Reasons to be cheerful

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                                         The world’s economies are                             Likewise, this year’s Small Company
                                         either in recession or rapidly                   of the Year, Blackmores, has embedded
                                                                                          sustainability right across its operations
                                         following an unprecedented                       (p.29). The brand has a rich history in
                                                                                          sustainability stretching back to its founder,
                                                                                          Maurice Blackmore, who said: “If man
                                         markets. US and European
                                                                                          persists in ignoring or defying the recycling
                                                                                          laws of nature, he will not avoid pollution,
                                         have been bailed out at a cost
                                                                                          malnutrition or starvation.”
                                         of trillions and as we head into                      Thirdly, there are moves afoot to

  Reasons to be                          for the big American auto
                                                                                          deal with the unethical behavior that has
                                                                                          troubled investors from here to New York,
                                         manufacturers are looking
  cheerful                               increasingly grim. Yet there
                                         are some genuine reasons for
                                                                                          some of which we examined in issue 81
                                                                                          (Oct/Nov). Professor Steve Keen, our keynote
                                                                                          speaker at this year’s awards, stridently calls
                                                                                          for radical reforms (p.21). Let his opponents
  It’s been a whole                      a close.                                         – and there were quite a few after his
  year since I took                           Firstly, US President-elect Barack Obama    gloomy take on the global economy at the
                                                                                          awards luncheon in Sydney – swallow their
                                         takes power in less than a month, bringing
  the reins at Ethical                   a US$150 billion, 10-year investment in          own criticism, for his analysis of our financial
                                         clean-energy technology. This means fully-       systems as a ‘Ponzi’ investment scheme was
  Investor. What                         integrated sustainable business practices        being acted out before our very eyes in New
                                         are likely to become the norm, not the           York as we went to press. Former chairman
  better to take                         exception.                                       of the NASDAQ stock market, Bernard
                                              Secondly, one might have thought that       Madoff, was charged by federal prosecutors
  stock of progress                      with Australia teetering on the brink of         with securities fraud after perpetrating
                                         recession, there would be little to report in
  in responsible                         the way of best practice at our 8th Australian
                                                                                          his very own ‘Ponzi’ scheme that allegedly
                                                                                          swindled investors out of US$50 billion.
                                         Sustainability Awards, held in Sydney earlier
  business and                           this month. But as can be seen from the
                                                                                               Although a little more sanguine than
                                                                                          Professor Keen, we enter the New Year
                                         diversity of the winners (p.12), all have
  investment?                            rigorous, innovative sustainability programs
                                                                                          feeling it will be the smart businesses and
                                                                                          investors (and indeed politicians) that
                                         in place which are paying real financial and
  Editorial by OLIVER WAGG                                                                will pull through. It’s our firm view that
                                         non-financial dividends.
                                              Are we going to see a meltdown in           companies and investors must continue
                                         sustainability initiatives as companies          to innovate on sustainability in order to
                                         across the board cut costs (and jobs)? We        succeed, not be tempted to pull back.
                                         hope the answer is an unequivocal ‘no’. Our           It is refreshing to hear from companies
                                         preparations for the awards, the pre-awards      such as the sustainability awards co-lead
                                         workshop and subsequent profiling of             sponsor GPT, whose Caroline Noller in her
                                         the winners in this edition have provided        editorial (p.13) asks if current efforts are
                                         a major reason to be cheerful. For what          enough to save the world; and, elsewhere,
                                         has become increasingly clear during the         to see the myriad of corporate responsibility
                                         past year is those companies that really get     initiatives currently in operation throughout
                                         sustainability are those which have been         our award-winners’ businesses.
                                         better-equipped to weather the storm, and,            But in our day-to-day dealings with
                                         more importantly, retain a much brighter         businesses and investors, we can’t quite
                                         outlook as they look into a very murky           get over the feeling that caution continues
                                         future.                                          to prevail. Opportunities do abound - as
                                              Take Corporate Express Australia, the       Energetics’ Tony Cooper notes (p.26). He
                                         2008 Sustainable Company of the Year
                                                                                          says we are on the brink of a 40 to 50-year
                                         (p.14). Its work on ethical sourcing struck
                                                                                          global ‘green revolution’, which will change
                                         the judges as an exceptional example of
                                                                                          the world’s economies with the same
                                         sustainability in action, while initiatives
                                                                                          dramatic effect as the agrarian and industrial
                                         to reduce the environmental impact of its
                                                                                          revolutions before it. Perhaps the winners
                                         operation through state-of-the-art, energy
                                         efficient buildings mean it can demonstrate      of next year’s sustainability awards will be
                                         a compelling business case for corporate         companies that are active players in that
                                         responsibility initiatives.                      revolution. ei

ethicalinvestor december 2008 issue 82                                                                                                  5
welcomed at this critical point for climate
policy, as Australia prepares to announce
its 2020 emissions reduction target and
international climate negotiations enter their
final turn in Poznan,” Eren added. Meeting
these targets would reduce annual emissions
by over 70,000 tonnes of CO2e (carbon dioxide
equivalent) from base buildings alone, or
the emissions equivalent of permanently
removing over 15,500 cars from Australia’s

    The number of the top 100 Australian
companies publishing a sustainability report
has doubled to 68 since 2005, KPMG said in a
global survey of reporting. In the US, 78 per
cent report on sustainability and in the UK, 99
per cent.
    Globally, disclosure on corporate
economic, environmental and social
performance has become the norm among
larger companies, with over 80 per cent of
Global Fortune 250 companies disclosing
their performance.
                                                  Brookfield’s refurbished building at 2-12 Macquarie St, Parramatta (known as Jessie Street)
Uptake of sustainability reporting
among the largest 100 companies in                sustainability reporting was 45 per cent with
the 22 countries surveyed by KPMG                 wide variation between countries.
                                                      The Global Reporting Initiative (GRI)
  Australia                       68              welcomed the results. “These are testing
  Brazil                          86              times for many companies globally,” said Ernst                                 Award sponsored by CSL
  Canada                          80              Ligteringen, CEO. “While companies need                               retail, education and other leaning-based
  Czech Republic                  33              to cope with the short-term effects of the                            community infrastructure; a diversity of
  Denmark                         40              financial crisis, long-term success requires                          housing affordability options; and a proximate
  Finland                         65              them to also address the now irreversible                             relationship between the town centre,
  France                          83              realities of global warming, resources scarcity,                      recreational and community facilities.
  Hungary                         44              and demographic change.”                                                   The company also has a long-established
  Italy                           65                  Report author Wim Bartels, global                                 corporate foundation that now donates
  Japan                           99              head of KPMG’s sustainability services, said:                         almost $20 million a year to charities.
  Mexico                          27              “Credible reporting needs to be based on                                   Announcing the award at the
  The Netherlands                 79              credible standards. We value the increase in                          luncheon in Sydney earlier this month,
  Portugal                        61              reports that are based on the GRI guidelines                          CSL’s director of corporate responsibility
  Romania                         24              as this contributes to the comparability and                          Sharon McHale, said in looking for a stand-out
  South Africa                    86              professionalism of corporate responsibility                           as a good corporate citizen, we should start
                                                  reporting.”                                                           at first base: “Does the company go beyond
  South Korea                     54
  Spain                           67                                                                                    cheque-book philanthropy? Tick, 20 years
                                                  LEND LEASE WINS SPECIAL                                               ago!
  Sweden                          59*
                                                  AWARD FOR SOCIAL-                                                          “Does the company engage employees in
  Switzerland                     60
                                                  COMMUNITY RELATIONS                                                   the community support process?” she asked.
  United Kingdom                  99
                                                       Lend Lease (ASX: LLB) won                                        “Tick. With perhaps Australians oldest largest
  United States                   78
                                                  this year’s Special Award for Social                                  most established employee volunteering day.”
 *Only 70 companies in Sweden were                and Community Relations, proudly                                           But that’s not enough, McHale added.
 analyzed compared to 100 in each of the          sponsored by CSL (ASX: CSL), for its role                             “This corporate citizen needs to be
 other countries.                                 in the new Rouse Hill town centre, a joint                            community focused in its core business
                                                  venture with GPT Group (ASX: GPT).                                    activity.”
                                                       The judges said Lend Lease shows                                      “Housing estate developments have not
    The KPMG survey also looked at the
                                                  leadership in presenting a community-ready,                           been kind to our sense of community - they
largest hundred companies by revenue in 22
                                                  integrated town development incorporating                             have helped to deride terms like suburbia and
countries and found that overall uptake of
                                                  features such as early investment in                                  the nuclear family. But the New Rouse Hill is

