ICCR is increasing its profile with a Global Warming Shareholder Campaign

ICCR is increasing its profile with a Global Warming Shareholder Campaign After meetings Tuesday, September 20, 2005 in NYC, a series of telecons have been set. The Fuel Sustainability Investor Education Initiative: ICCR is convening a series of conference calls this fall to brief investors about energy technologies, their economic and environmental costs:

Session 1: Electric Utility Industry September 29th at 1:00 PM
Session 2: Nuclear, Coal and LNG October 6th at 1:00 PM
Session 3: Hydro, solar, Wind and Biomass n October 27th at 1:00 PM
Session 4: Transportation: Oil, Bio-fuels and Fuel Cells November 8th at 1:00 PM
After a few gremlins, the telecon rolled forward, with speakers from Anne Reynolds of Environmental Advocates of New York, Andrew Brengle from KLD and Lena Hansen from Rocky Mountain Institute.

ICCR is over thirty years has been a leader of the corporate social responsibility movement, mainly as an advocate for shareholder activism, using their network of members to lobby for change in corporate behaviour, mainly in socially and environmentally responsible.

According to its website, ICCR's membership is an association of 275 faith- based institutional investors, including national denominations, religious communities, pension funds, endowments, hospital corporations, economic development funds and publishing companies. In the just-finished 2005 proxy season, US shareholders saw something new in proxy proposals: an attempt to reform an entire industry by separating the chair and chief executive officer positions. The Interfaith Center on Corporate Responsibility led an effort in sponsoring shareholder resolutions calling for revitalized leadership in the pharmaceutical industry through separating the roles of the chair and CEO at America's largest drug companies.

ICCR efforts on shareholder actions for climate change/global warming issues are being ramped up in 2005 with the Global Warming Shareholder Campaign. Although ICCR has been pushing companies on climate change since 1991, in recent years it has succeeded in eliciting statements by coal-fired utilities such as AEP, Cinergy, and FirstEnergy acknowledging their role in global warming and pledging cuts in their greenhouse gas emissions. From silence, it is progress.

ICCR’s 2005-2006 shareholder campaign has three main themes:

· New focus on energy alternatives—renewable energy and efficiency technologies
· Broader reach to new sectors and new companies, as well as deeper into traditional target companies
· Broader and deeper institutional investor support—greater effort to attract mainstream investors (pension funds, foundations, university endowments)

In addtion to electricity generators and oil companies, ICCR shareholder actions will target auto companies, banks, home builders, REITS, big box retailers, and insurance companies. Transport companies will follow in 2006.

ICCR wants to survey public pension fund voting practices on climate resolutions, piggybacking on the mutual funds voting scorecard, similar to the one developed by CERES and IRRC's Doug Coggan.

The fesity head of ICCR for the past 4 years is Sr. Patricia Wolf, RSM. In her four years as Executive Director, Patricia has spoken at major national and international gatherings, including The Conference Board, The Triple Bottom Line Investing Conference in Brussels, a conference of socially responsible investment managers in London, The Church Benefit Association and the Social Investment Forum. She was a member of the ICCR Governing Board for eight years, and chaired the ICCR Board from 1982 to 1984. She has also been mobilized Roman Catholic investment in economic development in low-income and minority communities.

One of her best associates is Sister Patricia Daly [Business Face of faith-based investors a nun CEOs are recognizing By Geoff Dougherty, Tribune staff reporter 1,833 words 12 June 2005 Chicago TribuneChicago]. "With her unassuming looks and cream-colored knit blazer, hardly seems the type to raise hell at a Fortune 500 company's annual meeting. But dozens of times a year, she does just that. She leaves her home with a Palm Pilot and a copy of Institutional Investor magazine in her bag and arrives at meetings ready to press for social responsibility. Daly is perhaps the most visible public face of an interconnected group of faith-based investor organizations that have become increasingly influential. Their power flows from investments of more than $100 billion, their willingness to file shareholder proposals year after year, and the fact that few executives want their company to be seen fighting nuns."

Growth of SRI in Europe, Dexia adds to team

News just in from Engaged Investor magazine reports that SRI is gaining ground.

Robert Melia-Watson, News Editor, writes that "Socially responsible investment, known as SRI, has been with us for quite a while for those that think strongly that businesses should strive to run a company which actually cares about what it becomes involved in. A company should strive, at the very least, to have some basic no- go areas like child slavery, armaments and tobacco.

