2005 Company Dialogue

12.23.05

Portfolio 21 seeks dialogue with Whole Foods on Fair Trade Certified products

In collaboration with other socially and environmentally concerned investors, Portfolio 21 wrote to Whole Foods Market requesting information on the company's Fair Trade Certified^TM products. We are interested in learning more about Whole Foods' approach to Fair Trade as we believe that Fair Trade products provide improved taste and quality in addition to the added benefits that these products offer to farmers and cooperatives. As consumer awareness and demand for Fair Trade Certified^TM products continues to grow, and is poised to play a critical role in providing stability and quality of life of commodity farmers, we call on Whole Foods to demonstrate a leadership commitment to these products. By doing so, we firmly believe the company will experience financial benefits and make a contribution to improving social equity for farmers.

11.21.05

Portfolio 21 supports maintaining the integrity of the Toxic Release Inventory

The Environmental Protection Agency (EPA) recently proposed changes to the Toxics Release Inventory (TRI) that will make it less effective in providing complete, detailed and timely data on toxic pollution. Currently, the TRI provides a critical tool for communities, citizens and investors to obtain reliable data on corporate toxic emissions. This information is essential in monitoring the environmental performance of U.S. companies and helps investors to identify both risks and opportunities presented by corporate environmental performance. Proposed changes include: requiring biennial, rather than annual, reporting of toxic releases, as well as revising the reporting threshold for certain chemicals that would enable companies to release ten times as much pollution before reporting requirements are triggered. As the TRI has been an important tool for socially responsible investors since its creation, Portfolio 21 wrote to the EPA, Oregon Senators Smith and Wyden, Representative Wu, and President Bush urging them to ensure that the TRI maintains its integrity and effectiveness.

10.10.05

Portfolio 21 Supports Majority Vote Requirement for Directors

Portfolio 21 joins other socially responsible investment firms by signing on to a public statement in support of reforms that would allow direct elections of candidates to boards of directors by majority vote. Corporate governance experts have long noted fundamental problems with the current system in the United States that does not permit shareholders to vote for or against specific nominees. The current system only allows shareholders to withhold votes from nominees, effectively guaranteeing the election of any nominee to the board. In practice, withholding votes has proved occasionally successful in registering shareholder discontent, but has failed to give shareholders a significant voice in the election of the governing body of the companies they own. Given this, we believe investors would be better served by a system that allows shareholders to elect or reject a nominee. Real elections can produce real accountability, and real accountability can promote real dialogue between boards and investors.

9.6.05

Stakeholder feedback to Baxter International regarding Sustainability Reporting

Portfolio 21 Investments participated in a stakeholder feedback process regarding its recently released 2004 Sustainability Report. We provided general comments complimenting the company for its transparency (particularly water pollutants, environmental compliance issues, product stories and future goals). Additionally, the company's environmental financial statement continues to be a leading feature of the report and its results are a testament to the good work being done at Baxter. We also provided nitty gritty comments regarding web layout and ease of navigation. And finally, we made one suggested improvement—that the company add, to both the print summary and the website, a big picture discussion, i.e., what does Baxter see as its biggest social and environmental impacts and controversial issues (e.g., PVC, bioethics, climate change). These are all issues that the company addresses on the website, but there isn't a central place that gives a summary of the company's most significant issues and impact.

8.30.05

Letter to Novo Nordisk regarding inconsistencies and apparent conflicts

Focus on the Corporation is a weekly column written by Russell Mokhiber, editor of the Corporate Crime Reporter, and Robert Weissman, editor of the Multinational Monitor. On August 23rd the Focus on the Corporation column discussed the sales and promotion methods of pharmaceutical companies and cited an example involving Novo Nordisk, a leader in the field of diabetes treatment. Essentially, the authors discuss a case where a Novo representative delivered éclairs "compliments of Novolog Mix70/30," to a health services center. Novo Nordisk aspires to "defeat diabetes by finding better methods of diabetes prevention, detection and treatment." As the authors rightfully point out, this means the company is providing "foods that worsened the very condition that their medication treats." Although the column appears to be based on a sensationalized anecdote, it raises some very good points regarding inconsistencies and apparent conflicts. As a result, we have written to Novo Nordisk asking for the company's perspective on this issue and any steps being taken to address these apparent inconsistencies and to avoid future risks to Novo's reputation.

