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December 31, 2011
Top Sustainable Investment Stories of 2011
    by Robert Kropp

Many sustainable investors see affinities between their concerns and those of the Occupy Movement, and global emissions from the burning of fossil fuels in 2010 were the highest in human history.

2011 may not have yielded stories as galvanizing as those of 2010, when the Supreme Court ruled in favor of corporate personhood and the BP oil spill caused widespread devastation in the Gulf of Mexico region. But in addition to the important stories described below, a number of developments of interest to sustainable investors deserve recounting and will be followed closely in 2012:

SEC Adopts Rules for Say on Pay
Despite Court Ruling, Opportunity for Proxy Access Remains
Index Ranks Companies on Political Spending Disclosure
What Happened at COP17?

The top stories of 2011:

5. EPA regulates emissions from power plants.

A top story from 2010 was the failure of Congress to act on climate change, despite passage by the House in 2009 of the Waxman-Markey climate change bill. 2011 saw no further action by Congress on the issue, despite the overwhelming consensus of climate scientists. In fact, as we enter an election year, almost all Republican presidential candidates either question whether global warming is due to human activity, or flatly deny the reality of climate change.

Despite attacks on its authority to regulate greenhouse gas (GHG) emissions, the Environmental Protection Agency (EPA) issued two important regulations in 2011 that together could prevent up to 46,000 premature deaths, 540,000 asthma attacks among children, and 24,500 emergency room visits and hospital admissions.

In June, EPA finalized the Cross-State Air Pollution Rule (C-SAP), which requires that 27 states in the eastern US reduce power plant emissions that contribute to pollution in other states. And in December, the Agency issued its final Mercury and Air Toxics Rule for Power Plants, requiring power plants to install pollution control equipment that will reduce emissions of mercury in the US by 99%.

EPA Regulations on Emissions Take Effect
EPA Finalizes Cross-State Air Pollution Rule
EPA Issues Rule on Mercury Emissions from Power Plants

4. UN Human Rights Council endorses Guiding Principles on Business and Human Rights.

The effect on corporate social responsibility (CSR) remains to be seen for the most part, but in June the United Nations Human Rights Council took a step toward enshrining the social responsibility of businesses by endorsing the Guiding Principles on Business and Human Rights authored by Professor John Ruggie, the UN Secretary-General's Special Representative for Business and Human Rights (UNSRSG).

Described by Rev. David Schilling, the director of human rights for the Interfaith Center on Corporate Responsibility (ICCR), as a "significant breakthrough and an indispensible resource for investors in assessing the human rights performance of companies," the Guidelines state that "Business enterprises…should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved."

"In order to meet their responsibility to respect human rights," the Guidelines continued, "Business enterprises should have in place…A policy commitment to meet their responsibility to respect human rights; a human rights due-diligence process…and processes to enable the remediation of any adverse human rights impacts they cause or to which they contribute. Business enterprises need to know and show that they respect human rights."

Shareowners have successfully engaged already on the issue of corporate adherence to the Principles. In December, the Jesuit Conference of the United States announced that its four-year engagement with OM Group has resulted in the adoption by the company of a human rights policy for its employees, including miners at its cobalt smelter in Lubumbashi, Democratic Republic of the Congo (DRC). A shareowner resolution requesting that OM Group develop a human rights policy that conforms with the Guiding Principles gained 43% of the shareowner vote at the company's annual general meeting.

Guiding Principles on Business and Human Rights are Published
UN Human Rights Council Endorses Guiding Principles on Business and Human Rights
Shareowner Engagement Leads to Adoption of Human Rights Policy at OM Group

3. Shareowners rally over issue of hydraulic fracturing.

Since 2009, when shareowners filed the first of 21 resolutions that by 2010 had gained an unprecedented 40% support, concerns over the impacts of hydraulic fracturing, or fracking, have gone mainstream. Risks associated with contamination by toxic chemicals of community drinking water supplies, the disposal of massive volumes of wastewater, and increased air emissions have been widely covered in the media, threatening the social license to operate of companies engaged in the controversial practice of natural gas extraction.

Richard Liroff, executive director of the Investor Environmental Health Network (IEHN), told, "There's a moratorium in the Delaware River Basin, there's been a moratorium in New York State, there's a moratorium in the Province of Quebec. There is a ban in France, there is a moratorium in South Africa, and there is a moratorium in the New South Wales state in Australia."

In 2011, the Securities and Exchange Commission (SEC) began requesting that oil and gas companies provide it with detailed information on their fracking practices, including the often toxic chemicals used. "Government officials said the SEC's interest in fracking is in ensuring investors are being told about risks a company may face related to its operations, such as lawsuits, compliance costs or other uncertainties," a Wall Street Journal article reported.

