EuroCharity Yearbook 2010: The future of responsible investing by Panagiotis Vergopoulos

EuroCharity Yearbook 2010

www.eurocharity.gr/en www.eurocharity.eu

ΠΛΑΓΙΑ σήμανση πιστοποιημένου εντύπου

ISBN: 978-960-99967-0-9

The Future of Responsible Investing

EuroCharity The reference point for Corporate Social Responsibility and the Green Economy

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Yearbook 2010

The Future of Responsible Investing

EuroCharity

Yearbook 2010

The Future of Responsible Investing

EuroCharity

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Yearbook 2010

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Publication series: EuroCharity Yearbook Publication title: EuroCharity Yearbook 2010: The Future of Responsible Investing Publisher: EuroCharity 2, K. Palama Street & 161, Vouliagmenis Avenue GR-172 37 Dafni, Athens, Greece Tel.: +30 210 927 1110-29 info@eurocharity.org www.eurocharity.gr/en www.eurocharity.eu Creative design and layout: Blast! Communications 29, Thessalias Street GR-174 56 Alimos, Athens, Greece Tel.: +30 210 996 7940 together@blastcom.gr www.blastcom.gr Printing: Pressious Arvanitidis S.A. An FSC® Certified Company (FSC® licence no.: FSC-C101658) 78th km. National Road Athens-Lamia GR-322 00 Ypato, Thibes, Greece Tel.: +30 22620 71078 info@pressious.com www.pressious.com Copy editing: Christina Deligianni Published in June 2011 by EuroCharity.

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Yearbook 2010

Table of contents Peter Michel Heilmann and Michael Spanos

Dr. Lykke Friis

EuroCharity

Danish Minister for Climate and Energy

The future of responsible investing

KEYNOTE REMARKS

Why investments required to achieve independence from fossil fuels are reasonable and well-spent 24 Prof. Jacqueline McGlade

Dr. Achim Steiner

Executive Director, European Environment Agency (EEA)

UN Under-Secretary-General UNEP Executive Director Chair, UN Environment Management Group (EMG)

Information and data for greening Europe’s economy

MEMBERSHIP ASSOCIATIONS & FOUNDATIONS

Rio+20 and financing the transition to a Green Economy

Paul Clements-Hunt

Giuseppe van der Helm

Head, UNEP Finance Initiative

President, European Sustainable Investment Forum (Eurosif)

Sustainable finance: The future of doing business in complex, competitive global financial markets

European SRI market doubles in spite of financial crisis

18 Lisa Woll

Dr. James Gifford

CEO, Social Investment Forum (SIF)

Executive Director, Principles for Responsible Investment (PRI)

Principles for Responsible Investment

SRI trends in the United States

20 Louise O’Halloran

Connie Hedegaard

Executive Director Responsible Investment Association Australasia (RIAA)

European Commissioner for Climate Action

Roadmap for moving to a low-carbon economy in 2050

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RI Academy: Shaping the future of responsible investment

Eugene Ellmen

Elwin Groenevelt FFP

Executive Director, Social Investment Organization (SIO)

Managing Director, Stichting Microkrediet Nederland (Qredits)

Canadian SRI shows resilience in the face of financial turbulence

A responsible way of microfinance in Western Europe

Frederic Hauge Jessica H. Fullmer

Founder and President, Bellona Foundation

How pension funds can save the climate â&#x20AC;&#x201C; and themselves

Founder and CEO, Sustainable Business Institute (SBI)

Socially responsible investing for a lighter footprint

Paul Dickinson Yolanda Kakabadse

Executive Chairman Carbon Disclosure Project (CDP)

Corporate climate change disclosure and responsible investing

President, WWF International

Fabio Salviato President, European Federation of Ethical and Alternative Banks (FEBEA)

The future of responsible investing lies in ethical finance Prof. Mervyn King

INTELLIGENCE & RESEARCH

Curtis Ravenel 48

Global Head, Sustainability Group, Bloomberg L.P.

The importance of environmental metrics

David Harris

Chairman of the Board of Directors Global Reporting Initiative (GRI)

Responsible investing is no longer at the sidelines

Governments must look at global financing sources to build a low-carbon world

Director of Responsible Investment, FTSE Group

Moving to the centre: ESG factors in investment decision-making

Yearbook 2010

Dr. David Wood Director, Initiative for Responsible Investment (IRI) at the Hauser Center for Nonprofit Organizations at Harvard University

Three issues in responsible investment

Gregory Larkin Head of Business Development for North America ESG Research business, MSCI Inc.

How can sustainability uncover mispriced investment opportunities?

Dr. Rodrigo Amandi Managing Director, SAM Indexes

Sustainability investing: Strong dynamics at play

Nicole Notat

AB VASSILOPOULOS (DELHAIZE GROUP) Nutritious, healthy, safe and affordable! We deliver the best for life!

ATHENIAN BREWERY Athenian Brewery’s three-year plan to become the Greenest Brewer in Greece

COSMOTE MOBILE TELECOMMUNICATIONS S.A. How can we operate without harming the environment 100 DIVERSEY The future of responsible cleaning

104

FIAT Investing in the future of sustainable mobility

106

GEFYRA S.A. The Rio - Antirio Bridge: Investing in the citizens

110

GENESIS PHARMA A pharmaceutical company with corporate social responsibility in its heart

112

HALYPS CEMENT (ITALCEMENTI GROUP) Sustainable development as a key driver of environmental and social value

116

HELLENIC PETROLEUM Energy for life

118

Founder and Chairwoman, Vigeo

Working towards a new and healthy relationship between finance and the economy

Dimitris Micharikopoulos Co-Founder and Senior Partner Institute of Social Innovation (ISI)

The current state of sustainable and responsible investment in Greece

Prof. Christos A. Alexakis CEO, Invest in Greece S.A.

The future of responsible investing – FDI 2.0

Constantinos Michalos President, Athens Chamber of Commerce and Industry (ACCI)

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Responsible investing: The way forward for Greece

SUSTAINABILITY IN BUSINESS

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (OTE) For OTE, responsible business means building ties in the marketplace, in society, with employees and the environment 124

INTERAMERICAN S.A. On the right track to sustainability

Prof. Don Tapscott 128

Bestselling author

Enabling responsible investing JT INTERNATIONAL (JTI) Making a positive difference through effective partnerships

130

MAERSK LINE Maersk Line: Why it makes sense to highlight the issues

132

MYTILINEOS GROUP Investing in sustainability

136

158

Prof. Muhammad Yunus

NATIONAL BANK OF GREECE A pillar for sustainable development in the economy, the environment and the wider community

142

TT HELLENIC POSTBANK TT HELLENIC POSTBANK: Little, everyday moves can make the big difference

146

VISIONARIES

148

Founder, Grameen Bank Chairperson, Yunus Centre 2006 Nobel Peace Laureate

Investing in social businesses

160

Acronyms and abbreviations

162

Index of tables, graphs, figures, facts and stats

164

John Elkington Executive Chairman, Volans

Europeâ&#x20AC;&#x2122;s SRI sector in a period of transformation

152

Joe Sibilia CEO, CSRwire, LLC

Language advances debate

154

Timothy Smith Senior Vice-President, Walden Asset Management

Corporate commitment to sustainability and CSR reporting: Investors help create an enduring trend

156

KEYNOTE REMARKS

MEMBERSHIP ASSOCIATIONS & FOUNDATIONS

INTELLIGENCE & RESEARCH

SUSTAINABILITY IN BUSINESS

VISIONARIES

148

Yearbook 2010

EuroCharity Yearbook 2010

Pericles, one of the most influential statesmen of Ancient Greece, said some 2,500 years ago, “it is not our task to predict the future, but to be well prepared for it”. In preparing for the uncertain future we face today, EuroCharity has created a repository of opinions, trends, actions, best practices, case studies and intelligence related to responsible investing – locally, in Greece, where our social enterprise is headquartered, regionally and globally. Peter Michel Heilmann President EuroCharity

The abundance of facts and stats in this publication demonstrate there should be little doubt that responsible investing is rapidly gaining momentum world-wide and sustainable assets have grown exponentially in the past 25 years. Still, not everyone is convinced that the flow of capital towards social good, improving governance practices, preventing environmental degradation, reducing emissions, strengthening climate resilience, better managing resources, protecting valuable habitats and species, lifting people out of poverty, stimulating innovation, and creating value without losing sight of our values can be a catalyst for change and for solving the world’s economic, environmental, climate and governance crises. During these turbulent years in international markets and many of the world’s economies, including Greece, striking the right balance between long-term

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sustainability, healthy financial returns, transparency and impact is crucial. Such a balance cannot be achieved without sharing best practices, know-how, data, success stories and experiences, which in turn create synergies, develop collaborations and drive real change. And this balance is precisely what the EuroCharity Yearbook 2010 addresses. It aims to inform key stakeholders world-wide on the importance of investing responsibly and sustainably. The book also serves as a platform, and catalyst, for further discussion and debate. We owe it to our children to reach investment decisions today that are not only made in a sustainable, responsible, equitable, profitable and indeed sensible way, but also make a real impact on the world we live in right now – and on tomorrow’s generations. On behalf of EuroCharity, we extend our thanks to the businesses, experts, visionaries, policy formers, activists and leaders who drive sustainability, and those who have participated in the creation of this year’s album. We sincerely hope our 4th EuroCharity Yearbook is a rich source of ideas, inspiration, and motivation and helps you to be better prepared for our challenging and exciting future!

The Future of Responsible Investing

This EuroCharity Yearbook clearly demonstrates that responsible investing is turning into one of the mega trends for years to come. The integration of Environmental, Social and Governance (ESG) issues in investment decision-making has urged asset owners across the world to channel substantial capital to responsible investing. Based on several reports and studies featured in this publication, we anticipate this to continue in future years. The dynamic market entry of major financial institutions into the ESG arena has created a rapidly-growing industry that includes research houses, rating agencies, index providers, data sources, market intelligence experts, financial advisers, ethical and alternative banks, investment forums, academic initiatives, asset management companies, reporting schemes, thinktanks, institutes, newswires, educational institutions, boutiques, brokerage houses and other players. The market is definitely expanding; however, everyone needs to speak the same language. Similarly, companies have shown an appetite for ESG disclosure. Evidence from reporting frameworks indicates a significant increase in information disclosure used by investors. The tipping point of responsible investing in the future will be the focus on bridging the ESG gap between senior corporate executives and asset managers, with integrated reporting becoming an increasingly valuable tool for all stakeholders.

Responsible investing is too universal to be dealt with at a local level only. The groundwork has been laid and regional adaptations must be made in order to expand responsible investing globally. The future of responsible investing will be shaped by two driving forces: ESG disclosure by companies will lead to the increased use of responsible investment strategies by investors and incorporation of ESG investment policies by large institutional investors and sovereign funds will drive asset classes to adopt a more sustainable and responsible profile.

Michael Spanos Managing Partner EuroCharity

EuroCharity has attempted to cover the full spectrum of this yearâ&#x20AC;&#x2122;s timely theme. We approached sustainability-driven international and local businesses, as well as political, financial and citizen sector leaders, and asked them to share their opinion on the future of responsible investing. To make our multi-stakeholder Yearbook more useful to its readers, we added some of the latest statistics and research available related to responsible investing. Responsible investing takes more than two to tango. If structured, operated and communicated well in the global financial marketplace, it can become the main driver for an environmentally sustainable, socially just and economically prosperous world.

Yearbook 2010

KEYNOTE

REMARKS

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â&#x20AC;&#x153;Future ages will wonder at us, as the present age wonders at us now.â&#x20AC;? Pericles (c.495 - 429 B.C.), politician, orator and general in Athens.

Yearbook 2010

Rio+20 and financing the transition to a Green Economy Dr. Achim Steiner UN Under-Secretary-General UNEP Executive Director Chair of the UN Environment Management Group (EMG)

A transition to a low-carbon, resource-efficient Green Economy has become a central agenda among international efforts to evolve sustainable development in a rapidly changing 21st century. The role of responsible lending and the ways financial flows evolve over the coming months and years will be part of the litmus test as to whether a Green Economy can be realised. Next year in Brazil, governments will meet again 20 years after the Rio Earth Summit of 1992 amid a landscape of persistent and emerging challenges and against a backdrop of recent and ongoing crises that are in part being triggered by the way we manage or, more precisely, mismanage finite natural resources. A Green Economy, in the context of sustainable development and poverty eradication, is one of the two central themes of the UN Conference on Sustainable Development 2012 or Rio+20.

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offers a way of implementing sustainable development and not for just one group of nations. Indeed, a Green Economy is in the interests of all nations – rich and less rich, developed and developing and state or market-led – in order to begin reducing humanity’s planetary impact in ways that reflect national circumstances. In support of international preparations, UNEP launched “The Transition to a Green Economy” report during its recent Governing Council held in Nairobi, Kenya. The report, involving economists from all over the world and civil society groups, including labour organisations and cities, suggests that investing 2% of the global GDP annually in ten key sectors could kick-start the transition if backed by the right kinds of smart, enabling policies and measures.

Honest stocktaking of what has worked in the intervening years and why, and, perhaps, more importantly why many things have not worked will also be central.

Financing that transition, amounting to around USD 1.3 trillion a year, could in part come from the phasingdown or phasing-out of somewhere close to a trillion dollars worth of “harmful” subsidies, covering fossil fuels to fertilisers and fisheries.

UNEP’s view is that despite debates, Green Economy

In terms of fossil fuels, this has formed part of G8 and

G20 summits for at least two years. But, to date, few countries have vigorously acted; Indonesia being one among several notable exceptions.

panels will likely be 50 GW – equivalent to 50 nuclear reactors – in countries where enabling policies have been adopted.

The Green Economy study showcases countries and communities where some transitions are already underway.

The Green Economy report also draws on TEEB, a broad partnership that UNEP hosts.

From the Republic of Korea, where recycling has grown by 14% and contributed USD 1.6 billion to the economy after the introduction of a producer responsibility law covering tyres to old batteries. To Uganda, where deliberate policies to encourage sustainable agriculture have triggered a growth in certified organic farmers from around 45,000 in 2004 to over 200,000 now – farmers whose incomes have risen as a result of premium prices on global markets for organic food. Indeed, a survey of UNEP and the UN Conference of Trade and Development has shown that among thousands of small-scale farmers who have switched to organic or near organic, yields have risen on average by 100% to in some cases 125%. In 2011, installed capacity of photovoltaics or solar

It underlines that year in, year out the world loses perhaps up to USD 4.5 trillion in terms of losses of services from primarily forest ecosystems. It also points to the narrowness of contemporary economics, where often real value remains invisible in national accounts and, thus, more informed decisionmaking. Across the tropics, mangroves are being cleared for shrimp farms. On the surface, the economics and, perhaps, the impacts look good, they favour farmed shrimp. Indeed, subsidised commercial shrimp farms can generate returns of around USD 1,220 per hectare by clearing mangrove forests. But according to a TEEB study from Thailand, this does not take into account the deficits to local communities totaling over USD 12,000 a hectare linked with losses

of wood and non-wood forest products, fisheries and coastal protection services. Nor does the profit to the commercial operators take into account the costs of rehabilitating the abandoned sites after five years of exploitation – estimated at over USD 9,000 a hectare. There will be challenges under the Green Economy scenarios – in a sector like fisheries, some jobs may have to go and funds need to be set aside to assist workers retrain in new areas of employment in order to save and restore over-exploited stocks. However, overall the models indicate that over time a Green Economy generates more employment than is lost from the old “brown” sectors. Rio+20 represents an opportunity to scale-up and accelerate these “green shoots”, in part by unleashing and directing responsible investment flow: not by establishing some global protocol or legalistic mechanism. More by agreeing on the principles and by encouraging nations to work towards the transition – more carrot than stick, more a question of evidence and inherent logic than some straight jacket. National indicators of a Green Economy will also be

Yearbook 2010

relevant, an issue that UNEP is now working on in collaboration with partners. There are risks: some countries are concerned about green tariffs or trade barriers. These are risks that need to be managed and mitigated. But these risks are also inherent in the existing economic models in a world where countries are competing in a global marketplace. To ensure adherence to the agreed principles of the global trade regime may, thus, require active engagement of the WTO. The second theme in Rio next year will be an International Framework for Sustainable Development – an issue that goes to the core of how global institutions are configured and whether they are pulling in directions that support sustainability.

Debate also animates around the fractured landscape of multilateral environmental agreements covering climate to biodiversity and chemicals to wastes, each with their own conferences and subsidiary bodies. The funding of the environmental dimension of sustainable development is also complex and fragmented, spread as it is across institutions and facilities. On even the most practical of assessments, the existing arrangements are challenging for many countries and especially developing ones with scarce human and financial capacity. Over the period 1992-2007, for example, there were over 540 meetings linked to 18 international environmental treaties. These meetings generated more than 5,000 decisions, upon which countries are required to act.

Almost since the establishment of UNEP, there have been calls for its upgrading. These debates are re-emerging on the Road to Rio 2012, as part of the broader debate on sustainable development governance.

There remains a great deal of political heavy lifting to mature this discussion and reach some final and perhaps far-reaching conclusions. But some things are clear.

Some talk of a World Environment Organisation, a UN Environment Organisation and others of perhaps a Sustainable Development Umbrella. Other suggestions are also being made.

At the UNEP Governing Council, the world’s environment ministers agreed that the status quo is not an option and two broad tracks have emerged – incremental and fundamental reform.

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The next 12 months or so may provide the skeleton, the muscle and the vision upon which these tracks can be taken forward. We are living in a world of challenges – many of which science is confirming are ever more tangible, real and pressing than perhaps they were in 1992. But we also live in a world of inordinate opportunity, not least for a fundamental departure from the economic, social and environmental pathways of the past. Rio+20 can be just another date in the calendar. But it could also be a tipping point in global affairs, where the promise of sustainable development made 20 years ago is transformed from an ideal into a reality for approximately seven billion people.

info Acting on the nomination of Secretary-General Kofi Annan, the UN General Assembly in 2006 unanimously elected Dr. Achim Steiner as the Executive Director of UNEP for a four-year term. He became the fifth Executive Director in UNEP’s history. At its 83rd plenary meeting in 2010, the UN General Assembly, on the proposal of the Secretary-General Ban Ki-moon, re-elected Achim as Executive Director of the United Nations Environment Programme for another fouryear term. In 2009, the Secretary-General also appointed Achim as Director-General UNON, which provides the administrative, conference, security and logisitics services to the UN family in Kenya, which hosts offices and projects of more than 60 UN agencies, funds and programmes, with over 5,000 staff. Before joining UNEP, Achim served as Director-General of the World Conservation Union (IUCN) from 2001 to 2006, and prior to that as Secretary-General of the World Commission on Dams. A German and Brazilian national, Achim was born in Brazil in 1961. His educational background includes a B.A. from the University of Oxford as well as an M.A. from the University of London with a specialisation in development economics, regional planning, and international development and environmental policy. He also studied at the German Development Institute in Berlin as well as Harvard Business School. He serves on a number

of international advisory boards, including the China Council for International Cooperation on Environment and Development (CCICED). The United Nations is an international organisation founded on October 24, 1945 by 51 countries committed to maintaining international peace and security, developing friendly relations among nations and promoting social progress, better living standards and human rights. With 192 Member States, the UN has four main purposes: to keep peace throughout the world; to develop friendly relations among nations; to help nations work together to improve the lives of poor people, to conquer hunger, disease and illiteracy, and to encourage respect for each other’s rights and freedoms; to be a centre for harmonising the actions of nations to achieve these goals. Established in 1972 and based in Nairobi, Kenya, the United Nations Environment Programme (UNEP) is the voice for the environment in the UN system. UNEP’s Division of Technology, Industry and Economics (DTIE) – based in Paris – helps governments, local authorities and decision-makers in business and industry to develop and implement policies and practices focusing on sustainable development. The Division leads UNEP’s work in the areas of climate change, resource efficiency, harmful substances and hazardous waste. On June 5 (World

Environment Day), 2007, the Secretary-General Ban Ki-moon called on all UN agencies, funds and programmes to become climate neutral. Since then, all UN organisations have been working together to put in place systems and procedures to measure and reduce the environmental impacts of the UN family. Greening the Blue was launched in 2010 to communicate with all UN staff as well as external stakeholders. The aim is to raise awareness of the importance of sustainability throughout the UN system and to highlight what has been achieved, what is happening next and how staff can become involved. The Environment Management Group (EMG) is a UN System-wide co-ordination body. Its membership consists of the specialised agencies, programmes and organs of the United Nations, including the secretariats of the Multilateral Environmental Agreements. It is supported by a secretariat provided by UNEP in Geneva, Switzerland.

www.un.org www.unep.org/greeneconomy www.uncsd2012.org www.unep.org

Yearbook 2010

Paul Clements-Hunt Head UNEP Finance Initiative

Sustainable finance: the future of doing business in complex, competitive global financial markets The United Nations Environment Programme Finance Initiative (UNEP FI) is a public-private partnership between the United Nations and over 200 financial institutions world-wide. It is designed to push forward the sustainable finance agenda by shedding light on the opportunities and risks associated, particularly, with the environmental facets of this sector. UNEP FI was one of the first partnerships that promoted and researched the kind of innovative thinking and mechanisms that put the notion of sustainable finance firmly on the political map. In fact, I am proud to say that UNEP FI has been working on defining the boundaries of sustainable finance for over 20 years. Through policy, technical, legal and training work, UNEP FI explores both the risks and opportunities created for banks, insurers and investors by a series of global mega trends, ranging from climate change to resource scarcity, energy security and issues, such as water stress. Our work not only concerns risk, but also looks at the finance and investment opportunities created by the emergence of new ideas, technologies, entrepreneurs and companies, as business and commerce continue to position for a low-carbon, resource-efficient future.

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As a UN-based partnership, UNEP FI has used its convening powers to gather top players from across the banking, insurance and investment sectors in order to catalyse political energy into manufacturing new knowledge and pioneering tools with which financial institutions can either develop, anticipate or factor in to the rapidly accelerating standards on environmental sustainability. In our understanding, sustainable finance can be defined as the incorporation of sustainable practices by financial institutions in all levels of their operations â&#x20AC;&#x201C; from making their buildings more energy efficient to embedding ESG values in the higher levels of decisionmaking. Globally, public policy is changing in response to a new set of fundamental trends, such as shifting demographics, a deeper appreciation of the finite nature of our resources and a growing understanding of the impact of pollution and other externalities on communities, ecosystems and human health. Sustainable finance is a response to these mega trends as the banking, insurance and investment community begin to respond by integrating a larger range of material risks that may impact their businesses and

Signatories by Category

Signatories by Region

North America 12%

Latin America 6%

Africa 9%

Middle East 1%

Investment 17%

Bank 66%

investments, but also by exploring the new commercial and investment opportunities that are arising. If you strip away the jargon, this new approach to finance is simply a smarter way of understanding a full range of risks and exploring new opportunities. Our ambition as a global partnership is to see the finance sector mainstream sustainable philosophies, approaches and disciplines as the future of doing business in complex and competitive global financial markets. The journey has certainly begun as leading financial institutions world-wide are positioning themselves for a greening of global markets. UNEP FI and its members believe that hardwiring these issues into the heart of business models and core strategies is fundamental to long-term sustainable growth and success.

Insurance 17%

Asia Pacific 28%

Europe 44%

Source: UNEP FI, 2011.

info Paul Clements-Hunt has been the Head of the United Nations Environment Programme Finance Initiative (UNEP FI) since November 2000. Prior to joining the United Nations, Paul spent two years (1998-2000) representing the Paris-based International Chamber of Commerce (ICC) and directing the organisation’s policy work in energy, environment and sustainable development. From 1991 to 1998, he was based in Bangkok, where he founded Thailand’s first environmental strategy consultancy which developed projects throughout South-East Asia. Paul graduated with a B.A. in Economics from the University of East Anglia (UEA), Norwich, England and completed postgraduate studies in journalism at the University College, Cardiff, Wales.

The UNEP Finance Initiative is a Unit within UNEP’s Economics and Trade Branch (ETB), based in Geneva, itself a Branch of one of UNEP’s eight core divisions, the DTIE. The UNEP FI’s day-to-day activities are run by a small Geneva-based Secretariat. To steer the initiative in the run-up to the landmark Rio+20 Summit in May 2012, UNEP FI has elected two Co-Chairs, Barbara J. Krumsiek, President & CEO of the Bethesda, Marylandheadquartered Calvert Group, Ltd., and Richard Burrett, a partner in the London-based Earth Capital Partners LLP.

www.unepfi.org

Yearbook 2010

Principles for Responsible Investment Dr. James Gifford Executive Director Principles for Responsible Investment

An investor initiative in partnership with UNEP FI and the UN Global Compact

With AuM of USD 25 trillion now signed to the UNbacked PRI, it is timely, five years after this Initiative’s NYSE launch, to assess the future of the Initiative and of responsible investment. Although more than 900 institutions are now committed to the six PRI principles, responsible investment is still at a relatively nascent stage, and the next five years will witness significant changes in attitudes, knowledge and incentives to help make responsible investment mainstream. When looking at the investment industry on a global scale, ESG issues are being integrated successfully into equities strategies, and there is strong momentum in other asset classes, too. For example, the private equity industry is now developing guidelines and processes to consider and monitor a range of ESG issues in a more forward-looking and strategic way. Responsible investment is now commonly seen as an investment approach that enables investors to make more informed investment decisions across their whole portfolios, thereby protecting shareholder value and enhancing long-term returns. Climate change as a catalyst? Climate change represents a risk and an opportunity

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for investors, and is now seen as a material investment issue. Research from PRI and UNEP FI – “Universal Ownership: Why environmental externalities matter to institutional investors”1 – shows that up to 50% of company earnings could be at risk from environmental costs. With policymakers slowly starting to address emissions on a global scale, investors and trustees need a better understanding of the issue and methods to integrate the analysis of these risks and the opportunities into stock selection and asset allocation. Other ESG-related trends will emerge, including, for example, demographic changes, human rights, water and food security, and increased regulation of the financial markets. Increasingly, investors are considering how well companies are positioned on ESG issues, resulting in portfolios that become less susceptible to ESG shocks, and that are focused on delivering long-term sustainable returns. Engagement – the big value-add Shareholder engagement with companies – the second PRI principle – is no longer limited to activist investors. Over recent years, mainstream asset owners and investment managers, in collaboration with their peers, have worked to ensure companies are managing

info

ESG issues and meeting stakeholder expectations. In the next few years, shareholder engagement will be prompted by growing ESG awareness and regulation, focusing on systemic issues across regions and industries. These engagements will continue to be supported by PRIâ&#x20AC;&#x2122;s Engagement Clearinghouse, which, over the last four years, has facilitated more than 270 shareholder collaborations on issues such as sustainability reporting, supply chain labour standards, human rights and carbon emissions. All trustees, including charities and endowments, will be expected to work with their asset managers on including ESG issues in their investment mandates, and proxy voting and shareholder resolutions will become a cornerstone of many policies. This will produce a tipping point where shareholders are working routinely with other investors on critical sustainability issues and are driving performance to everybodyâ&#x20AC;&#x2122;s benefit.

Dr. James Gifford is the Executive Director of PRI, an investor initiative in partnership with UNEP FI (a Unit of the Economics and Trade Branch, within the Division of Technology, Industry and Economics at the UNEP) and the UN Global Compact (a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption), and has been guiding the initiative since its inception in November 2003. He has a Ph.D. from the Faculty of Economics and Business at the University of Sydney on the effectiveness of shareholder engagement in improving corporate ESG performance. James was a member of the GRI Working Group on environmental indicators for the finance sector. He has a background in IT and environmental protection. James has degrees in Commerce and Law from the University of Queensland, and a Masterâ&#x20AC;&#x2122;s of Environment Management from the University of New South Wales. He was named in 2010 by the World Economic Forum as one of the 200 Young Global Leaders. The PRI Initiative was officially established in 2006 after the launch of the Principles to help investors to implement the Principles. Managed by the PRI Secretariat, the Initiative promotes responsible investment and supports investors by sharing best practice and facilitating collaboration. The six Principles of the PRI Initiative were developed by,

and for, institutional asset owners and investment managers. The Initiative has over 900 signatories from 50 countries with approximately USD 25 trillion in AuM. Developed by the investment community in a UNconvened process, the Principles reflect the view that ESG issues can affect the performance of investment portfolios and therefore should be given appropriate consideration by investors. The Principles provide a voluntary framework by which all investors can incorporate ESG issues into their decision-making and ownership practices and so better align their objectives with those of society at large. The Principles: 1. We will incorporate ESG issues into investment analysis and the decision-making processes. 2. We will be active owners and incorporate ESG issues into our ownership policies and practices. 3. We will seek appropriate disclosure on ESG issues by the entities in which we invest. 4. We will promote acceptance and implementation of the Principles within the investment industry. 5. We will work together to enhance our effectiveness in implementing the Principles. 6. We will each report on our activities and progress towards implementing the Principles.

www.unpri.org

1. Available at www.unpri.org/publications.

Yearbook 2010

Roadmap for moving to a low-carbon economy in 2050 Connie Hedegaard European Commissioner for Climate Action

In early March 2011, the European Commission adopted a Roadmap for turning Europe into a competitive low-carbon society by 2050. Europe and the rest of the world has to become low-carbon if we are to prevent climate change from reaching dangerous levels – levels that would bring huge human and economic costs. Tackling climate change is already at the heart of the Europe 2020 strategy for smart, sustainable and inclusive growth over the next decade and beyond. Now we are raising our sights to the long-term climate challenge. EU leaders have recognised the need for strong action by endorsing the objective of cutting our GHG emissions by 80-95% of 1990 levels by 2050. But the low-carbon transition we have to make is also about ensuring Europe’s competitiveness and innovation. It is about European growth and jobs. It is about reducing our energy bill, saving money and strengthening our energy security. And it is about cutting air pollution and thus lowering related health care costs. Last year, for example, Europe paid USD 70 billion more for energy imports than the year before. Imagine if Europe relied much more on renewables and energy

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efficiency; and didn’t have to pay billions to third countries each time oil prices spike. Or imagine if we created 300,000 European jobs by investing in a promising manufacturing sector. Well, that is actually what we have done over the last five years with renewable energy. There is potential to create up to 1.5 million NET jobs by 2020, and many of these cannot go abroad because they involve putting up wind turbines and retrofitting buildings in Europe. What we invest today will determine the future competitiveness of our economy. With our ambitious climate and energy targets for 2020 Europe has given itself a head start on the road to a low-carbon future. Now China, South Korea, India, Brazil and others are also investing heavily in clean technologies – technologies they want to sell in a growing world market. Following the Commission’s Roadmap will help ensure Europe stays in a leading position and maximises our share of the benefits to be reaped from the low-carbon transition. “Decarbonising” our economy will require considerable investment – in the order of 1.5% of EU GDP, or some EUR 270 billion, every year until 2050. That sounds a lot, and it is. But to put things in perspective, it would

only return EU investment to the level seen before the economic crisis. And it is responsible investment in the broadest sense. Much of this investment will have to come from the private sector. We will need to ensure that our policies create the right framework conditions for this to happen. Additional public-private financing mechanisms will be key. Innovative financing instruments of the kinds already being used in some member states, such as preferential interest rates and risk-sharing facilities, can help the limited public finance available to leverage a multitude of private sector investments. We must also ensure that the carbon price in Europe adequately rewards low-carbon investments and stimulates innovation. Going low carbon will not be at the expense of economic growth. On the contrary: by making responsible decisions now, we can make Europe a cleaner, greener and richer society by 2050. The challenges of the 21st century will require a new qualitative approach to economic development. It will take decades to develop and implement this new growth model. But with the 2050 Roadmap we have taken the first steps.

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Born in 1960, Connie Hedegaard had already been working with climate issues for several years by the time she began her appointment as the EU’s first-ever Commissioner for Climate Action in February 2010. In August 2004 she was appointed as Danish Minister for the Environment. In 2007 she was in charge of setting up the Danish Ministry of Climate and Energy, where one of the main tasks was to prepare the UN Climate Change Conference in Copenhagen in December 2009. Connie began her political career while a student at the University of Copenhagen. There she studied literature and history while at the same time pursuing a political career that encompassed both Danish and international politics. In 1984, at the age of 23, Connie was elected to the Danish Parliament as a member for the Conservative People’s Party, thereby becoming the youngest Danish MP ever at that time, and in 1985 she became Chair of the Atlantic Association of Young Political Leaders (AAYPL). In 1989, Connie became the first spokesperson for the Conservative People’s Party, but chose to leave politics for journalism in 1990. Besides her political career, Connie has had a long career in journalism. Apart from working as a politician and journalist, Connie has sat on a number of committees and boards, including chairing the Copenhagen-based Danish Centre for Culture and Development (DCCD) – which strengthens Denmark’s cultural co-operation with the developing countries – and as a member of the board of the Danish Parliament’s Democracy Foundation.

