It’s a common complaint from investors interested in socially responsible options – information can be difficult to find. The Social Investment Organization is offering a solution: “Your Guide to Socially Responsible Mutual Fund Companies in Canada.”
The guide, updated for 2010, is essentially a reference tool for both investors and advisors, providing information on Canadian firms with a strong interest in the principles of socially responsible investing.
"The Guide offers an accessible overview of each company's profile, SRI products and services and investment philosophy," says Eugene Ellmen, executive director of the Social Investment Organization.
"This new reference tool will enable investors to research SRI mutual fund companies and put them in a better position to discuss SRI options when they meet with their advisors to plan out their RRSP contributions for the next year."
Download the guide.
Thursday, February 25, 2010
Tuesday, February 23, 2010
Pension funds fail to direct proxy votes: SHARE
Proxy voting is a key component of shareholder advocacy and an important responsible investing strategy. Every year, the Shareholder Association for Research and Education (SHARE) surveys the proxy voting practices of the country’s investment managers. The results of the ninth annual survey are generally positive and slightly better than last year, SHARE says, with one notable exception.
The study indicates that 71% of investment managers vote most of their pension fund clients’ proxies at their own discretion, without instructions or guidance. That’s up from 63% last year and reverses a downward trend in place since 2004.
“This suggests that more institutional investors, including pension funds, let their money manager decide how their proxies should be voted,” says Laura O’Neill, SHARE’s director of law and policy. “The lack of direction is cause for concern.”
“Pension funds, and other institutional investors, should give their proxy voting agents guidance on how their proxies should be voted, ideally by adopting a set of proxy-voting guidelines,” O’Neill adds. “This is important because pension fund trustees have a fiduciary duty to oversee how the proxies attached to their funds’ stocks are voted.”
On the positive side, the survey found that 40% of firms disclose their proxy voting guidelines to the public (an increase of 11% over 2008) and 49% consult with their clients about proxy voting guidelines (up from 39% in 2008). In addition, votes cast by participating firms were more likely to match SHARE’s votes than in 2008.
Thirty-five firms responded to the survey, a response rate of 56%, also an increase from previous years. SHARE says that indicates “greater fund manager willingness to be transparent and accountable about the exercise of proxy voting rights on behalf of clients.”
Download the full survey.
The study indicates that 71% of investment managers vote most of their pension fund clients’ proxies at their own discretion, without instructions or guidance. That’s up from 63% last year and reverses a downward trend in place since 2004.
“This suggests that more institutional investors, including pension funds, let their money manager decide how their proxies should be voted,” says Laura O’Neill, SHARE’s director of law and policy. “The lack of direction is cause for concern.”
“Pension funds, and other institutional investors, should give their proxy voting agents guidance on how their proxies should be voted, ideally by adopting a set of proxy-voting guidelines,” O’Neill adds. “This is important because pension fund trustees have a fiduciary duty to oversee how the proxies attached to their funds’ stocks are voted.”
On the positive side, the survey found that 40% of firms disclose their proxy voting guidelines to the public (an increase of 11% over 2008) and 49% consult with their clients about proxy voting guidelines (up from 39% in 2008). In addition, votes cast by participating firms were more likely to match SHARE’s votes than in 2008.
Thirty-five firms responded to the survey, a response rate of 56%, also an increase from previous years. SHARE says that indicates “greater fund manager willingness to be transparent and accountable about the exercise of proxy voting rights on behalf of clients.”
Download the full survey.
Monday, February 22, 2010
Impact and Benefit Agreements workshop in Vancouver
by Christie Stephenson
Northwest & Ethical Investments (NEI) recently hosted a workshop “Impact and Benefit Agreements in Canada's mining sector: An overview of their emergence, performance, and implications for SRI.” The presentation was given by Dr. Ben Bradshaw, an Associate Professor of Geography at the University of Guelph, and originator of the Impact and Benefit Research Network.
Dr. Bradshaw opened the session calling the question of environmental governance “the question of our generation.” He framed the challenge of mining development as determining “by whom, and how, should activities like these be regulated?”, and explored the role IBAs could play in the negotiations between mining companies and impacted communities.
