GRI Equity - integral investing

The world is not flat. We do not realise it, but our children are beginning to. One of my children remarked how beautiful the sun looked coming "around" in the morning ... not coming up! She unconsciously recognises that planet earth revolves around the sun and is part of a bigger universe. Unlike we, who still think that the earth is the centre of everything. Its easy to be a discworld thinker, and often quite comforting, but its so far removed from reality that it matters whether or not we act as if we know the difference.

If you have not been struck by the weird weather patterns of recent months, perhaps the quake and tsunami in Asia may have helped teach us that we are connected to nature. The effects of the Tsunami are still reverberating around Asia. But an interesting live example of the potential for humans to reconnect to nature was provided by wild life there. All along the coasts where the tsunami hit species fled prior to the wave arriving because they sensed its arrival. Reports came in from all over the region - elephants in Sri Lanka, Indonesia and Thailand, buffalo, goats and dogs in Thailand and India, a flock of flamingoes in India all headed to higher ground. The evidence is also in the numbers as the death toll was lower among these animals than among humans. And the reason is not seismic per se, because animals further inland did not display the same flighty behaviour. Perhaps modern life has dulled human's connectedness to nature's energy. What is evident is that animals may be a valuable tool in early warning systems. www.sheldrake.org can offer more observations. Humanity certainly needs to reconnect to nature.

Geopolitics

February saw attempts made to rebuild cooperation between US and Europe as Bush and Secretary of State Rice made a tour of Europe. The NATO is a key subject with the US intent on maintaining it and its role in Europe. Europeans, particularly Germany and France, have questioned their role, initiating discussion that it might increase its autonomy, but this was rebuffed by the US. The differences in approach are fundamental, but Europe does exhibit a more mature and modern ability to compromise and cooperate and this will help prevent further acrimony.

NATO members and the EU have pledged to assist with the reconstruction of Iraq, putting aside some of the splits with the US which arose over the invasion. The EU announced, during Bush's visit to Europe, that it was keen to co-host a world conference on aid for Iraq. It has also emerged that all 26 NATO members - including France, which vehemently opposed the war - are now helping to train Iraqi army officers, though some contributions are small, the US appreciates the symbolism. "All 26 allies are working together to respond to the Iraqi government's request for support" said Jaap de Hoop Scheffer, NATO Secretary General.

Europe is planning to remove the 15 year old arms embargo with China because it is not appropriate to lump the rising superpower in with Myanmar and Zimbabwe. This does not please the US. However, it may encourage trade and investment between China and Europe which will also support the stable growth of both economic areas, and this inevitably will reduce the interest in military engagement and investment . We are against investment in military endeavour as a matter of policy. Though since the stated policy of these economies is for military industry, a policy of cooperation rather than confrontation is easier to manage and develop.

Divisions over Iran, which Europe fears might be subject to a US attack, is another area of contest. Another concern addressed is Russia and its "increasingly confrontational" approach towards its neighbours. The war in Chechnya is now 10 years old and the devastation is an embarrassment to civilisation. At the end of a two-day visit to Brussels by Bush, the EU and the US parted with pledges to work more closely together but without resolving a number of key disagreements.

Bush has presented the US 2006 budget to Congress, cutting 150 domestic programmes in a bid to lower the record US deficit. The $2.58 trillion (£1.38 trillion) budget includes reduction in subsidies to farmers, and lower spending on the environment, education, and health. The budget document projects the deficit will rise to $427 billion this year, before starting to decline. Military spending will, however, rise 4.8% to $ 419.3 billion in 2006. The budget does not include the cost of running military operations in Iraq and Afghanistan, for which the administration is expected to seek an extra $80bn from Congress later this year. Another key policy spending missing from proposals is the cost of funding the administration's proposed radical overhaul of Social Security provision, the federal programme on which many Americans rely for their retirement income. Ignoring these fundamental issues is, as one observer put it, "like leaving mortgage payments out of a houshold budget".

Israel confirmed it will declare a mutual truce with Palestine. While this is welcome, the success of these moves towards peace have not been successful in the past. We can hope for resolution but fundamental changes in the dynamics of relations will have to occur before people are comfortable to live together in this part of the world.

Prime Minister Omar Karami of Lebanon announced the resignation of his Syrian-backed government at the end of February. Another positive move on the path to peace in the Middle East, however there is increasing unhappiness, particularly since the assassination of former Lebanese prime minister Rafik Hariri in mid-Februaury.

Venezuela is reviewing all foreign investment in its mining industries in an effort to strengthen its indigenous industrial output. President Hugo Chavez has ordered all existing contracts with foreign firms to be examined to see if they provide maximum benefits to the country. The review will cover production of gold, aluminium and iron ore although it excludes the country's oil sector, for the moment. In a related move, Coke's main bottler has been closed for an investigation, though this is expected to be temporary.

Venezuela is also in the news again for its rejuvenated military buildup. Chavez has increased the army reserve to 100,000 and is buying weapons and infrstructure. He speaks of the US as the principal enemy and has a border war with Colombia, an ally of the US. While this may all be posturing by a Presidential ego, the general picture of development and opportunity in Venezuela continues to deteriorate.

