This blog will cover some news items related to Sustainability: Corporate Social Responsibility, Stewardship, Environmental management, etc.


Big investors want SRI research: European institutions to allocate part of brokers' fees to 'non-traditional' information

Big investors want SRI research: European institutions to allocate part of
brokers' fees to 'non-traditional' information
Financial Times, 18 October 2004 - Leading European institutional
investors are challenging the investment banking and broking industries to
provide research on socially responsible investment issues. They have
written to the main banks and brokers saying they will allocate up to 5
per cent of their commission budget to the issue.
The group, which consists of Universities Superannuation Scheme (USS),
PGGM, the Dutch pension fund, BNP Paribas Asset Management, RCM, part of
Allianz Dresdner Asset Management, and the boutique Generation Investment
Management, has dubbed its project the Enhanced Analytics Initiative. They
have called a meeting with the brokers and bankers for November 2.
The group feels that "non-traditional" issues of corporate performance on
issues such as overall strategy, corporate governance, human capital
management and environmental management have rarely been integrated into
mainstream analysis.
"We feel research on extra-financial areas such as governance and labour
relations is one of the keys to understanding the performance of a
business in the long term," says Philippe Lespinard, chief investment
officer of BNP Paribas Asset Management. "If we look five years ahead we
think these issues will eventually be part of mainstream financial
Roderick Munsters, chief investment officer at PGGM, argues that
"intangible issues should get more attention than they receive nowadays
because they play a crucial role in long-term performance and we are long
term investors."
One reason why research in this area has been limited is that many CSR
issues have a fairly long-term impact on corporate performance whereas
analysts have tended to focus on quarterly earnings numbers. This stems in
part from the traditional use of analysts as a means of stimulating
trading decisions to boost commission income. "SRI issues don't really
matter to brokers at all," says Neil Dwane, chief investment officer of
RCM (Europe). "What they want is for you to buy or sell."
USS says some brokers have done good work in this area, notably Antony
Ling, of Goldman Sachs, who published a note on the environmental and
social issues facing energy companies. "Those who do it do a good job,"
says Mr Lespinard. "It's just a very tiny research area."
A further issue is that the formula by which institutional investors
allocate their commission income has not really allowed for coverage of
these issues. Brokers have concluded that there is no money in it.
That is why the group, which manages a combined Euros 330bn of assets, has
set aside a specific portion of its commission budget for the purpose. But
they hope to recruit more members. "If the initiative stays at the current
scale, it will fail," says Mr Lespinard.
Mr Munsters thinks the broking community can be convinced. "If we can show
them that they can make a difference in performance they will listen and
if we can show them they can make money by providing research, they will
also listen."
And the fund managers also believe their clients think this issue is
important. "Commissions are client assets and we have a fiduciary duty to
explain to our clients that we are spending their money appropriately,"
says Mr Dwane.
Getting the corporate sector to co-operate will be important. Peter Moon,
chief investment officer of USS says: "We don't want to tell companies
what to do. What we want from the sell side is the kind of research that
permits us to challenge them about issues which are critical to how they
manage risks and opportunities."
But perhaps the key question is whether a focus on these issues will help
investment performance. Mr Moon is convinced it can. "We think this
project will improve returns because it will help us identify companies
that are good at managing extra-financial issues that are relevant, either
because of sector or size. This will help us allocate capital to companies
that are likely to be better long-term performers and we can make full use
of the long-term nature of our mandate."
But the group is not taking anything for granted. It plans to employ an
independent consultant to assess, every six months, how the project is
Copyright 2004 The Financial Times Limited

Report says consumption of resources outstripping planet's ability to cope

eport says consumption of resources outstripping planet's ability to cope

Thu Oct 21, 5:21 PM ET

GENEVA (AP) - Humanity's reliance on fossil fuels, the spread of cities,
the destruction of natural habitats for farmland and over-exploitation of
the oceans are destroying Earth's ability to sustain life, the
environmental group WWF warned in a new report Thursday.