Generic IBA provisions benefiting communities include financial provisions, employment and training, economic development, and environmental and cultural protections. Benefits for mining companies typically involve improved certainty, timely development of projects, a better investment climate, and an enhanced corporate image.
Dr. Bradshaw discussed the emergence of agreements in the context of flaws in the design and practice of the environmental assessment process; increased recognition of aboriginal rights, expectations and needs; and mining firms’ needs and interests. He suggested IBAs could address the limitations of environmental assessment (EA) such as inadequate follow-up on projects post-approval and the failure of EA, by design, to deliver specific benefits to those parties most impacted by a project. He also stressed that IBAs reflect the assertion of Aboriginal rights and title, and the increasing recognition of the concept of traditional territory. Mining companies may benefit from IBAs as they address multiple concerns such as the need to secure a social licence to operate, risk avoidance, reputational benefits, and pressure from shareholders, including socially responsible investors.
Additionally, Dr. Bradshaw reviewed the field of academic research related to IBAs, and presented his own work underway on assessing the impact of IBAs on signatory communities. He found that IBAs are largely meeting their explicit objectives, although this varies from community to community. He also found there is considerable disillusionment with IBAs in many communities, which reflects problems with IBA implementation and/or the existence of too many additional implicit expectations by members of signatory communities.
Dr. Bradshaw concluded with an overview of the implications of IBAs for SRI, noting the challenges associated with using the existence of these agreements as a useful tool for socially responsible investing analysts in screening companies for portfolio eligibility.
NEI’s senior analyst Chris Ballance, who covers the mining industry, remarked that “IBAs may be a sign of good relations between a company and the communities in which it operates. However, as Ben Bradshaw pointed out, the agreements are usually confidential and in some cases may not include or achieve benefits that are not already required through regulatory means. As analysts, we need to consider what is included in, and achieved by, an IBA rather than just look for its existence”.
Northwest & Ethical Investments (NEI) recently hosted a workshop “Impact and Benefit Agreements in Canada's mining sector: An overview of their emergence, performance, and implications for SRI.” The presentation was given by Dr. Ben Bradshaw, an Associate Professor of Geography at the University of Guelph, and originator of the Impact and Benefit Research Network.
Dr. Bradshaw opened the session calling the question of environmental governance “the question of our generation.” He framed the challenge of mining development as determining “by whom, and how, should activities like these be regulated?”, and explored the role IBAs could play in the negotiations between mining companies and impacted communities.
Generic IBA provisions benefiting communities include financial provisions, employment and training, economic development, and environmental and cultural protections. Benefits for mining companies typically involve improved certainty, timely development of projects, a better investment climate, and an enhanced corporate image.
Dr. Bradshaw discussed the emergence of agreements in the context of flaws in the design and practice of the environmental assessment process; increased recognition of aboriginal rights, expectations and needs; and mining firms’ needs and interests. He suggested IBAs could address the limitations of environmental assessment (EA) such as inadequate follow-up on projects post-approval and the failure of EA, by design, to deliver specific benefits to those parties most impacted by a project. He also stressed that IBAs reflect the assertion of Aboriginal rights and title, and the increasing recognition of the concept of traditional territory. Mining companies may benefit from IBAs as they address multiple concerns such as the need to secure a social licence to operate, risk avoidance, reputational benefits, and pressure from shareholders, including socially responsible investors.
Additionally, Dr. Bradshaw reviewed the field of academic research related to IBAs, and presented his own work underway on assessing the impact of IBAs on signatory communities. He found that IBAs are largely meeting their explicit objectives, although this varies from community to community. He also found there is considerable disillusionment with IBAs in many communities, which reflects problems with IBA implementation and/or the existence of too many additional implicit expectations by members of signatory communities.
Dr. Bradshaw concluded with an overview of the implications of IBAs for SRI, noting the challenges associated with using the existence of these agreements as a useful tool for socially responsible investing analysts in screening companies for portfolio eligibility.