Of course, the whole SRI scene is a lot more complicated than that and there are great grey areas. For example, it is hard to decide whether it is more ethical to spurn a company or try to influence its ethics by investing in it, and influencing the board. Let’s hope this signals a domino effect until no self respecting fund manager will dream of having being invested in any unethical company."

Robert's comments echo some of what my discussion with Ben touched on last week > creating black and white for investors out of the SRI grey. As a real indictaor of that, Dexia Asset Management has announced it will be expanding its SRI offering [DEXIA UPS ITS COMMITMENT TO SRI ] with 12% of its funds are now in SRI.

Dexia Asset Management, which has €81.4bn under management, and a pioneer of sustainable management in Europe, has significantly strengthened its socially responsible investment (SRI) team with seven sustainability analysts working in with the financial analysts and eight managers also dedicated to SRI.

In January 2005 Dexia had sent out an RFP to boutique SRI research firms looking for input and seem to have made the buy-or-build decision with a view to creating organic growth in capability, tapping externally for pinpoint advice. CSR factos are considered for:

1. Human Resources/Social
2. Environment
3. Corporate Governance
4. Customers
5. Human Rights
6. Business Ethics
7. Suppliers
8. Society

The data and information obtained would be further interpreted and analysed by Dexia AM and would serve as input for an in-house proprietary SRI scoring framework. Primary research into sector-specific topical CSR issues including:

• Listed companies Europe, US, Pacific
• Listed and non-listed (non-governmental)
• Bond-issuers (EUR and USD denominated)
  

Dexia reported to Engaged Investor that the socially responsible investment market is flourishing: from December 2003 to March 2005 assets in SRI funds increased by 35%, against 16% for the global market for collective investment in Europe. At the same time, assets in the Dexia’s funds rose by 46%. Hugo Lasat, chairman of the executive committee of Dexia Asset Management explained, “The growth of our sustainable management funds is certainly significant, but that of tailor-made SRI management is even stronger. Long-term investors, such as pension funds and insurance companies, are beginning to commit themselves to the path of SRI. The potential for growth is therefore considerable”.
According to researchers FERI FMI’s database, more than 160 managers offer some 374 SRI funds in Europe. Sustainability analysis at Dexia Asset Management (formerly Cordius Asset Management) relies upon assessment of the relations between a company and all its “stakeholders” (shareholders, clients, employees, suppliers, the environment and society) in order, within each sector, to trigger the indicators of sustainability.For instance: the investments of a company in the training of its employees and in partnerships with its suppliers create opportunities for product innovation. A safety policy for exploitation sites minimises the risk of accidents, which can have a very negative impact on the image of the company and its goodwill.

In April 2004 EuroSIF reported Dexia's activity, including industry roadshows and their Dexia Quant range of funds managed through quantitative models developed and tested in-house by the quantitative management fed by over 40 alpha factors likely to generate an out-performance, and each with a history of more than twelve years, these models select the most attractive stocks in each of the MSCI sectors (energy, finance etc).

Dexia's activity this year included Dexia SRI project gathers momentumPortfolio21, the SRI-project set up by the insurance companies of Dexia, Dexia Asset management and Stock at Stake N.V. that focuses on Human Rights, gathers momentum. The Portfolio21-model in April 2005 reportedly applied to 6,07 billion euro under management against 4,75 billion euro September last. In December, Stock at Stake N.V. addressed 19 corporations about alleged violations of ILO core conventions. The assets under management are part of the reserves for car insurances, life insurances, pension provisions, and so on.

DJSI Europe launches in NYC; BMO Groupo captures the halo

The same week as season 4 of The Apprentice starts on NBC with Trump playing mentor in NYC, Alex Barkawi and his colleagues at SAM launched their DJSI in North America.

It is a significant development for SRI in the US. Other European-driven US ventures have started in the last 12 months: EIRIS have had a researcher on-shore since early 2005, while F&C launched a 2-person research shop in mid-2004. But the Dow Jones brand and distribution in the US, together with the global approach and solid method SAM uses, creates the potential for a significant shift in the competitive landscape.

The launch event for the Dow Jones Sustainability North America Index and Dow Jones Sustainability United States Index introduced in New York on 23 September included:

• Jane Ambachtsheer, Global Head of Socially Responsible Investing, Mercer Investment Consulting;
• Bailey Bishop, Principal, State Street Global Advisors; and
• John Prestbo, Editor, Dow Jones Indexes.