And in December, EPA released its 121-page draft analysis assessing groundwater quality and identifying potential sources of contamination in Pavilion, Wyoming. EPA's analysis determined that fracking was responsible for contaminating the groundwater in the community.

Also in December, ICCR and IEHN published an Investor Guide to help increase corporate disclosure and mitigate the impacts of fracking.

Several shareowner resolutions requesting better disclosure of risks associated with fracking have already been filed for the 2012 proxy season.

Shareowner Support for Environmental Resolutions Continues to Grow
SEC Considering Oversight of Hydraulic Fracturing
EPA Finds Drinking Water Tainted by Fracking
Investors Provide Guidance for Companies Engaged in Hydraulic Fracturing

2. Global emissions break records in 2010.

A report by scientists at the Global Carbon Project found that during 2010, global emissions increased 5.9%, one of the largest growth rates in the past decade. Atmospheric concentration of CO2 is now 39% higher than it was at the start of the Industrial Revolution, and is the highest during at least the last 800,000 years. The absolute emissions from the burning of fossil fuels in 2010 were the highest in human history.

The increase followed a 1.9% decline in global emissions in 2009, which was attributed to reduced economic activity in the aftermath of the financial crisis.

In October, a coalition of 285 institutional investors representing more than $20 trillion in assets issued a Global Investor Statement on Climate Change. The Statement recommends that effective and well-designed domestic policies provide long-term certainty in order that appropriate incentives for private investment exist. It also calls for a binding international policy on climate change and funding mechanisms to bring climate-related investment to the necessary scale.

Although the burning of coal was responsible for more than half of emissions in 2010, a BankTrack report found that financing by banks for new construction of coal-fired power plants has totaled $313.5 billion since 2005. Most of the banks providing financing are signatories to the Equator Principles, and have publicly committed to managing environmental and social risks in their project finance transactions.

If all new coal-fired power plants now scheduled for construction come on line, the report warns, their lifetime emissions will equal those of all coal-burning activities since the beginning of industrialization.

Investors Managing $20 Trillion in Assets Call for Climate Change Policies
BankTrack Names Banks Funding Dirty Coal Power Plants
Global Emissions Break Records in 2010

1. Are Occupy Wall Street and sustainable investment aligned?

For the first time in decades, demonstrators took to the streets of US cities in large numbers. The primary focus of the protesters is the deepening inequality that threatens to become a permanent institution in American life.

Given that the voices of the movement are the voices of key stakeholders on whose behalf sustainable investors engage with corporations and policymakers, the alignment of concerns and goals between the two communities seems natural, if not inevitable. In October, Boston-based Zevin Asset Management issued a statement which said, "As socially responsible investors, we seek the same goals as those protesting."

"Overwhelming evidence demonstrates the rich have gotten richer at the expense of the middle class, the working poor, and the unemployed," the statement continued.

Several other sustainable investment firms soon followed Zevin's lead. And in November, Lisa Woll of US SIF: The Forum for Sustainable and Responsible Investment stated, "The Occupy movement occurring across the country, and indeed, around the world, speaks to many of the issues and concerns raised by sustainable and responsible investors over the past several decades-- and particularly since the unfolding of the recent financial crisis."

An analysis by the Economic Policy Institute (EPI) provided fodder for the protestors and shareowner activists, by finding that the top one percent of the US population now controls one-third of the nation's wealth.

Furthermore, according to EPI, the wealthiest 20% of Americans now hold 87.2% of wealth, and the net worth of the top one percent is 225 times greater than the median.

How Occupy Wall Street and Sustainable Investment are Aligned
More Fodder for Uprising Against Economic Inequality
Zuccotti Park Cleared of Occupy Protesters

Finally, two important investor organizations celebrated anniversaries in 2011. ICCR celebrated 40 years of shareowner action, stretching back to apartheid in South Africa and forward to such concerns of today as human trafficking, the rights of indigenous persons and workers, militarism, the environment, and fair access to capital.

And the UK Sustainable Investment and Finance (UKSIF) used the 20th anniversary of its founding to produce a report entitled Taking Responsibility: Achieving Resilience, that looks back on the growth of sustainable investment in the UK while acknowledging that its "task is only just beginning."

"Over the next 20 years, sustainable investment and finance will move even further center stage as the world faces the challenges of moving to a resilient and resource-efficient society," the report states.

UKSIF Reflects on Twenty Years of Growth in Sustainable Investment
ICCR Celebrates Forty Years of Shareowner Activism


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