8.25.05

Shareholder activism meeting with HSBC regarding controversial bond issue

Friends of the Earth (FOE) and International Rivers Network accused HSBC and several other large financial institutions, for 'environmental money laundering.' Essentially, by arranging a bond issue for several Chinese banks, FOE felt that the company was funding projects that wouldn't meet the Equator Principles standards, as well as funding projects in countries where there are existing international sanctions. On 8/25/05 we met with Francis Sullivan, Advisor on the Environment (on loan to HSBC from WWF), and Jon Williams who is responsible for sustainability risk management. In this meeting HSBC shared the company's due diligence process regarding bond issues that include environmental protections and the observance of applicable sanctions. While HSBC can't say that the standards of the Chinese banks are comparable to the Equator Principles, they do meet HSBC's due diligence requirements. Also, it is important to note that in these transactions the private banks (HSBC is one of several in this transaction) do not know exactly what projects the funds will be used for. HSBC sees working with institutions in emerging markets (where due diligence standards are met) as an opportunity to expose these organizations to leading policies and practices. Additionally, HSBC is engaging Chinese institutions and helping to educate and train executives on the rigorous policies, procedures and standards applied by HSBC and other western banks with the aim of preparing them to be well versed and competitive on this issues in the future. The end goal is to improve global performance on sustainability issues. While we still have some concerns about how the Chinese banks will use these funds (this information is confidential) we recognize HSBC's continued leadership and work toward positive goals.

8.23.05

Letter to Exel regarding misstatements

Socially responsible investors and consumers alike utilize information provided by companies regarding their social and environmental performance. For the most part, we believe these public communications are accurate, even though they do not always provide the transparency stakeholders would prefer. Occasionally, however, a company will make a misstatement. Portfolio 21 believes it is important to call companies on these issues when they arise to deter future "errors" in reporting. During a routine evaluation of a potential Portfolio 21 candidate, we uncovered some statements by Exel, a UK based transportation and logistics company, which if not inaccurate, are certainly misleading. The statements were regarding the company's involvement with two of the voluntary environmental leadership programs run by US Environmental Protection Agency (EPA). Exel is not a current participant in either the Climate Leaders Partnership or the SmartWay Transport Partnership, however, the company's 2004 environmental report, and communication with a company representative, indicate a level of involvement in the two programs. Direct communication with the EPA reveals that this is not actually the case. Portfolio 21 wrote to the company to point out this misleading statement, and contacted the managers of both EPA programs. It is our hope that Exel does commit to the initiatives as we feel they offer significant value and leadership opportunities. We are pleased to have increased the dialogue between Exel and the EPA and while the company does not currently meet our screening criteria, we hope to see improvements in the company's environmental leadership and performance in the future.

8.16.05

Supporting the Clean Cars for Oregon Coalition

Portfolio 21 Investments is a supporter of the Clean Cars for Oregon Coalition, a project of the Oregon Environmental Council. In conjunction with the Clean Cars for Oregon Coalition, Portfolio 21 Investments wrote to Oregon Governor Kulongoski commending him for his support of the Clean Cars program and his pledge to veto the recent attempt by the Oregon Legislature to prevent the Environmental Quality Commission from adopting stricter tailpipe standards for vehicles. Clean car standards will be good for Oregon by reducing pollution and associated respiratory illness and reducing our global warming pollution by 30%. Additionally, the program will give Oregonians greater choice in purchasing cleaner, more efficient, cost-saving vehicles—saving fuel and money for consumers and businesses. We continue to support the efforts of the Clean Cars for Oregon Coalition.

6.20.05

Coffee industry dialogue

Coffee is the second most heavily traded commodity in the world. As such, the coffee industry has great potential and responsibility to incorporate sustainability into business practices - covering issues from fair wages to organic farming practices to customer education. In June Portfolio 21 participated in a roundtable discussion with Sustainable Harvest and a number of coffee growers and coffee retailers to provide an investor's perspective on where and how progress can be made in this industry.

5.13.05

Joined a coalition of investors in sending a letter to beverage industry companies regarding the environmental impact of packaging

Portfolio 21 Investments joined a group of investors in a campaign aimed at recognizing the recent efforts and achievements of some beverage companies with regard to use of recycled content and other source reduction and recyclability issues associated with beverage packaging. However, due to concern with the continued decline in beverage container recovery rates over the past decade, we wrote to numerous beverage industry companies asking them to participate in a Beverage Container Environmental Survey so that the investment community can better evaluate the companies' achievements and challenges in reducing the environmental impact associated with production and consumption of its beverages. As institutional investors, we believe it is important for this information to be available to concerned stakeholders, so that we are able to measure progress and performance over time, relative to industry peers. Additionally, following the philosophy that 'what's measured matters,' we hope this will drive further improvements.

