Tuesday, January 22, 2008

Indian index has a religious edge

Jan 23, 2008
By Raja M
Asia Times (Hong Kong)

MUMBAI - The global trend towards socially responsible investing has gone religious in India, with Dow Jones Indexes and its US-based partner investment firm Dharma Investments Ltd launching the Dow Jones Dharma India Index in Mumbai on January 15, the first major faith-based investment product in South Asia.

The Dharma India index is the latest addition to the 130,000 stock indexes Dow Jones publishes globally, including the US, Britain and Japan versions of The Dow Jones Dharma Index.

The Dharma India Index, with 250 Indian companies, features stocks compliant with the code of moral conduct according to Hinduism, teachings of the Buddha and which also incorporate principles of the Sikh and Jain religious tenets - together, ways of life with billions of followers in Asia and forming nearly 20% of the human race.

The index license is sold to asset managers and others wishing to commercially use the Dow Jones Indexes information to market investment products or for publication in the media, such as television and the Internet.

According to a Dow Jones presentation in Mumbai, socially responsible investing (SRI), including faith-based investing, accounts for US$4 trillion worth of assets under management, a figure growing 20% annually.

European SRI assets are worth nearly $1.75 trillion and such assets are worth $22 billion in the Asia-Pacific region, according to Dow Jones. "Historically, the increase of wealth within any population has resulted in an interest in ethical investing," the Dow Jones Dharma Investment presentation noted.

India's first SRI product was the ABN AMRO Sustainable Development Fund, launched in March 2007. The Dow Jones Dharma Index is the first major faith-based SRI product in India.

"Mid-to-long term, we expect products like funds, open-ended funds, index funds, certificates but also exchange-traded funds" to be potential investors to the index, said Nicole Wesch, from the Frankfurt office of Dow Jones.

The DJ Dharma India Index value will be updated daily with a quarterly review. "The review frequency of indexes depends on the use of the indexes," said Wesch. "For example, the Dow Jones Wilshire 5000 is reviewed monthly and the Dow Jones Global Titans 50 is reviewed annually." Most Dow Jones indexes are reviewed quarterly.

The DJ Dharma Index aims to meet the needs of socially aware investors seeking to avoid companies with harmful practices, services or products. Environmental screening in the DJ Dharma Index will consider corporate performance on emissions, climate change and carbon footprint analysis, oil and chemical spills, waste management and recycling. Corporate governance filtering will involve labor relations and disputes and discrimination allegations, human-rights violations, working conditions and wages.

The launch of Dow Jones Dharma Indexes comes as stocks compliant with the Islamic code of conduct, or sharia, are attracting more attention worldwide, with the Islamic investment market estimated between $400 billion to $500 billion.

The 51 Dow Jones Islamic Market Indexes, the world's first faith-based ethical investment products, made their debut in 1999, with input from an independent advisory Sharia Supervisory Board with a member each from from Syria, Pakistan, Bahrain, Saudi Arabia, the United States and Malaysia.

Data available from the Dow Jones Indexes website says the DJ Dharma India Index of 250 companies has a total market capitalization $919 billion, compared with $1.6 trillion among 415 companies in the Dow Jones Dharma Japan Index.

The DJ Dharma US Index features 1,065 companies with a total $5.3 trillion in market capitalization. The full list of companies in the Dharma Indexes is made available only to their licensees, which denies an independent chance to verify how accurate their filtering mechanisms are.

For instance, the Indian companies Dow Jones gave out as examples in their Dharma India Index - ICICI Bank Ltd, Larsen & Toubro Ltd, Infosys Technologies Ltd, Housing Development Finance Corp and Bharti Airtel Ltd - did not include any units of the $70.3 billion Tata Group, India's most respected corporate house, India's largest corporate taxpayer and among the world's most socially responsible companies.

Philanthropic trusts own about 66% equity capital of Tata Sons, the primary promoter, making Tata Group possibly the largest corporate group of its kind in the world where the majority shareholder is Messrs Compassion and Charity.

"Until now, faith-based investing has been restricted to Islamic and Christian religions only," Nitesh Gor, chief executive of Dharma Investments, told the media. "But 20% of the world population consists of dharmic religions such as Hinduism and Buddhism. The idea [of the Dow Jones Dharma Indexes] is to promote faith-based investing through dharmic religion."