Finance ministers from the world's wealthiest nations supported the UK proposal to offer debt relief to the world's poorest countries, but the United States balked at some elements of the package.U.S. Treasury Undersecretary John Taylor said Brown's International Financial Facility plan, which over the next decade would forgive all debt from the poorest countries and double aid to Africa, "would not work for the U.S.".

The Wealth of Nations Triangle Index of Emerging Economies measures and values balance across three broad areas: economic, social, and information-exchange. Countries moving toward balance can defy investor stereotypes based solely on GDP and attract foreign direct investment. This year, tiny Slovenia tops a field of 70 competitors.

In Thailand, Thaksin won the election by a landslide. He is a popular autocrat who has brought many positive changes to Thailand and is not concerned particularly with democracy in economics or politics. Singapore is his shining example of the success of an authoritarian style. His popularity with the majority of Thais at the lower end of the economic ladder will assure him continued political viability. It is likely that Thailand will continue to perform, even if liberal media and commentary is dulled for some years to come. And if you have invested in a business favoured by Thaksin and friends, it will be better insulated from political risk.

The International Chamber of Commerce has published a report on globalisation which contains useful data and whose editorial perspective appears to be fairly balanced.

Risk and Terror

North Korea, perhaps posing the greatest nuclear threat, is playing games again as it suspended its engagement in non-proliferation talks. This may be posturing by the regime which is even alienating China, but should not be dismissed. The regime is volatile.

The international community needs to reduce the future risk of conflict and political instability around the world, according to a new report by the UK government. 'Investing in Prevention: an international strategy to manage risks of instability and improve crisis response'. The report attempts to define a practical agenda for seriously addressing conflict prevention and stabilisation over the next 5 to 10 years, and has particular relevance for Africa. The report forms part of the UK government's approach to the "2005 Agenda" - including the G8, UN High Level Panel Report and the MDG Summit in September.

Federal officials were repeatedly warned in the months before the 11 September 2001 terror attacks that Osama bin Laden and al-Qa'ida were planning aircraft hijackings and suicide attacks, according to a new report that the Bush administration has been suppressing. The independent commission investigating the attacks concluded that "intelligence that indicated a real and growing threat leading up to 9/11 did not stimulate significant increases in security procedures". The report, withheld from the public for months, says the FAA was primarily focused on the likelihood of an incident overseas. However, in spring 2001, it warned US airports that if "the intent of the hijacker is not to exchange hostages for prisoners but to commit suicide in a spectacular explosion, a domestic hijacking would probably be preferable".

The newly released details undermined testimony from Condoleezza Rice, the former national security adviser, who told the commission that information about al-Qa'ida's threats seen by the administration was "historical in nature". Kristin Bretweiser said: "There were 52 threats that were mentioned. These were present threats - they were not historical. There were steps that could have been taken. Marshals could have been put on planes that spring. Condoleezza Rice's testimony is undermined." The Bush administration has been blocking the release of the latest information. An unclassified copy of this additional appendix was passed to the National Archives in February with large portions blacked out. The latest pages note that of the FAA's 105 daily intelligence summaries between 1 April 2001 and 10 September 2001, 52 of them mentioned Osama bin Laden, al-Qa'ida.

The US has essentially stopped trying to build a democratic order in Iraq, and is now trying to gain stability and legitimacy. Iraq will still be a country that is substantially better off than it was under Saddam Hussein. There is real pluralism and openness in the society, more so than in most of the Middle East, though elections are not democracy. According to Anatol Lieven Bush’s language of freedom is not benevolent idealism but an ideological weapon. This view seems to be gaining credence as observers begin to view Bush as a liberal who wants to change the world, rather than a conservative who enjoys stability.

Some interesting statistics of comparison between the two Iraq wars have been shared with us. The absence of the Arab states is noticeable and a critical difference for achieving international legitimacy of the US led endeavor.

Comparison of theTwoGulf Wars & Associated Coalitions

1991 Gulf War (Desert Storm)

34 countries in the Coalition, really only 19 countries (with more than 200 troops in theatre) 870,000 troops in total

some provided equipment, medical teams, etc., above only counts troop contributions over 200.

2003 Gulf War (Operation Iraqi Liberation)

--28 countries in the Coalition, really only 14 countries (with more than 150 troops in theatre) 179,000 troops in total (as of Jan. 2005)

Investment, Finance & V. C.

Energy efficiency is moving to the top of the business agenda with the long-awaited Kyoto Protocol on climate change coming into effect in mid-February. The issue was already at the front of business leaders' minds, and anticipated rises in energy costs of around 25 per cent in the pipeline this year and next mean that reducing electricity and gas consumption is now a key business objective for many companies, even if concern for the environment isn't!

Where to invest? While generally positive about Europe and Asia, two economies which deserve attention are Germany and Japan. Perhaps this is a contrarian view because they seem to be down at the moment, but both are showing signs of fundamental change which will allow productivity and innovation to flourish. In Germany unemployment has catalysed some new flexibility in unions and employment terms. In Japan, pressures to move to new industrial relationships are helping break down barriers to entry. While caution and observation are required, we expect both economies to rebound in the coming business cycle and their equity markets to show some sparkle in the coming year.

