Thursday, December 17, 2009

Emerging market companies lagging on ESG reporting

A new study concludes that although a significant number of emerging market companies have begun to report on some environmental, social and governance (ESG) issues, most do not report extensively or according to global standards.

The Social Investment Forum (SIF) says that 96% of emerging market firms reported on at least one ESG factor, but only 14 of 100 companies reported in accordance with Global Reporting Initiative guidelines.

Governance structures and board committees were the most commonly reported ESG indicator while environmental information was the least likely to be disclosed.

“This report clearly points to a need for companies in emerging markets to improve their ESG reporting practices, and investors must become a key driver in encouraging companies to bolster transparency,” says Lauren Compere of Boston Common Asset Management, co-chair of the SIF’s Emerging Markets Disclosure Project.

Companies from Brazil and South Africa were the most likely to issue reports using Global Reporting Initiative guidelines. The report notes that both countries operate a socially responsible stock market index.

Thursday, December 10, 2009

8 in 10 can’t think of a corporate leader in climate change

Is that because there isn’t one?

There was a lot of interesting information in a CBSR webinar that I attended yesterday, Climate change: Public Opinion, Corporate Action and Update from Copenhagen. I’ll break it down into some themes that are particularly relevant to the SRI community.

Chris Coulter of GlobeScan presented 7 key findings on climate change. The questions were asked in a number of countries, and Mr. Coulter often highlighted the Canadian results for us. Notably, the question ‘Which company is doing the most to address climate change?’ elicited no answers from 8 out of 10 Canadians, indicating a real void in this area. Of the responses that were given, the top 4 ‘companies’ were Toyota, Cascades, Ford and Greenpeace. Should Ethical Funds be top of mind here? I don’t know. But it certainly indicates a general lack of corporate leadership and communication, and a significant opportunity for somebody to step forward.

Looking further into this abyss, in answer to an open ended question 'What have you done to reduce your impact on climate change?' the number one answer, provided by 27% of people was ‘recycle’.

We need to formulate some clear and simple messages, and start getting the word out more effectively. Luckily, it appears that people are receptive, in that 78% of Canadians feel that investing in renewables, public transit, energy efficiency etc. will be good for the economy. (and perhaps, if we get that messaging right, for their portfolio).

Mr. Coulter concluded that Canadians believe in the economic upside of a greener world, but are very confused as to how it’s going to happen. “Companies need to talk about these issues. Raising it as an agenda item is also a way to show leadership.”
That would be a start.

Tuesday, December 8, 2009

Be Invested. In a better world.

The Inhance funds have now officially morphed into the IA Clarington SRI funds, which will be offered nationally through IA Clarington's distribution network, as well as through Vancity branches. The Inhance fund family, Vancity Circadian fund family and Vancity Perspectives portfolio solutions family have been merged with funds managed by IA Clarington and represent approximately $92 million in assets under management (AUM), bringing IA Clarington's total AUM to well over $7 billion.

As previously reported, the investment management team at Inhance, including Steve MacInnes and Dermot Foley, has moved to Vancity and will continue to manage the funds for IA Clarington. "We were very pleased to be able to maintain the Inhance portfolio management team," said David Scandiffio, President of IA Clarington. "They are recognized leaders in this category and bring a vast amount of experience to the table."

IA Clarington has integrated the marketing of the SRI funds into the existing IA Clarington approach, which I think sends a message that these are funds for everyone. To their overarching advertising theme ‘Be Invested.’ they have added ‘In a better world.’

Rob Taylor, IA Clarington’s Vice President, National Accounts and Business Development talked about how they developed the campaign. “We could look at SRI from an outsider’s perspective, and ask ‘what does the investor want?’. We thought you should be able to feel good about where you invest your money. We wanted to focus on the underlying benefit of these funds, and then portray that in three words, and that’s how we came up with ‘Feel Good Investing’.”

The website is up and running for the launch of the funds and more marketing material will be available soon, featuring the same imagery and language that’s on the website now. “It can be a challenge for advisors to get information across to their clients. The industry spends a lot of time on numbers, but we think images and pictures and stories are a more powerful way to reach investors,” continued Mr. Taylor, “and that’s how we intend to build our campaign.”

‘Introducing Feel Good Investing – FGI – and the IA Clarington Inhance family of feel good investment funds.
Socially Responsible Investing (SRI) redefined: SRI is FGI.’

Do we really need another acronym? I don’t know. But a non SRI fund company demonstrating a commitment to SRI – that’s something we need more of.

Friday, December 4, 2009

Who is Qtrade, anyway?

When the news was announced Wednesday of Meritas’ merger with Qtrade, that’s the first question that came to my mind. I googled Qtrade, and discovered that they were the top rated on line brokerage. Rob Carrick said “The little independent from out west beats the big boys of Bay Street yet again. The story here is that Qtrade is relentless in scoping out the best innovations of its competitors and nimbly adopting them.” Sounds good so far.

I asked around, and people in Vancouver told me ‘They have a great reputation, but I don’t know much about them’. So I called Scott Gibner, CEO of Qtrade Financial Group, and asked him how they came to merge with Meritas. ”Both our firms got started in 1999-2000, so we grew up at the same time. We were always aware of Meritas’s mandate, and their growth. We have a number of relationships with credit unions, and that was a significant driver in our search for a socially responsible mutual fund partner.

“When we first started talking to the people at Meritas, they kept stressing that they had a pure SRI mandate and they weren’t interested in anything else. We said ‘Listen guys, we know that. That’s why we’re here.’”

Qtrade Financial Group provides wealth management services to financial institutions, among them credit unions, trust companies and financial planning companies. Qtrade Fund Management (QFM) offers a family of mutual funds, as well as managed portfolio solutions. “We plan on growing the SRI component. We have a very large need for it." continued Mr. Gibner. “Gary Hawton is the Chief Investment Officer of QFM because the SRI component is going to be pervasive throughout the offering.”

At this point, QFM has six wholesalers, primarily supporting the credit union system. But as the firms integrate, that number will grow.

Mr. Gibner was unequivocal in his support of SRI. “SRI should be part of everyone’s portfolio. It’s certainly part of my portfolio” Given the wishy washy views of some firms in the SRI space, that’s music to my ears. Welcome Qtrade!

Thursday, December 3, 2009

And the winner is….

Last night the Canadian Investment Awards Gala took place at the Fairmont Royal York in Toronto. The awards recognize leading investment products and firms who demonstrate a commitment to excellence within the Canadian financial services industry. The investment categories have grown over time, and in addition to the standard fund types and the SRI award, a set of awards for hedge funds was added this year.

The Socially Responsible Investment Fund Award was won by the Inhance Monthly Income Fund. Steve MacInnes, the Chief Investment Officer at Inhance, was on hand to accept the award. “It’s a compliment to myself and the team we have at Inhance. The Monthly Income Fund is a fund for the times we went through. It’s very well balanced, no crazy bets and diversified across all yield asset classes. It outperformed it’s balanced fund peer group. We had a shot at winning the whole category”

The runner up was the Ethical Balanced Fund. Both funds are in the top quartile based on Globefund rankings of 3 year performance of the Canadian Equity Balanced Peer Group. Perhaps we can now put an end to the pervasive myth of SRI underperformance.

Glorianne Stromberg was the winner of this year’s Career Achievement Award. This award is well deserved, and a courageous choice given the mutual fund industry’s reluctant acceptance of many of her much needed reforms.

The second annual Green Company Award for Environmental Leadership went to TD Bank. Peter Love, the former Chief Energy Conservation Office with the Ontario Power Authority, when presenting the award, asked a question that goes to the heart of SRI, ‘What good is prosperity if it cannot be sustained?”.

Unfortunately, Thomas Dyck in his acceptance speech spoke about the Great Canadian Shoreline Cleanup, a wonderful initiative, but neglected to mention the impact of TD’s Sustainable Investing Policy introduced earlier this year which now takes ESG factors into consideration when managing their 53 billion dollar mutual fund portfolio.

The CIA Gala is itself committed to going green. The event was powered with renewable energy by Bullfrog Power, and the program was printed by Informco on ‘100% recycled paper with no new trees harmed, using vegetable based inks and Environment 14001 certified processes.’ Hmm, looks like the broader investment community is finally catching up to us!

Wednesday, December 2, 2009

Qtrade and Meritas to join forces

Qtrade Fund Management and Meritas Financial have announced an agreement to combine their operations, creating a company with $4 billion in assets under administration.

Under the terms of the friendly merger, Meritas will continue to operate as an independent entity within the Qtrade Financial Group, specializing in socially responsible investing.

“The opportunity to broaden our wealth management offering with Meritas, a leading provider of SRI investment solutions in Canada, is very exciting,” said Qtrade CEO Scott Gibner in a statement. “Meritas’ strong and unwavering commitment to SRI over the last 10 years has been the foundation for their success and, as SRI funds continue to grow in popularity in Canada and globally, we believe this dedication and historical track record will continue to serve Meritas very well into the future.”

“I am excited by the expanded prospects for Meritas as a result of this partnership with Qtrade,” added Meritas CEO Gary Hawton. “This is a significant milestone in the growth and maturity of Meritas Mutual Funds."

During the current difficult economic climate where many mutual fund companies are cutting staff and closing funds, Hawton says Meritas plans to do the opposite, hiring more staff, developing stronger relationships with advisors and likely adding new funds to the Meritas family.

