Coal and the iron and steel works that consumed it were, 125 years ago, the foundations of Andrew Carnegie’s fortune.(1) So, his life would seem unlikely to hold lessons for investors concerned about global warming. But it does.
Carnegie’s Causes
The Scottish immigrant had two great causes. Most recognize his name today in the US and UK for his philanthropic investments in vehicles offering opportunities for human betterment: Carnegie libraries, university scholarships, Carnegie Hall, Carnegie Mellon University, teacher pensions (TIAA-CREF), etc.
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Social investors have long been interested in executive compensation. The pay packages of CEOs occasionally attract attention from the mainstream press, too, and the June 12 issue of The Economist weighs in on the issue.
Three different articles consider executive pay, and they follow different paths to the same general conclusion. Yes, the authors agree, it’s possible that companies overpay their executives – especially in the U.S. – but it’s hard to say how much compensation is too much. The first article, “Pay Attention,” includes this sweeping statement:
“It is near impossible, of course, to determine the correct absolute level of executive pay.”
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The Sustainable Endowment Institute (SEI) recently released its College Sustainability Report Card. According to its Executive Summary, the Report Card “seeks to encourage sustainability as a priority in college operations and endowment investment practices by offering independent yearly assessments of progress.”
Institutions of higher education have played a significant role in SRI at least since the South African divestment movement of the 1980s. The Report Card examines both the investment practices of these schools and the sustainability of core university operations.
SEI finds that “the level of campus sustainability initiatives far outpaces that of endowment sustainability activity.” Responsible food-service and recycling practices, for example, earned “A” grades for 29% of schools. Only 4% of colleges achieved the same grade for their “Endowment Transparency.”
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If a tree falls in a forest when no one’s around, does it make a sound? If a company emits carbon dioxide but saves a forest, has it achieved climate neutrality?
While both companies and outside stakeholders agree that reducing and/or offsetting emissions is a worthy corporate objective, there is no consensus on how to define and achieve this goal.
A new study from Clean Air-Cool Planet and the UK’s Forum for the Future considers climate neutrality and makes detailed recommendations for how to achieve it. Getting to Zero: Defining Corporate Climate Neutrality defines carbon neutrality as a condition in which “a company, or one of its products or services, can have no net impact on climate.”
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A growing number of KLD’s clients serve high-net-worth investors (HNWI), commonly defined as individuals whose investable assets exceed $1 million. Nelle Coady, Assistant Manager of Client Services at KLD, reports that “the next generation of money” is concerned with the social impact of their investments.
“Young, high net worth investors are looking to be more proactive,” Nelle explains. “Our institutional clients tell us that social responsibility is a priority for more and more of their younger investors.”
The wider investment community, in the U.S. and abroad, has recognized this trend. American Banker reports: “Major custody banks are increasingly adding socially responsible investment factors into their monitoring services.”
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If your livelihood depended on the quality of your advice, wouldn’t you be your own best customer? Maybe not, especially if you’re a fund manager, according to a new study from Morningstar. Their analysis of SEC-required disclosure of managers’ holdings reveals some surprising numbers:
“In U.S.-stock funds, 47% report no manager ownership. And it gets worse from there. Fully 61% of foreign-stock funds have no ownership, 66% of taxable bond funds have no ownership, 71% of balanced funds put up goose eggs, and 80% of muni funds lack ownership.”
Should investors be concerned? Investment News quotes Morningstar’s Russel Kinnel:
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In September, Burma was on the front pages of global media, the result of the Burmese military junta’s violent crackdown on the peaceful, pro-democracy protests spearheaded by Buddhist monks. Images of soldiers bludgeoning protesters, in one case shooting a Japanese photographer at close range (he later died), held the world’s attention for a number of days.
As of December, the story continued to unfold, mostly without the benefit of front-page coverage, as the media had moved on to other issues. The BBC reported that the UN had confirmed at least 31 deaths in the crackdown.
Later in the month Congress passed a bill aiming to tighten sanctions against Burma. The legislation is meant to close loopholes that allow Burmese gems to be imported through third countries, as well as those that provide the junta access to US banks to launder money in third countries.
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