Australasian UNEP Finance Initiatives ... - EPA Victoria/media/Publications/804.pdf · EPA Victoria...

‘Innovative financing for sustainability’

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Introduction Sherryl Garbutt MPMinister for Environment and Conservation, Victoria

Paul Clements HuntCo-Ordinator UNEP Finance Initiatives, Geneva

The Victorian Government recognises that the financial services sector has an important role to play with regard to the environment, both through the sector’s

I am pleased to provide you with a copy of the first own activities and through the influence it has over the Australasian UNEP Finance Initiatives Newsletter. The activities of others. Influence can be exerted through purpose of the newsletter is to provide the the consideration of environmental risk in financing, Australasian Finance Sector with a forum in which to the adoption of environmental criteria in investment promote and share new ideas and products which strategies, and the integration of environmental issues incorporate the environment as a key business driver. into insurance products.

EPA Victoria will produce this Australasian newsletter By considering environmental issues in its decision-under the Memorandum of Understanding between making processes, we are seeing that the financial EPA Victoria and the United Nations Environment services sector can have a major positive influence on Programme Finance Initiatives (UNEP FI). This the environment and can also improve its own Australasian newsletter will focus on developments in financial bottom line. It is for these reasons that I am domestic markets and will complement the excited about the work that EPA Victoria is doing under international UNEP FI newsletter published from its Memorandum of Understanding with the UNEP FI Geneva. and the publication of the first edition of this

newsletter. I hope that you will find this newsletter

useful and informative and I encourage you to

contribute articles about your own innovations and

activities for future editions.

Australian UNEP F1 Newsletter Issue 1 October 2001

Background

www.epa.vic.gov.au/programs/UNEPwww.unepfi.net

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A practical UK tool-kit

www.bba.org.uk

www.abi.org.uk

Environmental issues have clearly become a new factor driving commercial risks and opportunities in

the international financial services sector.

In recognition of this fact, UNEP established its Finance Initiatives in 1992 to promote sustainable development and environmentally sound business practices across the financial services sector. A number of major international financial institutions

responded by working with UNEP to draw up Terry A'Hearn, Senior Economist at EPA Victoria signs statements of environmental commitment.the MOU watched by Jacqueline Aloisi de Larderel

Under the Finance Initiatives, UNEP, in conjunction Director, Division of Technology, Industry and with many of the largest and most respected Economics, UNEP and Hanns Michael Hoelz, Global international financial institutions and insurers, runs a Head, Public Affairs and Environment Co-ordinator, number of activities. These include an annual Deutsche Bank.international conference, regional conferences and

Under the MOU, EPA Victoria will promote the UNEP seminars and the distribution of a regular newsletter.Finance Initiatives in Australasia on behalf of UNEP.

These activities disseminate information about best This will include activities such as holding meetings, environmental practice throughout the industry and seminars and conferences in Australasia, establishing help institutions deal with the commercial risks and and chairing Australasian advisory committees on opportunities increasingly raised by environmental environmental issues in the financial services sector, issues. and publishing regular UNEP newsletters.

The UNEP Finance Initiatives is largely run by Steering For more information, please refer to EPA Victoria’s Committees with representatives from major financial website: institutions. The current chairs of the Steering and UNEP FI’s website: Committees are Walter Jakobi, Gerling Re (Insurance

chair), Michael Hoelz, Deutsche Bank, and Richard

Cooper, Lloyds TSB (Banking co-chairs).

Following the success of the first Australasian UNEP Financial Services Conference hosted by EPA Victoria in February 2000, EPA Victoria was invited to sign a Memorandum of Understanding (MOU) with UNEP to co-ordinate and promote its Finance Initiatives

UK Guidelines on Environmental Management and activities in Australasia.Reporting for the Finance Services Sector have been

The MOU was signed in November 2000 at the Annual developed by the FORGE group (which includes, the Conference of the UNEP FI which was attended by 300 Abbey National Group, Barclays, CGNU, Lloyds TSB, representatives of international financial institutions. Prudential, The Royal Bank of Scotland, Royal & The signing ceremony took place at the headquarters Sunalliance). These guidelines provide a proactive of Deutsche Bank in Frankfurt. and positive response to reducing environmental

impacts and risks. The guidelines are available from

the British Bankers Association website

or through the website for the

Association of British Insurers


! ASRIA

! SRI in NZ

www.prometheus.co.nzwww.cleangreennz.com !

www.goodreturns.co.nz

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! New Magazine Ethical !Investor Launched in !June

www.ethicalinvestor.com.au

Summary of UNEP Credit Risk Seminars in Australasia

seminars were the first activity to be organised by EPA

Victoria under the MOU it has signed with UNEP.