“Our growth suggests that more Canadians are asking for SRI funds to be added to their portfolios,” Hawton says. “I am convinced that Meritas will emerge as the SRI fund company of choice for a growing number of investors and advisors.”

The transaction is expected to close at the end of March 2010, subject to regulatory and other approvals.

Monday, November 30, 2009

Thomson Reuters announces ESG acquisition

News giant Thomson Reuters has acquired Swiss-based ESG information provider ASSET4 AG for an undisclosed sum.

In a news release, Thomson Reuters said the deal represents a step forward in the integration of ESG data into mainstream financial analysis and underscores the company’s commitment to meet the evolving needs of the global financial community.

The global credit crisis, climate change, new regulation and other issues have highlighted the need for financial firms to assess the environmental, social responsibility, governance and reputational risks attached to the firms in which they invest, the release stated.

“Through the acquisition of ASSET4’s leading ESG information and tools, Thomson Reuters clients worldwide will benefit from having direct access to this increasingly important information as part of their investment process,” the company said. “This information allows investors to engage companies, improve investment performance, reduce risk and lower research costs, while corporate executives can reduce risk, enhance corporate governance and increase accountability, transparency and trust.”

“Thomson Reuters’ acquisition of ASSET4’s business is timely as our clients are looking for deeper insight into the combination of financial and extra-financial factors that drive the performance and risk of their investments”, said Abel Clark, global head of strategy and marketing, investment and advisory at Thomson Reuters. “The ESG content and tools will bring our clients increased transparency into areas of corporate performance that will grow in relevance as voluntary and mandatory ESG disclosure and performance standards become more prevalent.”

“Thomson Reuters is the natural choice to take the extra-financial information and tools that ASSET4 has built over the last five years to a truly global and mainstream client base,” added ASSET4 president Peter Ohnemus. “Thomson Reuters clients will now have the information and tools to make this type of analysis a reality.”

ASSET4 is a signatory to the United Nations Principles for Responsible Investment (UNPRI) and it is likely that, in the wake of this acquisition, Thomson Reuters will also consider signing.

Saturday, November 28, 2009

CBERN Workshop in Vancouver

By Christie Stephenson

On November 20th, the Canadian Business Ethics Research Network (CBERN) held a day-long workshop in Vancouver focused on its Ethical Issues Mapping Project. The meeting was convened by Dr. Simon Handelsman, CBERN's Pacific Region Hub coordinator, and attended by academics, as well as representatives of the First Nations, investor and business communities.

CBERN’s Project Director Professor Wesley Cragg overviewed CBERN's aim to develop research links between academics and practitioners of business ethics, corporate social responsibility, sustainable development, triple bottom line and corporate governance. Dr. Handelsman then discussed the mapping project, a pilot project to identify key ethical issues faced by the resources industry in BC and the Yukon, and identify, characterize and link researchers focused on business ethics and corporate social responsibility in the region.

UBC graduate student Mohit Bhatnagar presented the results of mapping project survey. These results revealed research priorities that were classified as extractive industry companies overseas and human rights, government policies vs self governance, fundamental goals of business, effects of economic crisis, indigenous and aboriginal peoples, ecological sustainability, culture of understanding, impact of capital markets, and emerging markets.

The workshop included a discussion of priorities for research and networking, as well as the role of ethics in academic programmes by Professor David Silver, Chair in Business Ethics at the W.M.Young Centre for Applied Ethics. In addition, a panel session was held on ethical and human rights in China by Edward Wang, of Raydwell Consulting, and William Roberts, of The Whistler Forum. A second panel session was held on public policy implications by Dr. Jane Lister, of the Liu Institute for Global Issues, and Pierre Gratton, President & CEO of the Mining Association of BC, and CBERN's James Cooney. A final session on First Nations Issues by moderated by UBC's Dr. Dawn Mills, and featured consultant Bruce McKnight and Joe Ringwald, of VP Brett Resources Inc., as well as Dave Porter of the Leadership Council (AFN, UBCIC, FNS).

Dr. Handelsman called the meeting "a great success in bringing people together, representing a step forward for establishing in BC a relevant focal point for collaboration in the field of business ethics in the 21st Century."

Friday, November 27, 2009

Stock exchanges performing poorly on ESG issues

The world’s stock markets play an important role in fostering confidence and promoting good governance and disclosure. However, most exchanges scored below 50% in an EIRIS study based on environment, social and governance (ESG) factors.

“Good quality ESG disclosure is crucial for holistic investment decision-making, however is currently lacking across the market,” the European research house notes in a report issued this week.

The Toronto Stock Exchange scored 49% on the EIRIS scale, compared with 52% for the NASDAQ, 54% for London’s FTSE and 70% for Australia’s ASX, the top performer in the study.

On the plus side, stock exchanges have already started playing a role in promoting better ESG disclosure through IPO and listing requirements in some countries, EIRIS says, but much more needs to be done.

“While regulation and company law play an important role in establishing and improving standards, it is increasingly apparent that stock exchanges are well placed to play a key role in the responsible investment debate and in particular in improving ESG disclosure through a principles-based market mechanism.”

The report recommends that stock exchanges:
-- Incorporate ESG disclosure requirements into listing rules and corporate governance standards;
-- Implement disclosure requirements on a “comply or explain” basis;
-- Support the requirement for a resolution on a CSR or sustainability report;
-- Explore measures to encourage best practices amongst companies, e.g., through sustainable indexes.

The Sustainable Stock Exchanges conference this month, hosted by the UN Principles of Responsible Investment, among others, provides an “excellent opportunity to achieve meaningful and lasting improvements to ESG disclosure throughout the market,” EIRIS says.

Download the report.

Wednesday, November 25, 2009

SIO AGM: Building Understanding Fostering Growth

The Annual General Meeting of the Social Investment Organization took place this morning at the Hyatt Regency in Toronto. Gary Hawton ably facilitated the meeting, in place of Board Chair Cheryl Crowe, who was unable to attend due to illness.

Congratulations go out to Sarah Thomson, Membership and Communications co-ordinator for an outstanding revamp of the Annual Report.

Eugene Ellmen, Executive Director, outlined the SIO’s activities. Foundational programs are intended to build membership capacity and increase the social capital of the organization. These include the communications strategy, and the biannual SRI Review. In Progress activities are highly important to the organization, but are not, or perhaps not yet, core. Initiatives in this category are the new advisor training program, building relationships with the academic sector and bolstering the SIO’s French language services. Finally, Aspirational programming is what is on the SIO wish list. Primary activities here include an increase in capacity that would allow the SIO to better address public policy issues, and building relationships with the foundations community and the pension sector.

In recognition of Eugene’s 10 years with the SIO, the Board presented him with a gift (fair trade, of course) and warm wishes.

The SIO has changed it’s year end from June 30th to December 31st to align it’s planning year with the budgeting time frame of many members. It will also allow the SIO to hold future AGMs along with the conference in June.

Changes presented by the Board Development Committee were passed, as part of a process of governance review, resulting in an opening up of nominations and elections. Work will continue in this area in the next Board year.

The new Board of the SIO is as follows:
Renee Arnold, Aberdeen Asset Management, Chicago
Jordan Berger, Mercer, Toronto
Cheryl Crowe, Assiniboine Credit Union, Winnipeg
Jennifer Coulson, Northwest and Ethical Investments, Vancouver
Dermot Foley, Inhance Investment Management/VanCity, Vancouver
Helene Gagne, Federation des Caisses Desjardins, Montreal
Gary Hawton, Meritas Mutual Funds, Kitchener
Doug McGee, Alterna Savings, Toronto
Christina McLeod, Genus Capital Management, Vancouver
Debra Sisti, RiskMetrics Group, Toronto
Stephen Whipp, Manulife Securities, Victoria
Don Wilson, Freedom 55 Financial, Toronto

“One of the reasons that SRI has prevailed through the economic and financial crisis of 2008 is the belief by SRI clients that socially responsible investment is good for both investment portfolios and for the planet....SIO is committed to working on behalf of the socially responsible investment industry in Canada to expand its reach to new stakeholders and new clients in the years to come.”

Check back soon for links to the 2009 Annual Report and new board

Monday, November 23, 2009

Positive contribution from ESG, Mercer says

The majority of academic studies released in the last few years show a positive relationship between ESG factors and financial performance, according to a report from Mercer.

The research firm looked at 16 studies released since 2007. Ten supported the hypothesis that specific ESG factors can make a positive contribution to investment performance, four were neutral and two were negative-neutral.

“The belief that responsible investment will automatically limit the investment universe and thereby limit returns is narrow in its focus and conclusion,” Mercer says. “Responsible investment is a broader practice, and a number of tools are available for integrating ESG into the investment process, including voting, engagement, collaboration, negative and positive screening and ESG integration into valuation metrics.”

Mercer notes that a variety of factors, such as manager skill, investment style and time period, is integral to how ESG factors translate into investment performance. “Therefore, it is not a given that taking ESG factors into account will have a uniform impact on portfolio performance, and we expect significant variation across industries.”

Depending on the sector studied, the results of the tests related to ESG materiality also varied significantly, Mercer found, noting that there is evidence to suggest that globally, corporations are not uniformly disclosing comprehensive information about ESG factors, creating a need for dependency on specialist ESG research firms.

