2006 Company Dialogue
12.12.06
Letter to Schnitzer Steel regarding the company's supply of pig iron
Recently, Bloomberg Markets released a report entitled "The Secret World of Modern Slavery." The report describes wretched conditions and forced slavery in the charcoal-making camps of Latin America. Pig iron, a substance necessary to make steel via mini-mills (which primarily use recycled metals as inputs), is one such substance that is imported from Brazilian slave camps. We contacted Schnitzer Steel to inquire if it was importing pig iron from Latin America, and to request more information on its supply chain code of conduct and sourcing policies.
11.17.06
Letter to Stora Enso regarding certification and activities in developing nations
During our annual review of Stora Enso, we were pleased to see the company disclose the proportion of its owned and managed forestlands that are certified under each of the various forest certification systems. We were also pleased that the company sources approximately half of its wood fiber from certified forests; however, Stora Enso does not disclose the specific proportion of total wood used from each of the certification system. We believe this is a key issue as Portfolio 21 sees Forest Stewardship Council (FSC) certification as the leading forest certification system. We cautioned Stora Enso that companies that choose non-credible schemes undermine the very concept of certification, and asked for details on the company's strategy for utilizing various certification schemes. Our letter also addressed concerns regarding Stora Enso's growing partnerships and investments in developing nations, specifically China and Brazil. We are concerned about social and environmental implications, and have asked Stora Enso to share its approach for managing the environmental, social, reputational and financial risk related to these activities.
10.30.06
Letter requesting Dell stop lobbying against China's new Labor Law legislation
Dell is a member of the American Chamber of Commerce (AmCham). AmCham is lobbying in opposition of China's Draft Labor Contract Law. Portfolio 21 supports this legislation to promote basic human rights of Chinese workers. Due to Dell's work on sustainability issues, we would expect Dell to support legislation to create a level playing field for businesses operating in China, while promoting basic human and labor rights. We asked Dell to state its position on the Labor Contract Law. Additonally, we urge Dell and AmCham to stop lobbying against this legislation. If AmCham is unwilling to do so, we suggest that Dell withdraw from this industry group all together.
10.12.06
Letters to Air Liquide and Atlas Copco regarding China growth strategies
Portfolio 21's Senior Sustainability Research Analyst and Portfolio Manager recently traveled to China to evaluate the market conditions and complexities associated with investment in China. During this visit, the challenges of doing business in China became increasingly clear. Some of our concerns regarding Air Liquide's and Atlas Copco's expansion into China include environmental controls and reporting, the disconnect between the central government's legislation and the reality of implementation, the climate risks of the country's dependence on coal, human rights violations; labor rights violations, and the overall lack of transparency in the Chinese culture. Given these concerns we asked Air Liquide and Atlas Copco how they plan to ensure the environmental and social integrity of their operations.
10.10.06
Comments to ISS encouraging support of Climate Change Reporting and Disclosure
Portfolio 21 Investments provided comments to ISS (the largest provider of institutional shareholder services, including proxy voting and advising) as part of ISS's first public comment period. ISS sought broad input on a variety of issues to help it develop its proxy voting policies for 2007. We provided feedback to ISS encouraging support of greater disclosure on climate change issues and impacts.
10.10.06
Letter to UN Special Representative on Human Rights and Business encouraging non-financial reporting
Socially responsible and faith-based investors incorporate a wide variety of social and environmental criteria into their investment processes, including corporate human rights performance. We do so because we are committed to using our leverage as investors to encourage more responsible corporate behavior, and to inculcate a deeper understanding and respect for international human rights in the corporate community. As investors, we believe that we stand in a unique position to achieve this goal, but we cannot do so without reliable data to allow us to assess corporate performance in this area. We use corporate human rights performance information in a variety of ways, including direct engagement with corporate management, proxy voting, and asset selection. This information is material to our investment decisions and we encourage increased disclosure and reporting on these issues.
