In June 2010, Mark was asked to present a one-hour keynote on the state of research into socially responsible investing. This was presented in NYC to a large group organized by Steve Scheuth and his SRI in the Rockies / First Affirmative Financial organizations.
This document outlines an organization's methodology for sustainable investment research. Some key points:
1) The methodology aims to separate moral and financial implications of sustainability issues, focus on operational performance over transparency, integrate factors through measurable variables, and identify impacts on financial statements.
2) Products will include an online tool ranking company CSR initiatives, thematic research, sector analyses, and in-depth company reports assessing sustainability risks and business model impacts.
3) Financial impacts of ESG issues are described and examples given of impacts on sales, assets, margins, and the value creation process.
Political risk, ESG and market performance - March 2014Damian Karmelich
As the ASX releases new corporate governance guidelines with an increased focus on risk management and environmental, social and governance principles Political Monitor examines the link between ESG, political risk & market performance.
The impact of a corporate culture of sustainability on corporate behavior and...Glenn Klith Andersen
This document examines the impact of a corporate culture of sustainability on corporate behavior, performance, and governance. Specifically, it compares companies that voluntarily adopted environmental and social policies (high sustainability companies) to those that adopted few such policies (low sustainability companies). It hypothesizes that high sustainability companies will have different board governance, stakeholder engagement, time horizons, information disclosure, and financial performance compared to low sustainability firms. The study uses a matched sample of 180 high and low sustainability companies to test these hypotheses over the long-term.
SA Finance Association Conference 2015: Investor Governance Revisited 160115Colin Habberton
This presentation is a summary of the purpose, process and findings of a pilot study into the decision-making dynamics of institutional investors in South Africa.
The objective of the study is to examined Corporate Social Responsibility Disclosure in quoted money deposit
Banks in Nigeria. The research design used for this study is historical research design. The design was used so as to
capture relevant information from annual financial statement of quoted companies. The population of the study
consists of Twenty one (21) deposit money banks in Nigeria and a sample of eight commercial banks was randomly
selected using convenient sampling technique. Data were analyzed using ordinary least squares regression. The
findings of this research indicate an existence of negative relationship between firm complexity and environmental
disclosed in the Nigerian banking sector. It also indicates the existence of positive relationship between earnings and
CSR disclosure in the Nigerian banking sector and that bank size was negatively related to the extent of corporate
social responsibility disclosure by Nigerian banks. The implication of these findings is that as bank increase its
activities they should also be concern with the well-being of the environment which they operate. Finally, the study
recommends that banks should focus on activities that will synchronize its corporate goals with the sustainability of
the environment
Oikos PRI Finance Academy 2015: Unpacking the Black BoxColin Habberton
This presentation was delivered on the 3rd June 2015 as a summary of the paper titled - 'Unpacking the Black Box: An investigaton into the decision-mkaing dynamics of South African institutional investors' - at the oikos PRI Young Scholars Academy hosted by Henley Business School at Reading University
Research Proposal - CSR - The Voice of the StakeholderAmany Hamza
In light of the recent financial crisis, the practices of CSR have come to the fore in media reports and academic debates. In this context, the goal of this research is, first, to examine the impact of the financial crisis on the implications of CSR activities in relation to stakeholders’ expectations in the financial services industry and, second, to help banking managers to understand what should be done for the benefit of their stakeholders and their own business sustainability.
What Is Social Return On Investment (SROI) And How Do You Apply It?Rizwan Tayabali
For many of those who are looking to start up a social enterprise, the framework of Social Return on Investment (SROI) could prove to be crucial in both understanding and presenting our social impacts in economic terms. Anything that helps raise funding and support has to be worth taking seriously, so here's a short overview of
SROI.
This document outlines an organization's methodology for sustainable investment research. Some key points:
1) The methodology aims to separate moral and financial implications of sustainability issues, focus on operational performance over transparency, integrate factors through measurable variables, and identify impacts on financial statements.
2) Products will include an online tool ranking company CSR initiatives, thematic research, sector analyses, and in-depth company reports assessing sustainability risks and business model impacts.
3) Financial impacts of ESG issues are described and examples given of impacts on sales, assets, margins, and the value creation process.
Political risk, ESG and market performance - March 2014Damian Karmelich
As the ASX releases new corporate governance guidelines with an increased focus on risk management and environmental, social and governance principles Political Monitor examines the link between ESG, political risk & market performance.
The impact of a corporate culture of sustainability on corporate behavior and...Glenn Klith Andersen
This document examines the impact of a corporate culture of sustainability on corporate behavior, performance, and governance. Specifically, it compares companies that voluntarily adopted environmental and social policies (high sustainability companies) to those that adopted few such policies (low sustainability companies). It hypothesizes that high sustainability companies will have different board governance, stakeholder engagement, time horizons, information disclosure, and financial performance compared to low sustainability firms. The study uses a matched sample of 180 high and low sustainability companies to test these hypotheses over the long-term.
SA Finance Association Conference 2015: Investor Governance Revisited 160115Colin Habberton
This presentation is a summary of the purpose, process and findings of a pilot study into the decision-making dynamics of institutional investors in South Africa.
The objective of the study is to examined Corporate Social Responsibility Disclosure in quoted money deposit
Banks in Nigeria. The research design used for this study is historical research design. The design was used so as to
capture relevant information from annual financial statement of quoted companies. The population of the study
consists of Twenty one (21) deposit money banks in Nigeria and a sample of eight commercial banks was randomly
selected using convenient sampling technique. Data were analyzed using ordinary least squares regression. The
findings of this research indicate an existence of negative relationship between firm complexity and environmental
disclosed in the Nigerian banking sector. It also indicates the existence of positive relationship between earnings and
CSR disclosure in the Nigerian banking sector and that bank size was negatively related to the extent of corporate
social responsibility disclosure by Nigerian banks. The implication of these findings is that as bank increase its
activities they should also be concern with the well-being of the environment which they operate. Finally, the study
recommends that banks should focus on activities that will synchronize its corporate goals with the sustainability of
the environment
Oikos PRI Finance Academy 2015: Unpacking the Black BoxColin Habberton
This presentation was delivered on the 3rd June 2015 as a summary of the paper titled - 'Unpacking the Black Box: An investigaton into the decision-mkaing dynamics of South African institutional investors' - at the oikos PRI Young Scholars Academy hosted by Henley Business School at Reading University
Research Proposal - CSR - The Voice of the StakeholderAmany Hamza
In light of the recent financial crisis, the practices of CSR have come to the fore in media reports and academic debates. In this context, the goal of this research is, first, to examine the impact of the financial crisis on the implications of CSR activities in relation to stakeholders’ expectations in the financial services industry and, second, to help banking managers to understand what should be done for the benefit of their stakeholders and their own business sustainability.
What Is Social Return On Investment (SROI) And How Do You Apply It?Rizwan Tayabali
For many of those who are looking to start up a social enterprise, the framework of Social Return on Investment (SROI) could prove to be crucial in both understanding and presenting our social impacts in economic terms. Anything that helps raise funding and support has to be worth taking seriously, so here's a short overview of
SROI.
