The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

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Monday, December 1, 2014

Strategic CSR - Social impact investing

The theme for this week's Newsletters is social impact investing (Issue: Investor Activism, p285). Aspects of impact investing, which grew out of the socially responsible investing (SRI) industry, have been a part of Strategic CSR since the first edition. The market for investment instruments that satisfy values-based investing demand continues to grow and, according to the article in the url below, has evolved into a new type of fund:
"It is an intriguing concept: investing in stocks of companies with female leadership. Backed by studies that say such companies perform better, fund companies are stepping in with investments that snub male-dominated companies, and bet on women."
In particular:
"Barclays PLC in July launched a Barclays Women in Leadership Total Return Index and related exchange-traded notes, Barclays Women in Leadership ETN. The index is made up of U.S. companies with a female chief executive or at least a 25% female board."
According to research that supports the foundation of such tailored funds:
"…from 2004 to 2008, Fortune 500 firms with three or more female directors had an 84% better return on sales and a 46% better return on equity. Matterhorn Group [at Morgan Stanley] cites studies by several universities and consulting companies as well that see a correlation between strong financials and women in leadership roles."
These funds come with two caveats (according to the article). First:
"Female leaders are often appointed in times of poor company performance, so their posts may be precarious, say Michelle Ryan and Alex Haslam, professors at the University of Exeter in the U.K. That 'glass cliff' could make such companies less attractive to investors, the researchers say. Some observers caution, too, that the presence of more female directors is not necessarily the cause of business success, but could instead be a consequence."
Second, and equally controversially, there is still considerable debate about the value of mutual funds with higher than average management fees, in general, and SRI funds, in particular:
"Robert Goldsborough, a fund analyst at investment-research firm Morningstar Inc., says, 'Over time, these kinds of screens typically produce performance that's on par with the market; typically not better, but not worse.'"
Take care
David Chandler & Bill Werther
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Men Had Their Chance; New Funds Bet on Women
By Daisy Maxey
August 4, 2014
The Wall Street Journal
Late Edition – Final