Lastly, she has received various prizes for her involvement in and contributions to social debate, due in great part to her wide-ranging activities as a lecturer and author. Her publications include “Da klimaet blev hot” [When the climate got hot] published in Denmark in 2008. She lives in Brussels and in Hellerup, Denmark with her husband, Jacob, and their two sons. The Directorate-General for Climate Action (“DG CLIMA”) was established in February 2010, climate change being previously included in the remit of DG Environment of the European Commission. It leads international negotiations on climate, helps the EU deal with the consequences of climate change and meet its targets for 2020, as well as develops and implements the EU Emissions Trading System (EU ETS). The Commission is looking at cost-efficient ways to make the European economy more climatefriendly and less energy-consuming. By 2050, Europe could cut most of its GHG emissions. Clean technologies are the future for Europe’s economy. DG CLIMA, therefore, promotes the development and demonstration of low-carbon and adaptation technologies. It currently employs around 160 Commission officials and external staff.

ec.europa.eu/dgs/clima ec.europa.eu/europe2020 europa.eu Yearbook 2010

Dr. Lykke Friis Minister for Climate and Energy Denmark

Why investments required to achieve independence from fossil fuels are reasonable and well-spent Folklore would have it that the bumble bee is unable to fly. Its body is too large and its wing span too small. And yet it flies. To many, the aim of turning our energy system green is seen in much the same way. Too unwieldy and too expensive to work. Nevertheless, it is my clear opinion that the green road is the one we all need to travel eventually. There is no denying that there are strong reasons for action. In the coming decades, more and more people around the world will achieve the means to live a modern lifestyle that they aspire to. The global need for energy will continue to rise as a car, a fridge, and a foreign trip will become part of the lifestyle of many more people. Our lifestyle has in the past been driven by cheap and easy access to oil, coal and natural gas. That road is not an option that in the future will be open to us. We will face ever-increasing pressure from the twin forces of climate change and the hunt for finite and ever more marginal sources of fossil fuel. One would think that these two forces ought to be a sufficient spur for action.

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The Danish government having seen the writing on the wall has set an ambitious target of weaning Denmark off fossil fuels by 2050. Heeding the words of Winston Churchill that “however beautiful the strategy, you should occasionally look at the results”, the Danish government recently presented its “Energy Strategy 2050”, which clearly defines the first steps towards this ambitious target. This strategy contains elements that to many outside our small nation would seem of proportions worthy of a bumblebee. Most importantly, the strategy will lead to a decrease in Danish dependence on fossil fuels by 33% in the coming 10 years alone. From 1980 till 2010, the share of renewable energy in Denmark rose from 3% to 19%. With this strategy, the rise will continue to 33% by 2020, meaning a full third of our energy will be produced by green energy, primarily wind and biomass. Nuclear is – it should be mentioned – not a part of the fossil-free Danish equation. How large a share of wind power is compatible with

a stable energy system? In the case of Denmark, that ceiling has not yet been reached. By 2020, nearly half of Danish electricity will be provided by wind power alone. Another 20% will come from biomass. By tying our electrical grid into a regional framework and by having a spare capacity backed by biomass, Denmark will continue to have a stable energy system. But, of course, would such a strategy come at a great cost to Danish society? The answer is a resounding no. The expansion of renewable energy is financed by feed-in-tariffs paid by consumers of electricity, but the rising efficiency of renewable energy means that the cost to consumers of 33% renewable energy in 2020 will be lower than the 11% provided in 2002. So, interestingly, the transition is relatively cheap. Our estimates are a price tag of approximately EUR 10 per household per month at the highest (2020), a price tag that will only slowly increase to this level. In my opinion, this is a cheap insurance policy against unexpected increases in fossil fuel costs and a solid investment in Denmarkâ&#x20AC;&#x2122;s future energy security. Folklore is wrong. It is possible to build an energy

system that is based on green energy and which is both affordable and stable.

info Born in 1969, Dr. Lykke Friis is a Danish politician and, since 2009, has been the Minister for Climate and Energy and Minister for Gender Equality. She received a M.Sc. in Economics from the London School of Economics and Political Science in 1992 and earned an M.A. in Political Science from Copenhagen University in 1993, followed by a Ph.D. in 1997. She has held close to twenty honorary offices, including Member of the EU Reflection Group appointed by the European Council, Member of the Danish Defence Commission, Deputy Chairperson of the Danish Growth Council and Member of the Board of the Danish Foreign Policy Society. In 2009 she chaired the UNFCCC climate change negotiations as the President of COP 15. She is married and a keen supporter of the German soccer club FC Bayern Munich.

The Danish Ministry of Climate and Energy was established on November 23, 2007. The Ministry is responsible for national and international efforts to prevent climate change, as well as energy issues, national geological surveys in Denmark and Greenland, and meteorology. The Ministry was created as a part of the Danish governmentâ&#x20AC;&#x2122;s increased efforts to promote a greener and more sustainable society. These efforts include a governmental goal that Denmark one day becomes independent of fossil fuels.

www.kemin.dk

Yearbook 2010

Information and data for greening Europe’s economy Prof. Jacqueline McGlade Executive Director European Environment Agency

In Europe, as elsewhere, natural systems play an essential role in sustaining our economies and societies. Europeans rely on stocks of natural capital and flows of ecosystem services both within Europe’s borders and elsewhere. Two fundamental questions arise from this dependency: First, are we currently managing these natural capital stocks sustainably, enabling them to continue supplying essential benefits, such as food, water, energy, material resources, and climate and flood regulation? Second, are our environmental resources – our air, water, soil, forests, biodiversity – secure enough today to sustain healthy populations in the future? To answer such questions, citizens and policymakers require accessible, relevant, credible and legitimate information. According to Eurobarometer polls, people concerned about the environment recognise that providing more information on environmental trends and pressures is an effective way to tackle environmental problems. The European Environment Agency (EEA) was founded to help meet the need for better information to guide

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decision-making. Its mandate is to provide timely, targeted, relevant and reliable information on the environment to support sustainable development and help achieve significant and measurable improvements in Europe’s environment. Making the right investments, which are sustainable both economically and in the wider environmental sense, is a significant challenge in today’s climate of financial uncertainties and rising oil prices. There is little question that renewable energy sources, such as wind, wave, solar and geothermal energy, will now play a much bigger role in the energy mix. However, environmental concerns are not only driving a shift away from fossil fuels. The need to manage resource use, finding ways to foster economic growth while maintaining healthy natural systems, will have implications for all sectors – a fact reflected in the designation of resource efficiency and innovation as key policy priorities for the EU up to 2020. Put simply, there is no such thing as business as usual. In our era of globalisation, investors often find more significant returns by exploring business opportunities abroad. Being informed about levels of environmental services and compliance with European environmental

standards is becoming part of the professional investor’s risk assessment. Information is now openly available, leaving little excuse for not considering environmental implications thoroughly. EEA provides access to a mass of data, information and analysis on its Web site. One unique activity is its use of satellite imagery, allowing users to inspect local environmental conditions, in some cases in near real time. Although tuned to the needs of the general public, it is highly relevant for sustainable investment screening and appraisal. For example, EEA’s Eye On Earth platform provides information on local bathing water and air quality, based on near real-time data from monitoring stations and computer modelling. It translates rather “dry”, complex scientific data into a format that is relevant and understandable for more than 500 million EU citizens, ultimately in 25 languages. Such information is of direct relevance for investors. Poor air quality can cause staff absences and may entail significant abatement costs for emitters where legal limits are exceeded, as air pollution is important for public health.

Similarly, sub-standard treatment of domestic or industrial waste water can have implications for tourism and recreation. And where EU requirements are not met, abatement costs need to be factored into project appraisal. In this context, the Water Information System for Europe (WISE) Web portal is a valuable resource for decision-makers, bringing together all the information collected from Member States at EU level and on surface and ground water. Information of this sort is essential, both for individual businesses and for policymakers aiming to green the economy as a whole. And these are just two examples.

info Prof. Jacqueline McGlade became Executive Director of the European Environment Agency on June 1, 2003. Prior to this post, she held academic positions in Europe and North America. In addition to lecturing globally, she has published more than 100 research papers and presented and appeared in numerous radio and television programmes, including her own BBC series The Ocean Planet and Learning from Nature. EEA is an EU agency tasked with providing sound, independent information on the environment. It is a major information source for the general public and for those involved in developing, adopting, implementing and evaluating environmental policy. The Copenhagen-based agency currently has 32 member countries.

www.eea.europa.eu www.eyeonearth.eu www.water.europa.eu

Yearbook 2010

MEMBERSHIP

ASSOCIATIONS

& FOUNDATIONS

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“Integrating social and environmental dimensions of investment is about better understanding and responding to the interests of the ultimate owners of capital. It is about moving the relationship between investors and investees towards a focus on long-term performance, and raising the bar of that performance to ensure that social and environmental issues – key foundations of tomorrow’s markets – are taken into account, and therefore counted in business and investment decisions.” Global Corporate Citizenship Initiative of the World Economic Forum.

Yearbook 2010

facts & figures

Selection / deselection of investments Negative (deselection) Positive (selection)

ESG investing methods

and strategies Source: Danish Ministry for Economic and Business Affairs and PRI, “Guide to responsible investment”, CSRgov.dk, February 2011.

• Deselection on moral, ethical and/or religious grounds

• Targeted investments of potential use to society

• Norm-based deselection based on international norms, conventions and the like

• SRI theme funds • Best-in-Class This positive selection of investment is typically based on different forms of ratings

Active ownership Engagement methods • Ongoing dialogue and discussion with company management Private / confidential

• Written enquiries about specific issues • Meetings and discussions about specific issues • Participation in general meetings • Proposals for resolutions

Public

• Voting, including proxy voting • Convening extraordinary meetings • Press releases and briefings • Contact with other shareholders

Collaborative

• Collaboration with other shareholders about specific demands or actions • Clearinghouse actions

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Key actors involved

in the “mainstreaming ESG” field

Source: UN Global Compact report “Who Cares Wins”, 2004.

Companies Lead the way by implementing ESG principles and by improving reporting and disclosure

Accountants Facilitate standardisation Educators Facilitate “high-level” thinking and training on ESG issues

Consultants Combine ESG research with industry level research Support demand and awareness building

Analysts / Brokers Incorporate ESG factors into mainstream research “be creative and thoughtful”

Better investment markets + More sustainable societies

NGOs Transfer objective ESG information on companies to the public and the financial community

Investors / Asset managers Reward ESG research Integrate ESG factors in research and investment processes

Pension trustees Consider in mandates and selection of managers Governments / Multilateral Agencies Pro-actively consider Pension Fund investment

Regulators / stock exchanges / governments Implement reporting standards, e.g. listing particulars

Yearbook 2010

European SRI market doubles in spite of financial crisis The sustainability theme presents some of the most pressing issues – and opportunities – world-wide today. The challenges in managing political processes across borders, successfully navigating business trade-offs and creating effective tools to explain and measure impact in the existing economic system can easily create an “ostrich effect” – a head in the sand so as to avoid the situation, pretending it does not exist. On the other hand, some countries are embracing a world where sustainability solutions can lead to new industries, lifestyles and leadership in an interconnected global economy. In this context, investors have an increasingly important role to play as they address sustainability issues with an investment rationale. They can utilise the sustainability theme as a means to better address risk management and the incorporation of ESG issues; equally, sustainable investors can seek to generate significant returns by embracing the opportunities of tomorrow. Eurosif has been assessing the European SRI market scale and trends since the early 2000s. The latest edition of the study, launched in October 2010, showed that the European SRI Market is undergoing a transformative period, having significantly grown since 2008, when the data was previously collected.

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Despite the slowdown in economic growth during the past two years, the study reveals the expansion of the European SRI market, now totalling approximately EUR 5 trillion AuM at the end of 2009. The ongoing financial crisis combined with disasters, such as the Deepwater Horizon environmental disaster in the Gulf of Mexico, have acted as a wake-up call for many investors, making them more aware of the need to integrate ESG issues into their investment decisions. The evolution of the SRI market in Europe (2002-2009) 6,000 4,987

5,000

4,000 EUR billion

Giuseppe van der Helm President European Sustainable Investment Forum

3,000

2,665

2,000 1,033

1,000 336 0 2002 (EU-8)

Source: Eurosif.

2005 (EU-9)

2007 (EU-13)

2009 (EU-14)

Created with the support of Amundi, BNP Paribas Investment Partners, CrĂŠdit Agricole Cheuvreux and Edmond de Rothschild Asset Management, the European SRI Study has been one of the few sources in Europe detailing the SRI market, both in terms of the amount of capital invested in SRI, as well as the highlighting of European and National market trends. European SRI is rapidly evolving as multiple players use different criteria and means to reach sustainable investment outcomes. The study reveals the rising challenge to define and segment SRI, due to its tremendous growth as well as its increasing link into mainstream fund management. The recurring and ever-pressing question posed by those interested in SRI is how to properly define this field. Eurosif uses the following definition of SRI: a generic term covering any type of investment process that combines investorsâ&#x20AC;&#x2122; financial objectives with their concerns about Environmental, Social and Governance (ESG) issues. In order to help investors, policy makers and the public simplify what is inherently a complicated topic due to the many SRI strategies available, Eurosif utilises Core SRI (estimated at EUR 1.2 trillion at the end of 2009) and Broad SRI (estimated at EUR 3.8 trillion at the end of 2009) as a means to segment the SRI market. Core SRI consists of norms- and values- based exclusions and different types of positive screens, while Broad SRI encompasses simple exclusion, engagement and integration approaches. Another important finding of the study is that the SRI market remains driven by institutional investors,

representing 92% of the total SRI AuM. These investors are especially active in some of the larger European markets, such as The Netherlands, Switzerland, Nordic countries and the United Kingdom. Public pension funds, reserve funds, universities as well as insurance companies are the main institutional investors to perform SRI. However, the share of retail investors has increased in almost all countries covered in this study, with Austria, Germany, Belgium and France having all seen their share of retail markets notably increase. In fact, a vast majority of SRI investors predict that demand from institutional investors will be the main driver for SRI growth in the next years, and Eurosif predicts a growth in SRI investments by 18% to 20% over the next two years. Other important drivers include demand from retail investors, media coverage, legislation and international initiatives. For example, the PRI initiative, developed by the UN, has contributed significantly to the need for the integration of ESG factors into fund management by institutional investors. Undoubtedly, the 2008 global financial crisis has also impacted the SRI industry, but overall, the impacts have been more positive than negative. Eurosifâ&#x20AC;&#x2122;s research respondents find that the financial crisis has made them more aware of the need to integrate ESG risks; from a demand perspective, the increase for more transparent products has correlated well with the SRI philosophy. Environmental and social crises have been an important factor that increased investor awareness of the need to integrate sustainability in investment decisions; the risks and liabilities of the Deepwater Horizon case clearly illustrate how environmental and social risks have

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significant and long-lasting financial consequences. Giuseppe van der Helm is the President of Parisbased Eurosif (the European Sustainable Investment Forum), the pan-European network and thinktank of national Sustainable Investment Forums whose mission is to Develop Sustainability through European Financial Markets. He has served as Director of VBDO, the Dutch Association of Investors for Sustainable Development, since November 2006. Giuseppe studied chemical engineering and business administration at Twente University. Following his graduation in 1985, he started as a marketeer with Royal DSM N.V., where he worked for 10 years in various positions. During that period, he got his first taste of sustainability while working in Paris as Quality Assurance Manager for the automotive industry. After a brief episode as Business Unit Manager with Sigma Coatings, he worked as President Europe with motor oil company Valvoline. In 2002, Giuseppe decided to leave the world of efficiency and profitability and to dedicate his energy to build a better world. After a sabbatical in which he travelled the world, he started to study Theology at the University of Tilburg. Giuseppe speaks five languages fluently. He lives with his four children in Vianen, The Netherlands. Current Member Affiliates of Eurosif include institutional investors, financial service providers, academic institutes, research associations and NGOs. The association is a non-profit entity that represents assets totalling over EUR 1 trillion through its Member Affiliates.

www.eurosif.org

Yearbook 2010

SRI trends in the United States Lisa Woll CEO Social Investment Forum

SRI emerged from the recent financial crisis doing better than the overall market in terms of holding onto assets and attracting new investments, according to our recent report on Socially Responsible Investing Trends in the United States or the “Trends Report.” This strong growth encompasses both retail investors, including those that invest in SRI mutual funds, and institutional investors, who hold the majority of SRI investments. We have also seen robust expansion of the strategies of shareholder advocacy and community investing. The top news is that SRI in the United States has continued to grow at a faster pace than the broader universe of conventional investment assets under professional management. At the start of 2010, professionally managed assets following SRI strategies stood at USD 3.07 trillion, a rise of more than 380% from USD 639 billion in 1995, the year of the Social Investment Forum Foundation’s first Trends Report. Over the same period, the broader universe of AuM increased only 260% from USD 7 trillion to USD 25.2 trillion. As a result of this growth, nearly one out of every eight dollars under professional management

in the United States today – 12.2% of the USD 25.2 trillion in total AuM tracked by Thomson Reuters – is involved in some strategy of SRI. The USD 3.07 trillion in total AuM in the United States use at least one of three SRI strategies: • the incorporation of ESG factors into investment analysis and portfolio construction (USD 2.5 trillion in assets identified in the report); • the filing or co-filing of shareholder resolutions on ESG issues (USD 1.5 trillion in assets identified in this report), and • deposits or investments in banks, credit unions, venture capital funds and loan funds that have a specific mission of community investing (USD 41.7 billion in assets identified in this report).1 The growth in the pool of assets engaged in SRI strategies has grown more rapidly than the overall investment universe due to a number of factors, including net inflows into existing SRI products, the development of new SRI products and the adoption of SRI strategies by managers and institutions not previously involved in the field. Since 2005, SRI assets

1. Before aggregating assets, controls are made to avoid potential double counting. Thus, the overall tally is USD 2.5 trillion for assets where ESG factors are incorporated into investment analysis and portfolio construction.

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have increased more than 34%, while the broader universe of professionally managed assets has increased only by 3%. From the start of 2007 to the opening of 2010, a three-year period when broad market indices, such as the S&P 500, declined and the broader universe of professionally managed assets increased less than 1%, assets involved in SRI increased more than 13%. Of this overall universe of assets engaged in ESG incorporation (the first of the SRI strategies described above), more than 80%, or USD 2.03 trillion, are held by institutional investors, such as public pension funds, foundations, endowments and faith-based investors. Investment funds and separate account vehicles manage USD 691.0 billion of assets subject to ESG incorporation.2 With regard to the SRI strategy of shareholder advocacy, a wide array of investors now files or cofiles shareholder resolutions at U.S. companies on ESG issues, and hundreds of these proposals come to votes each year. From 2008 through 2010, more than 200 institutions – including public funds, labour funds, religious investors, foundations and endowments – and investment management firms filed or co-filed proposals. These institutions and money managers collectively controlled USD 1.5 trillion in assets at the end of 2009. In addition, assets in community investing institutions rose more than 60% from USD 25.0 billion in 2007 to USD 41.7 billion at the start of 2010, reflecting a healthy growth in all four categories of community investing institutions that the Social Investment Forum Foundation has tracked since 1999: community development banks, community development credit unions, community development

loan funds and community development venture capital funds. All these developments show that the key principles of SRI are being more widely embraced. All signs point to more investors looking for investments that support good governance and greater transparency and disclosure on ESG issues.

info Lisa Woll is the CEO of the Social Investment Forum (SIF), based in Washington, D.C. Prior to SIF, Lisa was the Executive Director of the International Women’s Media Foundation, an international organisation seeking to strengthen the role of women in the news media around the world and to protect press freedom. Lisa has extensive experience in international and domestic social policy and has worked around the globe on human rights issues, particularly children’s human rights. She was the Director of the first international study to look at the impact of the Convention on the Rights of the Child and directed the Washington, D.C. office of Save the Children, She is a member of the Advisory Council of the Children’s Rights Division of Human Rights Watch. Lisa is also Board President of Women’s Voices for the Earth, a national environmental health

organisation based in Montana, and a Senior Fellow with the University of Illinois (Champaign-Urbana) Civic Leadership programme. She has written and spoken widely on human rights, human rights and development, as well as leadership. SIF is the U.S. membership association for professionals, firms, institutions and organisations engaged in SRI. SIF and its members advance investment practices that consider environmental, social and corporate governance criteria to generate long-term competitive financial returns and positive societal impact. SIF’s vision is a world in which investment capital helps build a sustainable and equitable economy.

www.socialinvest.org

2. Before aggregating assets, controls are made to avoid potential double counting. Thus, while the total assets of the three strategies shown here exceed USD 3.07 trillion, by subtracting assets that are counted in more than one strategy, the final total is USD 3.07 trillion.

Yearbook 2010

RI Academy: Shaping the future of responsible investment Louise O’Halloran Executive Director Responsible Investment Association Australasia

The importance of ESG issues for investment decisionmaking, corporate performance and shareholder value is increasingly well understood. More than 900 of the world’s largest investors controlling assets in excess of USD 25 trillion have signed on to the United Nations-backed PRI, which proceeds on the basis that ESG factors must be appropriately considered in investment decisions if fiduciary obligations are to be properly discharged. The 2010 Benchmark Report on Responsible Investment in Australia and New Zealand, produced by RIAA, shows core responsible investment (including managed responsible investment portfolios, community finance, green loans, responsible investment portfolios of charities and client portfolios of financial advisers) rose 13% in 2009-10 from AUD 16.15 billion to AUD 18.19 billion, while broad responsible investment assets are estimated to be AUD 74.8 billion, an increase of 25% from AUD 59.9 billion in 2009. These figures are expected to increase exponentially as practical implementation of PRI requirements occurs. To illustrate this point, Australian signatories to the PRI grew 29% from 87 in 2009 to 112 in 2010, with global AuM of USD 591 billion. The asset manager

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segment of local PRI signatories controls AuM of USD 412 billion. In other words, 50% of AuM in the Australian market are covered by PRI commitments to ESG integration. The strength of Australian uptake of the PRI is also shown by local signatories representing 14% of all global signatories. The demand for ESG inclusive investment products and services in Australia reflects changing drivers of economic and corporate value, which are increasingly linked to intangibles that have not been well understood or appropriately taken into account by traditional investment analysis. Wealth destructive events, like the global financial crisis and BP, have highlighted the reasons why ESG risks and opportunities must be factored into investment decision-making. This approach is now very much synonymous with local market and international best practices. Responsible investment is the preferred approach for an increasing number of institutional and individual investors and often outperforms mainstream funds. By way of example, RIAA’s 2010 Benchmark Report reveals that the average return over the year of Australian share funds was 15.09%, versus an average return of 11.56% for mainstream Australian share funds. This outperformance trend over longer

Long-term growth trends in responsible investment managed portfolios (in AUD)

timeframes is also reflected in other asset classes, including for overseas shares and balanced growth funds. Whilst awareness of the importance of ESG integration is growing exponentially, one of the biggest barriers to practical implementation is the availability of quality education and training to promote understanding and analysis of these issues and how they can be practically integrated into investment decision-making and organisational delivery. This is where the RI Academy comes in. The RI Academy is the world’s first structured learning pathway for financial services, corporate and other professionals that need to understand how ESG issues are impacting investment decision-making, company and shareholder value and ongoing access to investment and capital markets. Born as an Australian Government initiative, the RI Academy is being exported to the world’s financial services and corporate markets. In this regard, the RI Academy has a role to play in assisting jurisdictions implement a new and sustainable financial services architecture, where key market participants embrace investment techniques integrating ESG risks and opportunities. This approach underpinned the establishment of the RI Academy and is now being considered in the design of best practice fiduciary, risk management, training, financial literacy and competency standards currently under international consideration.

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Source: RIAA, 2010.

Louise O’Halloran was appointed Executive Director of the Responsible Investment Association Australasia (RIAA) in 2002. She has worked in senior management roles in the not-for-profit sector in Australia, the United States and the United Kingdom, assisting corporations to build brand equity through the establishment of community business partnerships. She has an MBA from Macquarie Graduate School of Management, a B.A. in journalism from Charles Sturt University (CSU), Bathurst, New South Wales, Australia and spent three years on an interesting journey towards a Ph.D. in business ethics at UNSW, the University of New South Wales.

organisation for responsible investment in Australia and New Zealand. RIAA’s members include fund managers, super funds, financial advisers, dealer groups, researchers, information providers and asset consultants who incorporate ESG factors into their investment and research processes. An initiative of the RIAA, the RI Academy was established in 2009 following a significant grant from the Australian Federal Government. RI Academy courses are delivered entirely on-line and provide certification on completion. The RI Academy is an export-driven opportunity and seeks to promote best practice solutions to the world.

RIAA is the leading professional membership

www.responsibleinvestment.org Yearbook 2010

Canadian SRI shows resilience in the face of financial turbulence Eugene Ellmen Executive Director Social Investment Organization

SRI in Canada has weathered the turmoil of the international financial crisis, and continues to represent nearly one-fifth of AuM in Canada. The most recent survey of assets, the “Canadian Socially Responsible Investment Review 2010”, shows that for June 2010, assets managed under SRI guidelines in Canada were CAD 531.8 billion. SIO, which compiled the report, estimates that this represents approximately 19% of the total assets of the pension industry, the asset management industry and the mutual fund industry. Canada’s large public-sector pension funds are global leaders in responsible investing. Many of them were signatories to the PRI, and many are continuing to show global leadership on the inclusion of ESG factors in investment.

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Caisse de dépôt et placement du Québec, the public pension fund manager for the province of Québec, is developing a risk management tool to enable it to carry out a fundamental analysis of equities in its portfolio based on ESG ratings. Pension assets managed under responsible investment policies represent almost CAD 455 billion, that is, approximately 85% of the total SRI assets. Growing numbers of institutional investors are demanding socially responsible investments from the asset management industry. Asset management firms investing funds under SRI mandates represent approximately CAD 46 billion or approximately 9% of the total.

These policies include a number of strategies, including shareholder engagement and proxy voting, ESG integration and thematic investments, such as green real estate, and sustainable infrastructure and private equity.

Most of this money is managed under social and environmental screening strategies on behalf of high net worth individuals, insurance companies, religious organisations and foundations. The remainder is managed under ESG integration strategies, under mandates more focused on a comprehensive riskreturn strategy.

The pension sector in Canada is growing in its sophistication on ESG inclusion. For example, the

At the same time, advisers and fund companies are offering a growing array of products and services

for individual investors interested in investments in accordance with their values.

social enterprises, social purpose businesses and microenterprises throughout English Canada.

SRI funds managed on behalf of individual clients in the retail market represent CAD 25.3 billion, or approximately 5% of the total.

This is a small, but fast-growing segment of SRI, and reflects the dynamism of the impact investment movement world-wide, as local communities come to grips with changing economies and widespread demographic, cultural and social change.

Assets for SRI mutual funds make up roughly half of the total in this category. These funds are among Canadaâ&#x20AC;&#x2122;s oldest and most experienced SRI investors, employing a wide range of SRI strategies, including best-of-sector selection, shareholder engagement and negative screening. Renewable energy income trusts, which invest in a pool of diversified investments focused on the production of clean energy, represent the other half of this group. Assets for impact investing are up considerably in the last two years. Part of this is due to some impressive growth, but part is also a reflection of changes in the measurement of impact investment assets. Impact investment assets are CAD 4.4 billion, about 0.7% of the total.

Sustainable venture capital accounts for approximately CAD 1.4 billion of the total. This reflects the value of such deals since 2006, and represents an increase of CAD 265 million in the last two years. Sustainable venture capital includes investments in the cleantech sector, which aims to create sustainable innovations in products, technologies, or manufacturing methods. It includes clean energy, water and wastewater, recycling and waste disposal, and other sustainable investment themes.

info Eugene Ellmen is the Executive Director of the Social Investment Organization (SIO) and a frequent commentator on SRI in Canada. His background includes experience as a business journalist, as well as an adviser to the government, credit unions and private clients. Established in 1989, the Social Investment Organization is Canadaâ&#x20AC;&#x2122;s trade association for SRI. Its members include financial institutions, asset management firms, fund companies, consulting organisations, advisers and investors. Its members serve more than one million Canadian depositors and investors. SIO members believe that SRI represents a useful investment tool to enhance returns and reduce risk. It is also a catalyst for positive social change.

www.socialinvestment.ca

This category includes the well-established social finance sector in QuĂŠbec, as well as innovative forms of lending and investment to finance non-profits,

Yearbook 2010

facts & stats

CANADA:

Total SRI (EUR bn): 380 Total SRI (USD bn): 547

UNITED STATES:

28% Global SRI data

Source: Latest data available from Eurosif (2009), SIF (2010), SIO (2010) and RIAA (2010).

Total SRI (EUR bn): 2,130 Total SRI (USD bn): 3,069 EUROPE:

66%

Total SRI (EUR bn): 4,986 Conversion rates as at May 30, 2011 (Source: FT Currencies).

Total SRI (USD bn): 7,184

Note: Data collection methodologies are not consistent.

ASIA EX-JAPAN:

0.0%

Total SRI (EUR bn): 2 Total SRI (USD bn): 3 JAPAN:

0.1%

Total SRI (EUR bn): 5 Total SRI (USD bn): 7

GLOBAL SRI AuM:

100%

AUSTRALIA / NZ:

Total SRI (USD bn): 10,909

Total SRI (USD bn): 99

Total SRI (EUR bn): 7,571

EuroCharity

0.9%

Total SRI (EUR bn): 69

Yearbook 2010

How pension funds can save the climate – and themselves Frederic Hauge President Bellona Foundation

With approximately EUR 400 billion in assets, the Norwegian pension fund is one of the world’s largest fund, second only to Japan’s public pension fund. The fund’s objective is “to safeguard and build financial wealth for future generations”. In other words, the fund must engage with long-term planning and has a financial interest in preventing a climate crisis that would have disastrous consequences for its assets. And disastrous is the right term to be used – according to the Stern Review of the Economics of Climate Change, sticking to the current growth path in greenhouse gas emissions would lead to a contraction of the global economy of up to 20%. But, until recently, the Norwegian pension fund has been extremely cautious in favouring climate-friendly investments over others. This was an embarrassment for a government that claims global leadership in fighting climate change. When the government launched a public consultation in 2008 on how to reform the ethical investment guidelines of the fund, the Bellona Foundation responded by coming up with guidelines for long-term investors, like the Norwegian pension fund. We concluded that for a long-term investor, incorporating “carbon risk” into the investment criteria is critical.

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It is obvious that if we are to prevent a climate crisis, the world will have to put a price on CO2 emissions or limit emissions in other ways. Companies with larger greenhouse gas emissions than their competitors are riskier investments than companies who focus on reducing their carbon footprints. Large pension funds need to use their influence to ensure that companies where they are share holders adopt a clear long term strategy to become carbon neutral. The Norwegian pension fund took much of our advice on board and in August 2009 published a short but demanding document entitled “Investor’s expectations on climate change”, which sets its expectations as a shareholder. The document requires all companies to measure their emissions. More importantly, all companies must assess the commercial effects of regulatory responses to climate change (such as a CO2 emission price) on the company’s direct operations, as well as perform sensitivity analyses based on different regulatory responses. Companies must set clear targets for emission reductions. And, crucially, they must “be constructive when engaging with policymakers regarding regulatory responses to climate change” and “disclose policy positions in regard to climate change regulation.”

If engagement with a company fails to produce results, Bellona believes that pension funds should sell their assets. At the same time, pension funds should undertake their own portfolio reviews of key emission and energy-intensive sectors, such as oil, gas, cement, metallurgy and power, to evaluate companies’ ability to thrive in a low-carbon, resource-efficient economy. The evaluation should be used to distinguish the companies that are underperforming in relation to their sector and thus to exclude them from the fund’s investment portfolio. Companies that perform well according to lowcarbon, resource-efficient criteria should be considered for further investment, assuming they meet other investment objectives for financial risk and return. For instance, funds should invest more in companies that would thrive under strict climate regulation and have a high price on greenhouse gas emissions. As private equity funding for risky ventures has somewhat dried up, private pension funds should also begin to explore this asset class. New low-carbon technologies and companies need to be developed and promising existing technologies need to be scaled up and made commercially viable. And in the long term, on average, it could prove to be extremely profitable.

Public pension funds cannot afford a climate crisis. Governments cannot afford huge pension fund deficits. However, both can be avoided by a combination of government policies that make climate change mitigation profitable and of large investments in the companies that are making the changes needed for a zero emissions society. It is really a no-brainer – pension funds could help save the world.

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Frederic Hauge is the President of the Bellona Foundation, which he founded as a direct action protest group in Norway in 1986, at the age of 20. In 2007, Federic was elected Vice-Chairman of the European Commission’s Technology Platform for Zero Emission Fossil Fuel Power Plants (ZEP), and in October of that year, “TIME” magazine named him one of the world’s “Heroes of the Environment”. Spotlighting the most innovative and influential protectors of the planet, this is what the magazine wrote about Frederic: “‘Raising environmental concerns in Norway, where oil and gas account for about a quarter of GDP and fund a vast national pension system, might seem

like a thankless job. But it’s a crucial one. After all, the nation’s energy riches give it a remarkable chance to bankroll environmental innovation’, says Frederic Hauge... ‘We’re a nice little selfish country of petroholics, and that gives us an extreme moral obligation to use some of that welfare to develop the technologies we need.’” In 2009, he was elected Steering Committee member of the European Biofuels Technology Platform (EBTP). Through investigation, documentation, legal action and non-violent activism, Bellona has dramatically impacted the way Norwegians think of and relate to environmental matters. More importantly, the Foundation has facilitated concrete changes in environmental policies among political and industrial leaders in Norway and internationally. Today, Osloheadquarterd Bellona is a recognised technology and solutions-oriented organisation with offices in Oslo, Brussels, Krakow, Poland, St. Petersburg and Murmansk, Russia. Altogether, some 75 engineers, ecologists, nuclear physicists, economists, lawyers, political scientists and journalists work at Bellona.

www.bellona.org

Yearbook 2010

Corporate climate change disclosure and responsible investing Paul Dickinson Executive Chairman Carbon Disclosure Project

Increased climate change disclosure by companies around the world offers transparency for investors, helping to identify and assess areas of business risk, as well as finding hidden market opportunities for enhancing brand, improving product value and increasing the bottom line. Furthermore, carbon management continues to rise as a strategic priority for many businesses. This is fuelled by opportunities to reduce energy costs; protect the business from climate change risk and damaged reputation; as well as generating revenue and remaining competitive. CDP is an independent not-for-profit organisation with the worldâ&#x20AC;&#x2122;s largest database of primary corporate climate change information. CDP has been requesting information from companies on their GHG emissions and climate change strategies for over a decade. CDP aims to accelerate solutions to climate change by putting relevant information at the heart of business, policy and investment decision-making and harnessing the collective power of corporations, investors and political leaders. In 2010, over 3,000 organisations in some 60 countries around the world measured and disclosed their GHG emissions and climate change strategies through CDP, in order to set reduction targets and make performance improvements.