April 2001 saw the launch of www.asria.org, the The Seminars were a great success with more than 150 primary resource for promoting Sustainable & people from more than 50 different organisations and Responsible Investment (SRI) in Asia. ASrIA's mission from all parts of the Australian financial services sector is to mobilise the capital markets in support of attending. The high level of interest in the seminars sustainable economic development. ASrIA aims to demonstrated the recognition in domestic markets that help financial institutions develop sustainable environmental issues can have an impact on lending investment products for the region, provide SRI activities. training and education, and foster the provision of high quality information on the environmental and social activities of corporates in Asia. At this stage,

ASrIA is primarily a web-based resource, however it is

also in active partnership with others on the ground

across the region.

For information on a selection of Socially Responsible

Investment products and services in New Zealand, the following websites may be of interest:

Speakers at the Seminars included:

Mr Richard Cooper, Head of Group Environmental Risk, Lloyds TSB Group plc,

Dr Bernd Schanzenbächer, Vice President, Product

Ecology Manager, Credit Suisse,

Mr Chris Bray, Head of Environmental Risk

Management Unit, Barclays Group and

Mr Mike Kelly, UK Head of Environment, KPMG, UK.

On sale in news stands in Australia, is a new monthly magazine, Ethical Investor. Ethical Investor focuses on the environmental and social performance, and good governance, of corporations, and on ways of investing that are both rewarding and consistent with

one's values. It is only $4.95 for each monthly issue.

For more information or to subscribe visit:

L-R: Gabrielle McCorkell, Terry A’Hearn, Chris Bray,

Richard Cooper, Mike Kelly, Helen Bloustein

Topics covered by the speakers included why financial institutions are channelling more resources into environmental risk management programs, how Helen Bloustein, EPA Victoriaenvironmental risk is assessed by financiers to

In March of this year EPA Victoria hosted a series of enhance profitability and safeguard reputation, what UNEP Environmental Credit Risk Seminars. The are the latest methodologies for assessing companies’


environmental risks, how European banks equip injuries to people occurred from environmental personnel with environmental credit risk techniques, management practices that appeared to operate under and why environmental credit risk is important from an the assumption that chemicals that were placed into

investment perspective. the ground, waterways and air would eventually “go

away” and disappear. If you would like a copy of the proceedings please Incidents such as Love Canal, Times Beach, Bhopal-contact the UNEP Australasian Liaison Office at EPA India, and Exxon Valdez have all helped in prompting Victoria: U.S. legislation such as the:E:

Resource Conservation and Recovery Act 1976

(RCRA) which covers “cradle to grave” responsibility

for generation of hazardous wastes;

Comprehensive Environmental Response Compensation and Liability Act (CERCLA or Superfund) 1980, a program to cover cleanup costs from historically contaminated sites by identifying

and making legally liable anyone who may have

contributed to that site’s contamination. There

exist numerous sites in the U.S. which could not be

cleaned because a responsible party could neither be identified nor be considered financially solvent, leaving the burden of cleanup on the federal and state governments:

Clean Air Act;

Clean Water Act; and

Numerous other state laws.

The creation of the U.S. environmental liability market occurred in response to the various financial

Dr Bernd Schanzenbächer, Vice President, Product responsibility requirements required by federal, state, Ecology Manager, Credit Suisse and local regulations, and to exclusions and

restrictions on general liability policies. In 1979,

Lloyds of London wrote the first pollution legal liability

policy and, in 1980, American International Group

(AIG) introduced its own pollution legal liability policy. Many companies jumped into the environmental

insurance market (40 companies in 1983) but only a

few remained by the mid-80s due to lack of expertise and knowledge. Today, the major providers of U.S. insurance coverages are AIG, ECS, Kemper, and Zurich.

Cami Mok, American International Group During these early years, the market was quite

conservative and environmental coverages were How and why did the US Environmental Liability restrictive and expensive, with an extensive Insurance Market develop?underwriting process. Many companies chose to self-

Our current lifestyle choices have been responsible for insure as they felt that environmental coverages were tremendous changes in the environment and in our far too expensive and limited in scope to justify management approaches. In 1930, the U.S. generated insuring these exposures. As the market has approximately one million tons of chemical waste as matured, insurance companies have been able to compared to five hundred million tons in 1990, a 500- provide significantly varied types of coverage with fold increase in 60 years. Contamination of land and competitive premiums. Now, regardless of whether a

[email protected]!