10.4.06
Letter to the SEC supporting shareholder access to proxy nominations
Due to a recent legal decision, which invalidated the SEC staff's most recent interpretation of its rule addressing shareholder access to proxy materials, Portfolio 21 Investments wrote to the SEC in support of shareholder access. Access to the corporate proxy materials by shareowner nominees remains an important issue and the SEC now has an enormous opportunity to broadly address this issue. In response to the Commission's proposed rules relating to shareowner director nominations, the Commission received hundreds of comments from individual investors, industry groups, academics, corporations, and other interested parties. We believe these stakeholders will continue to be interested and should be given sufficient time and information to provide the same type of valuable input provided in response to earlier rulemaking. We requested that the SEC ensure that stakeholder input on the broader proxy access issue is given due consideration by the Commission.
10.2.06
Shareholder Resolution Filed with Whole Foods Market
In order to continue our efforts to pressure Whole Foods Market to improve its corporate governance practices, Portfolio 21 Investments co-filed a shareholder resolution with the company calling for the separation of the CEO and Chairman positions. Whole Foods did respond to our 7/10/06 letter expressing corporate governance concerns (see below), and the company's response indicated a commitment to making improvements over the 2006 AGM incidents. However, we feel this resolution will result in further improvements in corporate governance. Specifically, we feel it is important to note that the primary purpose of the Chairman and Board of Directors is to protect shareholders' interests by providing independent oversight of management, including the Chief Executive Officer. Separating the roles of Chairman and CEO can promote greater management accountability to shareholders and lead to a more objective evaluation of the CEO.
9.26.06
Dialogue and resolution with Hewlett-Packard regarding political contributions
Working with a coalition of shareholders, Portfolio 21 filed a shareholder resolution with Hewlett-Packard (HP) regarding political contributions. It is our hope that we can persuade HP to move in the direction of greater transparency through continuing dialogue, but are submitting the shareholder resolution in the interest of preserving all of our options. Our goal is for HP to expand its disclosure of the company's political contributions. Absent a system of accountability, company assets can be used for political objectives that are not shared by and may be contrary to the interests of the Company and its shareholders.
9.19.06
Portfolio 21 supports best practice guidance on corporate reporting of climate change and environmental issues
Portfolio 21 joined investors in support of the Canadian Institute of Chartered Accountants' (CICA) discussion paper entitled, "MD&A Disclosure About the Financial Impacts of Climate Change & Other Environmental Issues." The CICA draft provides a checklist of questions for management to consider when determining whether climate change is material and how to present their climate discussion. This report encourages companies to disclose their strategies and systems for identifying and managing climate change risks, key performance drivers and metrics (such as actual GHG emissions) to execute that strategy, resources and systems (such as capital expenditures on GHG reduction initiatives), and historical and prospective financial reporting.
9.18.06
Ongoing pressure on Whole Foods to label products that are free of Genetically Engineered (GE) ingredients
Portfolio 21 has been involved in an ongoing dialogue with Whole Foods regarding labeling non-GE products since 2002. We led a group of Whole Foods shareholders to apply continued pressure on the company to deliver on its 2005 commitment to provide such labeling on all of its private label products. We were very pleased with the company's commitment and recognize that implementation is not simple, however, our recent survey indicated that approximately only 11% of Whole Foods private-label products currently carry non-GE labeling. We are anxious to see Whole Foods get the appropriate labels on the shelves sooner rather than later, particularly as large new players, such as Wal-Mart, enter the market. There are already a number of companies providing such voluntary labeling (Hain's, Nature's Best, and Amy's Kitchen). By failing to provide non-GE labeling on its private-label products, in which Whole Foods has already invested time and money ensuring to be non-GE, Whole Foods is squandering what should be a natural marketing advantage.