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The demand for primary corporate climate change data is growing. In 2011, more than 551 institutional investors (holding over USD 71 trillion in AuM) and some 60 purchasing organisations, such as Dell, EADS, PepsiCo and Wal-Mart Stores, have signed up to gather information through CDP. CDP data is now accessed through Bloomberg and Google Finance. It is also used by an increasing number of investment research providers and sellside brokers to generate new insights into the impacts of climate change on global industry and to highlight the associated opportunities. CDP has also launched two index products based on CDP data â&#x20AC;&#x201C; the FTSE CDP Carbon Strategy Index series and the Markit Carbon Disclosure Leadership Index. These products give investors exposure to companies better positioned in the transition to a low carbon economy. CDP has set three key strategic areas for the immediate future. One is to work with companies and the users of its data to continue improving quality and comparability. Data that supports action is central to fulfilling CDPâ&#x20AC;&#x2122;s mission. As part of this process, CDP has launched a new package, Reporter Services for responding companies, to help them develop their carbon management strategies

through increased data quality, deeper analysis and the sharing of best practice. Never forget that climate change is a global problem and requires a global solution. That is why CDP’s second key focus is on globalising all its programmes in the major economies in the coming years. Beyond CDP’s Investor programme, which sits at the heart of the initiative, CDP intends to grow its Supply Chain and Public Procurement programmes, as well as CDP Water Disclosure, in order to maximise the fulfilment of CDP’s mission. The third key focus is mitigation and emissions reduction. The number of companies within the Global 500 index (FTSE Global Equity Series) reporting reduction targets has already increased fourfold since CDP’s first reporting year. But this is just the first step. CDP remains committed to help advance emissions reductions and works with investors and industry to achieve this. These are exciting times for business and their investors with significant changes coming to the way we produce and consume energy. New power from low or zero emissions sources is an urgent priority for climate change policy that simultaneously helps deliver energy security. New technologies, such as smart grids, electric vehicles, alternative fuel sources and advanced telepresence videoconferencing are

Number of responding companies (Investor CDP and CDP Supply Chain programmes)

3,050 2,204

2,456

1,449 922 235

295

355

2003

2004

2005

2006

2007

2008

2009

2010

Source: CDP, 2011.

Yearbook 2010

Characteristics of carbon performance leadership Integrate climate change risks and opportunities into overall company strategy Strategy

Establish GHG emissions reduction target Engage with policy makers on climate policy

Governance

Identify formal accountability for oversight and management Establish incentives for climate change related activities

Stakeholder

Communicate in mainstream reporting or other regulatory filings

communications

Verify emissions data through an external third party Implement energy or emissions reduction initiatives

Achievements

Achieve significant emissions reduction Capitalise on opportunities as a source of business value

showing a clear case for business growth with reduced emissions. The opportunities for business are enormous. It is through the intelligent investment of capital into the right solutions, identified by the business community that we will achieve the low carbon future we need.

others. While the response rate for companies in the U.K. (FTSE 350 index) and the U.S. (S&P 500) is 69% and 70% respectively, the response rate from companies in other countries, such as China (11%), India (21%), Italy (35%) and Russia (8%), are much lower (CDP, 2010).

Some global companies are already excelling in the area of climate change reporting. Despite the lack of legislation, over 3,000 companies responded to CDP in 2010, including 84% of companies in the Europe 300 index and 82% of the Global 500. However, some countries have higher disclosure rates than

If we are to mitigate climate change, policymakers around the world must play a role in further encouraging disclosure of carbon emissions from not only large listed companies, but suppliers and SMEs (through the supply chain of purchasing companies and public bodies) and also cities. This will help to

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â&#x20AC;&#x153;The Carbon Disclosure Projectâ&#x20AC;&#x2122;s detailed reporting is helping persuade companies throughout the world to measure, manage, disclose and ultimately reduce their greenhouse gas emissions.â&#x20AC;? - Ban Ki-moon, Secretary-General of the United Nations gain an accurate understanding of major emission sources and carbon reduction opportunities, so there is essential intelligence on GHG emissions and climate change strategies for investor, business and policy decision-making.

info Paul Dickinson is the Executive Chairman of CDP. Paul founded the organisation in 2000 having previously founded and developed Rufus Leonard Corporate Communications and, more recently, EyeNetwork, the largest videoconferencing service in Europe. Paul is author of various publications, including “Beautiful Corporations” and a member of the Environmental Research Group of the U.K. Institute and Faculty of Actuaries. CDP was launched in 2000 at No. 10 Downing Street, London and is a registered charity. CDP aims to accelerate solutions to climate change by putting relevant information at the heart of business, policy and investment decisions and harnessing the collective power of corporations, investors and political leaders. Climate change is not a problem that exists within national boundaries. This is why CDP harmonises climate change data from organisations around the world and develops international carbon reporting standards. CDP operates the only global climate change reporting system on behalf of more than 551 institutional investors and some 60 purchasing organisations. CDP now operates five major international programmes: Investor CDP is the largest collaboration of investors

in the world and generates essential climate change information that helps drive capital flows to a low carbon economy. In 2011, over 551 institutional investors with assets of USD 71 trillion were signatories to Investor CDP. On their behalf, CDP issues an annual information request on climate change and GHG emissions data to more than 4,800 of the world’s largest companies. CDP Supply Chain helps global corporations to understand the impacts of climate change across the supply chain, harnessing their collective purchasing power to encourage suppliers to measure and disclose climate change information, set reduction targets and make performance improvements. Over 60 corporations including BT Group, Ford, Reckitt Benckiser, Royal Philips Electronics and Unilever are using CDP Supply Chain to gain an understanding of their supply chain emissions. CDP Public Procurement provides a way for national and local governments to better understand the climate change related risk they face through the supply chain, identify significant cost and carbon savings and work towards building a resilient, low carbon government supply chain. CDP Public Procurement works with over 30 U.K. government bodies, including the

Department of Energy & Climate Change, the Office of Government Commerce, Cabinet Office and the Greater London Authority Group. CDP Water Disclosure provides critical waterrelated data from the world’s largest corporations to inform the global market place on investment risk and commercial opportunity. In 2011, over 354 institutional investors representing USD 43 trillion in assets were signatories to CDP Water Disclosure. On their behalf, CDP requests information on the risks and opportunities companies face in relation to water. CDP Cities provides a global platform that allows city governments to publicly disclose their GHG emissions data, analysis of climate change risks, opportunities and adaptation plans. CDP Cities allows city governments to demonstrate their commitment to transparency and facilitate the sharing of emissions data, as well as providing valuable insights into the strategies deployed by cities in relation to climate change.

www.cdproject.net

Yearbook 2010

The future of responsible investing lies in ethical finance Fabio Salviato President FEBEA

For the first time in history, the people that live on our planet have to face several crises in their lifetime. We are facing a financial and economic crisis that has seriously shaken the global financial system and has put the whole world in serious difficulties. However, we are also facing a social, cultural, environmental and value crisis. In short, a systemic crisis that shakes us and forces us to contemplate so as to find a way out; a crisis that asks – above all international institutions – for rapid and precise interventions. If we want to preserve our planet, and to increase social wellbeing and employment, we must quickly pursue the road of social responsibility in the way we manage businesses and finance, and we must change the rules that have been set, above all, to maximise profits and outputs. Naturally, the profit aspect of economic activities must remain, but it has to confront with social and environmental parameters, which are necessary if we are to give life and to sustain new communities and collectivities. It is important that we start a careful reflection on the use of money and a redefinition of new rules of responsibility in the entrepreneurial and financial activities. The initiative of ethical or socially responsible finance represents one of the possible answers aimed at

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building a fairer world and society; that is why, this moment of crisis allows us to set the basis for the future of responsible investment. The ethical finance sector has been active in Europe for at least 30 years, and it currently counts around fifteen ethical banks. Their principal characteristics are transparency, the possibility for the saver to know who the beneficiaries of the funding are, and to sustain a social and civil economy (through investments in social co-operatives, NGOs, associations, the environmental sector/renewable energy sources, microcredit). Ethical banks, therefore, thanks to the application of management procedures which differ from those used in the traditional banking system, allow the saver to control how his/her own money is used, and to literally invest responsibly. Besides, from the perspective of ethical finance, “to give credit” does not only mean to lend money, but it means, above all, to entrust organisations, associations or persons that have a project and ask for funding in order to realise it. Ethical finance becomes, therefore, a tool able “to direct” the change towards an economy and finance with a human face. In order for responsible finance and investments to spread and become consolidated procedures of money management, a change is

info necessary at two different levels: that of the demand of financial services and that of their supply. The first one refers to the single individual that, through his/ her specific initiative, decides to employ his/her savings according to social, economic and environmental responsibility criteria. The second requires the creation of and the collaboration among the structures and the organisations of ethical finance that must provide effective tools that cater to the new economic and social demands. A further aspect that cannot be disregarded is the institutional and legislative one: the new sector of social economy and finance, in order to be operative, needs a shared normative framework. In this context, the experience of FEBEA is an important reference point at the international level. The Federation has been created in 2001 by 10 charter members, and it currently counts 24 members coming from 14 European states that co-operate to promote and to sustain ethical finance internationally. In particular, the Federation has created some tools in order to support its own partners and is currently committed to the process of preparing a European directive for the recognition of ethical finance.

Fabio Salviato is the President of FEBEA, the Brusselsbased European Federation of Ethical and Alternative Banks. He is founder member of Banca Popolare Etica, the first ethical bank in Italy, serving as President from its establishment in 1998 up to May 2010. Fabio is founding member of Consorzio Etimos, a financial consortium that collects savings to support micro entrepreneurial experiences and microfinance programmes in the Southern Hemisphere. He also serves as President of SEFEA (European Company of Ethical and Alternative Finance, an instrument created by FEBEA) and of Etica Sgr, society for savings management of the Group Banca Etica. With a mission of developing the ethical and solidarity-based finance in Europe in a concrete way, the FEBEA is an international non-profit association incorporated under Belgian law, created in Brussels in 2001. Members of the Federation include 11 banks, six savings and loan co-operatives, five investment companies and two foundations as its members, with a total balance sheet of EUR 21 billion and have some 528,000 clients and shareholders between them. Today, these members are: APS Bank (Malta), Banca Popolare Etica (Italy), Bank für Sozialwirtschaft AG (Germany), Banque Alternative Suisse S.A. (Alternative Bank Switzerland – ABS), BBK Solidarioa (Spain), Caisse

Solidaire du Nord-Pas-de-Calais (France), Colonya, Caixa Pollença Savings Bank (Spain), Charity Bank Limited (United Kingdom), Crédal Group (Belgium), Crédit Coopératif (France), Cultura Sparebank (Norway), Ekobanken medlemsbank (Sweden), Consorzio Etimos (Italy), Femu Quì S.A. (France), Fiare (Spain), Hefboom (Belgium), Integra Co-operative (Slovakia), La Nef (France), Merkur Cooperative Bank (Denmark), OEKOGENO e.G. (Germany), SIDI (France), SIFA (France Active Investment Company), TISE S.A. (Poland) and Cassa Centrale Banca (Italy). With different legal structures, all these 24 members share the same concern for transparency and social and environmental usefulness. In addition to being a place fostering exchanges and sharing experiences, FEBEA aims at creating financial tools able to help existing initiatives and encourage the growth in Europe of new initiatives in the field of alternative finance and social and solidarity-based economy.

www.febea.org

Yearbook 2010

Responsible investing is no longer at the sidelines Prof. Mervyn King Chairman GRI Board of Directors

This is the century of the individual – we have a moral duty to those who come after us. The people, the planet and profit are inextricably entwined; this means no people, no planet, no profit. And yet we are in a cycle of take – make – waste, of misusing and overusing the resources our planet provides us with. Sustainable businesses are the ones that will survive in the future on a planet in crisis, and this is something that investors are increasingly realising and acting on. In addition to reporting on their financial performance, many companies and other organizations also report on their sustainability performance, indicating their impacts on the economy, the environment and on society. The GRI, which provides the world’s most widely used sustainability reporting framework, has recorded an increase in the number of reports being produced every year since 1999. Why? Companies report for many reasons, and one of them is pressure from investors. Market forces are compelling companies to report, to be transparent about their non-financial performance. Responsible investing is becoming a common practice and companies are adjusting their behaviour in response. The PRI has now more than 900 signatories, representing over USD 25 trillion in investment capital, and the INCR has more

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than 90 members, representing more than USD 9 trillion. Responsible investing is no longer at the sidelines. The GRI’s Sustainability Reporting Framework provides companies and investors with a common language they can use to talk about performance and compare data. The result is that information on the economic, environmental, social and governance performance of some of the world’s largest companies now features on 4,500 Bloomberg terminals and 400,000 Reuters terminals globally. Investors have at their fingertips a wealth of information about companies’ non-financial performance that they can use in their decision-making processes. And this is only going to become more common. More and more companies are beginning to look into integrating data on their financial and nonfinancial performance, to produce an integrated report showcasing the health of their organisation. Integrated reports relate to long-term strategy, financial performance, risk and opportunities as well as environmental, social and governance issues. They show how the board has applied its collective mind to incorporating the sustainability issues into the longterm strategic planning of the company. In short, an integrated report shows the investor how safe their investment is in the long run.

This strong trend has resulted in the formation of the IIRC, which is tasked with developing a framework for integrated reporting. The multi-stakeholder Committee, including, among others, both financial and sustainability reporting experts, aims at publishing the first draft of the framework later this year. On January 25, 2011, the Integrated Reporting Committee in South Africa unveiled a discussion paper outlining how listed companies should report on their performance in an integrated way. South Africa has taken the lead, and is likely to be the first of many. As we move into the future, the lines between investment and responsible investment will naturally blur – it will become the norm to consider both sustainability and financial performance when deciding whether to invest in a company. As we face the challenges of a resourcestrained planet and a rapidly growing population, the focus for investors will be on long-term, rather than short-term, performance. We are transient stewards of the planet, and we need to make a huge contribution to ensure life on earth is sustainable. Encouraged by their investors, companies can drive us towards a sustainable global economy.

info

Prof. Mervyn E. King S.C. (www.mervynking.co.za) is the Chairman of the GRI Board of Directors. He is recognised internationally as an expert on corporate governance and sustainability. Mervyn is regarded as the architect of governance, having been the chair of a private-sector corporate governance committee, which became known as the King Committee. Its first report issued in 1994 was considered ahead of its time. Subsequently, two more reports have been published, the latest of which – King III – has been adopted by the NYSE and been incorporated into the Sarbanes-Oxley Act. His work in the area of governance has changed

Top 10 countries by number of reports – based on GRI G3 Guidelines – globally and in Europe Top 10 globally

% of world total

Top 10 Europe

% of total in Europe

U.S.A.

10%

Spain

19%

Spain

Sweden

10%

Brazil

The Netherlands

Japan

Germany

Sweden

U.K.

Australia

Switzerland

The Netherlands

Italy

Canada

Austria

Germany

Portugal

U.K.

Finland

4% Source: GRI, 2011.

the way businesses operate, prioritise and position themselves both locally and internationally. A committed South African, dedicated campaigner for justice and fairness, an accessible and selfless man, Mervyn has consulted, advised and spoken on legal, business and corporate governance issues in 39 countries. He has published a successful book, “The Corporate Citizen”, has won numerous awards and remains an inspiration for many.

sustainability and ESG reporting. GRI produces the world’s most widely used sustainability reporting framework to enable this drive towards greater transparency. The framework, incorporating the “G3 Guidelines”, sets out the principles and indicators that organisations can use to measure and report their economic, environmental and social performance. GRI is committed to continuously improving and increasing the use of the Guidelines, which are freely available to the public.

The Amsterdam-based GRI is a network-based, non-governmental organisation that aims to drive

www.globalreporting.org

Yearbook 2010

A responsible way of microfinance in Western Europe Elwin Groenevelt FFP Managing Director Stichting Microkrediet Nederland (Qredits)

As a microfinance institution operating in Western Europe, Qredits believes that responsible investment is at the core of our business. Qredits is the first Dutch nationwide microfinance provider and was established in January 2009 as an answer to the growing gap in (business) financing for small to medium-sized enterprises in the regular financing market. Closing the gap... This gap means an increasing group of enthusiastic entrepreneurs with viable business plans, but relatively small financing needs and sometimes some personal disadvantage (like a debt history, unemployment or handicap), cannot get their idea financed properly in the regular market. They have to resort to using unsuited financial instruments, for example personal finance instruments or high interest short-term loans, or they cannot start their enterprise at all. The use of unsuited financial instruments can be risky and can put unnecessary pressure on company finances, thus reducing the chance of survival for the enterprise, with possible dire financial consequences for the entrepreneur. If no financing can be obtained and other employment options are not available, financial and possibly social exclusion may result. ...in a responsible way Responsible investment in this market means for us that

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entrepreneurs should be given financing opportunities, but should not be over financed; and that suitable financing instruments should be used. Qredits tries to do this, by assessing investment proposals completely and fairly, looking at all the risks and opportunities for the entrepreneur, both from a personal and a company point of view and using a close monitoring approach to detect possible problems in time so as to be able to adjust loan conditions accordingly. For example, does the entrepreneur possess the necessary skills and training, and the necessary network? Is the enterprise viable, and what happens to the entrepreneur and his family in case of bankruptcy? Will they be able to recover financially? Qredits believes the only way to realise responsible financing for this group in the long term is by finding the answers to these questions and informing the client of all relevant risks and responsibilities. Regular financial institutions are not able to invest the time and effort needed to assess small loan applications in this way, mainly due to the high costs involved. Qredits aims at closing the resulting financing gap and at diminishing possible financial and social exclusion, by providing a responsible financing option, and at doing this in a sustainable way.

Qredits as an example How do we do this? We offer credit facilities of up to EUR 35,000 for existing and start-up entrepreneurs with viable business plans who have no access to regular credit facilities. Clients are also coached at least for the first year to maximise the chance of survival of the enterprise and are strictly monitored during the lifetime of the loan. Sustainability is realised by combining a made-to-measure loan assessment, necessary for the complete analysis of the situation, with a highly sophisticated IT-system, which ensures a quick and efficient financing process. From its establishment in 2009 to February 2011, Qredits has provided over 1,500 entrepreneurs with a business loan. The goal is to finance 1,200 additional clients in 2011 and be completely sustainable in 2012. We believe that the existing financing gap will grow in the future, due to costs and other factors for regular financial institutions. This will increase pressure on entrepreneurs and the risk of occurance of irresponsible financing. Thus, the need for and the challenges of responsible financing will grow. Qredits believes the complete assessment of applications, offering fair conditions, and correctly informing potential clients of risks and responsibilities is essential to realize responsible financing in the long term. Sound financing principles

will be essential for a fair and transparent financing market.

info Elwin Groenevelt FFP is the Managing Director of Qredits, the only rural microfinance institution in The Netherlands. Following his studies, Elwin began his career in the financial sector in 1994 as a management trainee at Crédit Lyonnais Bank Nederland N.V. Thereafter he spent several years within commercial banking as senior account manager. During the merger between Generale Bank and Fortis, he was staff member of the Board of Directors. Within the Retail Banking division of Fortis Bank, Elwin served as branch manager, district manager and regional director Eastern Netherlands. Within Fortis, Elwin initiated in 2006 the bank’s Microfinance project in The Netherlands. Following this successful project, he got involved in setting up a rural microfinance programme in The Netherlands. In 2008, Elwin was employed by the Dutch Economic Affairs, Agriculture and Innovation in The Hague for one year, which

formed the basis for the establishment of Qredits, a trading name of the Almelo-based Stichting Microkrediet Nederland. Qredits is a private, not-for-profit foundation funded by a group of public and private partners: three banks – ABN AMRO, ING Bank and Rabobank – as well as the Dutch Ministries of Social Affairs & Employment and Economic Affairs, Agriculture and Innovation. The new Dutch microfinance institution works nationwide and provides financing of up to EUR 35,000 as well as coaching facilities for small to medium-sized entrepreneurs, existing and start-ups. The loan portfolio of Qredits has been growing steadily to the current portfolio of 1,500 loans for a total amount of EUR 27 million.

www.qredits.com Yearbook 2010

Socially responsible investing for a lighter footprint Jessica H. Fullmer Founder and CEO Sustainable Business Institute

We are at the most imperative crossroad of all history, a time to look at our choices about what materials we choose to use, at what rate, and how we use them. We are able to make wiser choices to ensure a better quality of life for all systems on the planet, as well as for human beings. Companies and enterprises are able to be more effective and efficient, while increasing profit to their bottom line, given that we have integrated sustainable business practices. I believe that those that adopt sustainable values, policies, and procedures, will demonstrate SRI internally as well as externally. Our aim at SBI is to get thousands of companies on the journey of sustainable business practices, knowing that they will continually improve how to leave a lighter footprint on the planet as they are doing business. SBI foresees governments using minimal subsidies, increasing tax breaks for ambitious sustainability initiatives, and increasing taxes on “dirty energy” users to push firms toward more sustainable technologies, energy sources, and social organisation structures. Subsidies drain the economy and reduce incentives for efficiency. For example, the U.S. government has invested more than USD 80 billion in Clean Energy, as part of the American Recovery and Reinvestment Act.

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Contractors and developers will increasingly retrofit old buildings and build new “green buildings”, as businesses and individuals realise the low-cost, high-return incentive of building efficiency. The U.S. Department of Energy estimates that adopting building codes with higher building efficiency targets can save building owners over USD 4 billion per year. SBI believes that offering tax credits for efficient building improvements will also increase companies’ incentives to reduce their carbon footprints. SBI further advances the transition to a sustainable future, by facilitating corporate sharing of sustainable practices and promoting sustainable corporate achievements. SBI’s Seal of Sustainability serves as a visual branding tool for the public, signaling that a company can be both profitable and socially responsible. This predominant initiative acknowledges policies, procedures and practices that encompass environmental, economic and social sustainability. Successes in SRI from some of the SBI’s seal recipients include STMicroelectronics, one of the world’s largest semiconductor companies, whose “green” initiatives in new technologies and processes contributed to their 58% reduction of direct carbon emissions from

operations since 2005, and nearly USD 1 billion improvements in their cash position, despite the current economic crisis in 2009. The investments of leading biotechnology firm Novozymes (Novo Nordisk) in enzyme technologies, in-house LCA and integration of sustainability in everyday activities led to a net profit growth of 35% and energy efficiency improvements of 30% in 2010. In the developing world, SBI envisions increasing implementation of SRI due to globalisation. Companies implementing sustainable practices in the emerging markets are regarded as more stable and open, which attracts investors. The United Nationsbacked PRI resulted in nearly doubled assets from first year signatories. SRI in emerging economies also gives investors the opportunity to send out powerful signals about what they consider to be important. Eventually using sustainability as a strategic driver for long-term profitability, competitive brand differentiation, and market share will become a norm. Leading businesses are proactively assessing their future role in tomorrow’s society, creating new business models that incorporate shifts to new products and services that directly address global sustainability. These responsible investments for the future can offer

big returns through new innovations, risk management and improved stakeholder relations.

info Jessica H. Fullmer is the founder and CEO of the Sustainable Business Institute (SBI), a globally recognised institution, where, over the years, she managed hundreds of people and raised upwards of USD 10 million. Jessica is also the founder of Mo-DV, Inc.. She is responsible for the funding and strategic partnership as well as customers. Jessica was 1 of 5 people to be Adviser to the Chairmen of the Board for product development and strategy. She was mentored by Dr. Edwards Deming and his protégés. Founded in Silicon Valley in 1995, SBI is committed to encouraging business leaders to adopt and

communicate sustainable business practices through CEO Forums on sustainable business, the Seal of Sustainability and the Future Leaders programme. Seal of Sustainability recipients include BAE Systems, Kleinpeter Farms Dairy, LLC, The Allied Group, Be Green Packaging, LLC, Gaia Napa Valley Hotel & Spa, New Leaf Paper, Puroast Coffee Co., Inc., Clover Stornetta Farms, Inc., Sonoma County Water Agency, Shaw Floors, Novozymes, Inc. (Davis, California), General Motors Corporate, STMicroelectronics, Inc. Region America, Beijing Glorious Land Agriculture Co., Ltd (GLAC), Hot Lips Pizza Management, Inc. and Hot Lips Pizza Pearl, LLC.

www.sustainablebusiness.org Yearbook 2010

Yolanda Kakabadse President WWF International

Governments must look at global financing sources to build a low-carbon world To catalyse a rapid change to a low-carbon world, the future of responsible investing means supporting new sources of finance for the fight against climate change, including for adaptation, to protect forests and to support low-carbon technologies. To this end, governments, business, and the public now need to support the adoption of an internationally co-ordinated Financial Transaction Tax (FTT) as one of several sources of financing for climate change action, along with other global public goods. Efforts to address the threats of climate change currently are being paralysed by financing challenges, making it an opportune time to tackle these funding issues for environmental priorities â&#x20AC;&#x201C; both past and present deficits and new commitments. A FTT would be an internationally agreed tax aimed at transactions in the financial sector, including currencies, stocks, derivatives and other securities. If implemented globally and on a broad of financial transactions, the tax could generate several hundred

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billion dollars in revenue, and a significant part of this could be devoted to actions addressing climate change. By 2020, between USD 700 billion and USD 1 trillion in new and additional financing is required globally in the energy sector alone to achieve the relatively modest goal of cutting emissions in half by 2050. Much of this scaled up financing can come from the private sector, especially for mitigation, but significantly scaled up public financing will also be needed. Additional public financing of around USD 100 billion annually will likely be required by 2020 in developing countries for adaptation, and tens of billions per year more for forest protection and to address emissions in agriculture and other non-energy sources. The required investments in developing countries to prevent climate change and to prepare for the impacts of warming could turn out to be much greater, depending on a number of factors, including the degree of warming (i.e. below 2oC or 1.5oC) and resulting climatic disruption deemed acceptable, and the degree of certainty in achieving those goals.

info Meanwhile, developed countries have committed to providing USD 100 billion to support climate action in developing countries. Although this amount is small compared to the needs identified, there is as yet little indication of where these funds will come from, or even how much will be public finance. Given the much greater amount of total finance necessary, this commitment must be met with public finance, in order to support those activities that are not attractive to the private sector, and to help leverage and shift the much greater amounts of private sector finance needed in areas that are potentially attractive to the private sector. While governments can and must increase their support for climate action, there are clearly limits and it would be counter-productive and self-defeating to put all our eggs in the government budget basket. These budget contributions are under constant threat in the face of competing domestic spending priorities, and must be renewed annually. In the current financial crisis, budgets across the board in many countries are being cut. This is where innovative sources of finance like FTTs come into play. WWF will not be able achieve success on FTTs acting on its own, but by adding its efforts to that of the growing number of organisations and voices supporting FTTs, and using its influence to bring new organisations and voices into the discussion.

We plan to make a significant difference on this issue – both in shifting the politics in particular countries, and in ensuring that part of the revenue is allocated to climate change action, along with biodiversity, health, education and other sustainable development priorities. To move the low-carbon agenda forward, WWF already has worked with the financial sector and other business sectors for many years. Some examples of these efforts include: • WWF has partnered with global insurance giant Allianz to develop a better understanding of how investors can move the global clean energy agenda. • 26 companies have taken voluntary action and reduced their emissions by a total of 50 million tonnes of CO2 as part of WWF’s Climate Savers programme, comparable to the annual emissions of Switzerland. • WWF is currently rolling out “The Energy Report”, a global scenario and guidelines for achieving a 100% renewable energy supply globally by 2050 aimed at energy business leaders, investors and policymakers. While not the only solution, FTTs can move us further towards a low-carbon world – and fortunately this source of finance, along with other innovative sources, are being increasingly embraced by the public, governments and business.

Yolanda Kakabadse Navarro is the President of WWF International and Chair of the Advisory Board of Fundacion Futuro Latinoamericano, a regional NGO headquartered in Quito, Ecuador dedicated to promote the sustainable development of Latin America through conflict prevention and management. She is a member of the Board of Directors of the Ford Foundation, and the Inter-American Dialogue. Yolanda is also a member of the Environmental Advisory Board of Coca-Cola and the Holcim Foundation for Sustainable Construction, and between 1998 and 2000 she was the Minister of Environment for Ecuador. From 1990 until 1992, she co-ordinated civil society participation in the Earth Summit and from 1996-2004 served as President of IUCN. Yolanda has received numerous honorary orders and awards, including: the «Golden Ark Order» (1991), the «Global 500 Award» of UNEP (1992), Zayed Prize (2001) and a Doctor in Science (Sc.D.) Honoris Causa from the University of East Anglia (2008). Founded in 1961, WWF is one of the world’s largest and most respected independent conservation organisations, with over 5 million supporters and a global network active in over 100 countries. WWF’s mission is to stop the degradation of the earth’s natural environment and to build a future in which humans live in harmony with nature, by conserving the world’s biological diversity, ensuring that the use of renewable natural resources is sustainable, and promoting the reduction of pollution and wasteful consumption.

wwf.panda.org Yearbook 2010

INTELLIGENCE & RESEARCH

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“Not everything that counts can be counted, and not everything that can be counted counts.” Prof. Albert Einstein (1879-1955), 1921 Nobel Laureate in Physics, “TIME” Person of the Century.

Yearbook 2010

facts & figures % of responders with Board or other executive level responsibility for climate change

This table outlines some of the key findings from CDP 2010 by geography or industry data-set2 Sample: geography / number of companies

% of sample answering CDP 20103

Lowest percentage of respondents

% of responders with management incentives

% of responders with emissions reduction targets

% of responders taking actions to reduce emissions

% of responders indicating that their products and services help third parties to avoid GHG emissions

% of responders seeing regulatory risks

% of responders seeing regulatory opportunities

% of responders engaging policymakers on climate issues to encourage mitigation or adaptation

Highest percentage of respondents

% of responders reporting the companyâ&#x20AC;&#x2122;s response to climate change in mainstream annual filings / CSR reports

% of responders indepedently verifying any portion of Scope 1 emissions data

% of responders independently verifying any portion of Scope 2 emissions data

Asia ex-JICK 1354

Australia 200

US Bonds 180

Brasil 80

Canada 200

Central and Eastern Europe 100

100

China 100

Emerging Markets 800

Europe 300

FTSE All- World 800

France 250

Germany 200

Global 500

Global Electric Utilities 250

Global Transport 100

India 200

Ireland 40

Italy 60

Japan 500

Korea 200

Latin America 50

Netherlands 50

New Zealand 50

Nordic 200

Portugal 40

100

South Africa 100

Spain 85

Switzerland 100

Turkey 50

UK FTSE 600

US S&P 500

Russia 50

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Carbon Disclosure

Project Global Key

Risk / impact linked assessments

Trends1 Summary -

2010

Stakeholder responsibility

Source: Key findings from CDP 2010 by geography or industry data-set.

Board ethics bribery & corruption

Convention watch

Gove

in ESG corporate performance

kehol

der

Envir

onm

Product & process

ent

Community

Socia

Research areas

Employees

l / Sta

EIRIS criteria

ncern

‘Sins’

rnanc

Other involvement ement

pecif ic co

1. The key trends table provides a snapshot of response trends based on headline data. The numbers in this table are based on the on-line responses submitted to CDP as of July 14, 2010. They may therefore differ from numbers in the rest of the CDP 2010 report, which are based on the number of companies which responded by the applicable local deadline (e.g. June 30, 2010). 2. For some samples, the number of companies included in this table may be lower than the original sample size due to takeovers, mergers and acquisitions. 3. Includes off-line responses to the CDP 2010 questionnaire and indirect answers submitted by parent companies. All other key trend indicators are based on direct and online company responses only. 4. Asia excluding Japan, India, China and South Korea (ex-JICK).

Board structure & practice

ESG risk

Customers & suppliers

Source: EIRIS, 2011.

EIRIS is a leading global provider of independent research into the environmental, social, governance and ethical performance of companies. The independent, not-for-profit organisation provides responsible investment services to more than 100 asset owners, asset managers, banks, stock brokers and governments around the world – as well as major index providers. With over 25 years of experience, EIRIS promotes responsible investment and helps consumers, charities and advisers invest responsibly.

Policy systems reporting & performance

Human rights Biodiversity

Climate change

Yearbook 2010

The importance of environmental metrics Curtis Ravenel Global Head Sustainability Group Bloomberg L.P.

When he started the firm, Michael Bloomberg had an idea that was unique at the time, and it filled a gap – the need for common information – and so the Bloomberg terminal was born. Access to information and the ability to act on it, have transformed the securities industry globally by leveling the playing field between buyers and sellers. This has reduced costs, increased participation, democratised access through transparency and greatly improved liquidity – making markets more efficient. But financial markets display a strange dichotomy; with improved transparency and access to information, comes increasing complexity and challenges to finding value and managing risk. And for all of the efficiency they bring to capital allocation, markets still do not address some fundamental externalities – most notably, climate change. “The problem of climate change involves a fundamental failure of markets: those who damage others by emitting GHG generally do not pay,” said Lord Stern in his seminal 2006 report on the economics of climate change.