The biggest consumers of nonrenewable natural resources are the United
Arab Emirates, the United States, Kuwait, Australia and Sweden, who leave
the biggest "ecological footprint," the World Wildlife Fund said in its
regular Living Planet Report. Canada is the eighth largest consumer.
Humans currently consume 20 per cent more natural resources than the Earth
can produce, the report said.
"We are spending nature's capital faster than it can regenerate," said WWF
chief Claude Martin, releasing the 40-page study. "We are running up an
ecological debt which we won't be able to pay off unless governments
restore the balance between our consumption of natural resources and the
Earth's ability to renew them."
Use of fossil fuels such as coal, gas and oil increased by almost 700 per
cent between 1961 and 2001, the study said.
Burning fossil fuels - in power plants and automobiles, for example -
releases carbon dioxide, which experts say contributes to global warming.
The planet is unable to keep pace and absorb the emissions, WWF said.
Populations of land, freshwater and marine species fell on average by 40
per cent between 1970 and 2000. The report cited urbanization, forest
clearance, pollution, overfishing and the introduction by humans of
nonnative animals, such as cats and rats, which often drive out indigenous
"The question is how the world's entire population can live with the
resources of one planet," said Jonathan Loh, one of the report's authors.
The study, WWF's fifth since 1998, examined the "ecological footprint" of
the planet's entire population.
Most of a person's footprint is caused by the space needed to absorb the
waste from energy consumption, including carbon dioxide. WWF also measured
the total area of cities, roads and other infrastructure and the space
required to produce food and fibre - for clothing, for example.
"We don't just live on local resources," so the footprint is not confined
to the country where consumers live, said Mathis Wacknagel, head of the
Global Footprint Network, which includes WWF.
For example, western demand for Asia's palm oil and South America's
soybeans has wrecked natural habitats in those regions, so the destruction
is considered part of the footprint of importing countries. The same
applies to Arab oil consumed in the United States.
The findings are similar to those in WWF's 2002 report, which covered the
period up to 1999. But the latest study contains more detailed data
stretching to 2001. It shows the situation has changed little in most
countries and is now more worrying in fast-growing China and India.
The world's 6.1 billion-strong population leaves a collective footprint of
13.5 billion hectares, or 2.2 hectares per person. To allow the Earth to
regenerate, the average should be no more than 1.8 hectares, said WWF.
The impact of an average North American is double that of a European, but
seven times that of the average Asian or African.
Residents of the UAE, who use air conditioning extensively, leave a
9.9-hectare footprint, two-thirds caused by fossil fuel use. The average
U.S. resident leaves a 9.5-hectare footprint, also largely from fuel.
Swedes leave a seven-hectare footprint, but most is caused by land use.
Like its Nordic neighbours, the country has won praise from campaigners
for cutting fossil fuel use.

The average Canadian leaves a 6.4-hectare footprint, the report said.
The study also warned of increasing pressure on the planet's resources
amid spiralling consumption in Asia.
Loh said governments, businesses and consumers should switch to
energy-efficient technology, such as solar power.
"We can consume energy in a way that's harmful or in a way that's
sustainable," he said. "The technologies are available to enable the
world's population to live within the capacity of one planet."
High oil prices may help focus their minds.
"But it's not a question of how much oil is left," he said. "The question
we should be asking is how much fossil fuel consumption the Earth can
sustain. The Earth has a limited capacity."
On the Net:
World Wildlife Fund


Retailer Abercrombie and Fitch to boycott Australian wool

Retailer Abercrombie and Fitch to boycott Australian wool
Leading fashion retailer Abercrombie and Fitch has said that it is to
boycott Australian wool after being targeted by the People for the Ethical
Treatment of Animals (PETA) and threatened with being the subject of
graphic newspaper advertisements.
The company said in a letter to the organisation: "Abercrombie & Fitch
considers the proper treatment of animals to be of critical concern, and
it is committed to that end. We shall not support the Australian Merino
wool market until both the practice of mulesing is ended and the live
exporting of Australian sheep ceases".

The move is the first response to an international boycott called by PETA
in response to what the organisation says are unacceptable practices in
sheep rearing in Australia. In particular, PETA is urging an end to live
sheep exports, and the cessation of the practice of "mulesing," which it
describes as "atrociously cruel mutilation in which saucer-size portions
of flesh are cut from conscious lambs? hindquarters".