Most of the studies to date have focused on the link between ESG and listed equity investment, the report points out, however this is beginning to change. Future studies will focus on the link between ESG and fixed income and the link between sustainability and property values.

Download the report from Mercer’s website.

Wednesday, November 18, 2009

U.K. survey points to strong interest in SRI

A new survey suggests that most U.K. investors will take ethical considerations into account when next buying a financial product, however awareness of responsible investing (known as ethical investing in Britain) remains low.

The national online consumer study, conducted by Ipsos MORI for research group EIRIS, finds that 44% of the British public are interested in finding out about the ethical credentials of the next financial product they buy.

Respondents surveyed said that banks and financial institutions should prioritize current ethical concerns such as protecting human rights, tackling climate change, protecting the environment and investing in fair trade in their lending and investing activities, more so than avoiding “sin” issues relating to the manufacturing of alcohol, tobacco and gambling.

More than 60% of those surveyed could not name or describe in detail any ethical financial products or services. “Awareness is low even among those that stated they were interested and likely to consider ethical credentials when next choosing a product or service; almost half (48%) of those in this sample could not name or describe in detail any ethical financial products or services,” EIRIS said in a news release.

“The survey highlights a lack of knowledge as well as a lack of trust as key barriers to people purchasing ethical financial products and services.”

Thirty-five per cent agreed that they would not buy ethical financial products and services because they “do not trust the claims of financial providers” and 46% of respondents agreed that “there is not enough information available on how they make a visible difference in the world.”

“Our survey provides firm evidence of growing interest in ethical finance, suggesting that the message that it is possible to both make money and make a difference when investing ethically is starting to get through to consumers,” says Mark Robertson, Communications and Development Manager at EIRIS. “But levels of awareness, trust and confidence in ethical finance are low. The industry must respond with greater transparency and provide more information on how saving and investing can make a positive difference.”

The survey sample included more than 1,000 British adult investors.

Tuesday, November 17, 2009

SIO launches advisor education course

The Social Investment Organization has teamed up with advisor group Advocis to offer a new course on socially responsible investing, worth 2.0 Advocis technical credits.

The course is a two-hour face-to-face Powerpoint course, explains SIO executive director Eugene Ellmen, with plans to deliver in an online format.

The first hour outlines the basics of SRI as well as reasons to consider SRI for clients. The second hour explains how to implement SRI in an advisor's practice using the Advocis core competencies model.

“The aim is to combat the lack of awareness and knowledge of SRI so prevalent among advisors,” says Ellmen. “Research by GlobeScan suggests that the vast majority of advisors fail to mention socially responsible investment options to their clients. We believe they're missing out on a huge opportunity to reach out to their clients on a deeper level.”

Ellmen says the SIO believes that SRI represents an important aspect of the “know your client” and “know your product” parts of an advisor’s practice. “The Canadian Securities Administrators and IIROC have recently issued new guidance on KYC and KYP<’ he says. “We believe that a fundamental part of advisor practice is knowing what investments a client is comfortable with from a social and environmental point of view. That's an important part of this course.”

The SIO is talking to the educational chairs of Advocis chapters about delivering the course to local members. Dates have been lined up in London and Owen Sound, Ont. and Victoria, B.C.. “Our aim is to offer the course to all 43 Advocis chapters across Canada,” Ellmen says.

This week, the SIO will be issuing a new directory, called Your Guide to Socially Responsible Mutual Fund Companies in Canada, primarily for advisors, but also for the investing public who want information on SRI fundcos.

The guide lists SIO-member fund companies and describes their various screens and approaches, says Ellmen. It was created after a number of advisors asked for a document providing information on the various fund companies and will also be a supplementary resource for the SIO's advisor education course.

Monday, November 16, 2009

GRI Materiality Workshop in Vancouver

On November 5th, Vancity hosted a workshop by Bastian Buck from the Global Reporting Initiative (GRI). Bastian overviewed GRI’s current work on report content and materiality. He then led a discussion on what questions a GRI protocol on report content and materiality should answer and what a report should reveal about an organization's process of defining report content and materiality. Participants included representatives from reporting companies including HSBC Canada and Teck Resources, auditors Deloitte & Touche and Ernst & Young, consultants Interpraxis and Solstice Works, and SIO members Inhance, Northwest & Ethical Investments (NEI), Shareholder Association for Research & Education (SHARE). Bastian noted he was impressed by the number and variety of attendees interested in exploring the topic.

The following day he met with the members of the NEI sustainability team to discuss the GRI's work on materiality in the context of its sustainable investing activities.

Bastian's trip to Vancouver was part of GRI's international outreach effort to promote materiality as a key consideration in sustainability reporting.

Christie Stephenson is SRI Monitor's Vancouver correspondent.

Thursday, November 12, 2009

Pension plans urged to adopt SRI practices

A new Mercer report outlines the “impressive” growth in pension fund activity and assets invested using responsible investing guidelines.

The report, Best Practices in Responsible Investment for Canadian Pension Funds, commissioned by the Social Investment Organization and funded by Environment Canada, notes that there is a “growing consensus that responsible investment insights should be integrated into mainstream investing strategies if fiduciary duties to current and future beneficiaries are to be respected.”

Pension fund assets invested using SRI guidelines have jumped to more than $544 billion in 2008 from $25 billion in 2004, largely due to the adoption of responsible investment policies by major public and private funds, including the BC Investment Management Corporation, the Caisse and the CPP Investment Board.

Still, the report notes that many Canadian institutional investors continue to lag behind in incorporating ESG factors in the decision-making process.

“There is a growing body of evidence that ESG issues can have a material impact on financial returns,” the report states.

“Arguably, institutional investors that completely ignore ESG issues may be breaching their fiduciary obligations. Some environmental and human rights issues are becoming so pervasive and serious it is difficult to see how investors can continue to be indifferent to their impact. This seems especially true of climate change scenarios.”

"The release of a best practices roadmap for Canadian pension funds is timely," said Jane Ambachtsheer, Mercer's Global Head of Responsible Investment. "With the recent financial crisis, expectations for financial reform – and a longer-term approach to investment risks and opportunities – have never been stronger. Institutions around the world, from smaller corporate plans to mega funds, are embracing responsible investment strategies; this can only serve as further encouragement for Canadian asset owners to roll up their sleeves and engage as well."

"Canadian pension funds, endowments and foundations are increasingly recognizing the benefits of responsible investment policies," adds Eugene Ellmen, executive director of the Social Investment Organization. "Responsible investment is legally prudent and a means to identify and manage risk. RI can also help generate long-term value for stakeholders.”

The report makes a number of recommendations for pension plan trustees and administrators, including increased disclosure related to ESG issues and corporate governance, regulations to clarify the fiduciary obligations of trustees and incorporating long-term liabilities within current pension plan structures.

More specifically, the report calls on the federal government to “lead by example” and actively integrate ESG factors into federal funding of grants and projects related to capital markets and that the Social Investment Organization work with the Pension Investment Association of Canada to survey the quality of ESG-related educational materials offered to pension trustees.

The report also includes a section on responsible investment strategies for individual pension plans and a comprehensive list of key collaborative initiatives in which institutional investors can participate, such as the Canadian Coalition for Good Governance, the Carbon Disclosure Project and the UN’s Principles for Responsible Investment.

Wednesday, November 11, 2009

Putting your money where your mouth is

“Reason #10: Finally, people simply don’t know what they don’t know.
Many staff and board members of foundations are preoccupied by their charitable giving work. They are not aware that there are other possibilities for the application of all of the assets of an endowed foundation. They don’t ask questions. And if you don’t know, how will you be encouraged to alter your behaviour? This conference is an excellent opportunity to learn about SRI. But I ask you, how many members of foundation investment committees are present?”

That was Hilary Pearson, President of the Philanthropic Foundations of Canada, speaking at the SIO conference in June 2007. Taking this need for information to heart, tomorrow sees the release of a seminal report commissioned by the Social Investment Organization and funded by Environment Canada, Education and Training on Responsible Investing for Canadian Foundations and Endowments: An Inventory and Needs Analysis.

The report outlines key considerations and themes in Responsible Investing, identifies educational and training resources and includes a resource and training needs assessment with eight recommendations for capacity building within the foundation and endowment sector.

“While much groundwork has been done by some of the early adopters and membership organizations, training opportunities are insufficient and not comprehensive, limiting RI take-up in Canada.

“Those with an interest in advancing RI – the SRI industry, federal and provincial governments, and leading members of the sector – will need to invest in building RI knowledge and training capacity in the foundation and endowment sector until we reach a tipping point.” the report states.

One such initiative comes from Community Foundations of Canada (CFC). CFC represents 171 members from coast to coast, who collectively hold more than $2.4 billion in assets. A new website is up and running, devoted to sharing its growing collection of Responsible Investment resources with foundations and other funders.

“The market turmoil of the past year has underscored the importance of finding the most effective ways to use foundation assets. Many long-term investors – including foundations – are also re-examining their investment beliefs and philosophies to take into account environmental, social and governance factors,” said Monica Patten, President and CEO of Community Foundations of Canada .

"It's important for foundations to invest their assets in a way that respects their work in social responsibility and sustainability," said Eugene Ellmen, Executive Director of the Social Investment Organization. "Donors count on it, and local communities expect it. The SIO looks forward to working collaboratively with the foundation and endowment sector, governments and RI consultants to help further the application of Responsible Investment.”

