Sustainable Mutual Funds Investing Ratings

– Morningstar Has Added This To Its Widely-Used Information & Advice Platform – Some Practical Advice Offered to Investors…

Mutual Funds:  They are there in your individual or institutional portfolio, right? This should be of interest to most:

The 20th Century concept of “mutual funds” investment debuted before the stock market crash of October 1929; in 1924 the Massachusetts Investors’ Trust in Boston was created with State Street Investors’ Trust as the custodian.  That fund opened to public investment in 1928.  That same year the Wellington Fund (offering both bonds and equity) opened for business.

When the dramatic market crash occurred there were 19 open-ended funds for investors. The 1929 crash diminished individual investors’ appetite for equities for most of the following decade.  And, most Americans had little money to invest during the Great Depression (one of four households were unemployed).

But by 1940, as investors “recovered” and gained some confidence in the market, and the national economy improved with preparation for WW II, there were enough mutual funds for the Congress to pass the Investment Company Act of 1940 to regulate mutual funds and protect investors.

The first index funds came along in 1971 (a Wells Fargo offering); The Vanguard Group’s legendary investor John Bogle would use the concept (he embraced while a college student) to build the giant mutual fund enterprise.

By the end of 2016, Statista was charting 9,500-plus funds with US$16 trillion in AUM in operation.  There are also Exchange Traded Funds (ETFs) now with at least $3 trillion in AUM as of October 2017 according to Global X.

Of course, as investors embrace the concept of sustainable or ESG investing, both mutual fund and ETFs offerings have been coming to market to add to the long-available funds offered by Domini, Trillium, MSCI, Pax, Calvert, Zevin, and other SRI advisory firms (the newer funds du jour have such titles as Fossil Free, Green Future, Sustainable Investing, Green Bonds, Low Carbon, Socially Responsible, etc.).

And, of course, sustainability-focused ratings/scores/rankings/best for mutual funds and ETFs quickly followed here in the 21st Century as “sustainable” funds expanded. The popular Morningstar platform offers information on “Socially Responsible Funds” – any fund investing according to non-economic guidelines (issues include environmental responsibility, human rights, religious views, etc.)  Morningstar also offers Sustainability Ratings for “Sustainable Investing” funds and tools such as the Portfolio Carbon Risk Score™.

Janet Brown, a contributor to Forbes’ “Intelligent Investing,” offers her perspectives on ratings and rankings in this issue’s Top Story.  She begins with: between two funds with the same returns, many people invest in the one with companies with good ESG practices or commitment to data security and privacy.  Do sustainable ratings of the funds make a difference?

There are four factors she and the team at her company (Fund X Investment Group) and Morningstar recommend considering: (1) Cost of Ratings (free or not); (2) What do sustainability ratings measure?; (3) How to use these ratings to find suitable funds; (4) How do the ratings fit into your investing strategy?

The narrative captures highlights of a recent webinar by Fund X and Morningstar and explains some of the latter’s approach to the new Sustainable Funds ratings for you.

What You Need To Know About Fund Sustainability Ratings
(Friday – June 15, 2018) Source: Forbes – Given the choice between two funds that have similar returns, many people prefer to invest in the one that prioritizes investing in companies that focus on clean energy, good governance or are committed to data security or…

7 Reasons Why America is Rethinking Capitalism Now

Guest Post by Linda E. Dunbar

Global Public Affairs Executive: PR Strategist, Spokesperson, Employee Communications Leader Adept at Engaging Key Stakeholders.

7 Reasons Why America is Rethinking Capitalism Now

There is a move afoot to change capitalism as we know it. A radical overthrow by futuristic anarchist forces? Hardly. Actually, the US business community is bravely harking back to its pre-Milton Friedman roots.

In September 1970, the 5”0’, Brooklyn-born Friedman, a well-known American economist who would earn a Nobel prize in economics six years later, published an opinion piece in The New York Times.

The title — “The Social Responsibility of Business is to Increase Profits” — summed up his thesis succinctly. In his piece, he accused US business of “preaching pure and unadulterated socialism” in attempting to address social issues of the day.

Friedman’s dismissive view: “The business men believe that they are defending free enterprise when they declaim that business is not concerned ‘merely’ with profit but also with promoting desirable ‘social’ ends; that business has a ‘social conscious’ and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers.”

To set the scene, when Friedman wrote his piece, life was very different from today although there remains no shortage of societal issues for the US business community to address.

In 1970, a woman needed a man, any man, even her 17-year-old son, to sign a business loan, get a mortgage or a credit card regardless of her income. Her income would then be discounted by the lender by as much as 50 percent when deciding how much credit to extend. In those days…

Equal access to credit for all, at least on paper, would not come to be in the US until the Congress passed the Equal Credit Opportunity Act of 1974.

Just the year before, in 1969 Rep. Charlotte Reid (R-Ill.) became the first woman to wear trousers in the U.S. Congress and Barbra Streisand became the first woman to attend the Oscars in pants.

Also, in 1969 the Stonewall Inn riots in Greenwich Village launched the gay pride movement.

The unpopular Vietnam War would rage on another five years until the fall of Saigon in 1975.

Despite the passage of the historic Civil Rights Act of 1964, discrimination against minorities continued to be rampant. In Loving vs. the State of Virginia, the U.S. Supreme Court case that overturned “miscegenation” laws in the US, was decided in favor of the plaintiffs a mere three years after in the year 1967.

The first Earth Day was proclaimed in April 1970.

The animal rights movement had not yet gotten momentum. In fact, People for the Ethical Treatment of Animals (PETA) was not founded until 1980.

Following Friedman’s pronouncement, Corporate America and its corporate governance practices made shareholder value the end-all-and-be-all of corporate thinking.

Even if that approach clearly didn’t make any sense. Anyone in business today knows intuitively no customers no business no employees no business. But along with that pronouncement came the opportunity for many major U.S. companies to take a pass on societal issues, even issues that might have been caused by business practices (extractive industries and their activities affecting the environment come to mind).