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The Environmental Insurance Market: Development in the US and Current Conditions

company is seeking environmental coverages because Commercial real estate transfers where insurance

of government mandates or voluntarily as prudent products can address the concerns of buyers,

business practice, environmental insurance has sellers, developers or financial institutions;increasingly moved from being a specialty niche Increased public awareness of environmental product to an important part of a company’s risk issues;management strategy. In addition, there has been a Aggressive legal climate;dramatic change in the types of companies that Enforcement of environmental liabilities obtain environmental insurance, from the heavy “disclosure” requirements for US companies under industrial and hazardous waste management SEC and FASB accounting rules;companies of the early 1980s to the commercial Numerous environmental regulatory “cleanup” facilities, banking, real estate, and construction risks programs (voluntary cleanups and Brownfield

of today. For many companies, securing initiatives);

environmental insurance coverage has become as Utility deregulation (redevelopment of formerly

customary as acquiring general liability and used properties); and

automobile insurance. Reuse of military bases.

What coverages are being provided in the U.S. What does this mean for Australia?market?

Australia has the same concerns and needs to There are numerous environmental insurance manage environmental liabilities to protect human products. Their primary intent is to provide coverage health and the environment. While not all of the US for pollution conditions arising from a company’s market drivers apply in Australia, there exists a strong operations and activities whether the company is a and growing sense of environmental responsibility in general contractor or a chemical manufacturing this country. We are seeing increasing funding for facility. The various U.S. products can cover: environmental protection agencies and programs and

Sudden and gradual pollution releases; a focus on finding industry-interactive solutions to

environmental issues. Solutions will be needed to Third party property damage and bodily injury manage ongoing industrial operations, claims;redevelopment, and for cleanup of abandoned First party business interruption-rental values or contaminated properties such as old mines.loss of income;

Cleanup costs for historical and new To conclude, it is likely that we will see increasingly contamination; protective environmental legislation occurring in all Legal and defense expenses; parts of the world with an emphasis on conservation, Liabilities from the transportation and disposal of sustainability, and guardianship of our resources. materials and wastes; Companies that value these concepts and understand Stop loss coverage for environmental remediation the benefits of proactive environmental management projects; and programs will be in the forefront of business in the Lender liability and the protection of outstanding next decade. loan balances associated with the lending

For more information from AIG contact:activities of various financial institutions.Cami Mok Australian Environmental Risks Manager What is driving the U.S. market?E: Web Address: Many companies have become concerned about their

directors’ and officers’ (D&O) exposures and having proper coverage for pollution-related events. Other drivers include:

Resolving issues in Mergers & Acquisitions

transactions: contractual obligations, indemnities,

etc.;

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[email protected] www.aig.com

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SRI Tested in New Zealand

[email protected]

[email protected]

a wholesale Australasian equity product in partnership with Rodger Spiller & Associates.

Retail products have been slower to emerge, most likely due to a lack of perceived demand and, for those

Melanie Hewitson, TOWER Asset Management investors who have asked for a product, the cupboard has been rather bare. Until now.

It had to happen. In the wake of intense interest in Australia and further afield, socially responsible In March this year, the first New Zealand-based global investing (“SRI”) has hit the financial headlines in New SRI offering hit the market. TOWER’s Global Zealand. Responsibility suite of equity funds for wholesale and

retail investors is managed by Norwegian fund And the environment appears welcoming. A clean,

manager, Storebrand Investments. The appointment green, nuclear-free image; more Green MPs in

followed a global search for world’s best practice SRI parliament than ever before; the New Zealand

management. TOWER Asset Management’s Managing Business Council for Sustainable Development and

Director, Paul Bevin, admits their shortlist of managers Businesses for Social Responsibility enjoying

was short. “It was a challenge to find a manager that increasing membership; a survey naming corporate

offered excellence in the financial discipline of stock social responsibility practitioners Stephen Tindall and

analysis, conducted rigorous social and environmental Dick Hubbard as NZ’s most popular business leaders;

research, and also managed to combine the two increasing demand for organic food; liquor giant DB

elements into a portfolio construction and risk inciting public outrage for attempting to shut down its

management process that would pass scrutiny,” Bevin boutique brewer, Monteiths, on the economically-

said.challenged West Coast; and Triple Bottom Line and SRI on the agenda at this year’s Auckland Regional And is there demand from NZ investors? Capital National Party Conference. Financial Planning Ltd’s Director, Katrina Hawker said:

“If our clients are any indication of the future for SRI, To top it off it looks likely that the proposed New

then fund managers considering whether to introduce Zealand Superannuation Fund will incorporate socially

them here in New Zealand should be heartened.” responsible criteria into its investment policy.

TOWER also reports steady retail inflows and now has To imply that SRI did not exist in NZ before the more

two wholesale clients, both charitable trusts. A recent introduction of socially responsible managed

number of trusts have social or environmental funds by the likes of TOWER, Jupiter and AHGI is rather

objectives for their investments in addition to financial unfair to one community investment stalwart in

objectives. Also, for diversification and tax reasons, particular, Prometheus Ethical Finance. A credit union

more trusts are finding international equities to be an that has been lending to environmentally friendly and

attractive long-term investment. The Tower fund meets socially valuable projects since 1983, their assets now

demand on both these counts. exceed $6 million.