Friday, November 6, 2009

Thinking about SRI

Yesterday, Legg Mason Canada held a symposium at the National Club in Toronto showcasing their investment management subsidiaries. The Think symposium was aimed at highlighting the latest thinking on fixed income and equity markets. In addition to the usual sessions on US equity, emerging markets and fixed income, there was a presentation on Responsible Investing, entitled ‘The Time is Now’.

The Responsible Investing panel featured Mike Dieschbourg, CEO of Global Currents Investment Management and Mary Jane McQuillen, Director and Portfolio Manager at ClearBridge Advisors, and a member of the UNEP FI Asset Management Working Group.

The presentation was introductory in nature, starting with a review of the UN PRI, which now has over 500 signatories worldwide representing over 18 trillion USD of assets. Tidbits such as the fact that 385 of the Fortune 500 companies have signed on to the Carbon Disclosure Project, including Legg Mason, and the recent addition of ESG metrics on Bloomberg terminals served to confirm the ever broadening appeal of socially responsible investment principles. The message to the largely institutional crowd in attendance was ‘SRI is not on the fringes anymore’.

Mr. Dieschbourg shook up audience preconceptions by asking ‘What was Forbes Green Company of the year in 2009?’ The answer is Exxon Mobil. Whether or not we agree with that choice, it was an excellent way to engage people and get them thinking about what social responsibility means today. Pushing companies to improve using shareholder engagement is at least as important now as negative screening. He stressed that SRI is about “putting money and capital in the hands of people who are doing the right thing.”

Carbon risk was used as an example of an ESG factor that has a financial impact and an impact on stock prices. But this risk varies widely among companies and investors need to know which companies are which. In this case, ESG analysis clearly demonstrates its value as a powerful enhancement to traditional investment analysis.

Mary Jane McQuillan began by looking at how far SRI has come. In the past she said, SRI was about performance, and then about products, both of which have been addressed. Now the focus is on education, with respect to fiduciary duty and responsible investment. The CFA Institute has added ESG analysis to its curriculum, and it is expected that some of that material will soon be covered in the CFA exams.

As someone closely involved with both the Freshfields report and Fiduciary II, Ms. McQuillan hoped that these publications, as well as others by UNEP FI, would enable trustees and asset managers to start having the discussion about ESG risks and opportunities. “When it comes to ESG integration, having the discussion is the first part of the process.”

With specific reference to Canada, Ms. McQuillan felt that as the worlds largest exporter of energy intensive products, many with environmental and human right implications, we needed to focus on ESG now. Mr Dieschbourg summed it up neatly with a hockey metaphor “You can ask yourself, did you make the play, did you take the shot, but it’s the end of the game that you have to think about.”

Tuesday, November 3, 2009

RiskMetrics confirms KLD buyout

As reported last month on SRI Monitor, RiskMetrics Group has acquired Boston-based KLD Research and Analytics.

"Together, RiskMetrics and KLD will offer institutional investors a comprehensive suite of ESG services so they can more easily incorporate ESG analytics into their investment processes," RiskMetrics said in a news release. "Specifically, the combined firms will deliver increased coverage, more robust data, expert insights, and user-friendly tools. These enhanced capabilities will enable more investors to uncover the ESG risks and opportunities of thousands of companies worldwide."

Formed in 1988, KLD published the first research designed to evaluate the risks and opportunities associated with corporate social and investment performance. It also created the world's first socially-screened index, known today as the FTSE KLD Social Index.

Earlier this year, RiskMetrics acquired SRI research group Innovest. The purchase of KLD solidifies RiskMetrics' position as the world's largest ESG research firm.

Monday, November 2, 2009

Just in time for proxy season!

The SEC, in Staff Legal Bulletin 14E (CF), will now allow shareholder resolutions on ESG issues which previously were excluded as relating to the assessment of operational risk by companies.

“In those cases in which a proposal's underlying subject matter transcends the day-to-day business matters of the company and raises policy issues so significant that it would be appropriate for a shareholder vote, the proposal generally will not be excludable under Rule 14a-8(i)(7) as long as a sufficient nexus exists between the nature of the proposal and the company.”

However, it appears at this point that the determination will be made on a case by case basis with more guidance likely once we see how the SEC makes its decisions over the coming year.

An update by McGuire Woods LLP states “Companies arguing that these types of proposals should be excluded will need to show that the “proposal’s underlying subject matter involves an ordinary business matter to the company,” or spell out some other basis for excluding the proposal. Not only will the new SLB serve as a basis for including more ESG proposals in public company proxy statements, it would appear to permit those proposals to expressly request that companies undertake risk/liability assessments regarding these topics.”

This welcome change has occurred just in time for the 2010 proxy season, as many resolutions are filed in November. “We always saw the SEC rule on risk as completely absurd” says Bob Walker, Vice President of Sustainability at Northwest & Ethical Investments LP. “While it did impact how we crafted the shareholder proposals we filed with US companies, we never considered it when filing in Canada. Advancing better ESG risk management forms the core of our Shareholder Action Program.”

“ We believe that the board responsibility to ensure proper enterprise risk management procedures are in place must include a well-resourced consideration of ESG factors.”

“14 E (CF) will advance ESG investing – and corporate decision-making – in the United States almost immediately.”

Tuesday, October 27, 2009

Canada's best Cleantech companies

Last Friday the opening bell of the TSX was rung by Toby Heaps, editor of Corporate Knights, and representatives of the Cleantech 10™, a list of Canada’s best publicly and privately held companies in the Cleantech realm.

The Corporate Knights Cleantech 10™ was compiled by Corporate Knights Inc. and Cleantech Group LLC, the leading provider of Cleantech indices and information globally. The CK Cleantech 10™ was determined by first looking at technology-driven growth companies that have big impacts on resource efficiency and the environment—not simply those re-branding themselves as ‘green.’ A set of 18 screening criteria were applied to all TSX companies that Cleantech Group LLC use for their broad Cleantech Index. While the TSX has a large number of Cleantech stocks, they tend to be younger and smaller, so the screening criteria was applied with some leniency to allow for a rounded out top-ten list. A heavy emphasis was placed on purity (percentage of revenues or income from Cleantech business, and whether or not it’s really ‘clean’) and quality (strategy, management, financial strength, sector leadership). Other key criteria included growth, earnings, liquidity, capitalization, technology/intellectual property, and overall impact.

This year’s winner was Wesport Innovations, a company held in a number of SRI portfolios. "The growth of Canada's clean technology sector is the result of visionary companies who recognize that escalating energy and environmental concerns have created a tremendous opportunity for economic growth, job creation, and global leadership in a low carbon economy," said Karen Hamberg, Director, Sustainability & Environmental Performance for Westport Innovations Inc. "Westport strives to reduce its environmental impact in its operations as well as deliver significant economic, environmental and energy security benefits to customers with quality heavy-duty engine solutions."

For more information on the Cleantech 10™ and the Cleantech Next 10 Emerging Cleantech Leaders, click here.

The CK CleanTech 10™ 2009:

1. Westport Innovations (Vancouver, BC)
2. RuggedCom (Woodbridge, ON)
3. WaterFurnace Renewable Energy (Fort Wayne, IN)
4. Magma Energy Corp. (Vancouver, BC)
5. 5N Plus (Montreal, QC)
6. Canadian Hydro Developers (Calgary, AB) - in the process of being purchased by TransAlta
7. Carmanah Technologies Corp. (Victoria, BC)
8. NEO Material Technologies (Toronto, ON)
9. Stantec (Edmonton, AB)
10. Hemisphere GPS (Calgary, AB)

Thursday, October 22, 2009

"Green Investments Taking Root"

Socially Responsible Investing is becoming a growing trend and advisers are stirring clients in that direction
Naomi Carniol Special to the Star
Published On Thu Oct 22 2009

Sucheta Rajagopal buys organic vegetables. She takes the TTC and doesn't own a car. Her home is powered by green energy, thanks to Bullfrog Power.
Meet the new breed of investment advisers. Advisers who specialize in Socially Responsible Investing are more likely to drive a bicycle than a BMW. These advisers are focused on the bottom line, but they're also eco-minded and concerned about social justice.

Rajagopal, an investment adviser with Hampton Securities Ltd., decided to specialize in SRI because of her own concerns about social justice. Socially responsible investing, she explains, "is a way of integrating your values into the investing process." And that means looking at companies' environmental, social and governance practices.

When it comes to building portfolios for clients, Rajagopal is directed by clients' risk tolerance, financial goals and time horizons, but she's also guided by the social issues her clients are concerned about. Some clients are especially focused on the environment while others may be more interested in human rights. "I have a questionnaire I use with clients that says how important are these things to you? For every client, it's different."

SRI advisers use different screening tools when building an investment portfolio. Negative screening excludes companies involved in certain industries. For example, many of Rajagopal's clients do not want to invest in companies in the tobacco industry.

Positive screening focuses on finding companies that are making progress within sectors, such as mining, that may not be known for outstanding performance when it comes to environmental or social justice practices. SRI mutual fund companies, such as Meritas, use positive screening, accompanied by shareholder action, to encourage corporations to improve their environmental, social and governance behaviours. Shareholder action may involve meeting with company officials or filing shareholder resolutions to press a particular environmental or human rights issue.

