Wednesday, October 17, 2012

BMO tops 2012 Carbon Disclosure Project rankings

Only one company scored high enough to make the 2012 Canada 200 Carbon Performance Leadership Index (CPLI) – Bank of Montreal. Performance is grouped into 6 bands A, A-, B, C, D and E. The CPLI includes only Performance band A, which this year was achieved only by Bank of Montreal.

The CDLI (Carbon Disclosure Leadership Index) is made up of the 20 companies with the highest carbon disclosure scores from the Canada 200 sample, and these are, in order:

Bank of Montreal 91

ARC Resources Ltd. 90

Stantec Inc. 89

Teck Resources Limited 88

TMX Group Inc. 84

Suncor Energy Inc. 84

Barrick Gold Corporation 84

Enbridge Inc. 84

TransCanada Corporation 83

Enerplus Corporation 83

Telus Corporation 82

Bank of Nova Scotia 82

Tim Hortons Inc. 80

Emera Inc. 79

Cenovus Energy Inc. 79

Toronto-Dominion Bank 78

Inmet Mining Corporation 78

Nexen Inc. 78

SNC-Lavalin Group Inc. 77

Canadian National Railway Company 77

The 2012 Investor CDP Information Request was sent to the Canada 200 companies on behalf of 655 institutional investors (CDP signatories) representing $78 trillion in assets. 107 of the Canada 200 companies responded, a meagre 54%; however, they represent 79% of the Canada 200 by market capitalization.

Apart from the scoring, 3 key findings of the report, ‘Improving transparency as the foundation for carbon performance’ were:

• Companies are identifying more climate change risks with a direct short-term impact on their business

• Companies prioritize climate change on the corporate agenda, finding more value in emissions reduction initiatives and more opportunity to improve profitability

• Companies improve transparency on climate change issues, but lag on performance criteria

There is plenty of detail in the report, as well as graphics which clearly illustrate the range of responses. Accenture, the official writer of the report and CDP’s global implementation partner, has done an excellent job assembling the results and making the information accessible.

There remains a significant gap between the CDLI average and the Canada 200 average. So, while the leaders are improving, it’s not clear that the laggards are catching up. Furthermore, the range of scores for the 2012 CDLI is 77 - 91, while the range of scores for the Global 500 CDLI companies is 94 -100. Canada has a lot of catching up to do!

Tuesday, October 16, 2012

2012 CDP Canada 200 Report launched today

At concurrent events in Toronto and Montreal today the Carbon Disclosure Project (CDP) launched the CDP Canada 200 Climate Change Report 2012.

A capacity crowd of dark suits enjoyed coffee and snacks provided by Tim Hortons, as Scott Bonikowsky, Vice President, Corporate, Public and Government affairs, Tim Hortons Inc., was the keynote speaker.

The Toronto event began with an introduction by Stephen Donofrio of the CPD, who provided a brief overview of the work of the CPD, that is, to use the power of measurement and information disclosure to improve the management of environmental risk. Having worked on climate change through carbon disclosure for over a decade, the CDP is now addressing water use and beginning next year will be integrating the work of the Forest Footprint Disclosure Project, creating a comprehensive system for reporting on natural capital.

Mr. Bonikowsky then gave us some perspectives on Tim Horton’s sustainability journey, frankly admitting at the start, “We have made considerable strides and progress but we have considerable challenges ahead of us.” Tim’s created a sustainability strategy in 2009, from a starting point of adding value to the business, while recognizing that the company had to mitigate its significant negative environmental impacts. Some of this was driven by the recognition of the ‘relentless push towards increased transparency’ and the surprising number of requests for information on what Tim’s was doing with respect to sustainability and environmental initiatives. When the company released its first GRI report in 2010, it was downloaded 82,000 times, both a testament to the desire for information, and a spur to continue providing it.

He described some of Tim’s' challenges, including trying to reduce the absolute/aggregate impacts of a fast growing company, dealing with franchise owners as partners who have to be relied upon to execute many of the measures, and, in a comment echoed by many, the lack of standardization in sustainability reporting, leading to questionnaire fatigue and the ironic result that companies find themselves spending more time reporting and less time engaging in actual activities that reduce their footprint.

Brief remarks from Ernst Ligteringen, CEO, Global Reporting Initiative, commended the participation of the TMX at the launch, both in Toronto and Montreal. He stated that we need policy initiatives to encourage companies to make sustainability reporting part of the normal flow of information they release. The Shanghai Stock Exchange has been particularly active on this front, resulting in an increase in sustainability reporting initiatives among Chinese companies.

This was followed by highlights of the report (I’ll blog about this fully in the next post), and a brief Q and A and wrap up.

Monday, October 15, 2012

Three Cheers for Expensive Oil


October 15, 2012

Three Cheers for Expensive Oil


A version of this article appeared October 15, 2012, on page R4 in the U.S. edition of The Wall Street Journal, with the headline: Three Cheers for Expensive Oil.

Scarce oil may be one of the best things that could happen to agriculture.

