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Environmental Exposures—How it Can Affect Financial Performance

Environmental Exposures—How it Can Affect Financial Performance. Catherine Sheehy Director, Corporate Benchmarking Service. Investor Responsibility Research Center 1350 Connecticut Avenue, NW, Ste. 700 • Washington, DC 20036-1702 202-833-0700 • fax 202-833-3555 csheehy@irrc.org.

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Environmental Exposures—How it Can Affect Financial Performance

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  1. Environmental Exposures—How it Can Affect Financial Performance Catherine Sheehy Director, Corporate Benchmarking Service Investor Responsibility Research Center 1350 Connecticut Avenue, NW, Ste. 700 • Washington, DC 20036-1702 202-833-0700 • fax 202-833-3555 csheehy@irrc.org May 6-9, 2001 Financial Executives Summit

  2. Today’s Discussion • Introduction to IRRC • Trends in Socially Responsible Investing • IRRC’s use of environmental information and challenges in tracking environmental data • Corporate Environmental Profiles Database (CEPD) • Discussion May 6-9, 2001 Financial Executives Summit

  3. Investor Responsibility Research Center • Impetus for IRRC’s founding can be traced to an SEC rules change that enabled stockholders to vote for the first time on shareholder proposals with social connotations. • Founded in 1972 by foundations and universities— including Rockefeller, Ford, Carnegie, Harvard and Princeton—that concluded that newly emerging social proposals “were highly complicated, that facts were often hard to obtain, that [institutional investors] did not have the time and training adequate to investigate the issues, and that they were often duplicating each other’s efforts.” May 6-9, 2001 Financial Executives Summit

  4. IRRC: 2001 • Multi-service (screening, proxy voting research and services) • Staff of 70+ • More than 400 subscribers, including major global institutional investors • Impartial, non-partisan May 6-9, 2001 Financial Executives Summit

  5. Socially ResponsibleInvesting (SRI) What is it? May 6-9, 2001 Financial Executives Summit

  6. Socially ResponsibleInvesting (SRI) Otherwise known as ethical investing or values-based investing, is the practice of integrating personal values and societal concerns with investment decisions. May 6-9, 2001 Financial Executives Summit

  7. SRI Overview SRI market has increased from $1.185 trillion in 1997 to approximately $2.16 trillion in 1999. Social screening market has more than doubled since 1997, from $529 billion to $1.497 trillion in 1999. (from Social Investment Forum 1999 Trends Report) May 6-9, 2001 Financial Executives Summit

  8. Growth Indicators in SRI Dow Jones’ Sustainability Index Dow Jones’ Muslim Index Vanguard’s Calvert Vanguard Index Fund Commonfund’s Social Decision Fund May 6-9, 2001 Financial Executives Summit

  9. SRI Tools • Screening • Shareholder Advocacy • Community Investment May 6-9, 2001 Financial Executives Summit

  10. SRI Tools • Screening The inclusion or exclusion of corporate securities in investment portfolios based on social or environmental criteria. (Social Investment Forum Online Guide to SRI) . May 6-9, 2001 Financial Executives Summit

  11. Issues Addressed by MostScreened Portfolios • Tobacco—96 percent • Gambling—86 percent • Alcohol—83 percent • Weapons—81 percent • Environment—79 percent May 6-9, 2001 Financial Executives Summit

  12. SRI Tools • Shareholder Advocacy Describes the effort to submit and vote corporate proxy resolutions with the goal of influencing company behavior. (Social Investment Forum Online Guide to SRI) For instance, the South African anti-apartheid campaigns in the 70s and 80s was fueled in part by shareholder activism requesting companies to divest of their South African operations. May 6-9, 2001 Financial Executives Summit

  13. Environmental Proposals in 2001 • Endorse Ceres code of conduct - at 5 firms • Report on global climate change - at 5 firms • Develop plan for reducing pollutants - Chevron • Drilling plans for Arctic Refuge - Chevron, Exxon • Report on environmental impact - Enron • Report on chlorine phaseout plans - Weyerhaeuser May 6-9, 2001 Financial Executives Summit

  14. Environmental Exposures &Financial Performance • Academic research linking shareholder value and environmental performance • Socially responsible investors say they engage in screening and shareholder advocacy to ensure long-term financial health of company May 6-9, 2001 Financial Executives Summit

  15. IRRC’s EnvironmentalResearch • IRRC asks clients, what is the actual question you are trying to answer when you look for environmental information? • What data do you need to answer that question? NAEM Workshop: Relating Environmental and Financial Performance to Stockholder Value

  16. IRRC Environmental Information Sources • Environmental Protection Agency domestic facility data on more than 1,500 companies • Annual survey • Company reports and publicly available data sources (SEC 10-K, media) • Why these sources? May 6-9, 2001 Financial Executives Summit

  17. Environmental Data:Trends and Challenges • Positive over negative screening • Corporate disclosure and reporting guidelines • Energy: natural gas, nuclear, renewable, alternative • Sustainability indicators instead of environmental indicators • Demand for foreign operations data • FOIA process difficulties and time lag with govt data • Mergers, changes in corporate structure May 6-9, 2001 Financial Executives Summit

  18. Facing the Challenges: CBS Products and Research • Investigating possible new data sources, elements, indicators, and normalization factors • Industry specific surveys • Increase space for company comments in our profiles • University Consortium • Participate in Global Reporting Initiative and coordinate survey with guidelines • Partnerships • In process of formalizing dialogue with EPA May 6-9, 2001 Financial Executives Summit

  19. IRRC Wish List for Environmental Information From Companies and Industry Associations • Standard, publicly available, new normalizing factors, across industries or at least one (unit product/yr, EHS budget/yr, etc.) • Environmental Reports in downloadable, searchable database format • Points of contact for survey, confirming environmental information and social issues • More detail on foreign operations • Environmental capital and operations expenditure data May 6-9, 2001 Financial Executives Summit

  20. What We’d Like to Know • What would you like your shareholders and stakeholders to know about your company’s environmental practices? May 6-9, 2001 Financial Executives Summit

  21. Review • Introduction to IRRC • Trends in Socially Responsible Investing • IRRC’s use of environmental information and challenges in tracking environmental data • Corporate Environmental Profiles Database (CEPD) • Discussion May 6-9, 2001 Financial Executives Summit

  22. Environmental Benchmarkingand Screening Products • Corporate Environmental Profiles Database • Portfolio$creener May 6-9, 2001 Financial Executives Summit

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