The word dharma in the ancient Indian languages of Sanskrit and in Pali dhamma has vast connotations that defies exact translation into English, but the primary meaning is "universal laws of nature" without any sectarian divisions.

Dow Jones Indexes acknowledges that dharma or dhamma is a "spiritual concept central to the many religions originating in South Asia, including Hinduism, the Buddha's non-sectarian teachings, Jainism, and Sikhism."

The Dharma Index subscribes to the core of all spiritual thought originating in India: non-violence, respect for all forms of life, compassion and loving kindness.

The investment potential for the so-called faith-based investment products following a moral code of conduct is particularly big in India and offers a combination of the country's ancient spiritual riches with new-found economic wealth.

India, after millennia, is seeing a resurgence in the teachings of the Buddha, not least in the increasingly widespread practice of Vipassana meditation. For the growing hundreds of thousands of Vipassana practitioners from all religions, including those from the business community for whom brief but intense workshops are available in numerous centers throughout the world, products such as the Dow Jones Dharma index make for easier choices on how to incorporate non-sectarian, practical self-realization into their daily lives.

Many leading Indian businessmen are serious practitioners of Vipassana, including media baron Subash Chandra Goel, owner of Zee Television, Asia's leading Hindi satellite channel. Companies such as the Oil and Natural Gas Corporation of India and Indian Railways offer paid leave for senior officials and other employees to take Vipassana courses.

In Maharashtra state, of which Mumbai is the capital, the government training center in Pune city for senior Indian Administrative Service officers, the Yeshwantrao Chavan Academy of Development Administration, offers Vipassana courses as part of the curriculum.

Mumbai, India's busiest and most workaholic city, always finds time for investing in spiritual health. A long queue can invariably be found even on mornings of working days outside the famous Siddhivinayak Temple to Lord Ganesha, the deity for enterprises. Christians in the city drop into churches during the mid-day break and Friday prayers in mosques are well attended. In the miserably crowded suburban trains, many commuters quietly read prayer books or sing bhajans (devotional songs).

Faith-based investing in India took off with the world's first online sharia compliant online brokerage that opened in November 2007. Parsoli Corporation Limited, a Mumbai-based brokerage with a market capitalization of $25 million, launched Stockmultiplier.co.in, an online trading facility following the sharia, the life code of conduct, that forbids investing in businesses relating to alcohol, gambling, pornography and entertainment and those earning high income only from interest, such as financial institutions and commercial banks.

The company's Parsoli Islamic Equity Index tracks sharia-compliant stocks from listed equities in India's stock exchanges. "The response was overwhelming barely two days after we opened," Parsoli chief executive Jafar Sareshwala told Asia Times Online. "We received over 700 enquiries of which about 20% were non-Muslims. The idea of making money with clean investments appeals to a lot of people.''

The growth of Asian economies has helped to set the stage for the present concerns with investments anchored in religious values, according to Nitesh Gor of Dharma Investments, speaking at the Mumbai launch of the Dow Jones Dharma India Index.

"India and Asia have made remarkable advances economically over the last few years and in parallel we believe that bringing our religious values onto the global stage offers sustainable solutions to the problems facing the world today," he said.

The Dow Jones Dharma India Index is to be screened by three committees of academicians and religion practitioners - the academic advisory committee, a dharma supervisory committee and a religious council providing guidance and establishing the principles for the methodology.

Advisors include faculty members from Harvard University, the School of Oriental and African Studies in London, Britain's Oxford Center for Hindu Studies and the Oxford Center for Buddhist Studies, Yokohama University, Japan, Columbia University in the US, Thammasat University, Bangkok, and Jawaharlal Nehru University, New Delhi. such as the venerable monks Dr Ashin Nyanissara, chancellor of Sitagu International Buddhist Academy, Myanmar, and Religious figures involved includethe venerable Sangharaja, the patriarch of Cambodia, chief spiritual advisor to the king of Cambodia.

SRI evaluation clearly can be subjective, and what passes the SRI test for some fails for others. For instance, the Mumbai-based RO Somani Charitable Trust published its Karmayog corporate social responsibility ratings on January 4, with what it called India's first corporate social responsibility ratings of India's largest 500 companies based on sales.

"The results of the Karmayog CSR rating are extremely disappointing," the survey declared, "with no company meriting the highest five rating and with 46% of companies condemned with the lowest zero rating ... The only four companies with a four out of five rating were HDFC, Infosys Technologies, Tata Steel and Titan Industries."

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