Thursday, January 27, 2011

Sustainability a Key Competitive Driver in Natural Resources Sector

Jantzi Sustainalytics took advantage of the spotlight in Davos to offer a preview of their new report, Sustainability and Materiality in the Natural Resources Sector. The theme of this year’s Annual Meeting of the World Economic Forum is Shared Norms for the New Reality, reflecting the fact that we live in a world that is becoming increasingly complex and interconnected but also experiencing an erosion of common values and principles – a nice tie in with SRI.

The report identifies 8 business drivers common to companies in the natural resource sectors (oil and gas, mining and forestry) and nine categories of environmental performance. Analyzing existing literature, case studies and proprietary work with financial institutions and corporations, Sustainalytics answers two questions: how material is the correlation between the management of the environmental or social performance area and the business driver, and how strongly does the evidence support this link.

The research reveals five environmental/social categories that are strongly linked to competitiveness in the oil and gas sector, four links in the mining industry and two links in forestry.

‘The business case is strongest when multiple drivers of business success are considered. Some of the strongest linkages that were identified in our analysis cannot be captured in a simple payback or return on investment calculation. Links that support reputation are difficult to monetize. Links that mitigate risk are hard to quantify. It is interesting to note that the environmental and social areas that generate the most business value do so through their impact on multiple business drivers.’

Michael Jantzi, the CEO of Sustainalytics, comments “After 20 years of assessing corporate responsibility practices, I know that sustainabilty performance should be factored into valuations. The analysis in this report reveals the extent to which environmental and social factors can impact competitiveness.”

The full report will be released in March. Read the Executive Summary here.

Talisman recognizes free, prior and informed consent

Talisman Energy is being praised for its decision to include the principles of Free, Prior and Informed Consent (FPIC) in its new Global Community Relations Policy.

In a statement, Talisman said the new policy, which was approved by the company’s board of directors in December 2010, defines standards for engagement with communities including indigenous and tribal communities residing in the areas of its projects.

Bâtirente and the Regroupement pour la responsabilité sociale des entreprises (RRSE) were among the groups who commended Talisman for the move, noting that it follows over two years of dialogue by Bâtirente and RRSE, both shareholders of the company.

“As shareholders of Talisman, we are happy to see the company adopt a cutting-edge policy likely giving it a competitive advantage to access resources which are increasingly located in populated areas. Successful resource extraction projects depend on good community relations,” stated Daniel Simard, General Director for Bâtirente. “A process based on consent is clearly the best way to obtain and maintain the social licence to operate.”

Bâtirente and RRSE say they will now focus their engagement on the implementation of the policy, paying particular attention to Peru and Quebec where the company's activities are facing opposition from local communities.

“Although change cannot happen overnight, we believe this is a significant commitment,” states Sister Esther Champagne, president of RRSE. “We hope and expect Talisman will make a good faith effort to seek the FPIC of communities. We will be interested in how Talisman adapts its approach in order to obtain the consent of communities in Quebec where municipalities are presently forbidden to oppose mineral and gas extraction on their territory.”

The FPIC announcement is considered significant partly because of Talisman’s history – in 1998, it purchased Arakis Energy which was involved in the Sudanese oil industry during the country’s civil war. As conditions in Sudan worsened, Canadian church groups and NGOs stepped up their campaign against Talisman, urging shareholders to divest and asking the Canadian government to take action. Talisman ultimately sold its Sudan interest in 2003.

Wednesday, January 19, 2011

More companies asked to adopt say on pay

SHARE (Shareholder Association for Research and Education) and Meritas Mutual Funds are continuing their successful say on pay executive compensation campaign. In the last quarter, SHARE received positive responses on the issue from Inmet Mining Corporation, Nexen Inc. and Talisman Energy Inc., who have all indicated that they will adopt a say on pay vote within the next two years.

Six companies, Algonquin Power and Utilities Corp., Ballard Power Systems Inc., Kinross Gold Corporation, Research in Motion Inc., Shoppers Drug Mart Corporation and Stantec Inc. have received shareholder proposals filed by Meritas Mutual Funds asking them to adopt say on pay.

During the fourth quarter of 2010, SHARE corresponded with 33 companies on key ESG issues, according to its Q4 2010 Shareholder Engagement Activity Report. Almost 70% of the dialogue was characterized as “positive” or “on track” by SHARE analysts. As well as say on pay, SHARE focused on employment, human rights, toxic chemicals and sustainable forestry.