Thankfully, we have come full circle and Corporate America — in fact the global corporate business community — is coming together to rethink capitalism and its societal impact. Recent comments by asset management giants and others have been well-received as we look toward creating change.

What does rethinking capitalism mean? And why now?

Better Capitalism. Tempered Capitalism. The New Capitalism. Conscious Capitalism.

Whatever it is called, helping to transform the short-term, insular thinking currently stifling the potential of American business and its ability to effectively connect with stakeholders is an important element of the movement.

Understanding that although businesses have an important fiduciary responsibility to shareholders, the enterprises exist for reasons other than to solely enrich shareholders (and business leaders who understand that perform better than those who don’t).

And the core: understanding your reason for existing, your purpose, what business you are really in is critical for long term success. As in do what you love and the money will follow.

“Purpose” turns out to be an effective organizing principle for many businesses. This thought process is catching on.

Here are my seven reasons why I think the time is ripe to rethink capitalism and mesh social impact and success.

1. Social media – Businesses just can’t ignore customers and employees any more. Before social media an unhappy consumer complained to roughly 17 other people. Now unhappy customers have a direct impact on reputation in a way they just could not before social media and a poor reputation eventually leads to lost revenue.

2. The Age of Authenticity — People in the US are tired of literal and figurative airbrushing. People want companies to do what they say they will. And they want them to strike the right note. If your advertising firm has advised you to be edgy, you have no margin for error. See number 1.

3. Millennials – There are over 79 million Millennials and the numbers of men and women Gen Z are close behind. They expect a different relationship between society and business — and they are not taking no for an answer. The idea that life is too short to be someone you are not or spending time in a way that you do not want to is part of their DNA. Gay, transgender, what have you, Millennials and Gen Z are not batting an eyelash. Equality, diversity, and inclusion are table stakes. They expect diversity, inclusion, equality where they shop, eat, work. If not, they will go somewhere else. Period.

4. Additional demographic shifts – The minority is becoming the majority and in 2019, the majority of U.S. children will be minorities. As demographics shift no business can be successful by leaving people out, be they customers or employee or potential customer or employees. This loops back to numbers 1, 2, and 3.

5. Climate change and the detrimental impact of humans on the planet is real – some problems we — business, government, NGOs, activists, the general public — have no choice but to tackle together. Like having air to breathe and water to drink.

6. The #Me too, #Times up Movement – Dignity, respect, and equality in the workplace, everywhere actually, are a given. And these movements have ramifications beyond sexual harassment. According to CNN, #MeToo and #TimesUp have pushed 48% of companies to review pay policies. Gender pay equity has been an issue since possibly the beginning of time and now we are seeing movement on this issue.

7. The data – The data says inclusive, diverse companies perform better.
How much better will companies perform when their purpose is at the core of what they do, long-term strategy is understood and embraced by everyone from the board on down, and stakeholders are effectively engaged? That remains to be seen but the prognosis is good!

If this article resonated with you, please feel free to connect with me directly and also like, comment or share.

7 Reasons Why America is Rethinking Capitalism Now

Email me at: linda.dunbar@outlook.com
Linked In: https://www.linkedin.com/in/lindaedunbar/

Yes, It’s Hot in Saudi Arabia – Where Air Conditioning is a Must-Have – How Can A/C Be Made More Sustainable to Meet Future Power Challenges?

by Hank Boerner – Chair and Chief Strategist, G&A Institute

Many people are fascinated with the Kingdom of Saudi Arabia, with its wondrous 21st Century blend of modern and medieval elements – and the country appears to moving along with rapid and dramatic changes under new royal family leadership (Crown Prince Mohammed bin Salman).

One of the elements of change that caught our eye is a non-Saudi business leader’s commentary that addresses the question of there being “a new model for sustainability” in the Middle East, possibly led by the kingdom…with its Vision 2030 and innovations in power consumption for air conditioning.

Kevin Cha, President, LG Electronics for the Middle East and Africa — wrote an opinion in the Saudi Gazette, telling us this week in our Top Story about what he thinks may be in store for the future.

A diversified economy — moving away from decades of heavy reliance on oil and natural gas sales to the world — will mean (he asserts) more opportunities for Saudi subjects (they are not “citizens” in the western sense), and promises of a better lifestyle.  And with all that, the increasing need for better technological-based solutions. For air conditioning, especially.

This is the ideal time to instill values of resource management and sustainability in the “minds of millions of upwardly-mobile Saudis, Kevin Cha thinks.

As example within his area of expertise:  More than 70 percent of the kingdom’s generated electricity is consumed for air conditioning and cooling (yes, it is a desert-based kingdom) and summer demand is double that of winter months (note that it does get cooler in the Middle East winters).

While less than 65% of the world’s electric needs are now met through steam turbines fueled by traditional fossil fuels, 100% of Saudi Arabia’s electricity is generated from fossil fuels (of course it has abundant supplies of these).  But — this is unsustainable for the long-term, Kevin Cha points out.

Saudi Arabia’s Vision 2030 Plan for sustainable development could help to change this picture in dramatic terms.  New technologies and new products are being introduced to the kingdom — among them (curtain raised) is (of course) LG air conditioning products.  The conditions in Saudi Arabia make for a challenging testing ground for A/C technology.  (The local environment is dust-laden, corrosive, with high temperatures and humidity.)  And so the LG Electronics products are being “battle-tested” in Saudi Arabia.  Good for the company and the A/C industry:  As the world’s demand for electric power (including Saudi Arabia’s needs to be met with continued economic growth), the kingdom is providing a test bed for the LC’s technologies and products.

Saudi Arabia’s Vision 2030 calls for reducing reliance on oil and boosting state investment in the private sector.  There are important elements of the program that call for growth of entertainment and tourism (ala, Gulf Emirates-style), and reforms of the education system.  It is being formulated in “Our Vision” – Saudi Arabia…the heart of the Arab and Islamic worlds, the investment powerhouse, and the hub connecting three continents…”

And with lower-cost, abundant air conditioning to cool your hot days through more sustainable means!

