Future Energy

A List of Sustainability Lists in This Season of Lists

And yes it is a bit late in the New Year to be posting yet another take on the top 10.  But it was a busy Christmas season so here we go .....

I thought about putting together my own take on the Top 10 theme, you know, the 10 most important sustainability events for 2010, the 10 most important trends to watch for 2011 or maybe the 10 least sustainable politicians.  But the more I looked around at my favorite news and blog sites the harder it seemed to add anything that hadn't already been said.  Before I knew it I was putting together a list of all the top 10 (or five or 20, whatever) lists relating to sustainability, environment or clean tech investing.  What follows is a compilation of 23 lists that looked to be at least a bit relevant to this blog.  Enjoy!

To start, there are those basic lists that make sure we know what were the most important events from the year that has past.  In this category, the big stories of the year were undeniably BP's disasterous oil spill in the Gulf of Mexico and the U.S. Senate's failure to do anything useful about climate change.  The runner up story was probably the general failure to advance climate policy and regulation almost anywhere. 

1. Vermont Law School’s Top 10 Environmental Watch List for 2011
2. NY Times Green Blog: An Untameable Spill, An Unpassable Bill
3. Grist's Top 10 Green Stories of 2010
4. Mongabay's Top 10 Environmental Stories of 2010
5. EWG's Worst Environmental Stories of 2010
6. EWG's Top 10 Good Environmental News Stories of 2010
7. The American Lung Association's Eleven Biggest Clean Air Events of 2010
8. Sustainability's Top Trends from 2010
9. The 10 Most Hopeful Green Business Stories of 2010 by Joel Makower at Greenbiz
10. Greenbiz's 20 Most Popular Stories of 2010

Sticking with a look at the year that has past, but focusing on climate change issues were the 10 Carbon Reporting Trends That Defined 2010 from Greenbiz and Grist's Top Five Stories of the Year for Climate Hawks.  Did Grist capture the essence of the year with their lead in to the Climate Hawks list: Well That Sucked?

New Years wouldn't be complete without someone making some predictions (or just wishes) - and this list of lists won't disappoint. 

1. Top 10 Trends in Sustainable Business
2. Five Cleantech Wishes for 2011
3. The Greentech Wish List for 2011

(Greenopolis sat on the fence, listing the Top 10 Environmental Success Stories together with 10 associated Future Challenges.)

There were the clean tech/green tech investment lists.

1. 10 Clean and Green Energy Stocks for 2011 from the Alt Energ yStocks blog
2. Five Top Sustainable Investment Stories of 2010
3. The 2010 Cleantech 10 by Corporate Knights
4. The Cleantech Next 10 also by Corporate Knights

And then there were a few lists that defy my categories so far.  Popular Mechanics got the jump on this whole end of year lists thing by publishing their Debunking the Top 10 Energy Myths back in July of last year.   Triple Pundit put together And The Top Ten Most "Sustainable" CEO's Are... - and no surprise here Yvon Chouinard takes first prize. 

And last but certainly not least is what was perhaps the most interesting list, put together by Mother Jones staffers baring their souls and presenting their 10 Green New Year's Resolutions.  How can you not root for Emma L. when she tells us she's committing to:

Actually composting the veggies that melt into mush in the bottom of the veggie drawer instead of holding the bag by one corner and putting it in the trash.  There is something about the grossness factor that just makes it hard to scrape them out of the bag...I compost everything else I should!

Enjoy!

Are Sustainability Ratings Sustainable?

 

Source: dreamstime.com

Several days ago, I wrote about the strange case of the Dow Jones Sustainability Index and its puzzling choice of Haliburton for inclusion in the index for 2010/2011 to replace BP.  But the DJSI isn't the only group to release a recent update.  In recent weeks there have been a series of major ratings announcements, including from the Carbon Disclosure Project, FTSE4Good, Newsweek, CRD Analytics (Global 1000 Sustainable Performance Leaders) and Corporate Knights (Global 100 Most Sustainable Companies). 

To cap it all off, SustainAbility released Phase Two of its review of the universe of corporate sustainability ratings.  SustainAbility launched this particular research effort back in May (Phase One White Paper), in order to "better understand the universe of sustainability ratings and to influence and improve the quality and transparency of such ratings".  The review is intended to have four parts, with the most recent offering providing an inventory of more than 100 global rankings as well as the results of a survey of over 1,000 "sustainability professionals".  (Later Phases are also scheduled to benchmark an illustrative set of ratings using SustainAbility's own methodology.)

