Rejected Companies

Portfolio 21 seeks to educate and motivate companies to improve their environmental performance.

By informing companies when they fail our selection process, and providing specific reasons why they were not included in Portfolio 21, we hope to bring environmental performance to their attention. Many companies do not understand the impending ecological crisis, let alone have plans to address this challenge. We believe investors can play an important role in raising awareness of environmental concerns. Following is a sample of the companies that have failed to meet Portfolio 21's company evaluation criteria during the last 12 months.

Securities mentioned are not recommendations to buy or sell any security. Current and future portfolio holdings are subject to risk.

REJECTED COMPANIES
Date Company Comments
12.09 Amgen Amgen is a biotechnology-based human therapeutics company. As is the case with many biopharmaceutical companies, Portfolio 21 assumes Amgen utilizes both mammalian and microbial cells such as recombinant E. coli or yeast cultures. Scientific research has concluded that mammalian cells are environmentally benign; however, microbial cells do have the ability to replicate and therefore should be sterilized before disposal. Amgen failed to respond to numerous inquiries regarding its use and disposal of microbial cells.
12.09 Banco Santander Brasil Banco Santander Brasil has business divisions in retail banking, wholesale banking, asset management, and insurance. The company has above average environmental reporting, including trend data on all major key performance indicators. However, it lacks a comprehensive internal risk analysis system to manage the environmental and social impacts of its corporate lending and/or project financing.
12.09 PUMA PUMA sporting goods and accessories are sold in over 120 countries. While PUMA has implemented some environmental initiatives that demonstrate leadership, the company fails to recognize the importance of environmental life-cycle analysis and has not set supplier initiatives associated with the impact of leather production and tanning. In addition, the company does not have a comprehensive greenhouse gas policy and only has reduction targets associated with a portion of its operations.
12.09 ESCO ESCO serves customers across the utility, industrial, and commercial sectors with its engineered products. The company's Utility Solutions division offers hardware and software that supports advanced metering and demand response capabilities. While Portfolio 21 is attracted to this aspect of the business, ESCO's other business divisions fail to offer ecologically beneficial products or services. In addition, the company demonstrated a lack of transparency and unwillingness to engage in dialogue.
12.09 Chipotle Mexican Grill Chipotle Mexican Grill owns and operates over 800 fast service restaurants specializing in Mexican foods. While the company has implemented several initiatives that demonstrate a level of commitment to higher quality foods, it failed to respond to numerous inquiries regarding its use of genetically modified foods.
12.09 Campbell Soup J.M. Smucker manufactures and markets food products that include fruit spreads, peanut butter, shortening and oils, and coffee. According to Portfolio 21's biotechnology policy, if a company is not directly involved in genetic engineering, but sells products containing genetically modified organisms (GMOs), we will evaluate the company's activities and policies regarding biotechnology. J.M. Smucker does not have a public position on the use of GMOs. In addition, it does not disclose plans for increasing procurement of organic ingredients. The company fails to comply with Portfolio 21's biotechnology policy.
11.09 Campbell Soup Campbell Soup is a household name in food products in the United States, where the company derives close to 3/4 of its revenues. According to the company's corporate social responsibility report, its use of genetically modified ingredients is limited primarily soybeans, canola, and corn sourced in North America. Although it is not known what percentage of the company's raw materials ingredients are genetically engineered; Campbell's has shown lack of leadership is seeking alternatives and has refused to label products in the U.S.
11.09 Halma Halma is a UK company specializing in the production of electronic, safety, and environmental technologies. Portfolio 21 believes that in a world of increasing ecological constraints, environmental control technologies and services will likely see an upsurge in demand. However, after numerous failed attempts at dialogue with the company it is unclear what percent of the company's revenues are derived from environmental products. Without such data it is difficult to gauge how ecological constraints will affect Halma's future opportunities and/or risks.
10.09 BorgWarner Recognizing the need for fuel efficient vehicles, BorgWarner provides automakers with engine and drivetrain solutions for improved fuel economy. Outside of its products/services and R&D initiatives, however, BorgWarner demonstrates little environmental leadership. The company did not respond to numerous inquiries regarding its environmental initiatives and future plans.
10.09 McCormick & Company McCormick & Company manufactures food products, including seasoning mixes, herbs and spices, food coloring and easy-to-cook meals. According to Portfolio 21's biotechnology policy, if a company is not directly involved in genetic engineering, but sells products containing genetically modified organisms (GMOs), we will evaluate the company's activities and policies regarding biotechnology. McCormick & Company does not have a public position on the use of GMOs but follows local laws where it sells its products. In addition it does not appear to engage in activities advocating for labeling laws internationally. The company fails to comply with Portfolio 21's biotechnology policy.
8.09 Covidien Covidien is a global healthcare products company that derives the majority of its revenues from its medical devices division. Despite several case studies that highlight the company's initiatives to improve the eco-efficiency of its manufacturing processes and facilities, Covidien provides no information on its efforts to minimize the environmental impacts of its products through life-cycle analysis, material restrictions, and/or end-of-life take-back programs. In addition, Covidien has not set clear targets across all of its environmental key performance indicators and does not appear to be monitoring the annual progress on its direct environmental indicators.