Is Saudi Arabia getting ready to unveil a new model for sustainability in the Middle East?
(Friday – June 01, 2018) Source: Saudi Gazette – SAUDI ARABIA is witnessing unprecedented transformation across various facets of everyday Saudi life. As the country marches on towards a new diversified economy that offers new avenues of consumer spending, it is a critical time…

U.S. States and Cities — “Still In” to the Paris Agreement — and Great Progress is Being Made

By Hank Boerner – Chair & Chief Strategist, G&A Institute

This is our second commentary this week on the occasion of the first anniversary of the decision by the Trump White House in June 2017 to begin the multi-year process of formal withdrawal of the United States of America from the Paris COP 21 climate agreement…

The action now is at the state and municipal levels in these United States of America.

Where for years the world could count on US leadership in critical multilateral initiatives – it was the USA that birthed the United Nations! – alas, there are 196 nations on one side of the climate change issue (signatories of the 2015 Paris Agreement) and one on the other side: the United States of America. At least at the sovereign level.

Important for us to keep in mind: Individual states within the Union are aligned with the rest of the world’s sovereign nations in acknowledging and pledging to address the challenges posed by climate change, short- and longer-term.

Here’s some good news: The United States Climate Alliance is a bipartisan coalition of 17 governors committed to upholding the goals of the Paris Agreement on climate change. These are among the most populous of the states and include states on both coasts and in the nation’s Heartland.

The Paris meetings were in 2015 and at that time, the USA was fully on board. That was in a universe now far far away, since the election of climate-denier-in-chief Donald Trump in 2016.

On to the COP 23 and the USA

In 2017, two years after the Paris meetings, the USA officially snubbed their sovereign colleagues at the annual climate talks. A number of U.S. public and private sector leaders did travel to Bonn, Germany, to participate in talks and represent the American point-of-view. This included Jerry Brown, Governor, California (the de facto leader now of the USA in climate change); former New York City Mayor (and Bloomberg LP principal) Michael Bloomberg; executives from Mars, Wal-mart and Citi Group.

While the U.S. government skipped having a pavilion at the annual United Nations-sponsored climate summit for 2017, the US presence was proclaimed loud and clear by the representatives of the U.S. Climate Action Center, representing the climate change priorities of US cities, states, tribes and businesses large and small who want action on climate change issues.

Declared California State Senator Ricardo Lara in Bonn: “Greetings from the official resistance to the Trump Administration. Let’s relish being rebels. Despite what happens in Washington DC we are still here.”

# # #

As the one year anniversary of President Trump’s announcement to leave the global Paris Agreement (June 1, 2018), state governors announced a new wave of initiatives to not only stay on board with the terms agreed to in Paris (by the Obama Administration) but to accelerate and scale up their climate actions.

Consider: The Alliance members say they are on track to have their state meet their share of the Paris Agreement emission targets by 2025.

Consider: The governors represent more than 40 percent of the U.S. population (160 million people); represent at least a US$9 trillion economic bloc (greater than the #3 global economy, Japan); and, as a group and individually are determined to meet their share of the 2015 Paris Agreement emissions targets.

Consider: Just one of the states – California – in June 2016, according to the International Monetary Fund, became the sixth largest economy in the world, ahead of the total economy of France (at #7) and India (#8).

Consider: The US GDP is estimated at $19.9 trillion (“real” GDP as measured by World Bank); the $9 trillion in GDP estimated for the participating states is a considerable portion of the national total.

The states involved are: California, Colorado, Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, Washington, and the Commonwealth of Puerto Rico.

The initiatives announced on June 1, 2018 include:

Reducing Super Pollutants (including hydrofluorocarbons (HFCs), one of the Greenhouse Gases, and harnessing waste methane (another GhG).

Mobilizing Financing for Climate Projects (through collaboration on a Green Banking Initiative); NY Green Bank alone is raising $1 billion or more from the private sector to deploy nationally).

Modernizing the Electric Grid (through a Grid Modernization Initiative, that includes avoidance of building out the traditional electric transmission/distribution infrastructure through “non-wire” alternatives).

Developing More Renewable Energy (creating a Solar Soft Costs Initiative to reduce costs of solar projects and drive down soft costs; this should help to reduce the impact of solar tariffs established in January by the federal government).

Developing Appliance Efficiency Standards (a number of states are collaborating to advance energy efficiency standards for appliances and consumer products sold in their state as the federal government effort is stalled; this is designed to save consumers’ money and cut GhG emissions).

Building More Resilient Community Infrastructure and Protect Natural Resources (working in partnership with The Nature Conservancy and the National Council on Science and the Environment, to change the way infrastructure is designed and procured, and help protect against the threats of floods, wildfires and drought).

Increase Carbon Storage (various states are pursuing opportunity to increase carbon storage in forests, farms and ecosystems through best practices in land conservation, management and restoration, in partnerships with The Nature Conservancy, American Forests, World Resources Institute, American Farmland Trust, the Trust For Public Land, Coalition on Agricultural Greenhouse Gases, and the Doris Duke Charitable Foundation).

Deploying Clean Transportation (collaborating to accelerate deployment of zero-emissions vehicles; expanding/improving public transportation choices; other steps toward zero-emission vehicles miles traveled.

Think About The Societal Impacts

The powerful effects of all of this state-level collaboration, partnering, financial investment, changes in standards and best practice approaches, public sector purchasing practices, public sector investment (such as through state pension funds), approvals of renewable energy facilities (such as windmills and solar farms) in state and possibly with affecting neighboring states, purchase of fleet vehicles…more.

California vehicle buyers comprise at least 10% (and more) of total US car, SUV and light truck purchases. Think about the impact of vehicle emissions standards in that state and the manufacturers’ need to comply. They will not build “customized” systems in cars for just marketing in California – it’s better to comply by building in systems that meet the stricter standards on the West Coast.

US car sales in 2016 according to Statista were more than 1 million units in California (ranked #1); add in the other states you would have New York (just under 400,000 vehicles sold); Illinois (250,000); New Jersey (250,000) – reaching to about million more. How many more vehicles are sold in the other Coalition states? Millions more!