SustainAbility has launched their review just as the ratings are being taken more seriously and as their credibility and transparency are being called into question.  SustainAbility's timing is good given the comments I highlighted in my last post regarding DJSI's puzzling selection of Haliburton.  Looking beyond this one issue its also good given the growth in the number of sustainability related ratings, from 21 in 2000 to 108 today. 

Interestingly, SustainAbility highlights the discrepancies around so many ratings dropping BP in the aftermath of the Deepwater Horizon disaster and yet failing to note the conditions that preceded it (and BP's other major incidents in 2006 and 2005) - such as inadequate safety culture and poor deepwater drilling practices.  This cuts to the quick of many claims regarding sustainability ratings, i.e. that the focus on sustainability provides a leading edge look at the future prospects of the rated companies.  This clearly isn't the case with BP.

While SustainAbility says that it won't be explicitly ranking the ratings, I wanted to look at how they did compare.  I am most interested in energy companies and in those ratings that address them (and that I can access easily, so for example, FTSE4Good, which no longer appears to make its complete holdings list public, was excluded from my comparison).  I've only compared five ratings, including:

• DJSI - having picked on DJSI for one entire post, I don't need to say anything more about them here;
• Global 1000 Sustainable Performance Leaders - developed by CRD Analytics, a U.S. provider of sustainability analytics (I only concerned myself with the top 150 companies);
• Global 100 Most Sustainable Companies - developed by Corporate Knights, a Canadian magazine that looks at corporate sustainability issues, this rating has been around since 2005;
• Carbon Disclosure Leadership Index -developed by the Carbon Disclosure Project, now in its tenth year, the index highlights 104 companies (out of 760) with the highest disclosure scores;
• Newsweek's Green Company Rankings - now in its second year, Newsweek's rankings look at 500 U.S. and 100 global companies.  

These five ratings included more than 65 energy companies, including oil& gas and utilities.  Interestingly, for a list of so-called sustainability companies, only one renewable energy company - Vestas - was included (although, many of the oil & gas and utilities do have some level of renewables investment).  The following table provides a summary of the companies that were ranked by two or more ratings.  The "champions", i.e. those ranked by three or more ratings, are highlighted in green.  Only two companies, Royal Dutch Shell and PG&E, were highlighted by more than three ratings.

 

Companies	Sustainability Indices
	DJSI	Global  1000	Global 100	CDP    Leaders	Newsweek
BG Group PLC	√		29
Centrica PLC	√		31	92
Chevron				80	86
Duke Energy	√		70
Enbridge		29	16
Encana	√		25
Endesa	√	136
Energias de Portugal	√			90
E.ON AG	√				93
Enel SpA	√				91
ENI SpA	√				80
ExxonMobil		48			70
Hess Corporation		60		90
Iberdrola SA	√	37	55
Neste Oil Oyj	√		85
PG&E	√		2	90	66
Petrobras	√	89			84
Repsol	√	137		88
Royal Dutch Shell		106	20	89	88
Sasol	√	122
Spectra	√			94
Statoil	√	130	67
Suncor		74	40
Total	√				62
TransCanada	√		65
Vestas Wind Systems	√		42

Note: In most cases, numbers denote rankings within each rating.  CDP uses scores for disclosure performance rather than ranking companies. DJSI does not rank included companies.

 

A number of things strike me most about the ratings, including:

• The discrepancies between rating systems.  For example, PG&E is ranked second in the Global 100 rating but slid to 66th in Newsweek's Green Company rankings.
• How high a group of oil & gas and, in many cases, coal-fired utilities did relative to other companies in the global economy. 
• How few (only 1) renewable energy companies were among the sector's sustainability leaders????????     

So what are the ratings measuring sustainability or who has the resources and inclination to package the relevant information?  I for one will be interested to see what SustainAbility digs up as they continue their review.

 

 

The Dangers of Corporate Social Responsibility

                                            

Its been a long while since I posted anything and perhaps its fitting that starting up again I'm highlighting an article from this summer that has so recently ended.  A couple of weekends ago, I sat down with a pile of reading that had accumulated over the summer.  One of the gems in the pile was an article asking some tough questions on Corporate Social Responsibility or CSR.

