PARTE IV MERCADO DE TRABAJO Y RECURSOS FINANCIEROS
CAPÍTULO 13 SISTEMA FINANCIERO
5. Mercados financieros
Table C1: Summary of financial sector sustainable development initiatives – Australia
Investment
currently more than $400 million has been invested in ethical products (Rothschild, 2001)
Australian investors have been relatively slow to take up socially responsible investments (SRI) (The Allen Consulting Group, 2000) The SRI market in Australia is relatively immature, (The Allen Consulting Group 2000).
Superannuation
superannuation trustees have historically not considered or recommended SRI funds (The Allen Consulting Group, 2000)
$454 billion is held by
superannuation funds of which only a very small proportion is invested in screened funds (Proske, Saleeba et al,2000)
the Australian Institute of Superannuation Trustees has interviewed its members and found that six percent offered an ethical investment choice (Monash, 2000) member choice legislation may be introduced, which could be an important driver in increasing the demand for SRI products
75% of trustees are in favour of SRI
Credit and lending
the Australian banking sector typically has a low level of awareness and action in terms of sustainable development (Monash, 2000).
Insurance and re-insurance
sustainability issues have not featured very highly in the Australian
insurance sector (Monash, 2000) general liability product and public liability policies provide very narrowly defined cover for ‘sudden, unintended, unexpected and accidental pollution for a specific event in a specific timeframe’ the re-insurance market is very small in Australia
the Australian re-insurance sector recorded $3 billion in losses in 1999- 2000 as a direct result of unforeseen natural disasters (Monash, 2000).
Criteria
Sector Description
Investment Superannuation Credit and lending Insurance and re-insurance Criteria Regulations covering all Financial Sectors Investment
the Company Law Review Act 1998 s249D was amended to allow at least 100 registered shareholders to request a general meeting of a company (EA, 1999, cited The Allen Consulting Group, 2000). This amendment enables shareholder to challenge directors on the
environmental performance of a corporation.
Superannuation
in 1998 the Commonwealth government tabled the superannuation legislation amendment (Choice of
Superannuation Funds) Bill, 1998. This Bill will amend the current legislation that requires employees to make superannuation contributions to the fund chosen by their
employee. This Bill however has not yet been passed.
Credit and lending
the Federal opposition has proposed to introduce a new layer of regulation in the banks, requiring them to sign up to an enforceable ‘social charter’. This will require banks to provide fee free and no frills services to all customers (Mclachlan, 2000).
Insurance and re-insurance
the Australian Prudential Regulation Authority (APRA) are proposing new legislation to encourage the upgrading of the industry’s risk management practices (Monash, 2000).
Criteria
Regulations & Corporate Governance
ASIC Practice Note 68
ASIC guidelines stipulate licensing and other regulatory conditions as prima facie examples of s299(1)(f) Corporations Act requirements.
the requirements relate to performance under environmental regulations, not specifically financial disclosures (eg. contingent liabilities and capital commitments). the information in the directors’ report is required even though it has already been provided to a regulatory authority under environmental legislation.
the information would usually be more general and less technical than that provided in compliance reports to an environmental regulator. the expectation of ASIC is that compliance will be with the spirit as well as the terms of the Corporations Act.
This guideline is currently under review.
ASX Listing Rule 3.1
Listing Rule 3.1 – imposes a continuous disclosure requirement concerning information that might affect the company’s share price. Once a listed company becomes aware of any information concerning the company that a reasonable person would expect to have a material effect on the price or value of the company’s securities, the company must immediately inform the ASX.
Section 1001B imposes continuous disclosure obligations on unlisted disclosing entities.
Accounting Standards
accounting standards require disclosure of contingent liabilities (including environment) and have developed standards for the accounting of mining rehabilitation costs. EPA Victoria is presently working in conjunction with Environment Australia and the Institute of Chartered Accountants of Australia on an environment management accounting project. This project aims to promote improved practises and reform in management accounting techniques so that firms are able to improve profitability by reducing costs whilst achieving better environmental outcomes.
Investment
ethical and socially responsible screened funds, examples include:
- Challenger - AMP - Rothschild
- Australian Ethical Investment - Tower
- Hunter Hall - Westpac
OHS funds
- examples include Westpac
human rights fundings
- prepared to be released by Westpac
renewable energy funds
- examples include SEDA
venture capital investing into environmental type assets including:
- water - renewable - contaminated land.
Superannuation
ethical and socially responsible screened investment options.
A number of products are offered in the market by various organizations including:
- UniSuper - Hesta
(Rothschild, 2001).
Credit and lending
greensmart home loan products
- examples include Macquarie Bank and Housing Industry Association (Monash, 2000)
renewable energy project loans and funding
- examples include SEDA, CVC REEF & Federal Government
(Monash, 2000)
ethical deposit account
- examples include Bendigo Bank with Ethical Investment Trust
GGAP – greenhouse gas abatement
program
- $400 million over a 3 year period has been allocated
credit unions and community Banks (eg Bendigo Bank) appear to be providing services where large banks have withdrawn services.
