Monday, April 30, 2012

Corporate sustainability a work in progress, report finds

A new report measuring the sustainability of global large cap companies finds that many firms are demonstrating positive sustainability impacts, along with some leadership on environmental, social and governance (ESG) issues.

However, the report by global investment research firm EIRIS reveals that there are significant differences in the extent to which companies are on track to tackle the broad sustainability challenges they face.

For example, companies in the United Kingdom and continental European companies are outstripping their American and Asian counterparts on sustainability performance. And smaller companies generally lag behind larger ones.

"Big differences in corporate sustainability performance exist at the global and regional level. Tighter sustainability legislation in Europe and more public awareness contributes to this difference" said report author Mark Robertson.

The greatest level of sustainability is shown in those sectors that provide products and services with a sustainable benefit, the report says, such as health care and alternative energy.

Some sectors are inherently unsustainable, the report says, including oil and gas and mining, and need to re-focus their business drastically in order to offset negative impacts.

Among the sustainability leaders are sportswear company Puma, which has a strong environment record and has improved its supply chain labour standards, and drug maker GlaxoSmithKline, which has shown strength in supplying drugs cheaply to developing companies, the report says.

Swiss pharmaceutical giant Roche was praised for its strong equal-opportunities policies and its advanced code of ethics with strong anti-bribery rules. Philips Electronics made the top 10 for progress on environmental issues, particularly through increasing the energy-efficiency of its products.

Laggards included computer giant Apple, which EIRIS says needs to do more to address sustainability challenges - particularly those related to supply-chain risks. Other weak performers include ExxonMobil, which shows poor performance in the areas of biodiversity, climate change and water management and Toyota, which produces greener cars, but lags behind rivals on human-rights and supply-chain-labour standards.

"There are signs that companies are making sustainability a priority and acknowledging its importance, not only in terms of acting as good 'corporate citizens' but also in terms of ensuring their own long-term success,” says Carlota Garcia-Manas, Head of Research at EIRIS. “However, it's clear that companies need to do much more if they are to meet the concerns of their stakeholders and investors whilst managing the impacts of their businesses upon society and the environment in a sustainable way, both now and in the future."
Download the full report.

Thursday, April 26, 2012

Are the lessons of Deepwater Horizon in danger of being ignored?

Re-posted from the EIRIS blog:

by Josh Brewer

On the 24 April 2012 the US government filed the first criminal charges in connection with the 2010 accident at the BP oil rig in the Gulf of Mexico. A former BP engineer has been charged with deliberately destroying evidence about the scale of the oil spill.

Two years ago on 20 April  2010 the Deepwater Horizon oil rig in the Gulf of Mexico exploded, caught fire and then sank, killing 11 workers and seriously injuring several others.
In the weeks and months that followed the world watched whilst an environmental and economic disaster unfolded as oil from the damaged wellhead gushed into the Gulf. Finally, after an estimated 4.9 million barrels of oil leaked into the sea, the wellhead was capped on 15 July  2010 and a relief well completed on 19 September 2010.

At the time it seemed as if the explosion and subsequent leak would threaten the existence of BP, the company that owns the Macondo well. As it turns out BP has survived, although its liabilities in relation to the incident have run into tens of billions of dollars and its share price still hasn’t recovered, as investors will be aware.

Given the scale and impact of these events it was widely considered that some sort of Rubicon had been crossed for oil exploration, with the future of the industry placing a far greater emphasis upon sustainability and a safety-first approach to extracting oil.

However, a far different picture emerges if we look at some of the major incidents that have occurred over the last year.

In December 2011 a 40,000 barrel spill took place after a tanker accident at the Royal Dutch Shell operated Bonga oil facility, the worst spill in Nigeria in recent years. There are a number of lawsuits that have been filed against the company as a result of the spill.

In June 2011 a 3,000 barrel spill occurred in Bohai Bay, China, from a facility jointly operated by ConocoPhilips and China National Offshore Oil Corporation (CNOOC). ConocoPhilips was fined USD 158m by the Chinese government as a result of the spill.

Chevron has been fined USD 110 million by the Brazilian government for its part in a 3,000 barrel spill in the Frade field in November 2011, about 120 km off the coast of Rio de Janeiro state. This spill is also the subject of a USD 11 billion civil lawsuit.