In a way that describes the mission-building nature of most ventures in the nascent SRI niche of the money management industry, Alex also invited me and SRI majors from KLD (the brains behind the Domini 400), Tom Kuh and Peter Kinder.

DJSI were launched in 1999. Based on the partnership of Dow Jones Indexes, STOXX Limited and SAM using "objective and professional benchmarks integrating economic, environment and social criteria". At August 31, over USD4 billion is managed against the DJSI by asset managers in 14 countries.

The Dow Jones Sustainability Indexes are based on a best-in-class approach and comprise the leading companies in terms of sustainability from each industry in the respective regions. The underlying evaluation by SAM covers general and industry specific sustainability criteria and accounts for long-term economic, environmental and social trends.

It is interesting that Northfield Info Systems of Boston - who have done work with KLD on their indices, was invloved too, according to Bill Baue at socialfunds.com:

"When conducting a study on socially responsible investing (SRI) indexes covering the US market, Northfield Information Services had to isolate US companies from the Dow Jones Sustainability Indexes (DJSI) World Index because DJSI did not offer a US index. That changes today, with the launch of the DJSI United States Index, comprised of 93 companies, as well as the DJSI North America, which adds 18 from Canada for a total of 111 components. "

Greenbiz also covered the story at Dow Jones Sustainability Index Launched for North America as well as posted to Canadian bank BMO Group which quickly incorporated coverage into its CR profile. How companies react to index inclusion/exclusion will make a neat academic study, and something I notcied when researching the JSE SRI Index last year for socialfunds.com.

WIlshire Associates survey of Active Socially Responsible Investing

I had a good sandwich from Pressed again yesterday. Kerry suggested I try it after reading in her favorite Daily Candy that funds from sales were being directed to Katrina victims. Sitting in International Place trying to be heard over 2 protesters with megaphones complaining about the CO from the Big Dig ventilation chimneys (I think). In the most polite fashion, the 30 or so in the chairs stepped around and looked past the curiosity and gamely stuck to eating sandwiches and speaking - loudly!

I lunched with Ben Lavine CFA ex-Wilshire Associates just in town from UCLA and joining BatteryMarch. Ben led the Manager Research Group in late 2004 team to publish the February 2005 "Active Manager Survey Socially Responsible Investing". The impetus was to check what active managers outside of those with specific SRI mandates like Catholic Funds were doing, to create a market view for Wilshire and clients if they needed to give advice or make selection recommendations. Some impetus came from the Horace Man Fund, a philanthropic investment fund Wilshire works with.

Wilshire purposely focused on active mandates given that the marketplace for passive socially-responsible investment providers is fairly well known.
Wilshire highlighted:

Active SRI is not widespread within the traditional institutional investment community. Such mandates mainly reflect a manager’s accommodation of client-specific requests on social restrictions.

Managers typically view the social aspects of these mandates as divorced from the investment process. Active managers are primarily focused on identifying investment opportunities as defined by superior financial and operating performance.

Most firms do not dedicate resources, outside of retaining data vendors, to run socially responsible mandates. Most execute the process using a separate overlay and do not employ separate proxy voting procedures unless directed by the client.

Few managers can objectively measure the performance impact from the social restrictions. None can demonstrate whether the mandates are achieving optimal ‘social objectives’ versus a baseline benchmark. In other words, how does a client know whether their portfolio is achieving an optimal level of social utility given a certain level of tracking error against the market benchmark or a socially responsible benchmark?

Finally, Wilshire did not elicit survey responses from active investment entities whose primary focus is to invest in a socially conscious manner either for reasons related to moral principals or for financial value-added (so-called ‘angel effect’). The survey just focuses on firms who provide traditional active management services to the institutional market that are approached to run socially responsible mandates.

The results from the question on sources of SRI research was enlightening:
39% came from "client-directed", and 22% from "internal research", with KLD at 22%, Innovest at 17%, ICCR at 6%, IRRC at 28% and ISS with 39%, obvioulsy reflecting the corporate govenrance business.
Common socially-restricted categories include consumer products (tobacco, alcohol), weapons manufacturing, environmental scorecards, and corporate governance. Screening for Tobacco was at 100%, Environment at 29% and Nuclear Power 41%.