Positive screening allows socially responsible investors not only to achieve greater diversification in their portfolios but also to influence company practices, says Kevin Towers, a financial planner, who specializes in SRI, at GP Wealth Management. "If you take an active position in a company, a shareholder position, you can encourage better behaviour whereas if you don't invest at all, you really don't have a voice in what that company does," says the planner, who once owned a recycling company.

Both Towers and Rajagopal say occasionally they've had to explain to potential clients that SRI doesn't mean lower returns. "We don't have to sacrifice returns at all," Towers says. "Adhering to SRI principles correlates highly with prudent management practices and results in higher profitability and better share performance in the long term."

Towers explains that companies with better labour practices have "happier, more productive employees in the long term and fewer possible liabilities down the road in the form of wrongful dismissal lawsuits." In addition, eco-minded companies that produce less waste tend to be more profitable because "it costs companies to deal with waste in whatever form it takes." The less waste generated, the less money spent on dealing with that waste. Rajagopal adds "there have been a lot of studies that show that companies that have good governance policies will outperform."

For example, if a company building a pipeline meets with the community who will be displaced by the pipeline and together builds a plan for relocating the community "you're going to see that infrastructure project happen probably more smoothly than a company that just says, `We don't care about these people. We're just coming through.' In the latter case, protests and work stoppages will likely occur. Those things all contribute to the bottom line."

When helping clients build portfolios, SRI advisers have more selections to choose from than ever before. In the last decade the number of SRI funds has greatly increased, Rajagopal and Towers say. "You have Canadian equity funds, balanced funds, small cap funds, foreign funds, and American equity funds," Rajagopal says.
As SRI funds grow in popularity, it's difficult to describe a typical socially responsible investor because the investors come from different professions and are different ages, from first-time employees to retirees. One belief many socially responsible investors and advisers share is that investments cannot only help investors achieve financial goals, they can make the world a better place.

As Rajagopal says, "I go out of my way with my consumer dollar to find organic produce and fair trade products and buy clothes from companies that are adhering to labour standards and not using child labour. I want my investment dollar to do the same thing."

Wednesday, October 21, 2009

MEDA launches new private equity fund

MEDA Investments Inc., a private investment company and pioneer in microfinance, has launched a new fund for high net worth investors.

The Sarona Frontier Markets Fund is a fund-of-funds that invests in microfinance as well as small- and medium-sized businesses in developing countries.

Serge LeVert-Chiasson, vice-president of MEDA Investments and Sarona Asset Management, says the new fund will use the services of “the world’s best and most promising small- and medium-sized enterprise fund managers who have a clear double and triple bottom line focus and will provide a risk/return profile that is attractive to commercial investors.”

MEDA (Mennonite Economic Development Associates) is a not-for-profit company dedicated to helping the lives of families who are living in poverty in the developing world through investment, primarily microfinance. MEDA is currently active in 44 countries and makes investments based on its network of agents and partners around the world, LeVert-Chiasson explains. “Those partners provide us with really good insight into foreign markets and we’ve discovered that microfinance has really come of age. You’re seeing a lot more interest from Wall Street and some of the European financial centres. They see both the opportunity to make a successful return on their investments combined with a positive social impact.”

“Our target market is high net worth individuals who are interested in being part of the solution; they are seeking commercial returns but also high social and environmental impacts in their investments in the developing world,” LeVert-Chiasson adds.

MEDA’s history dates back to 1953 when a group of Mennonite businessmen invested in a dairy farm in Paraguay, an early investment in a socially-motivated small business.

“We’ve been investing in these markets for decades and we’ve discovered that investing in developing markets is much less risky than people are led to believe,” he adds. “You have to make intelligent bets on people and markets and culture, which many Canadian investors don’t have the capacity to do because you have to have an understanding of the local culture.”

The closed-end fund is available only to accredited investors in both Canada and the United States and has its first closing date on December 31, 2009. LeVert-Chiasson says MEDA would like to offer the fund to smaller investors; however legislation in the U.S. and Canada prohibits public fund offerings with illiquid assets.

Investors interested in supporting MEDA’s work can do so through its program of promissory notes, LeVert-Chiasson adds. “The downside is that interest rates are lower but it does allow investors who may not fit the definition of accredited investors to support our activities.”

Monday, October 19, 2009

PPNs: Socially responsible investment potential?

(the following was originally published on social

Principal Protected Notes are a possible way to broaden investor participation in socially responsible investment, writes Shyam Shankar in a recent posting on Social They do not have the same rewards as riskier investments, but will allow investors across the board to invest ethically/responsibly without the fear of large losses to their capital.

PPNs have gained favour in boomer investment communities precisely for this reason - they allow near-retirement investors to participate in equity markets while minimizing the risk of a large loss to their nest-egg before retirement.

The most obvious limitation of this investment product is that it presently relates to publicly traded companies. In their current form, they are not designed to finance new social enterprises. This is not to say that the same logic cannot be extended to smaller companies – tailoring the PPN concept for smaller scale social enterprises will just require additional thought and innovation.

All investments involve tradeoffs between risk and return. Here, the fact that a PPN will protect against loses means that the investor pays a price in terms of potential upside. A direct equity or option based investment could mean higher returns than a PPN.

Finally, this is a relatively new investment product in Canada, and therefore does not receive the same level of regulatory scrutiny as say, a mutual fund. That means it is up to investors to be that much more diligent, do their homework and seek out advice to make sure PPNs work for them.

The PPN is already an established asset class in the traditional investment arena. Targeting it toward environmental, ethical or other progressive ends will permit the average investor to participate in SRI with limited downside and small amounts of capital.

It will be RRSP season before we know it – wouldn’t it be great to see some new socially responsibly investment options? Perhaps a David Suzuki endorsed portfolio of environmentally sustainable businesses? Maybe a portfolio of firms vetted for fair trade practices? The possibilities are endless in terms of how to use the PPN structure.

Shyam Shankar is a blogger at Social

Thursday, October 15, 2009

Canada: Moving forward with responsible investment

Although Canadians can be proud of the many individuals and organizations that are leaders in the field of responsible investment, it would be harder to assert that Canadian institutional investors, as a class, are also leading their world counterparts. There are, however, encouraging signs that this is about to change.

One reliable indicator of active participation in responsible investment is the level of support for the UN Principles for Responsible Investment (UN PRI). The UN PRI is an international initiative launched with UN support – and assistance from Mercer – in 2004 to promote the integration of environmental, social, and corporate governance (ESG) factors into the investment management process. Today, the UN PRI can boast of over 550 signatories – asset owners, investment managers, and service providers – with over USD$18 Trillion in total assets.

Canada, which boasts many of the leading organizations and advisors active in the field of responsible investment (RI), has seven asset owners and 11 investment managers listed as signatories to the UN PRI. Australia, by contrast, with a smaller stock market and population and similar level of aggregate retirement savings, has 28asset owners and 43 investment manager signatories.

Part of this difference may be due to strong regulatory support “down-under” which arguably reflects and helps reinforce a broader interest in RI strategies. For example, the Australian Government has recently provided funding for the creation of the world’s first academic institution focused on encouraging the mainstream adoption of RI tools and strategies. More importantly, and in line with similar provisions in the United Kingdom and other European nations, Australia requires pension plans and investment managers to disclose if and how they assess, monitor, and mitigate ESG risks.

The call for ESG disclosure has been one near and dear to the RI community for many years. Here in Canada, there has been much discussion but little progress to date. Only the province of Manitoba explicitly allows trustees to consider so-called “non-financial” criteria in the investment decision-making process. Other Canadian jurisdictions are silent on the matter. The pressure may be mounting, however.

This year, for example, the Ontario Legislature unanimously approved a private member’s motion calling on securities regulators to study and make recommendations for meaningful disclosure of ESG-related risks. Shortly thereafter, the Ontario Securities Commission announced a review of corporate disclosure requirements.

This month, a private member’s motion was introduced in the House of Commons calling on public and private pension plans to disclose how they track and manage ESG-related risks. These actions mirror similar recommendations for pension plans in 2007, by the National Roundtable on the Environment and the Economy, and in 2008, by Ontario’s Expert Commission on the Future of Defined Benefit Pension Plans.

We may be reaching a tipping point in Canada as electoral speculation dovetails with widespread public concern about financial stability and retirement security. Canada’s largest pension plans are certainly not waiting for a regulatory push. Many of our globally-recognized funds are already considered global leaders in responsible investment and will be discussing the state of research and best practices with their counterparts this fall as the UN PRI holds an academic conference in Ottawa and a board meeting in Montréal.

The broader pension plan community, however, may require greater clarity from regulators to encourage widespread adoption of RI. If disclosure requirements are strengthened next year, 2010 may well be the year that RI practices truly enter the Canadian mainstream.

Jordan Berger is a principal at Mercer Investment Management in Toronto. This article was reprinted with Mercer's permission.

Tuesday, October 13, 2009

Consolidation continues in ESG research sector

U.S.-based RiskMetrics Group is set to make its second major acquisition of the year by purchasing Boston-based KLD Research & Analytics, according to industry insiders.

Neither company is talking, but U.K. website Responsible Investor says the deal is in its final stages. Global Proxy Watch, a corporate governance newsletter, predicts the agreement will be announced later this month.