NEI’s senior analyst Chris Ballance, who covers the mining industry, remarked that “IBAs may be a sign of good relations between a company and the communities in which it operates. However, as Ben Bradshaw pointed out, the agreements are usually confidential and in some cases may not include or achieve benefits that are not already required through regulatory means. As analysts, we need to consider what is included in, and achieved by, an IBA rather than just look for its existence”.
Wednesday, February 17, 2010
Social disclosure: Emphasizing the S in ESG
Ethical Funds, Canada’s largest SRI mutual fund company, is expressing concern that social issues are being ignored in a major review of disclosure requirements.
Last year, Ontario passed a motion mandating consultation on best practices in environmental, social and governance (ESG) disclosure standards. In response, the provincial securities regulator announced plans to conduct a compliance review of corporate governance disclosure and develop guidance for issuers on compliance with existing environmental disclosure. However, the OSC made no mention of integrating social disclosure in the review process, Ethical notes in its monthly newsletter.
“It goes without saying that enhancing environmental and governance disclosure is desirable, but we believe that social risks are just as material to investors – and in more ways than one,” Ethical says. Companies should be reporting to shareholders and other stakeholders on their own social impacts, both positive and negative, Ethical adds.
“But they also need to report to investors on social and community issues that could impact on the value of the company, by affecting its reputation or license to operate. This crucial second aspect of "S" appears to have received less attention in the recent consultations.”
For example, Ethical points to its campaign asking Enbridge to explain to investors the legal and regulatory implications of Aboriginal opposition to its Northern Gateway pipeline. In a recent report on the oil sands sector, Ethical’s researchers highlighted ongoing First Nations litigation against provincial and federal governments claiming inadequate consultation and possible breach of treaty rights in their management of development in the oil sands area.
“At a time when stock exchanges around the world are beginning to take steps to mandate sustainability reporting, leaving out the "S" in ESG disclosure –and failing to consider the impact of society on the company - could leave investors in Canadian companies exposed to significant risk.”
Ethical’s monthly newsletter.
Last year, Ontario passed a motion mandating consultation on best practices in environmental, social and governance (ESG) disclosure standards. In response, the provincial securities regulator announced plans to conduct a compliance review of corporate governance disclosure and develop guidance for issuers on compliance with existing environmental disclosure. However, the OSC made no mention of integrating social disclosure in the review process, Ethical notes in its monthly newsletter.
“It goes without saying that enhancing environmental and governance disclosure is desirable, but we believe that social risks are just as material to investors – and in more ways than one,” Ethical says. Companies should be reporting to shareholders and other stakeholders on their own social impacts, both positive and negative, Ethical adds.
“But they also need to report to investors on social and community issues that could impact on the value of the company, by affecting its reputation or license to operate. This crucial second aspect of "S" appears to have received less attention in the recent consultations.”
For example, Ethical points to its campaign asking Enbridge to explain to investors the legal and regulatory implications of Aboriginal opposition to its Northern Gateway pipeline. In a recent report on the oil sands sector, Ethical’s researchers highlighted ongoing First Nations litigation against provincial and federal governments claiming inadequate consultation and possible breach of treaty rights in their management of development in the oil sands area.
“At a time when stock exchanges around the world are beginning to take steps to mandate sustainability reporting, leaving out the "S" in ESG disclosure –and failing to consider the impact of society on the company - could leave investors in Canadian companies exposed to significant risk.”
Ethical’s monthly newsletter.
Friday, February 12, 2010
Say on pay gains ground in oil and gas sector
Meritas Mutual Funds, assisted by the Shareholder Association for Research and Education (SHARE), has withdrawn “say on pay” shareholder resolutions at Enbridge, EnCana and Suncor.
The three companies have agreed to establish an advisory vote on executive compensation, starting in 2011.
"Offering our shareholders a "say on pay" reflects Enbridge's commitment to shareholder engagement and to continuously improving our governance practices in view of emerging trends and best practices," said David Arledge, chair of the board of Enbridge Inc., in a statement.
EnCana’s board has approved a plan to include a non-binding advisory vote by shareholders on executive compensation at its annual general meeting planned for April 2011. “This vote will give EnCana shareholders an opportunity to provide feedback to the board of directors on the company’s approach to executive compensation,” the company said in a news release.