Ben mentioned the survey of 70+ possible managers was narrowed to a select group of 36 money managers, with response from 32 of which 18 indicated managing at least one SRI mandate. The money managers ranged from mainstream like Bernstein to SRI shops like Dreyfus, and included big players State Street and BGI. For purposes of this survey, Wilshire defined active socially responsible mandates as client accounts which have restrictions on investments in securities with pre-specified exposures to certain societal activities.

Wilshire excluded religious-oriented mandates (e.g., Catholic Healthcare Trusts) from consideration given their more refined set of criteria that might not be applicable to broader socially responsible mandates. Requests were only made for responses for active investment mandates given that the marketplace for passive index vehicles is fairly well known (e.g. Domini, Calvert, Parnassus). Wilshire did not elicit survey responses from active investment entities whose primary focus is to invest in a socially conscious manner either for reasons related to moral principals or for financial value-added (so-called ‘angel effect’). This survey just focuses on firms who provide traditional active management services to the institutional market who are approached to run socially responsible mandates.

Ben was most impressed with BGI's approach in partnership with KLD's Social Select Index launched 31 January 2005. The first iShares® ETF for Socially Responsible Investors tracks KLD's Select Social Index, that seeks to optimize socially responsible factors while managing risk, making it much more appealing to benchmark-driven institutional investors. As opposed to screening out whole sectors - something that has punished Domini Social Index 400 in the past 18 months - the SSI uses an under-weighting approach to problem sectors, trying to be more quantitative about degrees of CSR.

Domini Social Equity's overweight to in technology stocks produced outperformance in the late 1990s, but underweight holdings of energy and utility stocks have hurt recently: ''It's kind of a double whammy that put them near the bottom of their category," David Kathman, a Morningstar analyst who follows the Domini Social Equity fund, was reported as saying in August in the Boston Globe [BOSTON CAPITAL The price of conscience By Steven Syre, Globe Columnist August 2, 2005].

The challenge to screening has always been the cuts a regular portfolio will take, especially some of the overlap for large cap value managers. Ben thinks the market has already voted on the poor corporate performance of the firm, and that includes environmental, governance and other classic SRI factors. My recent experience with a screening product for a Philadephia Separate Accounts sponsor product this Summer receiving a monthly update of tickers was that the 9 issue areas produced a 52% screen out of a R1k Large Cap manager model portfolio. That explains why many wealth managers simply chop off screening impact at 10% of portfolio to keep sub-advisors in the Separate Accounts programs happy. SRI is a "necessary evil" I was told with a smile.

Ben thinks some of the undervalued research Wilshire's survey presented was the tracking error around benchmarks. He thinks too few investors explore the impact of the SRI factors in their portfolio.

My biggest takeaway was the need for "SRI attribution" and the ability to measure one SRI fund or manager against another. I am intrigued by the opportunities that these present.

I look forward to reading Bill Baue's article in Business Ethics Meet the Faces Behind 5 Great SRI Mutual Funds which profiles five SRI money managers who invest for stellar performance and social justice and "in the top ranks of mutual fund performance, and who fuse financial discipline with attention to social justice and ecological sustainability", including Jack Robinson, Winslow Green Growth Fund; Diane Keefe, Pax World High Yield Fund; John Montgomery, Calvert Large Cap Growth Fund; John Rogers, Ariel Appreciation Fund; and Ingrid Dyott, Neuberger Berman Socially Responsive Fund.

WSJ watches COX balancing act

Alan Murray last caught my eye for lambasting the SRI/CSR agenda in his opinion piece re. Jeff Immelt's Ecomagination [see posting "Just Imagination?" 5/09/2005]. Yesterday's WSJ had him offering back some bouqets in covering the challenge of CEO pay. [The EconomyBUSINESS: New SEC Chief Tackles a Big One: CEO Pay By Alan Murray890 words 21 September 2005 The Wall Street JournalA2]

It appears while Immelt won the battle for the mantle of head of the world's best run corporation [see Cover story in Barron’s “Real Asset: Barron's survey of the most respected corporations” by Michael Santoli 12 September 2005] but lost in the cash remuneration land grab to 2 peers he beat for the job. GE remains well-respected, and while the jury is still out on ecomagination, even Bill Clinton gave Immlet kudos on Meet The Press Sunday for his role as business leader in leading the USA where the government is failing, like climate change.

