Enbridge Removed from Jantzi Social Index

Citing the company’s poor environmental performance, Sustainalytics has removed Enbridge Inc. from the Jantzi Social Index, a socially screened stock index consisting of 60 Canadian companies that pass a set of broadly based environmental, social, and governance rating criteria.

“In the summer of 2012, the company experienced a spill in Wisconsin and at a remote Alberta field, each of which exceeded 1,000 barrels,” Sustainalytics said in a release. “This coincides with the recent conclusion of an investigation by the National Transportation and Safety Board into a 20,082 barrel leak at its Lakehead pipeline system in Michigan in 2010. “

Despite strong sustainability commitments and recent capital investment in pipeline integrity management programs, the company has failed to prevent significant releases and its spill record is concerning to investors, Sustainalytics added.

It’s another setback for Enbridge, which last month was removed from the IA Clarington Inhance SRI funds by Vancity. That decision was based on the U.S. National Transportation Safety Board report on the Enbridge 2010 pipeline spill in Michigan.

Vancity Investment Management is a sub-advisor on three SRI funds for IA Clarington and determines which holdings are contained within the funds, based on ESG criteria. Two of these funds previously contained Enbridge holdings.

Extreme weather events drive climate change awareness: Carbon Disclosure Project

Increasing incidents of extreme weather events which disrupted business operations and supply chains around the world have pushed climate change up the boardroom agenda, according to the Carbon Disclosure Project’s Global 500 Climate Change report released today.

“With the hottest U.S. summer on record, fires in Russia and flooding in the U.K., Japan and Thailand, among other events, 81% of reporting companies now identify physical risk from climate change, with 37% perceiving these risks as a real and present danger, up from 10% in 2010,” CDP said in a press release..

“Extreme weather events are causing significant financial damage to markets,” says Paul Simpson, CEO of the Carbon Disclosure Project. “Investors therefore expect corporations to think more about climate resilience. There are still leaders and laggards but the economic driver for action is growing, as is the number of investors requesting emissions data. Governments seeking to build strong economies should take note.”

The report notes that 2012 has seen a ten percentage point increase year-on-year in companies integrating climate change into their business strategies (2012: 78%, 2011: 68%), contributing to a 13.8% reduction in reported corporate greenhouse gas emissions, the report found.

Malcolm Preston, global lead, sustainability and climate change, PwC says: “Even with progress year-on-year, the reality is the level of corporate and national ambition on emissions reduction is nowhere near what is required. The new ‘normal’ for businesses is a period of high uncertainty, subdued growth and volatile commodity prices. If the regulatory certainty that tips significant long term investment decisions doesn’t come soon, businesses’ ability to plan and act, particularly around energy, supply chain and risk could be anything but ‘normal’.”

The CDP report, co-written by professional services firm PwC on behalf of 655 institutional investors representing $78 trillion in assets, provides an annual update on greenhouse gas emissions data and climate change strategies at the world’s largest public corporations.

The report features emissions data from 379 companies and rates them according to their climate change transparency. The best disclosers enter CDP’s Carbon Disclosure Leadership Index. This year, two companies achieved the maximum carbon disclosures scores of 100: German pharmaceuticals company Bayer and the consumer goods giant Nestle of Switzerland. While U.S. companies dominate the leadership index, German companies are proportionally over-represented, as are companies from Finland, Spain and the Netherlands.

Royal Bank of Canada was listed as one of the world’s largest non-responders to CDP’s request for emissions data, along with other big names such as Apple Inc., Berkshire Hathaway, Caterpillar Inc. and Amazon.com.

SIBs: the newest arrow in the SRI quiver

Social Finance in the UK, an SIB pioneer, defines ‘Social Impact Bond’ as “a financial vehicle that brings in non-government investment to pay for services which, if successful, deliver both social value and public sector cost savings. Investors receive a financial return from a proportion of the cost savings delivered.”

In an SIPC webinar today, Christian Novak of Frontier Market Advisors Inc. provided an introduction to Social Impact Bonds. He began by outlining some benefits of SIBs - risk is transferred from the government to private investors, they ensure that outcomes are the primary focus of the program and can maximize use of government funds.

He then provided two examples of SIBs, Peterborough Prison in the UK, and Rikers Island jail in New York City. The Peterborough SIB was launched in 2010 and has a goal of reducing recidivism rates by 7.5% or more compared to a control group of short sentence prisoners in the UK. It is a multi-stakeholder initiative with 17 investors and at least 3 social service organizations involved.

In Rikers Island, the sole investor is Goldman Sachs (!!?!), and once again the goal is to reduce recidivism, but here by 10% or more. In a twist, although Goldman Sachs is putting up 9.6 million dollars, it only stands to lose 25% of it (2.4 million) if outcomes are not reached, as Mayor Michael Bloomberg’s personal foundation is providing a guarantee for the balance. If SIBs are a ‘merger of profit and social progress’ as described by Mr. Novak, we can see whose interest is profit and whose is social progress…

Some of the risks of SIBs enumerated by Mr. Novak are performance risks, structural risk, government risk and reputational risk, particularly as SIBS are very visible transactions and the ‘financialization’ of the social sector remains controversial. Challenges facing SIBs are creating easily and accurately measurable metrics, linking metrics to measurable savings, the development and selection of intermediaries, establishing appropriate legal and regulatory frameworks, broadening investor participation and perhaps eventually creating a liquid secondary market for SIBs.


Read Deloitte’s report Paying for outcomes Solving complex societal issues through Social Impact Bonds

Check out social finance for more about what’s happening in Canada.