Suncor did not issue a formal public statement but a spokesman told the Calgary Herald that the company will announce a similar compensation plan next year.
Meritas filed say on pay resolutions at 12 companies last year. The Canadian Coalition for Good Governance expects as many as 35 public companies to sign up. The coalition published its say on pay policy last month.
The three companies have agreed to establish an advisory vote on executive compensation, starting in 2011.
"Offering our shareholders a "say on pay" reflects Enbridge's commitment to shareholder engagement and to continuously improving our governance practices in view of emerging trends and best practices," said David Arledge, chair of the board of Enbridge Inc., in a statement.
EnCana’s board has approved a plan to include a non-binding advisory vote by shareholders on executive compensation at its annual general meeting planned for April 2011. “This vote will give EnCana shareholders an opportunity to provide feedback to the board of directors on the company’s approach to executive compensation,” the company said in a news release.
Suncor did not issue a formal public statement but a spokesman told the Calgary Herald that the company will announce a similar compensation plan next year.
Meritas filed say on pay resolutions at 12 companies last year. The Canadian Coalition for Good Governance expects as many as 35 public companies to sign up. The coalition published its say on pay policy last month.
Thursday, February 11, 2010
Meeting the access to capital challenge for Canadian social enterprise
The following post was written by Social Investment Organization executive director Eugene Ellmen and was originally published on Social Finance.
The financing problems of social enterprise in Canada are well-known. Banks have difficulty extending commercial loans to social enterprise because they lack the security of hard assets, and private investors can't take ownership positions in businesses that - as non-profits - have no owners.
Yet there are fledgling models in Canada that have overcome these barriers. The Canadian Alternative Investment Coooperative, Access Toronto, Jubilee Fund and community loan funds in Montreal and Ottawa are some of the innovations that have successfully brought together socially responsible investors with local volunteers and publicly-funded agencies. The result is jobs and economic opportunity for low-income people in these communities.
The challenge now is to scale up. Is there a way to create an investment product that would attract not just thousands of dollars, but tens of millions of dollars to the social enterprise sector? As communities across Canada struggle with the effects of the current recession compounded by years of economic and social neglect, the need for such an investment vehicle has never been greater.
This challenge has been taken up by the Social Investment Organization in a new project called Impact Investing: a feasibility study for social enterprise financing. Announced Feb. 9 as one of a number of Ontario Trillium Foundation Future Fund projects, the SIO initiative aims to create a market-ready investment product for the social enterprise sector within two years.
Partnering with Causeway, a strong advocate for social enterprise in Canada, SIO will develop this investment vehicle with the help of an as-yet-to-be-formed advisory committee and a team of consultants. The project will draw on social enterprise projects in Ontario and, if warranted, across the country.
The advisory committee and consultants have their work cut out for them. While there are some workable models in Canada, social enterprise finance has remained small-scale in this country. One of the reasons for this is that Canadian social enterprise hasn't benefited from legislative incentives such as the US Community Reinvestment Act, which specifically mandates banks in the US to meet the credit needs of low-income communities. If this project is going to be successful, it will need to be successful under current Canadian laws and regulations. So what are the key challenges that need to be met? Here are some of the major issues:
- Creation of a social enterprise "pool" to form a base of investable assets. Individual projects across the province or across the country will need to be bundled together to form a diversified pool of viable businesses. When fully operational, the pool will need to be large enough that it can support paid staff to carry out appropriate due diligence on the projects in the pool. Without this due diligence, there won't be sufficient investor confidence to attract significant dollars. This could be done through a co-operative arrangement of some of the existing funds in this area (a fund of funds), or a new agency could be set up to manage the pool. This may require public subsidies to meet operational expenses, at least at the beginning.
- Establishment of a retail deposit product or investment note that would provide dedicated financing for the social enterprise pool. Deposits from this product (similar to the successful Calvert Community Investment Note in the US) would provide loans to the pool, which, in turn, would be used to provide loans to community funds or individual projects.
