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Resource nationalisation risk on the up

If you’re in the extractive game, then keep a close eye on your assets. That’s the message of a new report from political risk consultants Maplecroft, which predicts a “creeping” rise in resource nationalism during 2013.

Its Expropriation Index sees 21 countries fall into the “extreme risk” bucket, including resource-rich states such as Guinea (ranked third most at risk), the Democratic Republic of Congo (fourth), Burma (ninth), Equatorial Guinea (14th), Venezuela (16th) and Bolivia (19th). Maplecroft’s Political Risk Atlas 2013 also details a general trend of escalating political violence across the world. One-fifth of the 197 countries analysed show a substantial increase in such risk. Terrorism is flagged up as a particular concern in many promising economies, such as Nigeria, Thailand and India. Turkey finds itself for the first time in the unenviable list of 18 nations at “extreme risk” of terrorist threats.

Sustainability plans high, but public interest low

Change can come one of two ways: through a big bang or via methodical progress. The sustainability field has had plenty of the former in recent years – “breakthrough” ideas that too often come to naught. The pendulum now seems to be swinging the other way. Two in three (64%) US companies now have a sustainability plan in place or in the pipeline. That marks a step-change. In 2011, the figure stood at a mere 38%. According to hygiene and paper company SCA, which carried out the research, around one-third of US firms say the plans are impacting their bottom line.

SCA’s Tork Report also includes survey data on how consumers would like to hear about company efforts around sustainability. Topping the list (gaining 22% of votes) is information through the web. Further down are news stories (11%), third-party endorsement or certification (7%) and brochures (6%).

A dismal 3% cite published sustainability reports. Clearly drawing up a sustainability plan is only the first step. Engaging stakeholders will take hard work and imagination. At present, public sentiment in North America is either apathetic (“no preference”, 27%) or actively dismissive (“do not care to hear about … sustainability efforts”, 15%).

Big brands improve emission reduction efforts

Another new study finds that two-thirds of the world’s largest companies now have publicly available climate and energy strategies. The proportion is up from one-quarter in 2007, when environmental charity Climate Counts issued its first annual company scorecard.

The scorecard, which covers 145 companies from 16 sectors, gives each company a rating between zero and 100 on their climate change efforts. The average score in 2012 was 50.1, up from 30.6 five years previously. Sector leaders included Nike (89), Bank of America (86), UPS (89) and L’Oréal (87). Toys and children’s product manufacturers ranked lowest in general. Five of the top six companies, meanwhile, achieved higher revenues with lower emissions over the 12-month period covered by the report.

Lean year for carbon market

Forget fiscal cliffs. Carbon traders are staring at a price precipice. In 2012, the global carbon market dropped to its lowest total value since the inception of the EU emissions trading scheme five years earlier. Its current value of €61bn (£49bn) represents a contraction of around one-third when compared with the previous year, according to figures from Bloomberg New Energy Finance.

Europe’s debt crisis acerbated the slump, which witnessed carbon permit prices falling from a worldwide average of €11.20 per tonne to €5.70/t in 2012. Underlying this, however, is a problem of over-allocation in the EU. This effectively sees large industrial European companies collectively sitting on a €4.1bn surplus of free permits. In an attempt to bolster the market, UK legislators are proposing a “price floor” for permits of €19/t.

On the upside, trading activity across the world’s carbon markets actually increased in 2012. Transaction volumes reached 10.7bn tonnes, up by 26% on the previous year. Bloomberg New Energy Finance is hesitantly optimistic about the year ahead, expecting the market to bounce back to a total value of about €80bn. Intervention by the European commission is expected to push average prices up by about 15% to some €6.60/t.

