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Responsible Investing – A Sheep in Wolf’s Clothing to the Chemical Industry?

Submitted by: Atlantic Consulting

Categories: Business Ethics

Posted: Jul 11, 2002 – 12:00 AM EST

 

The Chemical Industry is Seen by Responsible Investors as an Acceptable, Sometimes Even a Desirable Investment, Concludes a Study Just Completed by Atlantic Consulting

Jul. 11 /CSRwire/ - ZURICH, Switzerland - The chemical industry is seen by responsible investors as an acceptable, sometimes even a desirable investment, concludes a study just completed by Atlantic Consulting. Companies such as Praxair and Sigma-Aldrich are seen as pioneers in social responsibility. Companies such as Du Pont and Bayer are seen as best-in-class in social and environmental responsibility. In responsible investment funds, chemicals shares are ‘market weighted’, i.e. the chemical sector is weighted similarly to its weighting by market capitalisation. A majority of the largest chemical producers – 14 of the top 20 – are found in a master portfolio of responsible investments that was compiled for this study.

This probably comes as a pleasant surprise to chemical industry veterans, who are well aware of the industry’s decline in public image and its battles with environmental activists. Maybe things are not as bad as they sometimes seem.

“As regards the chemical industry, the bark of responsible investors is worse than their bite,” commented Eric Johnson of Atlantic Consulting, who led the study. “If you look at the marketing material and the image of responsible investment funds, you see a wolf chasing the industry. Closer inspection reveals a sheep in wolf’s clothing.”

The study also points out the significance of responsible investing, which during the last decade has moved from the financial fringe much nearer to the middle of the road. Responsible investors account for 2-3% of public equity, and this will double or triple over the coming decade. Not overwhelming, but significant and growing faster than the rest of the financial sector. This means it should be of interest to financiers in most any industry, and chemicals are no exception.

Finally, the study notes that about half of the chemical companies most popular among responsible investors are labeled as something other than chemical companies by those same responsible investors. Only six of the 15 most popular chemical companies among responsible investors are labeled as such. The rest have sector labels such as ‘diversified industrial’, ‘oil and gas’ and ‘household products’. “Whatever the financial industry calls them, these are chemical companies,” noted Johnson. “They make, process and sell chemicals, they employ chemists and chemical engineers, they read chemical trade magazines, and they consider themselves to be chemical companies.”

Scope of the study

The report presents an analysis of responsible investing in the chemical industry. It is intended for finance managers, investor- and public-relations managers as well as environmental managers at chemical companies. It also may be of interest to investment professionals as well as social and environmental activists. The analysis is restricted to public equity investing. Credit lending was not included, because it is not very relevant to chemicals. Also not included were public debt issuance or private equity, because these are very new, very small facets of responsible investing.

The primary result is a portfolio analysis of the chemical holdings of responsible investment funds in 2001. It also includes an overview of the responsible investing industry and its methods of investment selection.

For more information, please contact:

Eric Johnson Atlantic Consulting
Phone: +41 (1) 772-1079

 

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