KLD is one of the world’s oldest and respected ESG research firms, and is the creator of the first socially-screened index, the Domini 400 Social Index (named after co-founder and well-known SRI author Amy Domini), now known as the FTSE KLD Social Index.

Earlier this year, RiskMetrics acquired SRI research group Innovest. With the purchase of KLD, RiskMetrics would solidify its position as the world’s largest ESG research group.

It’s been a big year for buyouts in the SRI research world. In August, Jantzi Research, one of Canada's leaders in responsible investment research, announced that it was joining forces with Sustainalytics, a European ESG research provider to the financial sector. The new company is operating as Sustainalytics globally and Janzti-Sustainalytics in North America.

U.K. fund managers facing climate change barriers

A new study conducted by FairPensions suggests most U.K. asset managers regard climate change as a critical investment issue. However, those same managers say they are prevented from taking action on such issues because of low carbon prices and a lack of demand from clients.

FairPensions surveyed 39 of the U.K.’s largest investment managers, representing about $12 billion in assets under management, in a study called "Preparing for the storm? - UK fund managers and the risks and opportunities of climate change," released earlier this month.

“An overwhelming majority (89%) of participating fund managers recognize that climate change is an “important” or “very important” investment issue, and a large majority (66%) state that it has become more important in the last two years,” the study says.

“However, 63% of fund managers surveyed said that the low current carbon price was the most significant barrier to the incorporation of climate change risks and opportunities into investment analysis and decision making.” This creates, in the words of one manager surveyed, an “imbalance between the relatively short-term horizons of mainstream investment analysis and the relatively long-term nature of the material business impacts of climate change”

The findings also suggest that fund managers feel little pressure from clients to temper short-term thinking: 56% of respondents cited “lack of demand from clients” as a barrier to managing climate change risks and opportunities.

Despite the near-universal recognition of the importance of climate change, there are significant differences in the extent to which fund managers are taking action to anticipate climate change, the study notes. For example, only 29% of those surveyed make use of climate change data in their analysis of “all companies where data is available.”

Fund managers surveyed fell into two main camps, those who take the view that “all sectors of the economy will be affected” versus those who think that “carbon emissions are material and relevant for some sectors but not for others: 39% request climate change data from companies in “all sectors” and a similar proportion (36%) request such data from companies in “a minority of sectors.”

Perhaps surprisingly, there is a strong consensus amongst participating U.K. fund managers on the need for greater regulation: 86% stated that they would welcome requirements on companies to report greenhouse gas emissions and 78% would welcome stock exchange listing rules requiring companies to disclose climate related risks.

In addition to support for reporting requirements, 72% would also welcome regulatory requirements on companies to reduce emissions.

Fund managers need clear signals from asset owners, the study concludes. Lack of client demand is identified in this report as one of the key barriers to fund managers taking action on climate change. “In the absence of any immediate pricing imperative to take climate change into account, clients should send clear instructions that the longer-term risks and opportunities associated with climate change should be given appropriate weight.”

Thursday, October 1, 2009

Industrial Alliance enters SRI space through acquisition of Inhance

IA Clarington, a subsidiary of Industrial Alliance, has announced plans to purchase the SRI mutual fund business of Inhance Investment Management from its current owner, Vancity, one of Canada’s largest credit unions.

The purchase price was not released, but the proposed deal also involves a long-term distribution agreement between Industrial Alliance and Vancity, under which IA Clarington funds will be available through Vancity’s 60 retail branches in British Columbia.

Founded in 2001, Vancouver-based Inhance offers six SRI funds: a balanced fund, a Canadian equity fund, a global leaders fund, a monthly income fund, a bond fund and a money market fund. Inhance has approximately $75 million in assets under management.

According to a statement released on Thursday, Industrial Alliance will create six new IA Clarington SRI funds through a merger with the Inhance fund family.

Inhance vice president Dermot Foley, fund manager Stephen MacInnes and other key members of the company’s investment team will remain with Vancity after the transaction closes, acting as sub-advisors for the new IA Clarington SRI funds.

"The addition of Inhance's SRI mutual fund business represents a natural evolution of IA's commitment to corporate social responsibility and a continuation of IA's "best-of-breed" investment philosophy through the addition of a top-rated Canadian SRI investment advisor," said Normand Pépin, executive vice-president of Industrial Alliance in a statement. "It also provides access to a new distribution network in western Canada made up of experienced financial advisors."

Vancity president Tamara Vrooman calls the deal an excellent opportunity for both Vancity and Inhance. “Vancity will retain Inhance’s renowned team of advisors who pioneered socially responsible investing and, by partnering with IA Clarington, will see socially responsible investments brought to a much wider marketplace,” she said.

The transaction is expected to close in December, pending unitholder and regulatory approval.

Wednesday, September 30, 2009

The next generation of responsible investing

(the following is a cross-post from

The Carleton Centre for Community Innovation is convening an international conference this week on responsible investing through the UN Principles for Responsible Investing (UNPRI) initiative. The Principles for Responsible Investment, convened by United Nations Environment Program and the UN Global Compact, was established as a framework to help investors achieve better long-term investment returns and sustainable markets through better analysis of environmental, social and governance issues in investment process and the exercise of responsible ownership practices.

Following the initial conference of the PRI Academic Network held at Maastricht University in September 2008, this conference will bring 75 invited academics and practitioners, including representatives from the Canada Pension Plan Investment Board, Caisse de Depot, BC Investment Management Corporation, Toronto Dominion Bank, and Desjardins. Over the three days, twenty seven papers will be presented by a group of international academics, inlcuding ten papers to be presented by doctoral and masters students from around the world to encourage the next generation of academics on this topic. A special themed issue of the Journal of Business Ethics (JoBE) will take the best qualitative papers on Responsible Investing presented at the conference selected by the program committee and subject to the usual peer-reviewed process of the Journal.

Karim Harji from Social Finance will be blogging from the conference to capture some of the key themes and areas of discussion.

You can follow Karim's blogs on the Social Finance website.

United Nations announces SRI research awards

The United Nations Principles for Responsible Investment has issued a call for academic research papers on the general theme of the mainstreaming of responsible investment.

Suggested topics include:

-- shareholder engagement and its effectiveness among mainstream investors
-- the integration of ESG issues into mainstream investments
-- ESG-focused investments and ESG alternatives among mainstream investors
-- responsible investment, market failure and regulatory response

The Danish government is sponsoring six research awards, worth a total of $33,000 (three $7,000 awards for post doctorate or academic articles and three $4,000 awards for graduate level articles).

The winners will be invited to present their work at next year's PRI Academic Conference in Copenhagen. The second annual conference is being held at Ottawa's Carleton University this week.

The first day of the Ottawa conference will focus on papers on the theme of "the Next Generation of Responsible Investment," while the second day of the conference will allow for other papers on responsible investment to be presented on themes such as universal ownership, corporate engagement and shareholder advocacy.

Link to the PRI Academic Network.

Monday, September 28, 2009

Must Read: this week's Economist

The current issue of The Economist, September 26th to October 2nd, has a number of articles of interest to the socially responsible investment community. The most important of these is 'Briefing - Financial innovation and the poor' about the rise of social finance, which discusses some new inititatives and some old ones. The focus is on 'impact investing', which includes, but is not limited to, SRI.

In Science and Technology, we have 'Last gasp for the forest'. A new climate treaty could provide a highly effective way to reduce carbon emissions by paying people to not cut down forests.

Schumpeter addresses 'The pedagogy of the privileged', stating that business schools have done too little to reform themselves in the light of the credit crunch.

And less directly related to investing but nonetheless fascinating is the cover story on telecoms in emerging markets. "How did a device that just a few years ago was regarded as a yuppie plaything become, in the words of Jeffrey Sachs, a development guru at Columbia University's Earth Institute, 'the single most transformative tool for development'?"

You might have to buy the hard copy, as the Economist doesn't put everything online, but the information and thought provoking content are well worth it.

Tuesday, September 22, 2009

10 years of sustainability indexing

If you happen to be in New York City today, you could join SAM, Dow Jones and STOXX for the 10th anniversary celebration of the Dow Jones Sustainability Indexes, at a cocktail and dinner reception at the American Museum of Natural History.

But it’s not just about a party. ‘The principles of sustainability have gained traction as the result of spirited discussion and debate. But given volatile markets and rising CO2 levels, it’s never been more important to accelerate those conversations and spread those ideas to new places. We want to fuel dialogue on two important topics:

What has our industry accomplished in the 10 years since these indexes have been launched?

What are the biggest challenges the industry faces in 2010, and the decade to come?’

Both very interesting questions, and as the results of the dialogue become available, we’ll be filling you in. And if you have comments, please let us know and we can get our own dialogue started too.

Launched in September 1999, the DJSI series provided the first global sustainability benchmarks worldwide. Today, more than 8 billion dollars(US) of assets are in financial products linked to the Dow Jones Sustainability Indexes such as mutual funds, separate accounts, notes, futures and exchange traded funds. Canadian investors can readily access the DJSI through mutual funds offered by TD Asset Management. In addition to the proliferation of products, SAM says “as the number of investors using the DJSI increases, the indexes are continuously moving up the corporate agenda.”

