Comment by Yohan Hill. From the June/July 2010 edition of Corporate Citizenship Briefing, Issue 112.
In terms of “news” stories, it seems that the record is stuck. There are reports of ongoing regulatory uncertainty around climate change, both globally and regionally (in the US, the EU and China), and not much action being taken to address the ecological deficits created by the world’s current consumption patterns. Recent estimates from WWF indicate we are over-consuming and creating an annual deficit of roughly 40% of the planet’s resources. Despite all this, the articles in this section of Briefing suggest that the impetus from investors to internalise climate change and other sustainability issues into their decision-making might be set to rise.
Rather than taking cues from broadly weak environmental policy signals, investors appear to be responding to the realities of greater resource scarcity; a booming global and increasingly urban population; and broadly robust scientific consensus that current growth patterns are unsustainable. Far-sighted investors might also be anticipating more stringent regional and international regulatory constraints in the long run.
Whatever the rationale, and notwithstanding the moral arguments, it is not just the ethical few that are taking note; mainstream investors are active as well. The recent survey from the Institutional Investors Group on Climate Change is a case in point. It reveals a dramatic increase in the proportion of institutional investors who consider firms’ climate change policies when making investment decisions. Google Finance’s recent inclusion of carbon disclosure ratings into the “key stats and ratios” section of company profiles is another. The business case for taking action on climate change and other sustainability issues appears to have been made, but what about the wider corporate responsibility agenda? Will the fervour generated by the sustainable business agenda detract from the pursuit of a more ethical and responsible business agenda, incorporating wider social concerns not directly linked to the bottom line? Let’s hope not. Long live the responsible investor.
Yohan is a senior consultant at Corporate Citizenship. Email him at Yohan.hill@corproate-citizenship.com to talk climate change, environmental strategy and emissions.
UK ethical investment hits record £9.5 billion
Latest figures from EIRIS, the London based non-profit sustainable investment specialists, show that the amount of money invested in Britain’s green and ethical retail funds (those open to the general public) has reached £9.5 billion. This represents approximately three quarters of a million investors, up from around 200,000 in 1999 when around £2.4 billion was invested. UK ethical retail funds have expand considerably in that time, with almost 100 now available where a decade ago there were only a couple of dozen. Growing consumer interest in ethical finance is backed up by the findings of EIRIS’ recent Ipsos/MORI survey national consumer which explored post credit-crunch attitudes to ethical finance and found that 44% of the British public are interested in finding out about the ethical credentials of the next financial product or service that they buy, with three-quarters of those likely to take this into consideration when next buying a financial product or service.
Index provider the FTSE Group launched two products on 23 June that weight London-listed companies according to carbon risk, aiming to draw pension funds concerned at exposure to proliferating climate policies. FTSE Group launched the indexes with ENDS Carbon and the Carbon Disclosure Project (CDP), which provide carbon emissions data for listed companies worldwide. The new indexes are based on the FTSE All-Share index, which tracks a basket of 630 companies listed on the London Stock Exchange, and the FTSE 350 index. Each new index has the same overall sector weighting as the standard counterparts, but within each sector judges stocks according to how environmental legislation impacts them.
Climate change risks worth €1.2 trillion in top companies
A report from EIRIS [24 June] shows that leading European companies representing €1.2 trillion by market capitalisation are failing to address the various climate change risks they face. The ‘2010 European Climate Change Tracker’ focuses on the activities of 300 companies listed on the FTSE Eurofirst Index, analysing the extent of climate change impacts and the quality of their responses. Over a third (41%) of the companies were identified as having a significant climate change impact, with approximately two thirds (64%) of these failing to adequately manage the risks they face. High impact industries like oil & gas and electricity contain the lowest proportion of companies with long-term targets in place. Investors are urged to exert their influence and engage for long-term targets, identify and respond to portfolio risk, encourage companies to consider product strategies and their product impact on climate change and increase their investment in climate change solutions.
A survey from the Institutional Investors Group in Climate Change (IIGCC) revealed that the proportion of institutional investors who consider firms’ climate change policies when making investment decisions has more than doubled in the past two years. From the 26 leading financial firms included in the IIGCC survey, 60% of asset owners asked climate change-related questions when meeting potential investment managers in 2009, compared to just 30% in 2007. Moreover, 70% of firms surveyed commissioned or supported climate change research, compared to 45% in 2008. The report suggests that climate change related risks and opportunities are increasingly informing investment decisions, with a growing recognition that dealing with climate issues represents good business, and that reputational risks are getting worse.
Contact: Institutional Investors Group in Climate Change www.iigcc.org
New Companies in Global Sustainability 50 Index
The NASDAQ OMX CRD Global Sustainability 50 Index announced the results of the semi-annual re-ranking of the Index at the end of May. The Index is made up of companies, listed on a major US stock exchange, that have taken a leadership role in disclosing their carbon footprint, energy usage, water consumption, hazardous and non-hazardous waste, employee safety, workforce diversity, management composition and community investing. Twelve securities were added to the Index, including the Dow Chemical Company, Infosys Technologies and Motorola. Securities removed included BP, BT Group and Royal Dutch Shell.
The Co-operative Bank turns away “unethical” business
The Co-operative Bank remains committed to its customers’ ethical stance, and last year turned away almost £100 million of business for ethical reasons. Its annual ethical audit report published 1 June details the business foregone by the Bank for ethical and environmental reasons. Opportunities turned away included finance for missile equipment to go to oppressive regimes, banking services for a manufacturer that continued to test on animals and lending for the development of two new UK coal mining operations. At the same time, the bank increased its support for UK businesses, particularly those with a distinct ethical, environmental or co-operative purpose, by £800 million, taking its total lending to £8.3 billion. The Bank revised its Ethical Policy in 2009 after a record 80,000 customers responded to a detailed questionnaire inviting account holders to express their views on topics as wide ranging as human rights, international development, ecology and animal welfare.
Contact: The Co-operative Financial Services www.cfs.co.uk
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