On December 19, the Social Investment Forum (SIF) posted the full text of “The Wages of Social Responsibility,” winner of the 2008 Moskowitz Prize. SIF, in cooperation with the Center for Resposible Business at the Haas School of Business, has awarded this annual prize for “excellent research in the SRI field” since 1996.

The abstract for “The Wages of Social Responsibility,” by Meir Statman of Santa Clara University and Denys Glushkov of Barclays Global Investors, is excerpted below. Click here to review this and other Moskowitz Prize-winning papers.

”Typical socially responsible investors tilt their portfolios toward stocks of companies with high scores on social responsibility characteristics such as community, employee relations and the environment. We analyze returns during 1992-2007 of stocks rated on social responsibility by KLD and find that this tilt gave socially responsible investors a return advantage relative to conventional investors. …

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In a December 16 article, the New York Times examined the role of the middlemen who funneled customers and assets to Bernard Madoff. Author Eric Konigsberg paid particular attention to Walter M. Noel, whose firm’s Fairfield Sentry fund invested exclusively with Mr. Madoff.

Now that Mr. Madoff has confessed to operating a $50 billion Ponzi scheme, the investment world is asking how he did it – and why no one caught on earlier. The Times article reveals that at least one observer – consultant Michael Markov – was advising his clients to steer clear of the Fairfield Sentry fund as early as 2006:

“People in the industry continue to question Fairfield’s due diligence. Michael Markov, a hedge fund consultant, said that he was hired by a fund two years ago to look into Fairfield Sentry’s returns and found that it was ‘statistically impossible to replicate them,’ he said.

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On December 15, President-elect Obama introduced his choice for energy secretary, among other members of his new administration’s environmental policy staff. Echoing his remarks from a recent meeting with Al Gore, the President-elect said that a federal commitment to a “clean energy future” could help shore up the faltering economy.

The effort to mitigate climate change is a massive long-term project, but the political climate typically favors short-term rewards. How could the transition to a less carbon-intensive economy – which would take decades – stimulate spending and hiring today?

One possible answer to this is “cap and dividend,” a variation on the cap and trade concept that President-elect Obama has already endorsed. Cap and trade programs typically charge carbon emitters for permission to release carbon into the air, and then direct those revenues towards mitigation.

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Integrity Research Associates has posted an article on “Fidelity & the Global Research Settlement.” Author Sanford Bragg explains that Fidelity has expanded beyond the scope of the 2002 Settlement to offer additional sources of investment research, including ESG research from KLD and governance research from Audit Integrity. Mr. Bragg writes:

“… [Fidelity] has focused on adding research which helps investors form a ‘mosaic,’ similar to the broader trends in investment research. The mosaic includes non-standard analysis such as governance and ESG research. …”

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A December 11 letter from a coalition of investors, managers and advisers has called on President-elect Obama to strengthen shareholders’ right to seek better corporate transparency. Sixty signatories, including KLD, have urged him to “reverse a five-year ‘pattern’ at the SEC blocking shareholders from using proxy resolutions to request better disclosure of identified financial risks to a company,” according to the coalition’s press release.

In the context of the still-unfolding financial crisis, consider this example of the SEC’s “closing the door to important shareholder concerns”:

“The SEC has disallowed many shareholder resolutions that ask companies to disclose the financial implications of an array of environmental, community, public health, and human rights concerns and issues….Within the past year the agency even struck down a proposed resolution at Washington Mutual asking the company to discuss its potential financial exposure as a result of the mortgage securities crisis. [Italics are from the original letter]”

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During our 20th year, KLD has sought the perspectives of socially responsible investing (SRI) thought leaders on the evolution of our company, and our industry. Now KLD is sharing these insights at a special section of our website: www.kld.com/about/20years

Our 20th Anniversary Retrospective includes:

- A discussion with Thomas Kuh, Managing Director of KLD Indexes, about SRI’s growth and development and how KLD has adapted to changes in the marketplace.

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As part of its Climate Change Series, the Financial Times has published a guide to “Green Giants.” These are companies that, as explained by author Fiona Harvey, “generate more than 80% of their revenue from clean technology.”

Some of these companies, like Danish wind turbine maker Vestas, produce products that visibly contribute to a less-polluting economy. Others help in less obvious ways, such as Copart, an American firm that has developed a new model for recycling old cars. Recycling reduces demand for raw materials, such as mined iron ore, and requires less energy than raw steel production.

KLD’s research profile of Copart summarizes its “Virtual Bidding Internet” auction technology:

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The New York Times reports that the price of a college education has grown far faster than incomes over the past 25 years. According to a new study from the National Center for Public Policy and Higher Education, tuitions and fees have increased 439% since 1982, while median income has only increased 147%.

In a somewhat curious understatement, the Center’s Patrick M. Callan tells the Times:

“If we go this way for another 25 years, we won’t have an affordable system of higher education.”

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Just in time for the holiday shopping season, Newsweek has published an article on “The End of the Mall.” Author Tony Dokoupil tells of the delayed opening of a new $2.3 billion mall in New Jersey. This facility, modestly named “Xanadu,” had been scheduled to open this fall, with 200 tenants. How many takers are there for 200 spaces in Xanadu? Nine.

Few would argue that New Jersey really needs another mall, but Xanadu is not an isolated case. Mr. Dokoupil cites evidence that the “stately pleasure-dome” is in trouble nationwide:

“Last year was the first in half a century that a new indoor mall didn’t open somewhere in the country—a precipitous decline since the mid-1990s when they rose at a rate of 140 a year, according to Georgia Tech professor Ellen Dunham-Jones, coauthor of the forthcoming book “Retrofitting Suburbia,” which focuses on the decline of malls and other commercial strips. Today, nearly a fifth of the country’s largest 2,000 regional malls are failing, she says…”

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