Jeffrey Immelt, Robert Nardelli and James McNerney. Mr. McNerney (Boeing Co.) has a package worth some $62 million if he stays for six years, Mr. Nardelli, (Home Depot Inc.), earned $28 million in 2004. Mr. Immelt has total compensation of $8.3 million - though the company has created "performance share units" that will make him wealthy if the company does well enough in the next few years.

Chris Cox as SEC head had taken much heat in parts of the SRI community for the perception that he would not be strong enough advocate for investors [see blog 4 August]. If you had to ask the average professional who Eliot Spitzer was, they would probably tell you. Seeing Spitzer speak at the first NYSSA Corporate Governance conference [Eliot Spitzer and John Bogle Keynote Speakers atNYSSA’s Corporate Governance Conference] in late 2003 it was impressive to see his cross-sector drive to the better interest of the consumer/investor, the person on the weaker side of the business transaction power scale.

But Cox is considered more cautious, and he will prove his own mettle. WSJ's Murray writes
"CHRIS COX ISN'T STARTING out as the capitalists' tool his critics made him out to be... is smart... got good political instincts.

Mr. Cox has directed staff to explore new rules regarding CEO and executive pay. The rules would not directly limit pay - reflecitng some wisdom by from the failed attempt by Government when it imposed a million-dollar cap on tax-deductible pay back in 1993, prompting an explosion of stock options. They are drawing a lesson from the SRI/activist community: sunlight. Judge Brandeis's 1911 comment has long been used in legal circles, and obviously in situations where change is needed (see Let The Sunshine In Joel Makower April 22, 2005)

"Compensation packages for executives have changed dramatically since 1992, when the commission last addressed this topic," Mr. Cox told The Wall Street Journal in an interview published Monday. Better disclosure, he said, "clearly needs to be addressed."

Murray reports that the growth in CEO pay has been "explosive". He writes the median salary and bonus for chief executives at 350 major U.S. companies jumped 14.5% last year to almost $2.5 million, according to analysis by Mercer. My first close examination of CEO pay when I lead Villanova University's first ever team to the inter-MBA Net Impact/Leeds Business Case Compeititon in Boulder and the case was on GSK. The competition allows a week to research the company, then the students are given the case question Friday 7pm for work through the night with delivery by 8am Saturday for presentations through the morning. We guessed that garnier's pay issue would be part of the make-up. Garnier's CEO package had attracted attention in UK from NGO's like AIDS Healthcare Foundation response to news reports of AIDS pharmaceutical giant GlaxoSmithKline's decision to pay its chief executive an annual US$10 million. The good news in 2002 had been that GSK had backed down after shareholders protested the proposal at the AGM. BBC reported following the meeting, the company said in a statement: "After taking into account shareholder views, the company has decided to postpone a decision on the matter".

Murray mixes Gordon Gecko with an attack on corporate governance efforts. He advances 2 reasons: "The first is timeless: Greed. It's still a powerful motivator in human affairs. The second is a direct outgrowth of the reform movement. As the pressures on CEOs increase, their tenures decrease -- usually, because of poor performance. That leaves corporate boards scrambling to find successors, often from the outside. And outsiders tend to cost more than insiders."

The nagging question always is "Is he really worth it?". Murray writes "The day Mr. McNerney's appointment became public, Boeing stock jumped more than $4 a share -- adding more than $3 billion to the wealth of the company's shareholders. NC Times reported "Investors sent Boeing's share price up $4.29, or 7 percent, to close at a four-year high of $65.96 Thursday on the New York Stock Exchange. " What he doesn't factor in is the level to which previous CEO's, perhaps also arriving to fanfare had driven the price. Off a low base...

See
Are CEOs overpaid? Walter E. Williams (archive) March 2, 2005
CEO Skill and Excessive Pay: A Breakdown in Corporate Governance? led by Stanford's Robert Daines February 2005.

In an interesting juxtposition, while Murray's second reason was the "inflation" CEO's doing their job may create, the corporate governance regulations caused by misdeeds of their CEO peers was playing out elsewhere in NYC. WSJ reported [Tyco Figures Will Be Jailed at Least 7 Years - Judge Orders Kozlowski, Swartz To Also Pay Back $240 Million; CEO's `Kleptocratic Management' By Mark Maremont 20 September 2005 The Wall Street Journal] in New York, inmates with > six years to serve until parole eligibility are sent to one of the state's maximum-security prisons, which house 22,000 mostly violent offenders, according to Linda Foglia, New York State Department of Correctional Services spokeswoman.