Given the complexities of climate change issues facing the globe, it is critical that government and business leaders focus on finding commonality and opportunity to move collectively towards a global deal or other means of mitigating impacts. Regardless, climate change will continue, with far-reaching implications requiring adaptation, and the world will respond in multiple ways – economically, politically and socially – with or without a deal. These responses will create significant risks and opportunities across all economic sectors and geographic regions. How companies address this is critical, requiring a more holistic view of “sustainability” that focuses beyond traditional financial analysis to include social impact and environmental management – not just to address the risks, but how to use these issues as a source of innovation and opportunity. Investors will need to understand this important new paradigm. The financial markets look to Bloomberg for their critical market information and in our search for

1. “How companies manage sustainability.” (McKinsey Global Survey results 2010). “A New Era of Sustainability.” (UN Global Compact-Accenture CEO study 2010).

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value in this area, we look for ways to provide more insight to our customers on emerging issues. Sustainability information is one such area. Recent studies from McKinsey and Accenture highlight that over three-quarters of executives believe sustainability contributes positively to shareholder value in the long term1. Additional research shows that most of a company’s share value is attributable to cash flow expectations beyond three years out. And there are important intangible or “extra financial” issues – like Human Capital, Risk and Brand Management, and Carbon Exposure – and capacity for innovation – that cannot be accounted for with traditional financial analysis. We began collecting ESG data to try and capture some of the drivers of that value. Having developed our own internal sustainability programme, we know first-hand that significant value can be derived from these efforts. Coupled with the proliferation of available company data, the regulatory circling of multiple, significant national and multi-national agencies and a significant increase in interest from institutional investors, led us to believe that ESG data is fundamental to equity analysis.

ESG Geographic Coverage

...with 8.0% global coverage based on 4,612** companies

Sweden

57 (4.0%*)

Canada

Russia

267 (6.1%*)

328 (14.4%*) France 87 (6.4%*)

United States

1,042 (7.7%*)

18 (1.4%*) Germany

80 (4.9%*)

Japan

Italy Spain 50 (12.3%*) 46 (18.5%*)

Mexico

China 49 (1.6%*) India

7 (4.6%*)

633 (15.5%*)

914 (22.4%*) S. Korea

38 (2.0%*)

Malaysia

13 (1.3%*)

Brazil

Chile

41 (4.0%*)

8 (3.5%*)

South Africa 48 (9.0%*)

Australia

306 (12.6%*) New Zealand 12 (8.5%*)

Total Companies Covered by Country 0

110

220

330

440

550

660

770

880

990

1100

*of total number of listed companies in country

But, like any new set of information, there are

**excludes companies with trading status: Inactive, Acquired, Suspended

Data as of 05/05/2011

Yearbook 2010

significant problems with the depth, breadth and quality. Inconsistent disclosure, varying standards, questions of materiality and data accuracy (verification) remain significant barriers to greater market integration. For those that lament the current state of affairs, please be reminded that it took hundreds of years to screw up traditional financial accounting! Given the relative youth of this field, we should not let the perfect be the enemy of the good. The multitude of organisations involved today reflect the enormous challenges (and opportunities) ahead. While NGOs, specialty research shops and socially responsible asset managers created the demand for transparency and pioneered sustainable investment strategies, the road ahead requires significant commitments from mainstream institutional investors â&#x20AC;&#x201C; and by extension â&#x20AC;&#x201C; their information providers. For Bloomberg, this means leveraging our role in the market to encourage companies to disclose, to work with our partners to address the questions of materiality and set new standards. While there has been a lot of very good work by statisticians, academics, researchers and even large institutional asset managers to demonstrate materiality and a correlation with risk and return, the challenge remains for sustainability data to be defined to a degree that

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ESG HITS by USER TYPE - Global Banks-Regional 7% Broker Dealers-Global 10%

Banks-Global 8% Universities 13%

Pension Funds 3% Broker Dealers-Regional 15%

Government Agencies 5%

Source: Bloomberg, 2011.

Hedge Funds 4%

Investment Advisers / Money Managers 33%

will enable mass use. Nor is there enough historical data to draw real conclusions. State Street did a fascinating study showing the volatility of various ratings applied to companies from independent ESG raters. Our own review of KPIs used across the world confirmed what many have known for some time: a social agenda still drives much of the industry. This of course means that “materiality” is not defined in financial terms, which has stigmatised ESG data among mainstream investors as “soft” or “subjective and qualitative” and significantly hampered its integration into traditional financial analysis. This is changing. A recent research note from Elaine Prior’s team at Citi highlights this. “Non-Financial” or “Extra-Financial” Data – These terms are sometimes used for ESG data. We do not differentiate data this way. We believe that ”the raft of data and information that may influence assessment of a company’s outlook can all be considered “financial”. ESG data is simply one tool in conducting research, and must be combined with additional information to make useful “ESG-related” interpretations and judgments”.

User count by country U.S.A.

30%

U.K.

10%

Switzerland

France

Japan

Canada

India

Australia

Germany

Rest of the world

33%

Source: Bloomberg, 2011.

Bloomberg launched its ESG data service in 2009 and since then has researched 20,000 firms globally – what it considers the most actively traded companies in the world – and currently has 4,700+ firms registered in the database, representing 52 countries. Bloomberg expects this number to grow to 5,000 companies by the end of 2011. A total of 5,000+ unique users used its ESG data service in the past 6 months in 29 countries, with usage stats up 50% in that same time. As corporations are disclosing more, asset managers are increasingly using Bloomberg’s ESG data. Yearbook 2010

This sentiment is being aggressively pushed by the IIRC, whose mission is to create a “globally accepted integrated reporting framework which brings together financial, environmental, social and governance information” by moving traditional CSR/ Sustainability reporting out of their silos and into company filings. These efforts, along with others such as the international expansion of the GRI, the PRI, the UNGC, the CDP and Ceres’ INCR all seek to mainstream ESG analysis. And, as Farnum Brown commented in a recent blog, the team at Trillium Asset Management “will identify, test, refine and systematise an evolving set of demonstrable ESG ‘alpha factors’ – that is, quantifiable environmental, social and governance factors that measurably improve corporate financial performance and investor returns”. This, he says, is “SRI 3.0” which moves ESG from ethical alignment

and shareholder activism to hard, statistical analysis. Trillium and many others have been doing this for years but only recently have the data to do any significant regression analysis – and the reality is it will be another 5+ years before we can truly appease hardcore quants.

we can create visibility into new and often complex instruments and issues. This builds confidence in the public market and, in turn, drives liquidity and broader participation. Ultimately, our goal is to provide reliable information that drives responsible investment decisions – across the value chain.

But what others have done behind closed doors (as Asset Managers, their methodologies are their intellectual property and competitive advantage), UniCredit’s Patrick Berger and the RI Academy’s Louise O’Halloran are working with Bloomberg to bring into the open and move the integration from the philosophical to the tactical.2

During the course of this year, we will collaborate with partners from industry, finance, non-profits and governments to identify best practices for ESG integration and develop new ones where necessary. While many firms have deep ESG data, they do not have Bloomberg’s depth of critical industry and financial data, news assets or the clean energy data of Bloomberg New Energy Finance. And most importantly, they don’t have Bloomberg’s user base – the most influential investors in the world. By combining these information sets with our powerful suite of analytical tools, we will create new opportunities for us, our customers, the environment and society.

As a fundamental tool for the financial community – one that works hard to understand participants’ workflow – Bloomberg is well positioned to integrate useful sustainability data and analysis into the valuation and decision-making process of the capital markets. By bringing information transparency,

2. UniCredit’s new ESG research methodology, The Halo’s Creed, is publicly available and seeks to quantify ESG issues and incorporate them into stock evaluations while the RI Academy launched a specialised course for Financial Advisers to integrate ESG issues.

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info Curtis Ravenel leads Bloomberg’s global sustainability initiatives – a Chairman’s Office effort and the result of his 2006 Bloomberg Global Leadership Forum proposal. The programme aggressively integrates sustainability considerations into all firm operations and leverages the BLOOMBERG PROFESSIONAL Service to evaluate sustainabilityrelated investment risks and opportunities for its 300,000 customers. Curtis has worked for Bloomberg in multiple roles. He was the Financial Controller for Asia managing accounting, tax, treasury and audit services for 23 legal entities with combined annual revenues exceeding USD 1 billion. This was preceded by various roles in the Capital Planning and Financial Analysis Groups. Prior to his work with Bloomberg, L.P., Curtis co-managed a small real

estate development group, founded a micro-brewery and worked with the Recycling Advisory Council in Washington, D.C. conducting Full Cost Accounting and Life Cycle Analysis work. Curtis earned an MBA from Columbia Business School and a B.A. in History from Davidson College and he is also currently a David Rockefeller Fellow with the Partnership for New York City. In 1981 Bloomberg started out with one core belief: that bringing transparency to capital markets through access to information could increase capital flows, produce economic growth and jobs, and significantly reduce the cost of doing business. Today’s Bloomberg builds on that foundation – everything we do connects decision makers in business, finance and government

to a broad and dynamic network of information, news, people and ideas that enables faster, more effective decisions. The Bloomberg Professional® is the leader in financial information across industries, and across the world. Please note that this article will also be appearing in a new publication entitled “Sustainable Investment: How to Invest in a Changing World”, edited by Cary Krosinsky, Nick Robins and Stephen Viederman.

www.bloomberg.com

Yearbook 2010

Moving to the centre: ESG factors in investment decision-making David Harris Director of Responsible Investment FTSE Group

The last ten years have witnessed a striking rise in the number and sophistication of approaches to integrating ESG – into investment analysis, decisionmaking and stewardship. From an initial focus on ethical concepts, a broader set of investors and analysts are now using their clout to encourage companies to adopt more sustainable practices. At the same time, investment institutions around the world are getting serious about managing their ESG risks. Besides PRI, a separate initiative – this time led by a government body – was the Stewardship Code, launched last year in the U.K., has been well received by institutional investors, with over 140 asset managers and asset owners having already signed up. The rise in AuM incorporating ESG of over USD 10 trillion over the last decade has been mirrored by a lowering of theoretical barriers. Long-held misconceptions regarding responsible investment – that it causes a performance drag and is contrary to fiduciary duty – have been turned on their heads. There have been a number of studies looking at whether investment approaches that focus purely on ESG factors perform against the broader market. One of the most comprehensive was from Mercer, the investment consultant, which considered 20 separate academic studies. Of these, ten had found

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a positive correlation, seven a neutral effect and three a negative correlation. While the results of the studies varied, the conclusion was that there was no evidence of a performance penalty. Additionally, Freshfields Bruckhaus Deringer, the global law firm, considered the concerns of pension scheme fiduciary responsibilities and suggested that not considering appropriate ESG issues could be regarded as a breach of fiduciary duty. The growing ESG market has been driven by institutional investors looking to secure sustainable, long-term returns. However, the idea that these issues should be integrated into investment decisions is a step away from the historic notion of SRI. Integration refers to a process where ESG does not replace conventional investment analytical techniques. Instead, it is brought within the scope of those processes, to provide a more complete view of risk and opportunity. There has been a corresponding shift in the language, tactics and motivations of investors in regards to ESG issues, for example emphasising engagement with controversial companies over exclusion. As a result ESG factors are now relevant at multiple levels of the investment cycle, whether it is portfolio construction, asset allocation, stewardship, engagement, or stock analysis.

Having introduced FTSE4Good, the worldâ&#x20AC;&#x2122;s leading Responsible Investment index series, in 2001, FTSE has established a track record of innovation and success in developing standards and tools for measuring company practices in challenging areas such as environmental management, human rights and countering bribery. The success of the FTSE4Good indices over the last ten years has had a notable impact on improving company ESG practices around the world. Since 2001, FTSE has engaged with over 1,000 companies in the FTSE4Good indices on ESG issues. Approximately 60% of these dialogues have resulted in, or coincided with, improvements in ESG disclosure and practices. The engagement and stewardship strategies of institutional investors and their fund managers have also grown in sophistication and scale. There is a much greater appreciation of the impacts ESG factors can have on value, whether negative, as in an environmental disaster or badly managed labour relations, or positive, as in the opportunities around energy efficiency or strong corporate governance. Investors need tools and objective data to measure the ESG performance of companies in their portfolios. Ultimately, responsible investment is characterised

Country

Average Overall ESG Rating

Country

Average Overall ESG Rating

Norway

3.73

Germany

2.98

The Netherlands

3.59

Australia

2.93

Sweden

3.57

Portugal

2.86

Finland

3.31

Canada

2.81

New Zealand

3.29

Global Average

2.76

France

3.29

Austria

2.74

Spain

3.24

Ireland

2.64

U.K.

3.18

Japan

2.63

Italy

3.17

U.S.A.

2.62

Switzerland

3.11

Israel

2.60

Greece

3.06

South Korea

2.31

Denmark

3.01

Singapore

1.91

Belgium

2.98

Hong Kong

1.34

Source: FTSE, April 2011.

Yearbook 2010

Methodology - overview

by change â&#x20AC;&#x201C; changing corporate behaviour to ensure that ESG risks are first identified and then managed appropriately; change in the way that investors analyse opportunities and interact with their portfolio companies as part of their stewardship processes; and change to the way that ESG risk and performance is assessed. The constantly evolving environment makes responsible investment one of the most exciting, creative and dynamic segments of the financial industry to work in and, as investors continue to change the way they approach ESG issues (focusing on broader performance measurements that enable them to consider how a company interacts with its environment, its workforce, and ultimately the society it exists within), the challenge for data and information providers, such as FTSE, will be to continue to develop innovative, relevant and transparent data and tools to keep pace with the increasingly sophisticated requirements of investors across the world.

3 levels of analysis Supply Chain Labout Standards

Social

Human & Labour Rights

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Governance

Theme Score

Theme Risk

Pillar Score

Pillar Risk

Countering Bribery

Overall

Overall Score Environmental

Climate Change

Source: FTSE, April 2011.

Corporate Governance

Environmental Management

info David E. Harris joined FTSE in 2002 and leads the development of the FTSE4Good, FTSE Environmental Markets and FTSE CDP Carbon Strategy Indices. The FTSE Responsible Investment Unit, which he heads, is responsible for the management of these indices, corporate engagement with index constituents, managing research partnerships, and developing new responsible investment indices and services. David supports the wider responsible investment market serving as a UKSIF board member and as a judge for the FT Sustainable Banking Awards. He also serves on an advisory group for Eurosif and is a member of the Forest Footprint Disclosure Project Steering Committee. Previously, David worked for Arthur D. Little’s Global Environment and Risk Practice developing sectoral sustainability strategies and programmes, and with PwC’s climate change consulting team. David has an M.Sc. in Environmental Technology from Imperial College, an Investment Management Certificate from the U.K. Society of Investment Professionals, and a first-class degree in Biological Sciences from Oxford University. FTSE Group (“FTSE”) is a world-leader in the creation and management of indices. With offices in London, Beijing, Dubai, Milan, Mumbai, Hong Kong, Madrid, New York, Paris, San Francisco,

Sydney, Shanghai and Tokyo, FTSE works with investors in 77 countries globally. It calculates and manages a comprehensive range of equity, fixed income, real estate and investment strategy indices, on both a standard and custom basis. The company has collaborative arrangements with a number of stock exchanges, trade bodies and asset class specialists around the world. FTSE indices are used extensively by investors world-wide for investment analysis, performance measurement, asset allocation, portfolio hedging and for creating a wide range of index tracking funds. FTSE is an independent company jointly owned by The Financial Times and London Stock Exchange Group. FTSE4Good Indices: The FTSE4Good Index Series, which recently celebrated its tenth anniversary, is one of the world’s most well-known series of benchmark and tradable indices for responsible investors. The index series was designed to objectively measure the performance of companies that meet globally recognized standards of corporate responsibility. The FTSE4Good Index Series inclusion criteria have been instrumental in encouraging improved ESG practices amongst corporations worldwide, and are used by consultants, asset owners, fund managers and ETF issuers for assessing or creating responsible

investment products. FTSE Group is a signatory to the PRI and has donated in excess of USD 2 million to UNICEF, generated through licensing fees of the FTSE4Good Index Series. FTSE4Good ESG Ratings: Launched in April 2011, FTSE4Good ESG Ratings are designed to objectively measure the ESG risk and performance of over 2,300 public companies world-wide. FTSE4Good ESG Ratings rate companies across six risk themes (Climate Change, Environmental Management, Human & Labour Rights, Supply Chain Labour Standards, Countering Bribery and Corporate Governance), and at an overall level on a Supersector-relative or absolute basis. FTSE4Good ESG Ratings have been designed to support active portfolio management, research and analysis, selection and screening and to form the basis of an active stewardship and engagement policy.

www.ftse.com

Yearbook 2010

facts & stats Responsible investment 2001 vs. 2011

Source: FTSE Group, “FTSE 4Good: 10 years of impact & investment”, 2011.

2001

Ethically driven What a company’s activities are Exclusionary Divestment Values SRI screening

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2011

Investment led How sustainable are a companyâ&#x20AC;&#x2122;s behaviours Inclusionary Stewardship & engagement Value Integration of ESG factors

Yearbook 2010

Three issues in responsible investment Dr. David Wood Director Initiative for Responsible Investment

The field of Responsible Investment – broadly meaning investment strategies that use ESG information to support long-term sustainable wealth creation – is both wide-ranging and dynamic. Recent years have seen innovations across: • Investor types, from pension funds to foundation endowments to retail investors; • Asset classes, from new strategies in stock-picking and shareholder engagement to real estate, private equity, and fixed income vehicles that target specific social outcomes; and • Issue areas, with recent attention to health, urban regeneration, financial inclusion, or sustainable agriculture leading to new investment strategies and measurements of success. These innovations have taken shape in the aftermath of a financial crisis that has called into question conventional investment strategies and practices, and highlighted more fundamental questions about the purpose of investment markets and the proper ways to evaluate whether these markets serve their purpose in allocating capital to socially optimal outcomes. If Responsible Investment (and its close cousins – mission, impact, social, sustainable and ethical investment) has yet to become a dominant view of markets, the wealth of ideas and action in the

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field make it exciting to study and practice. I would like to highlight three fertile areas in which the Initiative for Responsible Investment engages, to illustrate where we situate ourselves in the broader field. First, we work with More for Mission, a group of 96 foundations representing USD 38 billion in assets who have embraced the idea that they can use their endowments, not just their philanthropic grants, to achieve their organisational mission. These foundations have different objectives – from support for low-income families to the mitigation of carbon emissions – but they adopt similar strategies for deploying their capital to achieve those goals. The More for Mission community is especially attuned to the need for a developed investment infrastructure, with the financial expertise to target appropriate rates of return and the capacity to deliver specific social benefits. The community is working to build this infrastructure, and through practice serves as a market signal to both established and emerging financial intermediaries that there is a market for double- and triple-bottom line investments. In the foundation world, as elsewhere, much of the discussion around mission investment strategies focuses on integrating new ideas in a culture which

is not necessarily open to them. How can investors develop and implement strategies for long-term wealth creation? Responsible Investment, as a discipline, has often argued that conventional strategies favour shortterm benchmarks at the expense of long-term time horizons. This year the IRI is beginning a project – starting with pension fund and foundation trustees and extending to all sorts of investors – to better understand the institutional structures and culture in which investment decisions are made. Crucial questions about the purpose of funds, the ways in which information about investments is gathered and processed, and the agency issues between funds and service providers, often go unasked, leaving funds with strategies that may not match their needs. For this to change, fund trustees and staff alike must develop the capacity to ask hard questions, and identify promising solutions. By engaging with these investors directly, we will draw on their experience and expertise to develop a curriculum that addresses these fundamental questions, which we hope will support investor efforts to build a richer, deeper responsible investment field. Finally, in early 2011, along with our partners Pacific Community Ventures, IRI published a report entitled “Impact Investing: A Framework for Policy Analysis and Design”. The report offers a simple framework to encourage and enable investors to talk about the public policies that support or constrain their efforts to achieve socially optimal outcomes. By acknowledging the role that policy plays in creating and shaping markets, the report asserts that those investors with a focus on

impact – whether to mitigate the long-term risk to their portfolios or to achieve specific social goals – have a role to play in engaging policy makers in dialogue about better market design. We are following up the report by engaging with various global efforts to identify and develop policies that support impact investing. We also hope to use this engagement with policy to think about the roles that Responsible Investment can play in thinking about the fundamental structure of markets and the rules that shape how finance interacts with the world.

info Dr. David Wood directs applied research and other activities for the Initiative for Responsible Investment, a project of the Hauser Center for Nonprofit Organizations at Harvard University. He has managed projects including: the recent publication of “Impact Investing: A Framework for Policy Analysis and Design”; More for Mission Campaign Resource Center (CRC), a project on mission investing by U.S. foundations; the production of a “Handbook on Climate-Related Investments across Asset Classes”; the development of a Responsible Property Investing Center (RPIC); field definition in sustainable emerging

market SME investment; and research into the investor use of corporate reporting on non-financial information. He was elected in 2008 to the Board of the Social Investment Forum. Before he came to the IRI, he taught the history of ethics, including the history of economic thought at Boston University. He received his Ph.D. in History from the Johns Hopkins University. The Initiative for Responsible Investment (IRI) at the Hauser Center for Nonprofit Organizations at Harvard University promotes the development of the theory and practice of responsible investment through research, dialogue, and action. The IRI works across asset classes to build communities of practice around innovative responsible investment strategies and catalyse new opportunities and concepts in responsible investment. Projects of the IRI include the More for Mission Campaign and the RPIC. The Hauser Center for Nonprofit Organizations at Harvard University is a university-wide centre for the study of non-profit organisations and civil society. The Hauser Center seeks to expand understanding and accelerate critical thinking about the leadership of non-profit and non-governmental organisations through the key goals of research, education and practice.

www.hausercenter.org/iri

Yearbook 2010

How can sustainability uncover mispriced investment opportunities? Gregory Larkin Head of Business Development for North America ESG Research business MSCI Inc.

Conventional investment analysis often struggles to anticipate systemic change and market failures. At its best, sustainable investment can serve as a powerful tool for uncovering systemic risk while they are still mispriced and actionable. Sustainability in this context is a must-have for all investors, rather than a niceto-have for a narrow socially responsible niche. This transformation of sustainability as a vehicle for doing the right thing to a tool for uncovering mispriced earnings drivers is having an enormous impact on the investment world and the field of sustainability. MSCI has been a critical and early driver of that transformation. Its flagship product, the Intangible Value Assessment, focuses on material environmental and social drivers and has been first to market with pioneering models to measure company sensitivity to those drivers. Many of the biggest market shocks of the past decade (subprime, BP, Massey Energy, Foxconn) were preceded by a steady trickle of leading indicators that most investors overlooked. Those leading indicators were environmental and social. Before the subprime market collapsed we published research which asserted that this market was not sustainable and that borrowers had taken on more debt than their wages or assets would

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enable them to repay. Before the Gulf Oil Spill, we saw that BPâ&#x20AC;&#x2122;s appetite for unconventional oil was growing far more quickly than its investments in operational health and safety. Before Massey Energyâ&#x20AC;&#x2122;s Upper Big Branch (UBB) mine disaster, we noticed a persistent unwillingness to invest in health or to compensate victims of earlier smaller environmental and operational missteps. The value proposition of sustainability is its ability to link these seemingly macro-risk drivers to corporate earnings and risk. Looking forward, there are a series of environmental and social drivers that we believe will have a more pronounced impact on corporate earnings and capital markets. Here are two examples: Water Stress: Water stress will have a more pronounced impact on operational stability in the industrial, energy and power sectors with knock-on effects for sales and operational expenditure. We also believe that we will begin to see a premium placed on water reduction technologies and water efficiency. Our steel analyst recently tracked the production facilities of the worldâ&#x20AC;&#x2122;s largest steel manufacturers to their respective water basins. From there, he was able to calculate the percentage of production facilities dependent on stressed water basins.

UNDERWRITING CLIMATE CHANGE RISK EXPOSURE

Climate Change and Insurance: The insurance industry is one of the few industries where climate change represents a real risk to earnings rather than once GHG regulation kicks in. As storms become less predictable and more acute they have an enormous impact on the riskiness of the assets that property and casualty insurers protect. Our insurance team recently mapped the premiums written by major P&C insurers to the climate change sensitivity of their respective geographies. Through this we were able to identify which insurers are likely to see a more pronounced increase in liabilities because of climate change. The results of that analysis are as shown to the respective diagram.

% P&C or Specialty Insurance

These two examples illustrate how sustainability analysis can uncover risks that conventional analysis often overlooks. These are often the quiet storms that reconfigure the competitive dynamics of industries once they make landfall. It is a thrilling time to be involved in an analytical field which is quickly becoming indispensable.

Fidelity National Financial, Inc.

100%

Cincinnati Financial Corporation

100%

Allstate Corporation (The)

100%

Progressive Corporation (The)

100%

NKSJ Holdings Inc.

91%

Old Republic International Corporation

98%

The Hartford Financial Services Group

67%

Travelers Companies, Inc. (The)

98%

MS&AD Insurance Group Holdings Inc.

99%

Loews Corp.

100%

Assurant Inc

62%

W. R. Berkley Corporation

95%

White Mountains Insurance Gp

74%

26%

Tokio Marine Holdings Inc.

93%

AXIS Capital Holdings Limited

50%

51%

Chubb Corporation

97%

Validus Holdings Limited

54%

46% 45%

Berkshire Hathaway, Inc.

55%

Lancashire Holdings Limited

100%

Swiss Reinsurance Company

51% 15%

Beazley PLC

85%

Genworth Financial Inc

32%

XL Group PLC

72%

28%

Transatlantic Holdings Inc

100%

Renaissancere Holdings Limited

31%

69%

info Gregory Larkin is the head of Business Development for North America for the MSCI ESG Research business. In this capacity he is responsible for growing the ESG research business and working closely with asset owners and asset managers to integrate ESG analysis into their investment strategies. Prior to this he was the Sector Team Lead for the Financial Sector, where he developed several pioneering models to evaluate the environmental and social risk intensity of bank’s consumer and corporate assets. Greg made headlines early in his analyst career when he published research in October of 2006 predicting the collapse of

% P&C or Specialty Reinsurance

25%

50%

75%

100%

Percent of Written Property, Casualty, or Specialty Premiums in Countries with High ESG Vulnerability

Source: MSCI, 2011.

Asset Vulnerability

Population Vulnerability

the subprime mortgage market. He followed this with an equally prescient call in October 2008 predicting the collapse of the credit card market. He received his Master’s Degree in Emerging Market Economics in 2004 and B.A. in International Relations in 2000. MSCI ESG Research is the successor to ESG pioneers KLD, Innovest and IRRC, which were acquired through MSCI Inc.’s take-over of RiskMetrics Group last year. Investors use MSCI ESG Research to integrate ESG into the investment process. MSCI Inc. is a publicly traded company (NYSE: MSCI) and a leading global

Both Asset and Population Vulnerability

provider of investment decision support tools, including indices and portfolio risk and performance analytics. MSCI has clients in over 60 countries, and more than 2,000 employees located around the world.

www.msci.com

Yearbook 2010

Sustainability investing: Strong dynamics at play Dr. Rodrigo Amandi Managing Director SAM Indexes

Sustainability investing is increasingly establishing itself as the smart way of generating long-term returns, while contributing to global sustainable development. As this asset class has grown, so has the choice of products and methods used. SAM’s distinct approach provides the foundation for the globally recognised Dow Jones Sustainability Indexes and continues to evolve so as to remain at the cusp of the emerging global sustainability challenges. There is ample empirical evidence confirming the positive relationship between sustainability and financial performance, as measured by stock returns. Based on a thorough analysis of the historical information included in its unique sustainability database, SAM has found that an investment strategy that selects sustainability leaders and avoids sustainability laggards contributes to superior long-term investment results with improved risk/return profiles. Over the period 2001 to 2008, the stocks of the most sustainable companies were shown to achieve an average annual excess return of 1.48%, compared to the shares of their less sustainable peers. Quite clearly, sustainability can generate alpha. Investors seem to have taken note of this: In 2010, SRI investments in the German-speaking region increased

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by about 62% compared to 2008, reaching around EUR 34 billion, as the Oestrich-Winkel, Germanybased Sustainable Business Institute (SBI) reports. The investment industry has snapped up this trend: by the end of 2010, SBI recorded 354 sustainable mutual funds, up from 112 such vehicles in 2004, leaving investors to choose among a wealth of products, whose interpretations of the term sustainability differ as much as the methods used to achieve individual sustainability targets. Adding value on two levels SAM’s approach to sustainability investing strives to add long-term value on two levels – by tapping high-growth themes and by identifying best-in-class companies. On the one hand, SAM anticipates potentially radical market changes resulting from sustainability trends and the related emergence of attractive new business segments. On the other, SAM identifies the companies that are best positioned to prosper in a hyper-competitive and changing global business environment by effectively responding to the risks and opportunities arising from sustainability trends. SAM’s main research tool is its Corporate Sustainability Assessment (CSA), an in-depth annual analysis of the largest companies worldwide. Using a best-in-

info

class approach, the CSA identifies and filters out the best performers from all industry sectors, in terms of economic, environmental and social criteria. Aside from stock-specific factors, such as corporate conduct, labor practices and environmental policies, the CSA places special focus on industry-specific risks and opportunities. Many companies use the assessment to identify gaps and initiate improvements in their business practices. By continuously adding new, relevant industry-specific criteria, SAM captures the sustainability trends that are at the forefront of each industry sector and continues to raise the sustainability bar for companies across all sectors. Most recently, for example, SAM has added a water-related risk criterion to its assessment to measure companies’ ability to address the key risks and opportunities resulting from emerging global water challenges. A proven investment approach This approach provides the basis for portfolios focusing on sustainability leaders as well as for a series of themebased investment strategies addressing the major sustainability issues of our time – from Climate, Water and Healthy Living to Smart Energy, Smart Materials and Agribusiness. With such theme funds, investors can profit from a targeted selection of companies that

respond to global sustainability trends by developing and marketing innovative products and services. SAM’s pioneering approach has also proven its effectiveness as the basis for the construction of the Dow Jones Sustainability Indexes (DJSI), the most widely accepted global sustainability benchmarks. The DJSI index family comprises global and regional benchmarks, with index subsets allowing investors to exclude certain sectors or create customised indexes to suit their particular investment objectives. The prospect of inclusion in the prestigious DJSI also serves as a strong incentive for companies to continually benchmark and to improve their sustainability performance. A growth story in its own right Demand for sustainable investment approaches should keep growing, in the face of the increasingly acute global sustainability challenges, as more and more investors seek companies with superior business models and long-term return potential. Regulatory initiatives and external pressure from the media and non-governmental organisations are likely to fuel this momentum. SAM will continue to help shape the sustainability investing universe and, through its CSA and the DJSI, provide additional incentives for companies to become more sustainable.

Dr. Rodrigo Amandi, is the Managing Director of SAM Indexes GmbH, which forms part of SAM Group AG. Prior to joining SAM, Rodrigo served as a research associate at the Swiss Federal Institute of Process Engineering in Zurich. Rodrigo has a Ph.D. from the University of Nottingham, in clean technology, and studied chemistry at the San Pablo CEU University in Madrid. He joined SAM in 2006 as an equity analyst covering the chemicals sector. In addition, he was part of the SAM Sustainability Lab which further develops SAM’s research methodologies and their integration into financial valuations. SAM is an investment boutique focused exclusively on Sustainability Investing. The firm’s offering comprises asset management, indexes and private equity. Through its index activities, SAM has partnered with Dow Jones Indexes for the publication and licensing of the globallyrecognised DJSI as well as customised sustainability benchmarks. SAM is a member of the global asset manager Robeco, which was established in 1929 and offers a broad range of investment products and services. Within Robeco, SAM acts as the centre of expertise for Clean Tech Private Equity. In addition, SAM represents Robeco in its domestic Swiss market, handling sales, client servicing and marketing on behalf of the parent company, its clients and products. SAM was founded in 1995, is headquartered in Zurich, is a signatory to the PRI and employs over 100 professionals. As at December 31, 2010, SAM’s total assets amounted to USD 15.8 billion.

www.sustainability-index.com

Yearbook 2010

Nicole Notat Founder and Chairwoman Vigeo

Working towards a new and healthy relationship between finance and the economy The ecological and social challenges of the 21st century are putting our current consumption and production patterns into question and are a harbinger of major changes in our development and investment models. These stakes bestow new responsibilities upon financial players and financial institutions and, in so doing, create new areas of risk and opportunity.

15+ years’ experience 55 ESG analysts 150 clients and partners 2,500 issuers evaluated

The fact that companies are taking new ecological and societal requirements into account has nothing to do with charity – by neglecting these requirements, companies are taking risks that could adversely impact their reputation and, thus, the attractiveness of their brands, products and services. For them, it boils down to managing the impact of their decisions, activities and location choices upon “their eco-system” and to accounting for this. The most enlightened managers are able to glean opportunities from this situation in order to innovate and excel and to be one step ahead of the changes and, indeed, of regulations that will inevitably prevail sooner or later.