(Of course, we should acknowledge here that the states not participating yet have sizable markets — 600,000 vehicles sold in Florida and 570,000 in Texas.)

Project that kind of effect onto: local and state building codes, architectural designs, materials for home construction; planning the electric distribution system for a state or region (such as New England); appliance design and marketing in the Coalition states (same issues – do you design a refrigerator just for California and Illinois?).

There are quotes from each of the Coalition governors that might be of use to you. (Sample: Jerry Brown, California: “The Paris Agreement is a good deal for America. The President’s move to pull out was the wrong call. We are still in.”) You can see them in the news release at: https://static1.squarespace.com/static/5a4cfbfe18b27d4da21c9361/t/5b114e35575d1ff3789a8f53/1527860790022/180601_PressRelease_Alliance+Anniversary+-+final.pdf

# # #

In covering the 2017 Bonn meetings, Slate published a report by The Guardian with permission of the Climate Desk. Said writers Oliver Milman and Jonathan Watts: “Deep schisms in the United States over climate change are on show at the U.N. climate talks in Bonn, where two sharply different visions of America’s role in addressing dangerous global warming have been put forward to the world.

“Donald Trump’s decision [to pull out of the Paris Climate Agreement] has created a vacuum into which dozens of city, state and business leaders have leapt, with the aim of convincing other countries that the administration is out of kilter with the American people…”

# # #

At the US City Level

Jacob Corvidae, writing in Greenbiz, explains how with the White House intending to withdraw, cities are now in the driver’s seat leading the charge against climate change.

Cities have more than half of the world’s populations and have the political and economic power to drive change.

The C40 Cities Climate Leadership Group is the Coalition helping cities to make things happen. The C40 Climate Action Planning Framework is part of a larger effort to make meaningful progress toward carbon reduction goals and build capacity at the municipal level. Cities are expected to have a comprehensive climate action plan in place by 2020. This will include 2050 targets and required interim goals.

The cities have the Carbon-Free City Handbook to work with; this was released in Bonn in 2017 at COP 23. There are 22 specific actions that can (1) drive positive impacts and (2) create economic development. This September the Carbon-Free Regions Handbook will be available. There is information for you about all of this at: https://www.greenbiz.com/article/every-action-how-cities-are-using-new-tools-drive-climate-action

The clarion call, loud and clear: We Are Still In!  Watch the states, cities and business community for leadership on meeting climate change issues in the new norms of 2018 and beyond.

Food & Ag Sector – Sustainability is in Focus from Farm-to-Table As Companies Make Progress / Stakeholders Say “More”

Hey, a Cuppa Joe – the morning treat for many people around the world.  That first hot cup of dark coffee can set the tone for us for the day. And when our spirits (and energy) may lag, the cuppa joe can perk us up again for a while at any time of day.  But – how many of us give thought to how that wonderful dark liquid arrived in our grocery stores, at the local Starbucks or Dunkin’ Donuts or other coffee counters?

The Ecologist took a close look at the business of coffee recently and their commentary (and report on the industry) is our Top Story for you this week.

The writer set out characterizing the global coffee industry as one that has been mostly “unsustainable” but lately, major coffee producers have been working to create more sustainable business models.

Guest Writer Emily Folk explains:  the coffee industry spans countries and cultures, is centuries old, and from harvesting the beans through roasting to the final retail product, the industry is recognizing public expectations about some practices – and is undergoing changes.  She ventures that “people have begun to take note and hold companies accountable” – like Starbucks – and in response, major coffee companies are making promises to do better.  But are they keeping the promise? Doing enough?

Alas, there is a lack of progress to be reported, she says.  As well as some progress to cheer about.  Starbucks according to a news report in the UK runs water 24 hours a day in the production process.  Bad practice?  The company has also been selling reusable cups and installing recycling bins at every store.  Certainly good practices.

Should the buying public pressure brand name companies like Starbucks to do more?  The writer delves into that.

It would be good to recognize that progress is being made by growers through retail food marketing companies and to be thoughtful about what is next in that company’s (and other companies’) sustainability journeys.

The G&A Institute team has been working with food and agriculture companies on various issues over many years.  This is a sector (Food & Ag) rich in traditional practices and ripe for positive change as stakeholders and consumers present their expectations for the firms to be more sustainable – and accountable to society.  Every week in the newsletter we present Food & Ag news, commentary and research content for your consideration.  There are several items in this issue on the topics.

Top Stories

Making the coffee industry sustainable
(Wednesday – May 23, 2018)
Source: The Ecologist – Sustainability is increasingly important for implementation in businesses. One of the industries that has been unsustainable since its inception is coffee. However, some major coffee producers have been working to make a more…

We Are “Out” of the Paris Accord — Really? What a Year! Signs of Great Progress in the Trump Denial Era

June 1, 2018

By Hank Boerner – Chair and Chief Strategist, G&A Institute

It was just one year ago – ah,, but it seems much longer…

WASHINGTON — The New York Times – June 1, 2017: “President Trump announced on Thursday that the United States would withdraw from the Paris climate accord, weakening efforts to combat global warming and embracing isolationist voices in his White House who argued that the agreement was a pernicious threat to the economy and American sovereignty.

In a speech from the Rose Garden, Mr. Trump said the landmark 2015 pact imposed wildly unfair environmental standards on American businesses and workers. He vowed to stand with the people of the United States against what he called a “draconian” international deal.

“I was elected to represent the citizens of Pittsburgh, not Paris,” the president said, drawing support from members of his Republican Party but widespread condemnation from political leaders, business executives and environmentalists around the globe.”

What was to follow?

A Year of Significant Progress!

Today — interesting perspectives are shared in The Washington Post on where we are one year after President Donald Trump “withdrew” from the Paris Climate Accord. The United States of America is the first – and perhaps will be the only – nation to join and then withdraw the Agreement. Sort of.

Participation in the agreement for the USA runs to year 2020 so we are “still in” (officially).  The withdrawal process will take the next three years.

