Wednesday, 23 June 2010

Socially Responsible Investing: another Take from the Globe and Mail

A few months ago I had posted here and here about the difficulties and quirks encountered by investors interested in investing according to what are termed socially responsible principles. The Globe and Mail has come along and published another view in its Report on Corporate Social Responsibility based on research done by Corporate Knights. The approach taken differs fairly significantly from that of Jantzi Sustainalytics. Whereas Jantzi screens out "bad" companies in gambling, armaments etc and screens in "good" companies improving the environment etc, Corporate Knights seems to simply rate all companies according to quantifiable measures of environmental performance (4 indicators for energy consumption, carbon emissions, water usage, waste production), social performance (5 indicators for CEO to lowest paid ratio, employee safety, taxes paid, presence of a DB pension plan, funding adequacy of DB pension) and corporate governance (board committee on social responsibility, diversity of board membership, executive pay linked to social responsibility).

The Globe's effort is much better in my opinion - the ratings criteria are actually published unlike the vague Jantzi "we won't tell you because it is proprietary" message, the ratings criteria are clear and quantifiable and the criteria make sense. They even allow you to download the whole table of ratings for all the TSX 60 companies. Kudos to the Globe!

The Globe comes up with different results than Jantzi too. We previously noted that George Weston failed to make the grade in the Jantzi method (but we aren't told why) but in the Globe's ranking they are right up there in number 2 spot. Unfortunately, Tim Hortons is still a bad guy but now the Globe tells us why - they don't actually disclose any of the required data on the environmental factors. It's time to fess up Timmy.

FWIW, there are nine Canadian companies in the top Global 100 Corporate Sustainability ranking by Corporate Knights, a number far above Canada's economic weight (the US has only ten companies in the list). Take a pat on the back Canada for its corporate do-gooders. That is nowhere near the best country of all, the UK with 21 companies in the top 100 (no, BP is not amongst them).

For investors who want to take their socially responsible investing decisions seriously and not take the lazy "anything labeled socially responsible will do" route, the Globe's list is still not the final answer. Take Barrick Gold for instance - our previous post noted that there is controversy about the company's activities but it is ranked quite high at 19th best out of the TSX 60. Caveat emptor as always.

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