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This shift in scope has not been lost on the investors themselves, who are interested in its impact as it has a bearing on their asset allocation choices. Investors are increasingly aware of their responsibility in financing a sustainable economy and the influence of ESG issues in terms of safeguarding and maximising their investments. The need for investors to understand the degree to which a company is integrating ESG factors in its business practices and risk management is increasingly becoming clear. This need is met by Vigeo’s rating activity which measures the ESG performance of companies, countries and institutions. Our opinions shed new light on risk factors or competitive advantages outside of the scope of traditional accounting and financial analyses. They contribute to a better understanding of the value of companies’ immaterial assets (e.g. reputation, human capital, innovation), as well as their potential for creating future value.

Income from rating activity 6.0

Revenues (in EUR million)

“Responsible investment” initiatives remain relatively recent. Although their substance and transparency remain varied, such initiatives are increasingly driven by mature and well-considered choices. The expansion of these initiatives is unquestionable and, provided that they continue to gain momentum, this gives hope for a new and healthy relationship between finance and the economy.

4.5

3.0

1.5

0 2003

info Nicole Notat is the founder of Vigeo SAS and serves as its Chairwoman. A teacher by profession, she has played an active role in French and European trade unionism. Former Secretary-General of the French Democratic Confederation of Labour (CFDT), Nicole was the first woman to manage a trade union in France and has also served as Chairwoman of Parisbased Unédic, the French government agency for unemployment benefits, from 1992 to 1994 and from 1996 to 1998. From 2005 to 2009, she was appointed member of the Haute Autorité de Lutte contre les Discriminations et pour l’Égalité (HALDE, the High Authority against Discriminations and for Equity) and since December 2008 has served as a Board Member of Coface S.A. Since 2011, Nicole has been a Director of Le Monde. Born in Châtrices, Marne, North-East France, in 1947 into a family with a farming

2004

2005

2006

2007

2008

2009

2010

Source: Vigeo, 2011.

background, she was member of the Reflection Group on the Future of the EU 2030. This independent group was established by the European Council to assist the EU in effectively anticipating and meeting challenges in the longer term horizon of 2020 to 2030. Its report “Project Europe 2030: Challenges and Opportunities” was presented to the European Council in May 2010. Nicole founded Vigeo in July 2002, in a pioneer shareholder formula that brings together large European companies, European trade unions and financial operators. Headquartered in Bagnolet, France, Vigeo operates as a Corporate Social Responsibility Ratings Agency. The company has established itself as the leading European expert in the assessment of companies and organisations with regard to their practices and performance on ESG issues. Vigeo offers

two kinds of services through two business brands: Vigeo rating – the way to responsible investment – offers a broad range of products and services to investors seeking a sustainable and responsible performance of their investments; Vigeo rating analyses more than 2,500 issuers worldwide across equity and fixed income asset classes; Vigeo enterprise – the way to responsible management – conducts global CSR audits as well as thematic audits such as diversity and purchasing audits. Vigeo enterprise also develops services to assist organisations in the implementation of their CSR strategy. The Vigeo team currently comprises 90 employees of 14 different nationalities, based in four locations: Paris, Brussels, Milan and Casablanca.

www.vigeo.com

Yearbook 2010

The current state of sustainable and responsible investment in Greece Dimitris Micharikopoulos Co-Founder and Senior Partner Institute of Social Innovation

Responsible investment has gotten off to a very slow start in Greece, with SRI assets representing today a negligible portion of AuM. This is due to the level of market maturity as well as to the current implementation of the regulatory framework, which does allow for SRI screening, but is not implemented as such. Nevertheless, several pieces of evidence bode well for cautious optimism with respect to future growth prospects for SRI. CSR, frequently a precursor to SRI, has become standard best practice among the leading corporate players in Greece. As CSR continues to evolve into a system for measuring ESG performance through KPIs, the raw data required for SRI uptake will grow. The legal and regulatory context for SRI in Greece centers on disclosure requirements of listed companies and on pension funds regulation. More specifically, the latest legislation (Law no. 3586/2007) on the investment context of social insurance funds does not include any specific clause similar to the 1995 Pensions Act of the U.K. on disclosing Investment Principles and social, environmental or ethical considerations. However, there are certain provisions allowing for the incorporation of ESG considerations in the investment decisions of management boards of first pillar Pension Funds. These clauses, although not explicitly referring

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to ESG factors, imply that the relevant investment decisions should evaluate all risks â&#x20AC;&#x201C; financial and non financial â&#x20AC;&#x201C; and, therefore, a Pension Fund could legitimately screen the securities in which they invest according to SRI criteria or look to invest in companies that disclose ESG information. As far as disclosure of ESG information by listed companies is concerned, the current legislation provides only for transparency on certain aspects of corporate governance, whereas social and environmental performance remains a matter of general compliance and relevant data are disclosed on a voluntary and informal basis. Although the Greek SRI market is currently underdeveloped, institutional investorsâ&#x20AC;&#x2122; stock selection is poised to be increasingly influenced by sustainability criteria, as they seek companies with a superior business model and attractive long-term return potential. It should be noted that despite the universal acceptance and the growing number of PRI signatories, at the moment there is not a single Greek institutional investor, bank, asset owner, asset manager, pension fund or other financial market participant that has signed PRI and thus promote the six principles that incorporate ESG issues into investment decision-making and ownership practices1. On the retail side, customers are not well-informed about responsible investment

Relevant legislation, regulations and policy instruments in Greece INSTRUMENT

RELEVANCE TO SRI

Disclosure requirements for listing on the Athens Exchange

Corporate governance code of conduct.

“Investment policy should be designed in such a way that investment choices should have a longLaw no. 3586/2007 term time horizon in order to achieve the highest possible return with minimum risk” (article 17 § 1, Legal framework for investment and development of social insurance aa). Legal interpretation would suggest that this allows for the possibility of formally incorporating institutions (Pensions law) ESG issues in investment policy for pensions.

Presidential Degree 148/2009 on Environmental Liability

instruments, and a recent survey conducted by the Institute of Social Innovation among members of the Greek financial community indicates that there is no evidence that brokers and other providers are actively marketing or advertising SRI products. Without a doubt, the financial sector can play a critical role in the promotion of SRI in Greece. As intermediaries in the economy, financial institutions can contribute to mitigating environmental and social risks, while at the same time taking advantage of the opportunities that sustainability offers to the finance sector. According to the aforementioned survey on SRI, the major themes to emerge from current investment practices followed

The law seeks to more clearly establish environmental liability for firms that cause damage to protected species, natural habitats and sites of special scientific interest, or contaminate surface or ground water, or contaminate land that poses a risk to human health. Firms will be required to take preventative action to avoid damage to habitats, notify regulators if any damage is caused, and undertake remediation efforts to clean up any environmental damage caused. Environmental liability insurance is expected to become more widely diffused.

in Greece were: 1. Lack of client demand is universally cited as the major reason for the lack of supply at present. Various factors involved include: • Lack of awareness of SRI as a concept. • Confusion/misunderstanding about performance trade-offs. • Generally immature/unsophisticated investors are most risk-averse and tend to feel that including anything beyond traditional financial performance is more, rather than less, risky. 2. Mandatory disclosure of ESG issues is the only

1. A large Greek pension fund is expected to adopt PRI within 2011. The participation of Greece’s first institutional investor in this initiative will show leadership and demonstrate a more active approach towards SRI.

way banks and financial institutions will take them formally into account. Otherwise, the costs are seen as being too high and not worth the pay-off. 3. Lack of easily available tools for the operationalisation of ESG risks and opportunities (e.g. ESG risks assessment tools). 4. Given the small size of the investment universe on the Athens Exchange, the range of companies from which to screen stocks is considered prohibitively small (particularly considering diversification issues). 5. Modification of pension fund regulations, requiring even a small portion – say 10% – of total AuM to be SRI screened, would send the strongest market signal and have significant spill-over effects in the medium- to long-term.

Yearbook 2010

6. Generally low level of awareness of SRI specifics, even among members of the financial community, and there is often confusion between CSR and SRI. 7. As far as business lending by banks is concerned the consideration of ESG issues is in most cases limited to the assessment of governance issues. Screening of ESG risks, which occurs for bank lending typically relates to informal injunctions against lending to socially sensitive sectors such as media, political parties, armaments, etc. Major banks have systems to assess environmental risks, but these focus almost exclusively on potential legal consequences of environmental damages, not on the costs and impacts of the damages per se. 8. Bank lending to companies in which the Greek state has an ownership stake, such as utilities, make an assumption that the State will absorb any costs related to potential social or environmental damages and thus they are not incorporated into risk assessment profiles, resulting in a skewed and misrepresentative risk profile of actual ESG impacts. 9. The Greek Orthodox Church, although widely considered to be an excellent potential proponent

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of SRI as churches are in other countries, has not displayed any active and significant interest according to asset managers who have made relevant proposals in recent years. 10. Government could encourage the development and sale of SRI funds by providing tax incentives on relevant mutual funds. 11. The financial community overall sees the increasing income of private Greek investors in the long-term as a boon for SRI much as it is for CSR initiatives and growing eco-consciousness. 12. Creation of a sustainability index on the Athens Exchange would be an excellent and fairly simple signal to increase SRI uptake. There is strong evidence to suggest that as green development becomes a priority for the Greek government and a way out of the economic crisis and with the number of environmental and clean tech products offered on the rise, SRI will begin to grow. The offer of SRI products will most likely be very gradual, as many financial market actors are still either not convinced that sustainability and finance are compatible, or have difficulty adapting their business.

Should regulatory authorities or key institutional investors, such as pension funds, decide to send a strong indication to the market that sustainable development and long-term growth are worth the short-term cost and ire of those companies that are underperforming on social and environmental issues, the market would clearly sit up and take notice.

Typology of investment practices in Greece INVESTMENT ACTIVITY

RELEVANCE TO SRI

Commercial

One bank has developed an environmental performance scoring system to rate commercial loans, according to the environmental impact of the sector and proposed project. This scoring system is intended to be used as part of the bankâ&#x20AC;&#x2122;s normal risk mitigation procedures.

Investment Banking

Project financing for large infrastructure projects funded with EU, national or other semi-public funds in PPP generally require the preparation of environmental impact assessments.

Asset Management

TT Hellenic Postbank offers through its affiliate Hellenic Post Mutual Fund Management Company the Ecology International Equity Fund, which invests its assets in a portfolio that comprises select equities of companies listed on foreign exchanges, whose policies and missions aim among others to pursue environmental protection, including energy saving, reduced pollution and dissemination of associated technologies. In addition, the National Bank of Greece launched in 2010 the DELOS Green EnergyInternational Equity Mutual Fund, which invests in the sector of renewable and alternative energy.

Pension

A portion of pensions may be invested in stocks that include long-term performance criteria

Private

At the time of writing, no private banking outfits specialise in the sustainability niche with the exception of Alpha Bankâ&#x20AC;&#x2122;s Private Banking, which offers to its clients the option to invest in a mutual fund, investing in renewable energy companies and green technologies.

Corporate Investment

Greenfield investment projects in heavy industry use environmental impact assessments as part of their investment planning.

info Dimitris Micharikopoulos is the co-founder and Head of Sustainability Consulting Services of the Athens-based Institute of Social Innovation (ISI). He has significant research and consulting experience in the fields of sustainable development, employment and social protection and has managed a large number of projects in Greece and abroad related to policy formulation, the adoption, application and evaluation of corporate responsibility standards, the design, management and evaluation of social policy and international co-operation projects. He has also led

corporate responsibility consulting projects for some of the biggest Greek corporations. In the past, he has worked in research organisations and international institutions, and has served as an adviser to local government authorities as well as to the Hellenic Ministry of Labour and Social Security. He studied Law at the University of Athens and has postgraduate degrees from the University of Warwick (in International Economic Law) and from Trinity Hall, University of Cambridge (in European Studies).

and consultancy company, with offices in Athens, Greece and Nicosia, Cyprus. Its main activities focus on the provision of consulting services, as well as the elaboration of studies and research in the fields of social protection, employment and sustainable development. ISI combines an interdisciplinary approach to issues with significant international experience, while ensuring close relations with leading academics and consultancy bodies throughout Europe.

Founded in 2000, ISI is an independent research

www.csrservices.gr Yearbook 2010

The future of responsible investing - FDI 2.0 Prof. Christos A. Alexakis CEO Invest in Greece S.A.

For some time, SRI has been closely associated with investing in equity markets – choosing shares or funds based on their social return component, aside from expected financial returns. Interest in this model of investing has become so robust that, currently, SRI in the United States accounts for USD 3.07 trillion out of a total of USD 25.2 trillion, which is more than 12%, of all funds invested. Today, as society, investors, and businesspeople around the world become increasingly aware of pressing issues, such as global warming, health costs and the value of ecodiversity, both governments and investors have an expanded role to play in directing a new course of economic activity, at a micro and a macro level. In this regard, State policy can encourage – even direct – the flow of FDI funds to projects that have both a high financial return and high social value. With its new Investment Framework, the Greek government has taken the bold position of encouraging – and rewarding – socially responsible FDI, or what we may call FDI 2.0. Greece’s new Investment Framework centres on a new Investment Law and the “Fast Track Law,” or Strategic

EuroCharity

Investment Legislation, both of which offer highly attractive incentives to promote long-term, sustainable investments with strong SRI spill-over and significant social, multiplier effects. Greece’s new Investment Framework incentivises investment in areas that foster green technologies, have a positive impact on Greece’s natural environment, create new jobs, stimulate research and development, improve waste management practices, reduce pollution and substantially increase RES. The new Investment Law and the Fast Track Law are designed to meet the challenges of sustainable, long-term investment based on green growth. This represents a sea change from the past and immediately provides a pillar of growth that, pivotally, asks all stakeholders to view natural resources as assets that contribute to financial gain and that must be preserved for the continued, sustainable profit of future generations. The very concept of green growth is rooted in responsibility. In addition, natural resources can be evaluated with tools that provide them with monetary value. The air, the water, the ecosystem, and the mountains contribute to our economic output as well as to another “output” evaluated and defined with

alternative metrics, that is social cohesion, recreation value, health and physical well being, better dietary resources and venues for exercise, such as mountain climbing, white water rafting, golfing, surfing and birdwatching. In this regard, a more holistic approach to values may be integrated into our assessment tools, deriving a more accurate and true sense of return – to investors, to the Greek state, and to all stakeholders.

development that creates a favourable balance between regulations, standards and productive impact. Greece’s formal encouragement of multiplier linkages, social value with financial reward and sustainable growth go a long way in designing a new formula for global FDI investors.

info

The same may be said of investment in innovation and in R&D. For instance, providing incentives for R&D into waste management may extend in a multitude of directions. First, waste is reduced, reused or recycled in a way that may produce energy or new products. Along the way, this creates new jobs, perhaps new spin offs, and new value is added. The Greek state benefits from better waste management, less waste, more green energy and, therefore, a smaller carbon footprint, more employment, higher revenues, and social cohesion. The investor has enjoyed the expected return on his/her initial investment and becomes involved in a new venture, with new business partners.

Prof. Christos Alexakis is an economist with a specialisation in financial markets. He has extensive professional experience as a Senior Executive in enterprises with a global presence. In parallel, Christos is a member of the academic community as an Assistant Professor at the Department of Economics of the University of Piraeus and has taught outside of Greece as well. He has published books on investment issues and numerous articles in international academic journals. Since April 2010, he has held the post of CEO at Invest in Greece Agency. He was born in 1965 in Piraeus where he currently resides with his wife, Aggeliki and their daughter, Susanna.

Such a “sustainable” approach to today’s 2.0 Investment Framework provides Greece and all its citizens with

Invest in Greece is the official Investment Promotion Agency that promotes and facilitates private investment,

identifies market opportunities, and provides investors with assistance, analysis, and after-care support. Invest in Greece Agency is responsible for the implementation of the “Acceleration and Transparency of Implementation of Strategic Investments” Law (Fast Track). Within its new investment framework, Greece’s Fast Track Law facilitates strategic investment projects and accelerates their licensing process – a major benefit to investors and a significant boost to Greece’s New Investment Era. In addition, the Athens-based Agency identifies potential partners, locates sites, assists in legal and licensing procedures, analyses investment proposals, furnishes pertinent economic information and fully explains incentives available to investors.

www.investingreece.gov.gr Yearbook 2010

Responsible investing: the way forward for Greece Constantinos Michalos President Athens Chamber of Commerce and Industry

Responsible investing is not merely a new trend in today’s business world. It is the new way of doing business in the 21st century. More and more companies invest and integrate in their corporate strategy as well as daily operations responsible policies and practices, which reflect the view that ESG issues can and should affect a company’s performance, reputation and marketing profile. This is the lesson we learned from the recent international crisis. It is evident that the 2008 global financial crunch has not stifled interest in responsible investing. In fact, the number of institutional and private investors and companies interested in investing in responsible companies has risen. This trend is attributed to the understanding that socially responsible companies are more stable and can better survive a crisis. In a bear market, investors are forced to take a more long-term approach to investing. So they have to evaluate long-term ESG risks into investment decisions and choices. Furthermore, I would point out that what the recent global economic crisis and climate change – two major challenges of our time – reveal beyond any doubt is that the development model of the past years is in need of bold changes and interventions.

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In Greece, numerous corporations choose to invest and act as responsible corporate citizens. And despite the harsh market conditions, this choice remains a top priority. Each corporation is part of the community in which it operates. Each corporation is being affected and affects, at the same time, this community. There is a vital relation of interdependence, which serves as the fundamental basis of responsible investing. Obviously, a corporation aims at maximising its profits and gains and reaching its goals for the board of directors, the investors, the owners. However, financial stability does not anymore guarantee a company’s success. Responsible investing is now a key role in decisionmaking and incorporated into policies and is being implemented both by the Board of Directors and the employees. These companies have better chances not only of surviving in today’s ailing markets, but also to ensure their business future. Additionally, responsible investing is not a notion which can be applied only by multinationals or large corporations. SMEs can also incorporate and apply the principles of social responsibility. Studies show that the companies that prudently invest in

social responsibility are the most competitive and successful ones. In Greece, nine firms are included in the FTSE4Good Index Series, only one in the DJSI (European Stoxx Index and World Index), 33 firms publish reports using GRI Guidelines, no company has signed the PRI at the time of writing, just five corporations have replied to the Investor CDP 2010 questionnaire, while 81 are currently signatories to the UNGC. In May 2008, a UNGC Local Network – the Global Compact Network Hellas – was set up in Athens. In addition, Greece plays a dynamic role in innovative financing for sustainability in South-East Europe. For example, in 2004 UNEP FI established a Regional Task Force for Central and Eastern Europe (CEETF) to carry out the Finance Initiative’s activities in this particular region. The CEETF aims to support and expand sustainable finance practices in CEE by raising awareness in the region of the link between environment and finance. Participants in CEETF activities are financial sector institutions based in the region or with a considerable network of subsidiaries in the region, as well as NGOs and other interested stakeholders. UNEP FI Signatories based in Europe are automatically affiliated to the European Task Force and the CEETF is a sub-group

of this Task Force. Greece currently has four UNEP FI Signatories; one insurance and three banking groups. The non-profit Union of Environmental Scientists of Greece acts as one of the advisers to the CEETF.

Responsible investing is clearly the way forward for Greece, not only in good times when the economy is blossoming, but also in challenging times such as the ones our country is experiencing right now.

info Constantinos Michalos is the President of the Athens Chamber of Commerce and Industry (ACCI). He was born in 1960, studied Finance and Political Science at the University of Essex, England, and pursued postgraduate studies on financial applications at the London School of Economics and Political Science (M.Sc.). Since 2007, he has been an elected member of the board of Public Power Corporation S.A. (PPC). Since 1988, he has been the Chairman and Chief Executive Officer of SWAN S.A., an industrial exporting company based in Krioneri, Attica, specialising in the production of natural latex products. Constantinos is married with four children, and speaks English and French. Established in 1919, the ACCI is one of Greece’s largest business associations and counts more than 100,000 firms of all sizes and sectors among its members. The ACCI Administrative Committee is elected by its members, made up of experienced and successful

entrepreneurs. As a strong advocate for the Greek business community and one of the Greek State’s institutional advisers, ACCI firmly supports SRI and CSR to attract investment capital, enhance competiveness and economic growth in Greece and offer hopeful prospects for the future. The ACCI is a signatory to the UNGC, founding member of the Global Compact Network Hellas and a founding member of the Hellenic Network for Corporate Social Responsibility (CSR Hellas). ACCI’s SecretaryGeneral serves as Vice-President of CSR Hellas, which is the national partner organisation of CSR Europe with 150 member firms and business associations in Greece. ACCI is continuing to make every effort to increase awareness among its member companies of the importance of CSR as an active factor to achieve sustainable development.

www.acci.gr Yearbook 2010

SUSTAINABILITY IN BUSINESS

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â&#x20AC;&#x153;Transparency, innovation, eco-efficiency, investing in the community, nurturing and motivating employees, managing long-term risks and embracing long-term opportunities are integral parts of a companyâ&#x20AC;&#x2122;s enduring capability to create value. Business leaders who align their business strategy and technical development with sustainability and social accountability will deliver superior long-term results to shareholders.â&#x20AC;? Al Gore, 45th Vice-President of the United States of America.

Yearbook 2010

facts & figures

Reporting

45%

frameworks

40%

used by investors

30%

for ESG disclosure Source: PRI, â&#x20AC;&#x153;Report on Progress 2010. An analysis of signatory progress and guidance on implementationâ&#x20AC;?.

35%

25% 20% 15% 10% 5% 0% Global Reporting Initiative (GRI)

Global Framework for Climate Risk Disclosure

Other reporting framework by an industry or association 2009

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2010

2,000 1,800 1,600

GRI reports 1999-2010

1,400 1,200 1,000

Source: GRI Sustainability Reporting Statistics, 2010.

800

600

400

200

0 1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Yearbook 2010

A leading supermarket chain

Nutritious, healthy, safe and affordable! We deliver the best for life! With more than 70 years of history, generations of loyal consumers, who not only visit AB stores for their shopping, but also entrust us with their family’s healthy nutrition, AB’s story runs creatively and optimistically all through the 21st century. With 10,000 employees, 223 stores, 1,474 basic suppliers, 29,162 best quality products adapted to the modern nutritional needs and desires of consumers, AB is always ahead of its time. Our world has significantly changed, competition has become fiercer and consumer expectations are growing and changing every single day. AB shows how a solid clear strategy, dedication to principles and consistency, can result in impressive growth. During the last 19 years, being member of a large multinational family, Belgium’s Delhaize Group, has helped us offer assortments, products and services that are nutritious, healthy and safe, every day, at prices all customers can afford. We aspire to enrich the lives of our customers, associates and the communities we serve in a sustainable way. Our CSR strategy � developed collaboratively with Delhaize Group, following a thorough, internal review of existing efforts � sets foundational goals

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in the areas that are most material to our business: health and wellness of products and people, food safety, responsible sourcing, associate development and climate change impacts. We have grouped our strategy into three pillars: healthier products, healthier people and a healthier planet. These elements reflect the elements required for a sustainable business. Healthier products through: Promoting a healthier lifestyle and diet, as basic elements of quality of living; insuring high quality and quantity of our products; trustworthy information on food and other everyday products; and finally, through taking measures in order for our supply chain to have all the necessary means to insure the quality of our products and in order to follow safety and hygiene rules and regulations.

1. Recycling units for either 7 or 2 materials in 53 stores. AB Vassilopoulos is the only company in Greece and Europe to implement an Individual Alternative Management System for Packaging Waste, utilising special provisions of the law and with the certification of the Hellenic Ministry of Environment, Physical Planning & Public Works (now renamed to the Hellenic Ministry of Environment, Energy & Climate Change).

Yearbook 2010

The Aghios Dimitrios store in Athens: It has been distinguished with the European Commission's 2010 “GreenBuilding Partner Award”. It was recognised as the most energy-efficient store in Europe, as it combines energy-saving methods that allow it to consume 30% less energy than a conventional store.

AB’s Green Store in Stamata, Athens: Inaugurated in October 2010, it combines energy producing and saving methods able to reduce energy consumption by 40%! Green Store’s technologies are being tested for future use in our new stores.

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Healthier people through: Emphasising gender equality among our employees and enhancing bonds with the local communities with which we interact! Therefore, we try to develop the skills of all our employees and at the same time provide them with a healthy and safe working environment; cover basic needs of the local communities, through corporate actions towards local residents and local NGOs. A healthier planet through: our commitment to the safeguarding of our environment with four basic initiatives: Recycling, Energy-Saving Systems (applied to all our stores), a Centralised Logistics System and many Corporate Initiatives (beach cleaning, reforestation projects, etc.). AB Vassilopoulos, with a long history of environmental sensitivity, has always included in its development strategies environmentally-friendly programmes and practices such as: low consumption light bulbs, exploitation of heat from cooling machines, photovoltaic panels, recycling units (for aluminium cans, glass, plastic bottles, batteries, paper, shrink film, used cooking oil, light bulbs) that can be found in the majority of our stores. THE AB GREEN STORE: The Greenest Store in Greece! In 2010, our Aghios Dimitrios store in southern Athens

was recognised for its energy efficiency and honoured with the European GreenBuilding Award. The store is equipped with high technology and has the ability to consume 30% less energy than a conventional store. After the Aghios Dimitrios project, we decided to take the challenge of energy-efficient stores one step further with the creation of our AB Green Store in Stamata, northern Athens. This new Green Store marked the beginning of a new era as far as store design is concerned. The Green Store can produce and save energy in a percentage that can reach 40%, in comparison with our conventional stores. That percentage was achieved with top notch energy production and saving systems. In regards to sun energy, we used photovoltaic glass panels on the front of our store and on our roof top. We used solar collectors for hot water, side windows with automatic shading louvers to control lighting and solar tubes for natural lighting. The store has natural ventilation that helps it cool down during the warm summers and we used reinforced insulation, double glazing and an entrance lobby in order to reduce thermal loss. In order to save energy, we installed low-energy consumption cabinets with doors, LED lighting and used ecological CO2 instead of Freon. We also used low-energy consumption headlights with LED technology for our parking area, installed a 1 kW wind generator and, most importantly, we installed a geothermal system

for thermal exchange between the store and the ground below it for heating and cooling. In regards to our commitment towards protecting the environment, we built a water tank (170 m3), in order to collect rainwater for our irrigation system, our fire fighting system and for the water closets. We also planted a considerable number of trees appropriate to the area climate. But the unique character of a Green Store does not stop with the above. Apart from its special design, environmentally-friendly natural products were also used for its construction, such as wood, marble, limestone, etc. Finally, our Green Store offers its clients carts and shopping baskets from recycled plastic bottles, an electric car charging station and an integrated recycling centre (for metal, glass, aluminium, plastic, batteries, plastic bags, small electric devices and used cooking oil). We are proud of the work we have done so far. The strategy we are following is ensuring more responsible practices by catalysing new projects and redesigns of our operations. Thus, we strive to offer the best for life.

Yearbook 2010

Brewing a better future

Athenian Brewery´s three-year plan to become the Greenest Brewer in Greece “To be the World’s Greenest Brewer.” That is Heineken N.V.´s vision for 2020. Athenian Brewery S.A. (AB) shares this long-term ambition and works towards this direction. In co-operation with its parent company, Athenian Brewery has rolled out a three-year action plan with specific goals and tangible results based on three strategic imperatives – “Improve”, “Empower” and “Impact” – that further spread into six core initiatives. Green Brewer: Athenian Brewery works towards improving its energy and water ratios and CO2 emissions in production, warehouses and offices. Green Commerce: Aligned to its goal for Green Cooling, AB has gradually begun introducing “Green Fridges” in the market. At the same time, it is actively involved in a dynamic Pan-European process of developing a carbon footprint calculation model for Heineken N.V. products on SkU (stock-keeping unit) level, including suppliers, production units and consumers.

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Engaging Employees: Sharing its CSR vision, goals and initiatives with all employees remains a fundamental priority for AB. Furthermore, the company provides a safe and secure working environment and has embedded integrity, health and safety, employee rights and volunteerism in its culture. Heineken Cares: Athenian Brewery has been in close co-operation with local communities throughout Greece, mainly thanks to the local barley sourcing programme that the company has been implementing since 2008.

Responsible Consumption: The Heineken brand has been leading Athenian Brewery’s efforts towards responsible consumption. The goal that has been set is to develop a holistic Alcohol Policy Approach that will communicate the message of Responsible Consumption. Heineken will again take a leading role through impactful and consistent actions targeted to further sensitise the audience. In addition, the core messaging will be supported by all other Athenian Brewery's brands, as the “Enjoy Responsibly” message will remain present in their packaging, television spots and Web sites. Partnerships for Progress: Athenian Brewery partners with Greek NGOs that undertake actions related to responsible consumption and care for the environment. More specifically, AB actively supports, "Nifalioi" (Sobers), the only NGO in Greece dedicated to responsible consumption, in the implementation of two basic activations: the “Sober Driver” programme and speeches at universities and local communities. AB partnered with the NGO Mediterranean SOS Network for the implementation of the Amstel Eco programme, a series of beach clean-ups that take place every summer. The long-term objective is to maintain both partnerships and enhance the activation programmes throughout the year.

make their own contribution to this ambitious and demanding project, under the close supervision of a dedicated Committee that consists of representatives of four functions: Corporate Relations, Commerce, Human Resources and Supply Chain. This is just the beginning of the corporate journey towards becoming the World’s Greenest Brewer.

Athenian Brewery S.A. reinforces its commitment to sustainable development, through an ambitious set of actions across all functions that will enable it to become and remain the Greenest Brewer in Greece.

Athenian Brewery’s commitment to sustainability is also reinforced by the devotion of Heineken N.V. to this vision. All employees of the Athenian Brewery

Yearbook 2010

for a better world Corporate Responsibility Programme

How can we operate without harming the environment? “For the OTE Group, progress in the market goes hand in hand with responsibility towards our people, our customers, the environment and society. Indeed, this is how the best businesses succeed to be competitive and innovative in the 21st century.” - Michael Tsamaz, Chairman of the Board of Directors and Chief Executive Officer OTE and COSMOTE Since the day of its incorporation, COSMOTE has consistently placed Corporate Responsibility (CR) at the core of its activities, and has made it one of its primary “investments”, a necessary element to the company’s viability and growth. Using this philosophy, and by listening to the needs of society, we worked hard and the company developed an integrated Corporate Responsibility programme that is based on four key pillars: The Environment, Society, its Employees and the Marketplace. These pillars are the foundation of COSMOTE’s activities that contribute to the country’s development and the increase in the living standards of its citizens, that aims at raising awareness, promoting participation and activating forces, and that, most importantly, produce measurable and tangible results.

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The company’s historical growth in implementing and managing CR is a perpetual process of steady growth and development, which can be summarised as follows: From 2004 to date: • We created a separate CR functional area within the organisation; • We formulated the CR implementation framework, which encompasses all our policies – initiatives – actions. Its continuous growth and improvement is self-evident; • We established a Corporate Responsibility Team; • We carry out Risk Assessments at regular intervals as well as internal surveys on CR at regular intervals; • We established the Code of Conduct for employees in the COSMOTE Group;

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Environmental educational activities for children.

Reforestation on Mount Penteli.

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• Our dialogue with Social Stakeholders has become more systematic; • Our environmental management has become more systematic; • Our supply chain management has become more systematic; •W e published five CR reports (two in accordance with GRI Guidelines); • Every year we continuously increase our number of quantitative indices in general and of GRI indices; • Every year we aim at improving our Accountability Rating Greece. Focusing on the environment, even though we are one of the companies with a small environmental impact, COSMOTE continues to adopt environmentally-friendly practices with consistency and commitment, making environmental awareness a daily practice. It invests in a multi-dimensional environmental programme with three basic objectives: •T o minimise environmental footprint; •T o inform and raise the stakeholders’ awareness; •T o contribute to other sectors of the economy so as to become “greener”

Minimising our environmental footprint

Since 2005, the company has been implementing an Environmental Management System in accordance with ISO 14001, which evaluates its environmental impact on an annual basis. At the same time, it is constantly seeking ways of reducing its environmental

impact, by using available know-how and technology, more specifically: • By decreasing pollution emitted into the environment; • By following the principle “Reduce – Reuse – Recycle”: Reducing the pointless use of raw materials, Reusing materials used and Recycling solid waste, such as base stations’ batteries, paper, etc. that inevitably emanate from any corporate activity. The fact that indicatively proves the effectiveness of its strategy is that in 2010, COSMOTE, following a systematic effort, managed to reduce CO2 emissions by 3,500 tonnes due to the programmes implemented, recycled 557.6 tonnes of batteries withdrawn from the Base Stations, and recycled 77.9% of its solid waste from its warehouses.

Informing and raising the stakeholders’ awareness

Having undertaken the responsibility of raising awareness and informing the public, the Company dynamically continues its mobile phone, battery and ink cartridge recycling programme titled “Join Us in Recycling,” which has been implemented since 2005, in the framework of the Environmental Management System, at COSMOTE’s and GERMANOS’s retail network throughout Greece. Since 2005, we have gathered over 36,840 kg. of mobile phones and accessories. Employees: The company’s sustainable growth and future progress are linked to the development of its employees, who

are the most important ambassadors of the company’s vision and values. Through integrated communication programmes, the company raises the awareness of its employees with respect to the Environmental Management System. The result of this effort was the significant contribution of the company’s personnel towards achieving the goals of the System. Moreover, each year the company supports reforestation initiatives in different regions of Greece, either through voluntary participation of its employees or by covering the maintenance and watering costs of saplings. For example, in 2010 it participated in four reforestations.

