
In another demonstration of the impact of Corporate Governance and the ongoing small size of SRI pension funds, the Nestle' affair has garnered headlines, but may likely not impact the vote. It does keep the glare on. Nestle' has not been doing everything right, including (according to SRI Media) suffering two boycotts recently over matters such as selling of baby milk formula to the developing world, where hygiene standards made breast milk safer, and its alleged involvement in Coco slavery where tenant farmers are deliberately kept in a state of constant debt.
Together with the top-to-bottom attention on Nestle' and the way it does business may yet have some effect. I wonder what other delgates to the 2005 Ceres Conference, "Building Equity, Reducing Risk" tomorrow will have to say. I'll have thoughts from the conference Thursday evening.
Maybe this can bring it home hard for people I come into contact with. At least the saddest news gives me an solid start to my presenation to young MIT & Babson College students this Tuesday "A Spring Symposium: “Make your Career (& Life) Make a Difference”. I am hoping I can deliver to the students the real life - secrest of my success - type look at the world inside, a bit of humour, and a way to open doors.
Some of my comments will rest on the current goings on at Nestle'. After some scathing comments on the merits of CSR, Thursday sees the vote coming with the pressure from the Swiss Pension Funds grouping aiming to prevent the CEO from taking the vacating chair. Ethos - Swiss Investment Foundation for Sustainable Development and five other shareholders (collectively Ethos Group) have submitted this proposal to amend Nestle's articles of association to include a clause that "The Chairman cannot simultaneously hold an exclusive function within the executive management." Two groups, including a Swiss investment fund, Ethos, and ACTARES, a group of smaller shareholders campaigning for ethical business practices, have announced that they intend to submit motions to ensure the two posts remain separate. ISS has backed the pension funds ISS Supports Nestle Shareholder Proposal to Split Chairman and CEO. Ethos chief Dominique Biedermann said he was expecting about 20 percent of votes in support of the move. Two other groups representing institutional investors reportedly were lining up behind the call.
In another demonstration of the impact of Corporate Governance and the ongoing small size of SRI pension funds, the Nestle' affair has garnered headlines, but may likely not impact the vote. It does keep the glare on. Nestle' has not been doing everything right, including (according to SRI Media) suffering two boycotts recently over matters such as selling of baby milk formula to the developing world, where hygiene standards made breast milk safer, and its alleged involvement in Coco slavery where tenant farmers are deliberately kept in a state of constant debt.
Together with the top-to-bottom attention on Nestle' and the way it does business may yet have some effect. I wonder what other delgates to the 2005 Ceres Conference, "Building Equity, Reducing Risk" tomorrow will have to say. I'll have thoughts from the conference Thursday evening.
Thursday, April 07, 2005
Morgan Stanley: who holds the power; Schwab's missing institutional business...
The Morgan Stanley fracas is an opportunity to investors from SRI and Corporate Governance backgrounds to watch the heavyweights fight and reach for tools of shareholder activism. CEO Phillip Purcell is being bumped around by MS alumni who are pressing for a return of ousted ex-President Robert Scott. Yesterday's meeting was packed
As WSJ's Alan Murray pointed out "Corporate America is Getting Rocked Just Like It's 1789" (WSJ 5 Apr A2) it is not clear who is running MS. This CEO star Purcell is finding that sometimes just when you think you're leading, you're really only going for a walk alone. Murray points to the power "the board of directors that should take the reins of power from an autocratic CEO. But the MS board continues to give public support, as well as lavish compensation, to Mr Purcell's lavish compensation." Murray dismisses the employees - there are only so many who could walk away. He identifies the all-powerful, obdurate hedge funds as holding real sway. As investors, they ask very pointed questions, as Scott Sipprelle of Copper Arch Capital did and wrote a letter. Seems when hedge funds get involved, people on Wall Street listen.
Where are the pension funds in this? After smarting from the political power-play at CALPERS last November, maybe trustees are being a little more cautious. This Sunday is the start of the Council of Institutional Investors - mainly big public pension funds - and it will be interesting to see what voice they find. Tied to the debate of who should elect board members, I'm hoping it will be interesting. Phyllis Plitch at DJNewswires (Board Selections Spark a Backlash, 5 Apr) reported on the storms brewing at Caterpillar and Gannet where shareholder activists want a switch to majority voting AND the power not just to withhold but to propose and vote for alternative directors. The union investors are pressing for it. Ed Durkin, director of special programs for the United Brotherhood of Carpenters and Joiners of America, is quoted as saying both institutional and individual investors want it. Durkin says unions have sent resolutions to 80 companies to date this year.
Referencing "institutional" or "individual" investors, Charles Schwab's op-ed in Tuesday's WSJ "May We trade Through" makes for an interesting self-assessment of his business. He describes Schwab as "my business is focussed exclusivley on individual investors and the investment advisors who serve them". The question? What happened to Schwab Institutional?! Is this an admission that the venture to the corporate side has lost its way?
