Environmental Governance - Leveraging existing corporate governance systems to respond to the growing market demand for sustainability information.

Whether you have an existing sustainability program or are just beginning to develop one, Wallace Partners can help you focus your efforts in a manner that meets your business needs while addressing the interests of your most influential stakeholders.

Here are some questions we can help you answer:

• What are the most important sustainability issues for your industry and your company?
• Who are your stakeholders and how do they view your sustainability performance?
• How do you compare with your competitors on sustainability?
• Is your sustainability performance being accurately communicated by your company, within the market and among your stakeholders?
• Are your departments (EH&S, IR, HR, PR, etc.) aligned and working together to address the growing demand for sustainability information?

A Call for Standards

Market confusion and uncertainty is resulting in a call for standards from business and their shareholders.

What are we hearing from companies?
According to a new report from The Ethical Corporation Institute, “a lack of consistent, comparable data on greenhouse gas emissions from the world’s largest firms prevents investors, policy makers and the public from getting a clear picture of performance, a study has found.”

The study assessed the methods used to measure and to verify emissions data, approaches to setting absolute and intensity emissions reduction targets and reporting rules in different countries. Here are a number of key findings and recommendations:

• “A great deal of inconsistency" exists in firms’ reporting, making it difficult to compare performance even between companies in the same sector
• Firms report emissions and set targets in different ways. Half of firms report both absolute emissions data and emissions intensity data, 40% only report absolute emissions and the remainder do neither
• Industry bodies need to bring companies together to establish a common framework for reporting within the sector to enable comparison
• Government should collaborate more effectively to ensure performance can be compared worldwide

A new report from EIRIS outlines the effectiveness of companies’ risk mitigation of climate change. Key findings include:

• Many large cap companies at risk: Over a third (35.6%) of companies in the global 300 are high or very high impact for climate change (representing over USD 6.8 trillion market cap)
• High-risk companies have taken initial steps but translation into coherent strategy is less apparent 84% of high risk companies have a corporate-wide climate change commitment. But only 14% link board remuneration to climate change strategies and only 25% publish a long-term strategic target to reduce emissions
• Emissions disclosure by high risk companies is high but unreliable 81% disclose either absolute or normalized data but only 9% disclose the scope of their emissions against the GHG Protocol

What are we hearing from industry?
Top executives from U.S. industry told a congressional panel that the country should assign a dollar cost to carbon emissions to encourage investment in efficiency and tackle climate change.

"We need to reaffirm the principle of predictability," George David, chairman of United Technologies Corp, told the House of Representatives Select Committee on Energy Independence and Global Warming. "We need to say to our world that we are going to have a cost of carbon, whether it's cap-and-trade or a carbon tax. There's got to be an understanding that the cost of energy is going to be high for a long time."

What are we hearing from government?
A group of seven US states and four Canadian provinces, working together under the title of the Western Climate Initiative, last week unveiled draft plans for a carbon cap-and-trade scheme to come into effect in 2012. The draft document outlines how the coalition aims to use a cap-and-trade mechanism to reach its stated target of cutting emissions by 15 percent on 2005 levels by 2020.

Legislators and investors are also urging the Securities and Exchange Commission to adopt policy that would require publicly traded companies to disclose their financial risks from climate change. State treasurers, pension fund managers and institutional investors representing $6.5 trillion in publicly traded investments have called on the SEC to take some type of action on this disclosure issue.

Shareholder Trends

Shareholder Terminology
“Environmental, social and governance”, “sustainability” and “responsible investment” were the terms favored by the 350 FTfm readers who responded to a survey conducted by Axa Investment Managers and AQ Research. “Socially responsible investment”, the buzz-phrase used by the asset management industry to describe funds that consider the overall impact of investee companies, rather than just traditional financial metrics, ranked just fourth.

“Experts tell us around 80 percent of shareholder value is related to whatever we end up calling this aspect of corporate performance, so the fact that we don’t have a common word is a big problem,” says Raj Thamotheram, director of responsible investment at Axa Investment Management.

Socially Responsible Investing
A new report by TIAA-CREF indicates substantial growth in the number of investors and investment dollars that are seeking companies who are demonstrating action on sustainability issues. Historically, socially responsible investing (SRI) was seen as a boutique industry. At the end of 2007, however, $2.7 trillion in assets were invested by individuals, institutions, investment companies or money managers. That $2.7 trillion represents approximately 11% of all U.S. assets under professional management — nearly one out of every nine dollars is seeking to invest in companies that are demonstrating action on sustainability.

Environmental, Social & Governance
The integration of Environmental, Social and Governance (ESG) factors into investment decisions has become a hot topic over recent years, with many large pension funds and asset managers announcing major changes in their strategic direction to evolve their investment practices.  This trend shows that more and more mainstream investors and financial services firms are assessing the sustainability performance of the companies in which they invest.

Ratings, Ratings, and more Ratings

As the proliferation of “green claims” continues, so do the ratings. Here are a few of the latest updates:

New Climate-Based Index
KLD Research & Analytics, Inc. has marked the third anniversary of its Global Climate 100SM Index (GC100) – the first global index focused on solutions to climate change. The GC100 has returned 53% (15.24% annualized) from its launch on July 1, 2005 through June 30, 2008. The index holds a diversified group of companies that are leaders in renewable energy, clean technology & efficiency, and future fuels.

Sustainable Stock Index
The SB20 list, in its seventh year, consists of 20 public companies that are leading the way to a sustainable society.  The list consists of both large and small cap companies from around the world that either operate within the sustainability space, such as Green Building and Renewable Energy, or are “Corporate Pioneers” - companies with conventional products and services that are actively greening their product lines.

Ethical Ranking
Geneva-based Covalence is publishing today its quarterly ethical reputation ranking, giving the best ranked companies as well as those companies which have made the most progress in the 2nd Quarter of 2008. An overview of emerging and decreasing topics is also given. Several dozen major corporations are reviewed by sector.

Sustainability Rankings for Consumers
ResponsibleShopper.org informs concerned consumers about problem corporate practices, action campaigns and ways to live greener in relation to more than 150 major consumer companies. In a major enhancement of the Web site, ResponsibleShopper.org now ranks companies in 27 industry categories from best to worst based on research focusing on such key issues as human rights, social justice, environmental sustainability and more. In addition to attention-getting companies like Wal-Mart and Exxon, major consumer companies ranked by the new ResponsibleShopper.org site include such brand-name corporations as McDonalds, Toyota, Coca Cola, Disney, Hanes, and General Electric.

How we can help

Wallace Partners offers a proven approach to assessing current conditions and integrating sustainability into organizations. We apply a methodology that builds on existing management systems, identifies unforeseen assets, and enhances operational efficiency. Our strategic approach will help you identify the financial and reputational benefits of measuring and strategically disclosing sustainability performance data to priority stakeholders and the broader market. By identifying internal and external opportunities, we will help you lay the foundation for efficiently measuring and managing environmental, social, and economic performance, and disclosing sustainability information in a manner that:

• Increases business resiliency
• Reduces reputational risk
• Clarifies external perceptions
• Enhances access to investment capital, and
• Aligns with broader branding initiatives

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We’d be happy to have a call with you and your colleagues regarding your sustainability initiatives.