- Attraction of a mainstream financial institution interested in offering the deposit or note. There is no sense in having a well-designed vehicle if there is no efficient way of getting it into the market. A mainstream financial institution could get it into the hands of advisors, who then could talk to their clients about investing in it. Further, a deposit product offered by a mainstream financial institution would have the benefits of RRSP- and RESP-eligibility, combined with federal or provincial deposit insurance. Vancity has successfully offered such a product for years through its Shared Growth and Shared World programs, which have raised millions of dollars for Vancouver-based social enterprise and global microfinance funds.
- Enabling the institutional sector to invest in the pool, possibly through a separate fund designed specifically for high-net-worth or institutional investors. Many foundations, for example, are becoming aware of their power to invest in social enterprises that meet the same "mission-based" objectives as the foundations themselves. Finding an easily-accessible way for these institutions to invest in the social enterprise pool will be key to its success. Community Foundations of Canada is leading this work in the foundation sector.
The challenges will not be easily overcome. If they were, there would already be such a fund operating in Canada. However, the SIO is confident that using the existing know-how of the Canadian social finance sector as well as useful models from around the world that we can create a financing mechamism to enable social enterprise to reach its future potential.
The financing problems of social enterprise in Canada are well-known. Banks have difficulty extending commercial loans to social enterprise because they lack the security of hard assets, and private investors can't take ownership positions in businesses that - as non-profits - have no owners.
Yet there are fledgling models in Canada that have overcome these barriers. The Canadian Alternative Investment Coooperative, Access Toronto, Jubilee Fund and community loan funds in Montreal and Ottawa are some of the innovations that have successfully brought together socially responsible investors with local volunteers and publicly-funded agencies. The result is jobs and economic opportunity for low-income people in these communities.
The challenge now is to scale up. Is there a way to create an investment product that would attract not just thousands of dollars, but tens of millions of dollars to the social enterprise sector? As communities across Canada struggle with the effects of the current recession compounded by years of economic and social neglect, the need for such an investment vehicle has never been greater.
This challenge has been taken up by the Social Investment Organization in a new project called Impact Investing: a feasibility study for social enterprise financing. Announced Feb. 9 as one of a number of Ontario Trillium Foundation Future Fund projects, the SIO initiative aims to create a market-ready investment product for the social enterprise sector within two years.
Partnering with Causeway, a strong advocate for social enterprise in Canada, SIO will develop this investment vehicle with the help of an as-yet-to-be-formed advisory committee and a team of consultants. The project will draw on social enterprise projects in Ontario and, if warranted, across the country.
The advisory committee and consultants have their work cut out for them. While there are some workable models in Canada, social enterprise finance has remained small-scale in this country. One of the reasons for this is that Canadian social enterprise hasn't benefited from legislative incentives such as the US Community Reinvestment Act, which specifically mandates banks in the US to meet the credit needs of low-income communities. If this project is going to be successful, it will need to be successful under current Canadian laws and regulations. So what are the key challenges that need to be met? Here are some of the major issues:
- Creation of a social enterprise "pool" to form a base of investable assets. Individual projects across the province or across the country will need to be bundled together to form a diversified pool of viable businesses. When fully operational, the pool will need to be large enough that it can support paid staff to carry out appropriate due diligence on the projects in the pool. Without this due diligence, there won't be sufficient investor confidence to attract significant dollars. This could be done through a co-operative arrangement of some of the existing funds in this area (a fund of funds), or a new agency could be set up to manage the pool. This may require public subsidies to meet operational expenses, at least at the beginning.
- Establishment of a retail deposit product or investment note that would provide dedicated financing for the social enterprise pool. Deposits from this product (similar to the successful Calvert Community Investment Note in the US) would provide loans to the pool, which, in turn, would be used to provide loans to community funds or individual projects.
- Attraction of a mainstream financial institution interested in offering the deposit or note. There is no sense in having a well-designed vehicle if there is no efficient way of getting it into the market. A mainstream financial institution could get it into the hands of advisors, who then could talk to their clients about investing in it. Further, a deposit product offered by a mainstream financial institution would have the benefits of RRSP- and RESP-eligibility, combined with federal or provincial deposit insurance. Vancity has successfully offered such a product for years through its Shared Growth and Shared World programs, which have raised millions of dollars for Vancouver-based social enterprise and global microfinance funds.