Caution should be observed as the Japanese economy has officially gone back into recession for the fourth time in a decade with gross domestic product falling by 0.1% in the last three months of 2004. The fall reflects weak exports and a slowdown in consumer spending, and follows similar falls in GDP in the two previous quarters. The Tokyo stock market fell after the figures were announced and the Nikkei share index closed trading down 0.38%. However, against this Heizo Takenaka, Economic and Fiscal Policy Minister said "If you look at the bigger picture, the economy is in a recovery stage" . A previous estimate of 0.1% growth between July and September was downgraded to a 0.3% decline. Politicians remain upbeat about prospects for an economic boost later in the year. Ministers pointed to the fact that consumer spending had been depressed by one-off factors such as the unseasonably mild winter. Analysts said the figures were disappointing but argued that Japan's largest companies had been recording healthy profits and capital spending was on the rise. Japan's economy grew 2.6% overall last year - fuelled by a strong performance in the first few months - and is forecast to see growth of 2.1% in 2005. The economy's fragile recovery remains dependent on an upturn in consumer spending, a fall in the value of the yen and an improvement in global economies., which are not assured. Although the overall picture is uncertain, selected businesses will perform well.

The American Federation of State, County and Municipal Employees (AFSCME) Pension Plan has filed a lawsuit against American International Group (AIG) seeking to require the company to include in its proxy ballot this year a binding shareowner resolution calling for the amendment of the company's by-laws to allow shareowners to nominate director candidates. The US Securities and Exchange Commission (SEC) issued a no-action letter allowing AIG, which is currently under investigation by the New York Attorney General, to omit the resolution from its proxy. "We have no choice but to seek relief in the courts because of the current stalemate on proxy access rulemaking at the SEC," said Gerald McEntee, chairman of the AFSCME Pension Plan. For more information on this issue, read a related SocialFunds.com article.

In related developments, the US Securities and Exchange Commission (SEC) denied the request by Citigroup (ticker: C) to omit from its proxy ballot a shareowner resolution filed by the United Brotherhood of Carpenters Pension Fund calling for the election of directors by a majority vote, according to the Investor Responsibility Research Center (IRRC). The decision seems difficult to reconcile with earlier SEC no-action letters issued to Disney (DIS), Halliburton (HAL), Qwest (QWST), and Verizon (VZ) allowing these companies to omit this same resolution from their proxy ballots. On February 17, 2005, an SEC spokesperson said he was unaware of the decision and could not comment, according to IRRC. For more information on this issue, please read the related SocialFunds.com article.

HP's CEO Carly Fiorina was forced to resign by the board. It is unclear what strategy the board has in mind, but clear that bickering at this high level is not helping business execution. HP remains a major player in the computer industry both in printers and personal computers so the strategy pursued will be important to the industry.

Here's the love/hate score for a random selection of brands with a "passion index" against the average number of comments for these brands (positive or negative) in a "I love/hate [brand]" search" from WebProWorld. Microsoft, Walmart, and McDonalds are the big losers on the Love/Hate score. No surprise.

Responsible Investing

The California Public Employees' Retirement System's (CalPERS) Board of Administration has approved a plan to shine light on corporate environmental liabilities, improving transparency, and timely disclosure of environmental impacts. "Information is a necessary tool for investors," said Rob Feckner, acting president of CalPERS. "Shareowners need information on environmental liabilities to make informed investment decisions and assess costs associated with the impact to the environment." Under the plan, CalPERS will pursue initiatives aimed at improving environmental data transparency including:

"We expect environmental corporate stewardship to play a greater role in corporate governance over the next ten years," said Priya Mathur, vice chair of CalPERS Investment Committee. "Data on the corporate environmental impact will be one of the best sources for investors to measure related investment risks."

The Global 100 was launched launched at the World Economic Forum, Davos and provides a useful initial portfolio screen for businesses offering attractive risk/return profiles.

How to Build Your Sustainable Portfolio by Rona Fried, an update on an article from Progressive Investor, the monthly investing newsletter from SustainableBusiness.com was released. It provides on-going analysis of clean tech investment opportunities: renewable energy, fuel cells, organics, forests and emerging areas on the private and public sides.

Fortune Magazine recently published an insightful review of some so called ethical/green funds. It suggests a minimum level of due diligence in selecting these funds. "Imagine that you care deeply about the environment and that you want your investments to reflect your values. You might turn to the Sierra Club Stock Fund, a two-year-old mutual fund that promises to "invest for sustainable growth." The trouble is, the fund does not own shares in a single company that promotes alternative energy, organic farming, or other solutions to environmental problems. Most of the companies it does own--including Best Buy, Costco, Hershey Foods, Outback Steakhouse, and real estate investment trusts--do not even report publicly on their environmental practices."