Putting “Impact” at the Center of Impact Investing: A Case Study of How Green...The Rockefeller Foundation
More than ever before, investors are looking to put their money where their values are. As a result, impact investing has burgeoned into an over $100 billion industry in just over ten years. But how do impact investors know whether their money is truly having a positive impact on people and
the planet? How can these investors better manage their results, and use material data – both positive and negative – about social and environmental performance to maximize their impact?
This case study documents the journey of one organization, Green Canopy Homes – and its financing arm, Green Canopy Capital – toward more systematically thinking about, measuring, and managing its impact. While developing the impact thesis for its resource-efficient homes, Green Canopy applied a theory of change tool, an approach common within the social sector, to systematically map the causal pathways between its strategies and intended impact. Its rationale for adopting this approach was simple: use it to maximize impact, and understand and minimize possible harm. The tool also effectively positioned Green Canopy to measure and communicate about its social and environmental performance, and to make client-centric adaptations to its business.
The case study provides an illuminating example of how investors can adapt theory of change to serve their impact management needs. By demonstrating the relevance and transferability of this tool for articulating, measuring, and managing impact, the hope is that this case study can contribute to strengthening other investors’ approaches, in turn contributing to building the evidence base for the “impact” of impact investments.
Leverage Investment to Create Real ImpactHenry Qin
The document discusses impact investing in the US, Hong Kong, and China. It finds that while impact investing is more developed in the US, it is still emerging in Hong Kong and China. It analyzes the impact investing ecosystem and market in the US, provides a case study of an impact investing firm, and interviews the firm's chairman. It then provides recommendations to develop impact investing in Hong Kong and China, including removing regulatory barriers, increasing government program effectiveness, providing private investment incentives, encouraging impact organizations, and standardizing measurements.
The impact of corporate social responsibility on investment recommendationslucahearth
This document discusses a study that investigates how corporate social responsibility (CSR) strategies impact security analysts' investment recommendations. The study finds that analysts issue more favorable recommendations for socially responsible firms now compared to earlier periods, indicating a changing view of CSR's value. Additionally, firms with greater visibility and analysts with more experience, CSR awareness or resources are more likely to view CSR strategies positively in their recommendations. In summary, the document examines how CSR can influence value creation in public markets through influencing analysts' recommendations.
The international context for impact measurement in impact investing is growing. Impact investment aims to generate both social/environmental impact and financial returns. Effective impact measurement is critical for the success of impact investing by providing a consistent approach for comparing investments and identifying the most impactful interventions. This report explores impact measurement frameworks from the perspectives of investors and investees. It analyzes nine existing approaches against characteristics like being cost-effective, well-recognized, clear and easily implementable. The goal is to advance the discussion on developing a shared impact measurement approach to further unlock private capital for public good.
Sustainable Reality: Understanding the Performance of Sustainable Investment ...Sustainable Brands
This document discusses a study on the performance of sustainable investment strategies compared to traditional investments. Some key findings:
- Sustainable equity mutual funds and SMAs had equal or higher median returns than traditional funds/SMAs for 64% of periods examined over 7 years. They also had equal or lower volatility for 64-72% of periods.
- One index of firms with high ESG ratings outperformed the S&P 500 by 45 basis points annually since 1990.
- Studies show corporate sustainability practices are linked to lower costs of capital, higher stock price performance, and improved operational performance. Firms scoring highly on ESG criteria tend to outperform over the long run.
- Manager selection is
Sustainable Reality: Understanding the Performance of Sustainable Investment ...Sustainable Brands
This document discusses a study on the performance of sustainable investment strategies. The key findings are:
- Sustainable equity funds and separately managed accounts had equal or higher returns and equal or lower risk than traditional peers for the majority of periods examined over the last 7 years.
- Research shows corporate investment in sustainability is positively related to stock price and operational performance.
- An index comprising firms with high environmental, social and governance scores outperformed the S&P 500 by 45 basis points annually since 1990.
- Manager selection is important for both sustainable and traditional investments, as there is high dispersion of returns across strategies.
This document discusses a study on the performance of sustainable investment strategies. Some key findings of the study include:
- Sustainable equity mutual funds and separately managed accounts had equal or higher returns and equal or lower risk than traditional peers for the majority of periods examined over the last 7 years.
- Existing research shows a positive relationship between corporate sustainability practices and stock price/operational performance.
- A sustainability-focused index outperformed the S&P 500 by 45 basis points annually since its inception in 1990.
- Manager selection is important for both sustainable and traditional strategies, as returns and risk vary significantly across funds.
This presentation is a short overview of the fundamental concepts of responsible property investing. Responsible Property Investing is expanding to include metrics that provide investors guidance on how to measure social responsibility within their portfolios and to compare social responsibility between different property portfolios.
This document provides an outline for a presentation on the impact of corporate social responsibility (CSR) on financial performance, with intellectual capital as a mediating factor. The presentation covers background on CSR and the debate around its impact on firm performance. It reviews literature showing both positive and contradictory relationships between CSR and performance. The presentation aims to establish a multidimensional relationship between CSR, intellectual capital, and financial performance in Pakistani firms. It outlines variables, hypotheses, and methodology involving a quantitative study of listed manufacturing firms.
Corporate Social Responsibility and Profitability in the Banking Sector: The ...Dr. Amarjeet Singh
In this article, we explore the relationship between corporate social responsibility and profitability with particular reference to Ethiopian financial industry. In line with this, the paper investigated the practice of corporate social responsibility and its impact on profitability in two private banks in Ethiopia. The study used two sampling phases. The first one is to sample out the two banks among the sixteen private banks operated in the country and the second phase is to select number of respondents within the selected banks. According to National Bank of Ethiopia, (NBE, 2020) annual report among the sixteen private commercial banks operated in the country, six of them were operated in the industry for more than 20 years and two banks namely Dashen and United banks were randomly selected for the study. The study used questionnaires as an instrument for data collection and the Cronbach alpha test was used to test the reliability of the instrument. Correlation analysis was carried out to identify the nature of strength and direction of the relationship between the independent variables (philanthropic, ethical, legal and economic responsibilities) and the dependent variables (profitability), regression analysis was also employed to determine the degree in which the dependent variable can be predicated or explained from the independent variables. The finding reveals that ethical, philanthropic, legal and economic responsibilities of CSR dimension have a positive and significant impact on profitability of the banks. Furthermore, the overall finding of the study suggested that CSR practice of banks has a significant impact on the level of their profitability. The study recommends that banks should improve their efforts exerted towards their CSR practice in order to enhance their profitability.
Impact Investing the Performance Realities WhitepaperPhil Zimmerman
Impact investing aims to generate both financial returns and positive social or environmental impact. While impact investing was once thought to require sacrificing returns, advances in impact data and portfolio construction now allow investors to pursue impact goals without compromising risk and return. More investors are demanding impact strategies, driving growth in impact funds and improved reporting from companies. Impact investing now spans asset classes and issues through strategies like ESG integration and positive screening rather than just negative screening.
Investissement responsable : la création de valeur à partir des enjeux enviro...PwC France
PwC s'est entretenu avec 17 sociétés de capital-investissement, dont six figurent parmi les dix plus grandes sociétés mondiales de capital-investissement, 11 parmi les 50 plus grandes, et six parmi les sociétés de taille intermédiaire. 10 sociétés ont leur siège social en Europe et sept aux États-Unis. Sept des groupes sont signataires des Principes pour L'investissement Responsable de l'ONU. L'étude relève qu'un examen du processus de conformité pour les membres signataires des PRI était déjà en cours. Il est possible qu'à l'avenir une communication obligatoire soit exigée des signataires.