Confirming SAM’s view, Rick Waugh, President and Chief Executive Officer, Scotiabank says, "Scotiabank is working diligently to continue to integrate environmental, social and governance principles into all our operations. We believe that paying close attention to sustainability issues provides us with a competitive edge." Scotiabank has been named to Dow Jones Sustainability World Index for the first time this year, joining a select group of 11 Canadian companies to make the cut.

Monday, September 21, 2009

Corporate green rankings: looking beyond the list mentality

As Newsweek magazine notes in its latest issue, being green isn't new. However, in-depth analysis of green issues in the mainstream media is. This week, Newsweek ran its first-every "green rankings" issue, rating 500 major U.S. corporations based on their environmental performance, policies and reputation.

The results make for an interesting read. Hewlett-Packard comes out on top based in its "strong programs to reduce greenhouse gas emissions," according to Newsweek. Dell is second, followed by Johnson & Johnson, Intel and IBM. State Street, at number six, is the only financial services company to crack the top ten, followed by Nike, Bristol-Myers Squibb, Applied Materials and Starbucks.

To its credit, Newsweek devoted an impressive amount of editorial effort and external resources to this project. For more than a year, Newsweek says it worked with leading environmental researchers, such as KLD and Trucost, firms whose valuable research rarely appears in mainstream publications.

But what's perhaps more interesting is Newsweek's admission that any "green ranking" system is bound to have its flaws, explained in one of several articles related to the list.

"Ranking compaines based on sustainability is a huge challenge," Newsweek says, noting the inevitable apples and oranges element to comparing environmental performance across industries. "Some are far dirtier than others: a typical financial services company exacts a smaller environmental toll than even the best-run mining or utility company."

Newsweek attempts to compensate for that by including three components in its final green score: environmental impact, green policies and reputation.

The article goes even further: "Economists view environmental damage as a classic "externality" - a cost that impacts society but isn't imposed on producers or consumers. But with scientific consensus that carbon emissions threaten our climate, there's growing political will to curb them, particularly with the global powers set to meet in Copenhagen in December."

Rankings like this will soon be forgotten in the quick turnaround of today's 24-hour news cycle. But, by placing considerable emphasis on this story, Newsweek is telling its readers that climate change is critical and should be taken more seriously by the world's corporations and politicians, a fact that environmental and SRI groups have been trumpeting for years. So, if nothing else, Newsweek's green rankings suggest that the mainstream media is starting to listen.

Read Newsweek's 2009 Green Rankings.

Thursday, September 17, 2009

Pushing Tim Hortons on Fair Trade

Canadian coffee drinkers love Tim Hortons. Many of us make multiple trips to the nearest "Timmy's" every day. But the coffee giant has so far resisted requests to offer Fair Trade certified coffee. A number of groups are working to change that.

According to the Shareholder Association for Research and Education (SHARE), the Fair Trade program offers an alternative to the conventional coffee trade, ensuring that producers in developing countries get a fair price for their products. "This is accomplished through a set of trading, social and environmental standards whose implementation by producers or buyers is certified by an independent body," SHARE says. The standards are established by Fairtrade Labelling Organizations International (FLO), a non-profit group based in Germany.

Although Fair Trade coffee is widely available in Canada, and has been for years, it's sold mostly in smaller, independent shops. Recently, SHARE and Batirente started a dialogue with Tim Hortons to request that the company start offering Fair Trade certified coffee. Ethical Funds has announced plans to engage Tim Hortons on the same issue this year.

Tim Hortons does have a Sustainable Coffee Program, a goodwill project that aims to provide financial assistance, technical training, education and social services to a number of coffee-producing communities in Guatemala, Colombia and Brazil. That's admirable and SHARE has asked for more information on the program.

But is it enough?

SHARE, working on behalf of Meritas Mutual Funds, says it hopes to convince Tim Hortons to adopt a more forward-looking approach to coffee sourcing. "The proposed steps recognize the significance of the Fair Trade coffee market growth and the opportunities that Fair Trade presents for Tim Hortons' coffee supply management processes," says SHARE.

Average annual sales of Fair Trade coffee grew nearly 33% in Canada between 2003 and 2008. Tim Hortons has a chance to share in that growth, while at the same time helping the estimated 25 million people around the world who depend on the coffee industry to make a living.

Something to think about next time you're waiting in that long line-up for a double-double.

Tuesday, September 15, 2009

The time has come for increased pension fund disclosure

Robert Oliphant, the Liberal MP for Don Valley West will introduce a Private Members Bill later this week requiring public and private pension plans to disclose considerations given to ESG factors throughout the investment process.

The socially responsible investment community in Canada has been advocating action on this issue for some time. Mr. Oliphant was supported at a press conference on Parliament Hill earlier today by Eugene Ellmen of the Social Investment Organization, Sarah Smith from Jantzi Sustainalytics and Ian Thomson of KAIROS.

Mr. Ellmen said “Our members believe that investment means more than just financial risk and return. We believe that the only way we can truly invest for the future is by incorporating environmental, social and governance issues into financial analysis and management.”

Similar legislation already exists in many parts of the world. According to the OECD Policy Framework for Investment, ‘An amendment to the UK Pensions Act in 2000, prompted a higher level of disclosure in pension funds: the act requires fund managers to tell members whether they consider the ethical, social or environmental impact of the companies they invest in. Managers still have the option to state that they do not take these impacts into account, but the fact that they are required to disclose their policies puts greater pressure on them to justify their stances. Other countries in Europe, including Austria, Belgium, France, Germany, Italy and Sweden, have all enacted similar legislation. In Australia, the Financial Services Reform Act includes an amendment that compels providers of investment products to disclose ‘the extent, if any, to which labour standards, environmental, social or ethical considerations are incorporated into their investment principles’. The Act applies to all investment, not just pension schemes.’

Mr. Ellmen continues, “It’s important to understand that the bill does not force pension funds to adopt ESG policies and practices. In fact, we expect that many pension funds will choose to do nothing under these new rules. However, the important principle is that pension mangers and trustees will need to disclose whether any of their investment decisions were based on ESG factors in the last year.”

As with many areas of SRI, transparency is the first step. Given the steep losses incurred by many pension funds in the recent market meltdown, Canadians are looking for more information. Mr. Oliphant said “This bill is about transparency. It will ensure that clear information about the way investment decisions are made is available to protect pension plan members. It also recognizes the significant role pension funds play in the Canadian economy.”

Good work, Mr. Oliphant!

Sunday, September 13, 2009

Jantzi Research announces merger

Jantzi Research, one of Canada's leaders in responsible investment research, has announced that it will join forces with Sustainalytics, a European ESG research provider to the financial sector.

The new company will operate as Sustainalytics globally and Janzti-Sustainalytics in North America.

"The merger combines two trailblazers in responsible investment research," the companies said in a joint statement released today. "The new company responds to an increasing appetite for international ESG research coverage underpinned by local expertise."

Michael Jantzi will be the CEO of Sustainalytics. "We've had a long and successful history of working together thanks to our similar client-focused cultures, shared commitment to quality and common view of sustainability," he said.

"This merger was the logical progression of our past partnership," Jantzi added. "Together, we offer an unmatched understanding of the market and can provide more extensive coverage of companies globally with deeper sector analysis."

Jantzi's Bob Mann will be Sustainalytics managing director for North America. Ronald Lubberts, the former head of Sustainalytics, wil retain the position of managing director, Europe.

"Sustainalytics will continue to deliver high quality, innovative research and client-oriented services to investors and clients, and will offer access to employees spread across two continents and five cities," Lubberts said. "Clients will also benefit from our expertise in responsible investment and sustainability services, including access to a broader variety of products such as carbon related analytical tools."

The new company will be based in Amsterdam and Toronto, with local offices across Europe.

Formed in 1992, Jantzi Research pioneered the "best of sector" screening process and launched the Jantzi Social Index in 2000, a socially-screened stock index based on the S&P/TSX 60. Sustainalytics was created in 2002 and changed its name from Dutch Sustainability Research last year.

This is the second merger in the sustainability research sector in 2009. Earlier this year, RiskMetrics acquired Innovest.

Friday, September 11, 2009

Dexia brings SRI expertise to Canada

Dexia Asset Management, which has one of the largest SRI teams in Europe, is coming to Canada. The firm, which has $120 billion in assets under management, this week announced plans to open a new office in Toronto.

"Based on our unique approach and strong track record, we are extremely confident in our ability to provide real value to institutional investors in Canada," said Christophe Vandewiele, head of Dexia Asset Management Canada, in a statement.

"We are meeting with institutional investors across the country and many of them are indicating a keen interest in further diversifying their portfolios and obtaining foreign equity management expertise," Vandewiele said. "These institutions are becoming more acutely aware of the importance of social and responsible investing and are searching for quality investment solutions in this area."

Dexia offers more than 20 SRI funds to institutional investors in Europe.

Vandewiele added that SRI is in its "early stages of adoption" in the Canadian market, but noted Dexia's 12-year track record "building and managing a broad range of SRI funds in Europe."

"Accordingly, we are able to offer Canadian institutional investors an unparalleled level of expertise and experience incorporating SRI investments into their portfolios," he said.