Prisoners in such facilities are housed in cells, and work six hours a day at tasks like sweeping, painting, or working in the library, she said, adding that inmates generally are paid $1.05 a day. I wonder how many decimal points my .xls will need to calculate that with his original salary as numerator?

Are CEOs paid too much? Write to Alan Murray soon at business@wsj.com.

Why SRI-Extra; Blogging SRI on Socialfunds.com by Bill Baue

Bill Baue at Socialfunds.com explored SRI blogs September 07, 2005, highlighting both Lloyd's team blog and SRI-Extra. Bill identified how blogs allow "candid comments" on developments in socially responsible investment as they happen.

Why blog SRI?
SRI-Extra serves 3 functions:
1. A place to put thoughts that are often independent and not immediately applicable to current tasks.
2. To create a window for others interested in the industry. I remember being in grad. school and really wanting to see what it is like from the inside out. Here I may be able to attract new and more talented people into the SRI industry to the benefit of all.
3. Have a bit of fun and connect with others in SRI.

I hope people reading SRI-Extra see the scope we cover. SRI touches so many parts of the investment business - to call it SRI is sometimes an injustice. I was cautioned early on by a reader to stay "on-topic" with my blog. But from the descriptor on, you can see the business of investing using values and value, touches so many places. I hope readers may see how complex SRI is.

I was interested to read Lloyd's thoughts

"SRI is in a strange position--it has been around in its present form for 20 years or more, and is gaining mainstream acceptance, but at the same time needs to evolve to keep up with client demands and ensure that it remains relevant going forward," said Mr. Kurtz. "And things are happening very quickly in this profession, on several continents."

SRI-Extra aims to speak candidly, something I think more easily achieved with less embedding in the SRI movement and being more internatiuonal in perspective. I hope SRI-Extra provides for people interested in SRI move opportunities to window on the SRI mission, and especially across borders.

Internal blogs
Early on I realized that if I would be unable to commit to a stream of daily submissions. I am still getting the balance right. I believe in blogging for thought workers, and encouraged both KLD and the senior analysts to write, but nothing has happened yet. Nevervousness about liability and news articles about fired employees probably did not help [see Employee fired for blogging and Delta employee fired for blogging sues airline].

Over this past summer I project managed for the first time in the KLD Product Group a cohort of 12 mostly MBA students and had each contribute to a team blog. Some were better than others: one blog had 160 postings, another just 1. We had a remote consulting work model, and the blog was an excellent way to connect between Boston, NYC, and Asia.

While the content may sometimes by proprietary to KLD, I am encouraging the interns to adapt the content and re-publish under their own blog, as a window to future interns and those interested in getting into the industry.

Blogs also allowed the interns to have fun "unofficially", like the entry "Excerpt from the forthcoming intern guide, subtitled: Sleep? What's That?"

Conventional wisdom on SRI: more indication of boomers investing bravely?!

Interesting comments coming from the financial planning world on how SRI is growing [WHY THE CW ON SRI IS WRONG By Geoff Lewis3,004 words 1 September 2005 Registered Rep.95Volume 29; Number 9].

Although Lewis short-dates SRI to the 1960's - a broader view points to the early 20th century Quakers or even ancient Jewish laws re. dealing with one's money, the author does identifies that "(S)ocially responsible investing ... the concept has been viewed with suspicion in most parts of the investment industry."

He identifies conventional wisdom for advisors on the SRI advice business kept away from SRI clients which were
1. Were long on political and ethical commitment, but short on investing smarts.
2. Tended not to bring in big accounts.
3. By using nonfinancial criteria to pick stocks, these investors were doomed to underperform.
4. SRI remains a tiny slice of the equities business.
5. "Few he-man wirehouse brokers have snagged a trip to Bermuda for plugging SRI funds" - I liked that reality check!

But SRI is gaining momentum as a niche business with very loyal customers and, with a growing range of SRI products - including hedge funds - and a cadre of top-flight managers in the field, it's getting harder to prove that there is a performance penalty. Just this week Wednesday CitiGroup AM was shopping their SRI team from London to SIRAN and their US clients with a presentation called "Crossing the River" with a team led by Meg Brown.

I have more on this later.

The Limits to Profit stop in New Orleans?

