Photo:thinkpanama, Creative Commons, Flickr
If the first 7 weeks of this year have been recessionary, how has SRI fared in this climate?
Specifically, let's look at the Energy sector. The top names, in order of decreasing weight, are Exxon (XOM – $85.49), Chevron (CVX – $82.12), Conoco Phillips (COP $78.65), Schlumberger (SLB – 84.11), Occidental Petroleum (OXY – $70.13), Devon Energy (DVN – $93.10) and Marathon Oil (MRO – $50.61).
Let's assume that someone, we'll call this person Index Hugger, is interested in simply getting market exposure to Energy, so he purchases just the above mentioned companies, in proportions equal to those in the investable universe (this guy isn't concerned with beating the market, he just wants to get the market).
Now let's also assume that someone else, we'll call this person Social Investor, is also interested in market returns for Energy, but unlike his counterpart, he only holds names that have passed various social screens. This means that of the 7 names listed above, Social Investor can only hold one name, Devon Energy, because the other 6 have not passed muster with some traditional screeners (for simplicity's sake, let's assume that Social Investor has decided to choose from the same set of names as Index Hugger because he wants the larger market-cap names).
How do the two compare, year-to-date?
Index Hugger:
XOM -8%
CVX -12%
COP -11%
SLB -14%
OXY -9%
DVN +5%
MRO -17%
Social Investor:
DVN +5%
It just so happens that Social Investor was not just fortuitously short Energy, but particularly in the major players, and ended up with a gain. Index Hugger, on the other hand, despite being diversified among the biggest weights in the Energy sector, saw losses in almost all of his holdings. So far this year, it would seem that social screening in the Energy space has been a good strategy. Why those name(s) have not succumbed to the same downward pressures faced by big Energy names is a good question. We'll continue to investigate.
Disclosure: I hold mutual funds which may contain energy stocks.
Photo:capn madd matt, Creative Commons, Flickr