Socially Responsible Summer

By Maryann Khinda


Summer is everyone’s favorite time of year!  It’s hot and sunny – bring on the air conditioners, sprinklers, pools, barbeques and the large utility bills.
Want to prevent yourself from declaring bankruptcy?  Or increasing the size of the hole in the ozone?  You can still get your act together before Labor Day – but how you ask?  Here at Socially Responsible Investing we made it simple for you – we put together a short list of everyday things you can do around the house to reduce your carbon footprint and keep a few dollars in your pocket!


How to Reduce Your …

  1. Water Usage
    • Watch Your Pressure
      • Use water efficient shower heads, toilet devices and hose heads
      • Sprinklers should be put on a timer and coordinated sparingly with the weather schedule.  Maximize rain days to prevent overwatering or wasting water.  Why water the plants or the lawn yourself when Mother Nature will do it for you?
  2. Chemicals Usage = Hemisphere Damage
    • Aerosol Cans are not necessary.  Find alternatives when purchasing Bug Sprays or Sunblock – most brands offer the “pump” version.


  1. Gasoline Dependencies   
    • Like Long Trips?   Find greener transportation alternatives.  It is usually faster and cheaper to take a train, as you avoid traffic.  
    • Car Pooling is a great option too, as you share costs, driving responsibilities and gas tank costs.
    • Overheating Cars
      • Use the air conditioner sparingly.  Roll down your windows and enjoy the fresh air.  This is great when driving over 55MPH, as speed creates a greater wind current.
      • Use the car’s heater for 5 minutes every other hour of a long trip to prevent your car from overheating.  Its acts as an exhaust and cools off your cooling system.
    • Boating
      • Use your sails when it is windy or alternate days using the motor, by using your oars for a great workout.
  2. Electricity Usage
    • Dirty Air Conditioner Filters
      • Having a dirty filter obstructs the air flow in the air conditioner.  Maximize its impact by cleaning or replacing the filter regularly.  This will also help you lower your bills.
    • Cracks within your housing structure let in warm air (and conversely cold air in the winter)
    • Seal up your Home – windows, attics, garages – with sealant to keep the outside air out.

How to Maximize…

             1.Staying Cool Naturally
    • Windows are Nature’s Way to Stay Cool
      • Utilize Cross Ventilation by keeping all windows open to capture that free breeze Mother Nature wants you to enjoy.
    • Fans as a Supplement
      • Fans move air at a fraction of the electricity usage, saving you money and the environment from further plundering.
    • Fans in Windows
      • This builds on the ideas of the first two bullets, using nature’s breeze and cross ventilation.  This is a terrific room coolant! You might also want to try utilizing a fan as an exhaust in hot-spots like the Kitchen.
    • Water & Moisture
      • Keep Floors cool by daily mopping.  This is a common practice in warmer countries, such as India.
      • Place large bowls of water in front of fans to evaporate the water and naturally cool the room.  This method along with the ones above can get a room as cool as using an air conditioner!
        Source: Prevention Magazine
          2. Using the Heat to Your Advantage
    • Dry Clothes Outside Naturally
      • This is a very simple and old-fashioned task, but will reduce your electric bill and keep the house cooler, as you are not using the dryer and your clothes will smell like the summer’s sun.
    • Gardening
      • Gardening is a wonderful hobby that can yield delicious fruits and vegetables, if you get good at it!  It also enriches the soil and cleans the air.
    • Shading & Sunlight
      • Lowering your shades indoors can keep your rooms cooler by preventing the bright sun warming the room temperature.
      • Plant trees.  They add shade, color, lower the air temperature, clean the air and increase your home’s value.  After doing all the above, we suggest adding a hommack for a well-deserved rest!
We hope these ideas can help you.  If you have any feedback or other helpful hints to share, write us.


Announcement: The Societal Function of Investment Asset Classes: Implications for Responsible Investment

We at Socially Responsible Investing would like to invite everyone to an SRI special event: The Societal Function of Investment Asset Classes: Implications for Responsible Investment.

If you will not be able to attend SRI in the Rockies in early October, we highly suggest attending this.

Press release below:

October 4, 2012
The Initiative for Responsible Investment of the Hauser Center for Nonprofit Management at Harvard University invites all interested parties to attend a conference presenting eight academic papers on the relationship between the societal function of investment asset classes and the theory and practice of responsible investment.

These papers address the ways in which asset classes manifest themselves in the marketplace through investment vehicles, transactions techniques, and regulations aimed at preventing abuse and enhancing socially desirable outcomes, whilst answering the questions of what normative values-specific asset classes have come to embody through regulation, case law, or custom.

Event will feature Keynote Speaker, Professor Amar Bhidé of The Fletcher School of Law and Diplomacy at Tufts University.