Water scarcity as a business threat

In the event of a major water crisis, big brand food companies could well go out of business. That’s the verdict of Peter Brabeck-Letmathe, chairman of Nestlé. Before introducing water efficiencies, the Swiss-owned food and drinks company required about 4.5 litres of water to produce $1 of turnover. That’s now down to 1.5 litres. Comparatively speaking, that’s very low. Most industry averages hover in the range of 200 to 400 litres, according to Brabeck-Letmathe. Others are off the charts. For example, an astonishing 9,100 litres of water are needed to produce just one litre of bio-diesel.

With more people on the planet (an estimated 9.3 billion by 2050, according o the United Nations), water demand is increasing. Projections by Water Resources Group, an Australian utility company, suggest demand will outstrip supply by 40% in 2030. Even by 2025, more than 3 billion people will be living in water-scarce areas. Over the course of the past century, global blue water withdrawals increased from 500 cubic kilometres to 3,830 cubic kilometres.

Companies called on to ‘end slavery’

Virgin Group’s founder and chairman Richard Branson and Andrew Forrest, chairman of Australia-based Fortescue Metals, are calling on 25 major corporations to sign a “zero tolerance” pledge against “modern slavery”. The International Labour Organisation estimates that 20.9 million people around the world are forced into slave-like working conditions. The annual profits derived from that work amounts to an estimated $32bn, roughly half of which is generated in industrialised nations, says the ILO.

The US department of labour suggests at least 122 products from 58 countries are implicated, ranging from diamonds in Africa to bricks in Brazil. The pledge is part of the global Putting Slavery out of Business campaign, launched by Australian-based non-profit group Walk Free.

Asia’s responsible investment market expands

Sustainable investment assets under management in Asia now amount to about $74bn. About 130 investment managers in the region adopt sustainable investment approaches, states the Asia Sustainable Investment Review 2012.

Even so, as a proportion of the whole investment market, SRI only accounts for 1.1% of total assets invested in Asia. The figure is slightly distorted by Japan. If removed, SRI’s portion in the region increases to 2.9%. One of the region’s key players is South Korea’s National Pension Service. From 2009 to 2011, the fund increased its assets under sustainable investment by 36% year on year and now stands at almost $5.5bn.

Organisational snapshots

Benchmark standard grows

ISO14001 continues on the up. Organisations certified under the benchmark environmental management standard jumped 6% in the latest full-year period, to a total of 267,000.

China is leading the pack, with almost 82,000 qualified companies. Next in line come Japan, Italy, Spain and the UK, in that order. East Asia and Pacific comprise more than half the standard’s members (51.3%), with Europe (39.9%) accounting for most of the rest.

The only major blip occurred in the Middle East, where registered companies dropped by 4%. At a sector level, construction represents the industry with the most certifications, accounting for 34,155. The closest followers are basic metal and fabricated metal products (19,231) and electrical and optical equipment (18,001). The figures, which appear in a new survey by ISO, relate to 2011.

Sustainable food requires $83bn

Wheat, food oil and dairy prices are set to increase by between 15% and 45% over the next decade. This could cause a possible jump in global hunger and related social problems, says Ecclesiastical Investment Management. In this context, long-term investment is required if future food demand is to be met, warns the Food and Agriculture Organisation [].

The UN agency puts the total price tag at an estimated $83bn a year over the next 30 to 40 years. Such investment would bring about the 70% increase in food output required by 2050, according to the FAO.

Corporate insight

Noble gas

Oil and gas company Noble Energy experienced 118 spills during 2011, including 1,904 barrels of oil and 3,726 barrels of water, and 3,485 barrels of other fluids not produced on-site, such as diesel, chemicals and drilling mud. Nobel Energy operates in the Gulf of Mexico, among other regions. This marks its first sustainability report.

Hydro power

Australia-based renewable energy company Pacific Hydro [] produced 1.8m megawatt-hours of clean energy in 2012. This helped the company abate 1.2m tonnes of CO2-equivalent emissions, according to its first sustainability report. The report also draws attention to the new 111MW Chacayes run-of-river hydro plant in Chile, which Pacific Hydro delivered on time and on budget.

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