Pos­i­tive and neg­a­tive screen­ing af­fects in­vest­ment as a bat­tle rages over which com­pa­nies are sus­tain­able’, writes Robin Bromby

The Weekend Australian - Review - - Investments -

IT pumps oil, digs coal, ex­pends vast en­ergy re­sources on dig­ging cop­per and many other met­als and ships vast ton­nages of iron ore across the oceans us­ing en­ergy- rav­en­ous bulk tankers, yet BHP Bil­li­ton — de­spite its vast car­bon foot­print — came out win­ner in Aus­tralia’s sus­tain­abil­ity re­port­ing awards last month.

Run by the Aus­tralian and New Zealand chap­ter of the As­so­ci­a­tion of Char­tered Cer­ti­fied Ac­coun­tants ( ACCA), and pre­sented by Prime Min­is­ter Kevin Rudd, the awards were in recog­ni­tion of com­pa­nies that

re­port and dis­close en­vi­ron­men­tal, so­cial and full sus­tain­abil­ity in­for­ma­tion’’.

The award was recog­nis­ing that sus­tain­able in­vest­ment does not just in­volve com­pa­nies that, say, make so­lar wa­ter heaters or re­cy­cle waste ma­te­ri­als. In­stead, it is show­ing that even com­pa­nies that en­gage in what some would call dirty’’ sec­tors can make an ef­fort to limit their en­vi­ron­men­tal and so­cial im­pacts.

One of the crit­i­cisms heard about sus­tain­abil­ity re­port­ing is that it is of­ten just a bit of win­dow- dress­ing by com­pa­nies, some­thing put to­gether by the mar­ket­ing de­part­ment that pro­vides plenty of gloss and wellmean­ing state­ments but not all that much more. There is even a word for this: green­wash­ing.

And then there are those com­pa­nies that do not even bother with re­ports, and there are quite a num­ber in the S& P/ ASX 200 in­dex — the big end of town on the Aus­tralian Se­cu­ri­ties Ex­change — that have yet to take up the chal­lenge.

No one could ac­cuse BHP of mak­ing the min­i­mal ef­fort. Its 2007 re­port, the one that was recog­nised in May, ran to more than 300 pages.

With the alu­minium sec­tor op­er­a­tions in south­ern Africa, for ex­am­ple, the com­pany was in­volved in HIV/ AIDS ed­u­ca­tion and anti- malar­ial pro­grams in Mozam­bique ( part of the $ US103 mil­lion BHP spent dur­ing the year on com­mu­nity pro­grams), was look­ing at ways to cut en­ergy use in smelters, was mon­i­tor­ing air qual­ity and said it was con­scious of the need to re­cy­cle wa­ter in a re­gion that fre­quently suf­fered drought.

Of course, the re­port is based on self­mon­i­tor­ing and the fact re­mains that BHP — and all other com­pa­nies that pro­duce and con­sume en­ergy — are go­ing to be pol­luters to some ex­tent, and will have an im­pact on the so­cial en­vi­ron­men­tal.

But we can­not live with­out oil, steel and coal. At least, not yet. All we can do — all th­ese com­pa­nies can do — is to con­trol their en­vi­ron­men­tal im­pact, as BHP says it is do­ing. Harm min­imi­sa­tion, in other words.

The other win­ners of the Aus­tralian awards were not, at first blush, ob­vi­ously en­vi­ron­men­tally friendly com­pa­nies. They in­cluded Bo­ral, Fuji Xerox, Voda­fone New Zealand and ANZ.

And not ev­ery­one was im­pressed by the ACCA’s de­ci­sion.

Aus­tralian Eth­i­cal In­vest­ment, which man- ages $ 550 mil­lion, re­acted to the award by say­ing it would still not lift its in­vest­ment ban on BHP Bil­li­ton.

In its latest news­let­ter, AEI pro­filed the sort of sus­tain­able com­pa­nies it sup­ports.

One was EDF En­er­gies Nou­velles, a lead­ing French re­new­able en­ergy gen­er­a­tion com­pany. Us­ing wind, hy­dro, so­lar and biomass, EDF now op­er­ates in 10 coun­tries and is part of a con­sor­tium build­ing one of Europe’s largest off­shore wind farms. An­other to get the nod was Pe­tratherm, the Aus­tralian geo­ther­mal de­vel­oper at work in South Aus­tralia and Spain. The third com­pany was Her­man Miller, a US furniture man­u­fac­turer that has won awards for re­cy­cling.