So why are the oil companies still prepared to take such big risks both financially and in terms of their reputation? Because of the price of oil. The price for a barrel of Brent crude on 20th April 2012 was around USD 120 and it hasn’t been under USD 100 for the last twelve months, despite there being a global recession.

It seems that at this price level oil companies are prepared to engage in riskier ways of getting at oil because the rewards are so significant. This increased appetite for risk by many oil companies can be seen in the expansion of technically challenging and expensive exploration and extraction activities such as ultra deep water extraction, gas fracking, tar sands, the development of fracking type techniques to get at shale oil deposits and the expansion of exploration activities into the Arctic.

All three of the companies listed above have significant stakes in tarsands projects, Chevron and Shell have both invested heavily in ultra deepwater exploration and Shell is involved in oil exploration in the Arctic.

Given the significant oil spill incidents these companies have experienced recently it is vitally important for investors to understand how these companies are managing the risk of these methods of extraction.

For investors this means that they are likely to get good returns from investment in the sector but they are also being exposed to increased levels of risk due to the potentially severe environmental and social impacts of these riskier methods of extracting oil.

Responsible investors will want to ask these companies exactly what it is that they are doing to mitigate the risk of these methods and, where there is room for improvement, they will need to actively engage with the company in order to get commitment to address the issue effectively.

The Deepwater Horizon disaster is a warning of what can happen if this risk isn’t dealt with in the right way.

Wednesday, April 25, 2012

Sustainability report highlights need for improvement

A new report on corporate sustainability in the United States reveals individual examples of leadership but significant need for overall improvement.

Ceres and Sustainalytics assessed 600 U.S. companies on environmental and social challenges such as climate change and water scarcity.

"While there are encouraging pockets of sustainability leadership in the U.S. business community, far too many companies are only taking small, incremental steps," said Ceres president Mindy Lubber. "Sustainability has yet to gain traction at anywhere near the scale and speed required given the global threats we face."

"We're encouraged by the leadership shown by some companies and expect that their success will spur others to better leverage sustainability to identify risks and seize opportunities in an increasingly competitive global marketplace," added Michael Jantzi, CEO at Sustainalytics,.

The report highlights dozens of company examples in hopes of inspiring others to take similar actions. "For instance, Alcoa, Xcel and Intel are relative pacesetters in sustainable corporate governance practices; Baxter and Ford are setting a high standard in stakeholder engagement; and Exelon, Nike and the Coca-Cola Company are ahead of the pack in performance on metrics for reducing environmental impact and improving workers conditions," a press release announcing the report states.

In the report's four-tier assessment system, just a quarter of all companies surveyed were in the top two tiers for progress on governance, while 24% have some degree of meaningful stakeholder engagement. On corporate performance metrics, only 13% of the companies evaluated on human rights policies and programs were ranked in the top two tiers. And just a third of the 600 companies had time-bound targets for reducing greenhouse gas emissions in direct operations.

Lubber and Jantzi said companies are missing a big opportunity by not fully embracing sustainability. "We see it as a world of opportunity for companies to improve competitiveness, realize large savings through energy efficiency, invest in their workers, strengthen their supply chains and, in many sectors, reap the benefits of the enormous investment opportunities in clean technology and clean energy," they wrote in the report.

Wednesday, April 18, 2012

Goldcorp faces shareholder resolution on mine closure

Goldcorp Inc. has been asked to commit to the full costs of closure of the Marlin mine in Guatemala. In a shareholder resolution, the Loretto Literary and Benevolent Institution, Kathryn Anderson and the Unitarian Universalist Service Committee state that inadequate mine closure and post-closure of the mine risk long-term impacts on the water, food, housing and health of surrounding communities.

"The contamination of the land and water surrounding the Marlin mine will have lasting effects whose extent we cannot yet determine," says Sister Natalie Wing of the Loretto Literary and Benevolent Institution.

Goldcorp estimates closure costs for the Marlin mine to be $17 million US, the resolution notes. However, a recent study estimates those costs to be $49 million US.

A statement released by Amnesty International – a supporter of the resolution – says that indigenous peoples whose futures are at stake have not been meaningfully involved in the process to develop a closure and post-closure plan.