To understand how that could be, consider two facts. First, agriculture uses a huge amount of energy—almost a fifth of the total consumption in the U.S. alone. And second, farming as we know it erodes fertile land far faster than nature can replace it.

Now, thanks to steep rises in oil prices, growers are adopting practices that use less fuel. As a tremendous side benefit, these methods not only fight erosion but they build soil and enrich it with nutrients crops need. In fact, I'd argue that for perhaps the first time in modern history, the short-term incentives for individual farmers are aligning with humanity's long-term interest in conserving the soil and its fertility. It's a potentially huge change that could reshape farming as we know it.

Here's a look at two of the most rapidly growing and effective practices already in use and another that may take off soon.

Ditching the Plow

The most popular fuel-reducing strategy involves a radically new way of planting seeds. Instead of breaking up the ground with a plow to plant seeds, no-till farming leaves the remains of last year's crop on the surface. Drills punch through this mat of vegetation and insert seeds into the ground.

Ditching the plow can cut fuel consumption by as much as half, bringing substantial savings. It also reduces the need for expensive fertilizer. Specialized machinery can inject fertilizer along with the seeds, putting just enough right where developing crops need it most.

Those savings help explain why farmers have been moving to no-till, and why even more will as the cost of oil rises. But the side benefit of this shift will be alleviating a problem that's been plaguing humanity for thousands of years.

Plowing removes plant cover, and bare fields erode 10 to 100 times faster than shielded soil, far faster than nature can make more. Overplowing has stripped whole regions bare and helped bring down past civilizations. Parts of Syria that were extensively farmed in Roman times are now bare, rocky slopes, for instance, and in southern Greece you can still find ancient agricultural tools scattered on hillsides that can no longer support cultivation.

Modern industrial societies aren't immune. Islands of unplowed prairie in pioneer cemeteries across the American heartland stand higher than the surrounding, eroded fields. On some corn fields in the Midwest, I've seen soil that was so degraded it looked like beach sand.

No-till farming can change all that. The practice can reduce erosion by more than 90%, and bring soil loss close to the pace of soil production. Over time, no-till can also increase soil organic matter and boost microbial activity that helps cycle nutrients from the soil into crops and back again. And not plowing helps reduce runoff, leaving more water in the ground where it's available to crops.

Feeding the Earth

The next strategy involves reducing reliance on fertilizers that don't enrich the soil and require a lot of oil to manufacture. Instead, low-cost organic matter like manure, crop stubble, garden trimmings and even household food scraps are used.

This certainly isn't a new idea. Centuries ago, the Dutch reclaimed land from the sea and enriched it with organic wastes. Long before then, farmers from China to Peru improved their soils by returning organic matter to their fields.

But in the U.S. and Europe, organic sources of fertilizer fell out of favor in the middle of the past century. There are a lot of reasons, some of which don't have anything to do with agricultural effectiveness. Big crop subsidies led many farmers to stop keeping livestock, which meant no more on-farm manure. And after World War II, former munitions factories started cranking out cheap fertilizer, which together with cheap oil made animal husbandry an expensive, labor-intensive anachronism.

Intensive chemical-fertilizer use also dramatically increased crop production, especially on already-degraded land, during the Green Revolution that has helped feed the world's rising population. But the cost of fertilizer is tied to the price of oil.

With the price of manufactured fertilizers rising, recycling organic matter is becoming more cost-effective. It also can build fertile soil. While chemical fertilizers won't disappear from agriculture anytime soon, rising prices will make it increasingly attractive to rebuild soil fertility using organic matter, particularly on the third of the world's cropland already degraded beyond use.

Spurred by high fertilizer prices, some farmers are bringing livestock back onto their land. One energetic couple in Missouri told me how they used chicken and goat manure along with intensive composting to turn an abandoned farm with degraded soil back into a productive and profitable working farm in under five years.

It's not just conventional farmers who are adopting these methods. Some cities are setting up community food gardens to help counter rising food prices. These urban farmers see recycling organic waste as the key to growing fresh, affordable produce in cities, where most of humanity now lives.

I saw this for myself when I visited one such garden built atop a reclaimed landfill near downtown Seattle. Looking at the oversize vegetables and digging my hands into rich fertile soil, I could hardly believe this farm was started less than a decade before with trucked-in, sterilized dirt. Regular additions of compost rapidly turned this small patch of land into a reliable source of fresh fruit and vegetables for residents and local food banks.

Putting Down Roots

The final alternative strategy isn't here yet. But when it arrives, it has the potential to change the way American farmers harvest the country's third-largest crop: wheat.

The Land Institute in Salina, Kan., is developing a range of perennial grains that would make annual plowing unnecessary. To my mind, the most revolutionary efforts involve a version of wheat that can be used in many of the same foods as the regular stuff.

Harvesting perennial wheat would mean fewer passes with the tractor and less oil burned. Meanwhile, the longer roots of perennial wheat reach deeper into the soil, tapping into more of the water it holds, increasing crop tolerance to drought. Longer roots also enhance nutrient uptake, further reducing the need for fertilizer.