By that time, there might be a new occupant in the White House. 

This nation is still in by examination of various other factors that are explained by writer Chris Mooney in the WaPo. (He covers climate change, energy and the environment, reported from the Paris negotiations in 2015, and has published four books on the the subjects he covers.)

The key points we took away from Mooney’s excellent wrap up today:

  • The Trump Administration still has no consistent message about climate change,  and no clear policy, except for the antics of EPA Administrator Scott Pruitt, with his slash & burn attacks on environmental and climate-related regulations.
  • There is a positive development: NASA Administrator Jim Bridenstine embraced climate science.  (See notes at end.)
  • There has been unrelenting attack on President Barack Obama’s skilled moves to protect the country – and the planet! – such as the Clean Power Plan.
  • But, while the White House is the cheerleader for the coal industry, market forces reward renewable energy and natural gas as powerful drivers for change.
  • Other countries are sticking with the Paris Accord, but some of those countries may find it challenging to stay the course without U.S. leadership (says John Sterman of MIT).

Background:  The Obama Administration agreed in Paris with many other nations to the goals of a 26%-to-28% reduction of emissions below the 2005 levels — and today the U.S. and the whole world is off that metric, writes Chris Mooney.

Even if the commitments were realized, there would be a temperature rise of 3.3 degrees Celsius (almost 6% F) over time (according to MIT’s Sterman). So the USA would have to do even more than agreed-to in Paris. (The USA is the world’s second largest GhG emitter.)

Where are we? According to the Climate Action Tracker produced by NewClimate Institute and Ecofys, the USA is on track for an 11% to 13% decrease by year 2025, which is about halfway to the Obama Administration pledge.

What may interfere: the move to rollback auto fuel efficiency standards; an analysis by Rhodium Group projects adding 100 million tons (annually) by year 2035 for auto emissions alone if the rollbacks move forward.

The good news – from the “We Are Still In” front: the states of Virginia and New Jersey are making moves to cut emissions and the states of Colorado and California are developing new electric vehicle policies.

Vicky Arroyo (director of the Georgetown Climate Center is quoted:   At least we are not losing the momentum that was feared (one year ago today).

Kate Larsen, who directs climate change research at the Rhodium Group, thinks that the country is on track to meet or even exceed the Obama-era Clean Power Plan goals — thanks to the use of lower-cost renewable fuel sources and natural gas.

Greenhouse Gas Emissions in the United States are “hardly set to explode” and the country is moving toward lower GhG emissions over time, writes Mooney.

But. What the Trump announcement did last year on June 1 was to create fog about US national policy regarding climate change. The thing we all have to face: the slow progress exhibited and achieving climate change goals (those coming out of Paris) are not compatible.

The WaPo commentary is at: https://www.washingtonpost.com/news/energy-environment/wp/2018/06/01/trump-withdrew-from-the-paris-climate-plan-a-year-ago-heres-what-has-changed/?utm_term=.782d3cb38b3f&wpisrc=nl_most&wpmm=1

Counterpoint!

The EDF – a/k/a Environmental Defense Fund – today trumpeted the Year of Climate Progress (since June 1 2018).

EDF members and environmentalists immediately began the counter-attack in June 2017 and in EDF’s words, that led to a year of extraordinary climate progress. The organization presents a timeline on line.  Highlights:

  • June 5, 2018 – EDF helps launch a coalition of organizations, businesses and state and local civic and political leaders to pledge “We Are Still In!” – today there are 2,700 leaders participating.
  • On to July 2017 – California Governor Jerry Brown signs into law an extension of the state’s cap-and-trade program out to 2030.  The state is the sixth largest economy in all of the world!
  • September – North of the border, Ontario Province links its cap-and-trade program to the California-Quebec carbon market, creating a huge market covering 580 million tons of emissions. Sister province British Columbia intends to increase its carbon tax for April 2018 through 2021.
  • Nine Northeastern US States in the Regional Greenhouse Gas Initiative complete their second program review and agree to reduce emissions by 30% from 2020 to 2030.
  • Halfway around the world in December 2017 China announced its national carbon market (to be largest in the world); this will start with electric power and expand to seven other industrial sectors. (So much for the Trumpian claim China is doing nothing to meet Paris Accord conditions.)
  • We move further into 2018 and the Federal Energy Regulatory Commission (FERC) rejects the DOE coal and nuclear proposal.
  • Despite shouts and threats and Trumpian boasting, the U.S. Congress adopts the 2018 budget in March 2018 that leaves the EPA budget mostly intact (EPA Administrator Scott Pruitt wanted to cut the agency’s budget by 30%. Other environmental / energy agencies see budget increases.)
  • April – the UN’s International Maritime Organization adopts a climate plan to lower emissions from container ships, bulk and oil carriers, by at least 50% below 2008 levels by 2050.
  • Also in April — In the key industrial State of Ohio, the Public Utilities Commission approves AEP’s Electric Security Plan – this, EDF points out, will enhance and diversify the state economy, unlock millions in funding, provide customers with clean energy options and overall, will reduce pollution.
  • Next door, in April, the Illinois Commerce Commission approves the state’s Long-Term Renewable Resources Procurement Plan to have a pathway for electric utilities to produce 25% of power from renewable sources by 2025 and put incentives in play for development of wind and power.
  • April — EDF President Fred Krupp gives a TED Talk, outlining the plan to launch methane-detecting satellites in orbit above Earth to map and measure oil and gas methane emissions. The data and information gathered will help countries and companies spot problems, identify savings opportunities and measure progress.
  • April sure was a busy month – Canada issued policies to cut oil and gas emissions by 40% to 45% at new and existing facilities. This was part of a pledge made in 2016 (when President Obama was in office) for the USA, Canada and Mexico to decreased such emissions in North America by that amount by 2025.
  • On to May – and recently-elected New Jersey Governor Phil Murphy – a former Goldman Sachs exec – signed into law the plan to cut GhG emissions by almost half by 2030 (hey, that’s twice what the Clean Power Plan would have required!). The Garden State will require 50% of NJ electric needs to be met from renewable sources.
  • And on to May – ExxonMobil announced plans to reduce oil and gas methane emissions by 15% and flared gas volume by 25% — worldwide – by 2020.