An interesting take on the profit motive of business by Alan Murray at WSJ [BUSINESS: The Profit Motive Has a Limit: Tragedy By Alan Murray 7 September 2005 The Wall Street Journal A2]. Alan Murray covered the GE Ecomagination launch in May with heaps of skepticism (see post May 9), and follows the same vein in trying to find the thin line between when Wal-Mart must make money and put down the bar code scanners and help their employees and customer base - in Murray's view a Dickensian trade-off. I agree it is adiificult position, but I suggest it is made more difficult were one comes from the view that social, environmental or governance factors never had a place in making business work well in the first place.

"GOOD CORPORATIONS aren't made to be good charities. They are, after all, stewards of other people's money, and their mandate is to make a profit. The best of them focus on that mandate with ruthless efficiency". Murray highlights the personal epiphany of WMT's Chief Executive Lee Scott and his wife last Wednesday.

Murray describes Mr. Scott's balancing act.
"We can't send three trailer loads of merchandise to every group that asks for it," he says. He tells of being in Houston on Monday, and talking to someone who wanted Wal-Mart to donate 2,000 blankets to help refugees. Mr. Scott turned down the request. "We have to, at the end of this, have a viable business," he explains."

My two takeaways from this article are:
1. Alan Murray's stretch to understand business as anything outside of profit.
2. The bump back to WMT's philanthropy and community credentials by reading the story from inside the CE's head.

WMT received the best possible endorsement Sunday morning on Tim Russert's Meet The Press She drowned Friday night’ Sept. 4: Aaron Broussard, president of Jefferson Parish, La., breaks down while telling NBC's Tim Russert the story of the death of the mother of one of the parish’s employees. The distraught New Orleans community leader gave heartbreaking personal testimony of a colleague who promised his invalid mother help day by day, but eventually she drowned. The Feds never arrived.

Broussard's ringing endorsement was along the lines that WMT was ready to help, trucks were turned away, and why could the Fed. response not be like WMT?

Watching the impressive media coverage from WMT since the disaster, including the full-page advert supporting the American Red Cross and Salvation Army in Wednesday's WSJ, I wait with great interest to see how public opinion toward WMT improves, and how SRI ratings agenices may change their ratings.

A final WMT note: late into the night watching some stunning tennis at the US Open between legend Agassi and new-comer Blake through 1:15 a.m. I stumbled on the South Park episode where the brats (I do not know my way around the characters like I do Seinfeld) tried to destroy "Wall-Mart" but find the "heart" which is a "mirror". With sardonic humor, they make the point. WMT does represent the conflicted, schizophrenic US consumer.

WMT has been flat. In investment terms, much of their customer base is being flattened by the steep energy prices. Stores have been lost and disrupted. While their investment rating on financials may be flat-lining, perhaps the Katrina disaster may jolt them awake in SRI terms. Then again, maybe 2, 000 blankets is too many for WMT.

Investment analysts vs web

An interesting interview in Thursday, September 01, 2005 edition of IntegrityResearch ( http://integrityresearch.blogdrive.com/). I watch this blog for developments in independent research, seeing SRI research being interpreted by some as just that. HOW THE INTERNET HAS CHANGED EQUITY RESEARCH By Steven Irvine, August 30, 2005 has an interview with UBS head of Asian equity research, Nicholas Pink about the impact of the web. Funny how analysts do not want to be "supermarketed" where they are measured according to howe many "hits" they have on a report! I think it should at least be some discipline for all analysts - not necessarily popular vote, but some comment on readibility and timeliness.

From an environment angle it is a good story: at least fewer reports are printed and shipped. The web is delivering as a channel, although I know most of the researchers and analysts I know then print it off on the oither side, so maybe it is just the shipping costs that get saved, yes?! I must find some study like the Aviation study that identifies environmental costs/benefits to web distribution, and yes, failing all, do the math myself!

The greatest challenge is how quickly a report can shift through hands. The challenge is the same for all research shops. How to get paid for the hours and skills in every research report? I am exploring what security for intellectual property can be found, maybe some locking features in Adobe. Otherwise, the non-profit model is the only one for hard research - whether it is sell-side subsidized by i-banking or brokerage, or philanthropies funding the work of SRI researchers like the Rose Foundation or EIRIS or what ISS has done with IRRC. This implies only the largest retailers and distributors have power over allocating research dollars. Already reports suggest only about 3,000 of 10,000 US firms get coverage on a regular basis.