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Archive for September, 2009

21 September 2009

By the end of September, investors in the JSE will be a step closer to accessing a fast developing global investment theme – responsible investment – as the exchange starts to disseminate live values of its Socially Responsible Investment (SRI) Index to the trading screens of thousands of investors worldwide.

The SRI index is a South African benchmark for corporate citizenship, and has as its constituents JSE-listed companies with high standards of environmental, economic and social performance as well as good governance.

Until now, only close of day values of the SRI index have been available, and the JSE hopes the new development will prompt the creation of instruments based on the index, to be traded on the exchange.

Responsible investing

According to the JSE, responsible investing, a significant investment theme in many developed countries, is also growing in South Africa.

Institutional interest in responsible investing came of age in 2008 when South Africa’s largest pension fund, the Government Employees Pension Fund (GEPF), placed its weight behind the index and required institutions managing GEPF funds to support responsible investing.

“Investors are no longer content to use the SRI Index as a benchmark, but would like to track the performance of the index on a minute-by-minute basis,” the JSE’s Corli le Roux said in a statement earlier this month.

“This development is significant as it opens the door to investment avenues on the index, which is in-line with our vision to make responsible investment accessible and be seen as mainstream investment activity rather than a peripheral one.”

Like the FTSE/JSE Top40 index or any other JSE index, it will now be possible to track the performance of the index at any time during the trading day. This makes it more attractive for a market maker to create products such as exchange traded funds (ETFs), unit trusts or tracker funds based on the index.

“Responsible investment is coming of age and is increasingly important to investors, most notably for institutional investors such as pension funds,” said Le Roux.

“This is being pushed by drivers such as the UN Principles of Responsible Investment, which is burgeoning in support globally as well as locally, where the Index has been an aspirational benchmark for some years, and the recent launch of King III which is likely to provide added impetus.”

‘Good corporate citizens’

The SRI Index is calculated by the JSE, and constituents are drawn from the companies that meet the SRI criteria as well as set liquidity ratios. It acts as a tool for investors to select certified good corporate citizens and a benchmark for companies looking to improve corporate responsibility.

Since 2008, South Africa’s largest pension fund, the Government Employee Pension Fund, has collaborated with the JSE on the SRI index, and plans to use the index to inform its investment decisions.

David van der Roest

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Here are some funds that you might want to look into (I’ll include information on Vanguard’s S&P 500 index fund (VFINX) for comparison):

Fund Expense Ratio Turnover 5-Year Return 10-Year Return Top Holdings Include
Appleseed (APPLX) 0.90% 128% Too new Too new Pfizer (NYSE: PFE), Coca-Cola (NYSE: KO)
Calvert Social Index A (CSXAX)  0.75%* 14% (0.3%) Too new AT&T (NYSE: T), IBM
Pax World Growth (PXWGX)  1.46% 51% 1.3% (1.1%) Qualcomm (Nasdaq: QCOM), Cisco (Nasdaq: CSCO)
Domini Social Equity (DSEFX) 1.15% 9% 0.3% (2.0%) IBM, Amgen
Winslow Green Growth (WGGFX) 1.40% 113% 0.8% Too new First Solar (Nasdaq: FSLR), LSB Industries
Vanguard 500 Index Fund 0.16% 6% 1.2% (0.9%)  

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