- Enabling the institutional sector to invest in the pool, possibly through a separate fund designed specifically for high-net-worth or institutional investors. Many foundations, for example, are becoming aware of their power to invest in social enterprises that meet the same "mission-based" objectives as the foundations themselves. Finding an easily-accessible way for these institutions to invest in the social enterprise pool will be key to its success. Community Foundations of Canada is leading this work in the foundation sector.
The challenges will not be easily overcome. If they were, there would already be such a fund operating in Canada. However, the SIO is confident that using the existing know-how of the Canadian social finance sector as well as useful models from around the world that we can create a financing mechamism to enable social enterprise to reach its future potential.
Monday, February 8, 2010
SRI Monitor marks first anniversary
It’s fair to say that Sucheta and I really had no idea what to expect when we started the SRI Monitor blog this time last year. We did have a decent working knowledge of the socially responsible investment sector along with a strong belief that many stories related to SRI simply weren’t been covered by mainstream media. We hoped to fill that void and promote SRI at the same time.
Since the blog began in January 2009, we’ve written 157 stories on a wide variety of topics including shareholder advocacy, pensions, green energy, sustainability, ESG disclosure and transparency, along with our core topic of socially responsible investing. We’ve covered numerous conference and events, including the annual Social Investment Organization conference, held last summer in Winnipeg.
Sucheta and I have penned the bulk of the SRI Monitor stories, however our guest blogger list includes Christie Stephenson of Ethical Funds, Eugene Ellmen of the Social Investment Organization, Jordan Berger of Mercer Investment Management, Lisa Hayles from EIRIS and Karim Harji of Social Finance (we cross-post articles with the Social Finance website.)
We’d love to expand that list and invite readers to submit their own articles for publication. In addition, we welcome suggestions for topics you’d like to see covered in the blog.
SRI Monitor currently has about 130 subscribers, either through e-mail or newsreaders, and we’ve tallied about 9,000 page views since start-up.
We’re happy with those numbers but we do feel that the interest in SRI in Canada is much larger. We encourage you to spread the word about SRI Monitor - e-mail the link to your friends and co-workers and if you haven’t already, please join the list of subscribers.
Thanks for your support!
Since the blog began in January 2009, we’ve written 157 stories on a wide variety of topics including shareholder advocacy, pensions, green energy, sustainability, ESG disclosure and transparency, along with our core topic of socially responsible investing. We’ve covered numerous conference and events, including the annual Social Investment Organization conference, held last summer in Winnipeg.
Sucheta and I have penned the bulk of the SRI Monitor stories, however our guest blogger list includes Christie Stephenson of Ethical Funds, Eugene Ellmen of the Social Investment Organization, Jordan Berger of Mercer Investment Management, Lisa Hayles from EIRIS and Karim Harji of Social Finance (we cross-post articles with the Social Finance website.)
We’d love to expand that list and invite readers to submit their own articles for publication. In addition, we welcome suggestions for topics you’d like to see covered in the blog.
SRI Monitor currently has about 130 subscribers, either through e-mail or newsreaders, and we’ve tallied about 9,000 page views since start-up.
We’re happy with those numbers but we do feel that the interest in SRI in Canada is much larger. We encourage you to spread the word about SRI Monitor - e-mail the link to your friends and co-workers and if you haven’t already, please join the list of subscribers.
Thanks for your support!
Friday, February 5, 2010
Green Energy Act Finance Forum
‘The Green Energy Act (GEA) presents a significant opportunity for the financial sector to participate in funding the growth of renewable energy production in Ontario. In order to leverage this opportunity, and facilitate a large-scale deployment of renewable energy infrastructure, a number of financial instruments (equity, debt, venture), financial institutions (pension funds, banks, private equity, mutual funds) and other sector players (suppliers and operators) need to be engaged.’ Attracted by this potential, the Green Energy Act Finance Forum, presented by MaRS, the Green Energy Act Alliance and D&D Securities, drew a capacity crowd of 300 last Friday at the MaRS Discovery District.