To RSVP, please contact Annie Olszewski at [email protected] or by phone at 617.496.2213 as soon as possible due to limited seating. There is no registration fee for this conference.

For more about the event, click here.

Milking It – The Dairy Industry’s Decline & the Rouse to Organic’s Value

by Maryann Khinda

Milk, one of America’s oldest staples, has been in households since the turn of the century.  This was the drink of choice, before the likes of cola or sports drinks.  As you can see below, its height peaked in the 1960’s.  Since then, the milk industry (especially Plain Whole Milk) has been in a gradual decline (click table below).

This decline is risking the livelihood of farmers.  Skimming profits has been increasingly difficult due to the current economic situation.  Dr. Roger Cady’s research (a dairy specialist from Washington State University) surmises farmers are being forced to pack cows and keep larger herds in smaller (and most likely, less green) pastures to turn a profit.  Land is a valuable commodity and getting more out of less acreage yields better profit margins.  The average (family) farm previously had no more than 200 cows and will now wind up at the 300 mark minimum, just to breakeven (see chart)!

From a land and capital perspective, this is more efficient, but what does this mean for the cattle?  Without subsidies or tax incentives from the government, the milking industry will eventually become extinct.  After researching the depressing fate of the milk industry, a friend and I went on pursuit of a sustainable option, if any are left…
We found Ronnybrook Farms – a New York farm that walks the non-organic path.  My friend, whose been slowly moving towards becoming a vegetarian, stumbled upon Ronnybrook at a local Farmer’s Market.  He had been thinking of stopping milk consumption after watching a disturbing video on the mega-Dairies of industry.  He decided to taunt and question a Ronnybrook representative (who happened to be the owners’ daughter-in-law).  Her answer would be his final justification for not drinking cow juice.  Boy was he in for a surprise!
Ronnybrook has made a commitment to humane treatment of animals as well as sustainability.  There are certainly no economic benefits to keeping such a small farm (the farm only maintains approximately 100 cows in total).  Ronnybrook’s corporate stance is to do right by the animals and this will provide a better end-product for both the environment and for human consumption.
So what is it that makes this farm stand above the rest? 
Socially Conscience:  Ronnybrook still uses glass bottles – recalling one to the days of The Honeymooners TV program.  Ronnybrook’s motto is “Hopelessly out of date, and proud of it.”  Ronnybrook would rather use glass bottles and get more uses from the container and save the environment, than go for the cheaper carton or plastic options.  A sharp contrast to the market trend….
Passion: We actually went on an unplanned tour of the Ronnybrook Farm, in pursuit to verify their claims in regards to the facility and the treatment of animals.  Rick, one of the owners (the Osofsky brothers), actually stopped in the midst of whatever he was doing (he literally left his car running) and joyfully took us on a tour of the facility.  He asked about our backgrounds, etc. before initiating the tour.  And this wasn’t just any tour – a two plus hour tour – covering everything from the mechanics of butter churning, chemistry, regulations, the family tree of Holstein breeding, an ice cream sampling (beyond delicious) and a viewing of their magnificent mountain top meadow.  (Remember, all this time, his car was idling.)  You could feel the absolute pride in what they do, which is a rarity to find.  And most importantly, you could feel Ronnybrook was truly a happy place.
Cow Whisperers: The cows are treated like family – where in the world does this happen?  The cows actually have their own mattresses and receive medicine when sick.  Each cow is named by family members, depending on their features and personalities.  There’s Trevor, Claire, ToyStory Arrow, and of course, Fric and Frac !  I personally have never seen animals treated so well.  They keep their offspring with their moms after birth, rather than dragging them away as done in industrial farms.  Cows are not stupid, have emotions and often pout for days when their calves are taken from them.  Ronnybrook’s pasture and stables were impeccably maintained.  The animals looked clean, healthy and happy!  At the time we visited, the cows were in their stable; however we could tell they were happy because they were quiet and content, though a bit curious of their new houseguests!
Character: This is the mire point, where we get into doing what is right for oneself or one’s bottom-line vs. doing right by the animals, the environment or what others think is just.  Ronnybrook emphatically states that providing medicine to sick animals is MORE humane and that fact is worth not getting the “organic” stamp of approval.  This shows true compassion, but is this a smart business move to lose the “organic” label?  Ronnybrook does not believe the label is worth compromising their prized Holstein cows.  Cattle should be cared for like any living creature – why not help cure them when they’re ill too?

This leads us to our next question – is “organic” worth it?  What is the value?  Is it just hype?  Is it really worth paying extra?  As the demand for organic food has risen, prices have remained significantly more than conventional food.  One questions the value, or the cost-benefits that organic foods provide.