On human rights, SHARE sent letters to six companies requesting information about company policies, practices and reporting procedures in relation to specific human rights issues commonly affecting resource extraction firms. The firms were IAMGOLD Corporation, Inmet Mining orporation, Nexen Inc., Teck Resources Limited, TransCanada Corporation and Yamana Gold Inc.

As part of SHARE’S work on toxics, a shareholder proposal has been filed with Shoppers Drug Mart Corporation on behalf of Meritas Mutual Funds and the BCTF Salary Indemnity Fund asking the company to report to shareholders on initiatives to reduce or eliminate PVC and phthalates from proprietary products and packaging.

For more, download the SHARE report.

Tuesday, January 18, 2011

Ethical Funds takes new branding approach

Vancouver-based Ethical Funds – the country’s largest provider of SRI funds – has re-branded itself, with the Northwest and Ethical Investment name changing to NEI Investments and NEI now using the term ESG (environment, social and governance) to describe its products, as opposed to sustainable or responsible investing.

“Over the past few years, the term ESG – along with "responsible investing" – has come to be owned by investment institutions who believe non-financial factors should be part of the investment strategy. Using "ESG" instead of "sustainability" or "sustainable investing" ensures there is no confusion between our work and the work of those pursuing sustainable public policy, sustainable Olympics, or sustainable cities,” the company states in its latest newsletter.

NEI adds the term ESG – already popular in the institutional investment world – seems to be gaining traction with the mainstream investment industry. “Currently, the total global assets under management claiming to incorporate ESG factors stand in excess of US$22 trillion - mostly in European pension funds.”

NEI has already had some success making its corporate engagement services available to European investors, announcing in its newsletter that the company has been placed on a preferred list of suppliers for the Swedish National Pension Funds AP 1-4.

NEI’s new website is

Tuesday, January 11, 2011

Ontario regulator seeks input on shareholder rights

The Ontario Securities Commission is considering regulatory proposals that would compel Ontario issuers to address shareholders’ rights issues. The commission announced this week that it is seeking public comment on this initiative.

The OSC’s staff notice states that staff is reviewing three areas related to shareholder democracy:

Slate voting and majority voting for uncontested director elections

Shareholder advisory votes on executive compensation

The effectiveness of the proxy voting system

“Shareholder democracy has attracted considerable public attention in Canada and other countries, and OSC staff are reviewing our regime to identify the need for reform in this area,” said Leslie Byberg, Director, Corporate Finance at the OSC. “I look forward to consulting with our stakeholders and hearing their comments about potential regulatory proposals.”

The announcement was welcomed by the Canadian Coalition for Good Governance, which has been lobbying the commission to introduce such reforms. "These are key fundamental issues the coalition has been focused on since we were founded," CCGG executive director Stephen Griggs told the Globe & Mail.

The OSC is accepting submissions on the subject until March 31, 2011.

Tuesday, January 4, 2011

SIO chief calls for truce

The head of the Social Investment Organization, Canada’s umbrella group for socially responsible investing, has called for greater cooperation between the retail and institutional sides of the business. In a New Year’s editorial published on Responsible Investor, SIO executive director Eugene Ellmen noted that at times, the two sides appear to be “locked in a cold war.”

“Too often, the mainstream camp accuses fund companies and advisors of imposing simplistic ethical distinctions while the retail folks say the mainstream is watering down our basic values,” Ellmen said. “It’s time for our industry to forge a common front on issues we all agree on – a clean environment, better conditions for workers and communities, safe and useful products for consumers, and good returns for all investors.”

Peter Chapman, executive director of Shareholder Association for Research and Education (SHARE), was also asked to share his New Year’s thoughts, along with about a dozen other well-known figures from the SRI world.

Chapman says in 2011, he’d like to see “great strides” in incorporating a long-term view into how fiduciary duties are understood, building on 2010’s successful expansion of the UN Principles for Responsible Investment and continued advances in integrating ESG issues into investment strategy and decision-making. “It is increasingly clear that investment success depends on a healthy society and a sustainable environment,” Chapman added. “Unless we believe capital markets can function as a perpetual Ponzi scheme, long-term vision is essential for fiduciaries. Since most asset owners still struggle with implementation, topping our 2011 to-do list is developing stronger tools to make ‘long-termism’ a reality.”