ethicalinvestor december 2008 issue 82                                                                                                                              9
increase, by 9 per cent in 2007 from 8 per       of the global downturn are felt by the                              Sydney to distribute cheques totalling $1.32
cent in 2006. With the prolonged benefit from    Australian economy as a whole,” the report                          million, the 2008 charitable allocation.
the extra tsunami funds that were invested,      said.                                                                   The company shareholders have donated
in conjunction with a strong share market,                                                                           $5.49 million, or 5 per cent of pre-tax
investments also continued to grow (up 10        HUNTER HALL CHARITABLE                                              profits, to charities or charitable purposes
per cent). Such a steady stream of support       DONATIONS TOTAL $5.49M TO                                           that support social, environmental or
from all sources, together with an expectation   DATE                                                                humanitarian causes since listing in February
that this support would be maintained,               Hunter Hall International Limited on 28                         2001 through the Hunter Hall Shareholder
allowed charities to continue to spend almost    November hosted its annual charity event                            Nominated Charitable Donations Scheme.
all (93 per cent) of their 2007 income in the    at Vaucluse House in the eastern suburbs of                             Hunter Hall executive chairman Peter
same financial year.
     It is also encouraging that there was
a considerable increase in the number of
organisations disclosing their fundraising
costs experienced (up to 54 per cent from 44
per cent).
     It appears that the increased scrutiny
of charities in 2006, driven by the tsunami-
related surge in donations in 2005, has
prompted an encouraging renewal in the
sector’s response to requests for increased
transparency and accountability from donors
and the public, Givewell said.
     “Hopefully the sector’s willingness to
show donors that they are efficient, effective
and accountable will only help them in the
tough times that lie ahead, when they will
undoubtedly need to work harder to obtain
                                                 David Buckland (Hunter Hall), Suzanne Daniel (Hunter Hall), Captain Paul Watson (Sea Shepherd Conservation Society) Peter Hall
the same amounts of money, as the impacts        (Hunter Hall), Professor Gordon Parker (Black Dog Institute)

ethicalinvestor december 2008 issue 82                                                                                                                                            11
Hall said now, more than ever, is the time           very stuff of life”.                                     Each year HHL shareholders nominate a
for individuals, charities and other non-                 Also speaking at the afternoon tea             recipient for their portion of the donations
government bodies to take action to solve the        were representatives of recipient charities,        from a selected charities list, shareholders
problems of the world. He was scathing about         Professor Gordon Parker, executive director,        with in excess of 50,000 (HHL) shares may
the “mountain of indifference” to the world’s        Black Dog Institute and Captain Paul Watson         nominate their own preferred Australian
ecological and humanitarian crises. “The
                                                     of the Sea Shepherd Conservation Society            registered charity.
powers that be do not know what they are
                                                     (profiled in Ethical Investor 81).                       Hunter Hall is one of Australia’s largest
doing. The world is not in safe hands ,” he said.
                                                          Also included on the list of 31 charities      ethical fund managers with just over $1.6
     Commenting on the relative priority
given to the world’s environmental and social        this year are Amnesty International, Australian     billion of funds under management. The
crisis, Hall said, “Trillions have been spent on     Conservation Foundation, Australian Cancer          company is committed to the concept of
financial bailouts but our governments are           Research Foundation and Free the Bears Fund         responsible investing and applies an Ethical
spending next to nothing on protecting the           Inc.                                                Investment Policy to all its products. ei

                                                   The Australian Sustainability Awards recognise outstanding achievement in 2008 by
                                               Australian Stock Exchange-listed companies in a range of areas of corporate sustainability.
                                                   The six company awards this year were: Sustainable Company of the Year (ASX 200
                                               companies); Sustainable Small Company of the Year (ex-ASX 200), plus four special awards for
                                               achievement in the areas of Environment; Labour Relations; Social-Community Relations and
                                               Corporate Governance.
                                                   The nominations were reviewed by an expert judging panel: Terence Jeyaretnam, director
                                               of Net Balance Management Group and chair, College of Environmental Engineers, Engineers
                                               Australia; Professor Charles Sampford, foundation professor of law and research professor in
                                               ethics, Griffith University; Ulrike Schuermann, director of Momentum International Partnership;
                                               and Erik Mather, managing director, Regnan - Governance Research & Engagement. Ethical
                                               Investor’s executive director Michael Walsh acted as non-voting chair.
      Nominations were received from Sustainable Asset Management (SAM), Innovest, Centre for Australian Ethical Research (CAER), Corporate
  Monitor, Monash Sustainability Enterprises, CGI Glass Lewis and SIRIS. These groups were asked not to nominate a company that was also its
  client. Nominee companies were then invited to make a brief submission outlining their achievements in support of their nomination.
      This year we also invited nominations from Ethical Investor readers.

      Corporate award winners
       Sustainable Company of the Year                           Corporate Express Australian Ltd                                 CXP

       Sustainable Small Company of the Year                     Blackmores Ltd                                                   BKL

       Special Award for the Environment                         AGL Energy Ltd                                                   AGK

       Special Award for Corporate Governance                    Westpac Banking Corporation                                      WBC

       Special Award for Social-Community                        Lend Lease Corporation Ltd                                       LLC

       Special Award for Labour Relations                        SP AUSNET                                                        SPN

     Financial services industry awards
         For the second year, Ethical Investor made awards across three categories: Fund of the Year (as judged by Lonsec); the Sustainable Super
     Fund of the Year; and the Special Award for Sustainability Research.
         Nominations were reviewed by judges Charles Sampford, Griffith University ; Terence Jeyaretnam, Net Balance; Ulrike Schuermann,
     Momentum Partnerships; and Michael Walsh acted as a non-voting chair. Talieh Williams, of Unisuper, was a judge of the Special Award for
     Sustainability Research.

     Financial services industry award winners
        Fund of the Year                                                       Australian Ethical Equities Trust
        Sustainable Super Fund of the Year                                     Christian Super
        Special Award for Sustainability Research                              Andrew Gray, Goldman Sachs JBWere

12                                                                                                                 ethicalinvestor december 2008 issue 82

  Living within
  our means                              The GPT Group (ASX: GPT)
                                         congratulates Ethical Investor
                                                                                         this work, we now understand that the
                                                                                         ecological footprint of property is vast.
                                                                                         Approximately 63 per cent of humanity’s
                                         for another successful awards
  Is social,                             at the end of a tumultuous
                                                                                         footprint is associated with property,
                                                                                         transport and food.
  environmental and                                                                           Our estimates show that one square
                                         environmental and ethical                       metre of a regional shopping centre has
  ethical behaviour                      behaviour of many outstanding                   an ecological impact some 2,500 to 3,000
                                         companies was rewarded and                      larger than itself. Moreover, that retail stores
  enough to save the                                                                     themselves range between 900 for the
                                                                                         average bank branch to 4,000 times larger
  planet?                                                                                for a fast food outlet. In working through
                                                                                         these scenarios GPT has resolved to require
  By DR CAROLINE NOLLER                  enough?
                                                                                         tenants to engage with the footprint in the
                                              Humanity has been living beyond the        design of their stores, in order to increase
                                         planet’s means since the early 1980s. That      awareness of and support measures to
                                         is, we have been consuming more of the          reduce this incredible impact. Our recent
                                         planet’s capital than it can regenerate. In     Rouse Hill Town Centre project is on track
                                         fact the most recent WWF Living Plant Report    for a 24 per cent reduction and 35 per cent
                                         tells us that we used 1.3 times the planet’s    average reduction for tenants.
                                         available natural resource capacity in 2005.
                                         At this rate, we will need two planets worth
                                         of resources each year by the mid-2030s.              One square metre of a
                                              The ecological footprint is a measure of     regional shopping centre has
                                         the productive area of the earth required to
                                                                                            an ecological impact up to
                                         support a population or activity. The 2008
                                         Living Planet Report suggests the average
                                         Australian requires about 7.8 hectares per
                                         person per annum against a global supply of          In questioning the footprint level
                                         2.1 hectares; the average European 4.5 and      that defines a sustainable building, we
                                         the average Chinese person 2.1.                 considered world’s best practice, as
                                              There are more than two billion people     suggested by tools such as Greenstar, and
                                         in the world currently classified in the        found this to provide a 20 per cent impact
                                         emerging consumer class who aspire to           reduction as compared with an average
                                         our developed way of life. Clearly, global      shopping centre. Our recent international
                                         resource constraints and desires lead us        peer review of this work considered this
                                         to some very challenging ethical, moral         question and found support for a tenfold
                                         and development questions relating to           reduction as necessary. Clearly, we have a lot
                                         the consumptive rights of individuals           more work to do.
                                         and nations. More ponderous, though, is              The credit crunch may well prove a
                                         whether we will see an ecological crunch        critical time for the earth, by giving us the
                                         akin to the credit crunch we are witnessing –   opportunity to ‘green-tool’ our industries
                                         and if so what will be our responses?           and consumers so that we can avoid the
                                              Since 2004 GPT has been working with       ultimate development constraint – the need
                                         the founders of ecological footprinting, the    for an extra planet. ei
                                         Global Footprint Network and EPA Victoria
                                                                                                     Caroline Noller is head of corporate
                                         on its applications for property. Through
                                                                                                        responsibility at The GPT Group