A groundbreaking new study by the Aspen Institute and management consulting firm Booz Allen Hamilton found that companies routinely identify values as a top agenda issue, and public companies that report superior financial results also report greater success in linking values to operations in areas that foster growth, such as initiative and innovativeness. However, most corporate executives do not see a direct link to growth, and the joint study also revealed that most companies are not effectively measuring their "Return on Values" in areas important to their business strategy.

The study found that ethical behavior is part of a company's license to operate. Eighty-nine percent of companies studied have a written corporate values statement, and 90% of these specify ethical conduct as a principle. Other business values commonly included in formal statements are commitment to customers (88%) and commitment to employees (78%). "Ethics-related language in formal statements not only sets corporate expectations for employee behavior -- companies are using it as a shield in an increasingly complex and global legal and regulatory environment," said Chris Kelly, Vice President at Booz Allen.In contrast, some of the values often closely associated with revenue or earnings growth are found less often in values statements, such as innovativeness (60%), initiative (44%), and adaptability (31%). Commitment to diversity appeared in 41% of values statements studied. The most important factor is the behavior of the CEO. Eighty-five percent of the respondents say their companies rely on explicit CEO support to reinforce values, and 77% say it is one of the "most effective" practices for reinforcing the company's ability to act on its values. Nearly half of the respondents (47%) are based in North America with another fourth (27%) representing companies based in Europe, and a fifth (24%) representing companies based in Asia/Pacific. Respondents represent many industries: financial services and manufacturing lead at 26% and 25%, respectively, followed by technology and consumer-related companies (including consumer products, media and retail), each at 11%. Utilities (7%), transportation (7%) and energy (5%) comprise the balance along with 8% in miscellaneous or unclassified industries.

Venture Capital

Expansion Capital, a clean tech manager that has been establishing itself for a couple of years had a $ 20 million close on their fund - many congratulations. The fund is still open and expects a final close later in the year.

Interest Rates and Currencies

US interest rates will continue their upward rise. Data indicating strong GDP growth and rising inflation in 2004 will encourage the Fed to continue its tightening policy, although leading economic indicators still presage a recession. We expect inflation to put pressure on real spending power and the consumer and housing markets to begin to feel pressure. The tightening of rising rates is begining to be felt as real interest rates become positive, though inflationary pressures are increasing.

European rates are being maintained at 2%. The ECB is implementing a more conservative policy because of slower growth and unemployment concerns, especially in Germany.

The US dollar is under pressure and at risk of further weakness as central banks restructure their currency portfolios. In particular it is likely that Asian central banks are/will lower their reserves of dollars. Japan is the biggest holder of dollar reserves in the world, with South Korea the fourth largest. The weight of US dollar holdings by Asian central banks must decline. Observations of the need for dollar buying to shore up its value keep occurring. But alternatives are increasing. And the dollar is a poor investment currency for these central bankers. As we mentioned recently, our US only listed equity portfolio appreciated 28% last year, but only in dollar terms, in terms of other currencies performance was flat. Central bankers are watching their currency portfolios depreciate by tens of percent now and the last out of the door will suffer the greatest fall.

As Asian currency holdings adjust and the dollar is sold to be replaced with other currencies related to trade as well as the investment outlook, the dollar depreciation will continue. As this occurs dollar interest rates will be rising. The global impact could be recessionary, particularly for international accounts exposed to dollars. The timing of this change has begun and is expected to continue into 2006 though an accelerated shift, possibly catalysed by currency speculation and hedge funds, could occur. Unfortunately, as in the game of scarcity Musical Chairs, the last to move will suffer most.

While Asian central banks stand to lose significant value as the dollar declines there are other shifts which may mitigate this. The reinvesment in other currencies is one move which will moderate the effects of a dollar decline. The other will be the increasing investment by Asian businesses in US and Europe. Germany, for example, is already seeing Chinese companies establishing themselves there where they will build an dsell in local markets, increasing the value added of goods. Similar investment in the US by Japanese business has been ongoing for 2 decades now and Chinese and other Asian businesses are beginning to make the same FDI.

Trade and FDI

The shape of trade is shifting. The lifting of quotas will be a significant immediate part of that change. A useful report on the lifting of quotas and the impact on global trade has been released by Deloitte, entitled "Uncertainty Continues".

The gap between US exports and imports hit an all-time high of $ 672 billion in 2004. The US Commerce Department said the trade deficit for all of last year was 24.4% above the previous record - 2003's imbalance of $ 496.5 billion. The deficit with China, up 30.5% at $ 162 billion, was the largest ever recorded with a single country. The US consumer's appetite for all things from oil to imported cars, and even wine and cheese, reached record levels last year and the figures are likely to spark fresh criticism of the administration's economic policies.

The consumption habits of the US are increasingly important. The trade deficit is exacerbated by a significant appetite for imports which continues to exceed the growth of exports. While there is no apparent move to reduce this craving, the natural forces of the market will increasingly bear on the US consumer. While US exports tend to the higher tech, higher fashion and big industrial, which people may not notice so easily, tourism is one area where we can all feel the difference. Europeans can have a "cheap" holiday in New York and eat out, whereas American travellers to Europe are feeling the pain as dollar denominated prices have risen significantly. Although non-US exporters are seeking to maintain volumes by keeping prices down, they are also finding new markets, both locally and among other trading partners. Intra-Asian trade is expanding as is trade with Europe and South America. America will feel the need to open their markets, especially commodity markets like cotton, in order to balance their budget, but this is a cultural issue as much as an economic issue and change will be unfamiliar and slow.