Retrouvez toutes nos publications : http://www.pwc.fr/publications
The document is a primer for the 2014 Impact Capitalism Summit. It discusses how impact investing portfolios can outperform traditional investing by incorporating environmental, social and governance factors that are knowable but often ignored. It provides evidence that portfolios focused on high-impact companies can achieve lower risk and higher returns than benchmarks. The primer includes articles making the case for impact investing across different asset classes as part of a responsible investment strategy. It also profiles the summit organizers, Watershed Capital Group, and their experience assisting companies with sustainability solutions.
There is growing evidence that suggests that Environmental, Social and corporate Governance (ESG) factors, when integrated into investment analysis and decision making, it may offer investors potential long–term performance advantages. The number of companies disclosing information on their environmental, social and governance performance has grown very significantly in recent years. For large multinational companies, disclosure of ESG information has become a mainstream phenomenon It has become shorthand for investment methodologies that embrace ESG sustainable factors as a means of helping to identify companies with superior business models. ESG factors offer portfolio managers added insight into quality of a company’s management, culture, risk portfolio and other characteristics. By taking advantage of the increased level of scrutiny associated with ESG analysis, managers’ portfolios seek to identify companies based on performance indicators like
• Whether that company exhibits leadership in their industries.
• Whether that company is better managed and more forward thinking.
• Whether that company is better at anticipating and mitigating risk, meet positive standards of corporate responsibility.
• Whether that company is focused on the long term.
The applications of Sustainable Accounting, Reporting and Standardizations have taken a slow pace. The process began during early 1970s when it focused on social responsibility. During mid-late 1970s, it was shifted to employees and unions. 1980s saw explicit pursuit of economic goals with a thin veneer community concern and redefinition of employee rights as the major theme. In the 1990s attention shifted to environmental concern. Slowly, ‘environment reporting’, ‘triple bottom line reporting’, ‘sustainability reporting’ came into light.
This document summarizes a study that examines the impact of implementing social responsibility and disclosing social responsibility reports on capital costs for listed Chinese companies. The study uses quantile regression and ordinary least squares regression to analyze 227 listed companies rated by an ESG rating agency in 2019. The key findings are:
1) Implementing social responsibility had no significant overall impact on capital costs, but disclosing social responsibility reports was found to help reduce capital costs.
2) For companies with medium capital costs, better social responsibility performance was linked to higher capital costs, but performance had no significant impact for those with low or high costs.
3) Disclosing social responsibility reports effectively reduced capital costs, and the effect was more significant for companies
Barclays ESG_Brochure_US_18_small Sustainable Investing and bond returns NOV ...Andrew Bellak
1) The document presents the findings of a study by Barclays Research into the relationship between environmental, social, and governance (ESG) factors and corporate bond portfolio performance.
2) The study found that applying a positive tilt to ESG factors resulted in a small but steady performance advantage for corporate bond portfolios, with no evidence of negative performance impact. The positive effect was strongest for governance factors.
3) The study contributes new evidence that ESG investing need not negatively impact bondholder returns and can be successfully applied to credit markets in addition to equity markets.
Istanbul Stock Exchange Sustainability index project: what institutional inve...Graham Sinclair
Presentation to Istanbul Finance Summit covering SinCo perspective on what institutional investors want and the role of the ISE Sustainability Index project ISESI.
The document presents Climate Neutral Investments Ltd., a company that provides a climate neutral investing approach. It discusses socially responsible investing and outlines Climate Neutral's concept of researching portfolio carbon emissions and offsetting them through purchasing carbon credits from certified emission reduction projects. The company aims to neutralize the greenhouse gas emissions of investment portfolios while achieving traditional financial returns and positive social and environmental impacts.
The document discusses green banking and socially responsible investing. It provides background on the speaker's experience screening companies for environmental and social factors since the 1990s. It also outlines the role of banks in reducing information asymmetry regarding environmental and financial risks through lending practices. Socially responsible investing funds that consider ecological and social impacts are growing significantly. The Principles for Responsible Investment were established in 2006 as a framework for investors to achieve sustainable markets and returns through environmental, social and governance analysis.
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Putting “Impact” at the Center of Impact Investing: A Case Study of How Green...The Rockefeller Foundation
More than ever before, investors are looking to put their money where their values are. As a result, impact investing has burgeoned into an over $100 billion industry in just over ten years. But how do impact investors know whether their money is truly having a positive impact on people and
the planet? How can these investors better manage their results, and use material data – both positive and negative – about social and environmental performance to maximize their impact?
This case study documents the journey of one organization, Green Canopy Homes – and its financing arm, Green Canopy Capital – toward more systematically thinking about, measuring, and managing its impact. While developing the impact thesis for its resource-efficient homes, Green Canopy applied a theory of change tool, an approach common within the social sector, to systematically map the causal pathways between its strategies and intended impact. Its rationale for adopting this approach was simple: use it to maximize impact, and understand and minimize possible harm. The tool also effectively positioned Green Canopy to measure and communicate about its social and environmental performance, and to make client-centric adaptations to its business.
The case study provides an illuminating example of how investors can adapt theory of change to serve their impact management needs. By demonstrating the relevance and transferability of this tool for articulating, measuring, and managing impact, the hope is that this case study can contribute to strengthening other investors’ approaches, in turn contributing to building the evidence base for the “impact” of impact investments.
Leverage Investment to Create Real ImpactHenry Qin
The document discusses impact investing in the US, Hong Kong, and China. It finds that while impact investing is more developed in the US, it is still emerging in Hong Kong and China. It analyzes the impact investing ecosystem and market in the US, provides a case study of an impact investing firm, and interviews the firm's chairman. It then provides recommendations to develop impact investing in Hong Kong and China, including removing regulatory barriers, increasing government program effectiveness, providing private investment incentives, encouraging impact organizations, and standardizing measurements.
The impact of corporate social responsibility on investment recommendationslucahearth
This document discusses a study that investigates how corporate social responsibility (CSR) strategies impact security analysts' investment recommendations. The study finds that analysts issue more favorable recommendations for socially responsible firms now compared to earlier periods, indicating a changing view of CSR's value. Additionally, firms with greater visibility and analysts with more experience, CSR awareness or resources are more likely to view CSR strategies positively in their recommendations. In summary, the document examines how CSR can influence value creation in public markets through influencing analysts' recommendations.
The international context for impact measurement in impact investing is growing. Impact investment aims to generate both social/environmental impact and financial returns. Effective impact measurement is critical for the success of impact investing by providing a consistent approach for comparing investments and identifying the most impactful interventions. This report explores impact measurement frameworks from the perspectives of investors and investees. It analyzes nine existing approaches against characteristics like being cost-effective, well-recognized, clear and easily implementable. The goal is to advance the discussion on developing a shared impact measurement approach to further unlock private capital for public good.
Sustainable Reality: Understanding the Performance of Sustainable Investment ...Sustainable Brands
This document discusses a study on the performance of sustainable investment strategies compared to traditional investments. Some key findings:
- Sustainable equity mutual funds and SMAs had equal or higher median returns than traditional funds/SMAs for 64% of periods examined over 7 years. They also had equal or lower volatility for 64-72% of periods.