ethicalinvestor december 2008 issue 82                                                                                                13

Australia’s largest office
products company proves
there is a strong business
case for corporate social
Corporate Express’s ‘green’ warehouse, Erskine Park; built by Australand

                                                                      product at a tolerable level, then it will work     practices covering both human rights and
tougher for companies such as                                         no matter how tough the environment gets.”          environmental management practices.
                                                                                                                              “In conjunction with this strategy,
                                                                      The winning formula                                 Corporate Express developed a range of
machines supplier Corporate
                                                                           Corporate Express was a finalist in the        environmentally-preferable products under
                                                                      environment category of Ethical Investor’s          the EarthSaver name (see box).
year’s winner of the Sustainable                                      sustainability awards, for its extensive efforts        “In addition to the products offered,
Company of the Year. Global                                           to reduce its impact on the environment             Corporate Express works with its customers
                                                                      through sustainable sourcing, recycling             on their environmental programs whether it’s
                                                                      efforts and green building initiatives.             incorporating paper or toner recycling into
including spending on generally                                            But its consistent performance in all          their business or implementing sustainable
more expensive eco-friendly                                           areas of sustainability over time as well as        supply chain initiatives,” Williams says.
                                                                      leadership in the sector is apparent, says               Today, 83 per cent of the ‘costs of goods
products. But company CEO
                                                                      Terence Jeyaretnam, a director at Net Balance       sourced’ come from suppliers that are
Grant Harrod is adamant that                                                                                              signed up to the company’s ethical sourcing
                                                                      Management Group and one of the four
                                                                      corporate award judges.                             policy. These suppliers are audited at regular
that there is a strong business                                            The judges were particularly impressed         intervals and if they don’t comply, Corporate
case for choosing sustainable                                         with the company’s human capital and                Express will work with them to help them
                                                                      community programs, which complement its            achieve compliance standards.
Express achieves through careful                                      strong environmental performance.                       “If a supplier is not ready to work with us
                                                                           John Newton, group environment                 on this then we will look for an alternative,”
                                                                      manager at Amcor (ASX: AMC), co-lead                Williams says. “Most of the problems we
reducing its impact on the
                                                                      sponsor of the awards, said: “Sustainability is a   encounter are not over non-compliance. In
                                                                      journey. And for some companies the journey         Asia, for instance, [the challenge] is very much
its employees.                                                        is more complex and riddled with detail than        understanding why we want to do this.”
     Harrod admits that the current economic                          for others.                                             Corporate Express’s Harrod says the
downturn does present huge challenges                                      “This company sells a vast array of            ethical sourcing policy gives the company a
to Corporate Express’s commitment to                                  products, many of which are manufactured            framework to make the right decisions about
sustainability.                                                       overseas, particularly in Asia. And with that,      the thousands of products it buys every year.
     “It’s difficult for people not to become too                     it has become a leader in the awesome task              “Change is driven from the top, but
short-term focused, because you have to look                          of driving sustainability up its supply chain –     ultimately getting our people to actually
at the consequential cost of doing business,”                         focusing on both environmental and labour           effect that change is the real challenge.”
he says.                                                              standards issues.”                                      Corporate Express is looking at using
     “Nothing will work if it is demonstrably                                                                             the not-for-profit Supplier Ethical Data
more expensive. People have a tolerance                               Going straight to the source                        Exchange (SEDEX), a UK-based membership
level that certainly fluctuates based on the                              Jennifer Williams, the company’s                organisation for businesses who want to
economic environment they are in. What                                corporate social responsibility manager, says       improve the ethical performance of their
we’ve found is that if we can work with                               Corporate Express’s ethical sourcing strategy       supply chains. UK food and beverage supply
manufacturers at one end and customers                                means that its products are sourced and             and retail companies Cadbury Schweppes,
at another then we can find a sustainable                             manufactured using sound employment                 Unilever and Tesco are all members.

14                                                                                                                              ethicalinvestor december 2008 issue 82
                                                                                                                    COVER STORY
                              EarthSaver products: Corporate Express encourages               recycled materials in the original manufacture
                          the selection of recycled, re-manufactured and                      Products that are manufactured to IS014001 or
                          environmentally sensitive products. In order for products to        equivalent environmental management systems
                          be categorised under the EarthSaver classification, suppliers       Products that do not harm or degenerate
                          need to have signed CE’s Ethical Sourcing Policy and meet           the environment while in use (eg biodegradable)
                          one or more of the following criteria:                              Products that have at least 70 per cent recyclable or
                                                                                              biodegradable content when they reach their end of life.
                            Products that contain at least 20 per cent

    CE’s ethical sourcing policy is about both      standard, with everything from sensor lights
managing risk and protecting reputation,            and air conditioning, to low-flow water taps          Company profile
Williams says.                                      and waterless urinals. Corporate Express
                                                                                                              The company was officially listed on
    “For us it’s about making sure there are        installed energy saving appliances, flooring
                                                                                                          the ASX on 11 January 1995.
minimum human rights and environmental              made from recycled materials, maximised
                                                                                                              Staples Inc, via its wholly owned
standards in place in our suppliers. Our            natural lighting with open plan workspaces,
                                                                                                          subsidiary Staples International BV, has
customers really want to do this but, in the        and implemented a waste management
                                                                                                          acquired Corporate Express NV, the
end, our customers really want us to do this.”      system and educated employees. In
                                                                                                          company’s majority shareholder. Corporate
                                                    conjunction with the move, the company
                                                                                                          Express NV, through its subsidiary
Paper chain                                         designed a new data centre built with an
                                                                                                          Corporate Express International BV, owns
    Corporate Express supplies about a              emphasis on innovation to drive energy
                                                                                                          approximately 59 per cent of the company.
quarter of the country’s cut paper. In the past,    efficiencies, together with a focus on
                                                                                                              CEO and managing director Grant
these 50,000 tonnes per year were sourced           corporate sustainability.
                                                                                                          Harrod resigned in November, with
from Asian mills with very questionable                  Thirdly, the company’s new distribution
                                                                                                          effect March. No replacement has been
practices.                                          centre is a leading example of sustainable
                                                                                                          announced as we go to press.
    Traditionally, paper supply contracts           development for the industrial sector in
                                                                                                              CXP employs over 2,500 staff in
are short term – one to two months – due            Australia.
                                                                                                          50 locations throughout Australia and
to volatility in prices and production, giving
                                                                                                          New Zealand to source, warehouse and
suppliers little chance of providing a source       What next?
                                                                                                          distribute business essentials to customers
that was sustainable.                                    Both Harrod and Williams agree that now          including:
    Corporate Express tackled this by               is the time to step up its reporting efforts.         Office & Computer Supplies
partnering with Australia’s largest paper-               The appetite for sustainability reports is       IT Solutions
related office products manufacturer and            growing by the day as stakeholders demand             Business Furniture
supplier, PaperlinX Ltd (ASX: PPX), and its         better performance from companies.                    Print Services
subsidiary Australian Paper to give them two-            Corporate Express has plans to issue a           Canteen & Catering
year contracts that enabled them to make            separate sustainability report from next year         Corporate Cellars - Available in NSW & VIC
significant investment in upgrading their           – its current financial year will end in January.     only
manufacturing facilities to reach acceptable        Net Balance’s Jeyaretnam says addressing              Promotional Marketing
environmental certification.                        disclosure and transparency is essential              Facility Supplies
    All fibres used in the manufacture of           for any company that’s serious about                  Education Essentials
these papers are from independently-                sustainability.
certified sustainable sources and include                Although CE currently produces a report          Financials
recycled waste paper, sawmill residue,              on its sustainability performance, contained
sustainably managed hardwood and                                                                               For the six months ended 30 June
                                                    within the annual report, Jeyaretnam                  2008, Corporate Express revenue increased
softwood forests and plantations.                   encourages the company to move to an
    No fibre is sourced, either as timber                                                                 1 per cent to $648.1million. Net income
                                                    independent stand-alone report, with an               decreased 4 per cent to $32.8 million.
or pulp, from old growth or ecologically-
                                                    external assurer. He says without this, the           Revenue growth reflects increased sales
sensitive forests. Each Australian paper
                                                    accounts of performance are ‘’meaningless             from the Australia and New Zealand
manufacturing mill invests significantly
                                                    to their stakeholders and the investment              market.
in water conservation and waste-water
                                                    community”.                                                Net income declined due to an
management, and over 60 per cent of energy
                                                         Corporate Express launched its                   increase in distribution expenses, higher
used is from renewable sources
                                                    EarthSaver initiative over 10 years ago               selling & marketing expenses, an increase
Sustainability HQ                                   in order to work with its customers to                in finance cost, higher administration
                                                    maintain and preserve the earth’s natural             expenses and an increase in other
    Corporate Express’s commitment to the
                                                    resources. By raising environmental                   expenditure.
environment is perhaps best demonstrated
                                                    awareness, offering alternative products
by its significant investment in its buildings
                                                    and developing programs to reduce
during 2008 - its headquarters, data centre
                                                    waste, the company aims to incorporate
and distribution centre.
                                                    environmentally responsible activities
    The company moved its corporate
                                                    into our daily lives. ei
headquarters in June to a 4-green-star                                                                     Sponsored by Amcor