Contributing to other sectors of the economy so as to become “greener”

COSMOTE studies international and domestic trends and looks for opportunities in order to tap into its “green” technology for developing ICT services which, if implemented in private and public sector administrations, may become an integral part of the solution to the climate change challenge. Respectively, targeted initiatives as to their operation’s impact on the environment, and their role in informing and raising stakeholders’ awareness on environmental issues, are being undertaken by the Group’s subsidiary companies, such as AMC in Albania, GLOBUL in Bulgaria and COSMOTE ROMANIA.

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for a cleaner, healthier future

The future of responsible cleaning Diversey is a leading global provider of commercial cleaning, sanitation and hygiene solutions. The company is committed to a cleaner, healthier future by providing its customers with the products, solutions and expertise to make their facilities the safest and cleanest in the world. With offices in more than 60 locations around the world, Diversey employs more than 10,500 people globally and sells into more than 175 countries. Our purpose is what drives us to deliver superior solutions that help our customers protect their customers and their brands. It is the inspiration for our innovations of complete solutions that combine chemistry, machines, utensils, dosing and dispensing, packaging and processes to optimise results, while reducing waste, water and energy consumption and protecting workers. Living our purpose will result in a cleaner, healthier future. Our global leadership is rooted in our rich history. We draw on the power of our legacy companies, with nearly 210 years of combined experience in meeting customersâ&#x20AC;&#x2122; needs, to respond to the challenges of todayâ&#x20AC;&#x2122;s world and the promise of generations to come. As a longtime pioneer of innovative green technologies, Diversey has the unique ability to deliver more

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sustainable cleaning solutions â&#x20AC;&#x201C; for the environment and for your business.

Chemicals

A number of our chemical products are rigorously tested and certified by independent organisations such as Green SealTM, Environmental Choice, GreenGuard, EU Flower and Nordic Swan. These products include: glass cleaners, general-purpose cleaners, restroom cleaners, industrial degreasers, carpet cleaners, floor finishes/ sealers and floor finish strippers. We also have many environmentally preferable products developed and manufactured according to our own best-in-class criteria. We test for performance, reduced environmental impact and enhanced safety. These products include: toilet bowl cleaners, odor control

systems, wood- and stone-care products, environmental surface disinfectants, skin care products and specialty cleaners.

Dispensing technology

Our innovative dosing and dispensing technology precisely dilutes concentrated products with tap water to make cleaning safer, more cost effective and to have less impact on the environment.

Tools

We offer pioneering cleaning tools that minimise environmental impact and improve safety. For example, our hygienic cleaning system with microfiber pad technology cuts floor care time in half. And all of our microfiber-based systems and tools significantly reduce particulates and the threat of cross-contamination.

Training and support

Cleaning for health and the environment takes more than products alone. It requires the right practices. This is why we developed the Healthy High Performance Cleaning programme. HHPC is a comprehensive programme for green cleaning. The HHPC manual is essential to an integrated programme of green products, consumables, tools, equipment, procedures and training.

Great sustainability achievements

15.6 million gallons since 2004 and since 2006 use 28% less natural gas, 15% less electricity, and 16% less carbon emissions, the equivalent of taking more than 500 cars off of the road. The U.S. Green Building Council has also awarded Diversey’s distribution centre its third LEED certification at the Gold level, making it the first commercial building in the world to hold three LEED Gold certifications. The facility earned LEED Gold for Commercial Interiors (CI), following its Existing Buildings (EB) certification (earned in June 2010) and New Construction (NC) certification (earned in October 2007). Diversey is installing a 400-kW fuel cell from UTC Power, a United Technologies Corp. company, at its main global headquarters building. It is estimated that the fuel cell will generate more than 40% of the building’s electricity and 75% of its heat, further reducing the company’s carbon emissions by 3,365 metric tonnes per year, which is equivalent to taking 685 cars off the road. The fuel cell is expected to be operational by the first quarter of 2011. Fuel cells are one of the cleanest energygeneration sources available in the world and meet the strictest U.S. emission standards. Highly energy-efficient and virtually pollution-free fuel cells produce electricity, heat and water through an electrochemical process.

Using very clean, low-pollution energy sources and reducing our waste is right for the environment and generates substantial cost savings not only for our customers but also for our operations. Since Diversey’s main headquarters building was certified as LEED-EB (Leadership in Energy and Environmental Design for Existing Buildings) Gold in 2004, the facility has achieved substantial energy, water and carbon emission savings through various operational and environmental initiatives. These initiatives have helped the company reduce water consumption across its global campus by

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On the road to sustainability: Fiat leads the way

Investing in the future of sustainable mobility Fiat Group has long been committed to promoting increasingly sustainable development, in the firm belief that growth only has value if it is achieved responsibly. Making social and environmental considerations part of its strategic processes has become an integral part of Fiat’s daily business.

At Fiat Group, the integration of economic decisions with those of a social and environmental nature constitutes a commitment which is fundamental to the long-term creation of value. This awareness is rooted in the Group’s history and corporate culture since its establishment on July 11, 1899 in Turin, Italy and has evolved and strengthened over the years, becoming an integral part of the strategic approach which guides the business. In 2010, Fiat Group was Italy’s largest private industrial enterprise and one of the founders of the European automotive industry with 2010 net revenues reaching EUR 56.3 billion and trading profit at EUR 2.2 billion. With commercial relationships in more than 190 countries, Fiat Group designs, produces and sells cars, trucks, agricultural and construction equipment, engines, transmissions and components, with an emphasis on

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technological innovation and eco-compatibility. At 2010 year-end, the Group had 181 plants and nearly 200,000 employees world-wide, in addition to 113 R&D centres on five continents staffed by approximately 14,000 highly qualified personnel. Operating for more than a century, Fiat has produced approximately 97 million passenger cars and light commercial vehicles and its models have been named “Car of the year” 12 times. On January 1, 2011, the demerger of activities from Fiat to Fiat Industrial took effect. As a result of this transaction, there are now two distinct groups, one focused on the automobiles business (Fiat) and the other on the capital goods business (Fiat Industrial), each with well-defined objectives that are clearly understandable to the market.

CORPORATE GOVERNANCE

An organisation’s long-term success is closely linked to its ability to create value for shareholders, achieve customer loyalty, motivate employees, develop mutually-beneficial relationships with partners and integrate harmoniously with the local community. As such, the choices Fiat makes every day are centred around the needs and expectations of all stakeholders. Fiat considers its system of Corporate Governance as indispensable to creating value for all stakeholders, by guaranteeing an ethical, transparent and responsible management of the business. Fiat’s Corporate Governance is aligned with international best practice and the principles endorsed by the Corporate Governance Code for listed companies (issued in March 2006 by Borsa Italiana S.p.A.) with modifications adopted to address the specific characteristics of the Group.

SUSTAINABILITY GOVERNANCE

The success of an organisation over time is strongly linked to its capacity to respond to the needs and expectations of all stakeholders. Sustainable growth is, in fact, built on trust generated through the satisfaction of customers and shareholders, the sense

of belonging of collaborators, profitable relationships with partners, and positive and mutually beneficial interaction with local communities.

linked to climate change (80/100) and a “B” grade (on a scale from D-worst to A-best) for its climate change mitigation initiatives.

Fiat’s commitment to sustainable development was recognised by leading sustainability rating agencies and international organisations. In 2010, Fiat S.p.A. was confirmed as a sustainability leader for the second year running, maintaining its place in Dow Jones Sustainability Indexes World and Europe, the prestigious equity indexes that only admit companies that are best-in-class in terms of economic, environmental and social performance. Fiat received a score of 93/100 from SAM, specialists in sustainability investing, compared to an average of 70/100 for the pool of “Automobiles” sector companies analysed.

In relation to sustainable mobility, for example, after three years as a leader, Fiat Automobiles was again confirmed for the fourth consecutive year as having the lowest average CO2 emissions among the best-selling auto brands in Europe at 123.1 g/km (source: JATO Dynamics, the world’s leading provider of automotive intelligence).

Other European companies specialised in SRI also acknowledged Fiat’s performance, with Sustainalytics recognising it as the leading automobile company and oekom research awarding it a “Prime” rating. Fiat Group also participated in the review conducted by CDP, achieving the highest score (among automobile companies included in the world’s 500 largest corporations by market capitalisation) for the level of disclosure on issues

To minimise its environmental footprint, the Group has expanded the action plan established in 2009, initially focused on reducing energy consumption and CO2 emissions, to include challenging new targets for the reduction of water consumption, waste generation and major harmful emissions by the end of 2014. On the social front, the Group continued to manage the effects of the difficult economic environment on employees with responsibility and transparency and further enhanced its human capital development programme. The commitment to health and safety in the workplace also continued through targeted training and other initiatives.

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A YEAR OF SUSTAINABILITY: FACTS AND FIGURES

Fiat is working hard shaping the future of sustainable mobility. Fiat believes that innovation which is sustainable and puts people, society and the environment first is fundamental to strengthening its position. These are just some of the results of the Groupâ&#x20AC;&#x2122;s constant commitment to continuous product innovation and increasingly sustainable mobility.

recognised among sustainability leaders by the major

Fiat S.p.A. has been

rating agencies and international organiSations

For the fourth consecutive year, Fiat brand is

named the leader for the lowest CO2 emissions in Europe at 123.1 g/km

148 certified plants according to ISO 14001 - 138 certified plants according to OHSAS 18001 EUR 1.9 billion spent on research and development (+14% in comparison to 2009) -11% vs. 2009 in CO2 emissions per vehicle produced at Fiat Group Automobiles plants worldwide

EUR 218 million spent on occupational health and safety

-8% compared to 2009 in water consumption per vehicle produced at Fiat Group Automobiles plants world-wide

EUR 25.6 million have been given by the Group to local communities

aligned with the ISO 26000 guidelines on social responsibility

Sustainability Management System

15% of energy consumed by the Group is from renewable sources

(11% in 2009)

+7% compared to 2009 female employees in the Group Over 700,000 hours of training to dealer and service network on safety and the environment (+65% vs. 2009)

TwinAir with 92 g/km is the leader in Europe with lowest CO2 emissions for a gasoline engine First hybrid medium commercial vehicle launched in Europe 108

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EUR 64.5 million have been spent on personnel training (+32% compared to 2009)

Euro NCAP 5 stars rating for Alfa Giulietta in addition to the Fiat 500, Grande Punto, Bravo, Croma, Lancia Delta, Alfa MiTo and 159

SUSTAINABILITY PLAN

Always convinced that a development in harmony with the environment and people is not only more responsible, but also essential for sustainable growth, Fiat is committed to continually improving its sustainability performance. The Sustainability Plan focuses on certain priority areas and is updated annually to report the status of existing projects and establish new targets to ensure continuous improvement.

CORPORATE GOVERNANCE AND SUSTAINABILITY

•M aintain a system of Governance and risk management which is aligned with international best practice

PRODUCT

•C ontinue to reduce CO2 and polluting emissions • Increase recoverability, recyclability and reusability of vehicles •C ontinue to improve product safety

DEALER AND SERVICE NETWORK

• Train the network on the specific ecological and safety issues

PLANTS

• Promote environmental awareness within the Group • Continue to reduce the environmental impact and optimize energy performance

LOGISTICS

• Reduce environmental impact of logistics

CUSTOMERS

• Improve the customer satisfaction

NON-MANUFACTURING PROCESSES • Reduce waste and energy consumption

HUMAN RESOURCES

• Offer equal opportunities • Promote development of human capital • Attract and retain the best talent • Increase awareness • Continue to promote and safeguard health and safety

SUPPLY CHAIN

• Promote social and environmental responsibility among suppliers

COMMUNITY

• Support local communities • Support the professional development of young people

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Bridging communities, bridging society: GEFYRA S.A. walks the walk

The Rio - Antirio Bridge: Investing in the citizens

Dr. Panayiotis Papanikolas Vice-Chairman and Managing Director GEFYRA S.A.

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The “Charilaos Trikoupis” Bridge is one of the largest investments in modern Greece and, perhaps, the most emblematic among them. However, it is certainly the most emblematic investment for the partners themselves, namely France’s VINCI (the world’s leading concession and construction group) and the most distinguished Greek companies in this sector, AkTOR CONCESSIONS, J&P-AVAX and ATHENA. This is because in the case of the Rio - Antirio Bridge, as it is usually called, investors surpassed the financially-focused and strictly contractual approach to investment so that a project of advanced technology and increased services as well as a symbol of sustainable investment would be constructed and would operate.

worked so that the Rio - Antirio Bridge is a sustainable investment.

Sustainability was the investment philosophy of the concessionaire company, GEFyRA S.A., from the very beginning of the construction project, through investment in human resources and in the economic strengths of the local communities in Western Greece. The care and the respect to laws and regulations so as to ensure a nonnegative impact on the rich ecosystem in which the world’s largest cable-stayed bridge with multiple openings was being built were of equal importance to us.

The old investment mentality of the human beings/ clients had already become obsolete in the mind of Jean-Paul Teyssandier, the initiator of the Bridge, the same time he, as a scientist, decided in 1986 that the Rio - Antirio Bridge was feasible technology-wise. The new bridge should also be humanly sustainable.

From August 12, 2004, on the eve of the Athens Olympic Games and first day of its operation, we have

On the one hand, the validity of the doctrine of social sustainability “Into the community – From the community – For the community” and on the other hand, the environmental doctrine “In the ecosystem – From the ecosystem – For the ecosystem” had to be demonstrated. A common reference point for both doctrines is the human being, whose activity determines, in the most drastic manner, the fate of both society and of the environment.

Without ignoring the importance of human beings/ users, the concessionaire company went even further by investing in human beings/citizens. From a very early point on, it was realised that the

historical corporate doctrines “To bridge is to unite” and “A life-changing bridge” were just slogans, without an alliance with the positively active citizens who hold in their hands the future of society and the planet on which they live. In order to be convincing as an ally to the true citizen, GEFYRA S.A. became a conscious, active and responsible “corporate citizen” that justifies his commitments, through his work. The corporate credibility of GEFYRA S.A. is currently based on the collective memory of the fact that the biggest and hardest project of all time in Greece ended four full months before the contractual obligation. The sustainable “With the citizens – From the citizens – For the citizens” actions began early on and were intensified, after both the world and – especially –

Greece came in the midst of the economic crisis with its social aspects, but also in the midst of climate change. In the social sector, GEFYRA S.A. responded with combining more than 50 social action institutions to defend the weak in a common platform called “Solidarity Pylons” that attempts and manages to keep active those citizens who through their work replace the exhausted Greek welfare state. In the environmental sector, the company aims at educating and transforming the user of the bridge into an active, conscious citizen who, through eco-driving and the simple change of driving habits, can slow climate change, can stop wasting the available clean drinking water and can act on saving the marine mammals of the Gulfs of Corinth and Patras. At the same time, the GEFYRA corporate citizen reduces CO2 emissions and

offsets them through investments in renewable energy that provides electricity to parts of the world where other citizens are deprived of it. The whole GEFYRA S.A. awareness is based on the pylons that connect with many small bridges, the fate of people in and outside Greece. This is the underlying goal of its investors/partners, so that the European citizens who invested in it through their tax contribution are justified. Scientific studies to date show that the presence of the Bridge has improved the economic, social and environmental status of the area in which it was built, but also that of other areas that benefit from its effects. This, for us, the people of the Bridge, means that the road we opened towards this direction has become even longer.

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Dynamic growth with integrity and responsibility

A pharmaceutical company with corporate social responsibility in its heart “The pharmaceutical industry is inextricably linked to people, to life and to a fundamental good: that of health. For us at GENESIS Pharma, this – first and foremost – means responsibility. A responsibility that has been at the core of our corporate culture from the very beginning and which characterises everything we do beyond the narrow confines of our business activity.” - Constantinos Evripides, CEO, GENESIS Pharma GENESIS Pharma is a Greek pharmaceutical company whose core business activity focuses on life-threatening chronic, severe and rare diseases. Recognising the great potential offered by biotechnology in effectively tackling these diseases, GENESIS Pharma has made it its mission to ensure that Greek patients have direct access to innovative biotech therapies. Fourteen years after its foundation, GENESIS Pharma has developed a network of international partners that includes some of the largest biotech research companies in the world. The company brings to the Greek, Cypriot and South-East European markets 21 drugs in the therapeutic areas of Oncology, Hematology, Nephrology and the Central Nervous System. It is the second-largest Greek pharmaceutical

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company based on turnover and ranks among the top-three companies in hospital sales volume in the country. From its first year of operation, corporate social responsibility has been an integral part of GENESIS Pharma. Professionalism, transparency and accountability are what characterise the company’s relationships with its employees and partners, with the medical community, patients and society at large. A basic principle for GENESIS Pharma, however, is that its debt to society and to the people that surround the company is also increasing. For this reason, as the company grows, the inclusion of corporate accountability principles in its operations is also being strengthened.

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Over the past years, the company has embarked on a systematic assessment and evaluation of its commitment and actions in order to adopt even more efficient practices and to set even higher goals for the future. In this context, a central priority for GENESIS Pharma is to serve the medical community and patients, maintaining the highest standards of transparency and accountability. Its operation is fully in line with Greek and European legislation, the Code of Ethics of the Hellenic Association of Pharmaceutical Companies and the respective codes of the European Federation of Pharmaceutical Industries and Associations (EFPIA) on marketing of prescription drugs. The company has an internal Department of Regulatory Affairs that ensures full harmonisation and compliance during product management, a Certified Quality Management System for the "Import, Storage, Distribution and Sale of Pharmaceutical Products", as well as a Pharmacovigilance System and a Risk Minimisation Plan. At the same time, GENESIS Pharma has formed a dedicated team of medical experts to support patients. The purpose of the group is to provide patients not only with psychological support, but also with information on the evolution and nature of their treatment. Equally important for GENESIS Pharma is its commitment to its employees. The company aims to be a role model for its own people, who are the driving force for its development. In this respect, the company continuously invests in fostering a fair, creative and pleasant working

environment by implementing an integrated Human Resources programme. This programme includes opportunities for education and empowerment, a variety of benefits and rewards, actions to support employee families and working mothers, as well as activities designed to create a friendly and inspiring working environment. GENESIS Pharma is the only Greek company that has been ranked by its own employees for nine consecutive years among the best working environments in Greece in the Best Workplaces Hellas competition. It is also the only Greek pharmaceutical company that excelled in the respective European competition from 2005 to 2008. In addition to continuously integrating the principles of responsible operation, GENESIS Pharma implements a comprehensive programme of social contribution, whose core axes are health and education. The company supports associations of patients that suffer from chronic and rare diseases and implements public awareness and education initiatives for important health issues. Within this context, GENESIS Pharma has entirely covered the cost of a major initiative of the Greek Association for Rare Diseases to create the first registry of patients with rare diseases in Greece. The company also consistently supports medical research and the work of universities, through donations for their research programmes. In addition, GENESIS Pharma implements a public

awareness campaign in collaboration with the Panos Mylonas Road Safety Institute, focusing on the importance of driversâ&#x20AC;&#x2122; good health for safe driving. The aim of this initiative is to help reduce the high rate of road accidents that occur in Greece every year. GENESIS Pharma also invests in education for the younger generations. In this respect, the company collaborates with NGO Euroscience for the implementation of the "Let Knowledge Fly" programme. This programme aims at supporting schools in remote areas of Greece by supplying computers, and public and school libraries by supplying books and educational materials. Apart from offering books and equipment, GENESIS Pharma has undertaken the initiative to gain widespread support for the programme by informing and mobilising other companies and private individuals. GENESIS Pharma also implements practices for resource efficiency, recycling and environmental protection, despite the fact that, being a commercial company, its environmental impact is limited. The company also pays significant attention to the management of expired pharmaceutical products. The commitment and consistency of GENESIS Pharma to the principles of corporate social responsibility have recently been sealed with a significant distinction. GENESIS Pharma was the first and only pharmaceutical company in Greece to have an outstanding corporate social responsibility performance in the framework of the National 2010 Corporate Responsibility Index (CRI).

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A world-class local business with a global presence, building a better and sustainable future for all our stakeholders

Sustainable development as a key driver of environmental and social value Italcementi Group has a clear sustainable vision that begins with the commitment made and continuously supported by the Chief Executive Officer. Sustainability is the driver for reshaping our common belief and strategic views, requiring hand-out and assumption of responsibilities. At Halyps Cement, a member of the Italcementi Group in Greece, my duty is to ensure the full operational deployment of the Group’s vision, mission and values and to consider sustainable development as a key element crosscutting with our day-to-day operations. As members of Italcementi Group, we enthusiastically embark on the process of developing and encouraging sustainable development as one of the most valuable assets of our company. Therefore, all Italcementi Group activities in Greece have made the commitment to respect and follow sustainable development principles and values in the entire scope of their daily activities, via continuous improvements that will pave the way forward for a better future for us all. Serge Schmidt Managing Director Italcementi Group Greece

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With an annual production capacity of approximately 75 million tonnes of cement, Italcementi Group is the world’s fifth-largest cement producer. The parent company, Italcementi S.p.A., is one of Italy’s 10 largest industrial companies and is listed on the Milan Stock Exchange. Italcementi Group companies combine the expertise, know-how and cultures of 22 countries on four continents boasting an industrial network of 59 cement plants, 11 grinding centres, five terminals, 350 concrete batching units and 90 aggregate quarries. In 2010, the Group reported sales of approximately EUR 4.8 billion. Founded in 1864, Italcementi gained important international status with the takeover of Ciments Français in 1992. As a member of the WBCSD, Italcementi has signed the Cement Sustainability Initiative (CSI) Agenda for Action, the first formal commitment that binds a number of world cement industry leaders. It also took over the co-Chairmanship of the CSI for the period 2006-2007. Moreover, Italcementi has been included in the “Sustainability Yearbook 2011”, the most

comprehensive publication on corporate sustainability released annually by SAM, and has adhered to the UNGC. Through the activities of its Research and Innovation centres in Italy and France, the most advanced in Europe, the Group intends to anticipate market trends and requirements, giving priority to environmental issues and the optimisation of resources. Italcementi has also developed a range of environmentally-friendly products. For conserving energy, a “thermal cement” for the production of concrete with very low thermal conduction co-efficients, thanks to the presence of vitreous aggregates obtained from recycling materials such as TV and computer screens that would otherwise be difficult to recover. The “thermal cement”, designed both for cladding exteriors and for vertical internal walls and floors, helps to keep buildings cool in the summer and warm in the winter, clearly saving on CO2 emissions and heating bills. Italcementi’s long tradition of innovation includes TX Active®, one of its top-rated products, known and marketed all over the world as the photocatalytic “smog-eating” cement. The materials in this range take advantage of photocatalytic properties that, when applied to any cementitious material, use the action of light to abate air pollutants. Architecture, research, innovation and sustainability: today’s cement is a new material guaranteeing outstanding performance. The cement of the new millennium is also an environmentally-friendly material used in forward-looking architectural projects. Cement and concrete are living materials capable of adapting to the new construction techniques. Cements containing TX Active®, internationally patented by the Italcementi Group, help improve the quality of life by reducing airborne pollutants.

Halyps Cement: the first Group plant to obtain EN 16001 certification Halyps Cement has been certified for compliance with EN 16001: 2009, the new European standard for energy management systems. Thanks to the energy efficiency measures adopted by the company to cut its energy costs, Halyps Cement is the first company within the Italcementi Group and currently one of just a handful of companies globally to possess EN 16001 requisites.

Following the implementation of its energy management system, Halyps Cement has introduced a series of measures to enhance efficiency. The “backbone” of the company’s certification is the electrical efficiency programme Halyps Cement commenced in 2009.

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A pioneering international energy Group with continuous and sustainable growth

Energy for life For the HELLENIC PETROLEUM Group, the target of sustainable development is a main strategic option, not just as an expression of its corporate social responsibility, but also as a critical element of competitiveness in the area of energy production and supply. Founded in 1998, HELLENIC PETROLEUM is one of the leading energy groups in South-East Europe, with activities spanning across the energy value chain in 11 countries. Its shares are primarily listed on the Athens Exchange and its market capitalisation amounts to about EUR 1.8 billion. Refining is the Groupâ&#x20AC;&#x2122;s core business, accounting for over 70% of total assets and profitability. HELLENIC PETROLEUM owns three of the four refineries in Greece, with a 70% share of the Greek wholesale oil products market. The Group is the domestic marketing leader as well, through its fully-owned subsidiaries EkO and Hellenic Fuels (formerly BP Hellas), with a retail network of some 2,200 service stations throughout Greece. HELLENIC PETROLEUM owns the sole refinery in Skopje (FyROM) and is one of the key fuels marketing players in Cyprus, Serbia, Bulgaria, FyROM, Montenegro,

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Albania, Bosnia and Georgia, via a network of more than 300 retail petrol stations. The Group is also active in petrochemicals, natural gas, power production and trading. Responding to the contemporary economic, environmental and social challenges, HELLENIC PETROLEUM is pursuing a clear mission: to provide quality products and services in the energy sector, through highly efficient operations in the Greek and international markets. The key to achieving this mission is a sound, value-driven corporate culture, based on safety, transparency and responsibility towards the people, the environment and society. These core values are entrenched in HELLENIC PETROLEUMâ&#x20AC;&#x2122;s corporate identity, goals and practices, as well as in its relationships with employees, customers, local communities and all other stakeholders.

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HELLENIC PETROLEUM:

• Publishes an annual sustainability report based on GRI G3 Guidelines • Complies with ISO 9001, ISO 14001 and OHSAS 18000 • Is a signatory to the UN Global Compact • Is EMAS certified

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At the heart of HELLENIC PETROLEUM’s culture and business strategy is the concept of sustainable development; development that meets the needs of the present, without compromising the environment and the ability of future generations to meet their own needs. In this context, HELLENIC PETROLEUM applies a solid environmental policy with documented and measurable targets. It invests in the continuous modernisation of its production process, in order to minimise the environmental impact of its operations and supply products that meet the highest quality and environmental standards. The HELLENIC PETROLEUM’s industrial facilities are among the first installations in Greece, which were harmonised with the terms of the Integrated Pollution Prevention and Control Directive (IPPC), regarding the adoption of Best Available Techniques in the production process. The refineries of the Group are optimised in terms of energy efficiency, so that fuel consumption and energy efficiency are minimised. The Group’s commitment to sustainable development is confirmed by the implementation of two significant projects, with a total budget of EUR 1.5 billion, for the modernisation of the Elefsina and Thessaloniki refineries. Following the projects’ completion, the refineries will be able to produce products in accordance with the new European and international specifications, while achieving environmental improvement by reducing

local pollutants by up to 85% in Elefsina and 55% in Thessaloniki. Further environmental investments, with a total budget of more than EUR 78 million, have been scheduled until 2014. These include further application of Best Available Techniques, energy efficiency systems and approaches to environmental protection, reduction of emissions and upgrading of the wastewater treatment. For HELLENIC PETROLEUM, sustainable development is also associated with an active contribution to society and, especially, to the local communities that surround its facilities, in Greece and abroad. This is achieved through the creation of jobs and business opportunities on a local level, tax contributions on a national and local level, as well as targeted community programs and activities aiming to support social cohesion and improve quality of life in neighboring areas. The Group currently employs more than 450 employees who live permanently in the Thriassion region and more than 100 employees whose permanent residence is at the region of West Thessaloniki. Its annual municipal tax contributions amount to EUR 3 million and it spends around EUR 17 million each year on locallybased suppliers. HELLENIC PETROLEUM has been also implementing an extensive CSR Programme, especially designed to address the needs of citizens who live in the neighbouring areas of Thriassion and West Thessaloniki.

The Program involves a series of initiatives and projects that mainly focus on the fields of education, culture, sports, social solidarity and support to vulnerable groups, senior citizens, students and young people. Through the years, HELLENIC PETROLEUM has managed to build strong relationships with local communities, based on mutual understanding and good will. Its investment and efforts in this field have been recognised, through a series of awards, by chambers, associations and municipalities. The driving force behind the Group’s success are the 5,000 people who constitute its workforce in Greece and abroad. Recognising that employees are its most important asset, HELLENIC PETROLEUM invests in their professional and personal development, through a policy, based on motivation, rewards and equal opportunities. The continuous training and education opportunities that are offered, the focus on health and safety at the workplace, along with a broad spectrum of benefits for employees and their families, are the main features of this policy, which demonstrates the Group’s commitment to its people. In an era of continuous changes and rising global challenges, HELLENIC PETROLEUM follows a clear road ahead; combining the drive of a powerful national champion, the extroversion of an international player and the culture of a responsible corporate citizen, with active contribution to society.

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facts & stats NORTH AMERICA

Examples

of engagements

(AND EUROPE): Investors asked 11 companies that have operations that are impacting (or have the potential to impact) indigenous peoples to improve their community relations approach in light of international standards and best practices.

with companies from around the world

Source: Annual Report of the PRI Initiative 2010. *The Emerging Market Disclosure Project (EMDP) is an international initiative led by representatives from Boston Common Asset Management, Calvert Investments, SIF and SIF’s International Working Group (IWG) that has been working since 2008 to assess and improve ESG reporting in emerging markets.

U.S.A. (ALSO CANADA, EUROPE

AND BRAZIL): A coalition of nine global investors called on 54 companies to increase representation of qualified women on Boards of Directors and in senior management.

BRAZIL: Investors involved in the Emerging Markets Disclosure Project* wrote to around 100 Brazilian companies to ask them to use the GRI guidelines to disclose ESG information. The letter invited the companies to an investor workshop in São Paulo to foster the dialogue.

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SWITZERLAND: International and national investors collaborated to persuade 10 of Switzerland’s largest companies to allow shareholders a say on executive remuneration.

EUROPE: Leading investors engaged with the European Commission and national governments to ensure that “acting in concert” regulations do not prevent legitimate investor collaboration on corporate governance and sustainability issues.

UZBEKISTAN: A coalition of 20 signatories engaged with many global companies to help end the use of forced child labour in Uzbekistan’s cotton sector; the world’s third-biggest cotton supplier. Over 70 of the world’s largest apparel brands and retailers have joined the effort including C&A, Gap and Levi’s.

MYANMAR (BURMA): Since October 2009 signatories have engaged with Total to discuss the human rights impact of the company’s pipeline operations in Myanmar (Burma).

SOUTH KOREA: Investors involved in the Emerging Markets Disclosure Project* started a dialogue with 10 companies to improve their sustainability reporting after conducting a baseline exercise on their ESG disclosure performance.

SINGAPORE: After a dialogue with investors on the importance of corporate sustainability and ESG disclosure, two Singaporebased companies took action that subsequently led to their inclusion in the FTSE4Good Index.

AUSTRALIA: A collaborative engagement helped persuade a subsidiary of Australian mining firm Wesfarmers to invest in equipment to enable the sourcing of phosphate rock from places other than a controversial current source in an illegally occupied part of the Western Sahara.

SUDAN: 22 institutional investors visited Sudan and met with major companies, civil society representatives and officials from the Sudanese Government to encourage business activity that supports revenue transparency, peace and protection of human rights.

D.R.C.: A group of investors initiated dialogues with 14 North American, European and Japanese consumer electronic companies to ensure that those companies are taking appropriate actions to manage the social and business risks caused by the sourcing of tin, tantalum and other minerals from the Democratic Republic of Congo. These minerals are used in products like mobile phones and laptops and in some cases are linked to armed groups responsible for human rights violations.

SOUTH AFRICA: Local and international investors participating in the Emerging Markets Disclosure Project* wrote to the Chairmen of six of the top 40 publicly-traded South African companies excluded from the SRI Index of the Johannesburg Stock Exchange (JSE). The JSE SRI Index measures ESG and related sustainability concerns such as a company’s response to climate change. Company follow up includes conference calls and in-person meetings.

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A commitment to good governance, fiscal responsibility, and constant improvement to ensure the wellbeing of our stakeholders

For OTE, responsible business means building ties in the marketplace, in society, with employees and the environment “For OTE, progress in the market goes hand in hand with responsibility towards our people, customers, the environment and society. Indeed, this is how the best businesses succeed to be competitive and innovative in the 21st century.” - Michael Tsamaz, Chairman of the Board and Chief Executive Officer, Hellenic Telecommunications Organization S.A. (OTE) For over half a century, Corporate Responsibility (CR) has been a core part of OTE’s culture. “Building Ties”, our CSR strategic framework, was introduced in 2005 and covers responsible behaviour in the marketplace, society and the environment, while cultivating meaningful relations and dialogue with all our important stakeholders, starting from our own employees. OTE’s CR strategy and actions are formulated in alignment with the European and global standards, such as FTSE4Good, the GRI G3 Guidelines for Sustainability Reporting, and Greece’s Corporate Responsibility Index (CRI). Building Ties in the Marketplace: OTE makes a crucial contribution to the marketplace and to the

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Greek economy through its strong focus on investing in expanding the broadband technology network and infrastructure throughout Greece. This includes both remote areas of the country and access for all social groups. OTE’s signature programmes include discount product rates for students and for people with special needs, and a range of teleassistance, helpline and telemedicine services for vulnerable groups. Since 2006, Greece’s broadband penetration has increased from 4.7% of the population to more than 20% in 2010. The modernisation of Greece’s telecommunications, and convergence towards the European average for broadband access, is more vital than ever for the country’s recovery from today’s deep challenges.

1. Building Ties in the Marketplace: OTE call centre.

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2. Building Ties with the Environment: Releasing hawks and other birds to the wild, in collaboration with the NGO ANIMA - Society for the Protection and Care of Wildlife.

Building Ties with Employees: Europe Corporate Games (beach volley).

Building Ties in Society: Inauguration of the operation of the European Helpline for Missing Children 116000, assigned to "The Smile of the Child" association.