Corporate Social Responsibility moves centre stage

Corporate Social Responsibility moves centre stage
Article by Mallen Baker
The question of the role of business in society has received a high
profile in recent months with a couple of films that have sought to shine
a critical spotlight on what many see has the dominant institution of our
Of these, Super Size Me, is the least interesting. The idea that it's news
that if you eat nothing but McDonald's burgers you will get fat is a fact
so mundane that it seems hardly worthy of comment, let alone making the
premise for a full picture. Of course, the picture still manages to make
some reasonable hits - particularly on the lack of real interest and
supervision in a number of school canteens.

Recent research in the UK suggests that parents believe that schools,
families and individuals are primarily responsible for influencing diet
choices, with less than 1 in 10 seeing the main focus as being companies.
So there is a real message here about how far those institutions do or
don't embrace that responsibility.

However, the more interesting work is 'The Corporation' - a film
documentary based on the book of the same name by Joel Bakan. This book is
a welcome relief from some of the desperate rhetoric of the anti-corporate
movement, and poses some frank and fundamental challenges to the movement
for corporate social responsibility.

The main contention of the book is that the company, as an institution, is
so fundamentally gripped by its requirement to maximise short term returns
for its shareholders that, even though companies may be run by people of
integrity and good conscience, it will always inevitably behave with a
disregard to the consequences on society.

It shows how leading business figures, such as John Browne of BP, have
been able to make real progress and to show real leadership in moving BP
towards the cause of sustainable development. It quotes Browne when he
says that following such a path is done primarily because it makes perfect
business sense. But then observes that when the business sense is not
there - such as in the issue of whether or not exploration should begin in
the Arctic, BP's position reverts to that which will make it the most

Corporate social responsibility, therefore, will not ever really play a
part in making businesses into good corporate citizens. If the corporation
was a person, it would be a psychopath. It lies, steals, even kills
without hesitation when it serves the interests of shareholders to do it.

There is a serious point here. There are, indeed, real limits imposed upon
businesses by the short term nature of the market. The fact that
shareholders enjoy the privileges of ownership without carrying any of the
responsibilities of ownership has produced one of the great anomalies of
our time. It is not as though shareholders even have the ability to shape
their own expectations - the law expects them to be served through
financial returns. It does not recognise that shareholders might want
companies to behave ethically, or to do something to build value in the
long term.

This isn't a point that is exclusive to issues of social responsibility.
The evidence from Jim Collins' 'Good to Great' research is that real,
sustainable value creation follows from steady, quiet investment over a
period of time rather than chasing every quarter's figures.

There is no doubt that we are reaching the end of progress in the
development of the contribution of corporate social responsibility unless
the fundamental issue about the role of business in society can be

In the mean time, the observation that CSR activity will only be
undertaken when there is a solid business case is not the issue. After
all, many of us have spent a lot of time in recent years arguing the
business case. The issue is more one of how more of the different business
leaders, making judgements based on their perception of the issues, and
their realistic options, can be encouraged to show the kind of leadership
and imagination Browne did in seeing how BP's enlightened self-interest
could help to reshape its industry and to address a serious global
problem. If all businesses imaginatively and with skill embraced only the
business case options available to them, it would make a huge impact.

For the rest, there is regulation. If society doesn't want to drill for
oil in Prudhoe Bay it can refuse to allow it.

The Corporation is a useful, well written and researched contribution to
the debate around the role of business in society. Although it is critical
of business, it does not demonise companies nor the people that lead them.
It seeks to illustrate some of the consequences of how businesses are
structured, and the dynamic that leads their decision making.

To be fair, it could do more to acknowledge the positive impact that the
economic activity of business has alongside the downsides. And the
features it attributes to business are not exclusive to that institution -
after all the similarly amoral nature of the nation state has been a
subject of discussion and historical analysis for a much longer period of

But CSR activists would do well to read this book and / or see the film.
It is a useful challenge to complacent thinking on both sides of the