In introducing the first panel, European Perspectives and Best Practices, Tom Rand, CleanTech Practice Lead at MaRS, suggested that Europe has provided a clear, credible, long term commitment to the clean tech sector and that’s what it takes to attract large amounts of capital.
Jerome Guillet, Head of Energy at Dexia Credit Local, discussed some issues in project finance, including regulatory risk, construction risk and financeability. He viewed price stability as the single most important factor in financing renewable energy projects, as these projects require a significant expenditure up front, which is then recouped from a revenue stream over 15 -20 years. Second was priority interconnection of the project to the grid to eliminate volume risk. And finally, a consistent long term framework with a suite of polices supporting a fixed price, a fair ROI rationale and the assured interconnect. “What attracts capital? Stability and simplicity.”
TLC – that’s how it’s framed at DB Climate Change Advisors. Covering themes similar to those of Mr. Guillet, Nils Mellquist stated that investors want Transparency, Longevity and Certainty, in order to reduce the cost of capital and make financing more achievable. Deutsche Bank has produced a research paper Paying for Renewable Energy: TLC at the Right Price which sets out, among other things, their view of the optimal features of an Advanced FiT. ‘Germany remains a leading example, and in North America the province of Ontario has emerged with a particularly strong policy.’
Mr. Mellquist stressed that the Feed in Tariff should not stand alone, it should be tied in to other policy initiatives. “Carbon markets that are robust, hedgeable and liquid are still some way off. Until we get there, we need policy to help.”
“When you have a policy goal, a FiT and TLC, you will get an investment response.”
In introducing the first panel, European Perspectives and Best Practices, Tom Rand, CleanTech Practice Lead at MaRS, suggested that Europe has provided a clear, credible, long term commitment to the clean tech sector and that’s what it takes to attract large amounts of capital.
Jerome Guillet, Head of Energy at Dexia Credit Local, discussed some issues in project finance, including regulatory risk, construction risk and financeability. He viewed price stability as the single most important factor in financing renewable energy projects, as these projects require a significant expenditure up front, which is then recouped from a revenue stream over 15 -20 years. Second was priority interconnection of the project to the grid to eliminate volume risk. And finally, a consistent long term framework with a suite of polices supporting a fixed price, a fair ROI rationale and the assured interconnect. “What attracts capital? Stability and simplicity.”
TLC – that’s how it’s framed at DB Climate Change Advisors. Covering themes similar to those of Mr. Guillet, Nils Mellquist stated that investors want Transparency, Longevity and Certainty, in order to reduce the cost of capital and make financing more achievable. Deutsche Bank has produced a research paper Paying for Renewable Energy: TLC at the Right Price which sets out, among other things, their view of the optimal features of an Advanced FiT. ‘Germany remains a leading example, and in North America the province of Ontario has emerged with a particularly strong policy.’
Mr. Mellquist stressed that the Feed in Tariff should not stand alone, it should be tied in to other policy initiatives. “Carbon markets that are robust, hedgeable and liquid are still some way off. Until we get there, we need policy to help.”
“When you have a policy goal, a FiT and TLC, you will get an investment response.”
Thursday, February 4, 2010
SRI funds improving on social factors: survey
Canada’s socially responsible mutual funds appear to be doing better on issues like ESG screening and integration, according to Corporate Knights magazine’s annual responsible investing guide.
The survey scores more than 50 SRI mutual funds on performance and social factors, including proxy voting, engagement and ESG integration. “Our average CK Social Score (CKSS) rose this year from 51.6 in 2009 to 55.41,” the magazine notes. “However, our average engagement impact score fell from 44.83 in 2009 to 42.3 in 2010.”
Despite this, the survey points to a number of positive changes related to engagement. “Northwest & Ethical Investments encouraged TELUS, Research In Motion, and Rogers to adopt stronger supply chain codes of conduct. Canadian retailer Le Chateau now discloses its supply code of conduct, and Goldcorp agreed to issue a 2009 Human Rights Impact Assessment for its Marlin mine in Guatemala.”
Inhance Investment Management, a subsidiary of Vancity, obtained commitments from BMO and TD to assess the risks of financial instruments derived from greenhouse gas trading, the survey notes while TD Asset Management adopted and disclosed a sustainable investment policy in April 2009.