ethicalinvestor december 2008 issue 82                                                                                                              15
                                         SPECIAL AWARD FOR THE ENVIRONMENT

                                                                                                                                            Source: AGL
                                           AGL’s Hallett (Stage 1) Wind Farm, South Australia

                                           How does Australia’s largest                              In 2007/08, AGL’s greenhouse footprint
  response                                                                                      actually increased a head-turning sixfold.
                                                                                                Sustainability manager Cathlin Thurbon

  to climate                               environmental award? By
                                                                                                explained the increase was due to the
                                                                                                acquisition of the gas-fired Torrens Island

  change                                   expanding its wind and hydro
                                                                                                Power Station in Adelaide.
                                                                                                     “It’s also important to consider the
                                                                                                greenhouse intensity of assets managed and
                                                                                                invested in by the company,” Thurbon said at
  170 years after                          the intensity of its greenhouse                      the awards luncheon in Sydney.
                                                                                                     “We have continued to lower the
  its gas lit the first                    in early carbon trading.                             greenhouse intensity of our electricity
  public street lamp                             Francis Grey, head of research at              output with increased investment in low-
                                                                                                emission and renewable energy generation
                                           Sustainable Asset Management (SAM), said
  in Sydney, AGL                           he nominated AGL Energy (ASX: AGK) for               capacity,” Thurbon said.
                                           an award because it had devised a blueprint               In other words, the same Torrens
  Energy’s ability to                      like no other for doing business in a carbon-        Island acquisition, because it emits less
                                           constrained world.                                   greenhouse gas than a coal-fired power
  adapt has earned it                            “When you go through the top 200               station, also contributed to an overall drop
                                           (of Australia’s biggest listed companies), I         in AGL greenhouse intensity of 14 per cent.
  the Special Award                        can’t think of another company that’s got a               Comparing the ratio of coal, gas and
                                           strategy for how they’re going to turn global        renewable energy in AGL’s portfolio to the
  for the Environment.                     warming into a profit centre,” Grey said. “In        national market, the utility shows much
                                           terms of Australian companies, this is a first.”     less reliance on coal – of course, the biggest
  Profile by SUSAN WOODWARD                      Judges were particularly impressed             greenhouse gas culprit.
                                           with AGL’s disclosure record. They noted the              CEO Michael Fraser has stated the
                                           company’s 2008 sustainability report set a           future of coal-fired power stations is limited.
                                           standard for comprehensiveness and that its          However, an AGL portfolio absent of coal
                                           emissions figures stood up to close scrutiny,        is unlikely in the foreseeable future. The
                                           including an external audit by Net Balance.          utility advocates for a transition period
                                                 “I think they should be commended for
                                                                                                using ‘clean coal’ with ‘rights to emit’ and
                                           taking those steps to lead,” said Tony Cooper,
                                                                                                the grandfathering of emission levels into
                                           managing director of the climate-change
                                                                                                a national Carbon Pollution Reduction
                                           advisory firm and sponsor of the award,
                                                                                                     On the other hand, AGL is the only utility
                                                 AGL has spent $2 billion on renewable
                                                                                                outside the US to be listed on the Chicago
                                           energy development since 2006. It owns
                                                                                                Climate Exchange, committing itself to a 1.5
                                           several hydro-electricity projects in Victoria
                                                                                                per cent reduction in greenhouse gases per
                                           and New South Wales. It recently opened
                                           its first wind farm in South Australia and           annum for 2007-2010. It also has signed an
                                           is heavily investing in more wind and                agreement to provide renewable energy to
                                           geothermal projects.                                 electric vehicles introduced into Australia.
                                                 As AGL positions itself as “Australia’s             Business survival is the motivator for at
                                           largest private owner and operator of                least starting to meet the climate change
                                           renewable energy assets”, the bottom line            challenge. According to SAM’s Grey, energy
                                           for the environment must also examine the            companies that can’t make the transition
  Sponsored by Energetics                                                                       “can look forward to a future like General
                                           company’s efforts to reduce greenhouse gas
                                           emissions.                                           Motors”. AGL seems to grasp that. ei

ethicalinvestor december 2008 issue 82                                                                                                      17
The Australian Ethical Equities Trust is fund
of the year, as assessed by Lonsec

Andrew Gracey, Australian Ethical Investments, receives award from Steve Sweeney, Lonsec (right)

Despite the weak macro                                              emerge in complementing traditional               structured benchmark after fees by 18.7 per
                                                                    techniques featured in fundamental company        cent and 9.3 per cent pa respectively to the
                                                                    analysis. A key driver in this uptake is the      end of October 2008.
investment managed funds
                                                                    recognition that environmental, social and             The manager tends to build a fairly
                                                                    governance factors will continue to have an       concentrated portfolio with a preference
momentum with ongoing                                               impact on the bottom line through share           for small- and mid-cap exposure managed
product development within the                                      price performance and profit sustainability.      in a benchmark-unaware, high-conviction
broad responsible investment                                                                                          approach (that is, the manager does not
                                                                                                                      heavily follow a benchmark in deciding which
                                                                                                                      stocks to select for the portfolio, while taking
                                                                      Trust was a clear outperformer                  meaningful position sizes in companies
in markets has understandably
                                                                       over the assessed period and                   where the manager has strong belief in the
                                                                                                                      underlying investment thesis).
in the product pipeline following
                                                                                 over the past year                        The BT Wholesale Ethical Share Fund
very strong growth in 2007.                                                                                           is also worthy of mention, polling strongly
     This present situation contrasts starkly                                                                         in this year’s award. It has delivered a good
with the strength of the market in 2007,                                Similarly, Lonsec observes investment         record of relative benchmark outperformance
when it was nigh on impossible to escape                            managers’ growing engagement with key ESG         on 1- and 3-year comparison (outperforming
the general buzz emanating from the                                 industry bodies such as the United Nations’       the benchmark by 3.6 per cent and 0.6 per
sector. Factors driving growth included the                         Principles for Responsible Investment and         cent pa after fees respectively).
launch of some high profile sustainability                          emerging forums like the Investor Group on             More broadly, Lonsec’s recent review of
funds, community concern about climate                              Climate Change (IGCC).                            the Australian SRI sector demonstrates that
change, and increased acceptance of ESG                                                                               sector performance continues to hold up
factors within the investment processes of                          And the winner is….                               well in comparison to mainstream Australian
mainstream equities fund managers.                                      Following the methodology outlined            equities managers. This is an encouraging
     While it is by no means the norm to find                       below, Lonsec has awarded the 2008 Ethical        trend and continues to dispel the old chestnut
all traditional fund managers drilling down                         Investor Fund of the Year to the Australian       that investors forgo alpha by incorporating
to factors such as a recruitment practices,                         Ethical Equities Trust.                           social considerations into their investments.
community engagement and reputation                                     The Australian Ethical Equities Trust was a
management, most fundamental managers                               clear outperformer over the assessed period       Depth of SRI
will include a broad measure of company                             and performed particularly strongly over the           Australian Ethical scored highly on this
management quality within their stock                               past year. The fund contains both Australian      criterion, according to Lonsec’s assessed
selection process.                                                  equities and global equities in approximately     depth of SRI factors considered within the
     ESG factors are likely to continue to                          a 70/30 mix and has outperformed a similarly      investment process. The manager’s charter