The mine is expected to close in 2018 when mineral reserves are exhausted. "It is likely that pollution from toxic heavy metals, erosion of infrastructure, sedimentation and disturbances to the landscape will prevent the land from returning to its pre-mine condition and uses," the press release states.

The shareholder resolution calls on the company to fully fund the closure and post closure of the mine, consult with local communities and to publicly disclose a comprehensive account of its planning and remediation processes.

Goldcorp has recommended a vote against the shareholder resolution. The company's AGM is scheduled for April 26.

Tuesday, April 10, 2012

NEI files pipeline resolution with Enbridge

Concerned that Enbridge Inc. has not adequately assessed the risks related to the Northern Gateway pipeline, NEI Investments has filed a shareholder resolution with the company, asking Enbridge how First Nations’ opposition will affect the decision to move forward with the project.

Despite an ongoing six-year dialogue with Enbridge related to the pipeline, NEI says it has been “unable to determine how the board of directors of Enbridge has assessed the risks facing the project from First Nations’ opposition, and to what degree the board is aware of these potential risks.”

“NEI has been unable to reconcile Enbridge’s claims that First Nations support will be acquired with statements of opposition from key First Nations’ leaders along the pipeline right of way,” NEI said in a proxy alert.

NEI – which owns the Ethical Funds brand – notes that the Gateway pipeline is a $50 billion project affecting more than 80 native communities and organizations.

“Numerous court rulings have reaffirmed that Aboriginal communities must be consulted and accommodated on developments that potentially impact their title and rights, as guaranteed in the Constitution. Gateway faces vocal opposition from several Aboriginal communities who state the project will be detrimental to these rights.”

The resolution asks Enbridge to produce a report detailing how the board has assessed the risks associated with First Nations’ opposition to the pipeline project. “The report should discuss how First Nations’ opposition will factor into the final decision to pursue Gateway. If the project will be pursued regardless of opposition, the report should detail how the company will mitigate the operational, reputational, and legal risks of such opposition.”

Enbridge has maintained that the project enjoys “significant support” from First Nations along the pipeline corridor, however NEI points out that as of the date of the proxy "less than half the First Nations along the pipeline route are supportive and most of the other First Nations have expressed emphatic opposition to the project.”

“NEI is concerned that the level of First Nations’ opposition to the Gateway project brings significant risks to both the project and the company,” NEI concludes. “These risks will likely manifest in several ways, ranging from almost certain legal challenges and delays, to long-term damage to the company’s corporate reputation as a responsible company.”

Monday, April 9, 2012

glass ceilings everywhere...

What decade is this? The CEO of IBM is a woman, Virginia Rometty, but she can't be a member of Augusta National, because it's an all male golf club!