The USDA has 4 rules for milk to be considered “organic”:
1.     no bovine growth hormone (BGH)
2.     no antibiotics
3.     no pesticides in cows’ feed
4.     access to pasture
Taking these rules a step further, perhaps there is no added health value to organic milk.  Conventional milk is safe and healthy for consumption:

1. BGH is a protein hormone.  If ingested, our digestive tracts will destroy it.  However, from an ethical point of view, note that BGH leads to higher levels of udder infections.
2. Milk is routinely tested to ensure the milk has no antibiotic content. You cannot purchase milk in the United States with any antibiotics in it!
3. Similarly for pesticides – while there are trace amounts found in regular cow’s milk, they are at levels far below what has been established as tolerable for humans.

Organic Milk – Is it worth the cost?

MSNBC covered this topic
at length (see Organic milk: Are the benefits worth the cost? ) and concluded there is no real merit to the value of organic milk, “research does not support a health advantage of organic over conventional milk for any segment of the population. “

Ronnybrook has a long term stand on this issue, and has even made the pages of The NYT:
Our farming methods are by all practical measures organic, if not beyond.  We use no pesticides on our fields, manure is our fertilizer of choice and we use cropping techniques that promote healthy soil.  Our cow’s diet is a healthy, natural one.  We strive every day to make sure yours is too.  So, what is the difference between dairy farming practices at Ronnybrook and practices on organic dairies? Check out the chart below and we hope it is clearer that if dairying organically is a goal to strive for then Ronnybrook has clearly reached that goal and has moved beyond it.“
Comfort stall barns with individual cow mattresses for every cow
Large confinement barns with as many or more than 5,000 cows
Spend 24 hours a day on concrete paddocks
Access to pasture or outdoor exercise everyday
Family farm
Use rBST
Use pesticides
Use antibiotics
After some extraneous researching and soul searching, organic foods feel healthier for the individual and more sustainable for the environment.  Organic milk, though, does not deem that same value in all regards.  Organic appears to be just a label and one needs to dig deeper into the actual practices of the farm or dairy in question.

What are our Conclusions?
·       Milk Consumption, despite all the got milk? ads, is down and does not appear to be coming back.
·       Farmers’ in the milk industry are increasing their herd size and lowering their pasture to cow ratio to yield better profit margins, which goes against the long-term sustainability model.
·       Ronnybrook Farms is maintaining a socially responsible, sustainable non-organic farm, despite the superficial trend that organic dairy is the way to go.
·       Despite the above point, overall, organic foods are healthier for the environment and for the human body.  Though, we urge consumers think through before making purchase decisions and buy from groceries that do.  We believe Whole Foods Markets is a good example.  (Note: Whole Foods is a socially responsible company overall.)
·       Non-organic vs. organic milk differences are minimal according to the cited study.
After taking a tour of Ronnybrook (they strongly encourage their customers to reach out to them to do so) – they are true to their word, cow mattresses and all.  Let’s hope they can stick around for awhile…

Are French better Stock Pickers ? A review of French SRI

Are the French worse at SRI, or are they better, and perhaps a bit more practical about measuring performance?

Many socially responsible funds advertise SRI as a way to increase returns on investment (ROI).  Even the United Nations, under the UN Principles for Responsible Investment have said that:

“There is a growing view among investment professionals that environmental, social and corporate governance (ESG) issues can positively affect investment portfolio performance.”

Several American studies we have read seem to establish that SRI funds perform better than conventional indices, albeit ever slightly.   The most popular index, the KLD Social 400, is an index launched in 1990 to invest in U.S. based SRI type companies using both Negative and Positive Screening.  This index indeed has had a good long-term outperformance.  However, after reviewing several studies, we believe performance results are still not clear-cut.  Why?…well, we’ll just touch on a few…

  1. Survivor basis:  Share price histories of  corporations that are bankrupt may not have been used in studies.  This upwardly skews performance.
  2. The “Chicken & Egg” effect:  It is not clear that companies with high ESG are that way because they can afford to do good, or that they did good first.
  3. Availability bias:  The majority of studies are conducted by students, and asset managers.  It is doubtful that they would publish studies that show weak SRI performance, as most authors are trying to “make a case” for SRI.
  4. There are few standardized definitions of ESG; studies tend to look at different factors.  For example, some studies focus on the outperformance of companies in the Fortune 100 Best Companies to Work for list.  However, many SRI analysts do not consider such companies as necessarily highly ranked in ESG. 