Kyoto Protocol may offer Japan new opportunities

Kyoto Protocol may offer Japan new opportunities
The Daily Yomiuri, 13 October 2004 - Following the Russian Cabinet's
recent decision to ratify the Kyoto Protocol, the 1997 accord aimed at
preventing further changes in global warming is likely to come into effect
in spring.
Japan has been lukewarm about taking measures to prevent global warming,
but can no longer afford to put off a response. Reducing greenhouse gases
will be difficult, but it offers the country an opportunity to strengthen
economic cooperation with developing countries through the corporate
purchase of carbon dioxide emission credits.
This summer's abnormally hot weather and a spate of powerful typhoons
causing severe damage have highlighted the effects of global warming.
Nevertheless, Japan has been slow to take measures to cut emissions of CO2
and other greenhouse gases.
Under the Kyoto Protocol, which set emissions reduction targets, Japan is
required to cut its annual average greenhouse gas emissions by 6 percent
from its 1990 level between 2008 and 2012. In fact, Japan's emissions in
fiscal 2002 increased 7.6 percent from the 1990 level, so Japan will have
to cut 13.6 percent altogether. The nation now finds itself hard-pressed
to achieve the target.
Even so, with the imminent ratification of the long-delayed climate change
treaty, the government cannot afford to stand idly by. For too many years
it has followed reactive policies, responding to external pressure or
changes in the circumstances surrounding itself at home and overseas. The
government is not used to having a proactive foreign policy and leading
other countries. How then should Japan deal with the current challenge?
In such a situation, the industrial and business sectors tend to be
criticized. But viewed objectively, Japanese companies have made
considerable progress in their efforts to save energy and streamline their
operations--well aware that their survival depends on cost-cutting and
environmental preservation.
Japan's home electronic and technology industries have kept the economy's
engine ticking over while transferring factories to China and Southeast
Asia for cost-cutting purposes.
These savings have run their course, and companies are now shifting their
focus to domestic operations. This move could boost the country's energy
consumption, but this is a necessary evil given the need to maintain the
country's economic growth and industrial competitiveness.
Steel and other smokestack industries consume energy on a massive scale,
but if they were forced to continually relocate their factories overseas,
Japan's industrial sector would inevitably decline.
It is obvious Japanese factories should strive to reduce emissions. But if
their emission reduction targets are unrealistic, alternative measures
must be considered.
This is where economic measures acknowledged under the Kyoto Protocol,
such as emission trading, come into the picture. Among these "Kyoto
mechanisms," the clean development mechanism (CDM) is especially drawing
global attention. Under the CDM, developed countries implement
emission-reduction projects in developing countries--such as tree planting
and collection of methane gas--through financial and technical
cooperation, and in return receive emissions credits in proportion to the
reductions achieved through the projects. The advanced countries are
authorized to use the credits to achieve their emission reduction targets.
In April, the Japan Bank for International Cooperation concluded a
cooperation agreement with a Mexican government organization, under which
the JBIC will finance CDM-related projects in Mexico, and in return
Japanese companies will receive emissions credits.
The number of Japanese companies interested in CDM projects will
undoubtedly increase if organizations such as the JBIC promote deals and
support projects with developing countries. These projects can promote
sustainable development through environmental improvement and increasing
opportunities for technical transfers and investment.
According to a survey by the Japan Research Institute, Asia accounts for
50 percent of total CO2 emissions by developing countries. China produces
29 percent, compared with 12 percent by Latin America. Asian countries can
reduce CO2 emissions, and Japan and its companies can profit from this by
building cooperative and international relationships.
At a time when there are growing calls for stronger economic activity
between Japan and other Asian countries, CDM may create in the region a
future oriented toward economic cooperation, directly leading a higher
quality of life for Asians.
The nation and its companies must meet global expectations in reducing
emissions of global warming gases and achieving targets, but it is
important to remember that mere numerical adjustments will not do--a new
vision for working with other countries is needed.
Copyright 2004 The Yomiuri Shimbun