And what of the future? There is an emerging view that A number of long established investment advisers are

SRI is no fickle investment fashion like, say, dot coms. known for finding ethical investment solutions for their

It is backed by increasing evidence of the business clients, Money Matters for instance, and Capital

case for sustainable business practices. So no wonder Financial Planning in Christchurch. Then there’s

investors are taking an interestEthical Investment Aotearoa, an association of ethically orientated investment groups, whose aim is For further information contact:to promote the benefits of investing ethically in New Melanie Hewitson,

Business Development ManagerZealand.E:

Of the larger asset managers, NZGT has, for some years, managed negatively screened NZ equity portfolios for wholesale investors, mainly religious superannuation funds. They have recently introduced

Web Address:

OR:Stephen HallE:



Ethical Investment Sainsbury’s executive Conference visits Australia

www.eia.org.au

Gabrielle McCorkell, EPA Victoria Helen Bloustein, EPA Victoria

During the last 10 years a service industry has grown in Under its agreement with the UNEP to promote Australia to meet the growing demand of ethical environmental issues to the finance sector, EPA investments. The industry comprises: Fund managers Victoria organised for Alison Austin, a senior executive offering ethical investments to the public and industry; of Sainsbury’s (Britain's second largest supermarket financial planners advising investors and academics; and leader in environmental performance and researchers analysing and reporting on the reporting) to come to Australia in March 2001. While investments that are available; and individuals, she was in Australia, Alison discussed European entrepreneurs, companies and governments creating trends in incorporating sustainability issues into the opportunities for investing money in a socially and business practices and how they can be used to environmentally positive manner. further a company’s competitive advantage.

With an increase in the number of ethical investment Sainsbury’s was recently named as the leading food professionals the Ethical Investment Association (EIA) retailer for the second year running in the UK's has been formed to pool the efforts of those involved, 'Business in the Environment's Index of Corporate and more efficiently promote the concept and practice Environmental Engagement'. Sainsbury’s is a leader in of ethical investment to the public. EIA, through both the sustainability debate in Europe, with a progressive serving and supporting its members, aims to be the environmental policy that covers issues such as GMOs, flag bearer for ethical investment in Australia. organic products, and product stewardship.

In August 2000, EIA hosted the first ethical investment One of the main purposes of Alison’s visit was to conference in Australia. The conference was a great speak at the annual Conference of Major Super Funds success with more than 220 people in attendance from Conference which was held in Queensland from 26-28 all areas of the finance sector. The aim of the March. EPA Victoria and Alison were joint presenters in conference was to provide a balanced assessment of a session at the conference on Socially Responsible the industry and its prospects for growth in Australia, Investment.provide information for trustees and financial planners

At the conference, Terry A’Hearn of EPA Victoria spoke considering socially responsible investment and raise about the latest developments in SRI that are occurring the profile of the industry as a whole.in mainland Europe and the UK and how they would

Since the conference, the Australian ethical influence the Australian growth of the SRI market. investment industry has grown. There have been big Alison Austin gave her perspective on these trends increases in funds under management, new funds from a corporate point of view. This was especially launched, and an increasing realisation among topical as companies are increasingly seeking ways to business that their environmental and social conduct be included in the various sustainability indices that is impacting on their bottom line. Consequently, EIA is are being launched around the world, including the holding its 2nd Annual Event. EPA Victoria has formed Dow Jones Sustainability Index and the recently a strong relationship with EIA and the event was held launched FTSE 4 Good Index. In addition, changes to in conjunction with UNEP, in Melbourne on the 3 and 4 the UK Pension Act in July 2000 mean that all Pension September 2001. plans must now state to what extent they account for

social, environmental and ethical considerations. For further information on the Ethical Investment

Pressure is building on companies to be able to Association go to:

respond to these sort of questions when they talk with fund managers and other investors about how they conduct their business.


While in Victoria, Alison Austin had meetings with the Recently published Australian Prudential Regulation

Department of Natural Resources and Environment and Authority (APRA) statistics show that the private sector

Food Services Victoria, various companies such as insurance industry generates direct premium revenue Coles Myer and National Foods and was also involved of $15.9 billion each year. ICA members issue some 36 in a sustainability luncheon with John Elkington. This million insurance policies annually and deal with three was attended by more than 20 representatives from million claims each year. companies, non-government organisations and

The ICA and its members have been increasingly academia. Alison’s discussions while she was in

concerned about the potential impacts of climate Victoria were on topics as broad ranging as

change on the insurance industry and the community sustainability of the food chain, gene technology, the at large. While the insurance industry itself is not a state of supermarket retailing in the UK and Europe large emitter of greenhouse gases, it is both highly and the implications of socially responsible susceptible to the manifestations of climate change investment.and potentially an effective channel for educating

business and the public about ways to minimise

emissions and the adverse impacts of climate.