8.30.06
Urging Governor Schwarzenegger to sign The Honest Corporate Reporting Act
Portfolio 21 Investments joined a group of investors in a campaign aimed at protecting investors by discouraging corporations from engaging in overly aggressive accounting schemes, manipulating accounting numbers, or hiding profits from either shareholders or the Tax Board. The Honest Corporate Reporting Act requires large companies to explain any differences between the profit numbers they report to tax authorities and profit numbers they report to shareholders. With increased transparency, companies will be less prone to hiding income, and investors will have a clearer sense of the true financial health of the companies in which they invest. Regrettably, Governor Schwarzenegger vetoed The Honest Corporate Reporting Act.
7.10.06
Whole Foods responds to letter regarding corporate governance
On 4.18.06 Portfolio 21 sent a letter from the Socially Responsible Investment community to Whole Foods addressing growing concerns about Whole Foods' governance record as it relates to shareholder treatment (see entry below). In a response from the company on 7.10.06, Whole Foods indicated that the company had done a review of common practices at other companies, and committed to allow shareholders to present resolutions during the formal portion of the meeting in 2007 and beyond. However, the company will not be hiring a CSR or Sustainability Director. While we still feel that a designated person responsible for social, environmental and corporate governance issues would have a positive impact on the value of our investment, we are pleased with this response.
6.26.06
Portfolio 21 engages HSBC regarding its subsidiary, Hang Seng Bank
HSBC has a majority-owned subsidiary, Hang Seng Bank, headquartered in Hong Kong. Following a June 2005 evaluation of Hang Seng Bank, Portfolio 21 found that the company did not meet Portfolio 21's rigorous environmental sustainability criteria due to insufficiently comprehensive or transparent reporting of environmental policies and performance, especially in regards to product/service impacts, paper procurement, corporate and project lending activities, direct impact metrics and future initiatives and targets. We communicated these findings to HSBC and encouraged HSBC to fully implement its environmental sustainability approach and policies at Hang Seng, especially considering this business unit's rapid expansion in mainland China.
6.20.06
Portfolio 21 encourages Xerox, AMD and Air Products to respond to the Carbon Disclosure Project survey
Xerox, AMD and Air Products are companies that are all well positioned regarding climate change issues and are leaders in overall environmental issues. We believe these companies have a responsibility to increase awareness of corporate action on climate change by responding to the Carbon Disclosure Project (CDP) survey. The CDP questionnaire asks for the disclosure of investment-relevant information concerning greenhouse gas emissions. Eighty-nine percent of surveyed companies responded to the 2005 CDP survey. As of June 20, 2006 the abovementioned companies had not responded. We encouraged Xerox, AMD and Air Products to respond to the CDP survey by the June 30, 2006 deadline. ***Xerox and Air Products subsequently responded to the 2005 survey.
4.25.06
Portfolio 21 engages Wild Oats regarding private-label dairy products
Aurora is a name known in the natural foods industry as Aurora's principal owners founded Horizon. At Horizon's inception Aurora sold only its Idaho farm, leaving Aurora with approximately six conventional factory farms and thousands of milk cows. Currently, Aurora's largest organic dairy farm produces 10 million gallons of milk a year from 4500 cows with virtually no opportunity to graze. We wrote to Wild Oats to inquire how the company is addressing Aurora's unsustainable practices. We are concerned that Wild Oats is looking to source its private labeled dairy products from dairy farms that are truly committed to the spirit of the organic regulations, not dairy farms that are trying to weaken the organic standards to make it easier for them to provide large volumes that can be sold at an organic price premium.
4.25.06
Portfolio 21 provides public policy feedback to the National Organic Standards Board
Over the past several years the market has witnessed an increased consumer demand for organic products. In response to this growing demand for premium priced environmentally sound products, large agribusiness corporations have acquired majority shares in numerous organic companies. As a result, agribusinesses are lobbying heavily to lower organic standards and have disproportionate representation in the National Organic Standards Board (NOSB). In our letter to the NOSB we pointed out that as the agency within the USDA commissioned to provide guidance for organic law, it is up to the NOSB to ensure that food produced and labeled as organic remains free from genetically modified organisms, sewage sludge, antibiotics, pesticides and factory farm production methods. We stressed that to ensure the integrity of organics it is imperative that the NOSB remain a diversified and democratic organization. More specifically we urged the NOSB not to let the large food corporations who are looking for a piece of the "organic pie" influence and subsequently weaken the organic standards or their application.