- One index of firms with high ESG ratings outperformed the S&P 500 by 45 basis points annually since 1990.
- Studies show corporate sustainability practices are linked to lower costs of capital, higher stock price performance, and improved operational performance. Firms scoring highly on ESG criteria tend to outperform over the long run.
- Manager selection is
Sustainable Reality: Understanding the Performance of Sustainable Investment ...Sustainable Brands
This document discusses a study on the performance of sustainable investment strategies. The key findings are:
- Sustainable equity funds and separately managed accounts had equal or higher returns and equal or lower risk than traditional peers for the majority of periods examined over the last 7 years.
- Research shows corporate investment in sustainability is positively related to stock price and operational performance.
- An index comprising firms with high environmental, social and governance scores outperformed the S&P 500 by 45 basis points annually since 1990.
- Manager selection is important for both sustainable and traditional investments, as there is high dispersion of returns across strategies.
This document discusses a study on the performance of sustainable investment strategies. Some key findings of the study include:
- Sustainable equity mutual funds and separately managed accounts had equal or higher returns and equal or lower risk than traditional peers for the majority of periods examined over the last 7 years.
- Existing research shows a positive relationship between corporate sustainability practices and stock price/operational performance.
- A sustainability-focused index outperformed the S&P 500 by 45 basis points annually since its inception in 1990.
- Manager selection is important for both sustainable and traditional strategies, as returns and risk vary significantly across funds.
This presentation is a short overview of the fundamental concepts of responsible property investing. Responsible Property Investing is expanding to include metrics that provide investors guidance on how to measure social responsibility within their portfolios and to compare social responsibility between different property portfolios.
This document provides an outline for a presentation on the impact of corporate social responsibility (CSR) on financial performance, with intellectual capital as a mediating factor. The presentation covers background on CSR and the debate around its impact on firm performance. It reviews literature showing both positive and contradictory relationships between CSR and performance. The presentation aims to establish a multidimensional relationship between CSR, intellectual capital, and financial performance in Pakistani firms. It outlines variables, hypotheses, and methodology involving a quantitative study of listed manufacturing firms.
Corporate Social Responsibility and Profitability in the Banking Sector: The ...Dr. Amarjeet Singh
In this article, we explore the relationship between corporate social responsibility and profitability with particular reference to Ethiopian financial industry. In line with this, the paper investigated the practice of corporate social responsibility and its impact on profitability in two private banks in Ethiopia. The study used two sampling phases. The first one is to sample out the two banks among the sixteen private banks operated in the country and the second phase is to select number of respondents within the selected banks. According to National Bank of Ethiopia, (NBE, 2020) annual report among the sixteen private commercial banks operated in the country, six of them were operated in the industry for more than 20 years and two banks namely Dashen and United banks were randomly selected for the study. The study used questionnaires as an instrument for data collection and the Cronbach alpha test was used to test the reliability of the instrument. Correlation analysis was carried out to identify the nature of strength and direction of the relationship between the independent variables (philanthropic, ethical, legal and economic responsibilities) and the dependent variables (profitability), regression analysis was also employed to determine the degree in which the dependent variable can be predicated or explained from the independent variables. The finding reveals that ethical, philanthropic, legal and economic responsibilities of CSR dimension have a positive and significant impact on profitability of the banks. Furthermore, the overall finding of the study suggested that CSR practice of banks has a significant impact on the level of their profitability. The study recommends that banks should improve their efforts exerted towards their CSR practice in order to enhance their profitability.
Impact Investing the Performance Realities WhitepaperPhil Zimmerman
Impact investing aims to generate both financial returns and positive social or environmental impact. While impact investing was once thought to require sacrificing returns, advances in impact data and portfolio construction now allow investors to pursue impact goals without compromising risk and return. More investors are demanding impact strategies, driving growth in impact funds and improved reporting from companies. Impact investing now spans asset classes and issues through strategies like ESG integration and positive screening rather than just negative screening.
Investissement responsable : la création de valeur à partir des enjeux enviro...PwC France
PwC s'est entretenu avec 17 sociétés de capital-investissement, dont six figurent parmi les dix plus grandes sociétés mondiales de capital-investissement, 11 parmi les 50 plus grandes, et six parmi les sociétés de taille intermédiaire. 10 sociétés ont leur siège social en Europe et sept aux États-Unis. Sept des groupes sont signataires des Principes pour L'investissement Responsable de l'ONU. L'étude relève qu'un examen du processus de conformité pour les membres signataires des PRI était déjà en cours. Il est possible qu'à l'avenir une communication obligatoire soit exigée des signataires.
Retrouvez toutes nos publications : http://www.pwc.fr/publications
The document is a primer for the 2014 Impact Capitalism Summit. It discusses how impact investing portfolios can outperform traditional investing by incorporating environmental, social and governance factors that are knowable but often ignored. It provides evidence that portfolios focused on high-impact companies can achieve lower risk and higher returns than benchmarks. The primer includes articles making the case for impact investing across different asset classes as part of a responsible investment strategy. It also profiles the summit organizers, Watershed Capital Group, and their experience assisting companies with sustainability solutions.
There is growing evidence that suggests that Environmental, Social and corporate Governance (ESG) factors, when integrated into investment analysis and decision making, it may offer investors potential long–term performance advantages. The number of companies disclosing information on their environmental, social and governance performance has grown very significantly in recent years. For large multinational companies, disclosure of ESG information has become a mainstream phenomenon It has become shorthand for investment methodologies that embrace ESG sustainable factors as a means of helping to identify companies with superior business models. ESG factors offer portfolio managers added insight into quality of a company’s management, culture, risk portfolio and other characteristics. By taking advantage of the increased level of scrutiny associated with ESG analysis, managers’ portfolios seek to identify companies based on performance indicators like
• Whether that company exhibits leadership in their industries.
• Whether that company is better managed and more forward thinking.
• Whether that company is better at anticipating and mitigating risk, meet positive standards of corporate responsibility.
• Whether that company is focused on the long term.
The applications of Sustainable Accounting, Reporting and Standardizations have taken a slow pace. The process began during early 1970s when it focused on social responsibility. During mid-late 1970s, it was shifted to employees and unions. 1980s saw explicit pursuit of economic goals with a thin veneer community concern and redefinition of employee rights as the major theme. In the 1990s attention shifted to environmental concern. Slowly, ‘environment reporting’, ‘triple bottom line reporting’, ‘sustainability reporting’ came into light.
This document summarizes a study that examines the impact of implementing social responsibility and disclosing social responsibility reports on capital costs for listed Chinese companies. The study uses quantile regression and ordinary least squares regression to analyze 227 listed companies rated by an ESG rating agency in 2019. The key findings are:
1) Implementing social responsibility had no significant overall impact on capital costs, but disclosing social responsibility reports was found to help reduce capital costs.
2) For companies with medium capital costs, better social responsibility performance was linked to higher capital costs, but performance had no significant impact for those with low or high costs.
3) Disclosing social responsibility reports effectively reduced capital costs, and the effect was more significant for companies
Barclays ESG_Brochure_US_18_small Sustainable Investing and bond returns NOV ...Andrew Bellak
1) The document presents the findings of a study by Barclays Research into the relationship between environmental, social, and governance (ESG) factors and corporate bond portfolio performance.