The complement to net-imports is investment by foreigners in America, but this is also becoming less attractive and other options are increasingly viable which suggests that foreign purchases of debt and assets will not be so aggressive. Another indication of this trend is that financial investors are flush with cash and are eyeing Europe as a playground for private equity and M&A, rather than the US. These trends suggest a more insular US economy in a year's time which is neither healthy nor valuable for America. Nor will it be healthy for global trade because of America's weight in the economy, but it may be a stage that is required in the evolution of markets to more efficent and equitable dynamics.

Energy

Would it be premature to say that oil is on the way out? Not if there are enough qualifications. Certainly the economics of alternative energy are comparable with fossil fuels and the design of alternative fuel systems is more efficient, especially over industrial investment lifecycles. in addition, big oil has a foothold in the alternative fuels market. While oil will be a big part of energy consumption for 3 or 4 decades, the landscape will be significantly different soon. Rocky Mountain Institute has published an insightful book Winning The Oil Endgame.

Progressive Investor's Special Report, "Investing in Solar: A Market at the Tipping Point" can be found at www.sustainablebusiness.com. 2004 was a big year for solar on public markets worldwide. Stocks soared for just about all of the 24 public PV companies worldwide. 2005 portends to be even a bigger year, with over 20 IPOs in the works. The sector will be much bigger with many new players, and with existing players reaching profitability. Institutional investors are showing great interest in the field, especially since Sharp is investing so heavily in it. Solar PV is expected to contribute about 15% to Sharp's overall operating profit by the end of next year.

One of Africa's biggest electricity companies, South Africa's state-owned power company, Eskom, unveiled plans to build the world's biggest hydro-electricity plant on a stretch of the Congo River, harnessing enough power for the whole of Africa. The proposed plant at the Inga Rapids, near the river's mouth in the western Democratic Republic of Congo, would cost $50bn (£26bn) and could generate some 40,000MW, twice the power of China's Three Gorges dam. Rather than damming up the river entirely, the plan by - which has already won over independent experts - involves creating a "run-of-river" plant in which water is siphoned off, channelled through turbines and then fed back into the river. The river is seen as ideal. Known as the "river that swallows all rivers", it is fed by 10,000 streams that funnel into powerful rapids along its 2,900-mile course. Some 526 million people in Africa do not have access to any electricity. Powercuts are common even in the most developed African countries, and in the more remote parts of the continent the sole power source is the diesel-fuelled generator.

Reuel Khoza, the Eskom chairman, said: "Only between five and 10% of Africa's population has access to electricity. That we consider lamentable in a continent that is abundant in energy sources. The Inga project is one that really excites us because we believe that in one fell swoop we could address the bulk of Africa's needs and do it in a manner that is clean and environmentally friendly, by harnessing run-of-river hydro-electricity as opposed to damming up a river." But critics say even run-of-river plants can damage the environment, by blocking the migratory path of fish and stalling the flow of silt downstream. The World Rainforest Movement, in a report on the project, said "Megaprojects like this ... often imply social, economic and environmental disruption of people's livelihoods, lands and life." There are also fears that electricity from the project, dubbed "Grand Inga", will simply enrich corporate backers rather than reach Africa's poorest, many of whom live beyond the electricity grids.

The plan also hinges on attracting private investors, who may be cautious about committing large sums of money to one of Africa's most unstable countries. Congo endured civil war between 1998 and 2002, in which seven neighbouring states were sucked in to back rival factions and fight over the vast country's huge mineral resources. Despite peace accords and the withdrawal of foreign troops, the conflict has simmered on with minor clashes between militias and rebel groups. Some 3 million people died, mainly from the hunger and disease linked to the conflict.

Climate Change

Another piece of evidence that climate change is happening and is caused by human activity was presented by Tim Barnett of The Scripps Institution of Oceanography in California. His research is novel in that it takes data from oceans rather than atmospheric readings. And it is persuasive on both counts - that the world is warming (half a degree in the last 50 years) and is caused by industrial man (the pattern of ocean warming reflects human activity).

The Kyoto accord, which aims to curb the air pollution blamed for global warming, has come into force seven years after it was agreed. The accord requires countries to cut emissions of carbon dioxide and other greenhouse gases. Some 141 countries, accounting for 55% of greenhouse gas emissions, have ratified the treaty, which pledges to cut these emissions by 5.2% by 2012. But the world's top polluter - the US - has not signed up to the treaty. And even for countries that have signed up to Kyoto, meeting the goals could be difficult. Canada, one of the treaty's first signatories, has no clear plan for reaching its target emission cuts. Far from cutting back, its emissions have increased by 20% since 1990. And Japan is also unsure it will be able to meet its legal requirement to slash emissions by 6% from 1990 levels by 2012.