8.09 Toyota Motor Corporation Toyota's primary business is the manufacture of vehicles and parts. The company was the first to mass-produce a hybrid vehicle and has announced plans to install hybrid technology across its entire product line by 2030. The company also hopes to begin mass-production of plug-in hybrid vehicles in 2012. Despite the company's significant achievement in this area, Toyota, largely through its membership in the Alliance of Automobile Manufacturers, has a history of fighting environmental legislation aimed at reducing the impact of emissions from gasoline and diesel vehicles. These actions demonstrate an inconsistency that is difficult to reconcile with the rest of the company's business model.
7.09 Equinix Equinix provides global data center services primarily comprised of colocation, interconnection, and managed information technology infrastructure services. Portfolio 21 believes energy efficient data centers will be in demand in a digital world with diminishing natural resources, particularly as the cost of energy increases. While Equinix has made some progress in improving energy efficiency at some of its data centers, the company does not disclose the power usage effectiveness for any of its centers, nor has it made commitments to build data centers with green building standards.
7.09 Autonomy Autonomy develops and distributes software products used in automating the management, processing and delivery of unstructured information sources. Despite the company's relatively minimal direct environmental impact, Autonomy discloses extremely limited information on environmental metrics. It provides metrics on the carbon dioxide per million dollars in revenue for its headquarters in Cambridge, UK only. More important, however, is the fact that while Autonomy's products increase human efficiency and improve the way in which we interact with information and computers, Autonomy's software provides few, if any, ecological benefits.
7.09 AGL Energy AGL Energy is an Australian energy company that sells electricity and natural gas to more than 3 million residential, small business, and commercial customers. When compared to Australia's overall generation mix, which is approximately 90% from coal, AGL's installed capacity shows a diverse energy mix that is relatively light on coal. However, AGL has a significant (32.5%) ownership interest in the Great Energy Alliance Corporation and an associated ownership of the Loy Yang coal mine (the largest producing open cut brown coal mine in the southern hemisphere). The risks associated with these coal investments supersede the company's positive attributes.
7.09 Benesse Corporation Benesse Corporation is a diversified consumer services company based in Japan. The company's business activities include education, language learning, and nursing care operations. The company incorporates some environmental topics into its education materials for school-aged children, however, the company's communications lack sufficient information to know if it is a meaningful curriculum. In addition, the company provides inadequate communication on its environmental activities and initiatives to determine the depth of its commitment to environmental sustainability.
7.09 Calgon Carbon Calgon Carbon a provider of services and products for purifying water and air, primarily using activated carbon. A large proportion of Calgon Carbon's products and services provide environmental benefits and may experience an increase in demand as a result of increasing ecological limitations. Despite this fact, Calgon Carbon's business is dependent on coal. The company sources its coal mainly from mines in the Appalachian mountains, a region known for the mountain-top removal of coal. In addition, Calgon Carbon's processes require significant energy inputs. The company also does not have supplier guidelines in place, does not disclose its energy use and/or emission metrics, and has been cited by the Environmental Protection Agency for significant violations.
6.09 Rezidor Hotel Group Rezidor Hotel Group manages hotels, inns, and resorts across Europe, the Middle East, and Africa. The company instituted a Responsible Business program in 2001 that tracks environmental metrics, but Rezidor has yet to establish short- or long-term reduction goals with respect to energy and water consumption, waste production, and emissions output. Although the company has taken steps to secure varying eco-certifications for some of its properties it does not appear to have plans to implement ISO 14001 certification group-wide.
6.09 Morningstar Morningstar Inc. is an investment information and services company providing data, research, and analysis of mutual funds, stocks, and variable annuities. Despite the company's significant research capabilities, Morningstar does not appear to have a team solely dedicated to the research and analysis of how ecological constraints will impact an investment over the long term. In addition, Morningstar provides no information on the existence and/or extent of its initiatives to reduce the company's direct environmental impact.
6.09 Origin Origin is focused on the retail sale of energy (gas and electricity) and the exploration and production of oil and gas reserves in Australia and New Zealand. The company generates the majority of its revenues from retail sales, but in 2008 only a small proportion of Origin's owned and operated generation assets fed the demand of its 3 million customers. As a result, the company relies on energy purchases from third parties, which are likely from fossil fuel sources. In addition, the company's business focus on oil and gas extraction fails to recognize ecological constraints.
5.09 Clorox Clorox is a consumer products company offering a range of cleaning products, personal care products, and household items; popular brand names include Clorox bleach, Hidden Valley Ranch salad dressing, and Burt's Bees. The company recently began to track its greenhouse gas emissions, established a corporate-wide Eco Office, and introduced Green Works, a natural line of household cleaners. However, Clorox does not appear to have a systematic life-cycle analysis program for its product design, has not made its sustainability strategy clear, and has yet to establish goals for reducing its energy, water, waste, and greenhouse gas emissions.
4.09 The Macerich Company The Macerich Company is involved in the ownership, redevelopment, and management of shopping centers. Unlike many of Macerich's competitors, the company has yet to commit to building new construction to LEED standards. Macerich is also not a member of the United States Green Building Council and fails to demonstrate commitment to environmental building principles.
