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In This Issue
Editor's Note
Mitigating Water-Related Risks
As rain finally begins to fall in Southwest China ending the worst drought in over 100 years, this edition’s feature article looks at the implications of water for investors in China. The media extensively covered the human impacts of the water shortage (25 million people were affected), but little attention was paid to the business impacts.
As BSR’s Environmental Manager Laura Ediger explains below, there are several steps investors can take to encourage companies to reduce their exposure to risks from water shortages. We also reference a number of recently released reports on this topic in the News to Know section. Also, UNPRI’s James Gifford explains in his regular article why and how investors should be active owners. Feedback and comments on this newsletter are encouraged and should be directed to Julie Zhu at jzhu@bsr.org.
In Depth
Impacts of Water in China for Investors
BSR has a long-standing focus on supporting company efforts to reduce their impacts on water quality and availability. Recently, many investors have started considering how water shortages might affect business, and how companies should mitigate their impacts. We spoke with BSR’s Laura Ediger to learn more about water trends and their implications for investors.
Learn more →
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Insight From the UN PRI
Principle 2: The Importance of Active Ownership
The recent global financial crisis, with its catastrophic corporate failures, has demonstrated the vital importance of “active ownership” to regulators, investors, and the economy as a whole. What is “active ownership”? The second principle of the PRI states: “We will be active owners and incorporate ESG issues into our ownership policies and practices.” Within the PRI network, there are a number of key strategies used by PRI signatories to align the behavior of the companies they own with their interests as long-term investors.
Most PRI signatories use their rights as shareholders to vote in an informed way at company annual general meetings. Voting sends important signals to companies that investors are fulfilling their basic monitoring role and are willing to challenge management where they feel management is not acting in the interests of investors relating to various ESG issues. PRI signatories also regularly file and co-file shareholder proposals and send letters to company management explaining voting decisions. Recently, for example, a PRI signatory filed “Say on Pay” resolutions, aimed at aligning pay with performance, and ensuring shareholders played a role in remuneration structures. These recommendations were accepted by nearly 50 U.S. companies including Microsoft, Pfizer, and Goldman Sachs.
Many PRI signatories engage directly with companies on ESG issues that are material to long-term financial performance. Our recent PRI Report on Progress found that signatories were involved in over 12,000 engagements with investee companies over the course of 2008. These engagements covered issues including executive remuneration, water sustainability, labor standards and biodiversity, and ranged from sending a letter to management to participating in company meetings and shareholder resolutions.
PRI signatories are able to use a private forum called the PRI Clearinghouse to enhance their impact by working with other investors in a collaborative dialogue with investee companies and to pool resources. A recent engagement to promote the Carbon Disclosure Project, for example, has seen a group of 50 investors target 300 companies, including three mainland China- and two Hong Kong-based companies, asking them to improve the disclosure of their carbon emissions and develop emission-reduction strategies. This is a good example of how being an active owner can help investors identify the ESG risks and opportunities of today and avoid crises in the future.
For more information, please contact Narina Mnatsakanian at narina.mnatsakanian@unpri.org.
News to Know
On the Horizon
Upcoming Events
- Social Investment Forum’s 2010 Spring Symposium on the Paradox of China’s Transformation | May 17 to 18, 2010, Washington, D.C.
BSR Manager Zhuo Xin will be discussing the impacts of China’s tremendous economic growth and environmental and development challenges on investment.
- The 12th China Venture Capital and Private Equity Forum | June 4 to 6, 2010, Shenzhen
Join BSR member Tsing Capital, who will be among the speakers discussing clean tech in China at China’s leading venture capital forum.
- The Amsterdam Global Conference on Sustainability and Transparency | May 26 to 28, 2010, Amsterdam
From the Global Reporting Initiative, this conference will address how we can guarantee that ESG reporting is as mainstream and common as financial reporting by 2020.
- Sustainable Agricultural Practices in China | 1st Week of June, 2010, Beijing and Shanghai
At this workshop, we will launch a new report on best practices for how companies can improve the environmental and health impacts of their supply chains. Contact lediger@bsr.org for details)
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