"A lot of private companies like Dupont, Dow Chemical, Chevron, Connoco, Alcoa, International Paper, IBM ... are actively thinking about this issue," said Richard Rosenzweig, of energy brokers Natsource. Their decision is a consequence of globalization and the restrictions on carbon dioxide emissions from cars and power plants that several US states have imposed. Most of these businesses have manufacturing plants in countries that have signed the 1997 Kyoto Protocol. These plants must comply with the treaty. "If you are a power company in the US," Rosenzweig said, "you believe you might be regulated in the future, you want to be prepared and learn about this issue... these are the main reasons why those companies are involved."

Forest fires have long been part of many ecosystems, for example those caused by lightning strikes. However, fires are having greater and greater impacts on the land and the atmosphere as the scale of the burning increases with human activity. Burning of forest and grassland is used in many regions for the purpose of land clearing, such as in Southeast Asia, where the yearly agricultural burning is at its peak. Among other pollutants and particles, biomass burning releases high amounts of carbon monoxide (CO) into the atmosphere. The image at this link shows the observed CO concentrations at 700 hPa (~3 kilometers altitude) over Southeast Asia for January 20-30, 2005. The high concentrations of CO coming from the fires are clearly seen in the data, as is the transport of this pollutant towards the East.

More news on Google issues as it initiates two new products: a toolbar with autolinking and an online calendar. The toolbar has been questioned as it delivers links based on revenue to Google rather than utility to the viewer. The calendar is still in development. Both initiatives raise red flags for us because of the little known but insidious security and corporate associations issues (see www.google-watch.com). Google was once the browser of choice and will still be for many of you. However, if you have any privacy concerns or sensitive security issues you should not use Google; consider Yahoo, AltaVista and other broad based, comparable engines. If you must have a search toolbar (which is not so necessary in Mozilla or Firefox where searches can be customised) these engines also offer them. The calendar function in Mozilla is highly functional and integrates seamlessly with the browser and email modules.

Skype Technologies, a firm that offers subscribers free phone calls over the internet, agreed a partnership with Hutchison Global Communications. For those of you who use a computer alot, we must hype Skype! We've now had it up and running for a month or so and must commend the functionality and utility of the VOIP telephony service. You can download the software for your platform and start using it with 15 minutes. There is a facility to make international calls to telephones at local call rates (prepaid basic rate approx 2c per minute for major IDD destinations). A headset and boom microphone are recommended to improve quality. It also frees up the main telephone line for incoming calls (assuming your internet service is on a second or dedicated service).

The decision to make IE 7 is widely seen as a U-turn because, before now, Microsoft said it had no need to update the browser. Typically new versions of its browser appear with successive versions of the Windows operating system and a new version of IE was expected to debut with the next version of Windows due in 2006. The current version of IE is falling behind rivals such as Firefox, Mozilla, Konqueror and Opera. And now there are rumours that search engine Google is poised to produce its own brand browser based on Firefox.

The Firefox browser has been winning fans and eating market share since its first full version was released in November 2004. According to market statistics gathered by Websidestory, Firefox's market share is now approaching 5% of all users. Some technical websites report that a majority of their visitors use the Firefox browser. IE still dominates with a monopolist's share of about 90% but this is down from a about 96% in mid-2004.

Dell has released a new, environmentally preferable desktop computer design that improves usability and serviceability while increasing energy efficiency and reducing lead content.In addition to compliance with several international environmental design standards, Dell plans to meet specifications for the European Union's Reduction of Hazardous Substances (RoHS) directive before the July 2006 deadline. The RoHS directive requires that manufacturers of electronics products shipped in the EU eliminate or minimize several chemical compounds, including lead. The Dell OptiPlex GX280 chassis are designed to accommodate future RoHS-compliant platforms.

Yahoo is 10 years old. It will celebrate in the first week of March. A BBC review in November 2004 ranked it the best search engine.

Open source is moving beyong computing. While Firefox continues to take market share from MSIE, CAMBIA, a non-profit biotech reseach group in Austraila, has issued an open source license for a technology developed to transfer genes in genetic manipulation. This is a step beyond database or computer sharing as it actually licenses technology for genetic engineering. They have started a website, www.bioforge.net, where this open source collaboration can take place, in a similar way to that which sourceforge.net serves as a forum for software development. This release will impact Monsanto and others who rely on technology protection to build profits. Another opening of technology is taking place in the world of medicine where NIH has decided to make research work that it has helped finance to be made available free, online. The NIH sponsors about 11% of medical papers published annually and this includes the 30% - 50% of teh most important papers that are frequently cited.

Integral Systems and LOHAS

America is innovating its concept of being an in car nation. Shared vehicle fleets are now establishing themselves successfully in a number of US cities. Many people prefer not to have the hassel of owning a car, but are happy to pay the costs for occassional use. You don't have to own a well to get water or a generator to get electricity. Must you own a car (or two or three) to drive? "You can join a mobility plan, like you join a cell-phone plan," says Dan Sturges, a transportation researcher for WestStart, a nonprofit based in Pasadena, Calif. "It is self-service, on-demand, pay as you go. And you get different vehicles for different needs." See coverage by Time magazine here, or checkout www.flexcar.com.