2) The study found that applying a positive tilt to ESG factors resulted in a small but steady performance advantage for corporate bond portfolios, with no evidence of negative performance impact. The positive effect was strongest for governance factors.
3) The study contributes new evidence that ESG investing need not negatively impact bondholder returns and can be successfully applied to credit markets in addition to equity markets.
Istanbul Stock Exchange Sustainability index project: what institutional inve...Graham Sinclair
Presentation to Istanbul Finance Summit covering SinCo perspective on what institutional investors want and the role of the ISE Sustainability Index project ISESI.
The document presents Climate Neutral Investments Ltd., a company that provides a climate neutral investing approach. It discusses socially responsible investing and outlines Climate Neutral's concept of researching portfolio carbon emissions and offsetting them through purchasing carbon credits from certified emission reduction projects. The company aims to neutralize the greenhouse gas emissions of investment portfolios while achieving traditional financial returns and positive social and environmental impacts.
The document discusses green banking and socially responsible investing. It provides background on the speaker's experience screening companies for environmental and social factors since the 1990s. It also outlines the role of banks in reducing information asymmetry regarding environmental and financial risks through lending practices. Socially responsible investing funds that consider ecological and social impacts are growing significantly. The Principles for Responsible Investment were established in 2006 as a framework for investors to achieve sustainable markets and returns through environmental, social and governance analysis.
Similar to Socially Responsible Investing - Keynote - "State of the Union" (20)
Socially Responsible Investing - Keynote - "State of the Union"
1. Progressive Investing:
A “State of the Union”
Review of Performance and Impact
Mark T. Donohue
Clean Technology Entrepreneur-in-Residence, Babson College
&
President, Sustainable Impact Investing, LLC
6/17/2010 Mark T. Donohue: BaseCamp SRI, NYC 1
2. SRI Investing Today: Sizing the Market
570 UN
“Principles for
Responsible SRI Industry
Investment”
Signatories $7 trillion in
assets under
management
$18 trillion in assets
under management
Source: UNEP Finance Initiative - Annual Report of the PRI initiative 2009; swissHEDGE
6/17/2010 Mark T. Donohue: BaseCamp SRI, NYC 2
3. SRI: Terminology
Ethical Investing: “Negative screening. Avoiding
companies on ethical, moral or religious grounds (e.g.
gambling, alcohol, tobacco). Classic SRI can embody solely
negative screens or negative plus positive screens.
Impact investing: “Actively placing capital in businesses
and funds that generate social and/or environmental good
and a range of returns, from return of principal to above
market.”* The primary focus is solely on positive screens.
*Adapted from the Monitor Institute: Investing for Social and Environmental Impact
**Adapted from Krosinsky: Sustainable Investing: The Art of Long-Term Performance
6/17/2010 Mark T. Donohue: BaseCamp SRI, NYC 3
4. SRI: Terminology
Sustainable Investing / ESG: “Simultaneously pursuing
opportunities that arise from climate change while at the
same time avoiding risk in securities and industries that will
most likely be affected by ESG issues.” (Environment, Social
& Governance issues)**
*Adapted from the Monitor Institute: Investing for Social and Environmental Impact
**Adapted from Krosinsky: Sustainable Investing: The Art of Long-Term Performance
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5. The New Criteria:
ESG
• Environmental
• Social
• Governance
• Used to find hidden value or
deficiencies that may not yet be
reflected in financial results and
share prices. *
*Adapted from RiskMetrics methodology, “Global ESG 100” January 2010
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6. Sustainable Investing Provides
Better Risk Management
Pricing in risk
Credit risk
Liability risk
Reputational risk
Adds managers that diversify world view
of your portfolio
Defining materiality of extra-financial
factors
Life cycle environmental cost-benefit-risk analysis
Companies with enhanced ESG performance offer reduced
risk in terms of “long term” beta, given their mgrs’ better info
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8. RiskMetrics Global ESG 100
Source: RiskMetrics Group, “Global ESG 100” January 2010
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9. Examining the Links Between ESG
Factors & Investment Performance
A review of 20 academic
12 studies that examined
fund performance from
1963-2005 (adapted from
“Demystifying
Responsible Investment
Performance,” UNEP &
Mercer
4 4
Positive Negative Neutral
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10. Moskowitz Prize Winners 2004-2009
• 2004: “Corporate Social and Financial Performance: A Meta-Analysis”
• 2005: "The Economic Value of Corporate Eco-Efficiency”
• 2006: "Monitoring the Monitor: Evaluating CalPERS' Shareholder
Activism”
• 2007: "Does the Stock Market Fully Value Intangibles? Employee
Satisfaction and Equity Prices”
• 2008: "The Wages of Social Responsibility”
• 2009: "The Economics and Politics of Corporate Social Performance"
Source: Center for Responsible Business, Haas School of Business, UC Berkeley; www.sristudies.org
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11. SRI as Valid Statistical Construct
2004 Winners - Orlitzky, Schmidt & Rynes: “Corporate
Social and Financial Performance: A Meta-Analysis”
University of Sydney & University of Iowa
• Meta-analysis of 52 studies examining the relationship between
Corporate Social Performance (CSP) and Financial Performance (CFP)
• The studies were performed during the 1972-1997 time period
• Conclusion: ”There is a positive association between CSP and CFP
across industries and across study contexts."
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12. Linking Environmental & Financial
Performance to Valuation
2005 Winners - Guenster, Derwall, Bauer and Koedijk:
"The Economic Value of Corporate Eco-Efficiency"
Erasmus University
• Authors found positive links between eco-efficiency and firm value
and eco-efficiency and return on assets
• Conclusion: “Results suggest that managers do not face a tradeoff
between eco-efficiency and financial performance, and that investors
can use environmental information for investment decisions."
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13. Measuring the Impact of
Shareholder and Social Activism
2006 Winner - Barber - "Monitoring the Monitor:
Evaluating CalPERS' Shareholder Activism"
University of California at Davis
• Author reviews the theory and empirical evidence underlying the
motivation for institutional activism while distinguishing between social
activism and shareholder activism.
• Estimated wealth generated via CalPERS shareholder activism is $3.1bn
between 1992-2005 (author’s figures)
• Conclusion: “Institutional activism should be limited
shareholder activism where there is strong theoretical and
empirical evidence indicating the proposed reforms will increase
shareholder value”
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14. Quantifying the Human Element
2007 Winner – Edmans - "Does the Stock Market Fully Value
Intangibles? Employee Satisfaction and Equity Prices"
University of Pennsylvania, The Wharton School
• A value-weighted portfolio of the "100 Best Companies to Work For in
America" earned an annual alpha of 3.5% from 1984-2009, and 2.1%
above industry benchmarks.
• Conclusions
• Employee satisfaction is positively correlated with
shareholder returns
• The stock market does not fully value intangibles
• Certain ("SRI") screens may improve investment returns
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15. Examining ‘Doing Well by Doing Good’
2008 Winners – Statman & Glushkov –
"The Wages of Social Responsibility"
Santa Clara University, Leavey School of Business
• The return advantage that comes to SR portfolios from the tilt
toward stocks of companies with high scores on social responsibility
is largely offset by the return disadvantage that comes to them by the
exclusion of stocks of ‘shunned’ companies.