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Regarding Internet Safety, OTE develops and distributes “On-line Protection” services and information for its customers. OTE also participates in the Safenet non-profit organisation and sponsors the work of the Adolescent Health Unit (AHU) of the 2nd Department of Paediatrics University of Athens at the “P. & A. Kyriakou” Childrens' Hospital, which operates the toll-free “YpoSTIRIZO” (I SUPPORT) Help Line number 80011 80015. In 2010, OTE launched a new initiative to promote public awareness on Internet Safety, including a special leaflet, “Safely Surf the Internet”, addressed to parents and distributed at OTE’s nationwide Store Network. OTE has also held public education sessions for pupils and parents at the OTE Telecommunications Museum and organised activities to raise awareness of OTE employees and their families. Building Ties with Employees: OTE supports its employees through policies and practices that encourage development and success, but also ensure the wellbeing and satisfaction of its people. In particular, OTE is diligent in securing the health and safety of all employees, ensuring Equal Opportunity in the workplace, and providing extensive training for employees. For example, in 2010 OTEAcademy, OTE’s subsidiary that caters for the training needs of both OTE Group employees, the wider public and the private sector, provided training to almost 6,000 employees, averaging 23 hours per person. Furthermore, OTE encourages employee involvement in CR, through blood donation and volunteering programmes,

and company-wide communications campaigns on topics, including health and safety at work, smoking cessation, Internet safety and the environment. Building Ties in Society: OTE is a long-term committed partner to society. Our efforts focus on helping children, people with disabilities and vulnerable groups, through support to voluntary organisations dedicated to assisting them; and supports young people by providing them access to technology. OTE also supports organisations that promote the Greek cultural heritage, and encourages a culture of employee volunteerism through our programme of voluntary blood donation and through offering a helping hand in emergency situations, such as forest fires. Social organisations supported by OTE include “The Smile of the Child”, the “Together for Children” Union, MDA Hellas, the Food Bank, and Association for the Psychosocial Health of Children and Adolescents (A.P.H.C.A.). Cultural organisations supported by OTE include the Benaki Museum, the Society for the Study of Greek History and the Thessaloniki Museum of Photography. From 2006 to 2010, OTE has contributed more than EUR 9 million in community sponsorships, donations and televoting fundraising. Building Ties with the Environment: OTE places great emphasis on combining financial growth with environmentally-friendly policies. Our environmental strategy sets as first priorities preserving our natural

resources and combating climate change. In 2007, OTE began systematically recording its environmental footprint for energy, water and waste management, published annually in its CR Report, and in 2009 OTE began participating in the Carbon Disclosure Project (CDP). OTE is also a signatory to the Global e-sustainability Initiative’s Broadband Code of Conduct, and participates in Greece’s national taskforce on technology and climate protection. Since 2006, OTE has collected about 7,000 tonnes of materials (metals, cables, paper, plastic) for recycling by certified waste management facilities. OTE has also achieved major reductions in paper use through e-applications for telecommunication operators and electronic systems in internal OTE operations. OTE also invests in renewable technologies, for example, operating 180 small photovoltaic systems to power transmitter masts in various isolated areas of Greece and uses wind energy (in addition to PV systems) for supplying power to the wireless broadband network of Mount Athos (Agion Oros). OTE supports several environmental organisations in Greece, including “CALLISTO”; the Hellenic Society for the Protection of Nature; ANIMA - Society for the Protection and Care of Wildlife; and the Union for the Protection of Forests. Learn more about OTE’s CR by visiting: www.ote.gr/cr2010.

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A pioneering force in the Greek Economy: Driving the insurance industry towards responsibility

On the right track to sustainability The prevailing circumstances in the Greek society today force the insurance market to rise to a more demanding level of practice. INTERAMERICAN is ready to meet the contemporary challenges, having built up a new business model, in which the human resources take a leading role, the economic activities are renewed and cutting-edge technology is used. The prevailing circumstances in the Greek society today force the insurance market to rise to a more demanding level of practice. INTERAMERICAN is ready to meet the contemporary challenges, having built up a new business model, in which human resources take a leading role, economic activities are renewed and cutting-edge technology is used. George kotsalos CEO, INTERAMERICAN Group

”Through the realisation of the strategic priorities set by our business plan 2011-2013, we aim to strengthen the reliability of the company and fully meet the needs of today’s citizens.”

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About INTERAMERICAN

INTERAMERICAN was founded in 1969 as a limited liability company. In 1971, it was converted into a société anonyme. Ever since the first years of its operation, it became established in the mind of the general public as a “Major and Reliable” company in the insurance sector. In 2001, INTERAMERICAN was incorporated in one of the top European financial groups, EUREkO B.V. The integration of INTERAMERICAN into EUREkO is the

most important development in its recent history, as it provided the company with a European orientation in its perception of organisation and administration, while enriching its know-how. INTERAMERICAN’s vision is to be a financially robust and dynamic insurance company that offers confidence and security to its clients, helping them prosper at every stage of their lives.

Activities

INTERAMERICAN today has focused on the sectors of insurance and health services, developing a wide range of activities with: • Individual and Group Life and Health Insurance. Retirement, saving, income protection, life procurement for children and health care programmes. • Non-Life Insurance. Programmes for property

protection, civil liability, legal protection, accident and transport, technical works, etc. • Assistance services. Medical and Road Assistance. • Health services. The only company in the insurance market with its own private clinic (ATHINAIKI) and medical centre (MEDIFIRST). • Investment services. Mutual Funds and investment products.

I NTERAMERICAN's headquarters in Athens. It was in this building that the company launched its operations in the insurance business in the mid-70s.

INTERAMERICAN's employees have rallied to support “Volunteers for Life”, a corporate club with social and environmental goals.

new challenges and opportunities are to be found in the green economy. Once again acting as a pioneering force in the Greek insurance market, INTERAMERICAN has developed its green entrepreneurship through two product lines: • “Energy Line”, providing insurance coverage for Renewable Energy Sources

• “Green Line”, providing insurance coverage for Environmental Corporate Liability

Financial results

INTERAMERICAN achieved the following operational profit for each product line: EUR 7.5 million in the life sector, EUR 1 million in the health sector (insurance and services), EUR 3.6 million in non-life insurance, with the combined ratio dropping to 98.5% in 2010. Overall, the operational profit of 2010 presented a 95.2% increase as compared to the corresponding operational profit of 2009 (EUR 6.2 million). Total gross premiums written for 2010 amounted to EUR 486 million. Specifically, the company achieved gross premiums written of EUR 155 million in Life, EUR 115 million in health and EUR 216 million in non-life insurance. Consolidated solvency index is estimated to be 189%.

Corporate Social Responsibility

INTERAMERICAN is one of the few companies in Greece that have understood the need for tuning in to the concerns and views of stakeholders and has integrated CSR in its business operation and strategy. INTERAMERICAN’s second CSR Report (2009) was a great leap forward in terms of the GRI G3 Sustainability Reporting Guidelines, with the report receiving a B+ grade, as compared to grade C for the company’s first report a year earlier. Case study: Financial challenges and opportunities emerging from climate change For the advanced insurance industry around the world,

The company is the only insurance firm in the market that has undertaken specific commitments for the environment as member of the UNEP FI and signatory to the UN Global Compact.

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An overview of JTIâ&#x20AC;&#x2122;s corporate philanthropy and social responsibility programmes

Making a positive difference through effective partnerships

Japan Tobacco International (JTI) is a member of the Japan Tobacco Group of Companies (JT), a leading international tobacco product manufacturer.

JTI is active in 120 countries around the world. While each location presents unique opportunities, cultures and challenges, they all have one thing in common: Wherever we do business, we are committed to providing a safe workplace for our employees and to conducting our business in a way that is environmentally sustainable. Supplementary to an approach that minimises our impact on the environment, we believe in improving the societies in which we operate. We do this by engaging in Corporate Philanthropy activities across the countries in which we are present. Our programmes focus on both helping less-advantaged people to improve their quality of life, and promoting the arts. In addition, the JTI Foundation (www.jtifoundation.org), an entity independent from, but financially endorsed by, the JTI Group, helps limit the human impact of natural disasters through its partnership with organisations specialised in disaster relief and risk reduction. In 2010, it supported operations following the terrible disasters in Haiti and Pakistan in co-operation with one of its main partners, GEA, the Turkish Search Rescue and Ecology Group. The Foundation has also supported emergency operations in Romania and Moldova after severe floods, as well as in Serbia after an earthquake that left some of the most vulnerable members of the community homeless. Most recently, the JTI Foundationâ&#x20AC;&#x2122;s partners have been active in Japan, following the earthquake and

tsunami that struck the eastern part of the country. As part of our ongoing efforts to reduce emissions at our factories, JTI has focused on introducing energy efficient technologies to our processes. This means that not only have we cut our emissions, but we have also made substantial cost-savings as a result of reduced energyconsumption. So, how effective have our efforts to reduce emissions been overall? Well, despite being the fastest growing of the international tobacco-companies over the last 10 years, we have reduced cigarette factory emissions of CO2 by nearly 30%, and reduced waste by nearly 40%1 since 2003. Another example of our sustainable approach to business is the tree-planting schemes that we operate around the world. In some developing countries that produce tobacco, wood is one of the main sources of both fuel for curing the leaf, as well constructing the barns in which curing and storage take place. In order to contribute to the replenishment of this resource, the JT Group is committed to both forest preservation and tree-planting. Five years ago, JTI began an ambitious reforestation programme in Malawi and Tanzania, now extended to Zambia and the Philippines, with nearly 18 million trees planted. In these countries, JTI has complimented this work by improving the standards of living for local communities with projects, such as installing sanitary facilities and irrigation systems, and giving guidance on agricultural technology.

1. Emissions intensity measured per million cigarettes produced.

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This improvement in the standards of living, particularly for those that are marginalised by society, is a core part of JTI’s approach. We have a number of initiatives that focus on supporting both adults and older people in more than 40 countries. This includes, for example, computer literacy programmes in Canada and South Korea, programmes for those marginalised by society in Tanzania and Ireland, an adult literacy scheme in The Netherlands, and neighbourly aid in Poland. A concrete example of how JTI’s programmes are making a difference can be found in Taiwan. On this island older people already account for 10% of the population, with the government forecasting that this rate will climb to 30% within 50 years. JTI Taiwan has therefore developed a partnership with the Hondao Senior Citizens Welfare Foundation to carry out projects that fulfill both the physical and psychological needs of the elderly and find new ways to increase social inclusion: in 2010, the ”Move to Music” and ”Dreams Never Get Old” programmes were accomplished. For us, our responsibilities go beyond redressing our operating impact. We are committed to making a positive difference wherever we operate. Not just because it makes us look good, or because it might save us money, but because we believe it is the right thing to do.

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Creating a ripple effect on sustainability in the container shipping industry

Maersk Line: Why it makes sense to highlight the issues Maersk Line, the container shipping entity of the Danish conglomerate A.P. Moller - Maersk, is generating attention to its way of driving sustainability. The company is highlighting an industry-wide problem in terms of carbon and sulphur emissions; it is seeking international regulation of its own industry, and asking its customers to push their suppliers towards higher environmental performance.

Søren Stig Nielsen Head of Sustainability Maersk Line

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At Maersk Line, we have a clear interest in the whole industry reducing its environmental footprint. We want to grow at the expense of road transport and air freight. And the more we do so, the more society can, in fact, reduce CO2 emissions. This is a unique selling point in today’s carbon-conscious world. Because of the enormous capacity of today’s container ships, container shipping is the most energy-efficient

way to transport goods over long distances. Our industry, in this respect, emits the lowest CO2 per item transported. However, looking at the total amount of emissions of the world’s fleet, the need for improvement is more than obvious. Our industry must become much more sustainable if we are to be viewed as a “solution” industry. We are, therefore, highlighting the issue and pushing for changes in the industry.

The right mix: A new standard of environmental efficiency in container shipping is about to hit the world's oceans. In early 2011, Maersk Line signed a contract with korea's Daewoo Shipbuilding & Marine Engineering Co., Ltd. (DSME) to build 10 of the world's largest and most efficient vessels, with an option for an additional 20. Scheduled for delivery between

2013 and 2015, the Triple-E class vessels, standing for Economy of scale, Energy efficiency and Environmentally improved, will entirely change the shipping industry's understanding of size and efficiency. To be built for the Asia-Europe trade lane, Triple-E class vessels will reduce CO2 emissions by more than 50% per container moved, compared to the industry average.

While we can argue that container shipping is the most CO2 efficient mode of transport it nevertheless emits much more sulphur to the air than other modes of transport – up to 500 times more. Sulpfur is, thus, a major problem for our industry. We are concerned with the health impacts of repeated, long-term airborne exposure to sulphur emissions, in particular for people living close to busy ports. A strategic address for high impact improvement

“We are concerned with the health impacts of repeated, long-term airborne exposure to sulphur emissions.” To improve the air quality around ports, we have committed ourselves to a drive towards “zero SOx”. To do so, we have a global fuel switch programme in place. By 2015, we will have implemented at least 10 fuel switch programmes. Our CO2 reduction target per container is 25% by 2020 and we use innovation and operational

efficiencies to meet our yearly targets. In 2010, we cut CO2 by 4.6%. We can do a lot in Maersk Line, but, for high impact results, the industry needs regulation. We are, therefore, pushing for a global agreement on climate change. One option could be an international carbon levy on bunker fuel. Such a deal would almost surely increase the cost of operating a shipping line, but as long as the agreement is designed to ensure a level playing field for all, we welcome it. As with any company looking for financial gains from an environmental leadership position, Maersk Line depends on customer demand for environmental performance. To bring change to our industry, we need the support of our customers. Even though the demand is on the increase, we would like to see a greater push from our customers to make environmental performance a more important selection criterion. For example, we have some customers that ship with us, because they

Smart transport: Compared to other modes of transport, shipping has a more favourable carbon footprint when transporting one ton of goods per km. But there is still much room for improvement within the shipping industry, in which Maersk Line wants to be a “Low Carbon Leader”. With innovation and savings, the goal is to reduce its carbon emissions by 25% from 2007-2020 per container moved. In addition, Maersk

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are concerned about supply chain emissions, but they are also shipping with carriers that have less of an environmental track record. Many of the world’s manufacturers have, nevertheless, committed to low carbon supply chains. We, now, have the data to let them realise their commitments. As an example, our key clients can track their shipment’s CO2 emissions when choosing Maersk Line. The data is independently verified and compares Maersk Line’s performance to that of the industry average. With carbon emissions averaging 65.9 grammes per container, Maersk Line came out 10% better than the container industry average for 2009. The more quantifiable you make sustainability, the easier you make it for your customers to make qualified decisions. Our journey to become more sustainable is and will, therefore, be data-based and measurable, and made publicly available. We will use this kind of transparency along with our size and position to create a ripple effect in the industry.

Line is the first shipping line to receive independent verification of its CO2 emissions data, vessel by vessel. The Maersk Carbon Footprint Calculator is a useful tool developed by Maersk Line and Damco that can be valuable for a variety of purposes, including environmental reporting and identification of "carbon hotspots" in a transportation supply chain.

Integrating environmental, social and corporate governance issues in the way we do business

Investing in sustainability Through business excellence and development, with a sense of responsibility towards society, environment and people, through creating value for clients, business partners and shareholders and with the support of its people in the service of a common vision, the MYTILINEOS Group establishes its place as the leading independent producer of Energy in Greece and as a powerful, competitive European Heavy Industry European Group in Energy, Metallurgy and EPC Projects. The Group The MYTILINEOS Group is active in the sectors of Energy, Metallurgy and Mining and EPC projects. Since its establishment in 1990, the Group’s development has been outstanding and today it is considered one of the country’s leading industrial groups, with significant international activity. It started as a family metallurgical company in Greece more than 100 years ago. The MYTILINEOS Group has been listed on the Athens Exchange since 1995 (with its share today being a constituent of the FTSE 20 large-capitalisation index). It employs specialised and trained scientific staff, with a total workforce in excess of 2,000 employees in Greece and abroad. The Group’s optimal goal is business excellence, always in

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accordance with the principles of CSR. The MYTILINEOS Group, in all of its activities, demonstrates its respect for the environment, society and people, while improving the living standards of the local communities where it operates. Activities - Branches The MYTILINEOS Group is active in the sectors of Energy, Metallurgy and Mining and EPC projects. METALLURGY & MINING Through substantial investment, the MYTILINEOS Group has established itself as one of the leading groups in South-East Europe and the Middle East in the sector of production and trading of alumina and aluminium. The companies of the Group that are active in this sector are the following:

ALUMINIUM OF GREECE Established in 1960, it is today the largest and the most modern vertically-integrated producer of alumina and aluminium in Europe. Its annual production capacity will increase to 1,100,000 tonnes of alumina and 180,000 tonnes of aluminium by 2013. DELPHI-DISTOMON The company is the second-largest bauxite producer

in Greece and South-East Europe, with an annual production of over 800,000 tonnes, exclusively from underground mining sites.

decisions. In the energy sector, the Group holds an investment portfolio that includes both thermal and RES.

ENERGY With a presence in the energy sector since 2002, the MYTILINEOS Group has evolved into the leading independent energy producer in Greece through carefully planned strategic partnerships and business

PROTERGIA 2010 is a milestone year for the Group with the establishment of PROTERGIA, the company that came into being through the 100% acquisition and operation of ENDESA HELLAS, the joint venture

history 1990: Establishment of the MYTILINEOS Group. 1995: Listed on the Athens Exchange. 2002: With an extensive investment programme, MYTILINEOS enters the energy sector. 2005: Acquisition of ALUMINIUM OF GREECE S.A., the largest producer of alumina and aluminium in South-East Europe. 2006: The presence of the Group is strengthened in the sector of RES through the acquisition of DELTA PROJECT S.A. and SPIDER ENERGY S.A. 2007: Forging of a strategic partnership with ENDESA and establishment of ENDESA HELLAS, the largest independent producer of energy in

Greece. Completion of a triple merger through the absorption of ALUMINIUM OF GREECE and DELTA PROJECT by MYTILINEOS. 2008: The combined heat and power cogeneration plant (CHP) enters its test operation phase; this is the first thermal plant of the Group to be connected to the national power grid. Strategic partnership agreement signed with MOTOR OIL in the energy sector for the construction and operation of a 473 MW commercial electrical power plant. 2010: NaturalGasMarketDeregulation.TheMYTILINEOS Group becomes the first private player to procure

Liquefied Natural Gas (LNG). The MYTILINEOS GROUP and ENEL reached an agreement on the acquisition of the latterâ&#x20AC;&#x2122;s shares in ENDESA HELLAS. This move led to the establishment of Protergia, an energy company, making the Group the sole shareholder and, as a result, the countryâ&#x20AC;&#x2122;s largest independent producer of energy. Establishment of M&M Gas Co. S.A. jointly with MOTOR OIL for the purpose of importing and trading natural gas (liquefied and non-liquefied).

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1. Environmental remediation efforts being carried out by Delphi-Distomon S.A. in the Rodia area, Fokida prefecture, Greece.

A Health & Safety seminar at ALUMINIUM OF GREECE S.A.’s industrial plant.

Antikyra - Aspra Spitia F.C.’s youth soccer team playing on a five-a-side pitch.

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company established with ENDESA in 2007. The energy portfolio of PROTERGIA has made the Group the largest independent producer of electrical power in Greece. The activities of the company include the development and operation of thermal power plants and of RES, as well as the trading of electrical power and CO2 emissions. M&M GAS In 2010, M&M GAS Co S.A. is jointly established by MYTILINEOS and MOTOR OIL for the supply and trade of natural gas (both liquefied and non-liquefied). The company aims at sourcing natural gas to cover the needs of both companies on competitive terms, as well as at supplying natural gas to third parties. EPC PROJECTS Through its METKA subsidiary, the Group has established its presence in large-scale energy, environmental, infrastructure and defence procurement projects. METKA METKA was established in 1962. In 1973, the company was listed on the Athens Exchange, where its share is traded to this day. Its largest factory is in Nea Ionia, Volos, but there are four other factories in Greece and the Middle East. METKA implements turn-key projects from their engineering and procurement stage to their construction, primarily for combined-cycle, conventional thermal and hydroelectric power plants. It has developed into the leading EPC company in Greece and is acknowledged as one of

the most specialised and internationally renowned constructors of energy projects in Europe. CSR Doing business in a responsible manner is a non-negotiable principle for the MYTILINEOS Group. We deeply believe that Sustainable Development is inconceivable without due respect to the environment, society and people. Guided by this philosophy, the Group systematically implements a comprehensive CSR programme in all fields of its activity. The MYTILINEOS Group actively participates in national and international bodies and associations to exchange ideas and good practices related to CSR, such as the Hellenic Network for Corporate Social Responsibility, the SEV Business Council for Sustainable Development of the Hellenic Federation of Enterprises and the UN Global Compact. In practice, the Groupâ&#x20AC;&#x2122;s CSR is reflected in its commitment to act beyond its statutory obligations in four key areas: ENVIRONMENT - WORKPLACE COMMUNITY - MARKETPLACE. ENVIRONMENT In the MYTILINEOS Group, we wish to consciously use our size and dynamics to protect our environment. In this context, we make sure in a consistent and responsible manner, both in our daily practice, and in long-term programmes, that we work towards a better environment for ourselves and our children. The rational management of the stocks of mineral

resources and natural resources (energy, water and fuel), the GHG emissions, the use of residues (e.g. bauxite), the control of air quality and the restoration of natural landscape in areas affected by mining activities are the main environmental challenges the MYTILINEOS Group faces in its whole range of activities. Aiming at minimising the negative effects of the activity of our companies on the natural environment, we implement environmental protection policies and we control industrial risks, those policies being the basis for formulating an integrated and effective system of practices and environmental management. Our efforts are not solely focused on implementing the required regulations and standards and taking the appropriate measures. It is also expressed through our voluntary commitment to conduct regular audits of our activities, both in the factories and the headquarters of our companies with a view to certification according to ISO 14001. In this direction of self-regulation, our key environmental objectives are the bauxite residue disposal ashore by 2012, the systematic measurement and reduction of CO2 emissions, the systematic restoration of habitat and biodiversity conservation in areas affected by mining activities.Â The goal of sustainable development is a key strategic priority for the MYTILINEOS Group, not only as a CSR performance, but also as an indicator that grants us a significant competitive advantage in business development especially in the field of energy. WORKPLACE The MYTILINEOS Group invests in our people, and recognises that we owe them our business success

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and our future growth. In this context, the Group has formed a working environment with the basic characteristics of corporate culture that is security, fairness, stability, satisfaction, loyalty and commitment to corporate principles, such as respect for the rights and dignity of workers. On a daily basis, the Group engages on the following: • We try to attract and retain capable management executives and aim at principles and values, such as integrity, consistency, dedication, creative thinking, conscientious and responsible work. • We aim at providing working conditions and a working environment that ensures the best conditions for creativity, growth and the full potential of every employee. • We share our knowledge and experience to promote “lifelong” learning and the development of the skills of workers, as well as training in areas that are consistent with the strategic development objectives of the Group. • We improve the daily working conditions. Our continuous goal is the safety and hygiene of workplaces and our priority is “NO ACCIDENTS AND NO OCCUPATIONAL DISEASES” in all Group companies, while at the same time ensuring a work/ life balance. • We constantly evolve and create opportunities for professional development of everyone, with equal opportunities and competitive salaries and benefits, through a performance appraisal system. • We maintain social peace, through policies and systems that contribute to the harmonious development of partnerships and a good working environment.

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•W e establish an internal communication system that promotes vertical and horizontal communication and reinforces corporate culture. • We stand by our people with honesty, open communication and support them in every step of their professional development. • We responsibly and consistently operate with the desire to remain our employees’ first choice throughout their professional career. HUMAN RIGHTS With a sense of responsibility, the MYTILINEOS Group supports and defends human rights in accordance with the Universal Declaration of Human Rights and the standards of the International Labour Organisation. We are committed to protecting human rights in all our business units for workers, contractors, subcontractors, customers, suppliers and all our business partnerships. In this context, we provide fees that are formed at levels higher than those foreseen in the national legislation. We promote gender mainstreaming, equal treatment and recognition of freedom of expression. We prohibit any discrimination, harassment or unprofessional behaviour at work. We prohibit the employment of minors under 18 years of age, and all forms of forced labour (such as mandatory overtime work, threats of dismissal, etc.). We regard as a key responsibility of our senior executives the proper management of all forms of diversity, for the protection and respect of individuals. In this context, the more systematic “recording of situations that involve the risk of the violation of human rights”, the “education of our employees” and the “promotion of the protection

of human rights in the business cycle impact of our business” are the key objectives of our Group, which together with our principles and our working practices are directly related to the protection of Human Rights. COMMUNITY In the MYTILINEOS Group, we operate as a “responsible corporate citizen”. Apart from our contribution to the economic development of the local communities in which we operate, we aim at promoting their balanced and multi-faceted development, consciously and actively supporting their cultural, spiritual and social life. The social policy of the Group is expressed, beyond our established position to strengthen Culture, Sport and Entrepreneurship, through co-ordinated actions for financial and technical assistance on local infrastructure issues through all our companies. Every year: • We contribute to local infrastructure projects with economic, technical and other resources. • We support initiatives by local communities and environmental organisations. • We strengthen the local cultural life and education. MARKETPLACE Amid an ever-changing economic environment, the Group managed to ensure the smooth continuation of investments in all sectors, while maintaining high liquidity and low financial cost. Based on its highly trained manpower, its significant assets and its financial standing, the Group aims at continuous organic growth in the wider region of South-East Europe, North Africa and Middle East and focuses on the development

of important synergies among the key areas of its activity, seeking balanced development. Along with its investment plan, the Group develops methods to reduce costs and takes advantage of sophisticated tools and methods of compensation to ensure the optimisation of economic performance in the coming years. The key development objectives of the Group include the exploitation of opportunities created by the impending opening of the energy market in Greece, the continued investment and the balancing of risks in mining, and the use of the unique expertise and infrastructure available to the group for its EPC projects.

The MYTILINEOS Group gives emphasis on the quality and safety of its products. The quality of its products and services, and the ongoing support and service of its large customer base is for the Group a daily commitment for continued growth. In the field of metallurgy, the Group is committed and takes extra care to ensure the best quality products in accordance with the expectations and requirements of customers in order to achieve this primary objective. The Group implements specific procedures related to improving the quality, safety and its environmental footprint of its products and services. In the field of EPC projects,

except for the fact that its business activity is driven by international regulations for the design of such projects, such as the monitoring of subcontractors to comply with safety regulations and hygiene, the Group implements detailed monitoring measures and characteristics of quality, safety and sanitation projects in the final stages of their implementation in order to meet the demands and expectations of customers and the high quality standards of the Group.

4-5. Combined-cycle natural gas-fired power plants in Agios Nikolaos, Viotia prefecture, Greece.

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National Bank of Greece: The leading bank in Greece for the past 170 years

A pillar for sustainable development in the economy, the environment and the wider community â&#x20AC;&#x153;Today, 170 years since its establishment, National Bank of Greece continues to play a leading role in the financial sector in Greece, as well as the wider region of South-East Europe. Within the climate of economic turbulence that Greece is currently experiencing, we have taken various initiatives and are making coordinated efforts to help the country successfully ride the storm of the crisis.â&#x20AC;? - Excerpt from the message of Board Chairman Vassilios Rapanos on the occasion of the 170th anniversary since the Bankâ&#x20AC;&#x2122;s establishment. Throughout its 170 years of history, NBG has played a key role in encouraging actions and initiatives of a social and environmental nature, and continues today to be a core participant in the economic and social development of the country, as the largest banking organisation in Greece and, indeed, one of the largest in the wider region of South-East Europe.

Investing in Green Energy

In principle, reducing consumption of energy and

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other materials, and investing in new environmentallyfriendly technologies all provide significant environmental and financial benefits to individuals and companies alike. Accordingly, recognising the significance and benefits of green energy NBG has launched a number of green financing products aimed at investments in RES, while also endeavouring to enhance environmental awareness among us all.

Upgrading the energy map of Greece

Consistently in the frontline of investment initiatives of strategic significance for the country’s development, NBG has always sought to be a leading player in the provision of finance to large-, medium- and small-scale investments in RES.

Aeolian Park and Photovoltaic Park in the region of Argolida, Peloponnese, Greece, constructed with NBG financing.

RES present low-risk sustainable investments, which can significantly contribute to the country’s economic growth by creating new jobs, generating research and technology, and fostering development of new and older industrial sectors. For two decades now, we have been the no. 1 bank in financing RES-related projects. Besides our role as an advisor providing guidance to prospective investors, we have put up a large proportion of total bank financing for the creation of wind farms (“Aeolian Parks”), photovoltaic and hydroelectric projects, as well as other forms of energy production, such as energy production from urban waste. In 2010, NBG's participation in financing for this kind of investment amounted to EUR 375.4 million and involve projects whose total budgeted investment cost is EUR 657.4 million and power capacity approximately 297.9 MW, of which 222.20 MW concern Aeolian Parks and 75.7 MW Photovoltaic Parks. Projects that have been financed entirely by us include an Aeolian and Photovoltaic Park in Argolida, with a power capacity of 20 MW and 2 MW, respectively, an Aeolian Park in Thrace, with a power capacity of 6.75 MW, a

“…the business community cannot remain indifferent in a society which, particularly today, is facing complex, acute and unprecedented problems.” Extract from the speech by NBG’s CEO Apostolos Tamvakakis on the occasion of the signing of the sponsorship contract for the construction of a new surgical wing at the Evangelismos General Hospital in Athens.

hydroelectric plant in the Municipality of Aridaia, Pella, with a power capacity of 4.1 MW, while a significant number of projects are currently under construction, such as: • One Aeolian Park in Troizinia, with a power capacity of 33 MW; • Two Aeolian Parks in Evros, each with a power capacity of 23 MW;

• Two Aeolian Parks in Troizoinia, each with a power capacity of 20 MW; • One Photovoltaic Park in Magnesia, with a power capacity of 3.15 MW. Furthermore, we have launched an Energy Fund, through which we participate in projects that exhibit

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“Under the current circumstances, where the economic crisis has highlighted the desperate need for modernisation and radical change in public administration and, generally, in the handling of public finances, we in NBG are particularly aware of our responsibility to contribute to efforts for national economic reorganisation, adaptation and reform, transparency and the elimination of squandering of financial resources.” Extract from the speech by NBG’s CEO Apostolos Tamvakakis on the occasion of the signing of the sponsorship contract for the deployment of the Electronic Prescription System by the country’s Insurance Funds.

particularly interesting environmental potential. The Fund is intended for investors who wish to provide financial support and invest funds in major environmentfocused projects.

large, improving the quality of our daily life, reducing the cost of living, and creating a new lever for growth in the Greek economy.

Last, we have also launched the DELOS Green EnergyInternational Equity Mutual Fund, a cutting-edge themed equity mutual fund which invests chiefly in the equity of companies listed on international markets, active in the sectors of RES, alternative fuels, water resources management, waste recycling and waste management, aiming at achieving optimum returns on a long-term basis.

Over the years, we have played a substantial role in efforts to improve living conditions throughout the country in key areas such as healthcare, actions aimed at addressing various social issues, and efforts to regenerate and restore the natural and urban environments.

Green solutions for all

NBG, encourages Green Energy investments by offering specialised financing packages to retail customers, such as Green Loan, Loan for installing photovoltaic systems and Energy Housing for the energy upgrade of houses, purchase of hybrid technology cars, and installation of photovoltaic systems on rooftops of houses with a significant financial benefit for households, as well as to businesses that wish to invest in energy production, through Photovoltaic Parks. We believe our actions demonstrate that we place special emphasis on enhancing environmental knowledge and awareness among the community at

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Sustainable development with a social focus

By means of targeted and strategic actions, we provide financial support for the implementation of large and complex projects, investing in the social and environmental development of the country. Our systematic contribution to the community was

reaffirmed recently with the signing of a sponsorship package worth EUR 30 million for the construction of a new wing containing modern surgery facilities at Evangelismos General Hospital in Athens, the country’s largest hospital. This project – unquestionably a major investment in the public health sector – will give a new impetus to the functionality of the largest hospital in Greece, increasing significantly its capacity to offer vital health services. Another major corporate philanthropy investment for the benefit of the entire community was our donation of EUR 1.5 million for the supply of the Electronic Prescription System to be deployed by all the country’s Insurance Funds. The supply and operation of this system will mark a major advance in efforts to reduce spending by the country’s insurance organisations, and thereby contribute to enhancing their sustainability and, by extension, ability to continue the provision of healthcare services to the public. In the field of the environment, the Bank’s actions include sponsorship of an urban renewal programme launched by the Hellenic Ministry of the Environment, Energy & Climate Change, which aims at regenerating

"…these districts with their extremely dense population levels and very narrow streets really need to be approached in a new way. From the architectural and city-planning perspective they are in need of radical solutions capable of regenerating and enhancing the quality of life for thousands of our fellow citizens.” Extract from the speech by NBG’s CEO Apostolos Tamvakakis at “Architecture and the City”, an event held to promote the “Athens x 4” competition.

“In these difficult times for Greece, we believe that the right strategy is to lead – through systematic actions and the provision of the right incentives – above all young people with talent and openness of spirit to a business culture that focuses on innovation and the use of technologies. In this way, we can help generate a collective capital of the mind and intellect that will be able to contribute to the development of Greece… “As NBG celebrates 170 years of progress and a creative business culture that has been closely interwoven with the history of the modern Greek state, we are investing in initiatives that propagate a spirit of innovation and look forward to the future with optimism.” Excerpt from the speech of NBG’s CEO Apostolos Tamvakakis at the award ceremony for the 1st i-bank Innovation and Technology competition.

decaying urban areas of Athens by means of the “Athens × 4” competition for eliciting proposals to improve the quality of life for thousands of residents of the Greater Athens area living in densely populated neighbourhoods with narrow streets and pavements.