Thursday, September 10, 2009

Sunny Money for Some

As interest in SRI grows, product offerings need to keep pace. A welcome addition for socially responsible investors is the newly launched Solar Income Fund LP. Note, however, that the Fund is structured as a Limited Partnership with a $25,000 minimum investment for accredited investors only. It is offered in BC, Alberta, Saskatchewan, Manitoba, Ontario, Newfoundland, Nova Scotia and PEI.

The Solar Income Fund LP will construct, own and operate solar photovoltaic system installations in Germany. Why Germany? The simple answer – Feed-In Tariffs (FITs). The Renewable Energy Sources Act (EEG) in Germany guarantees each plant operator a fixed price for electricity generated from renewable resources. According to the WorldWatch Institute ‘The FIT is credited for the rapid deployment of wind and solar power among world renewable energy leaders Denmark, Germany, and Spain this past decade. Similar policies have since been adopted by many other countries, leading the FIT to become the most prevalent tool for promoting renewables.’

The EEG has been in force since 2000, and has driven renewable energy capacity and use in Germany. Paul Ghezzi, the Managing Director of the Solar Income Fund LP says ”The reason we selected Germany is that it is the most prudent, the most mature and the most stable market in terms of solar PV. Our hope is that in a year or two, Ontario will be there.” Ontario was one of the first jurisdictions in North America to adopt a FIT, in the Green Energy Act. It is anticipated that the FIT will encourage a similar green renaissance here.

However, the twist in the Solar Income Fund LP is that because the income is generated in Germany, investors will have to file German income taxes, and this makes the investment more complicated.

The three most important variables for the solar PV installations are how much will they cost, who is financing them and who will buy the energy generated. The Solar Income Fund LP has nailed down all three. Their contracts are fixed cost, the banks and the German government have come through with financing on excellent terms and the feed-in tariffs provide certainty at the end of the process. “When it comes to alternative energy, the real money is being made in private infrastructure,” continues Mr. Ghezzi. “This allows individual investors to participate.”

Well, the accredited ones anyway. The Solar Income Fund LP is targeting an 8% return, and hopefully some capital gain for investors at the end of the day. The exit strategy will be to sell the installations, or perhaps take them public a few years down the road when the LP winds up.

Wednesday, September 2, 2009

Are ethical investments good?

That's the provocative title of a study from researchers at the University of Western Australia, which looked at the returns associated with firms being included in, and dropped from, the FTSE KLD 400 Social Index, the world's longest-running SRI index.

"Our sample includes all firms added to, and deleted from, the [index] after its inception in May 1990 to the end of December 2007. Over this period, 370 firms were added to, and 370 firms deleted from the index."

Although the majority of deletions were due to corporate actions, such as mergers, the authors conclude that, using long-run event study methodology, that "there are positive and statistically significant long-run abnormal returns for firms being included in the [index]."

"We provide clear evidence that investing in companies which are recognized as being ethical can have long-term benefits for investors' wealth," the study states.

The authors admit that their finding "flies in the face of the consensus now emerging from academic studies in finance, which argue that funds' cost of implementing an ethical strategy are passed on to investors and thereby reduce investors' returns."

However, the study says that KLD's decision to include a firm in the index sends a clear signal that a firm is ethical and is also "unequivocally" good news for investors in those firms. "Indeed, some of the abnormal returns are large." More than 50% in some cases. "That is, $100 invested in these stocks would have earned, on average, $50.63 more that an investment in the benchmark."

The authors admit that long-run event studies are problematic and although they make efforts to avoid skewing the results, this report's conclusions will no doubt be controversial.

Download a copy of the study from this website.

Monday, August 31, 2009

Green Stocks Still Waiting for Stimulus Money

“The state of our economy calls for action: bold and swift. And we will act not only to create new jobs but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place and wield technology's wonders to raise health care's quality and lower its costs. We will harness the sun and the winds and the soil to fuel our cars and run our factories.”

These words from President Obama’s inauguration speech were followed by a string of appointments applauded by environmentalists, including Stephen Chu as Energy Secretary and Lisa Jackson as head of the EPA. And then we had the American Recovery and Reinvestment Act, the stimulus package, signed into law last February. Socially responsible investors were excited – finally, our time to shine. We were ready to make money investing in what we believed in. Blog entries with titles like ‘These stocks will soar on Obama’s infrastructure plan’ were popping up everywhere. Now, six months later, we are still waiting.

“The idea behind the government's economic stimulus package was to get money flowing through the system, boost economic activity and create jobs. But an review of the latest federal spending data shows that the money is flowing at a trickle. According to our calculations, roughly $53 billion or one-third of the $150 billion in fiscal stimulus money available for this year has been spent as of June 19. As a percentage of the $479 billion in total stimulus funds, that represents only 11.1 percent.”

New Flyer Industries (NFI.un)is a manufacturer of hybrid transit buses based in Winnipeg, with a couple of facilities, and a whole load of contracts, in the US. It’s a good example of a company whose share price should be on the move in this environment but isn’t. In a press release last month, New Flyer said that production of 140 diesel-electric hybrid articulated buses ordered by a major U.S. customer has been deferred indefinitely as a result of delays in the customer receiving funding. The share price, which had been just above the $10 mark, has tumbled 20% in recent weeks over concerns that more contracts may be deferred.

Ray Steele, the manager of the Mavrix Sierra Equity Fund, owns New Flyer and continues to like it. On a fundamental basis it has a low P/E even after reducing future earnings forecasts. However he cautioned that more order delays will be negative for the stock and may lead to a significant cut in yield. He listed some of New Flyer’s positive investment attributes, “The order book is huge and is stable compared to most manufacturers, the buses are mostly hybrid or extended buses which are in greater demand and are better for the environment than a traditional bus, mass transit spending can be delayed, but not eliminated and stimulus spending will benefit mass transit spending when it does eventually flow.” He reiterated that so far there has been little to no flow of any stimulus spending.

We’ll keep investing in green companies, but for green stocks to take off, we may be waiting till 2010.

Wednesday, August 26, 2009

Here today, gone tomorrow – Jov Winslow Global Green Growth Fund

Launched with much fanfare in January 2008, the Jov Winslow Global Green Growth Fund was closed to new purchases as of August 14th, and will be terminated as of close of business on Tuesday October 13th, 2009. Investors may redeem their holdings in advance of the termination date. Any investor holdings that remain as of the termination date will be redeemed for cash and paid out to the investor. JovFunds has indicated that any deferred sales charges will be waived.

“We are very disappointed in our inability to make this fund a viable entity” said Steve Hawkins, Managing Partner, JovFunds. “A perfect storm of things worked against us”.

Primarily due to market conditions, but possibly also affected by a lack of marketing effort, the Jov Winslow Global Green Growth Fund had a difficult time attracting assets. As of last month, the Fund’s AUM was less than 3 million dollars. At that level, the Fund did not generate enough revenue to cover it’s administrative and operational costs, and was being subsidized by JovFunds. “Feedback was that the prospects weren’t good to attract enough assets in the near term to make it viable”, Mr. Hawkins stated.

This is a blow to existing investors in the Fund, many of whom have hung in through the tough times, and were looking forward to finally seeing the value of their holdings go up. The latest commentary from Winslow echoes this optimistic view. “Our outlook for the next several quarters is very positive. We believe the recession is ending or has ended, and we feel that our focus on a diversified portfolio of companies in expanding green technology industries, with promising fundamentals, strong management, compelling growth strategies and distinct competitive advantages puts us in an ideal position for strong returns coming out of a recession.”

Another factor involved in the decision was the reorganization going on at JovFunds, which looked at which products they had available shelf space for. JovFunds current direction seems to be towards exchange traded funds, through the Beta Pro and Alpha Pro ETFs, and the Fiera funds of ETFs. When asked if they were planning to exit the green space altogether, Mr. Hawkins did not rule out the possibility of a green ETF at some point in the future.

Friday, August 21, 2009

Global survey taps water as top environmental concern

A new study indicates that water issues are the planet’s major environmental problem, ahead of air pollution, depletion of natural resources, loss of habitat and even climate change.

The independent survey, which involved 15,000 people in 15 countries, was commissioned by Circle of Blue, a Michigan-based network of journalists, scientists and communicators focused on global water issues, and conducted by GlobeScan.

Ninety-three per cent of those surveyed agreed that water pollution is a serious problem while 91% believe that a shortage of fresh water is a serious problem.

More than half of those surveyed agreed that governments are now primarily responsible for ensuring clean water but 78% said that solving drinking water problems will require significant help from companies, "indicating that partnerships are an important component to resolving the world's fresh water sustainability challenges."

When asked about eight environmental issues, Canadians consider water pollution and fresh water shortages to be among the most serious, the study found, although there were also concerns expressed about the depletion of natural resources and air pollution.

Nearly all Canadians surveyed (97%) agree that it is important for all people to have adequate, affordable drinking water and 94% worry that fresh water shortages will become an increasingly severe problem worldwide.

"This research confirms the general public's awareness and understanding of water as a critical resource, as well as the importance of conserving and protecting fresh water supplies through stewardship," says Chris Coulter, vice-president of GlobeScan. "From locale to locale, the angles of concern may vary, but the concern about water issues is pressing, virtually everywhere."

World Water Week also saw the establishment of the Global Water Roundtable, a multi-million dollar project intended to evaluate and establish a set of standards for water stewardship, with the goal of adressing the global threat of water stress, the increasing pollution of rivers and a decline in fresh water wildlife species.