4.18.06
Portfolio 21 spearheads an SRI industry letter to Whole Foods regarding corporate governance
We believe that social, environmental and governance issues are important to the mission of Whole Foods and can have an effect on shareowner value as well. As a result, Portfolio 21 initiated a letter from a coalition of socially responsible investors expressing our concerns that the last annual general meeting (AGM) denied the right of shareholders to present a resolution. The company's unwillingness to allow any statement prior to the vote calls into question the seriousness of management's attentiveness to the concerns of its owners. The poor treatment of socially responsible shareholders is of particular concern due to the similarity between the profiles of the typical socially responsible investor and the typical Whole Foods' shopper. If the company is unable to interact with its own shareholders in a positive manner, how can we be sure that the company will be able to handle concerns raised by its customers? We feel that the company's indifference toward shareholder rights at this year's AGM, compounded by numerous other negative interactions experienced by stakeholders, could be an indication of poor management. We recognize WFMI may lack sufficient staffing resources to effectively address stakeholder issues, therefore we recommend the company consider hiring a CSR/Sustainability Director whose responsibilities would include managing relationships with stakeholders and NGOs. We firmly believe this could have a positive impact on the value of our investment. We look forward to a response from Whole Foods Market that addresses the company's plans to remedy these issues and work to protect our investment.
4.11.06
Portfolio 21 seeks dialogue with Sharp regarding e-waste and toxic chemicals in mobile products
In our letter to Sharp we shared our disappointment with the company's lobbying efforts against Washington's state e-waste legislation, particularly given the company's support for the Oregon legislation. On this point, we encouraged the company to recognize the need for industry-wide solutions and to work to support the development of such solutions. On a separate note, we inquired about Sharp's specific actions and target dates to phase out PVC, brominated flame retardants and phthalates from its products.
4.11.06
Portfolio 21 encourages Siemens to decrease the toxicity in 'Siemens-BenQ' mobile phone devices
Siemens' reputation is at risk due to publicly available information and campaigns aiming to increase consumer awareness of brominated flame retardants and PVC in mobile phone devices. We wrote the company to highlight that the continued use of the Siemens brand name as a trademark licensee may lead concerned customers and investors to associate the negative issues surrounding the 'Siemens-BenQ' mobile phone devices with Siemens. We encourage the company to use it brand leverage to pressure BenQ to decrease the use of harmful chemical pollutants in its mobile phones.
4.7.06
Letter to Canon encouraging action on consumer e-waste collection programs
Canon has continued to excel in creating products that realize energy efficiency, resource efficiency and the elimination of hazardous substances, all of which have reinforced Canon's position as a leading supplier of office equipment. While Canon does a good job recycling the products collected, we would like to see Canon increase the number of collection sites and programs available for individual consumers. In our letter to Canon we asked that the company identify the materials for recycling and processes for proper disposal as well as requested that the company establish recycling sites at its e-stores or at its authorized dealers, such as programs offered by Dell, IBM and Hewlett-Packard.
4.4.06
Portfolio 21 seeks dialogue with Air Products regarding toxic releases
A large proportion of Air Products' sales are associated with the provision of oxygen and hydrogen, gases that are used for a variety of purposes, including numerous applications with environmental benefits. We wrote Air Products with our concerns regarding the company's Chemicals business segment. Air Products emits five times the volume of toxic releases of its competitor, Praxair. However, based on the risk multiplier factor that seeks to enable comparability of total toxic impact, Air Products is not a Toxic 100 company while Praxair is. We wrote the company to see how Air Products foresees the future development of this business division and to get a better understanding of how investments in research and development will address the health and environmental risks associated with Air Product's overall toxic releases.