18                                                                                                                           ethicalinvestor december 2008 issue 82
                                                                                                      FUND OF THE YEAR
defines the investment universe of securities      stakeholder bodies, and evidence of activism          corporate casualties of the credit crunch.
and combines both positive and negative            on corporate governance matters. Similarly,               On balance, we can expect those
screens for portfolio construction. Lonsec         BT also continues to deepen its exposure              managers making concerted efforts to
classifies the manager as adopting a ‘dark         to the ESG movement, particularly through             measure, challenge and hold management
green’ approach, which is an indication of         its relationship with ESG assessment group            accountable for their sustainability records to
Lonsec’s assessment of the level of ethical/       Regnan and the ongoing embedding of ESG               avoid more of the train wrecks and identify
socially responsible investing criteria applied    factors into its equities research process.           more of the long-term profit generators than
to, and evident in, the manager’s investment                                                             those industry participants lacking a more
process. The list of excluded industries is the                                                          holistic approach and focussed solely on near-
most extensive of those managers covered                The BT Wholesale Ethical                         term profit drivers. ei
by Lonsec and the manager’s investment                Share Fund is also worthy of                                   Steve Sweeney is a senior investment
approach displays a long track record of                                                                                analyst – managed funds Lonsec.
managing in a ‘true to label’ manner and a
                                                      this year’s award, delivering                                                For funds’ performance
deep commitment to responsible investment.
     Like most managers, Australian Ethical                                                                         see Corporate Monitor tables, p.47-48.
outsources most of its screening services           benchmark outperformance on
to an external provider, but there are some           1- and 3-year comparison                               Methodology
within the Lonsec universe that continue to                                                                      This is the second year that
differentiate their investment approach by                                                                   Lonsec has been involved in the
conducting SRI research internally (notably        Performance annus horribilis                              Australian Sustainability Awards and
AMP and Hunter Hall).                                  2008 seems certain to leave some                      specifically in helping to determine
                                                   enduring mental scars on participants at all              the Ethical Investor Fund of the Year.
Momentum                                           levels of the financial services community                The methodology for this year is the
    The final segment of the assessment            whether they are money managers, investors,               same as last year and the starting
process is a determination of the manager’s        investment product researchers, regulators or             point once again is the universe of
overall engagement with the responsible            company liquidators!                                      ethical/SRI funds currently rated by
investment sector. The primary assessment              While events in credit markets continue               Lonsec. This totals nine funds across
tool is Lonsec’s survey of fund managers to        to play out and cast an uncertain shadow                  Australian equities and global equities.
identify those managers looking to drive           over fund managers, as with all periods of                These funds were then subjected to a
forward the opportunities from this sector         transformation there will be opportunities for            separate scoring process to determine
versus those adopting a more passive               those perceptive enough to look for lessons               the overall winner. The award
approach. Factors canvassed included: the          amid the carnage and wise enough to look                  methodology is a mix of retrospective
engagement of the investment team in SRI;          beyond the near term. It is possible there are            quantitative and current qualitative
membership of key industry bodies and active       even greater opportunities for the responsible            observations, as outlined in Table 1
participation in those forums; and evidence of     investment community.                                     below.
proprietary research on major issues such as           In poring over the ashes of the numerous                  A couple of caveats worth pointing
climate change and sustainability issues.          corporate collapses in the past year, it may              out about the award; firstly it is not an
    This factor continues to demonstrate           be possible to recognise a familiar pattern               award for merely being the ‘deepest
varying levels of engagement with the              of management behaviour – namely,                         green’ fund, or the best performing
sector. As in last year’s award, Lonsec believes   substandard approaches to risk management                 fund in the previous year, although
AMP Capital Investors continues to display         whether it be unsustainable borrowing                     these factors, combined and weighted,
a leading role in its commitment to the            tolerances, unbalanced growth expectations                are key contributors to the final
responsible investment agenda. Both AMP            or poor governance checks.                                outcome. Secondly, the award is not
Funds covered by Lonsec (the Sustainable               It is unrealistic for investors to expect             designed to be forward looking or
Share Fund and AMP Responsible Investment          investment managers to avoid all corporate                predictive of future performance but
Leaders International Share Fund) share a          blowups, yet investors in this sector have                rather to recognise managers who
common philosophy and exhibit heightened           perhaps a greater claim to hold their money               have excelled over the previous 12
credibility in the sector through publishing of    managers accountable where there has been                 months.
proprietary research, membership of relevant       significant exposure to the well publicised

 Table1: Lonsec methodology for determining the 2008 Ethical Investor Fund of the Year
 Factor                                            Weighting Assessment
 Performance                                          50%      Performance (after fees) against a relevant benchmark to 31 October 2008 (70% weighted
                                                               to 1 yr/30% over three years)
 Depth of SRI/sustainability/ESG in investment        35%      Lonsec assessment of the investment process eg. rigour and depth of screening, excluded
 process                                                       industries, zero tolerance/threshold exclusions, portfolio sustainability and alignment of
                                                               interest with investors.
 The investment manager’s momentum on SRI/            15%      Lonsec assessment of manager’s qualitative momentum on SRI/ sustainability/ESG based
 sustainability/ESG                                            upon a range of factors including manager responses to Lonsec’s SRI/sustainability/ESG

ethicalinvestor december 2008 issue 82                                                                                                                      19