Inhance received the highest social score of all fund companies surveyed. In December, Inhance and IA Clarington Investments entered into a long term strategic relationship for the distribution of IA Clarington mutual funds through Vancity branches. “This is significant, as IA Clarington’s deep investment network will significantly increase the assets invested in Inhance funds,” Corporate Knights says.
On the performance side, the survey reveals that pure-play environmentally-oriented fund companies have financially outperformed more broad-based ESG-mandated fundcos. That list includes Criterion’s Water Infrastructure and Global Clean Energy funds. However, such products do not employ socially responsible investing screens and some industry analysts argue that they are industry-specific funds, not SRI products.
Corporate Knights asked fund companies whether they invest in microfinance, community direct investment (CDI) or cleantech private equity. “Meritas is the only mutual fund company in Canada to invest up to 2% of its assets into CDI and microfinance. Inhance’s parent company, Vancity, offers microfinance and CDI investments as separate products. Acuity invests in microfinance through international development bank bonds in its Social Values Balanced Fund, and was the only fund company in our report to invest in private cleantech companies through its Clean Environment Fund.”
The survey also looked at turnover rates, the proportion of a portfolio’s securities that are replaced with new ones in a given period of time. Rates ranged from zero (Meritas Money Market Fund, Meritas Balanced Portfolio Fund, and Acuity Alpha Social Values Portfolio Class A) to 143% (Mavrix Sierra Equity Fund). “While growth funds typically have higher turnover rates, we still feel that a long-term growth manager should buy and hold, rather than try to time the market or use other practices that better belong in casinos.”
Read the survey results here.
The survey scores more than 50 SRI mutual funds on performance and social factors, including proxy voting, engagement and ESG integration. “Our average CK Social Score (CKSS) rose this year from 51.6 in 2009 to 55.41,” the magazine notes. “However, our average engagement impact score fell from 44.83 in 2009 to 42.3 in 2010.”
Despite this, the survey points to a number of positive changes related to engagement. “Northwest & Ethical Investments encouraged TELUS, Research In Motion, and Rogers to adopt stronger supply chain codes of conduct. Canadian retailer Le Chateau now discloses its supply code of conduct, and Goldcorp agreed to issue a 2009 Human Rights Impact Assessment for its Marlin mine in Guatemala.”
Inhance Investment Management, a subsidiary of Vancity, obtained commitments from BMO and TD to assess the risks of financial instruments derived from greenhouse gas trading, the survey notes while TD Asset Management adopted and disclosed a sustainable investment policy in April 2009.
Inhance received the highest social score of all fund companies surveyed. In December, Inhance and IA Clarington Investments entered into a long term strategic relationship for the distribution of IA Clarington mutual funds through Vancity branches. “This is significant, as IA Clarington’s deep investment network will significantly increase the assets invested in Inhance funds,” Corporate Knights says.
On the performance side, the survey reveals that pure-play environmentally-oriented fund companies have financially outperformed more broad-based ESG-mandated fundcos. That list includes Criterion’s Water Infrastructure and Global Clean Energy funds. However, such products do not employ socially responsible investing screens and some industry analysts argue that they are industry-specific funds, not SRI products.
Corporate Knights asked fund companies whether they invest in microfinance, community direct investment (CDI) or cleantech private equity. “Meritas is the only mutual fund company in Canada to invest up to 2% of its assets into CDI and microfinance. Inhance’s parent company, Vancity, offers microfinance and CDI investments as separate products. Acuity invests in microfinance through international development bank bonds in its Social Values Balanced Fund, and was the only fund company in our report to invest in private cleantech companies through its Clean Environment Fund.”
The survey also looked at turnover rates, the proportion of a portfolio’s securities that are replaced with new ones in a given period of time. Rates ranged from zero (Meritas Money Market Fund, Meritas Balanced Portfolio Fund, and Acuity Alpha Social Values Portfolio Class A) to 143% (Mavrix Sierra Equity Fund). “While growth funds typically have higher turnover rates, we still feel that a long-term growth manager should buy and hold, rather than try to time the market or use other practices that better belong in casinos.”
Read the survey results here.
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