• Conclusion: Investors can “do well by doing good” by using a
best-in-class method for portfolio construction. However, this
method does not call for negative screening of ‘sin’ stocks.
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16. The Relationship Among CSP, CFP
and Social Pressure
2009 Winners – Baron, Jo, Harjoto - "The Economics and
Politics of Corporate Social Performance"
Stanford University, Santa Clara University, Pepperdine University
• Authors examined examines the interrelations among CFP, CSP, and
social pressure using a large data set of firms with social engagement for
1996 to 2004.
• For consumer industries, greater CSP is associated with better CFP and
the opposite is true for industrial industries.
Conclusion: “Empirical studies have examined the relation
between CSR and CFP, and while the results are mixed, overall the
research has found a positive but weak correlation.”
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17. Paul Hawken: Critic or Purist?
“The cumulative investment portfolio of the
combined SRI mutual funds is virtually no
different than the combined portfolio of
conventional mutual funds.”
“The language used to describe SRI mutual
funds, including the term “SRI” itself, is vague and
indiscriminate and leads to misperception and
distortion of investor goals.”
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18. Walking the Walk: Hawken &
Highwater Global
• Over 90% of Fortune 500 companies fail HG screening
• Google, Vestas, Ford among select companies
• Since inception in the fall of 2005, Highwater has returned a
total of 52.55% (as of Feb, 2010)
• Key question:
“Are the company's products or services helpful?”
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19. Selected SRI Fund Performance 2006-2009
25%
20%
20%
15%
10%
5%
0%
0%
-5%
-10%
-15% -13%
-16%
-20%
Calvert Social Domini Social Parnassus Equity Highwater
Investment Equity Income Global Fund
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20. Source: Krosinsksy & Robins, 2010
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22. The Blended Value Approach
“…that all organizations, whether for-profit or
not, create value that consists of economic, social and
environmental value components—and that investors
simultaneously generate all three forms of value
through providing capital to organizations.”
- Jed Emerson
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23. Asset Class Vehicles Benchmark
Cash / cash equivalents Community banks, credit 91-day Treasury Index
unions, loan funds
Fixed income Bonds, debt securities Barclay’s Capital
(sovereign, corporate) Aggregate Bond Index
Public equities Stocks, mutual funds, ETFs Russell 2000, S&P 500
Private equity Hedge funds, fund of funds, Private Equity
other niche products Performance Index
Real estate REITs, MBSs NCREIF Property Index
Commodities ETFs linked to commodities, S&P GSCI Commodity
Chicago Climate Exchange Index
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24. Asset Class: Cash/Cash Equivalents
Small Banks/Credit Unions
• Support community development
• Local farming
• Local small, sustainable businesses
• Energy efficiency programs
Large Banks
• Via ESG/CSR criteria
• Provide funding to underserved communities
• Microfinance
• Community Reinvestment laws (CRA)
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25. Asset Class: Fixed Income Securities
Bonds: Targeted Investments
• Traditional low levels of ESG activity
• Community development / infrastructure
Corporate Debt
• Issued by corporations with strong social/environmental
programs
Government Debt
• Creation of public goods
• Development of sustainable energy sources
• Risk of political controversy for investors
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26. Fixed Income: Domini Social Bond Fund
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27. Fixed Income: Pax World High Yield
Bond vs. Barclays Aggregate Bond
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28. Asset Class: Public Equities
Financial Analysis & Portfolio Construction
• ESG analysis provides insight beyond what is presented
in financial statements
• SRI + ESG screening criteria results in slightly lower
volatility than non-screened benchmarks
Long Term Investment Horizon
• Lower turnover = higher returns
• Incentives for management to overcome ST
pressures, i.e. ‘market myopia’
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29. Winslow Green Growth vs. Russell 2000
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30. Performance of CleanTech Indices vs S&P 500
80%
60%
40%
20%
0%
2007 2008 2009 LTM Q1 2010 3 YTD
-20%
-40%
-60%
-80%
CTIUS ECO AGIGL NEX S&P
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33. Water: Long-Term Outperformance
Water Utility Stocks vs. Major Indices
1998-2003
800%
600%
400% Water Utility Stocks
DJIA
200% S&P 500
Nasdaq Composite
0%
Water DJIA S&P 500 Nasdaq
Utility Composite
Stocks
Source: Summit Global Management, Bloomberg
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34. Water: A True Neccessity 5 Yr Annualized Returns
25%
20%
15% Water Utility Stoc
DJIA
10% S&P 500
Nasdaq Composit
5%
0%
1989-1993 1993-1998 1998-2003 2003-2008
-5% Source: Summit
Global
Management, Bloom
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35. Asset Class: PE/VC
Private Equity & Hedge Funds
• Hedge funds can incorporate SRI criteria as input into
taking long and short positions in instruments
• Funds may adjust standard investment strategies by
limiting exposure to pre-defined SRI-compliant
instruments*
• Relatively few hedge funds known to incorporate ESG
criteria
Venture Capital
• Classic VC investments in SRI are found in the cleantech
sector
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36. International Clean Technology
Returns Analysis (ICTRA)
• Comprehensive annual report prepared by New Energy
Finance (Bloomberg) and European Energy Venture Fair
• Gathered from all stages of private equity investments
across EU and N. America, the analysis delivers aggregate
return metrics at the investment level rather than the fund
level
• 456 investments, 379 portfolio companies analyzed
• 2010 results will be presented in September at the
European Energy Venture Fair (EEVF)
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37. ICTRA Report: Investment IRR by Outcomes
(# investments, # companies)
21.3%*
Public listing (31, 25) 83.2%
Later up round (69, 65) 32.9%
M&A (33, 27) 13.5%
PIPE** (13, 12) -0.5%
No substantial change (186, 169) 0.0%
Later down round (56, 48) -15.5%
Written down (30, 29) -44.4%
Liquidated/written off (38, 35) N/A
All Venture (456, 379) 42.4%
Source: ICTRA, Bloomberg New Energy Finance
4.5%*
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38. Asset Class: Real Estate
Real Estate as Hard Assets
• Responsible Property Investing (RPI)
• No-cost & value-add strategies
• Green building & energy efficiency
• Community (re)development
• Sustainable materials
• Smart growth & conservation
Real Estate as Securities
• REITs
• Mortgage-backed securities
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39. Investments in Energy Efficiency = High Returns
Investment/ Rate of Annual Asset value Simple
sq ft (US$) energy savings/sq increase at payback
savings ft (US$) 10% cap
rate (US$)
Janitorial 0.01 5% 0.14 135,000 Immediate
O&M 0.05 9% 0.20 198,000 4 months
Lighting 1.04 16% 0.36 360,000 3 years
HVAC 1.21 9% 0.21 207,000 6 years
Combined 2.30 40% 0.90 900,000 2.5 years
Source: Krosinsky & Robins, 2010
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40. Asset Class: Commodities
Few opportunities for ESG
• Commodities directly tied to natural
resources
What role for carbon?
• As pricing mechanism for externalities
Potential for sub-categories
• Allow for sustainability factors, i.e. land use
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41. What Does the Future Hold?