  call for radical
  reforms                                Professor Steve Keen, ASA keynote speaker
                                         Consider a business model that                    increase debt levels evaporates.
  Clearly, the good                      involves taking in funds from                          The economic boom of the last 15 years
                                                                                           was a direct consequence of this indirect
                                         depositors for 90-day term
  times of the inflating                                                                   Ponzi scheme, and the crisis we are now
                                                                                           in is a consequence of its bursting. Clearly,
  bubble are not                         and paying high returns to early                  the good times of the inflating bubble are
                                         depositors using money from                       not worth the pain of its bursting, and the
  worth the pain of                      later ones. Could such a scheme                   whole process is fundamentally, though not
                                                                                           consciously, unethical.
  its bursting, and                      -so long as the money coming                           How does one behave ethically in such
                                         in from new entrants exceeds                      an environment? With great difficulty,
  the whole process                                                                        obviously. Triodos Bank, profiled in October’s
                                         the payment commitments to
                                                                                           Ethical Investor, shows that it can be done.
  is fundamentally,                                                                        But such behaviour remains a minority
                                         has to fail.
  though not                                  Is it ethical? Of course not. It’s a Ponzi
                                                                                           pastime when a Ponzi boom is afoot.
                                                                                                The problem is the environment itself,
                                         scheme, named after the early 20th century
  consciously,                           conman Charles Ponzi who promised to
                                                                                           which makes Ponzi lending feasible. If
                                                                                           we are to stamp out this virulent form of
                                         double investors’ money every 90 days by
  unethical                              investing in an arbitrage scheme to exploit
                                                                                           unethical behaviour, we need to reform
                                                                                           our asset markets so that debt-financed
                                         mispricing of international postage reply         speculation by individuals is no longer a
                                         coupons (Ponzi believed the arbitrage             path to individual riches and social ruin.
                                         profits were there –-they weren’t – but                Such reforms are possible, but drastic.
                                         hadn’t set up the business to exploit them             I suggest two: redefining shares so
                                         by the time the first depositors turned up        that they last only 25 years, and are then
                                         expecting their dividends).                       redeemed by the issuing company at their
                                              Would you do it? If you are an ethical       initial sale price; and limiting a housing
                                         investor, of course not – well, at least, not     loan to a low multiple of its imputed rental
                                         consciously. But in reality our financial         return. Buyers could pay whatever they
                                         system has evolved into one big Ponzi             wanted to buy a property, but anything
                                         scheme, with lenders doling out money to          more than (say) ten times its annual rental
                                         finance not actual investment, but simply         income would have to be paid for using
                                         speculation on asset prices.                      non-borrowed money.
                                              Such lending leads to gains for                   Such changes are much more difficult
                                         individual borrowers, if the increase in prices   than simply exhorting individuals to behave
                                         outweighs their financing costs. But for          ethically. But the ultimate test of ethics
                                         society as a whole, it simply drives up debt,     is whether we are willing to reshape our
                                         without adding to productive capacity.            society itself to make it so. ei
                                              Just as a pure Ponzi scheme relies on an
                                                                                                      Professor Steve Keen is an associate
                                         ever-increasing stream of depositors, our
                                                                                             professor at the University of Western Sydney
                                         hybrid financial system relies on an ever-
                                                                                                    and was the keynote speaker at the 8th
                                         increasing level of debt relative to income.
                                                                                                         Australian Sustainability Awards.
                                         It inevitably breaks when the willingness to

ethicalinvestor december 2008 issue 82                                                                                                 21
     wins through
     Judges favour
     research that
     focuses on
                                         Goldman Sachs JB Were’s Andrew Gray (left) receives award from UniSuper CEO Paul Murphy
     implementation                                                                                     between good governance and financial
                                                                                                        performance. The analysis notably includes
     at this year’s                                                                                     periods of market volatility with data
                                                                                                        current to 31 March 2008, and so supports
     Australian                          social and governance
                                                                                                        the conclusion that good governance may
                                         (ESG) issues as material to                                    derive more optimal performance outcomes
     Sustainability                                                                                     in a range of market climates.
                                         followed by the far harder task
     Awards.                                                                                                 Based on data supplied by governance
                                                                                                        specialists CGI Glass Lewis, specific
                                                                                                        indicators analysed in the winning study
                                         the the Special Award for                                      include: audit quality (independence,
                                         Sustainability Research                                        strength of process); overall board (skill mix
                                                                                                        and structure); board skills; remuneration
                                                                                                        (clarity of policy, reasonableness of policy,
                                         Andrew Gray of Goldman                                         size); and accounting (clarity/reasonableness
      Judges for this award                                                                             of policy around abnormal times), to form an
      Professor Charles Sampford         assessment of how good                                         overall governance score.
                (Griffith University )   corporate governance may lead                                       Measuring the excess returns from
      Terence Jeyaretnam                                                                                good governance against a passive
               (Net Balance)                 The report, Good Governance = Good                         index, accounting (12.5 per cent) and
                                         Returns (Still…and even through the recent                     remuneration (8.2 percent) proved the
      Ulrike Schuermann
                                         period of market volatility), beat out the                     most rewarding factors over the short term,
                (Momentum Partnership)
                                         two other finalists, Elaine Prior’s evolving                   whereas remuneration (46.7 per cent) and
      Talieh Williams                                                                                   audit quality (37.1 per cent) were the clear
                                         analysis of the carbon footprint of the ASX
                (UniSuper)                                                                              winners over the longer-term.
                                         100 for Citi Investment Research, as well as
                                         Christal George’s most ambitious report on                          In presenting the award, the judges
                                         the importance of Indigenous rights to the                     concluded: “This research has strong
                                         resources sector, for the Centre for Australian                potential to influence, and provide direction
                                         Ethical Research (CAER).                                       to, professional investors as they look to
                                                                                                        avoiding the types of corporate disasters
                                         Winner: Good governance leads                                  revealed by the financial crisis.”
                                         to better returns                                                   Importantly, the finding that good
                                                                                                        governance matters over different time
                                             Plotting the semi-annual governance
                                                                                                        horizons is relevant to both ESG and non-
     Sponsored by UniSuper               rankings over more than seven years,
                                                                                                        ESG investors. A common thought within
                                         Gray’s report finds a positive correlation
                                                                                                        the ESG community is that, over time, it will

22                                                                                                             ethicalinvestor december 2008 issue 82
                                                                    SPECIAL AWARD FOR ESG RESEARCH
increasingly be the corporate governance                     abatement options.                                                According to the report, continued
space – ‘where the rubber hits the road’ –                       Building further on her previous research,               poor business practices by resources
where many ESG issues will be addressed.                     Prior illustrates how a small number of                      companies in relation to Indigenous rights
     For instance, my own research elsewhere                 materials, utilities and transport stocks – in               might reasonably lead to a number of risks,
has found that even supposed ‘ethical’                       particular BHP Billiton (ASX: BHP), Rio Tinto                including: reputational damage, access
blacklisting and the $1 billion sell-down of Rio             (ASX:RIO), Bluescope Steel (ASX: BSL) and                    to investment capital, license to operate,
Tinto by the Norwegian Government Pension                    Qantas (ASX: QAN) – contribute to 65 per                     litigation, and increased regulation.
Fund in September followed many months                       cent of the carbon footprint of an indexed                        Recognising that the ‘S’ in ESG is often
(perhaps years, if one considers the related                 ASX 100 investment portfolio.                                neglected as an investment-related research
blacklisting of Freeport-McMoRan in 2006) of                                                                              topic, by providing a framework for both
failed engagement.                                               Andrew Gray’s research has                               corporate managers and investment analysts,
     Too few investment professionals see                                                                                 the report makes a meaningful contribution
the distinction between ‘sustainability’ and                                                                              to our understanding of the role of
‘ethics’ at all, most commonly because it takes                                                                           Indigenous rights in the resources sector.
place behind the closed doors of governance
                                                               professional investors as they
that Gray, the Norwegians and others, such                     look to avoiding the types of                              2008: a fruitful year for ESG
as shareholder activist Stephen Mayne, have                   corporate disasters revealed by                                  As it draws to a close, 2008 must be seen
thankfully thrown open.                                                                                                   as a fruitful year for advocates of ESG analysis;
                                                                                                                          the paradigm shift has continued and our
Finalist: Is carbon footprint data                               Although such carbon risk must be                        understanding of its implementation has
meaningful to investors?                                     assessed against other investment factors, the               markedly improved.
     Following a special mention at last                     report cautions that it is predictably greatest                   Thanks to the combined efforts of
year’s awards for her landmark report on the                 where low-emissions alternatives are not                     Australia’s vibrant ESG community, the last 12
risks and opportunities of climate change                    available or where companies are operating                   months has increasingly seen ESG research
to the ASX 100, Citigroup’s Elaine Prior has                 close to best practice.                                      being delivered in forms and by providers
reinvigorated the report’s epistemological                                                                                of more traditional investment analysis.
position to address a most pressing question:                Finalist: Indigenous rights and                              In this light, Gray’s focused effort on good
is carbon footprint data really useful for                   the resources sector                                         governance was a deserved winner, and has
investors?                                                       One of the year’s most ambitious ESG                     most certainly been at the vanguard of that
     The answer, according to ASX100 Carbon                  researchers must have been the Centre for                    advancement in a field of stiff competition.
Footprints: data is data, but what does it                   Australian Ethical Research’s Christal George                The ESG community must now engage and
mean?, is that carbon footprint data is of little            for her insightful report into Indigenous rights             educate Australia’s public – whose best
relevance to investors seeking meaningful                    and the resources sector.                                    interests we (theoretically) all serve – if we
insights into the financial impact of a carbon-                  Bucking the trend of studies into either                 are ever to play a major role in creating truly
constrained world on their investments.                      climate change risks or portfolio-level ESG                  sustainable financial markets. Perhaps the
     More importantly to investors, Prior                    performance, Indigenous rights, Indigenous                   paper that does that will win next year. ei
states, is a broader consideration of: the                   wrongs: the risks for the resources sector
geographical location of carbon emissions;                   finds that most companies have only basic                            Nicholas Taylor formed Outcrop to offer,
the allocation of free permits; outsourcing                  commitments to Indigenous rights and report                   bespoke research into environmental social and
strategies; and a company’s particular                       poorly on their implementation.                                                             economic issues.