4.1.06
Portfolio 21 seeks dialogue with Praxair regarding Toxic 100 report
Over half of Praxair's revenues are derived from applications that improve its customers' energy efficiency and environmental performance. Our concern as shareholders and reason for writing the company was that a recent report, "Toxic 100," authored by the Political Economy Research Institute (PERI) at the University of Massachusetts, rated Praxair as the 85th top air polluter among all corporations in the Fortune 500, Forbes 500, and Standard & Poor's 500. Our research indicated that the Surface Technologies Division is primarily responsible for the release of high impact chemicals responsible for placing Praxair on the Toxic 100 list (Chromium, Cobalt, and Nickel). Among other items, we inquired if the company had invested capital in environmental initiatives to address its toxic air emissions.
4.1.06
Letter to Kingfisher encouraging company to continue promoting FSC certified wood
Kingfisher recognizes that long-term success requires sustainable supply chains for its products. To this end, in 2005 Kingfisher introduced buying standards on timber to help buyers and suppliers implement the company's timber policy and support growth in sustainable forestry certification. Significant portions of Kingfisher's home improvement timber sales continue to be derived from FSC certified wood. After several years of not reporting its social and environmental performance we were pleased to seethe company recently published its Social Sustainability Report. Moreover, the company committed to disclosing its key performance indicators in 2006. With this commitment in mind we asked the company to disclose its environmental indicators as they relate to certified timber, climate change and store waste. We also encouraged the company to continue its commitment to FSC certification.
4.1.06
Portfolio 21 encourages Dexia to withdraw from the Baku-Tbilisi-Ceyhan (BTC) pipeline
The Baku-Tbilisi-Ceyhan (BTC) pipeline has been called into question because of the support for undemocratic regimes, the fueling of regional conflicts, the violation of human rights, and environmental damage. If these are the types of projects that are being funded, we at Portfolio 21 question whether the Equator Principles are being adequately assessed by the Equator Banks. As an Equator Bank, Dexia concluded that this project complied with the IFC Safeguard Policies and Equator Principles. In our letter we inquired how the company came to this decision, what lessons have been learned and what actions the company is taking to ensure that human and environmental rights are not being violated. We concluded our letter by voicing our disappointment at Dexia's choice to finance this controversial project and encouraged the company to withdraw from the project.
3.15.06
Greenpeace represents Portfolio 21 at the Hewlett-Packard Annual Meeting
Toxic components in electronic products are one of the most significant challenges for companies involved in the computer industry. Hewlett-Packard has demonstrated leadership in this area by publicly committing to eliminate brominated flame retardants and PVC in HP brand products. Greenpeace was part of a campaign to convince the company to take this leadership step. At HP's Annual Meeting Greenpeace sought to read a statement that was supportive of HP's leadership position, but also asked for the company to transparently report on its progress. Additionally, Greenpeace outlined the importance of removing toxics from electronics based on human health, safety, environmental, and reputational risks. At the Annual Meeting, HP's CEO publicly affirmed that HP would follow though with its commitment.
3.6.06
Letter to UBS following Portfolio 21's annual review
UBS's substandard score in the World Wildlife Fund/BankTrack report "Sustainable Finance" was the impetus for an immediate Portfolio 21 review of UBS. Portfolio 21's annual review process must confirm the company's continued commitments to sustainability in order to maintain the company's inclusion in Portfolio 21. While we are happy to report that UBS continues to meet our rigorous screening criteria, the review process identified some gaps in our data. Our letter to UBS outlined these concerns and requested additional information including: updated performance indicators, information regarding the growth of the company's SRI or eco-performance funds, examples of how the company addresses environmental risks, investments at the facility level to reduce the company's overall ecological impact, and current position regarding the Equator Principles.