• The convergence of sustainability and financial analysis will continue
• Continued integration of ESG criteria by more asset/fund managers
across asset classes, but primarily in public equities
• Evolution of regulations, standards and disclosures related to
emissions/exposures
• Growth and development of carbon markets will provide
opportunities and challenges
• Release of key UN report, "The Economics of Ecosystems and
Biodiversity“ in late 2010, which will try to offer best of class metrics is
valuing material inputs to business.
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42. Q&A
Contact Information:
Mark T. Donohue
Mark.donohue@babson.edu
617.571.4440
http://www.linkedin.com/in/marktdonohue
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43. Appendix: United Nations Principles for
Responsible Investment
1. We will incorporate ESG issues into investment
analysis and decision-making processes.
2. We will be active owners and incorporate ESG issues
into our ownership policies and practices.
3. We will seek appropriate disclosure on ESG issues by
the entities in which we invest.
4. We will promote acceptance and implementation of
the Principles within the investment industry.
5. We will work together to enhance our effectiveness in
implementing the Principles.
6. We will each report on our activities and progress
towards implementing the Principles.
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44. Selected Sources
• Sustainable Investing: The Art of Long-Term Performance, Krosinsky & Robins
• Handbook on Responsible Investing Across Asset Classes, Boston College Carroll
School of Management, Institute for Responsible Investment
• UNEP FI publication: “Translating ESG into Sustainable Business Value”
• UNEP FI publication: “Demystifying Responsible Investment Performance”
• Goldman Sachs Global Investment Research: GS SUSTAIN focus list
• Impact Investing Report, The Parthenon Group
• Demystifying Responsible Investment Performance: A review of key academic
and broker research on ESG factors , UNEP FI & Mercer
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Editor's Notes
Over the past 30 years, the field of socially responsible investing has grown and become more sophisticated. With these developments has come a new and evolving vocabulary to define and describe the industry. Some observers, notably Paul Hawken, take a decidedly more critical approach to this evolving language: “The language used to describe SRI mutual funds, including the term “SRI” itself, is vague and indiscriminate and leads to misperception and distortion of investor goals.”
Over the past 30 years, the field of socially responsible investing has grown and become more sophisticated. With these developments has come a new and evolving vocabulary to define and describe the industry. Some observers, notably Paul Hawken, take a decidedly more critical approach to this evolving language: “The language used to describe SRI mutual funds, including the term “SRI” itself, is vague and indiscriminate and leads to misperception and distortion of investor goals.”
While leading companies and organizations such as Risk Metrics Group (formerly Innovest) and the United Nations Principles for Responsible Investment are working to establish international standards for ESG criteria, this is still an area that is evolving. However, we can see from across the spectrum of SRI funds that ESG criteria are the common theme when it comes to determining which companies are including in portfolio construction.ESG investing underscores the widespread acceptance of the principle that investors cannot, in the long run, achieve their goals by investing in corporations that externalize their costs onto society.The common theme among the new vocabulary of SRI is the foundation of environmental, social and governance issues. ESG criteria is the primary metric by which companies are being measured and valued today. As ESG criteria become standardized and integrated into more financial modeling and valuation techniques, the underlying investment philosophy will begin to change.
It is not entirely clear how risks posed to financial institutions when considering environmental/climate/social issues are priced into valuations. Current research suggests using beta analysis – that is, measuring a company’s financial risk – that includes sustainability criteria as derived from ESG metrics. Examples include looking at costs-benefits, e.g. impact of potential litigation costs from environmental factors (asbestos, oil spills, etc.)Cost-benefit: costs associated with regulations, legal costs, taxes, environmental provisionsLT growth: sustainability themes, demographics, renewables, developing world market growthRisk mitigation: internal policies, HR + human capital practices, stakeholder dialog, corporate governance practices, environmental management systems
Where are we today? After a horrendous 2008 where all funds across the world were battered, 2009 shows that sustainable funds are bouncing back quicker than other types of funds. As stated by analysts at SAM, sustainable investing is an “all-weather approach” that is supported by strong correlations between social performance (or CSR) and financial performance (as shown by stock returns).The Social Investment Forum (SIF), using data provided by an independent third party, Thompson Reuters, conducted a review of 160 socially responsible mutual funds from 22 different fund families. The analysis showed that 65% of the 160 funds outperformed their benchmarks over the entire 2009 calendar year. Social Investment Forum (January 21, 2010) “Two thirds of Socially Responsible Mutual Funds Outperformed Benchmarks During 2009 Economic Downturn.” Press Release. Retrieved 2010-3-27.
From its inception in February 2005, the Global ESG 100 has outperformed the benchmark FTSE All World Developed (AWD) Index by 116 basis points per annum, as of the end of 2009. This is just one example of several ESG-calculated funds that has outperformed its traditional, “mainstream” benchmark comparison index.
Adapted from Demystifying Responsible Investment Performance: A review of key academic and broker research on ESG factors (joint study by UNEP FI and Mercer).50% of the academic studies show a positive correlation between ESG factors and investment performance.
The annual Moskowitz Prize is the only global award recognizing outstanding quantitative research in the field of socially responsible investing (SRI). The prize was launched in 1996 by the Social Investment Forum - the national trade association for the socially and environmentally responsible investing (SRI) industry - to recognize the best quantitative SRI study.
Meta-analysis of SRI performance over the past 30 years shows that there is not a trade-off between social performance and financial performance of companies. In fact, the data shows that one reinforces the other. Ultimately, market mechanisms may encourage social performance.
Authors used Innovest environmental rating system as basis for hypothesis testing. Through statistical testing, they showed that companies with higher eco-efficiency ratings had higher values and better ROA.
From the paper:“The amount business spends on CSP dwarfs the amount it spends on campaign contributions and lobbying expenditures. Milyo, Primo, andGroseclose (2000) estimated that corporate campaign contributions and lobbying expenditures were $300 million and $3 billion, respectively, whereas charitable contributions alone were $35 billion.”“Despite the embrace by much of the business community, the relations between social performance, financial performance, and social pressure remain as much a matter of faith and speculation as of evidence, assessment, and calibration. Moreover, interpretations of empirical results vary, and the direction of causation remains an open question. That is, good CSP could cause good CFP, but good CFP could provide slack resources to spend on CSP.”
Highwater Global clearly outperforms other SRI funds.
One of the hallmarks of truly sustainable funds is low portfolio turnover. The graphic clearly shows a positive correlation between low turnover and fund performance. This further emphasizes the importance of having a long-term investment horizon versus short-term, more speculative holdings.As a broader illustration of how far removed we are from this ‘truth’, consider that stock market turnover has increased in the US, for example, from 25% in 1986 to 150% in 2004. What further proof is needed that fund managers and large investment banks focus on trading at the expense of long-term value creation?
Much of the research in SRI categorizes investments by asset class. These are some examples of the different investment vehicles available to investors in each category as well as a conventional benchmark that is used to measure SRI fund performance against the broader market. These are examples; different academics have differing views on benchmarking.Approaches [among investment funds] still vary widely between firms, which is confirmed by statistics from PRIassessments. ESG integration remains far from covering all asset classes. The latestreport noted that:■ Integration primarily concerns equities for both asset owners and investmentmanagers.■ Fixed-income products, especially those issued by governments, and hedge fundspost a lesser degree of integration.
