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April 20, 2012
Eurosif Outlines ESG Risks to Media Companies
    by Robert Kropp

The fast-changing media sector faces risks associated with trust, freedom of expression, and diversity, and a report cites examples of best practice in an environment dominated by the News Corporation's phone hacking scandal.

The potential reputational risks to media companies have been much in the news since last July, when the phone hacking and bribery scandal at News Corporation led to a decline of the media giant's stock of 24% in the months that followed. Eleven billion dollars in market value was lost before the company's stock price recovered.

In a recently published report on the media sector, European Sustainable Investment Forum (Eurosif) identifies trust and ethics as two of the environmental, social, and corporate governance (ESG) issues about which media companies should be concerned.

"Failures of press/journalistic ethics," the report states, "Can result in calls for greater regulation of content providers and may also undermine the public's trust." Furthermore, with the rise of social media the choices for consumers have grown, and media companies perceived as untrustworthy can lose viewers and face reduced revenue streams.

Against the cautionary tale exemplified by News Corporation, Eurosif cites as a case study the example of the Finland-based Alma Media, the goal of whose sustainable media project "is to re-establish trust by allowing readers to understand the journalistic process."

Additional ESG considerations faced by the rapidly changing media sector include freedom of expression, security and privacy, environmental impact, copyright, and content diversity. Although the sector contributes only 1.7% of global greenhouse gas (GHG) emissions, media companies "can have an important influence on the public's awareness of, and opinions on, environmental and social issues."

A recent poll of US consumers, commissioned by the Project for Improved Environmental Coverage, found that nearly 80% of respondents believe that news coverage of the environment should be improved.

As an example of corporate best practice in providing content to developing nations, Eurosif cites the Research4Life partnership, through which Reed Elsevier "makes more than 1,500 journals available to 4,000 institutions in low-income countries."

"Providing this access has made an important contribution to allowing scientists from developing countries to have their research presented in international journals," the report observes.

That Reed Elsevier also recognizes reputational risks to media companies gained widespread attention earlier this week, when it became the tenth corporation to cuts its ties with the controversial American Legislative Exchange Council (ALEC). "We made the decision after considering the broad range of criticism being leveled at ALEC," a company spokesperson said.

Eurosif's report is based on research provided by the Sweden-based Ethix SRI Advisors. "From an investment perspective, it is very difficult to assess the investment implications of ESG issues at a sectoral level," Rory Sullivan, strategic advisor to the firm, said. "Investors need to look forward and try and understand how the company and the sector as a whole are changing."


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