During the past year ICA has taken steps to lead by example and to educate its members.

Senator Robert Hill was invited to be the keynote

speaker at ICA’s annual Canberra Day Conference on

August 10, 2000. Senator Hill spoke at length about the Government’s programs aimed at reducing greenhouse emissions and invited ICA members to consider ways in which they could further support the Government’s initiatives.

ICA has also commenced the production of a Alison Austin newsletter for members called Greenhouse Cuttings

with the intention of creating a specialist channel for For further information on Sainsbury’s sustainability

communication to and between members with regard initiatives go to:

to greenhouse emissions and climate change issues.

Sandie Watson, Insurance Council of Australia

The Insurance Council of Australia (ICA) made a

commitment to the Greenhouse Challenge through a

Facilitative Agreement in December 1999. ICA represents 70 member organisations (made up of 138 registered general insurers) that provide more than 90 per cent of all underwriting in Australia. Some ICA members are subsidiaries of international insurers

while others are domiciled in Australia with significant

overseas activities.

www.j-sainsbury.co.uk

The Greenhouse Challenge…….ICA takes the initiative


As both an educational exercise and to lead by

example, ICA’s Pitt Street headquarters have been

subjected to an energy audit and a management

review using the ‘One-2-Five’ Energy program of

Energetics. The results were both revealing and valuable demonstrating that significant energy savings can be made even in relatively small service organisations.

The results of that exercise formed the basis for the second issue of Greenhouse Cuttings in which members were urged to consider reducing energy costs as an immediate and highly effective way of reducing greenhouse emissions.

Future Vision

Gabrielle McCorkell, EPA VictoriaICA members provide general insurance products to communities across Australia. As such, extreme Companies from all industries around the world are weather and associated events including cyclones, increasingly making information about their storms and bushfires have an affect on the insurance environmental performance available to the public. In community. At the same time the extensive marketing the Finance Sector some institutions are leading the and customer relationship networks and sales teams way. In examining Deutsche Bank’s public of ICA members represent a unique opportunity to Environment Report it is apparent that they have educate business and the public to both reduce risk recognised the importance of dealing with and minimise emissions. environmental issues and sustainable development.

For over a decade Deutsche Bank has been addressing In the coming year ICA will continue to build on the environmental issues in an innovative fashion as communication it has started with members about the reflected in the emphasis placed on business policy, direct and indirect advantages of energy management internal environmental management and social in their own operations and the positive greenhouse responsibility. outcomes that these actions deliver. ICA will also urge

its members to consider the advantages of an energy Deutsche Bank, as a signatory to the UNEP Finance audit in both financial and environmental terms. Initiatives, base their principles for environmental

protection on the “Statement by Banks on the Material promoting effective greenhouse action will be Environment and Sustainable Development” (UNEP posted on the ICA internet site. A network of interested declaration). An essential component of their industry players will be built and a discussion corporate guidelines is that they act with facilitated about ways the broader insurance industry understanding and responsibility towards can influence business and the community to support sustainability. It implements these principles through the aims and objectives of the Greenhouse Challenge.its environmental management system which is based

ICA’s existing involvement with the planning arms of on the international standard ISO 14001; for which Emergency Management Australia and other Deutsche Bank received certification in May 1999.Emergency Service organisations will be strengthened

Deutsche Bank views environmental protection and ICA members will be urged directly to join the internally as a multi-dimensional matter that Greenhouse Challenge.constantly requires an integrated case-by-case

For further information contact: approach. To meet its environmental obligations it Sandie Watson established an environmental management system for National Public Affairs Manager

its in-house operations at the Head Office and all E: major German locations in 1997, which is based on ISO Web Address:

Internal Environmental Management

[email protected]


14001. Its activities focus on the areas of: area of sustainable development is having employees

Purchasing/office supplies and logistics; accept, support, and participate in active

environmental protection. Information and sharing of Facilities management; andopinions and experiences are important to generate Recycling and waste management. this necessary acceptance and support. Consequently,

Some of the initiatives under the internal environment emphasis has been placed on internal motivation and program include: communication, complete with incentives, tips and