Konrad Yakabuski, a columnist with the Globe and Mail, wrote wrote the article for the July/August Report on Business Magazine, hinting at his point of view in the title - The Kindness of Corporations.  While I have spent many years working on "sustainability" and often CSR, for energy companies and others, I thought that Mr. Yakabuski presented a very accurate view of the inherent contradictions and conflicts associated with CSR as it is currently espoused by everyone from multi-national corporations to NGO's and academia. 

He gets right to the point, stating early in the article that CSR is undemocratic and its proponents naive.

"When corporations take on a social role, often at the urging of elected officials themselves, it relieves governments of their responsibilities to mediate social demands. It removes policy-making from its proper forum. Put plainly, CSR is undemocratic.  It is also naive."

At the heart of his argument is a realistic look at the hierarchy of interests of companies and in particular their managers and directors.

"There is still little evidence to suggest that shareholder interests come anything but first in the minds of directors and CEOs. Indeed, their jobs depend on it. And any company that did not put shareholders first could itself be subject to legal retaliation."

Perhaps the most blatant example given concerning this conflict of interest relates to the actions of Canada's largest independent oil and gas company, Encana.  Mr. Yakabuski highlights the contrast between what the company says in its CSR report with its actions .....

[Encana's 2006 CSR Report] "on display at the York event, highlights EnCana's efforts to engage native communities and develop carbon sequestration technologies. "Acting in a conscientious and reliable manner is as important to sustaining our business as the profits we earn," CEO Randy Eresman asserts in the report. Conscientious and reliable? Late last year, EnCana sent a menacing letter to non-profit groups and charities in Colorado. It warned they risked losing its financial support if they failed to speak out in EnCana's favour at public consultations on oil and gas drilling. Tougher state rules, the letter indicated, might adversely affect "the company's ability to partner with organizations such as yours that meet the needs of the community on a daily basis." The groups took the letter as an ultimatum: Support our lobbying efforts or lose your grants. Somehow, this bit of power politics didn't end up in EnCana's CSR report. Such contradictions can be found everywhere among the CSR-practising flock."

(Not to pick on Encana, Mr. Yakabusli also gives an example involving BP.)

With this example and later in the article, Mr. Yakabuski hits upon a key weakness of CSR and CSR Reports: that is the lack of accountability for what is proffered in these reports.  While standards such as the Global Reporting Initiative have emerged, these are relatively toothless, as are the various ratings of companies on sustainability (e.g. the Global 100 Most Sustainable Companies).  The notable gap he identifies is with respect to companies political lobbying.  Notwithstanding what they say in the glossing publications, what are they saying to governments and what are they really supporting. 

At the end, Mr. Yakabuski offers the following conclusion ....

"if democracy is to mean anything, corporations must answer to governments, not the other way around. That balance has gotten out of whack. It's not good for democracy, or for capitalism."

I am certain that I am not doing the article justice but its accurate and its well worth reading.

Enjoy.

Everyone Wants to be Green - Even Investors!

                                 

                              Source: The Green Guide For Kids

The most recent issue of Financial Post Business, a monthly insert in the National Post, includes an article that looks at "green" (a.k.a. socially responsible or SRI) investing (see The Path to a Green Portfolio by Bruce Gillespie).

Citing recent performance of the Jantzi Social Index (Canada) and the Domini Social Index (U.S.), both of which have beat their mainstream peer indexes in recent years, Mr. Gillespie makes the case that investors no longer have to trade off performance to invest with an environmental consience.  If they ever did.

But the article also includes a caution that not all "green" funds may be very green, citing two Canadian environmental mutual funds that include big chunks of conventional oil & gas as well as oil sands operators. 

Quoting Sucheta Rajagopal of Hampton Securities in Toronto:

"Everybody's branding themselves now as a green investment.  Everybody has a sustainability report, but what do those reports really say?  One of the challenges ahead for investors ahead is identifying who's really doing what they say they are doing, and who's hopping on the bandwagon."

On the other hand, the article does identify two mutual funds that meet the test of greeness, the Investors Group Investors Summa Global Environment Leaders Fund and the TD Global Sustainability Fund, both of which include a significant proportion of renewalble energy in their top holdings.