The advertising numbers for Pfizer demonstrate the questionable legitimacy of the drug industry. It is the 4th largest advertiser in the US and sells products that require a prescription. They spend $ 3 billion to encourage consumers to demand prescription drugs from their doctors. Many of their treatments can be replaced with natural products and healthy lifestyles - those that can not not would not require advertising.

Surveys show that consumers are very concerned about the use of radio frequency ID (RFID) tags in shops. More than half of 2,000 people surveyed said they had privacy worries about the tags, which can be used to monitor stock on shelves or in warehouses. Some consumer groups have expressed concern that the tags could be used to monitor shoppers once they had left shops with their purchases. The survey, by CapGemini on behalf of more than 30 firms who are seeking to promote the growth of RFID technology, showed that awareness of tags among consumers in Europe is low. It is another step in replacing the information vested in traditional community, face-to-face distribution channels (consumer and industrial) which are given up by big volume industrial business models. The ability for trust and communication to be established requires communbity contact with people - not high staff turnover, changing faces and anonimity for fear.

Scientists in Derby, UK are using deep-freeze technology to help protect banana production in Malaysia. Plant specialists from the University of Derby are studying a deadly fungus that attacks bananas. This plant which offers such succulent fruit is in danger of extinction by accident!

World health officials have issued their strongest warning yet about the global threat posed by bird flu. The world is now in the gravest possible danger of a human flu pandemic triggered by the virus, Dr Shigeru Omi told a conference in Vietnam. The World Health Organisation fears bird flu may get deadlier if it mutates into a form that could be easily transmitted between humans. Thirteen people have died in Vietnam from the virus since December.

In a continuing sweep of the banning of smoking in public places, Cuba, the cigar mecca, has also instituted a ban on smoking! Castro gave up in 1986 and so there was some motivation from the top to implement the ban. Que sera, sera.

Scientists in Denmark have discovered that organically-grown vegetables strengthen the immune system. Researchers at the Danish Institute of Agricultural Sciences have found that rats fed with organically-grown vegetables are healthier than rats fed with non-organic greens. The rodents given the organic produce had more vitamin E which acts as a powerful antioxidant and is known to protect against cardiovascular disease. They also had less body fat and were calmer than those fed on non-organic food. The study was funded by the Danish Research Centre for Organic Farming, which said in a statement: "In all cases where differences were observed there was a beneficial effect of the organically grown diet."

Further research from the Organic Center in the US found that organic farming methods have the potential to elevate average antioxidant levels, especially in fresh produce. The Organic Center 's second State of Science Review (SSR) looked at existing scientific information in order to compile its report Elevating Antioxidant Levels Through Organic Farming and Food Processing. It reveals that on average antioxidant levels were around 30% higher in organic food compared to conventional food.

Modern humans emerged at least 35,000 years earlier than was previously thought, according to an analysis of fossils found in Ethiopia. Bones belonging to two early humans unearthed in 1967 have been dated to 196,000 years ago using new techniques, making them by far the oldest examples of Homo sapiens yet discovered. This brings the evidence of ancient human fossils into line with that provided by DNA, which suggests Homo sapiens became a distinct species about 200,000 years ago. It also suggests the modern anatomy of our species evolved long before a mind we would recognise as human. While the external physical features of Homo sapiens seem to have been set 195,000 years ago, it was not until about 70,000 to 50,000 years ago that humans began displaying signs of modern behaviour. Between those later dates, a "cultural explosion" took place that brought the first examples of figurative art, and body decoration, sophisticated bone tools, fishing and possibly even primitive religion. This suggests that while the human skeleton evolved little over more than 100,000 years, the brain made a sudden evolutionary leap that enabled people to think in much the same way as they do today.

A study commissioned by the Diagnostic Clinic, has revealed that 68% of British adults (over 30 million) think that complementary medicine such as Chinese, naturopathy and osteopathy, can be as valid as conventional medicine. It shows that a massive 24% of people believe western medicine is the only legitimate way of diagnosing and treating health problems. It also revealed that 35% of adults would not consult a doctor for many health problems including persistent tiredness, regular headaches, skin rashes and mild allergies.“These findings demonstrate that public opinion has developed more rapidly than the traditional medical community can deliver,” says Dr Rajendra Sharma, medical director of the Diagnostic Clinic. “People want, and deserve a greater range of health options, yet few doctors have the breadth of knowledge to advise on the best complementary options available,” he adds.

The Church of England is due to debate whether or not environmentally friendly practices, including offering organic wine and bread during communion, should be adopted. A report entitled Sharing God’s Planet: A Christian Vision for a Sustainable Planet, accompanies the debate and includes a foreword by Archbishop of Canterbury, Rowan Williams. He recommends that the CoE should undertake “an ecological audit” and consider practical ideas to make itself more environmentally friendly such as carpooling and recycling.

Prosperity With A Purpose: Christians and the Ethics of Affluence, a study commissioned through the official ecumenical body, Churches Together in Britain and Ireland, argues for a positive Christian engagement that links wealth creation to social justice. This is bound to stir up a lively debate.