Some important elements for this asset class include: Understand bank’s mission statement Identify key features of the financial institution’s internal social and environmental performanceExamples: Shore Bank (US);Triodos Bank (UK/NED), Wainwright, New Resource bank, RS Social FinanceCDFI: Community Development Finance Institution - are entitled to special federal grants on the condition thatthey direct a certain percentage of their capital and business to serving thosewho have historically lacked access to the financial markets.The generally strong performance of their loan portfolios demonstrates that,while the risk of lending in low-income communities—or to emerging sectorssuch as green banking—may be different, it is not necessarily greater than thatin other markets.Equator Principles: identify social and environmental guidelines for project finance.
Investors who want to select SRI-themed bonds are forced to rely on specialist asset managers/research providers as the ratings agencies are not yet playing a major role. New investments in infrastructure include certain cleantech initiatives such as water/wastewater treatment, efficiency projects, solar/wind & other power generation projects.Best practices include: Understand role of credit-ratings agencies Analyze credit risk through ESG lens to help identify elements that could lead to default Investors should directly negotiate terms that include ESG criteriaFund examples include Sarasin Sustainable Bond EUR (SUI); Pax World High-Yield Bond Fund (US); Norwich Sustainable Future Corporate Bond (UK); ABN AMRO Groen Funds (NED)
The Domini Social Bond Fund seeks to provide its shareholders with a high level of current income and total return by investing in bonds and other debt instruments that meet the Fund's social and environmental standards.Standards are achieved primarily through negative screening (tobacco, arms, etc.)Domini shows better performance than other, similar funds in this particular asset class. It is interesting to note the severity of the drop in late 2008 of the Barclay’s benchmark fund; Domini shows a much less severe drop and a more sustained rise in 2009.
The High Yield Bond Fund seeks to invest in forward-thinking companies with sustainable business models that meet positive environmental, social and governance standards. The High Yield Bond Fund avoids investing in companies that its investment adviser determines are significantly involved in the manufacture of weapons or weapons-related products, manufacture tobacco products, or engage in unethical business practices (negative screening).The fund typically invests in fixed income securities with ratings of BBB- or below (junk bonds).
- Review www.sristudies.org- Some studies show positive correlation between ESG/CSR and financial performance while other studies show no statistical significance:: jury is still out?- Screened investment products—and many other investment products as well—typically use optimization techniques to readjust the risk characteristicsof their screened portfolios relative to a particular benchmark.SRI funds typically show lower volatility than non-ESG screened funds. By properly recognizing the importance of certain ESG issues to the long-term performance of companies, investors are able to benefit as well as create incentives for managers to overcome the short-term pressure created by “market myopia.”It is important to determine whether or not fund managers have adequate ESG research capabilities; there are 3rd parties who can provide such specialized research including KLD Research & Analytics in the US and others around the world.Cleantech Index/CleanEdge Index (as proxies for cleantech industry)Alternative Energy IndexPZD (Powershares) / other ETFs
2001-2010 comparison rangeWGGTX: The investment seeks long-term capital growth. The fund normally invests 80% of net assets (plus any borrowings for investment purposes) in equity securities of environmentally sustainable companies. It may invest in any industry sector, but tends to focus on certain environmentally-oriented investment themes. The fund may invest in companies of any size capitalization. It intends to invest a significant portion of assets in domestic small-capitalization companies.The fund may invest up to 20% of assets in foreign securities
Brief history of Cleantech Index:Trading on the New York Stock Exchange (NYSE) since January 15, 2009, Cleantech Index (CTIUS) was introduced on the American Stock Exchange (ASE) in February, 2006 and represented the first index of its kind. The purpose of CTIUS was to provide the first cost-effective way to invest in the rapid growth of clean technology companies (which are found in a variety of industrial sectors). Within the Index, CTIUS companies fall into industrial sectors corresponding with the Cleantech Group's definition of cleantech.Additional remarks on cleantech as a separate asset class (from Cleantech Forum Paris, 2010)Asset class of clean technologies are exempt from taxes in some countries—these measures need to be increasingly widespreadClean energy needs to be a sustainable asset class to attract institutional investors, e.g. pension funds and bond finance. To achieve this, we have to be able to rate clean power plants, so investors can evaluate their investments.
Notes on Powershares Cleantech:The PowerShares Cleantech Portfolio (Fund) is based on the Cleantech Index™ (Index). The Fund will normally invest at least 90% of its total assets in securities that comprise the Index and ADRs based on the stocks in the Index.
PHO started in 2007 – only 3 yr performance comparison available
Water is very much a localized resource, unlike electricity or natural gas that can be widely distributed, so local waterprovision is one of the world’s few true natural monopolies. Their business is simple – to provide anuninterrupted supply of clean water and dependable wastewater services to an ever-growing andnever-satiated demographic. But this rather dull business model, plus the fact that water has no economicsubstitute, has created an enduring industry that is unequaled in long-term performance and relativelyunaffected by cyclical market conditions. (Taken from Summit Global water case study)
Impact of shorting on SRI: On the positive side, shorting is a way for responsible investors to profit from their insight into the materiality of ESG risks rather than just divesting a stock and preventing capital loss. (Taken from BC IRI handbook.)Basically, SRI investors can short companies that they think are not prepared to handle rigors of ESG-screening and go long on those that are higher ranked according to ESG criteria.
Participation is limited to private equity and venture capital investors that have made at least one clean technology investment in Europe or North America over the past seven years.Formerly known as the European Clean Energy Venture Returns Analysis (ECEVRA), ICTRA presents a comprehensive and robust insight into returns being achieved internationally on clean energy and green technology investments. Gathered from all stages of private equity investments across Europe and North America, the analysis delivers aggregate return metrics at the investment level rather than the fund level.
Energy conservation is the central factor that benefits investment returns: - Lowers operating costs - Improves net operating margins - Raises valuations = higher returns from operations and price appreciationREITs offer some targeted opportunities for investors to look at certain trusts that emphasize green buildings, energy efficiency, etc.MBS as fixed-income vehicles: burden lies with investors to examine MBS envelopes for holdings, e.g. are pools of mortgages tied to community (re)development, affordable housing, new ‘green’ construction, etc.CalPERS and CalSTRS have goals to reduce energy consumption in their RE holdings by 20% over 5 years.
This simple table shows that relatively small investments (low-cost strategy) are proven to result in increased returns and lower risks associated with exposure (financial, physical and policy risks).
Responsible investment in commodities remains more an idea to be explored than a developed practice.
Negative screening offers the potential to remove from investmentportfolios stocks that destroy long-term value through externalities, createheightened risk exposure because of social and/or environmental changes, orviolate an investor’s moral principles.Positive screens are used to emphasize those industries that responsibleinvestors believe are contributing solutions to ESG problems. Because ESGissues impact the long-term sustainability of companies and industries, positivescreens can act as a proxy for sound, long-term management practices in acompany.Henderson Global Investors Global Care Growth FundPerformance-based or “best-in-sector” screens are similar to positive screens,but rather than focusing on industry sectors, an external performance indicatoris used to identify companies that qualify as investable. For example, a company may be within thisinvestable universe if its level of carbon reductions puts it in the top 10 percentof its industry, or if its carbon emissions are below a particular percentage overa given time.