Nominees for the 2008 Special Award for ESG Research

 Principal Author                  Position                               Affiliation                              Research Paper
 Andrew Gray                       Executive Director/Head of ESG         Goldman Sachs JBWere                     Good Governance = Good Returns (Still….and even through the
                                   Research                                                                        recent period of market volatility)
 Ben Spruzen                       Associate Director                     SIRIS                                    Building Value— Responsible Property Investment Performance
 Christal George                   Corporate Ethics Researcher            Centre for Australian Ethical Research   Indigenous rights, Indigenous wrongs: the risks for the resources
 Darren Lee                        Lecturer                               School of Finance, University of         Socially responsible investment fund performance: The impact of
                                                                          Queensland                               screening intensity
 Drew Fryer                        Analyst                                Innovest Strategic Advisors              The impact of industry assistance measures under the Carbon
                                                                                                                   Pollution Reduction Scheme
 Elaine Prior                      Director/Senior Analyst                Citigroup                                ASX100 Carbon Footprints: data is data, but what does it mean?
 Graeme Newell                     Professor                              School of Economics and Finance,         Sustainability and property trusts series
                                                                          University of Western Sydney
 Joanne Saleeba                    Executive Director                     Investor Group on Climate Change         2008 Carbon Disclosure Project Report Australia and New
 Mark Barraclough                  Analyst                                Innovest Strategic Advisors              Impacts of carbon pricing in Australia
 Mark Goddard                      Australian Climate Change Services     PricewaterhouseCoopers                   Carbon value
 Stewart Jones                     Professor                              University of Sydney                     The Investment Performance of Socially Responsible Investment
                                                                                                                   Funds in Australia

ethicalinvestor december 2008 issue 82                                                                                                                                            23

     ethics and                           Caroline Noller (GPT) with award winner Peter Murphy (Christian Super CEO)

     sustainability                       scores from the awards judges
                                                                                                                Apart from using a negative screen to
                                                                                                           filter out investments that don’t align with
                                                                                                           Christian values, such as alcohol, arms or
                                                                                                           even fast food, the super fund overweights
     Christian Super’s                                                                                     those companies that it thinks are ‘doing
     advertising motto                    mandates and corporate
                                                                                                                “You can see that we are really
     “adding values to                        Presenting the award to Christian Super
                                                                                                           committed to finding areas where we can
                                                                                                           actually see tangible good in the underlying
     money” clearly rings                 CEO Peter Murphy, GPT head of corporate                          investments that these people are investing
                                          responsibility Dr Caroline Noller said the                       in,” Murphy says.
     true throughout its                  super fund clearly has embraced ethical                               For instance, the fund invests in the
                                          investment principles more than any other                        Macquarie Clean Technology Fund, which
     investment strategy.                 fund in Australia.                                               seeks to invest in projects that are using
                                              “It was the first industry super fund                        clean technology or increasing efficiency,
     Profile by OLIVER WAGG               to decide that putting all its money into                        such as a geothermal power plant in Lake
                                          ethical investments was not at odds with its                     County, US.
                                          fiduciary duty to maximise returns,” Noller                           Helping fight global poverty represents
                                          said.                                                            another critical mission for Christian Super,
                                              Christian Super, with around $400                            through an investment in two separate
                                          million in assets under management, was                          microfinance funds run by JPMorgan
                                          one of the early entrants into the ethical                       (Microinvest II Fund) and Triodos Investment
      Judges for this award               investment market. “We’ve been here for the                      Management (Triodos-Doen, Hivos-Triodos
      Terence Jeyaretnam                  long haul and we’ll continue to be here for                      Fund, and Triodos Fair Share Fund).
               (Net Balance Foundation)   the long haul,” Murphy said.                                          “As a businessman, I’ve always struggled
                                              In an interview with Ethical Investor,                       to figure out how does Make Poverty History
      Ulrike Schuermann
                                          Murphy says the fund is “clearly,                                actually get traction? When JP Morgan
                (Momentum Partnerships)
                                          unambiguously Christian. We want to align                        came out and explained to me that there
      Charles Sampford
                                          our heads and our hearts with our wallets                        are two billion working poor in the world
               (Griffith University)
                                          and ask, if we are Christians, what does it                      and through microfinance we can help
      Michael Walsh                       actually mean from the point of view of                          break that cycle of poverty, that was just so
               (Ethical Investor,         looking after your finances day to day?”                         exciting for us.”
               non voting chair)              But the super fund’s strategy is certainly                        While proudly ethical, the fund has also
                                          not set in stone. “It’s not a ‘set and forget’                   embraced the growing segment where
                                          strategy,” Murphy explains. “This is very                        mainstream investing has combined with
                                          much reflected in the robust discussions                         the principles of environmental and social
                                          between members of its ethics committee.”                        responsibility. It has a position paper on
                                              “There are always differing views around                     climate change and sits at the table of
                                          the margin. Our ethics committee is really                       industry-wide initiatives, such as the UN PRI
                                          vibrant. In terms of the ideas, they are up                      and the Investor Group on Climate Change.
                                          for grabs and we need to continue to work                             The other finalists for this award were
     Sponsored by The GPT Group           hard on that process. Underlying that is our                     VicSuper and Hesta. ei
                                          commitment to God.”

24                                                                                                                ethicalinvestor december 2008 issue 82
                                                        SMALL COMPANY OF THE YEAR
                                         Throughout Australia the
                                         Blackmores (ASX: BKL) brand
                                         has become synonymous
                                         with health and wellbeing.
                                         Australia’s leading provider

                                         also boasts a dedicated
                                         commitment to ethical and

                                         this month as the company was
  rewards for                            awarded the 2008 Sustainable
                                         Small Business of the Year
                                                                                          Blackmores corporate HQ

                                                                                          means of creating dialogue between the
                                                                                          company and the community.
                                         Award.                                                The recent B your Best platform creates
                                              The award, sponsored by Australian          dialogue between Blackmores and those
  investors                              Small Scale Offerings Board (ASSOB)
                                         recognises best practice in corporate,
                                                                                          in the wider community who wish to reach
                                                                                          their full, personal potential.” We are more
                                         sustainability across Australian small           than just pills in a bottle. Our vision inspires
  This year’s winner                     businesses.
                                              Terence Jeyaretnam, director of Net
                                                                                          consumers to be happier and healthier with
                                                                                          their individual wellness goals.”
  finds that looking                     Balance and a judge of this award, said               Believing they must mirror the
                                         that Blackmores is a deserving winner            themes they wish the community to
  after the welfare of                   given its consistent good performance in         accept, Blackmores encourages employee
                                         environmental, social and financial aspects      wellbeing, with flexible work arrangements,
  its staff pays both                    of sustainability.                               maternity leave and employee assistance
                                              CEO Christine Holgate says that “as         programs.
  financial and non-                     an Australian company with a passion
                                         for natural health, we have a long-
  financial dividends.                   term commitment to sustainability.                  “We are more than just pills
                                         Environmental factors are critical
  Profile by CHIARA MACFARLANE           contributors to health.                           consumers to be happier and
                                              “This is not a strategy for short-           healthier with their individual
                                         term gains,” she adds. “In fact, it was a
                                         fundamental value instilled into our
                                         corporate culture by the company’s founder,                        Holgate
                                         Maurice Blackmore, who said, ‘If man
                                         persists in ignoring or defying the recycling         The development of a new ‘tri-
                                         laws of nature, he will not avoid pollution,     generation’ power plant in Warriewood also
                                         malnutrition or starvation’.”                    illustrates its leadership in environmental
                                              Blackmores’ participation in the National   practices. The new campus is the first of
                                         Packaging Covenant marks seven years of          its type in Australia and one of few in the
                                         continuous focus on reuse and recycling.         world where excess heat from the plant
                                         “We have developed procedures to ensure          is harvested and used to generate hot
                                         new products comply with environmental           water and heating for the site, resulting in
                                         policies and [have] minimum packaging            a reduction in carbon dioxide emissions.
                                         requirements,” Holgate says.                     Water self-sufficiency is achieved for up to
                                              Blackmores also has successfully aligned    nine months of the year through rainwater
                                         its product and marketing messages to            harvesting and recycling.
                                         promote increased wellbeing throughout                It’s this commitment to sustainability
                                         the community.                                   that Holgate believes will see Blackmores
                                              “As a company and as individuals,           through the uncertain economic future. “We
                                         Blackmores strives to make a difference - by     believe the company receives significant
                                         taking the initiative, investing back into the   drive and consumer support from the fact
                                         community and creating our own future,”          that we are a sustainable company with
                                         says Holgate. Using multi-media platforms,       high ethical standards and product quality.
                                         Blackmores has created a vast empire of          Maintaining this position is important
  Sponsored by Assob
                                         consumer contact points, which serve as a         to us.” ei

ethicalinvestor december 2008 issue 82                                                                                                  29