Insurance and re-insurance
two main products include: - pollution legal liability for third
party claims that arise from
seepage and contamination “not previously identified”(eg Richard Oliver)
- clean up costs - first party clean-up for responding to clean up orders when and if made.
Criteria
Product & Services
Investment
the main forms of screening used within the SRI industry in Australia are negative and positive screens as well as best of sector
(The Allen Consulting Group, 2000) there is anecdotal evidence that analysts do consider and have developed approaches to evaluating environmental investment risks (Fayens et al, 1998)
the ‘best of sector’ approach where investment is in the best performers across all sectors, is growing in interest. This approach does not bias against any industry and hence allows for greater diversification of risk across the portfolio
a number of independent SRI rating agencies have been establised for example, Sustainable Investment Research Institute
environmental advocacy groups such as the WWF and ACF provide public information on company
performance
the Sydney Morning Herald/Age reputations index is published annually.
Superannuation
rating tools have been developed by AMP
Westpac are using the Eco-Index rating system developed by Monash University. This system uses a best-of sector approach and has focused its screening criteria on environmental issues (The Allen Consulting Group, 2000)
Westpac have purchased a rating system from SAM to screen their international funds. This is the same rating scheme as that used by the Dow Jones Sustainability Index (DJSI).
Credit and lending
most banks have implemented environmental risk criteria as part of their corporate and project lending activities
environmental assessments tend to be once off and are not monitored for the duration of the loan period some financial institutions are developing a range of environmental advisory products as part of their corporate and project finance services, eg identification and evaluation of emission credits and renewable energy projects.
Insurance and re-insurance
limited consideration is given to environmental risk
in general no specific screens or tools appear to be used to assess
environmental and/or sustainability development issues.
Criteria
Analysis/ Screening Tools
Investment
SRI has traditionally been a niche interest and is viewed as providing inadequate returns (Proske, Saleeba et al, 2000)
SRI funds have primarily had an environmental focus (The Allen Consulting Group, 2000)
traditional ethical fund managers are critical of new ‘best of sector’ mainstream SRI products
environment groups are concerned that ‘mainstream’ fund mangers invest in ‘unsustainable projects’ whilst simultaneously offering SRI products.
Superannuation
stakeholders generally do not understand superannuation and are not interested in actively managing their funds (Proske, Saleeba et al, 2000)
a growing proportion of stakeholders want to invest in SRI alternatives (Proske, Saleeba, et al, 2000) typical concerns include: - social issues in the areas of: - health & safety
- human rights - tobacco
environmental issues in the areas of:
- energy efficiency - recycling
- resource and material - waste and emissions (Proske, Saleeba et al, 2000).
Credit and lending
stakeholders are typically concerned about:
- charges to low income people - closing of local branches - increased fees
- access to banking services for aged - environmental impact of lending
decisions, with particular regard to projects in sensitive areas
(O’Rourke, 2000).
Insurance and re-insurance
stakeholders of the insurance sector are concerned about the issue of climate change, with particular regard to the issue of claims associated with flood damage Aid Watch has raised concern regarding the government provision of subsidised insurance services to exporters to less developed countries via government agencies such as EFIC.
Criteria
Stakeholder Issues
Investment
of the top 100 Australian companies, 25% of the investment sector included a statement on their environmental performance (in accordance with the Corporations Act s299(f)) in their Directors Report in their 1999 Annual Report. (Ecobusiness, 2000). This statement on environmental performance however only requires disclosure of the bare minimum level of
compliance with existing state legislation.
Superannuation
some superfunds are now investigating blanket screening all investments on social/environmental issues as opposed to just screening individual funds.
Credit and lending
banks are developing internal environmental policies and environmental improvement programs (ie Commonwealth Bank, Westpac, ANZ)
Westpac is the only Australian signatory to the UNEP Statement by Financial Institutions on the Environment and Sustainable Development (Pricewaterhouse Coopers, 2000)
some banks have signed the Greenhouse Challenge
Maleny Credit Union has a Triple Bottom Line report.
Australian banks are now
implementing community initiatives including :
- ANZ’s community service charter, foodbank Australia and Youth at Risk programs
- Westpac’s Smith Family and youth and education programs
no stand alone public environmental reports are currently published.
Insurance and re-insurance
QBE Insurance Group Ltd is the only Australian insurance group to sign the UNEP Insurance Initiative the Insurance Council of Australia has committed to aiding the
reduction of greenhouse gas emission as part of the Greenhouse Challenge (Insurance Council of Australia, 2000)
some companies have reported on their environmental performance locally. The focus of these reports has been on internal operational management rather than a change in business practices
Export Finance & Insurance Corporation (EFIC) has implemented internal environmental risk screening procedures and an environmental policy
some companies are reporting as part of parent companies public
environmental reports
no stand alone public environmental reports are published.
Criteria
Management of Internal Sustainability Issues