Triodos Bank recently removed Johnson & Johnson and Quest Diagnostics from its Sustainable Investment Universe. There were too many breaches of legislation that when added up was reason enough to exclude these companies from further investments.
Controversies where you least expect them
12-12-2011 | Triodos Sustainability Research excludes many companies from potential investment because they don’t meet our minimum standards. There are often predictable outcomes, but sometimes even we are surprised.
The Triodos Sustainable Investment Universe includes sustainable pioneers and frontrunners within a sector. Whilst some companies are strong sustainability performers, they can at the same time be involved in an activity that does not meet Triodos minimum standards. For example, a whiskey maker involved in bullfighting, or a railroad company involved in nuclear power. Triodos insists that all companies in our universe meet all of our minimum standards.
Alcohol producer and animal welfare
French alcohol producer Pernod Ricard Group has brands that include Ricard, Havana Club, Malibu, and Jameson. The company has implemented sound programmes to reduce water consumption and greenhouse gas emissions, making it a sector leader on environmental issues. However, to our surprise, we learned that one activity of the group involves bullfighting. Through a cultural sponsorship fund, the company supports the Union des Clubs Taurins Paul Ricard. Although the Union does not organise nor finance bullfighting events, it clearly promotes events organised by its members, and those events include the cruel Spanish style Corridas. During Corridas, bulls are killed after suffering severe stress and torture during the games. Triodos considers bullfighting to be an unnecessary violence against animals, which strongly counters our policy on animal welfare. Despite the involvement of Pernod Ricard being small and indirect, we chose not to select a company with links to such events.
Railroad companies and nuclear power
Generally, transport by rail is considered a better option for the environment when compared to transport by road or air. Although this is not true in all circumstances, railroads are considered positive for public passenger and cargo transport. However, during an analysis of railroad companies earlier this year, Triodos excluded a number of railroad companies because of their involvement in nuclear power. Triodos excluded US company CSX Corporation because it provides tailor-made transport and landfill services for low level radioactive waste that may contain uranium and plutonium. Triodos also excluded Norfolk Southern, also from the US, because it provides tailor-made transport services of spent nuclear fuels and high level radioactive wastes for the US government. The services provided by these companies to the nuclear industry clearly require specialised technologies and tailor-made services. Triodos has a zero tolerance for involvement in nuclear energy and therefore we did not select these companies for inclusion in our Sustainable Investment Universe.
Water manager and consistent breaches of law
Access to clean water and sanitation is an important sustainability issue. Brazilian company Sabesp is responsible for the planning, construction and operation of the water, sewage and industrial wastewater systems in more than 368 cities of São Paulo, Brazil. The company undeniably does a lot of good including providing water to more than 25 million people, and offering a differentiated pricing system with reductions for low income earners and those living in slums. However Sabesp is also involved in an exceptional amount of lawsuits related to environmental damage, taxation, labour rights, and pricing disputes. The company has set aside a provision of EUR 1 billion, around 25% of its 2010 revenues, which could be used to pay for legal fees and fines as a result of court cases it may lose. Whilst most of the cases are still pending, the company did not provide any clarity on the proceedings, nor did it outline any measures taken to prevent future occurrences. Triodos considers transparency to be a core aspect of sustainable performance. As the company was not transparent on the issues, it was excluded from our Sustainable Investment Universe.
Note: The issues explored in this article are relevant for sustainable investments on the stock market. Triodos Bank believes that our socially responsible investments are a powerful means of promoting our values and working for greater sustainability, while enabling us to offer a complete range of attractive investment options to customers who choose to invest on the stock market.