  Governance                               In a tough year for the                          stand up to times of crisis – and the financial
                                                                                            crisis has hit this company’s industries very
  through thick                            amid an important corporate                      hard indeed.”
                                                                                                 Nugent noted that Westpac was “on the

  and thin                                 (ASX: WBC) has won the
                                                                                            brink of collapse in the last recession.
                                                                                                 “Now, it leads its sector in risk
                                                                                            management and if the integrity of its credit
                                           Special Award for Corporate                      management systems hold firm over the
  For a bank to win an                     Governance                                       next couple of years, this will go a long way
                                                                                            to helping Australia weather the subprime
  award for corporate                      the 8th Australian Sustainability                financial storm.”
                                                                                                 Erik Mather, managing director of
  governance amid                          Awards.
                                                                                            governance, research and engagement
                                                 Given its long-term reputation as a
  global financial                         strong corporate governance performer,
                                                                                            experts Regnan, and an awards judge, noted
                                                                                            Westpac’s award was an accomplishment in
                                           it’s easy to take for granted Westpac’s
  chaos is no mean                         achievements in this area. But given no
                                                                                            a year in which “few companies showered
                                                                                            themselves in corporate governance glory”.
                                           other organisation, certainly within the
  feat.                                    Australian banking sector, has been able to
                                                                                                 “Westpac has demonstrably navigated
                                                                                            through the issue of suboptimal lending
                                           rise to the same standards of governance,
  Profile by ALEXANDRA CAIN                                                                 practices better than anyone else so far,”
                                           Westpac’s ongoing commitment to world’s
                                                                                            Mather says.
                                           best practice corporate governance is
                                           no mean feat, especially in straightened
                                                                                                “Westpac’s award was an
                                           economic times.
                                                 As Westpac’s award submission notes,           accomplishment in a year
                                           its ongoing commitment to good corporate              in which few companies
                                           governance has produced real results over             showered themselves in
                                           time. For example, it has now reduced its          corporate governance glory”
                                           own greenhouse gas emissions by over 40
                                                                                                  Erik Mather, Regnan
                                           per cent since 1996.
                                                 Francis Grey, the head of research
                                                                                                 Tim Williams, Westpac’s head of strategy
                                           at Sustainable Asset Management, who
                                                                                            for group sustainability, says: “With so much
                                           nominated Westpac for the award, says,
                                                                                            focus on climate change, it’s great to have
                                           “For many years we at SAM have considered
                                                                                            governance acknowledged in this way.
                                           Westpac to have one of the best corporate
                                                                                                 “It’s an understatement to say it’s been
                                           governance positions of any global
                                                                                            a difficult year in our sector. But we’ve fared
                                           company. We use them as an example of
                                                                                            better than many others.”
                                           how to do corporate governance around the
                                                                                                 “Partly this is because when it comes to
                                                                                            risk management, ethical decision-making
                                                 Of course, most banks, Westpac among
                                                                                            and all the rest, we’ve stuck to our guns. As
                                           them, must still face the issue of predatory
                                                                                            to where to from here, we still have a job to
                                           lending practices. The banks also still
                                                                                            do explaining sustainability performance
                                           publicly have to deal with the fact they
                                                                                            in terms mainstream investors understand
                                           have generally not passed on the full official
                                                                                            and can build into their valuation models,”
                                           interest rate cuts to borrowers.
                                                                                            he says.
                                                 Monique Nugent, who is corporate
                                                                                                 The other organisations that were
                                           governance manager at Barclays Global
                                                                                            nominated for this award were AGL Energy
                                           Investors, when announcing the award, said:
                                                                                            (ASX: AGK), Origin Energy (ASX: ORG) and
  Sponsored by Barclays Global Investors   “The real test of a company’s governance
                                                                                            Woolworths (ASX: WOW). ei
                                           and risk management systems is how they

ethicalinvestor december 2008 issue 82                                                                                                  33
                                         SPECIAL AWARD FOR LABOUR RELATIONS
                                            SP Ausnet (ASX: SPN) is
                                            Victoria’s largest energy
                                            delivery business covering both
                                            gas and electricity networks.

                                            customers and managing a

  Delivering                                     Louisa Graham, corporate relations
                                            manager, says the company is “thrilled”
  sustainability                            to receive the Special Award for Labour
                                            Relations/ Human Capital Management,

  to its                                    sponsored by Net Balance Management

  workforce                                      “It is a great honour to be nominated
                                            for this award with our peers. We’ve
                                                                                             SP Ausnet employee engagement brochure

                                            worked hard and placed a lot of effort into      of the senior management team you
                                            developing this side of our business and         would generally require an engineering
  The Victorian                             now it is showing success.”                      background. This is starting a groundswell
  electricity and gas                            The Diversity Initiatives Group (DIG) and
                                            the Skilling for the Future (SFF) program
                                                                                             so that in the future years there is a greater
                                                                                             pool of diversity to choose from.”
  distributor looks                         highlighted SP Ausnet’s commitment both               The second area where the company
                                            to its workforce and the broader community.      has taken the initiative with its community
  after one of its most                          “We are a progressive organisation          and employees is through the SFF program
                                            committed to teamwork, customer service          which targets school leavers. The program
  valuable assets – its                     and health and safety,” the company said in      has been running for five years. “SFF is
                                            its submission to the judging panel.             designed to attract, retain and engage
  employees.                                                                                 young people into a range of roles in the
                                                                                             industry,” says Cussen.
  Profile by ASLAN SHAND                             “We are a progressive                        Using detailed analysis of labour supply
                                                                                             and demand over the coming five to 10
                                                teamwork, customer service                   years, SP Ausnet is focusing on recruiting
                                                  and health and safety”                     and training young people in the industry
                                                                                             to combat the predicted national skills
                                                                                             shortages. As a major sponsor of the VEET
                                                DIG was set up between 12 to 18              program it provides year 11 and 12 students
                                            months ago to “drive diversity initiatives       with the opportunity to gain experience and
                                            across the business”. The first year of DIG      insight into the energy industry.
                                            looked at increasing gender diversity across          “It is a great initiative for the community
                                            the company, as both the energy industry         and students. We’ve also employed two
                                            and SP AusNet are traditionally male             students who participated in the program,”
                                            dominated.                                       says Cussen.
                                                During this time they have provided               Innovation and community involvement
                                            two female employees with engineering            are considered an important part of the
                                            degree scholarships, recruited three female      business and “senior leaders allow a lot
                                            graduates, their first female apprentice,        of time, training and support for the
                                            have the first female recruited into their       development of innovation,” says Graham.
                                            Victorian Energy Education Training (VEET)       This is exemplified in a mentoring program
                                            program and have recruited five females          through which SP Ausnet employees
                                            into traditionally male roles.                   provide guidance for people who have
                                                “We are starting to see a lot of results,”   experienced long-term unemployment. “It
                                            says Shelley Cussen, group manager, human        was introduced by one of our employees,”
                                            resources. “It doesn’t always look like a        says Cussen. “Some people have secured
                                            huge change but it is a big change for our       jobs after completing the program and it is
  Sponsored by Net Balance                  industry. For example to be a member             rewarding for both our employees as well as
                                                                                             the people being mentored.” ei

ethicalinvestor december 2008 issue 82                                                                                                    37