4.4.05

Resolution with Whole Foods Market to label private brand products according to GE or non-GE content and subsequent announcement of agreement by Whole Foods

Whole Foods has gone to considerable lengths to ensure that its private label products do not contain food grown from genetically engineered (GE) ingredients. The company has done little to promote its leadership in this area, however. We feel that it is failing to take advantage of a natural opportunity to enhance its market share, given consumer wariness of genetically engineered foods. As a result, Portfolio 21, in conjunction with several other concerned stakeholders, co-filed a shareholder resolution calling on Whole Foods to adopt a policy to identify and label all Whole Foods private label products with respect to the presence or absence of GE ingredients. At the company's 2005 annual meeting, where this issue was to be voted on, the company announced its intention to label its private brand products, thereby satisfying the demands of the resolution. We applaud Whole Foods' commitment to improving transparency, increasing consumer education, and realizing the full benefit of its market advantage, which results from the exclusion of GE ingredients from its private label products.

3.22.05

Acceptance and activism letters to Air Products and Air Liquide

Air Products and Air Liquide, both providers of industrial gases, were recently admitted into Portfolio 21. These companies provide products and services that in effect increase efficiency (such as oxygen used in the combustion process) and reduce pollution (such as hydrogen which is used to reduce the sulfur content of fuel). While we believe the companies have good understanding of the business advantages associated with considering issues of environmental sustainability, we also recognize that they have areas for improvement. In this letter we opened a dialogue with the company regarding areas we feel the company needs make progress. These included improved and comprehensive environmental reporting, commitments to reduce direct energy use and CO2 emissions, and ISO 14001 certification of their respective environmental management systems.

3.3.05

Acceptance and activism letter to Schneider Electric

Schneider Electric, a provider of energy efficiency equipment and services, is a recent addition to Portfolio 21. While we believe the company has a good understanding of the business advantages associated with considering issues of environmental sustainability, and provides beneficial products and services, we also recognize that the company has areas for improvement. In this letter we opened a dialogue with the company regarding areas we feel the company needs make progress. These included improved environmental communications, further development of end-of-life product take-back activities, and tracking, reporting and minimizing CO2 emissions from direct operations.

2.24.05

Acceptance and activism letters to NEC and Sharp

Sharp and NEC are two recent additions to Portfolio 21. While we believe these companies are making real headway on sustainability issues, and are strategically positioning themselves to perform well in a business world facing increasing environmental limits, we are disappointed that neither company is taking a strong leadership role in addressing e-waste issues in the U.S. While Sharp and NEC are complying with end-of-life regulations in Japan and the EU, we wrote to these two companies and encouraged them to apply their environmental leadership and know-how to developing producer responsibility solutions in the U.S.

2.11.05

Feedback to the U.S. Green Building Council regarding PVC credit in the LEED rating system

Portfolio 21 provided feedback to the U.S. Green Building Council regarding its draft report on PVC use in buildings. The draft report indicated that there were no significant environmental advantages generated by avoiding the use of PVC. We wholeheartedly disagree, as does the Health Building Network. There are many health and environmental problems with PVC and this substance is NOT part of a sustainable future. Portfolio 21 invests in companies that are incorporating principles of environmental sustainability into their business strategies and one of the ways this can be demonstrated is through a commitment to LEED certification of their buildings. Thus we feel it is very important for the USGBC to continue to lead in the area of green building, so that we can continue to feel confidence in recognizing achievements related to LEED certification. We believe that the USGBC has the opportunity to support the development and transition to a PVC-free building industry and we encourage the USGBC to take another look at its draft report.

1.26.05

Portfolio 21 endorses the SEED Bio-Economy Action Agenda

The Future 500 has developed a Bio-Economy Action Agenda designed to hasten the transition from a petroleum economy to a bio-economy. By coordinating action and collaboration with NGOs, corporations, and government, the Future 500 aims to develop markets for bio-based emerging technologies—bioplastics, biodiesel, biohydrogen, etc.—that will help transition us from a petroleum economy to a bio-economy. Portfolio 21 fully supports reducing, and eventually eliminating, reliance on fossil fuels, and encourages companies to develop and use bio-based alternatives.