Yes – a remarkable year, kicked off on June 1st 2017 by a vindictive head of state set on reversing the significant progress made under his predecessors.

But many individuals, companies, investors, civic organizations, NGOs proclaimed: We are still in.  The movement represents city halls, board room, college campuses, investors, and more…interests representing US$6.2 trillion (one-sixth of the entire American economy) have signed on to the We Are Still In declaration — https://www.wearestillin.com/we-are-still-declaration

Have you?

Notes:

The New York Times story by Michael Shear, June 1 2017 is at: https://www.nytimes.com/2017/06/01/climate/trump-paris-climate-agreement.html

The American Institute of Physics info on NASA, embrace of climate change consensus: https://www.aip.org/fyi/2018/bridenstine-embraces-nasa-science-climate-change-consensus

We Are Still In information at: https://www.wearestillin.com/

Executive Compensation and the Investor, Worker & Stakeholder: The New Corporate Disclosures on CEO Pay Ratios Are Now Part of the Public Dialogue

There are some interesting new angles to the perennial public dialogues that go on about issues related to executive compensation.  The new news is regarding the compensation packages for the Top Man (in the Fortune 500 universe, there are only 24 companies that have female CEOs) and the relationship of that sum to (1) the employees of the firm and (2) the shareholders, including key fiduciaries managing OPM (other peoples’ money).  The CEO Pay Ratio disclosures of 2018 are now becoming more of a public dialogue.

One thread of conversation that is gaining some momentum in the public square is about the ratio of the CEO’s pay to the median worker pay at various companies in specific sectors.  This disclosure was mandated in 2010 with passage of the Dodd-Frank reform legislation and it took until this year before the final rules were in effect for public company disclosure, and the disclosures began.  The analysis of what this all might mean to investors and stakeholders is now underway.

The CNBC commentator James Thorne, for example, explored the ratio issues in a post on May 13th.  He begins his commentary by noting that for decades, as publicly-traded companies disclosed their CEO’s pay, criticism could rise when investors thought the pay was not justified by the company’s performance.

Now that the CEO-to-Median employee disclosures are being made, Thorne’s initial conclusion was that companies with certain characteristics — closer CEO pay to workers in the ratio —  maygenerate a higher profit-per-worker than firms with a wider gap. He began his research with the question:  does the ratio say something about performance?  The CNBC analysis suggested that it did — with equal pay distribution generating higher profit per worker.

In examining corporate disclosure on the pay ratio to date, the “bunching up” seems to be in the 200-300-400 (200-to-one, etc.) range, with some firms having ratios as high as 800 to 1,000 CEO pay to the median.  The analysis was performed by Calcbench.

The CNBC commentary explains that ratios can vary, depending on factors like company size, geographic distribution and percentage of part-time or seasonal workers; companies also have latitude in deciding how the ratio is calculated (and then disclosed). The Willis Towers Watson firm noted that direct (company-to-company) comparisons can be difficult. The SEC cautioned that firm-to-firm comparisons were not the intent of the disclosure rule.

Touching on something relevant to the investment side is Ric Marshall, MSCI’s executive director of ESG research:  “The investors who will find the most value [in ratio disclosures] are those who have concerns about inequality.”  Here at G&A we are seeing a steady flow now of news and commentary on the ratio issue from investors and other stakeholders focused on inequality and related societal issues.

With fundamental changes in the structure and definition of “worker” the short- and longer-term effects of these changes are being examined by a host of social scientists and pundits. (The familiar “rank and file” has been replaced by part-timers, seasonal workers, contractors, consultants, outsourced workers, and more variations at many firms.  Researchers are closely examining the results).  One extension of this ongoing public discussion is the concept floated for a minimum payment to those displaced or unable to find work in the new normal of “employment.”

We suggest that you check out the flow of related commentary on the topic of “the workplace” from the McKinsey & Company’s Global Institute at: https://www.mckinsey.com/mgi/overview

The Top Story this week from CNBC explores the CEO pay ratio dialogue and provides highlights within industries for you (manufacturing, retail trade, etc.).

The overall public dialogue on “inequality” (steadily rising in tempo and fervor) includes the subset of executive compensation and the CEO pay ratio is becoming a part of the discussion.  The news, commentary and research results to come in the months ahead will be of interest to investors, employees and other stakeholders.

Top Stories

Companies with closer CEO pay ratios may generate higher profit per worker
(Monday – May 14, 2018) Source: CNBC – A CNBC analysis of CEO pay ratios suggests that companies with more equal pay distribution also tend to generate higher profit per worker.

FEATURED AD

The “100 Best Corporate Citizens 2018” Roster -– Published by CR Magazine

by Hank Boerner – Chair, G&A Institute

Now in its 19th year, the well known CR Magazine “100 Best Corporate Citizens 2018” list was just unveiled; this effort recognizes the ESG performance of public companies in the United States. (The publication is now titled Corporate Responsibility Magazine, published by 3BL Media LLC.)

Top Companies:
Microsoft
(MSFT) earned top ranking (#1), followed by Accenture, Owens Corning, Intel, and Hasbro (at #5).

The next five ranked companies are (#6) Altria Group, Cisco Systems, Ecolab, Johnson & Johnson, and NVIDIA Corp (at #10).

The biggest gainers for the year were Becton, Dickenson; IBM; Owens Corning; and Biogen.  The complete list is available in our Top Story (below).

Assembling the list does not rely on responding to a survey, publisher Dave Armon explains.  Each year the rankings measure the success of the “Brands Taking Stands” movement by celebrating the most successful, most transparent companies that report on their responsible practices. “We congratulate the company on the 2018 list for their commitment to corporate responsibility,” he said in announcing the rankings.