Model of the building of Evangelismos General Hospital depicting the new wing with modern surgery facilities.

Recognising the significant opportunities for the development of entrepreneurship in Greece and investment in knowledge, innovation and creative ideas, we organised an open public competition under the title i-bank Innovation and Technology, which seeks to promote the creative skills of young people and develop a new platform for generating ideas and concepts in e-commerce, e-applications, the environment and technology, and alternative banking networks. In collaboration with six of the top Greek universities, our i-bank Innovation and Technology competition has promoted and rewarded the efforts of young people with ideas and vision to develop their skills in the field of technology entrepreneurship and, ultimately, realise their full potential as creative human resources in this country.

We wish to show, in practice, that business investments can and should be of a social and environmental nature, besides aiming at economic benefit. During this extremely troubled time for the economy, we have undertaken initiatives and consistently provide support through our financing programmes for the Green Economy, as well as other business sectors and high-tech industries presenting growth potential. Above all, we are concerned to apply measures and adopt practices that enhance our relations with our customers, ease the burden on vulnerable social groups, embrace and encourage an environmentfriendly lifestyle, and support the Greek economy.

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True to its human-centred and eco-friendly profile, the Bank promotes CSR initiatives and wealth creation for society

TT HELLENIC POSTBANK: Little, everyday moves can make the big difference “With a people-oriented character and deeply conscious of its social role, TT Hellenic Postbank promotes moral values as the most important asset of a bank and builds long-term relationships of trust.” - Cleon Papadopoulos, Chairman, TT Hellenic Postbank S.A. As a modern, ethical bank, TT Hellenic Postbank aspires to surpass its own goals, consistently giving back to society, ever since its founding over 100 years ago. Social responsibility is synonymous with the Bank’s philosophy, and our actions demonstrate over time consistency and continuity to our contribution to society.

Today, TT Hellenic Postbank takes social responsibility to another level, by incorporating CSR in its operating mechanisms and in the products and services it offers, so that no distinction is made between economic benefit and social return.

In the same context, the Ecology International Equity Fund (www.tteltaaedak.gr), an open-ended Mutual Fund registered in Greece, invests in internationally listed companies whose products and services are principally involved with ecology, alternative energy sources, water resources management, waste management and new materials. The fund uses the “Bloomberg open-end environmentally-friendly funds index” (ticker: BBOOSENV) as a benchmark.

Thanks to its unique design, Solar Terrace, the

An initiative of TT Hellenic Postbank’s green subsidiary,

Social responsibility lies in the heart of every TT product

Cleon Papadopoulos Chairman TT Hellenic Postbank S.A.

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programme for the installation of solar panels on household rooftops (www.iliakitaratsa.gr), is free of complex procedures, offering autonomous domestic energy and the highest possible economic return in the market from the sale of “green” electricity.

Athens Green 360, which promotes a carbon emissions exchange network amongst 360 Attica-based companies, is another characteristic example of the coexistence of corporate initiative and social benefit. Another significant activity is the Green Energy in Crete solar panel programme, where TT Hellenic Postbank joined forces with the Pancretan Co-operative Bank and T Bank in an effort to create regional wealth and protect the environment in rural areas.

Always there where needed

People-oriented activities are the focal point of the Bank’s values. The provision of aid to ailing social groups and the nurturing of responsible and conscientious citizens are strategic goals for the management and an inspiration for the employees. TT Hellenic Postbank is committed to supporting those who believe they can shape the future and work in that direction. The Bank actually acts as a source of inspiration for its employees, teaching them an individual sense of social and environmental responsibility every single day. The same holds true for people who have been placing their trust with the Bank for more than a century, by inviting them to make a difference for a better future. On this basis, TT Hellenic Postbank pro-actively supports innovative goals, such as investing in green

development, supporting real economy and promoting CSR projects for Education, Health, Environment, Culture, Sports – for people themselves. Joining forces with green companies for the organisation of Green Design Festival in Athens, setting-up the financial groundwork for the implementation of an inspired project such as the Navarino Natura Hall, to make an eco-friendly model out of Messinia, the contribution of the employees from their monthly salaries to the NGO "Mission" of the Archdiocese of Athens to feed the poor, an initiative reinforced by the Chairman’s decision to increase the amount raised ten times, the Children’s Museum and the Savings of Love Easter Bazaar for children in need, are but a few indicative initiatives led by the Bank and sustained by its employees.

Corporate profile

TT Hellenic Postbank S.A. is a publicly-traded bank listed on the Athens Exchange, a member of the Hellenic Banking Association, the European Savings Banks Group (ESBG) and the World Savings Banks Institute (WSBI). TT Hellenic Postbank is a modern alternative bank with a wide depositor base, capital adequacy among the highest in Europe and a healthy loan book, enjoying the required potential and the financial background to provide substantial support to the Greek economy and society.

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VISIONARIES

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â&#x20AC;&#x153;The Principles for Responsible Investment provide a framework for achieving better long-term investment returns and more sustainable markets. They offer a path for integrating environmental, social and governance criteria into investment analysis and ownership practices. If implemented, they have tremendous potential to more closely align investment practices with the goals of the United Nations, thereby contributing to a more stable and inclusive global economy.â&#x20AC;? Kofi A. Annan, Seventh Secretary-General of the United Nations.

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facts & figures

Companies

ESG gaps

between company managers and

CEO / CFO

Institutional investors Asset owners

Investor relations managers

Mainstream asset managers

Sustainability managers

ESG-inclusive asset managers

asset managers Source: â&#x20AC;&#x153;Translating ESG into sustainable business value: Key insights for companies and investorsâ&#x20AC;?, Report from an international workshop series of the WBCSD and UNEP FI, March 2010.

Regular communication takes place, but needs to systematically integrate material ESG factors. Insufficient communication; regular communication needs to be established.

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“Companies need to provide more data on how ESG factors influence their operations and commercial performance.”

“Companies should provide a clear link between ESG factors and its financial materiality in annual reports.”

“Companies should show ESG as a means to reduce volatility.”

Workshop 3: New York

Workshop 1: London

Workshop 5: Vienna

Workshop 2: Montreux

Workshop 6: Johannesburg

Workshop 4: Kuala Lumpur

“Investor-friendly language is a comparative language. ESG is only relevant if it can be compared to a competitor, past performance, or new market development.”

“Companies need to report more on social inequities in the workforce, and inequities and lack of transparency in employee remunerations. These issues are acutely material in South Africa.”

“Corporate measurement, monitoring and reporting of environmental issues in Asia are weak. ESG factors that have been included in codes of conduct by multinationals are reported more widely (where Asian companies are linked to MNC supply chains). There is an imbalance in requirements for MNCs and SMEs in Asia.”

What investors want

Source: “Translating ESG into sustainable business value: Key insights for companies and investors”, Report from an international workshop series of the WBCSD and UNEP FI, March 2010.

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Europe’s SRI sector in a period of transformation John Elkington Executive Chairman Volans

We are moving from an era where financial institutions saw sustainability largely as a matter of citizenship and risk management to a new recognition of potential market opportunities. You might argue that it is all too little and too late, but the big battalions of the financial market are finally beginning to get involved in the business of social responsible and sustainability investment. The SRI sector has typically operated on a very much smaller scale, though during the past 20 years – a period when I have served on the advisory boards of half a dozen SRI funds, most recently joining one for F&C Asset Management – the industry has grown from relatively small roots to a fairly substantial slice of the EU economy. In the process, it has helped dilute early skepticism among investors – and bring useful market pressure to bear on mainstream business.

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financially troubled times, with Eurosif concluding that “the ongoing financial crisis combined with disasters such as the Deepwater Horizon environmental disaster in the Gulf of Mexico have acted as a wake-up call for many investors, making them more aware of the need to integrate ESG issues into investment decisions.” Created with the support of Amundi, BNP Paribas Investment Partners, Crédit Agricole Cheuvreux and Edmond de Rothschild Asset Management, the Eurosif’s 2010 European SRI study investigated the EU SRI market across nineteen countries, including, for the first time, the Baltic states, Poland, Greece and Cyprus. Based on the self-reporting of asset managers and selfmanaged asset owners, the study revealed that the total SRI AuM had increased from EUR 2.7 trillion to EUR 5 trillion, as of December 31, 2009.

If, like me, you track the market trend reporting of Eurosif, you will already have seen its assessment that the European SRI market is “undergoing a transformative period, having significantly grown since 2008. Eurosif’s 2010 European SRI Study estimated the total European SRI Market at EUR 5 trillion AuM.”

As Eurosif noted, this represented “a spectacular growth of about 87% since the data was previously collected two years before. ”Institutional investors remain the main drivers of the SRI market, with a share of 92% of the total AuM, although the share of retail investors had also slightly increased since 2008, particularly in Austria, Belgium, France and Germany.”

There are many reasons for this growth in the midst of

Another important finding of the study is that bonds

info are now the favoured asset class among SRI investors, representing 53% of total SRI assets, while equities had dropped to 33%. Interestingly, microfinance funds are also beginning to generate interest from SRI investors and Eurosif predicts the alternative asset class to grow quickly as investors demand integration of ESG criteria into more diverse areas. Although this sector has had its ups and downs, and will continue to do so, former Eurosif Executive Director, Matt Christensen, concludes that, “previous questions about the ‘financial performance’ of SRI funds are now being replaced by queries about how to best measure the ESG impacts in order to meet the rising expectations of investors.” The SRI sector, in short, has acted as a crucially important incubator of new thinking, methodologies and business models. A fair number of funds have now been absorbed by bigger firms and the mainstreaming of much of the ESG and SRI agendas will present the remaining independents with a major challenge. However, the best among them will welcome the challenge, knowing that the big incumbents rarely launch the market revolutions that drive real change, instead requiring continuing pressure from smaller, more nimble actors.

But we also need to drive disruptive change if we are to tackle system challenges like climate change. Early last year, I helped guide a group of 19 founders and CEOs of U.K. cleantech companies around Silicon Valley, meeting venture capitalists, start-up business, major corporations and public sector agencies that create the pre-conditions for cleantech cluster development. And one conclusion was that, no matter how much Europe may have done in the ESG investing field, we need to move well beyond the rating and ranking of today’s companies to catalysing the formation of tomorrow’s.

John Elkington (www.johnelkington.com) is the Executive Chairman of Volans, co-founder of SustainAbility and a member of the GRI Board of Directors. He is a world authority on corporate responsibility and sustainable development. In 2004, “BusinessWeek” described him as “a dean of the corporate responsibility movement for three decades” and in 2009, a CSR International survey of the Top 100 CSR leaders placed John fourth: after Al Gore, Barack Obama and the late Dame Anita Roddick of The Body Shop, and alongside Prof. Muhammad Yunus of the Grameen Bank.

Many major corporations have considered the ESG sector’s interest in their strategies and performance as a key part of the business case for action. As the sector scales, these pressures will inevitably intensify, but challenges like climate change, peak oil and peak water will ensure that people like the insurers and reinsurers will become increasingly concerned – and they are major investors in their own right. So, while CFOs and business leaders need to pay close attention to what ESG analysts are focusing on, they will also increasingly need to pay attention to the degree to which the businesses they invest in, lend to or insure are innovating ahead of the sustainability curve – and ahead of the competitive pack.

Volans is part think-tank, part consultancy and part broker. The company works globally with entrepreneurs, businesses, investors and governments to develop and scale innovative solutions to financial, social and environmental challenges.

www.volans.com

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Language advances debate Joe Sibilia CEO CSRwire, LLC

For many years, the language used to describe the movement towards a more economically just and environmentally sustainable society included many terms. One of the most popular terms has been “socially responsible investing” (SRI). Today, there is a movement away from this term and towards a new incarnation of the same idea – “impact investing”. It seems that the philanthropic industry (at least in the U.S.) is moving closer towards measuring the impact of investments, as opposed to citing a specific (social) initiative, and calling for a public-private partnership that includes philanthropy, creating what some others call the “fourth sector”. It is a vibrant effort. The Rockefeller Foundation in participation with the IRI at Harvard University and InSight at Pacific Community Ventures recently published a report, “Impact Investing: A Framework for Policy Design and Analysis”, that argues that “investments that effectively deliver social benefit invoke a strong case for government support.” The language used in the report moves the conversation closer to impact as opposed to social, as the term of choice. This report comes on the heels of the seminal report from the IRI titled “From Transparency to Performance – Industry-Based Sustainability Reporting on Key Issues”. “From Transparency to Performance”

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argues that government mandates to broaden disclosure be not meant purely as a measure, but as a way to get a more generally acceptable set of reporting requirements to compare and contrast peers. SRI grows up to become impact investing, and impact investing is attracting the attention of public policy initiatives. Sometimes, a shift in language is the impetus to advance ideas. The government, business and philanthropy sectors cannot individually solve the plethora of problems developing countries and the planet as a whole are facing. The recent financial crises in Greece and the U.S. (and elsewhere) demonstrate the need for greater transparency, especially in financial instruments. Hiding under the cover of home ownership as a right and ample credit as a privilege, financiers took advantage of a gullible public. If we begin to measure our investments in relation to its impact on solving social and environmental problems, we begin to look at the process through a new lens. Consider the connection between the recent financial crisis, where investors were asked to “bet” on the rising value of a financial instrument (credit default swap) without any knowledge of its underlying value and an

impact investing instrument, where its intrinsic value is connected to solving a social and/or environmental problem, while being financially rewarding. Everyone wins in the latter, while the former benefits the first few financiers and leaves the underlying problems to the government and general public. As the evolution away from single bottom line capitalism matures towards a more comprehensive view of how we organise society, it seems intuitive that measuring impact will bring us closer to our goal.

info

Joe Sibilia is a visionary of the socially responsible business movement, the founder and CEO of Meadowbrook Lane Capital LLC (MBLC) and the CEO of CSRwire, LLC. Joe also founded the Gasoline Alley Foundation, a 501(c) 3 corporation that has incubated 43 small businesses since 1985 and teaches inner city and/or underprivileged persons to be successful entrepreneurs using socially responsible/sustainable business practices, while revitalising inner-city neighbourhoods.

the ‘Movement’ towards a more economically just and environmentally sustainable society and away from single bottom line capitalism.” EuroCharity is one of CSRwire’s partners.

www.csrwire.com

Through MBLC, Joe has worked with a number of socially responsible companies and has been widely recognised for his work in attempting to take Ben & Jerry’s Homemade Ice Cream private, while creating a private stock exchange for CSR companies. MBLC successfully preserved many of the founders’ social initiatives, and advancing the connection between good corporate citizenship and increased share value. MBLC has been described by “The Wall Street Journal” as a “socially responsible investment bank” specialising in turning values into valuation. His longrange plans for CSRwire, The Corporate Social Responsibility Newswire, is to establish a “platform for innovative revenue sharing applications advancing

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Timothy Smith Senior Vice President Walden Asset Management

Corporate commitment to sustainability and CSR reporting: investors help create an enduring trend In the last 20 years, there has been a sea change within business regarding corporate responsibility policies and practices, as well as rapidly expanding support for CSR leadership and sustainability reporting by investors. The majority of S&P 500 companies now publicly declare their commitment to act as responsible corporations and do some form of CSR or sustainability reporting. Similarly, there is a surge of commitment by investors globally who integrate ESG issues into their investment and company engagement process and press for meaningful transparency and business leadership in CSR. The multi-faceted business case for CSR and sustainability leadership is regularly made by ESG investors in company engagements. Decrease regulatory and litigation risks The business world is changing. â&#x20AC;&#x153;All companies face a direct impact from decreasing natural resources, rising populations and disruption from climate change. And what may be a subtle effect now will only become more intense over the next five to ten years,â&#x20AC;? states

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EuroCharity

Mark G. Parker, President and CEO of Nike, Inc. Global challenges are already stimulating new legislation and future regulations. Company CSR leaders are likely to be better equipped to face such challenges. For example, a company that is already monitoring and setting goals to reduce its carbon emissions will protect itself when carbon pricing becomes the regulatory norm. Avoid reputational risk and build public trust In light of the recent economic meltdown, public trust in business has, unfortunately, substantially declined. Trust is a crucial factor for future long-term business prosperity. Taking advantage of opportunities to reduce costs and enhance revenue Many companies have already found multiple ways to cut operational costs utilising their sustainability programmes as a guide. For example, Apple Inc. reduced packaging for their computers, which enabled them to fit more products into a cargo hold and reduce waste, transportation, and fuel costs.

info Leadership in CSR can also improve a companyâ&#x20AC;&#x2122;s efficiency, productivity, competitive edge, long-term survival, and its ability to attract labour, investors and consumers. Advantages in recruiting customers An increasing number of companies is urging suppliers to meet high corporate responsibility standards. Supply chain guidelines often include requiring suppliers to meet specified environmental, social, and governance performance levels as well as publishing CSR reports. Investors are a key catalyst for this change In the last decade, there has been a rising chorus of investor voices persuading, prodding and holding companies accountable on dozens of corporate responsibility and governance issues. There is a spectrum of diplomatic, private persuasion all the way to very public challenges for companies and results have been impressive. The tremendous boost in active shareholder involvement, demonstrated by PRI and CDP, is based on the investorsâ&#x20AC;&#x2122; belief that in order to be a prudent and responsible fiduciary, they must integrate ESG issues into their investment process since these issues can and do have a demonstrated impact on the bottom line. These investors firmly believe they are protecting the value of their portfolio and the beneficiaries of their pension funds. The addition of these institutional investors to the equation has changed the acoustics

for many companies who listen more attentively and react more positively. Companies are being held to higher standards for their own conduct, but also for the actions of their suppliers and even their trade associations, such as the U.S. Chamber of Commerce. The Chamber alleges that they are acting on behalf of businesses, even when they work to undermine many environmental laws or regulations. There are many reasons for companies to move in this direction, but the bottom line is that it is good for business.

Timothy Smith is the Senior Vice President and Director of ESG Shareowner Engagement at Walden Asset Management, a division of Boston Trust & Investment Management Company (BTIM). He joined Walden in October 2000, moving from his post as Executive Director for the ICCR where he worked for 29 years, 24 of them as Executive Director. Tim believes that investors should be concerned about ESG issues and should be actively involved in raising corporate responsibility and corporate governance questions with companies in which they are shareowners. In 2007, Tim was named as one of the top 100 most influential people in Business Ethics by the research-based Ethisphere Institute. Walden Asset Management, led by Timothy, has been an active leader in engaging companies they invest in, in literally dozens of ESG issues. Walden is deeply involved in company dialogues, shareholder resolutions and public policy on issues, such as the environment and climate change, diversity, human rights, vendor standards, executive pay and governance reforms. This year, a very specific campaign led by Walden challenges companies with strong sustainability that sit on the board of the U.S. Chamber of Commerce to evaluate their role in that board. The Chamber actively lobbies in ways that undermine forward-looking environmental policies and contributes millions of dollars to candidates in elections that oppose sustainability initiatives. Walden and other investors argue that these companies cannot any longer serve as passive Chamber board members.

www.waldenassetmgmt.com www.bostontrust.com Yearbook 2010

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Enabling responsible investing Prof. Don Tapscott Bestselling author

It was many years ago when I first heard the optimistic adage, “you do well by doing good.” Back then, advocates of the so-called Corporate Social Responsibility were trying to make a business case for good corporate behaviour. Few were persuaded. The main reason for lack of success in winning support for “being good” is that the adage was not true. Many companies did well by being bad. Creative accounting, unfair labour practices, corporate secrecy, monopolistic behaviours, externalising costs, and shady environmental behaviours could help beef up the bottom line. Not to mention that corporate executives themselves could “do well” by paying astronomical bonuses, even while their companies were struggling. But, today, all this is changing. An old force with new power is rising in business, one that has far-reaching implications. Evidence suggests firms that embrace this force and harness its power will thrive. Those who ignore or oppose it will suffer. The force is transparency. Globalisation, instant communications and organised civil society have changed the rules of the game. In

158

EuroCharity

an ultra-transparent world, every step and misstep is subject to scrutiny. And every company with a brand or reputation to protect is vulnerable. To build trusting relationships and succeed in a transparent economy, growing numbers of firms in all parts of the globe are being forced to behave more responsibly than ever. Disgraced banks represent the old model – a dying breed. Business integrity is on the rise, not just for legal or purely ethical reasons, but because it makes economic sense. Companies need to do good – act with integrity – not just to secure a healthy business environment, but for their own sustainability and competitive advantage. Firms that exhibit ethical values, openness and candor have discovered that they can be more competitive and more profitable. They have stakeholders who have a legitimate, important and overall healthy interest in the breadth, veracity and integrity of corporate performance and behaviour. But how can companies evidence integrity to the world, showing investors that they get it? They need to bake honesty, consideration and accountability into their business model and everything they do. As part of this, corporate reporting needs to change. The

typical annual report is a static document produced on paper and deals primarily with financial information. The bottom line is that shareholders, board members, regulators, employees, customers, journalists and other stakeholders have had a very limited view of the corporation. The irresistible force of transparency has met the immovable object of an outdated and even dangerous model of reporting. A prime example of this is that the world could not foresee the impending collapse of the financial services industry.

When all companies share a global computer with all stakeholders, there is new world of possibilities for positive transparency and engagement while at the same time appropriately protecting intellectually property, legitimate corporate secrets and the privacy of individuals. This is the future of responsible investing.

It is time for a change in reporting to keep pace with the growing desire for responsible investing. We need a comprehensive, networked, real-time, living-andbreathing system that reports a single version of the truth to all concerned parties, inside and out. The good news is that the digital revolution has matured to the point where this is possible. The Internet has evolved from a network of Web sites that enable organisations to simply present information. It is now a computing platform in its own right. Elements of a computer – and elements of a computer programme – can be spread out across the Internet and seamlessly combined as necessary. The Internet is becoming a giant computer that everyone can programme – providing a global infrastructure for creativity, participation, sharing and self-organisation.

Prof. Don Tapscott is one of the world’s leading authorities on innovation, media, and the economic and social impact of technology. Born in 1947, the Canadian Professor has authored or co-authored fourteen widely read books, including “Macrowikinomics: Rebooting Business and the World”, which TheHuffingtonPost. com said is “nothing less than a game plan to fix a broken world.” Don is the Chairman of Moxie Insight, a member of the World Economic Forum and an Adjunct Professor of Management for the Rotman School of Management at the University of Toronto.

selling management book of 2007. The collapse of the financial systems and the global economic crisis of 2009 were a wakeup call to the world. Macrowikinomics explores the need to rethink and rebuild many of the organisations and institutions that have served us well for decades, even centuries, but are no longer able. Many pillars of traditional economic and social life have come to the end of their life cycle. How should our institutions change for a new century, new media, new generation and a new economy? Macrowikinomics maps out what needs to be done.

Co-authored by Don and Anthony D. Williams, the book “Macrowikinomics: Rebooting Business and the World” is a follow-up to “Wikinomics: How Mass Collaboration Changes Everything”, their best-

www.dontapscott.com www.macrowikinomics.com

info

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Investing in social businesses Prof. Muhammad Yunus Founder Grameen Bank Chairperson Yunus Centre 2006 Nobel Peace Laureate

According to economic theory, there is only one type of business: the profit maximising business. The main objective of the investor is to maximise the return on investment. This way of economic thinking assumes that the investor is a selfish human being. This narrow view of human nature is the fatal flaw that makes economic theory incomplete and inaccurate. I am proposing that selflessness in human beings should also be included in economic theory. We should accommodate selfless business or social business in the theory. While the selfish business aims to maximise the profits of the company for personal gain of the investors, the selfless business aims to solve a social problem and make a positive impact in the world. The social business is a non-loss, non-dividend enterprise dedicated entirely to achieve a social goal, where the investor aims to help others without taking any financial gain for him or herself. At the same time, the social business generates enough income to cover its own costs; any surplus is invested in the expansion of the business or in increased benefits to society. The first joint venture social business was created in 2005 between Grameen Group and Danone, the multinational

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French dairy group, aimed at reducing malnutrition among the children of Bangladesh. Grameen Danone Foods Ltd. produces a delicious yoghurt for children and sells it at an affordable price to the poor. This yoghurt is fortified with all the micronutrients that are missing in the children’s ordinary diet. As a social business, the success of the company will be judged not by the amount of profit generated, but by the number of children getting out of nutrition deficiency. Grameen has also created joint-venture social businesses with other reputable multinational corporations to overcome major social problems. Grameen-Veolia Water Ltd. was created to provide safe drinking water in a cluster of villages in Bangladesh; Grameen-Intel Social Business to bring information technology-based services to the poor in healthcare; BASF Grameen Ltd. to protect people in Bangladesh from malaria and mosquito-borne diseases; Grameen UNIQLO to produce reusable sanitary napkins for women to address the issue of women’s health; GrameenYukiguni Maitake Co., Ltd. (GYM) to produce “mung” beans in Bangladesh for local consumption and for export to Japan; Grameen GC Eye Care Hospital to perform cataract operations for the poor.

Many other corporations are now approaching Grameen to invest responsibly by creating sustainable social businesses. Social business funds have been created in India and there are initiatives to create startup funds in Monaco, Bangladesh and Japan to provide equity and loan support to social business initiatives. Even profit maximising companies can be uniquely designed as social businesses by giving ownership to the poor. This constitutes a second type of social business. Grameen Bank falls under this category of social business: it is a social business owned by its (poor) borrowers, who hold 96.5% of the shares. The profits are paid out as dividends to the borrowers through their saving accounts. Grameen Bank has 8.5 million borrowers, 97% of whom are women. Nine of the thirteen members of the Board of Directors are elected by the borrowers as shareholders. The Bank lends out over USD 125 million a month in collateralfree loans averaging about USD 200. I have mentioned how Grameen has invested responsibly for a better tomorrow through social business initiatives in particular areas. Each level of government, bilateral and multilateral donors, foundations and businesses can create Social Business Funds to encourage citizens and other companies to

create social businesses aimed at addressing specific social problems. Now is the time for bold and creative thinking to invest

in social businesses to overcome social problems, rather than just to maximise profits for personal gain. This is what I see as an important direction for the future of responsible investing.

info Prof. Muhammad Yunus, Founder of Grameen Bank, and 2006 Nobel Peace Laureate, has been instrumental in lifting people world-wide out of poverty with the pioneering use of microcredit – supporting income-generating activities by lending small amounts without collateral to the poor. He has won numerous other awards as well. Professor Yunus received his B.A. and M.A. in Economics at Dhaka University in Bangladesh. A Fulbright scholar, he earned his Ph.D. in Economics from Vanderbilt University in Nashville, Tennesse, U.S.A. Endearingly known as “Banker to the Poor”, Muhammad was born in the Bangladeshi village of Bathua, in Hathazari, Chittagong, the business centre of what was then Eastern Bengal, on June 28, 1940. He is the third of 14 children in his family, five of whom died in infancy. His father was a successful goldsmith

who encouraged his sons to seek higher education. But Muhammad’s biggest influence was his mother, Sufia Khatun, who always helped any poor man or woman knocking on the Yunus family’s door. This inspired Muhammad to commit himself to the eradication of poverty. Chaired by Muhammad, the Yunus Centre serves as the one-stop resource centre for all Grameen social business related activities, both globally and in Bangladesh. It aims at keeping the spirit of the global social business movement very high through various events, social media, publications and Web sites. The Centre’s Executive Director is Lamiya Morshed.

www.yunuscentre.org www.bankertothepoor.com www.grameen-info.org

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Acronyms and abbreviations ACCI ASrIA AUD AuM BT C(S)R CAD CDLI CDP CEE(TF) CEO CERES CFO COP CRI CSA CSI DJSI DRC DTIE EC EEA EIB EIRIS EMAS EPC ESG

162

Athens Chamber of Commerce and Industry Association for Sustainable and Responsible Investment in Asia Australian Dollar Assets under Management British Telecom Corporate (Social) Responsibility Canadian Dollar Carbon Disclosure Leadership Index Carbon Disclosure Project Central and Eastern Europe (Task Force) Chief Executive Officer Coalition for Environmentally Responsible Economies Chief Financial Officer Conference of the Parties Corporate Responsibility Index Corporate Sustainability Assessment Cement Sustainability Initiative Dow Jones Sustainability Indexes Democratic Republic of Congo Division of Technology, Industry and Economics European Commission European Environment Agency European Investment Bank Experts in Responsible Investment Solutions Eco-Management and Audit Scheme Engineering, Procurement and Construction Environmental, Social and Governance

EuroCharity

ETF EU EUR Eurosif FDI FEBEA FFP FSC FT(SE) FTT FYROM GDP GHG GIIN GmbH GRI HHPC ICCR ICT IIRC INCR IRI IRRC(i) ISI ISO IT IUCN

Exchange-Traded Fund European Union Euro European Sustainable Investment Forum Foreign Direct Investment Fédération Européenne de Finances et Banques Ethiques et Alternatives Federatie van Financieel Planners Forest Stewardship Council Financial Times (Stock Exchange) Financial Transaction Tax Former Yugoslav Republic of Macedonia Gross Domestic Product Greenhouse Gas Global Impact Investing Network Gesellschaft mit beschränkter Haftung Global Reporting Initiative Healthy High Performance Cleaning Interfaith Center on Corporate Responsibility Information and Communications Technology International Integrated Reporting Committee Investor Network on Climate Risk Initiative for Responsible Investment Investor Responsibility Research Center (Institute) Institute of Social Innovation International Organization for Standardization Information Technology International Union for Conservation of Nature

JTI K(G)W KPIs LCA LED LEED - EB LLC MBLC MNC(s) MSCI NBG NGOs NV NYSE NZ OHSAS OTE P&C PLC PPP PRI PV PwC R&D RES RIAA RPIC

Japan Tobacco International Kilo (Giga) Watt Key Performance Indicators Life Cycle Assessment Light-Emitting Diode Leadership in Energy and Environmental Design for Existing Buildings Limited Liability Company Meadowbrook Lane Capital Multinational Corporation(s) Morgan Stanley Capital International National Bank of Greece Non-Governmental Organisations Naamloze Vennootschap New York Stock Exchange New Zealand Occupational Health and Safety Assessment System Hellenic Telecommunications Organization S.A. Property & Casualty Public Limited Company Public-private partnership Principles for Responsible Investment Photovoltaic PricewaterhouseCoopers Research & Development Renewable Energy Sources Responsible Investment Association Australasia Responsible Property Investing Center

S&P SA SAM SBI SEFEA SIF SIO SME(s) SpA SRI TEEB UK UKSIF UN UNEP(FI) UNFCCC UNGC UNICEF UNON US(A) USD VBDO WBCSD WTO WWF

Standard & Poor’s Société Anonyme Sustainable Asset Management Sustainable Business Institute Société Européenne de Finance Ethique et Alternative Social (or Sustainable) Investment Forum Social Investment Organization Small and Medium-sized Enterprise(s) Società per Azioni Socially (or Sustainable and) Responsible Investing The Economics of Ecosystems and Biodiversity United Kingdom UK Sustainable Investment and Finance United Nations UN Environment Programme (Finance Initiative) UN Framework Convention on Climate Change UN Global Compact UN International Children’s Fund UN Office at Nairobi United States (of America) United States Dollar Vereniging van Beleggers voor Duurzame Ontwikkeling World Business Council for Sustainable Development World Trade Organization World Wide Fund for Nature (or World Wildlife Fund)

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Index of tables, graphs, figures, facts and stats Title

Source

Page

Title

Source

Signatories by category and by region

UNEP FI

ESG investing methods and strategies

ESG hits by user type (global)

Bloomberg

Danish Ministry for Economic and Business Affairs, PRI

User count by country

Bloomberg

Key actors involved in the “mainstreaming ESG” field

UN Global Compact

Average Overall ESG rating by country

FTSE Group

ESG rating methodology - overview

FTSE Group

The evolution of the SRI market in Europe (2002-2009)

Eurosif

Responsible investment 2001 vs. 2011

FTSE Group

Long-term growth trends in responsible investment managed portfolios

RIAA

Underwriting climate change risk exposure

MSCI Inc.

Global SRI data

Eurosif, SIF, SIO, RIAA

Income from rating activity

Vigeo

Number of responding companies (Investor & Supply Chain programmes)

CDP

Relevant legislation, regulations and policy instruments in Greece

Institute of Social Innovation

Characteristics of carbon performance leadership

Typology of investment practices in Greece

Institute of Social Innovation

CDP

Top 10 countries by number of reports – based on GRI G3 Guidelines – globally and in Europe

Reporting frameworks for ESG disclosure used by investors

PRI

GRI

GRI reports 1999-2010

GRI

CDP key trends summary 2010

CDP

Examples of engagements with companies from around the world

PRI

122

Research areas in ESG corporate performance

EIRIS

ESG gaps between company managers and asset managers

WBCSD, UNEP FI

150

ESG geographic coverage

Bloomberg

What investors want

WBCSD, UNEP FI

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EuroCharity

Page

EuroCharity Yearbook 2010

www.eurocharity.gr/en www.eurocharity.eu

ΠΛΑΓΙΑ σήμανση πιστοποιημένου εντύπου

ISBN: 978-960-99967-0-9

The Future of Responsible Investing

EuroCharity The reference point for Corporate Social Responsibility and the Green Economy

EuroCharity

Yearbook 2010

The Future of Responsible Investing