Innovest Rates the Players
by John Laumer, Philadelphia on 10.27.05
We've long thought that stock screening methods seemed overly negative in method. By the time you've satisfied every negative test..."we don't like companies which [fill in the blank]".... the field of good-to-choose-from becomes excessively narrowed. Composite perfection in human affairs, something Mark Twain storied us to be more cynical about, if used as a metric for guiding investments, abandons any chance for rewarding nascent good and driving postive change. The latest concern is that companies most skilled in public relations gaming of a rating system draw attention away from the shy performers that are "doing well by doing good". Considering all of the above, Innovest ought to turn the heads of TreeHuggers. Innovest long ago bypassed the negative screen approach, favoring correlations of resource efficiency with financial performance, and now is incorporating the human side.
We credit the always well-written Crosslands Bulletin for reminding us of Innovest with a recent newsletter, from which we excerpt here: "Innovest Strategic Value Advisors has created a system to screen the social responsibility of companies. The benchmark is the set of 10 principles contained in the UN's Global Compact. The analyses are intended to give financial organizations and public institutions another way to gauge investments relative to the environmental, social, and governance attributes of the companies. The service will be for sale".
"The first institutional investor client for Innovest's Global Compact Plus is the pension program set up by the New Zealand government...When Innovest was founded in 1995 its mission was to find hidden shareholder value by using hard numerical environmental performance metrics as a proxy for superior management. Eventually pressure from competitive socially responsible investment advisors inspired the firm to expand its research to intangibles such as human capital, governance, and behavior in emerging markets..."
"As Innovest softened its approach, the Global Compact felt the need to harden, leading to a convergence of objectives...The Global Compact is rapidly becoming the international gold standard‚ for CSR performance, and this new tool will help investors critically assess companies‚ relative attractiveness as investment candidates," said Innovest Chief Executive Matthew Kiernan."