Vegetarian and vegan groups have criticized a prominent US nutritionist who has claimed that vegetarian and vegan parents are damaging their children's health by denying them meat. UK experts immediately contested the findings which was based on a study of impoverished children in Kenya. Sir Paul McCartney told the BBC that her claims were "rubbish" and that he suspected her report had been "engineered by livestock people who have seen sales fall off." Liz O'Neill, head of communications at the Vegetarian Society, meanwhile, insisted that the US study "should not scare any parents in this country." The Kenyan study found that adding just two spoonfuls of meat a day to their starch-based diets dramatically improved muscle development and mental skills. The author, in saying that it is unethical to withhold these foods during early years, may have been taking a stab at governments and multilaterals who are in a position to alleviate poverty. A spokesperson for the British Dietetic Association questioned the relevance of the report to children in the developed world where "there is no evidence that vegan and vegetarian children in this country suffer impaired development".

Tesco, the largest supermarket in the UK and a widely held investment is being investigated about mislabelling healthy foods which are not. This may put a crinkle in their cost structure but it is unlikely that most Tesco shoppers read the label or mind what's in their product since they are seeking low cost.

As noted recently the world is becoming predominantly urban, for the first time more of humanity vives in urban rather than rural communities. Mike Davis' article Planet of Slums makes intriguing reading.

Clint Eastwood's latest film, Million Dollar Baby has many Americans unhappy because it condones euthanasia (though its message is more in praise of worthwhile failures). It is to be expected that America will find euthanasia hard to accept given its traditional culture and unwillingness to discuss death in a healthy way - it is usually seen with fear and not discussed at all in Western culture. Peter Singer's work on Rethinking Life and Death has made profound waves even in the elite academic institution of Princeton. So Eastwood's story is welcome. Art often is the harbinger of change and perhaps this story will raise American culture to the realities of life and death. This could even benefit the health care industry as resources may not be so readily expended on brain dead bodies. Perhaps medical negligence and liability will decline. And people's sentiments and wallets may not be such easy prey at the death of family and friends.

You may have heard that it is 40 years since Elliott Jacques coined the phrase 'midlife crisis' to describe the stage in human development (especially male) that Carl Jung had identified a few decades before. Even if we haven't, or won't, suffer from one, there's a good chance that someone we know will, so it's handy to know a little about these 'crises' and how they can be a positive experience. Graham Wilson produced a short summary on them, which is available on one of his websites here.

Activities, Books and Gatherings

A busy month both in the office and the garden. The most stimulating experience was losing and recovering a hired digger from a boggy patch of water garden being reclaimed. Anthony and Michael gave inspiration, humour and energy till together we had sawn boughs and trunks from 4 trees, burined them under the tracks and removed the 3 tonne "sculputre" from its swamp. The garden, surrounded by rhododendron and Japanese knot weed, will be beautiful and accessible as spring draws into summer.

Chinese New Year was a modest affair for us, but has really blossomed in Ireland, where the community in Dublin is becoming a vibrant centre of culture. The year of the Rooster seems to be bringing a positive feeling to Hong Kong and perhaps it will enter a new dynamic this year. The CE is possibly mooted to go.

Extracurricular reading was rather muted in February, though a re-read of The Hungry Spirit led to a useful summary in three pages. I also am rereading Pratchett's Mort, a topical subject with euthanasia in the cinema and weather caused loss.

The date for Be The Change is 5 May (05/05/05). BeTheChange was originally a gathering in 1974 (the year the Tao of Physics was drafted) which addressed holonic dynamics, without the language since developed. Thirty years later, an anniversary event took place in 2004, which was excellent for many reasons - speakers, participants, technology, ideas, spirit. Its success demanded annual gatherings. It is likely to be worthwhile and an unusual opportunity to hear, exchange and meet leading thinkers.

Top

This report has been prepared for information purposes and is not an offer, or an invitation or solicitation to make an offer to buy or sell any securities. This report has not been made with regard to the specific investment objectives, financial situation or the particular needs of any specific persons who may receive this report. It does not purport to be a complete description of the securities, markets or developments or any other material referred to herein. The information on which this report is based, has been obtained from publicly available sources and private sources which may have vested interests in the material referred to herein. Although GRI Equity and the distributors have no specific reasons for believing such information to be false, neither GRI Equity nor the distributors have independently verified such information and no representation or warranty is given that it is up-to-date, accurate and complete. GRI Equity, associates of GRI Equity, the distributors, and/or their affiliates and/or their directors, officers and employees may from time to time have a position in the securities mentioned in this report and may buy or sell securities described or recommended in this report. GRI Equity, associates of GRI Equity, the distributors, and/or their affiliates may provide investment banking services, or other services, for any company and/or affiliates or subsidiaries of such company whose securities are described or recommended in this report. Neither GRI Equity nor the distributors nor any of their affiliates and/or directors, officers and employees shall in any way be responsible or liable for any losses or damages whatsoever which any person may suffer or incur as a result of acting or otherwise relying upon anything stated or inferred in or omitted from this report.

Private and Confidential

February Round-up

Perspective