ESG and Sustainability Perspectives – Issue #9

USEPA Makes It Official:  Carbon Dioxide and 5 Gases - Are Pollutants – Setting the Path to Regulation of GhGs

It’s now official USA government policy: The United States Environmental Protection Agency has formally declared six “heat-trapping gases” to be major pollutants and threats to human health and the environment.  The announcement triggered a 60-day public comment period (through mid-June) as regulations are being structured for greenhouse gas emissions (GhGs).  Looking at the positive side, EPA Administrator Lisa Jackson said the move would also create millions of new jobs and relieve some of the nation’s dependence on foreign oil supplies. Carbon dioxide is a primary target of proposed regulations.

Even as the EPA addressed regulations the US Congress was considering the Waxman-Markey bill coming out of the House of Representative’s powerful Energy and Commerce Committee. Named for primary sponsors Henry Waxman and Edward Markey, the proposed legislation would have the federal government issue permits to a variety of organizations emitting GhGs, including oil refineries, electric utilities, auto manufacturers, and industrial firms in the cement, aluminum, paper and chemicals sectors. 

The permits would begin issuance in 2012 are seen as a softening of the blows of controlling emissions in an ailing US economy; the Obama Administration has been championing a “cap and trade” solution, which would levy taxes on emitters.  Each year (after 2012 out to 2025) an amount of credits would be auctioned to industry.  Not clear:  How the federal government will issue credits to industry and still be able to raise substantial funds from US emitters with a cap & trade policy.

ESG investment interests have been evaluating the impact on cap and trade or similar legislation (or regulation) on public companies and an industry of research and analytics firms (and consultants) have been increasingly focused on the USA as a potential pacesetter in the capital markets (in regard to pricing, auctions, etc. of GhG emissions).

So – Is ESG Data Going Mainstream?

That question is posed on the Harvard Business School blog by Mindy Lubber, head of the Ceres organization.  She writes that “it wasn’t so long ago that US corporate governance reports on ESG risks were as rare as penguins in the desert.”  Not anymore, she observers, citing such recent reports as those issued by American Electric Power, Coca-Cola and National Grid.

She observes that “governments, NGOs, regulatory bodies, and stock exchange are pushing to encourage or require standardized reporting of corporate ESG data…” And perhaps the strongest signal is coming from Bloomberg, launching an ESG data service this year for its 250,000 global data terminal customers (covering 2,000 to 3,000 companies’ data).  A game changer, she writes, given the reach of the Bloomberg platform.

See her full comments at:  http://blogs.harvardbusiness.org/leadinggreen/2009/05/is-esg-data-going-mainstream.html

And note the addition of a leader in environmental markets to INSIGHTS-edge – Global Change Associates, a financial services advisory service in New York City -- and its chairman, Peter S. Fusaro.  He is a prolific author, keynote speaker and respected thought leader.   His blog notes on carbon trading is here:  http://www.gai-insightsedge.com/index.php?id=2542&tx_iframe_pi1[name]=SMEPFReports

How Sustainability-Focused are German and UK Investors?

Two recent studies that looked at responsible investment concluded that UK pension funds and Germany’s major investments are increasingly focused on ESG – but in Germany, there is a still a long way to go. 

Thirty of the United Kingdom’s pension funds were analyzed by Fair Pensions; six pension schemes have so far signed on to the UN’s Principles for Responsible Investment (PRI) and 14 funds consider an asset manager’s SRI credentials in their selection process.  Of the 30 funds, 17 have some focus on SRI and 13 build SRI commitments into their asset manager contracts. On the other hand…

Union Investment looked at Germany’s banks, insurance companies and large corporations to determine awareness of the UN PRI and evaluate investor attitudes toward ESG factors.  There is much smaller recognition of SRI and ESG in Germany, judging from the answers of those surveyed -- just under half of the organizations surveyed (48%) thought ESG had some economic element to investment decisions.  Of the other half, three-quarters do not consider SRI factors because of costs and decreased returns. However, perhaps most starting was the finding that only four professional investors in 100 were even aware of the UN PRI.  More education of German investors is needed, thinks Union Investment.

Strategy:  Take on the Largest to Change Corporate Behavior

Trillium Assets Management Corporation is one of the leading American SRI institutions, so it is fitting that Trillium took on the largest and arguably one of the most successful large US company – Berkshire Hathaway, led by famed investor Warren Buffett – on a number of issues.  Joined by the International Labor Rights Forum (ILRF) and International Rivers, Trillium called on the company’s 2,000+ institutional investors to support a shareholder proposal requesting Berkshire Hathaway issue a Sustainability Report on its ESG issues.

Berkshire shareholder Joseph Petrofsky submitted the proposal, which was backed by PROXY Governance and CalPERS, the California public employee pension fund who invited all shareholders to cast a “yes” vote at the May AGM.  The Company is a combination mutual fund and holding company with interests in various businesses, and a number of wholly-owned subsidiaries.  Even while criticizing other corporate leaders for their lack of concern for the shareowner, his own shareowners are calling on Mr. Buffett to task for not communicating more about the ESG performance of his own portfolio.

Shelley Alpern – Trillium director of social research and advocacy – said: “Whether it’s the need to pay for removal of dams because of water pollution in the Northwest (PacifiCorp), loss of business relationships because of labor violations in Honduras (Russell Athletic), or having to defend its investment in a company (PetroChina) linked to human rights abuse in Darfur, the evidence is clear:  Berkshire Hathaway owes it to its shareholders to disclose the risk from its companies’ environmental and social practices.”

Perspectives & Insights is prepared by The Institute’s Editors

Perspectives & INSIGHTS is prepared by the Governance & Accountability Institute, Inc.

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