4.09 AMB Property AMB Property is a Real Estate Investment Trust that owns warehouses near ports, airports, and major highway interchanges in the Americas, Europe, and Asia. AMB fails to provide a clear discussion of tools such as environmental lifecycle analyses and demonstrates little understanding of ecological constraints and their impact on business. Aside from the company's commitment to developing all new properties in the U.S. to LEED standards, AMB's environmental initiatives and leadership are lacking.
3.09 T. Rowe Price T. Rowe Price is an asset management firm that provides no-load mutual funds for individual investors and corporate retirement funds. While we commend the company for recognizing that extra-financial factors (including environmental footprint) impact a company's performance, and ultimately T. Rowe Price's portfolio performance, this environmental analysis is not incorporated across all sectors.
3.09 Emerson Electric Despite the fact that many of Emerson Electric's products have direct environmental benefits, this electronics company does not demonstrate environmental leadership. Emerson Electric does not indicate that it utilizes life cycle analysis or design for the environment principles in the development of its products. The company does not provide information about its global product line's compliance with the European Union legislation restricting hazardous substances, if it has established product take back programs, or how it addresses and/or enforces environmental laws in low cost countries such as China. Given the company's lack of reporting and unwillingness to engage in dialogue with Portfolio 21, Emerson Electric has not been recommended for inclusion in the fund.
3.09 Credit Saison Credit Saison's revenues are primarily derived from its credit card business; however, in addition to its credit service segment, the company also operates Finance, Real Estate, Entertainment, and other divisions. Given the company's diversified business activities, Credit Saison's environmental impacts extend beyond its energy use and office level initiatives. However, the company provides no information on its data centers, environmental metrics, or employee initiatives. As a result of the company's poor environmental leadership, Credit Saison was not included in Portfolio 21.
3.09 American Express Unlike industry peers Visa and MasterCard, American Express (Amex) issues credit cards, sets annual fees, and solicits members. Amex also offers travel services to its cardholders. Amex reports on its energy use, has a CO2 reduction goal, and has begun to establish numerous environmental initiatives, including the addition of environmental guidelines in procurement contracts. However, given the nature of Amex's diversified business model, the company's risk exposure, both ecological and financial, is higher than its competitors and for this reason has not been included in the fund.
3.09 MasterCard MasterCard processes credit card transactions and facilitates the authorization, clearing, and settlement of transactions. Portfolio 21 views the energy usage and greenhouse gas emissions associated with MasterCard's processing centers as its largest environmental impact. To date, MasterCard has not disclosed its energy use, nor has the company established a carbon dioxide reduction goal.
2.09 Suez Environment Suez Environment is a water and waste services company that operates globally. Portfolio 21 anticipates increased demand for the services Suez Environment provides, but as ecological constraints persist we feel the company is not well positioned due to its deep involvement in controversial technologies, such as waste incineration and water desalination. In addition, Suez Environment has a large presence in less regulated developing countries that may be more vulnerable to the tensions of services provided by public-private partnerships.
1.09 Copart Copart sells vehicles through its online auctions. These vehicles are either damaged or deemed a total loss by insurance companies. The majority of Copart's customers are auto salvagers or auto rebuilders. Both auto salvaging and auto rebuilding have environmental benefits, however, Copart does neither. Rather, Copart functions as an intermediary between sellers and purchasers. While Copart facilitates auto salvaging and auto rebuilding, Portfolio 21 considers its services as a non-essential part of the economy. Moreover, Copart does not recognize the environmental benefits that its services facilitate.
1.09 Groupe Danone Groupe Danone is one of the world's leading food and beverage companies. According to Innovest, a financial information services and investment advisory firm, "...genetically modified organisms may be present in [products in] regions where there is no legislation, such as North America." Portfolio 21's biotechnology policy does not permit the incorporation of genetically modified ingredients into food products. We wrote to Danone for confirmation of Innovest's statement and to seek additional information on how Danone evaluates and mitigates the risks posed to the company through its use of genetically modified ingredients. Danone has failed to respond to our letters, faxes and voicemails.
1.09 Visa Visa provides a network to connect cardholders, merchants, and financial institutions-making payments faster, more convenient, reliable and secure. Visa makes no correlation between the environmental benefits and/or detriments of its activities, particularly regarding its role in promoting electronic-based commerce and the subsequent increase of processing centers. To date, Visa does not address its energy use or its direct environmental impacts.
1.09 Pacific Gas & Electric Pacific Gas & Electric is an electric and natural gas utility company. Since 2005, PG&E's retail portion of nuclear power has averaged 24% of its total fuel mix and 62% of its generation capacity. Portfolio 21 believes that as ecological constraints persist, the nuclear sector will face increasing costs and regulations surrounding fuel disposal, safety, mining and transport of uranium, and the pollution emitted during construction (and procurement of materials for that construction). We believe PG&E's heavy reliance on nuclear power generation places the company in a high ecological risk category, and feel the company demonstrates poor leadership by not acting to limit its exposure to nuclear energy.