Carbon trading in Europe triples since Russian move on Kyoto

Carbon trading in Europe triples since Russian move on Kyoto
Financial Times, 12 October 2004 - The amount of carbon dioxide being
traded in Europe has almost tripled since Russia said it would ratify the
Kyoto protocol on climate change at the end of last month.
It underlines the opportunities for energy-efficient companies and brokers
in a new offshoot of the commodities market.
Russia's move boosted the embryonic carbon trading market because it
represented the strongest indication yet that the Kyoto protocol would be
The trade in carbon emissions arises from international attempts to reduce
the amounts of carbon released into the atmosphere by industry and so to
slow global warming.
Under these attempts, made chiefly by the European Union, industries such
as power utilities have the amount of carbon they can emit capped. If they
emit more, they can be fined. But if they do not use their full allowance,
they can sell the excess to other companies, which use it to extend
About 670,000 tonnes of carbon emissions were traded in the first week of
October, according to Point Carbon carbon consultancy, compared with the
record 1m tonnes in September. Early this year, fewer than 50,000 tonnes
were traded a month.
Henrik Hasselknippe, senior analyst at Point Carbon, said: "We're seeing
dramatic increases. This is impressive for a market that didn't exist a
short time ago."
A European carbon trading scheme will start in January, leading many
companies affected - chiefly in power generation, steel and cement
production, and pulp and paper - to begin trading emissions allowances now
in preparation, even though many allowances have still to be set.
Analysts say London's International Petroleum Exchange could become a
leading platform for trading in a market seen as offering great potential.
By the end of this year, companies will be able to trade in carbon
financial instruments at IPE after it made a deal with the European
Climate Exchange, a subsidiary of the Chicago Climate Exchange, which has
been trading in emissions for several years.
"These (carbon financial instruments) will be traded in just the same way
as natural gas and power contracts are traded now," said Mark Woodward,
project manager for the emissions project at the IPE.
Anthony Hobley of the Baker & McKenzie law firm, said London was well
positioned, partly because of the implementation of a Pounds 215m (Dollars
360m) voluntary system of emissions trading three years ago. He said:
"That experience has proved very useful.
"This is a huge business opportunity, and the expertise and the services
are here in London to take advantage of that."
London, however, will face competition from other European cities. The
European Energy Exchange in Leipzig is an obvious choice for some to
trade. Austria, Amsterdam and Norway have also been mooted as possible
As carbon emissions trading increases, the financial services industry is
preparing itself for a potentially lucrative market.
Louis Redshaw, head of environmental markets at Barclays Capital, said
carbon emissions trading was becoming an essential part of general
commodities trading. "CO impacts a large number of other commodities we
trade in," he said.
Other banks with significant interests in carbon emissions trading include
Fortis Bank and Dresdner Kleinwort Wasserstein.
Copyright 2004 The Financial Times Limited

BT signs world's biggest green energy contract

BT signs world's biggest green energy contract
The Express, 15 October 2004 - Telecoms giant BT yesterday made the
world's biggest purchase of "green" electricity in a deal that will see
virtually all its power needs supplied by environmentally friendly energy.
Under three-year contracts with British Gas and npower worth several
hundred million pounds, BT's depots, offices and 6,500 telephone exchanges
will be powered half from sustainable resources such as wave, solar, wind
and hydroelectric schemes. The other half will come from combined heat and
power plants that emit less carbon than conventional coal and gas
The deal will save emissions equivalent to the amount of carbon dioxide
produced by over 100,000 cars or 50,000 homes - the size of a small town.
It was welcomed by the Government which hopes other companies will follow
suit. Tony Blair has set a target of cutting a fifth of Britain's
greenhouse gas emissions over the 20 years from 1990 to 2010. He said:
"The actions of leading companies such as BT are living proof significant
cuts in greenhouse gas emissions need not come at the cost of economic
Paul Reynolds, chief executive of BT Wholesale, said: "Energy efficiency
is a key element of our purchasing strategy and sustainability is at the
heart of our business.
"We are aiming to increase energy efficiency and reduce emissions and we
believe we will achieve both aims with these new contracts."
Dr Steve Howard, chief executive of the Climate Group, which campaigns to
reduce greenhouse gas emissions, said: "BT's initiative is globally
significant and sends out a message the purchase of green electricity is
no longer a niche market. It has gone mainstream.
"BT is leading the way in showing good business, cost savings and
protecting the climate go hand in hand."
BT has been investing in energy-efficient plant and is looking at
renewable technology within its buildings. It said the contract was the
biggest purchase of green electricity anywhere in the world.
The group has reduced energy-related CO2 emissions by 80 per cent since
British Gas, owned by Centrica, and npower, owned by German group RWE,
offer "green" electricity at a premium.