There's a dramatic illustration of the idea hanging in a stairwell at the Land Institute: a life-size picture, close to two stories tall, of a perennial wheat plant and its Rapunzel-like roots. Next to it, a picture of a conventional wheat plant looks anemic by comparison, its roots reaching down just several steps.

Perennial wheat also has the potential to do long-term good. Harvesting the wheat would leave the plant and its root system in place, storing a lot of organic matter below ground, where it helps support the growth of the next crop. Minimally disturbed ground, reinforced by interlaced root systems, also means far less soil erosion.

To some, I'm sure that all this speculation about a revolution in farming sounds naively optimistic. But the movement toward these new methods is already under way, and the economic case for more farmers to adopt them will only get stronger as oil and fertilizer get pricier.

Let's hope so, for our descendants will need productive, fertile soil just as much as, if not more than, we do today. And what we now consider alternative methods of farming are some of the best ways to ensure that they'll have plenty of it.

Dr. Montgomery, a professor of geomorphology at the University of Washington in Seattle, is the author of "Dirt: The Erosion of Civilizations." He can be reached at

Saturday, October 13, 2012

Responsible investors expanding into emerging markets

Responsible investment allocations to emerging markets have increased to about US$161 billion, up from US$125 billion in 2009, a 30% rise, according to a survey of more than 40 global responsible investment houses by RI researcher EIRIS.

The US$161 billion figure represents about 7% of the survey respondents’ total assets under management. 

Around a quarter of investors indicated that they have increased their exposure to emerging markets in the aftermath of the financial crisis. “Arguably one of the positive effects of the crisis has been to convince an increasing number of mainstream investors of the value of taking factors such as climate change, environmental and social disclosure and corporate governance into account when making their investment decisions and exercising their ownership obligations,” the survey says.

The survey points to a “heightened materiality” of ESG issues in emerging markets.

“Whether it is deforestation of the Amazon in Brazil, the conflict between Vedanta and indigenous peoples in India or environmental pollution or labour issues in China it is clear that company ESG issues have a major impact on peoples’ lives in emerging markets,” the survey said. “For this reason there will be strong pressure from those affected, or likely to be affected, to mitigate the negative impacts of company operations. This is likely to feed into demands for better ESG disclosure and performance.”

The survey found that stock exchanges in Brazil and South Africa have leapfrogged their developed-world peers by creating advanced ESG listing requirements, sustainability indices and other products to drive disclosure.

"The term 'emerging markets' is increasingly outdated, especially when applied to huge markets like China - the second largest economy in the world. South Africa and Brazil are leading the way with ESG initiatives which developed markets could well learn from,” said Josh Brewer, report author and Head of Financials and Technology team at EIRIS.

Poor corporate ESG disclosure remains the number one challenge to investing in emerging markets, with more than 78% of surveyed investors mentioning it. Environmental issues, compliance with international norms and corporate governance remain core responsible investment concerns in emerging markets, just as they are in developed markets, the survey said.

Investors named ESG-themed funds as the most popular emerging markets investment strategy, followed closely by general socially responsible investment funds and then niche SRI funds.

China was identified as the most popular emerging market, followed by Brazil, Taiwan, Thailand and India. The survey also asked responsible investors which emerging market countries were making positive steps towards ESG disclosure; Brazil, South Africa and Turkey were identified as ESG leaders.

“The identification of Brazil and South Africa as leaders in terms of ESG is borne out by EIRIS research, with a majority of companies from these two countries consistently scoring better than their emerging market peers,” the survey said. “In fact, the top ranked companies from Brazil and South Africa often do as well, or better than, the best  performers from any markets, developed or emerging.”


Thursday, October 4, 2012

European SRI assets flourishing, study says, though mainly institutional

Sustainable and responsible investment is flourishing in Europe, according to a Eurosif study released this week.

“This is an incontrovertible truth whichever strategy one chooses to look at and whatever definition of SRI one ascribes to,” the study said. “During a timeframe when European assets under management increased by 3.8%, all of the sustainable and responsible strategies have outpaced this growth.”

For example, sustainability themed investments rose to 48,090 million euros in 2011, from 25,361 million in 2009, a 38% increase. Similarly, best in class/positive screen investments rose 46% to 283,206 million euros.

However, the impressive growth figures “mask some uncomfortable truths,” the study adds. “The European SRI market remains primarily institutional, and most of the growth in each of the individual strategies comes from a small number of institutional players investing in new mandates. The growth in each strategy is not from SRI assets outperforming the market, nor is it from an inflow of assets from the retail market, but a conversion of existing investments to one of the strategies.”

The proportion of SRI institutional assets has grown from 92% in 2009 to 94% in 2011.

Eurosif notes that this represents a challenge for the industry: Why are retail sales not keeping pace with institutional investors and professional asset managers who are pouring money into SRI? “Clearly, communication and clarification is needed to make retail investors see the same value in SRI that professional investors do.”