3.3.06
Portfolio 21 Investments supports Oregon Clean Cars Rules
As part of Portfolio 21 Investments' ongoing support of the Clean Cars for Oregon Coalition, a project of the Oregon Environmental Council, we submitted comments to the Oregon Department of Environmental Quality supporting the permanent adoption of the Oregon Low Emission Vehicle Rules. Clean car standards will benefit Oregon by reducing pollution and associated respiratory illness, as well as decreasing global warming pollution by 30%. Additionally, the program will help Oregonians save fuel and money by providing greater choice in purchasing cleaner, more efficient, cost-saving vehicles. As a direct response to the issue of global warming, which, unless dramatically and effectively addressed, will result in serious climate disruption, the clean car standards offer a good step in the right direction. Portfolio 21 fully supports Oregon's Clean Car standards, and looks forward to their permanent adoption.
3.3.06
Encouraging IMPCO Technologies to adopt an ISO 14001 certified Environmental Management System and begin environmental reporting
IMPCO has been recognized as a leader in the development, manufacturing and marketing of products that support the use of alternative fuels, which are technologies that will assist in the creation of a sustainable society. While we at Portfolio 21 applaud IMPCO's commitment and investments to expanding the use of alternative fuels worldwide, we seek to know more about IMPCO's involvement in pollution prevention, energy and resource efficiency at its own offices and manufacturing facilities. We wrote IMPCO to encourage the company to adopt an ISO 14001 certified Environmental Management System, and to publicly report on its environmental initiatives and data. While we value companies that produce technologies necessary to facilitate a sustainable future we also place great value on the company's policies to ensure that its products are produced using the most sustainable methods possible.
2.27.06
Letter to Quantum regarding the company’s merger with Starcraft and increased military contracts
In February 2005, Quantum shareholders approved the merger with Starcraft, a company that appeared not to have an environmental focus and was not involved in Quantum's main business, the development of alternative fuel vehicle components. At the same time there was a great deal of publicity surrounding Quantum's increasing number of military contracts. We wrote Quantum to inquire on these issues. Quantum responded by stating that it hoped this merger would enable successful growth in the area of alternative fuel systems by creating a full service company with capabilities from conception to production and that the company's revenues generated from military contracts were less than 2% of total revenues.
2.06.06
Portfolio 21 seeks dialogue with Atlas Copco regarding the divestment of its rental service operations
On February 2, 2006 Atlas Copco announced its decision to divest its construction equipment rental operations segment. The rental services segment had accounted for 27% of the company's revenues and allowed for one product to be used for varied purposes by multiple users. As a business model, rental services offer excellent opportunities for reduced environmental impacts through materials efficiency, end-of-life product take-back, refurbishment, and most important, customer feedback. While Portfolio 21is disappointed to see the divestment of this unit, we are particularly concerned that the elimination of the rental division will also eliminate a feedback mechanism that enables the company's design for environment goals. For manufacturing companies such as Atlas Copco it is a great challenge to design products that minimize impacts during the customer use phase and at the end of the product's useful life. In light of the company's recent divestment, we are interested to hear about specific steps the company is taking to ensure that creative, ecologically sound designs for environment and disassembly continue.
2.06.06
Portfolio 21 seeks dialogue with UBS and Deutsche Bank regarding WWF/BankTrack report, "Sustainable Finance"
In recent years, major commercial and investment banks have begun to address the environmental and social impacts associated with their operations. For leading finance corporations, such as those held in Portfolio 21, this analysis is now commonplace and is considered critical to the proper management of risk. A recent World Wildlife Fund/BankTrack report, "Sustainable Finance," examines how the banking sectors' policies compare with each other, as well as how they compare with international standards and/or best practices. In total, 39 banks from around the world were ranked, five of which are held in Portfolio 21. We were disappointed to see that two of our holdings, Deutsche Bank and UBS, earned low overall scores. We believe this is not reflective of the leadership these companies have demonstrated in the past, and we are concerned that Deutsche Bank and UBS may not be investing the necessary resources to maintain their leadership status. We have engaged the companies and are interested to hear about specific steps they are taking to make improvements in these areas.