Installing solar energy equipment (that is, building new ideas for appropriate environmental measures. To photovoltaic modules). This equipment will, during assist with this, Deutsche Bank has introduced its lifetime, reduce the impact on the atmosphere regional environmental meetings to introduce by a total of 600 metric tons of carbon dioxide and sustainability development concepts, status reports on 0.7 metric tons of sulfur dioxide; projects that are part of the environment management installing a water collection basin, to collect system and ensure that open dialogue on rainwater for use in the toilets and watering the environmentally relevant topics takes place. gardens. This reduced its city water consumption by

For further information on Deutsche Bank’s about 60 per cent;Sustainability Programs see:offering company cars that are more fuel efficient;

re-sorting waste by a specialised disposal

company, at Head Office, in order to minimise the amount of refuse that is dumped in landfills or incinerated;

completely transferring to an electronic office mail system, which has saved the bank an average of

130,000 sheets of paper each month;

introducing internal purchasing guidelines, with

particular attention placed on procuring Ian Woods, AMP Henderson Global Investorsenvironmentally compatible and, if possible, reusable and recyclable products;

Many people believe that globalisation is a threat to Incorporating special assessment criteria and an

sustainability. At AMP, we believe that instead, it can environmental clause on running environmentally

be used to progress the goals of sustainable compatible business when selecting suppliers and

development. For example, one running theme in the concluding contracts; and

effort to make globalisation a lever for sustainable Promoting of video and teleconferencing whenever

development is the growing emphasis on the social possible. The Bank’s Travel Policy specifically

responsibilities of corporations. Attention has shifted encourages the use of public transportation, via job

from corporate philanthropy to responsible business ticket agreements plus car-pooling and car-sharing.

practice – making the promotion of human rights, high

standards of environmental stewardship and social The environment program works to identify accountability – a core element of business quantifiable goals and measures whose operations. implementation can lead to further group-wide

reductions in the consumption of energy, water, paper

and fuel. An example of a goal is to reduce CO 2

emissions from energy consumption by 5 to 10 per cent per employee by the end of 2001. An example of a measure is the introduction of environmental clauses in all contracts concerning technical management,

housekeeping, painting and other trade work.

A critical factor affecting continual improvement in the

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www.deutsche-bank.de!

So why is sustainability ! important to asset

managers?!

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And as society raises its expectations of corporate poor management of these issues can expose a

behaviour, so the role of the investors that finance company to risks (for example to its reputation or

these corporations becomes ever more central – environmental liability);particularly for the socially responsible investment foreclose opportunities (for example new products movement that has been actively contributing to this and markets); andshift since the 1970s. The integration of sustainable Affect other ‘soft’ aspects of business performance development and corporate responsibility factors into (for example recruitment and retention of high-the investment process has proved to be an quality, motivated employees).increasingly effective way for fund managers to

It is part of AMP Henderson’s stewardship of its clients’ anticipate rising social expectations, tightening assets and the exercise of its responsibilities as a part-regulation and changing market demands. owner of the companies in which we invest.

AMP Henderson Global Investors, an asset The purpose of engagement work, consistent with AMP management company with some $A300 billion of Group’s commitment to sustainable development, can funds under management, recently launched the AMP be encapsulated as being: ‘To encourage progress Henderson Sustainable Future Funds, part of its suite towards sustainable development in the companies in of more than 30 portfolios run globally on a socially which HGI invests.’responsible basis. These funds have two core

elements. The first is to invest in companies that So what does engagement entail? Our engagement contribute to, benefit from, or best adapt to the global work follows five guiding principles:shift to more socially and environmentally sustainable

Focus: we will focus on the most important issues in forms of economic activity. We believe that terms of sustainable development, and on the sustainability will drive investment markets and thus companies for which these issues are most relevant shareholder returns. by virtue of their business.

The second is that AMP Henderson can, through its Transparency: the way in which priority companies corporate governance practices, engage companies as and issues are selected, and the way we pursue a responsible shareholder. AMP Henderson’s UK those priorities, are clear.affiliate, Henderson Global Investors (HGI) is now

extending its corporate governance policy to all its Integration: engagement work will be closely

equity investments (not just SRI) to include key integrated with SRI research, ‘traditional’ corporate

elements of the corporate responsibility agenda. governance work, and both SRI and mainstream

Starting with the FTSE 100, these include fund management.

environmental management, human rights, employee practices and community relations. We recognise that Credibility: our work will be based on a thorough traditionally, corporate governance has been confined understanding of environmental and social issues to a fairly narrow set of questions including roles, and their relevance to business, derived from in-remuneration and operation of boards, and to the house research and networking with other voting of shares. However, many of the boards that organisations.have been developing best practice on social and environmental management have done so by adopting board level policy commitments. Such companies are treating these issues as corporate governance issues. For these companies good governance of these issues

is a fundamentally important part of good corporate

governance as a whole.