Could performance perceptions be cultural?
Further, there is a positive bias among those researchers (many of them American) that are conducting the studies.  However, such bias may be cultural.  According to a Novethic study entitled ESG Perceptions and Integration Practices, French do not believe that ESG will increase fund returns.  In fact none (0% of those surveyed) believed that SRI would improve performance.  The most popular survey answer, at 59%, was “Contributing to bringing about a more sustainable business model” with 30% looking to “Manage long-term risks.”  In other words, French utilize SRI because it’s the right thing to do, not because they expect to receive handsome rewards.  For comparison, a large 57% of surveyed asset managers in the United Kingdom believed SRI could improve performance.  (We are using the UK as a substitute for the United States, which was not included in the survey.)

Does French performance data support their beliefs?
We have reviewed three (related) French SRI studies on investment performance.  All three studies were conducted by the EDHEC-Risk Institute.  École des Hautes Études Commerciales du Nord (the long name) is one of the top business schools in France (est. 1906).  Our favored study is the report entitled French Corporate Social Responsibility: Which Dimension Pays more? (Published June 2010).

Its results stated that “At the aggregate level, i.e, when all events are considered simultaneously, it appears that CSR has a positive (0.05%) but not statistically significant impact on a company’s stock returns.”

The short answer to the headline question above, is that Yes, French performance data do support their belief that SRI does not increase performance.

But lifting the rock reveals some interesting findings…
So why do we like this study you ask?  Well, it gives us hope.  The purpose of this study was to separate the dimensions (factors) of CSR to examine which particular ones were relevant.  In other words, what would the results look like if we isolated the “C” for example, from CSR.  The study actually examines 6 different dimensions, and four of them yielded an average positive cumulative abnormal return that was statistically significant.

The best were Environment (the “E” in ESG) and what the report called Insertion, which is helping young and handicapped people in their careers (in other words, the “S” in ESG). Suburbs also performed well, which is related to helping local communities, and is also the “S” from ESG.  We note this correlates with the outperformance of SRI investments using the Fortune 100 Best Companies to Work for list, which is more related to the “S” than the other dimensions examined in the French study.  (Note: As a reminder, SRI refers to the act of investing in companies that utilize CSR/Corporate Social Responsibility and ESG/Environmental Social Governance.  SRI is from the investors’ perspective, while the other two are from the corporation’s view.)

Cumulative Abnormal Returns Comparisons (click to enlarge)
Source: EDHEC, June 2010

Two additional French studies
The other two studies (one is an update) were based on the original EDHEC paper written in 2008.  The first study used the Fama-French three-factor model for a six-year period ending in 2007.  The latest study’s (September 2010) goal was to update the latter study to examine the effects of the Financial Crises on socially responsible investments.  This study examined 62 funds over a fairly long period for SRI (8 years).  The sample was split into two types of funds: Traditional SRI, which is mostly best-in-class funds and a Green group of funds.  Note that Negative funds that screen out for sin-stocks are not as popular in Europe as in the States, and thus, were not examined.  The Green group included funds that are related to the environment such as renewable energy, water preservation or climate change.

Did the Financial Crises affect Socially Responsible Investments?
The results of the September 2010 update (The Performance of SRI and Sustainable Development in France: An Update after the Financial Crises) were not what investors were hoping for.  None (zero) of the 62 funds of the sample produced both positive and statistically significant alpha.  In other words, after adjusting for risk and the security market line, SRI funds did not outperform conventional indices.   The study appears very comprehensive as it not only looks at the conventional Fama-French factors (which are similar to Beta) but also examines and compares the VaR (Volatility at Risk) for the funds.  It notes that SRI indices exhibit both higher standard deviation (volatility) and VaR than conventional indices.

Side-note on the studies’ use of Green Funds.  Firstly, Green Funds should be examined with a long time period (perhaps 20 years if possible) since their look-back periods may be too short as these funds may be leveraged to energy prices and solar subsidies and such are cyclical in nature.  Secondly, we note that certain investments in Green Funds may not be considered socially responsible by SRI aficionados.

The study highlighted Green Funds, of which had better returns than traditional SRI funds with a slightly higher risk.  However, this is not what we have experienced in the United States.  Ethanol and Solar companies, for example, have had extremely volatile stock prices over the last 5 years, though we cannot provide our readers specific alphas at this time.

Lastly, the study analyzed the effects of the U.S. led Financial Crises onto SRI funds.  The general conclusion was that SRI funds were not spared the increase of extreme risks during the crises.

Our Conclusion:  It appears that the French are no better and no worse at socially responsible investing compared to the Americans.  However, the French culture, which includes their historically more intense reliance on statistics, produces a more realistic conclusion.  We are yet to be convinced that SRI improves investment performance given all the extra work and analysis involved (and higher volatilities).  This “extra work” results in higher management fees to investors (i.e., lower net returns). Future studies will no doubt answer this question one day…

Call Now Button