Methodology:
The list examines 260 data points of performance measures and disclosure, harvested from publicly-available information for every company in the Russell 1000® Index, in seven categories (environmental, climate change, employee relations, human rights, corporate governance, financial, and philanthropy & community support).  The underlying research is conducted by ISS Corporate Solutions (Institutional Shareholder Services).

The inaugural list was published in 1999 by the former Business Ethics Magazine, which segued into CR Magazine.

Coming up soon, CR Magazine in collaboration with the 3BL Association (formerly the Corporate Responsibility Association), presents the well known annual COMMIT!Forum conference, now re-branded as the 2018 3BL Forum by its new owners.

This year’s event is at MGM National Harbor near Washington DC, October 23-25; the theme is “Brands Taking Stands – The Long View”.

3BL Media LLC is the global leader in disseminating CR and sustainability content. Its brands include Triple Pundit; CSR Wire; 3BL Wire; 3BL Report Alert; Justmeans, 3BL Studio, and others. Corporate clients utilize the platforms for their sustainability, CR and related content distribution, communications and campaigns.

G&A Institute has collaborated with the 3BL Media staff and Corporate Responsibility Magazine on a long-term basis.  3BL content is carried daily on G&A’s news and opinion web-based distribution platforms.

The details for the “100 Most are in the Top Story:

Top Stories

Corporate Responsibility Magazine Announces 2018 100 Best Corporate Citizens
(Wednesday – May 09, 2018) Associated Profiles : CSRwire Source: CSR Wire — Corporate Responsibility Magazine (CR Magazine) announced today its 19th annual 100 Best Corporate Citizens list, recognizing the standout environmental, social and governance (ESG) performance of…

Are We Making Progress? Considering Recent News About “Apparel Fashion and Sustainability” — and the Investor Initiative to Help Make East Asian Factory Workers Safer and Better Paid…

by Hank Boerner – Chair, G&A Institute

In monitoring the growing abundance of news stories and commentary about “supply chain,” “globalization” or “trade” topics and issues, our editors often see the focus is on apparel, clothing, textiles, fashionand related topics & issues.

Companies in the developed economies widely source apparel footwear and related items in the developing and under-developed nations – and what happens there can quickly make news that travels around the globe.

Example:  The focus five years ago about this time was on the East Asian nation of Bangladesh and the Rana Plaza vertical factory tragedy in the capital city of Dhaka (or Dacca) that killed more than 1,000 garment industry workers.  The labels of leading western nation marketers were scattered about the debris and ashes — and those familiar brand images as well as images of the collapsed building and details of the tragedy helped to focus attention on worker conditions in the East Asian region in both North America and Europe.

The Interfaith Center on Corporate Responsibility (ICCR) investor coalition is keeping the focus on worker safety as the “Bangladesh Accord on Fire and Safety” is renewed for another three years.

ICCR institutions and their investor allies organized as “The Bangladesh Investor Initiative” (with collective AUM of US$4.5 trillion) on the 5th anniversary are urging a stronger corporate response and demonstrated commitment to local worker safety and adequate wage levels.  The link to our blog commentary on recent developments and background information for companies and investors is below.

Some good news to share is that sustainability is catching on in the fashion industry.  The uber fashion magazine from publishers Conde Nast – Vogue, with more than one million readers — just published a story about the embrace of “eco-friendly” fashion, spotlighting “the best designers of a new generation are stitching sustainability into everything they do…”

“While sustainability has long been considered a “byword for hemp-heavy bohemia,” writer Olivia Singer explains, “a new generation of designers is building brands with a more conscious approach to fashion at their core.”

Fabrics are sourced through collectives in India empowering female weavers as just one example.  In the article designers explain why sustainability is important to their brands (Richard Malone, Le Kilt, Elliss, E.L.V. Denim, Alyx, Marine Serre, Richard Quinn are featured interviews).

A number of creative approaches being adopted by the designers is explained — just think about the contribution to global sustainability of turning recycled plastics and viscose into yarn and fringing, using organic cotton as well as recycled polyester for “new” fashions, creating ECONYL from fishnets to make swimwear, and using recycled cotton and plastics as part of the effort of making sustainability a “pillar of luxury”.

The encouraging details are in our Top Story this week – a cautionary note:  some of the fashion photos are edgy and might offend.

Top Stories

The Young Designers Pioneering A Sustainable Fashion Revolution
(Thursday – April 26, 2018) Source: Vogue – While eco-friendly fashion has never had particularly glamorous connotations, the best designers of a new generation are stitching sustainability into everything they do.

And of interest, our own related content on G&A’s Sustainability Update Blog:  The Bangladesh Garment Factory Workers Tragedy and Investor and Corporate Response Five Years On…

As the Global Demand for Palm Oil Rises, There is More Focus on the Growing Areas – and on Industry Behaviors Such as Deforestation

By Hank Boerner – Chair, G&A Institute

Palm Oil is one of the world’s most popular vegetable cooking oils and in western nations is widely used as prepared food ingredients. Food industry interests promote the benefits: lower cholesterol levels, less heart disease, more Vitamins A and E, and much more, derived from the rich beta-carotene from the pulp of oil palms.

Palm oil also shows up in our detergents, shampoo, cosmetics, pizza slices, cookies, margarine — and even in biofuels. Palm oil is especially used for cooking in Africa, Asia and parts of South America and is growing in favor in other regions such as in North America.

The palm oil plantations are located in such regions of the world as Southeast Asia – and there the industry is linked to the downside of the beneficial consumer product: deforestation, degrading of flora and fauna habitat, abuses of indigenous peoples, and negative impact on climate change as old growth land and tropical forest is cleared to make way for oil palm plantations.

Stakeholder reaction resulted in the creation of “reliable No Deforestation, No Peat, No Exploitation” policies – the “NDPE”.

These were developed for certification (to buyers) by the Roundtable on Sustainable Palm Oil (RSPO) and adopted in 2013 and 2014 by numerous Southeast Asian palm oil traders and refiners.