The extension of the corporate governance policy in this way reflects HGI’s recognition that:

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[email protected]

The Australian Public Environmental Reporting Website – A Government Initiative for Business

Accountability: we will report regularly to clients Environment Australia’s aim, in developing the

and others on our work and its achievements. website, is to provide a comprehensive set of

background information, guides, and examples for In Australia and the UK we have met with a number of companies and other organisations wishing to develop companies across a range of issues, of which the most their own Public Environmental Reports (PER). It also significant issue raised has been that of climate

provides useful information for researchers, investors change. Our operations from the UK have also raised

and others with an interest in PER.the issues of human rights (including working

conditions in developing countries in suppliers of The PER website includes a library of electronically

goods to the UK), social responsibility in the rail and available Australian PER, and will continue to include bus industries; and sales and patents policies of as many of these as can be brought together, forming a pharmaceuticals companies distributing in the comprehensive overview of PER in Australia. The site developing world. also includes a selection of international reports and

links to international library sites as well as to The AMP Henderson Sustainable Future Funds offer

individual companies in Australia and abroad. Australian investors choice to invest in companies that

will form part of a sustainable future, whilst HGI’s corporate governance programme enable it to exercise its share ownership with social responsibility.

For further information on AMP Henderson Global

Investors SRI program contact:

Ian Woods Senior Research AnalystE: Web address:

The site includes guidance on how to prepare a report

such as Environment Australia’s “Framework for Public Environmental Reporting: An Australian Approach” and

the link to the Global Reporting Initiative. To assist Alex Fearnside, Environment Australia users, the site includes tips and tools on creating a

PER, compiled from advice offered by Australian On 10 April 2001, Senator the Hon Robert Hill, the companies. Links to related sites of interest are also Commonwealth Minister for the Environment and included.Heritage, launched the Australian Public

Environmental Reporting Website, at the Adelaide Currently, about 40 Australian companies are listed on session of the conference series ‘Sustainability: The the site, from a range of industries, including mining, Business Case.’ energy, telecommunications and manufacturing.

Additional sectors, including the finance and service “Public environment reporting provides industry and sectors, are now starting to embrace the benefits of the community with an on-going scorecard on progress public environmental reporting.toward ecological sustainability,” Minister Hill said.

“Importantly, it allows companies to showcase the Through examining a variety of reports, organisations considerable efforts being made to improve can pick and choose the content, format and style environmental performance.” which suits their business and industry sector. For


example, a mining company’s environmental impacts

will vary greatly from the impacts of a small

manufacturer or a water supply company. The data collected and the information that is of greater importance to stakeholders will necessarily differ.

Clare Bellis, Macquarie University

The BackgroundWhen I tell people that I chair an actuarial committee with an interest in climate change issues, I often get The Sustainable Industries Branch of Environment the response: “Oh yes, of course, actuaries work for Australia works with business and industry on a range insurance companies. Naturally they would be worried of issues aimed at improving environmental about increased claims as a result of climate change.” performance. These include promoting the emerging That is true as far as it goes: actuaries are involved, environment industry, managing the Packaging with meteorologists and other experts, in looking at Covenant and promoting the concept of eco-efficiency the impact on insurance costs of changing weather (that is, improved combined ecological and economic patterns and other environmental risks. But that is outcomes). only one of many aspects of the environment that

Our focus on eco-efficiency is being achieved through affect the work of actuaries.developing agreements with industry associations and

Actuaries are experts in the analysis and management through research and dissemination of information, of all sorts of financial risks. The profession developed including case studies about ‘tools’ such as life cycle originally to meet the needs of life insurance assessment, design for environment and environment companies, which sold policies which might run for as management systems, which can help a company long as 100 years. Actuaries had to make sure that the meet the dual goals on improving environmental and companies built up sufficient funds during the many economic performance. We see public environmental decades when premiums exceeded claims, in reporting as one of these ‘tools’.recognition that eventually those funds would be

Hence we support voluntary public environmental needed to pay out the claims. For this reason the reporting by corporations and would like to see the profession has always had a long-term perspective to number and quality of these reports increase. As a modeling financial risk. contribution to facilitating the uptake of PER, we have undertaken a number of initiatives. During 2000, Environment Australia funded a one-year program to place Public Environmental Reporting Extension

Officers in industry associations. Amongst the success

stories generated through the hard work of the three

officers and participating companies, some barriers to

greater uptake of environmental reporting were identified. Feedback indicated that organisations needed an up-to-date, Australian, web-based resource: a resource which would answer all their questions on what a Public Environmental Report is Nowadays, actuarial models are used for all sorts of and how to produce one. So began the Environment problems, not just those related to insurance, and this Australia quest for the ultimate Australian PER site. has extended to environmental issues. For example, a If you are interested in information on the website,

working group of the Institute of Actuaries of Australia contact:

(the professional body which represents all actuaries in Australia) has been looking at whether actuarial Anne Close

Financial Sector Projects Team member models can be used to place a financial value on the E: biodiversity of natural areas. Another working group is Web address:

looking at Socially Responsible Investments, and

Actuaries and the Environment

[email protected]

www.ea.gov.au/industry/sustainable/per


analysing the returns that SRI funds have achieved. programs to run in Australasia. Successful meetings

Actuaries also advise on the financing and risk have so far been held for three of the four committees. management of large capital projects. They already Possible projects the committees are looking at need to take into account how such projects may be include: running educative SRI fora in New Zealand; affected by the financial consequences of consolidating government environmental data; and the environmental impacts. As companies look more at rural implications of environmental credit risk.

the “triple bottom line” of their profit results (and

factors such as the increasing proliferation of SRI funds UNEP Australasian Advisory Committee Membership:

will encourage this trend), actuaries will have to model

the non-financial impacts as well. Environmental Credit RiskThe committee that I convene brings together actuaries

Australian Bankers Association Stephen Carrollwho work in the energy industry and others with an ANZ Peter Smith

interest in climate change issues. Those involved in Commonwealth Bank Glenn HomanFitch Carolyn Martinenergy markets have to be aware of possible market Macquarie Bank Mary Reemstdevelopments such as trading in renewable energy National Australia Bank Chris Davey

certificates or carbon credits. Other members advise Westpac Paul TrowbridgeEnvironment Australia David Pinchcompanies on the development of a corporate climate EPA Victoria Terry A’Hearn

change strategy. EPA Victoria Helen Bloustein

Thus the actuarial profession is increasingly involved Insurancein understanding environmental issues. This interest

AIG Cami Mokwas evident during May at the biennial Convention of Gerling Stephen Westwoodthe Institute of Actuaries of Australia where a number Institute of Actuaries of Australia Karen Johnston

QBE Victor Walterof environmentally focused papers were delivered. Swiss RE Bruce ThomasMacinante Consulting Justin MacinanteFor more information on any of IAA environmental Environment Australia David Pinch

programs or committees contact: EPA Victoria Terry A’HearnEPA Victoria Helen Bloustein

Jane FergusonSocially Responsible InvestmentDirector, Public Affairs

E: AMP Ian WoodsWeb address: Commonwealth InvestmentManagement Scott BourkeEthical Investment Association Janice CarpenterEthical Investment Association Simeon MichaelsMonash Doug HolmesSAM Francis GreyNRMA Tim HardySIRIS Mark BythewayTower NZ Melanie HewitsonWestpac Investment Helen Bloustein, EPA VictoriaManagement Erik MatherEnvironment Australia David PinchA key initiative under EPA Victoria’s agreement with EPA Victoria Terry A’Hearn

UNEP is the establishment of advisory committees EPA Victoria Helen Blousteincovering the following four topics:

If you would like more information on the UNEP Socially Responsible InvestmentAustralasian Advisory Committees please contact the Environmental Credit RiskUNEP Australasian Liaison Office at EPA Victoria:Insurance

Operational Environmental ManagementE:

The committees are made up of financial institution

representatives (see below for details) and will advise

EPA Victoria and UNEP on the nature of activities and

[email protected]

UNEP Australasian Advisory Committees

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[email protected]


UNEP Australasian Advisory Committee on SRI

Back L-R: Melanie Hewitson, Tim Hardy, Scott Bourke, Helen Bloustein, Ian Woods

Front L-R: Dave Pinch, Erik Mather, Simeon Michaels, Terry A’Hearn

Absent: Francis Grey, Janice Carpenter, Mark Bytheway

Contact Us AUSTRALASIANSIGNATORIES TO THEUNEP FINANCEINITIATIVES

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[email protected]

[email protected]

This is the first issue of the Australasian UNEP FI

Newsletter and we would encourage any feedback,

and future contribution of articles/shorts.

If you:

Have a new product with an environmental focus;Westpac

Publish an environment report; or

Are doing anything innovative with respect to QBE Insuranceenvironmental management

and would like an article published in this newsletter

please contact us.

Please let us know if you would like to receive future editions of this newsletter electronically, or would like to be removed from our mailing list.

Contact us through the UNEP Australasian liaison

office at EPA Victoria, via:phone: +61 3 9695 2687email: or

phone: +61 3 9695 2538


UNEP FINANCE INITIATIVES - AUSTRALASIAN LIAISON OFFICE

EPA Victoria 40 City Road Southbank Victoria 3006

GPO Box 4395QQ Melbourne Victoria 3001

Telephone 61 3 9695 2538 Facsimile 61 3 9695 2578

Www.epa.vic.gov.au

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