From today's Wall Street Journal

The Masters will lull you. To enter Augusta National Golf Club is to step back in time, and the atmosphere amid these pine trees is intoxicating—serene, verdant, immaculate. There's no modern chaos. Even when invaded by thousands of golf tournament "patrons"—a grandiose term for "fans"—tradition rules.
Of course, all that whispery reverence becomes pretty silly. The Masters can feel stoned on mysticism and prestige, to the point where Augusta National becomes a reality distortion field, detached from the outside world. This is not heaven. If it's heaven, it's heaven with a Hooters around the corner, and a brand new champion named Bubba.
But reality takes its time pushing through the gates here, which is why Augusta National is again confronted with a question that gets elevated as a "cultural moment" but really just sounds absurd in 2012: Why aren't there any women members?
The subject has been pushed to the forefront by the appointment of Virginia M. Rometty as the CEO of IBM. IBM is a prominent Masters sponsor, and Augusta National has a history of inviting the company's top executive to join its club. Ms. Rometty is a golfer. She spent late Sunday afternoon at Augusta sitting in a second-row chair behind the 18th green. Her jacket was pink, not green.
To enter Augusta National is to step back in time, and the atmosphere amid these pine trees is intoxicating—serene, verdant, immaculate.
She was right there when fan favorite Bubba Watson and Louis Oosthuizen sank par putts to send the 76th Masters to a playoff. She stayed locked in her seat as the pair rolled up 18 again for the first playoff hole. She stood and applauded when word arrived that the 33-year-old Watson had captured the Masters on the second playoff hole, at the tenth, down the hill from IBM's company cabin. If she's not a golf fan, it's hard to say who is.
For Augusta, welcoming Ms. Rometty to the club should be a no-brainer, a rubber stamp, a tap-in, to use the golfer's term for an easy putt. But it's not.
Defenders of Augusta National always point to the fact that it's a private club, and is permitted to conduct its business the way it wants. And it's true that the club is not breaking any laws.
Beyond the fierce protectors, there's a substantial, soft middle population of patrons and sponsors who may agree that women belong in Augusta, but are too enchanted by the Masters to push. This charming environment of white-painted cabins and $1.50 pimento cheese sandwiches makes it easy to turn down the common sense, and resist rocking the boat. That is how exclusion survives.
It's time to take off those stylish green tin foil hats, turn down the reality distortion field, and acknowledge the obvious: Absence of a female member at golf's most prominent club—not just a folksy conclave in the woods, but the sport's best-known stage, a citadel of corporate power, happily monetizing and broadcasting its event to millions—is woefully out-of-date and should embarrass anyone invested in this event.
It feels bizarre to even refer to this as a "debate." This confers far too much respect, as if it's actually a subject worthy of argument. Look at the recent comments from President Barack Obama and Republican challenger Mitt Romney—I'm pretty sure if you put both men in an open field, one of them would tell you it's sunny and the other would tell you there's a raging hailstorm. Both men agree that Augusta should admit women.
But Augusta National abides by its own clock. In an instant-response, social media era in which the slightest provocation and merits a reply, it doesn't react to campaigns or even polite queries. The club can do as it wants, and knows that this majestic tournament has a way of airbrushing uncomfortable truths. Sponsors glide along.
Witness Augusta National chairman Billy Payne's awkward news conference last week, in which he repeatedly dodged questions about female membership. Augusta National has dragged its heels before—it didn't have an African-American member until 1990, and it endured protests about the absence of women in the previous decade. Stubbornness is built into the woodwork here.
This controversy is unlikely to stop the Masters from being a significant event. The shame is that it's preventing it from being a better, more inclusive one. If Augusta can handle a Bubba in a green blazer, it can handle the 21st century. And the 20th.
Watson is a likeable, unpretentious champion—"It's just me. I'm just Bubba," he said when it was over—and Virginia Rometty is not an inconvenience for Augusta National. She's a gift. A female power broker, a golfer, atop one of the world's most prominent companies, where a green jacket has customarily come with the job. It doesn't matter if Ms. Rometty wants to press her case. All the public relations gurus and crisis managers on earth couldn't have given this anachronistic club a better opportunity.
It should be so simple. It's sad that it's not.
Write to Jason Gay at

Monday, April 2, 2012

Social investment groups join forces

Sustainable investment organizations from around the world – including Canada's Social Investment Organization – will collaborate on a new global report on trends in sustainable and responsible investment.

The regional organizations currently produce their own research reports, usually once every two years. The new report is scheduled for release in December 2012.

"This is an important step in helping to identify and compare sustainable investment industry developments across geographic boundaries," the groups said in a joint press release. "Specifically, the report will analyze the prevalence of investment strategies that consider environmental, social and corporate governance (ESG) factors in investment analysis and ownership activities."

The report will be a "valuable resource to investors and policy makers and will serve as the baseline for future research," the press release continued. Each participating organization will be responsible for collecting data in its home market.

The sustainable investment organizations agreed to implement the new report at a meeting in London last week, also pledging to launch a global website later this year and to collaborate more closely on policy issues.

"The strength of the sustainable investment industry lies in the diversity of our members in Canada and around the world," said Eugene Ellmen, Executive Director, SIO. "Our collective activities as sustainable investment forums will give voice to our members by showing this global diversity."

The meeting was attended by sustainable investment groups from the United Kingdom, the United States, Canada, Australia and Holland, as well as the European Sustainable Investment Forum and the Association for Sustainable & Responsible Investment in Asia.

The sustainable investment organizations collectively represent more than 1,000 members including pension funds, asset managers, NGOs, banks, community development organizations, research institutions and consulting firms, impact investors and financial advisors.