Archive for SRI

Many “Social” and “Sustainable” Mutual Funds Owned BP

Marc Gunther takes a look at why so many “Sustainable” and “Socially Responsible” mutual funds owned large stake in BP.

Worth a read.

Some of the biggest offenders were
* the Dow Jones Sustainability Index
* Pax World Funds
* MMA International Fund
* Legg Mason Social Awareness Fund

while the Sentinel Sustainable Core Opportunities Fund has Transocean (which operated Deepwater Horizon) as its biggest holding.

Among the relatively rare sustainable funds that were practicing what they preach (at least as far as oil companies are concerned) were Portfolio 21 and the Highwater Global Fund.

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Socially Responsible Finance Jobs?

Live Earth seems to have had a big effect… both this (my personal blog) and Alt Energy Stocks have seen a big boost in readership this week.

So if you listened to Live Earth, and had a life-changing experience, you might be just looking for a new, socially responsible career. I can tell you one sector that does not have enough good talent: Socially Responsible Finance. The folks over at the ForEx Blog have put together a list of Four Careers in Social Finance, although they call it 13 (perhaps because there are a few tips and pointers thrown in as well.) This neatly deflates two myths about money-men:

1. Some of us do want to make the world a better place
2. Not all of us are good at math.

I do have one major gripe: They didn’t mention my job: Renewable Energy Investment Analyst/Advisor/Writer. Maybe because it’s too long… or actually three jobs… but, really, guys, there’s no real competition. C’mon in, the water’s fine!

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Divestment from Sudan

Monday I was speaking to a client who brought up some concerns about investments in Sudan/Darfur. Mia Farrow had come to her workplace and given a talk about how Fidelity has investments in Darfur, and she was happy because I had had her sell all her Fidelity funds when she moved her assets into my care.

Because I use individual stocks, however, she wanted to be reassured that she didn’t own any companies which do business there. Since I don’t invest in oil companies as a general rule, and most of the companies doing business there are involved in oil, I knew she wasn’t overly exposed to the country, but I wanted to check for some of the large conglomerates I inculded in her portfolio as part of my blue chip alternative energy strategy.

It turns out Amherst College has published it’s list of companies they won’t invest in because of investments in Sudan, and I thought this list would be useful to those of my readers who manage their own portfolios using individual stocks.

Here’s the current list:

    Alcatel SA
    Alstom S.A.
    Bharat Heavy Electricals Limited
    China National Petroleum Corp. (PetroChina and CNPC Hong Kong Ltd)
    China Petroleum and Chemical Corp. (Sinopec and Sinopec Shanghai)
    Dong Feng Automotive Company Ltd.
    Harbin Power Equipment Co. Ltd
    Lundin International SA
    Muhibbah Petrochemical Engineering Sdn Bhd
    Nam Fatt Co. Bhd
    Oil & Natural Gas Co. Ltd. (ONGC)
    Ranhill Bhd
    PECD Berhard
    PETRONAS and subsidiaries: PETRONAS Dagangan BHD, PETRONAS Gas BHD and MISC Berhad
    Schlumberger Ltd.
    Sumatec Resources (IR OilRigs International Ltd)
    Videocon Industries Ltd.
    Weir Group PLC (Weir Pumps Ltd.)

The original list included two companies I like because of their electricity transmission businesses, so I was happy to see that both Siemens and ABB SA had pulled out of the country, which gives me one more reason to like them both.

UPDATE 4/10/07

I just received an email from Max Croes at Sudan Divestment Task Force. They have their own, more in depth list developed in conjunction with Calvert. You can get an updated list from them by emailing, and much more useful infromation is on their web site.

They use more nuanced critera:

    1. Has a business relationship with the government, a government-created project, or companies affiliated with a government-created project; AND

    2. Provides little benefit to the disadvantaged populations of Sudan; AND

    3. Has not developed a substantial business-practice policy that acknowledges and deals with the fact that the company may be inadvertently contributing to the Sudanese government’s genocidal capacity.

UPDATE 4/14/07

And now we hear that The New York Times, CNN, Newsweek, Business Week and the Boston Globe all turned down anti-Fidelity ads sponsored by the Save Darfur Coalition.

My thought: Fidelity is a BIG advertiser.

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SRI Mutual Funds: Robin Hood or Robber Baron?

My Competition

A couple weeks ago I got into a discussion with Marc Gunther about socially responsible (SRI – the “I” is Investing) mutual funds and how I feel that they charge too much for the services they provide.  This is of course rather self-serving, since socially responsible mutual funds and alternative energy mutual funds are my most direct competitors for business… there really are very few independent investment advisors who will manage portfolios of individual securities for accounts under $1M… almost everyone uses mutual funds.  So in the socially/environmentally  responsible realm, my real competition is advisors using socially responsible and alternative energy mutual funds, and/or people who manage their own portfolios with these funds.

There’s a certain amount of Robin Hood, when it comes to SRI funds: they do charge high (compared even to the mutual fund industry) fees, but they also engage in valuable social research, and even in advocacy for social change.  I don’t dispute that these are valuable services, but I wonder if the funds investors are getting good value for their money.  After all, despite my Robin Hood metaphor, the people paying the fees are not the fabulously wealthy, they actually tend to be smaller investors… perhaps it would be better if the research and advocacy were done by nonprofit groups, and the socially responsible mutual funds just followed the nonprofit’s lead as to where they invest.

