Ethical Investment Seminar Sue Watson and Matthew MacLeod 15
February, 2009 Engineers Without Borders Ottawa Professional
Chapter
Slide 2
What is value? Objective e.g. asset-based? Speculative e.g.
Dutch tulip craze? Hockey cards?
Slide 3
Case Studies Begin...
Slide 4
Fundamentals of the Stock Market How are you really affecting a
company by investing or not? What happens to companies that can't
(or shouldn't) grow any more? Borrowing power? Power to buy other
companies? Common stock vs. preferred stock Can vote with common
stock, but better dividends with preferred stock, other special
rights
Slide 5
Stock Valuation Remember what is value, anyway? Efficient
Market Hypothesis Only changes in fundamental factors, such as
profits, losses, acquisitions or dividends, ought to affect share
prices However, this is visibly not the case Tech crash Steve
Jobs
Slide 6
Stock Valuation So what is affecting the price? risk valuation
(e.g. 'risky bets' go down) psychological factors (tendency to see
patterns, bandwagon effect, certain price levels, etc.) actually
unrelated (but apparently related) negative economic news Note that
expected growth is already priced in to the stock Financial guru
Warren Buffet recommends a strategy of waiting for stocks to become
undervalued due to external factors
Slide 7
Case Study - The TSX Toronto Stock Exchange The centre of the
Canadian financial universe BUT, also the centre of the mining
universe Almost 60% of the world's mining companies listed Rough
break-down as of December 31, 2008 ~29% in financials (banks) ~27%
in energy ~17.5% in materials (mining) Any Canadian ethical fund
needs to confront this reality
Slide 8
The Best in Sector Approach Reward the leaders, punish the
laggards Basic argument even (or perhaps especially) in the 'worst'
industries, it is helpful to encourage companies to become 'less
bad' Vote with your dollars Approach taken by most SRIs...
otherwise what else would they invest in on the TSX? Sends a market
signal to companies that they should improve And... you're
profiting in the meantime
Slide 9
Case Study Jantzi Social Index Perhaps most well-known Canadian
'Ethical' fund/SRI But does this look like you? Top 10 Holdings
:
Slide 10
Engage.. or Avoid? Is it better to be an 'activist investor' in
'negative' companies, or avoid them? If you don't vote, you can't
complain... but is that really analogous? If the market is truly
efficient, does avoiding make a difference? Does engaging through
an ethical fund multiply your power, or dilute it? Will you ever
have enough voting power?
Slide 11
Counter-Point: What if you live outside the centre of the
universe? Statscan reports