Mr. Gillespie also suggests that green investors look at some of the energy investment trusts that focus on green power (and provide some protection from the risks of small-cap volatility affecting many renewable energy companies).  Four that he suggests give investors access to "pure green plays" include:

• Algonquin Power Income Fund
• Great Lakes Hydro Income Fund
• Boralex Power Income Fund
• Creststreet Power Income Fund

At first glance, all of the four appear to be focused solely on renewable power.  I'll look at them a bit more closely another time.

Enjoy.

"Just How Responsible Is Your SRI Fund?"

Saturday’s Vancouver Sun business section has an article for you if you’re interested in Socially Responsible Investing (SRI) and the mutual funds that are marketed as a vehicle for doing so.  (See “Just How Responsible Is Your Socially Responsible Fund?”, Vancouver Sun, Saturday, October 20^th, 2007.)

Reporter Fiona Anderson looks at the holdings of eight Canadian socially responsible and/or ethical mutual funds and suggests that “ethical investors may be surprised to discover where their money is ending up, and just how little difference there is between the SRI’s and regular mutual Funds.” 

Much of the article looks at SRI fund investments in Suncor and Encana, two Canadian oil and gas companies.  Suncor is primarily an oil sands operator and developer while Encana, which focuses on conventional oil & gas recently announced its intent to invest in a new oil sands project in Alberta.

In the article, a spokesperson for Ethical Funds, one of Canada’s largest providers of SRI-based mutual funds, justifies its involvement in the oil sands sector by stating that “It’s hard not to be in the oilsands, because if you’re not in the oilsands you’re not in oil”. 

There is some truth to this statement, at least in Canada.  Oil & gas companies account for more than 430 listings on the Toronto Stock Exchange (TSX) and TSX Venture Exchange combined.  By value, trading in oil & gas listings accounts for 24% of activity on the TSX and 23% on the TSX Venture.  Certainly many of the largest companies are involved in the oilsands, but not all of them.

The article then goes on to indicate that “instead of avoiding them [oilsands companies], Ethical Funds rolls up its sleeves and works with them to improve their performance.”  And Ethical’s spokesperson states that they are “making pretty significant efforts to engage the sector in ways that they can begin to think about carbon-neutrality by 2020”.  The SRI industry labels this approach “engagement” and it has largely replaced the old approach of using screens to avoid certain types of companies. 

Having worked for and with many Canadian oil & gas companies on sustainability issues over the past 15 years, I am very sceptical that the SRI funds have the kind of influence on the directions taken by the companies that is implied in the above statement.  In which case, are they really more socially responsible than any other funds if they are investing in all of the same equities?

It’s a difficult set of questions.  SRI funds want access to as wide a range of equities as possible to allow them top acheive competitive performance.  And looking specifically at the oil & gas industry, the oilsands are becoming such a large part of the Canadian oil & gas industry.  However, I believe the answer is to place much more emphasis on results, i.e. who is producing the lowest carbon product and who is doing so with the least impact to air, water and land resources. 

How to Invest Sustainably

Its a sign of the times. The current issue of Atlantic Monthly has an article penned by Henry Blodget looking at socially responsible investing (SRI for short). Blodget was previously known as an internet/e-commerce securities analyst whose career with Merrill Lynch ended in the fallout of the dot-com crash. His article, entitled The Conscientious Investor (Sorry, Atlantic Monthly doesn't provide access to the whole article without a subscription. You'll have to buy the magazine or subscribe if you want to read the whole thing), takes a slightly sceptical view of SRI but winds up concluding that “socially responsible investing certainly deserves to go mainstream. Capital-allocation decisions can help shape behaviour.”

What value Blodget concedes to SRI, he suggests accrues because “it encourages investors to think like owners instead of renters or gamblers.” And he goes on to add that “If you invest the time to analyze a company’s business practices-or better yet, to change them-chances are you will be more committed to the company’s stock than if you were just looking for a quick score. Why does this matter? Because perhaps the most return-reducing habit for most investors is frequent trading.”

For a more charitable view of SRI, take a look at Ethical Funds’ publication, Guidebook to Sustainable Investing. Intended to describe Ethical Funds approach to investing, it provides a good overview of the thought process for incorporating environmental, social and sustainability concerns into the selection of stocks and the ongoing managment of an ethical or sustainable stock portfolio.

For those wanting the speed read, the Social Investment Forum provides an even briefer introduction to SRI in an online guide.