The policies (spelled out as best practices) are designed to prevent clearing of forests and peat lands for new palm oil plantations. There are 29 company groups, reports Chain Reaction Research, that have refining capabilities and have adopted NDPE policies. (Climate Reaction Research is a joint effort between Climate Advisers, Profundo and Aidenvironment.)

“Un-sustainable” palm oil practices are an issue for investors, customers (buying the oil), companies with sustainable practices, and countries in which palm oil is grown and harvested.

According to a new financial risk report from Chain Reaction Research, major markets with customers that accept “unsustainable palm oil” include India, China, Pakistan and Indonesia.

One of the major centers of production is the huge – more than 3,000-miles wide — Pacific Basin archipelago nation of Indonesia (once known as the Dutch East Indies). Almost half of the world’s palm oil refineries are in Indonesia and Malaysia.

The Indonesian government (the Ministry of Agriculture) reacted to the NDPE policies and proposed changes to its own certification program – known as the “Indonesian Sustainable Palm Oil Standard” (ISPO) – that would appear to be presenting companies with pressure to adopt one or the other of the certifications.  (The ISPO policy focus is on reducing Greenhouse Gas Emissions and addressing environmental issues.)

For Indonesia, palm oil is a strategic product that helps the government to meet job creation and export market goals. “Small holders” account for more than 40% of production in the country.

“Evidence suggests that the need for edible oil and energy will continue as populations grow, “Darmin Nasution, Coordinating Minister for Economic Affairs for Indonesia points out. “Land that can be utilized will decrease, so the question is how to meet those needs in the limited land area. Increasing productivity will be the key.”

Companies using the existing Indonesian ISPO certification were accused of human rights abuses and “land grabs” and so in January the government developed the new certification, which opponents claim weakens protection (the draft changes for the regulation removes independent monitoring and replaces “protection” with “management” for natural ecosystems).

Stranded Asset Risks

CDP estimates that global companies in the industry had almost US$1 trillion in annual revenues at risk from deforestation-related commodities. As the developed nation buyers looked carefully at their global supply chains and sources, “stranded assets” developed; that is, land on which palm oil cannot be developed because of buyers’ NPDE procurement policies. Indonesia and Malaysia have some of the world’s largest suppliers.

Western Corporate Reaction

Early in 2018 PepsiCo announced that it and its J/V partner Indofood suspended purchasing of palm oil from IndoAgri because PepsiCo — a very prominent global brand marketer — is concerned about allegations about deforestation and human rights were not being met.

Institutional Investors are busily identifying companies that source Crude Palm Oil (“CPO”) without paying attention to sustainability requirements, putting pressure on both sellers and buyers and perhaps pushing the smaller players to the sidelines. European buyers import CPO in large quantities to be used in biofuels.

The bold corporate names in western societies show up in rosters of company groups with refining capacity and NDPE policies, including Bunge, Cargill, Louis Dreyfus Company, Unilever, and Wilmar International. These are large peer companies in the producing countries (like IOI Group, Daabon, Golden Agri-Resources) are aiming for “zero deforestation” in their NDPE policies.

Other companies that source palm oil include Kellogg’s, Procter & Gamble, Mars, General Mills, Mondelez International, and other prominent brand name markets.

Your can check out the Chain Reaction Research group paper – “Unsustainable Palm Oil Faces Increasing Market Access Risks – NDPE Sourcing Policies Cover 74% of Southeast Asia’s Refining Capacity” at: http://chainreactionresearch.com/2017/11/01/report-unsustainable-palm-oil-faces-increasing-market-access-risks-ndpe-sourcing-policies

What About Exercise of National Sovereignty?

This situation raises interesting questions for developed nation brand marketers. If the government of Indonesia presses forward with the country’s own standards, should the purchaser in a developed country ignore or embrace the country standard? Instead of the Roundtable on Sustainable Palm Oil (RSPO) standard? What about “sovereign rights,” as in the ability for a sovereign nation to establish its own policies and standards governing the products developed within its borders?

As industry groups create their own standards and invite industry participants to embrace these (such as for product certification), corporations may find themselves bumping up against “nationalistic” guidelines designed to benefit the internal constituencies rather than “global norms” imposed from outside the country’s borders.

# # #

Responding to the streams of negative news coming out of Indonesia, Chain Reaction Research on April 26 reported that Citigroup has cancelled loans to Indofood Agri Resources and its subsidiaries. Citigroup will exit its overall relationship with Indofood other than specific financial relationships that are not related to the palm oil business, says the research organization.

The research firm said that labor and environmental violations by Indofood and other companies related to Anthoni Salim and his family have been documented. The web of companies: Salim and family own 44% of First Pacific, which owns 74% of Indofood.

In April a report commissioned by Rainforest Action Network Foundation Norway and SumofUS and prepared by Chain Reaction Research alleged deforestation of almost 10,000 hectares of peatland by PT Duta Rendra – which is majority owned, the report says, by Salim and PT Sawit Khatulistiwa Lestan, which is associated by Salim.

Notes:

As we prepared this commentary, the Danish Institute for Human Rights and The Forest Trust carried out a Labour Rights Assessment of Nestle’s and Golden Agri-Resources palm oil supply chain in Indonesia.  Nestle’s and GAR and going to share their own action plans in response to the findings and recommendations.

For The Roundtable on Sustainable Palm Oil information: https://www.rspo.org/

There is information from a recent conference in Jakarta for you at: https://www.scidev.net/asia-pacific/forestry/news/science-can-keep-palm-oil-industry-sustainable.html

The Indonesian Government ISPO information is at: http://www.ispo-org.or.id/index.php?lang=en

General Mills Statement on Responsible Palm Oil Sourcing is at: https://www.generalmills.com/en/News/Issues/palm-oil-statement

Rainforest Action Network information is at: https://www.ran.org/palm_oil?gclid=EAIaIQobChMIuJyBg97i2gIVE1mGCh3A-QMYEAAYASAAEgKZePD_BwE#

The Union of Concerned Scientists information is at: https://www.ucsusa.org/global-warming/stop-deforestation/drivers-of-deforestation-2016-palm-oil#.WudvOKjwbAw