Just what sus­tain­able in­vest­ment is can be hard to pin down. Views and def­i­ni­tions vary on what is now known as SRI — so­cially re­spon­si­ble in­vest­ing.

As one Bri­tish news­pa­per pointed out when re­port­ing on that coun­try’s in­au­gu­ral na­tional eth­i­cal in­vest­ment week in early June, you could go back as far as the Quak­ers who for­bade their fol­low­ers in­vest­ing in the slave trade.

Twenty years ago, eth­i­cal in­vest­ing was mainly avoid­ing shares in com­pa­nies that pro­duced to­bacco, al­co­hol or ex­ploita­tive prod­ucts. Vic­tor Biv­ell, ed­i­tor of Aus­tralia’s

mag­a­zine, writ­ing in this news­pa­per a few weeks ago, said that sus­tain­able in­vest­ing in­cluded not only en­vi­ron­men­tal sen­si­tiv­ity but also a much wider range of ac­tiv­i­ties un­der­taken by com­pa­nies.

But you could also ar­gue that sus­tain­able’’ im­plies just that: in other words, op­er­a­tions by com­pa­nies that are ad­dressed at en­sur­ing the sus­tain­abil­ity of the world’s re­sources and en­vi­ron­ment. Hence, the BHP ex­am­ple: the baux­ite that it uses is not re­place­able, but the en­ergy it at­tempts to save in pro­cess­ing that min­eral does serve the wider pur­pose of min­imis­ing dam­age to the world’s re­sources. Re­cy­cling wa­ter used in such plants would also come un­der that head­ing.

On the in­ter­na­tional scene, the World Eco­nomic Fo­rum held in Davos each year in­cludes the un­veil­ing of the list of the world’s most sus­tain­able cor­po­ra­tions based on sev­eral fac­tors, one of the key ones be­ing en­vi­ron­men­tal im­pact. This year the Aus­tralian in­clu­sions in the list were ANZ, Bab­cock and Brown, In­sur­ance Group Aus­tralia, Rio Tinto and West­pac Bank­ing Corp.

Again, not ob­vi­ous en­vi­ron­men­tal can­di­dates.

Nor was NSK Corp on the same list, a com­pany that makes bear­ings and other au­to­mo­tive prod­ucts. But the com­pany says it has re­fined its man­u­fac­tur­ing and taken sig­nif­i­cant steps to, among other things, re­duce scrap waste, lower CO emis­sions, in­crease en­ergy ef­fi­ciency and cut down on the use of harm­ful chem­i­cals. In its 2007 cor­po­rate so­cial re­spon­si­bil­ity re­port, the com­pany out­lines goals for 2010. They in­clude achiev­ing a waste- re­cy­cling rate of 98 per cent or greater, re­duc­ing the num­ber of liq­uid coolants with chlo­rine- based ad­di­tives by 85 per cent and re­duc­ing CO emis­sions per pro­duc­tion unit an­nu­ally by 1 per cent.

Prop­erty de­vel­op­ment is an­other not- soob­vi­ous ex­am­ple of where sus­tain­able in­vest­ment could play a part.

The United Na­tions En­vi­ron­men­tal Pro­gram is­sued a re­port mid- June urg­ing in­sti­tu­tional in­vestors world- wide to em­brace UN guide­lines when putting money into prop­erty de­vel­op­ment com­pa­nies.

The re­port pointed out that build­ings were ei­ther di­rectly or in­di­rectly re­spon­si­ble for about half of the world’s car­bon diox­ide emis­sions, both from their op­er­a­tion and the en­ergy con­sumed by peo­ple trav­el­ling be­tween them ( as in be­tween home and work). It ex­pressed con­cern that the prop­erty in­dus­try was mov­ing too slowly to ad­dress its en­vi­ron­men­tal foot­print. It wants in­vestors, when con­sid­er­ing back­ing prop­erty schemes, to take into ac­count such is­sues as en­ergy con­ser­va­tion, wa­ter con­ser­va­tion, re­cy­cling, in­vest­ing in ur­ban re­gen­er­a­tion, pre­serv­ing parks and open space, tree plant­ing, green build­ings and green power pur­chas­ing.

In­vest­ment banks are also get­ting in on the scene as part of their sus­tain­able in­vest­ment ef­forts. Credit Suisse led a $ US130 mil­lion ini­tial pub­lic of­fer­ing for a so­lar en­ergy

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