Using Nonprofits for SRI Research

The question is, what reliable data is published by nonprofits that we can use to better inform the social aspects of our investing decisions.  So I set out on an Internet quest, to see what I could dig up (putting aside for the moment everything I know from my own research, which consists of keeping up with environmental and energy news as well as changes in alternative energy technology.)  I limited my search to just climate change (who’s helping, who is causing the problem) and thought I’d Google around and see what I could find. 

The National Resources Defense Council publishes reports bench marking the 100 largest electric power producers for air emissions.  Using their data, I thought I’d see if I could pick out some of the best electric utilities.  Among investor owned utilities with more than 20 million MWh of generation, the lowest emitters per MWh generated (2005 data) are: PG&E (NYSE: PCG), Exelon (NYSE: EXC), Entergy (NYSE: ETR), PSEG (NYSE: PEG), and FPL (NYSE: FPL).

Looking over this list, I note a heavy reliance on nuclear power, which I have to say does not make me happy when I’m looking for environmentally responsible companies.  has a list of US Nuclear Utilities, and guess what: they’re all on the list!  It’s surprisingly hard to find good data on how much power each utility gets from nuclear… unsurprisingly, perhaps, utilities are not vying with each other for nuclear leadership (with the exception of Exelon, which claims to produce about 20% of the US’s nuclear power on their site.

  So what would be environmentally responsible?  How about a lot of wind generation, and, even better, am emphasis on energy efficiency and demand side management programs?  So I went over to The American Council for an Energy Efficient Economy (ACEEE) and noted that of the companies in my list, PG&E won their award for best practices for their upstream residential lighting program.

It’s not that easy

And now it’s two hours later, and I have to come to the conclusion that I was wrong… there really is no nonprofit that compiles the necessary information in an easy to use way to help an investor use objective criteria to understand the social positions of companies, so the research that these mutual funds do is hard to replicate (although not hard to copy: simply get a copy of their prospectus and mimic their holdings in your discount brokerage account.)   However, copying their portfolio does not lessen the value of the research that went into it… it just is a way of making use of their research without paying for it.

But does it need to be that expensive?

Is the price they charge for their service a reasonable one?  Considering they typically charge 0.5% to 1% of assets more than a typical low cost mutual fund, it still seems high to me.  Just to pick on one fund at random: the Citizen’s Value Fund (MYPVX), which has an annual expense ratio of 1.29% and assets under management of $45.68M, compared to the CMG Large Cap Value find (CLCPX) which I chose because it was another large cap value fund with similar assets under management ($39.59M) and an annual expense ratio of 0.5%.

Looking at these numbers, we see that this smallish Citizens Fund is charging its customers approximately $360,000 a year for their social research and advocacy.  That seems like enough to me to keep three well-paid analysts happy, and certainly enough money to run a nonprofit with a dozen underpaid but dedicated interns to keep track of which large cap value companies are socially responsible under a wide variety of criteria.

MYPVX is just one of a couple hundred SRI funds… many of which doubltess share research into which companies are being responsible, using their criteria. There is no doubt in my mind that this reasearch is valuable, and that their assets have an effect on the behaviour of companies in the market. Is it worth it? You decide every time you invest.

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Banking decisions: Returns or Environmental Responsibility?

Follow-up on my 1/15/07 blog entry

I heard back within an hour when I emailed New Resource Bank… I still have not heard back from Eco-Bank, two days later, so they are out of the running for my business. 

I have to admit, I’m leaning against going with New Resource anyway, and looking into local banks so that I have the added convenience of local ATMs.   I believe that it is good to put our money where our morals are, but that we should not pay too much to do so…  If I go with New Resource, I effectively tie up $4000 of my money at zero interest, vs. $1000 tied up at the local credit union. 

If I go with the local credit union, the $3000 difference will naturally be invested in projects that help the environment AND are likely to earn good returns, but $1000 is tied up, possibly financing someone else’s Hummer. 

If I go with New Resource, my $4000 minimum earns no returns, but is still invested in projects that help the environment.  Is the loss of earnings on the $3000 worth the fact that the other $1000 will be invested in an environmentally sound manner?

I think I’ve talked myself out of using New Resource… For me, my money is better deployed elsewhere.  For you, the calculation could easily be different: my job is to find investments that are both good for the environment and good for the pocketbook… so I always have more environmentally sound opportunities than I have money to put into them.  

For most people, the opposite is true.   Finding sound investments is extremely difficult (and usually harder than it seems), but complicating things with the added requirement that the investments also be environmentally sound moves the task totally out of reach.  So, given that you are probably not a green investment professional, you will be giving up less potential earnings on the account minimums, and using them for your banking needs is an easy way to ensure that your money is being used responsibly.

Keep in mind, this entire discussion is based on the requirements of New Resource’s Business Checking accounts…. the account minimums are much lower for their personal checking accounts, and so the trade-offs there are not so dire.  Unfortunately for New Resource, I am not in the market for personal banking services… I have an excellent deal through my broker (a deal which they are unfortunately unable to extend to my business account.)

See comments for a response from Peter Liu, New Resource VP & Founder.

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