As WSJ's Alan Murray pointed out "Corporate America is Getting Rocked Just Like It's 1789" (WSJ 5 Apr A2) it is not clear who is running MS. This CEO star Purcell is finding that sometimes just when you think you're leading, you're really only going for a walk alone. Murray points to the power "the board of directors that should take the reins of power from an autocratic CEO. But the MS board continues to give public support, as well as lavish compensation, to Mr Purcell's lavish compensation." Murray dismisses the employees - there are only so many who could walk away. He identifies the all-powerful, obdurate hedge funds as holding real sway. As investors, they ask very pointed questions, as Scott Sipprelle of Copper Arch Capital did and wrote a letter. Seems when hedge funds get involved, people on Wall Street listen.
Where are the pension funds in this? After smarting from the political power-play at CALPERS last November, maybe trustees are being a little more cautious. This Sunday is the start of the Council of Institutional Investors - mainly big public pension funds - and it will be interesting to see what voice they find. Tied to the debate of who should elect board members, I'm hoping it will be interesting. Phyllis Plitch at DJNewswires (Board Selections Spark a Backlash, 5 Apr) reported on the storms brewing at Caterpillar and Gannet where shareholder activists want a switch to majority voting AND the power not just to withhold but to propose and vote for alternative directors. The union investors are pressing for it. Ed Durkin, director of special programs for the United Brotherhood of Carpenters and Joiners of America, is quoted as saying both institutional and individual investors want it. Durkin says unions have sent resolutions to 80 companies to date this year.
Referencing "institutional" or "individual" investors, Charles Schwab's op-ed in Tuesday's WSJ "May We trade Through" makes for an interesting self-assessment of his business. He describes Schwab as "my business is focussed exclusivley on individual investors and the investment advisors who serve them". The question? What happened to Schwab Institutional?! Is this an admission that the venture to the corporate side has lost its way?
Thursday, March 24, 2005
Trillions at Stake
Forthcoming April 2005 articles from Kiplinger’s – an influential investor periodical – I thought important to think through [Saddam Burgers, Anyone? James K. Glassman 1,673 words 1 April 2005 Kiplinger's Personal Finance MagazinePage pages 28, 30ISSN 1528-9729; Volume 59; Number 4].
"Trillions at stake. Enter socially responsible investing, or SRI. Not too many years ago, SRI was an eccentricity. Now it's an industry. The Social Investment Forum's latest report says that $2.2 trillion has been invested in SRI portfolios managed by professionals--up from $40 billion in 1984. There are 200 mutual funds that focus on stocks that meet ethical criteria. Many are tiny, but 55 have more than $100 million in assets and 26 have more than $1 billion".
1. Material references to KLD, differentiated from Domini, but based on Bill Baue’s earlier article mixing Domini/KLD, is this enough?
2. Reference to bad Laffer paper.
3. Describes the market moving to “one-to-one” ie customizable portfolios at the individual level, not mutual funds; implication that demand will increase for investor tools i.e. need a product to empower investors/advisors in a user-friendly way like IWF Idealswork.
4. 3 reasons why SRI not good for mutual fund investor:
a. weaker talent in money management
b. no premium company performance to capture in investment portfolio
c. SRI funds so different, hard to match to your values.
This last point SRI marketers can think through on how to sell into: moving the facts to the market, where they “build” the ratings/screens based on the investors own attitudes. Put differently traditional SRI ratings agencies can move the argument forward by addressing 3. and with help of academics/white papers
1. is not an issue for ratings agencies because they are investment agnostic.
Question for traditional SRI business is: can we deliver investor-friendly information for money managers, or does current SRI ratings still fail the “mothering” test?
"Trillions at stake. Enter socially responsible investing, or SRI. Not too many years ago, SRI was an eccentricity. Now it's an industry. The Social Investment Forum's latest report says that $2.2 trillion has been invested in SRI portfolios managed by professionals--up from $40 billion in 1984. There are 200 mutual funds that focus on stocks that meet ethical criteria. Many are tiny, but 55 have more than $100 million in assets and 26 have more than $1 billion".
1. Material references to KLD, differentiated from Domini, but based on Bill Baue’s earlier article mixing Domini/KLD, is this enough?
2. Reference to bad Laffer paper.
3. Describes the market moving to “one-to-one” ie customizable portfolios at the individual level, not mutual funds; implication that demand will increase for investor tools i.e. need a product to empower investors/advisors in a user-friendly way like IWF Idealswork.
4. 3 reasons why SRI not good for mutual fund investor:
a. weaker talent in money management
b. no premium company performance to capture in investment portfolio
c. SRI funds so different, hard to match to your values.
This last point SRI marketers can think through on how to sell into: moving the facts to the market, where they “build” the ratings/screens based on the investors own attitudes. Put differently traditional SRI ratings agencies can move the argument forward by addressing 3. and with help of academics/white papers
1. is not an issue for ratings agencies because they are investment agnostic.
Question for traditional SRI business is: can we deliver investor-friendly information for money managers, or does current SRI ratings still fail the “mothering” test?
Saturday, January 01, 2005
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