ESG Update as at 20 April 2019


Australia and New Zealand ESG Updates

It’s official: Philip Morris tobacco first Australian company to close gender pay gap

Philip Morris Australia, a huge tobacco company, is the first company in Australia to achieve the EQUAL-SALARY certification awarded by an independent Swiss-based foundation, the EQUAL-SALARY Foundation.

Philip Morris is the first multinational organisation to receive the certification, putting it on the equal pay pedestal by PricewaterhouseCoopers Switzerland and the World Economic Forum.

There is still a gap between what women and men are paid on average, sitting at 14.1 per cent between full-time male and female workers across Australia. While there is still a difference in what male and female full-time workers at Philip Morris are paid of 0.9 per cent, it is low enough to get the certification.

philip morris tobacco.jpg

The EQUAL-SALARY process took about 18 months and involved interviews with staff, focus groups, and PricewaterhouseCooper analysis and audits of salaries of the global staff.

Philip Morris Australia was also recently awarded the Federal Government’s Employer of Choice for Gender Equality citation for the fourth year running. Forty-four per cent of Philip Morris’ workforce is female, including a female managing director.

Philip Morris has its sights set on closing the gender gap in management, with their new mantra being that they want to make the world a better place - a remarkable turnaround from being a maligned cancer on the human population that would stop at nothing to get people to smoke just one more cigarette.

Interestingly, tobacco advertising was initially one of the change factors for women being allowed to smoke. When smoking became popular in western culture, only men were allowed to smoke; any women caught smoking were punished with job losses and other social and economic disadvantages.

Vintage tobacco ads championed independent women who can do anything - including smoking. Turns out Philip Morris has been an advocate for women all along!

Best performing ESG investment options inside superannuation

Australia has 141 signed and active ESG investment providers with products that align to the United Nations Principles for Responsible Investment (UNPRI) - we are the fourth most active country for ESG investment awareness. A quarter of these providers are superannuation funds, with almost half of Australia’s super savings overseen by ESG-principled funds.

ESG options inside superannuation funds are proving to be consistent performers, with the top performer to April 2019 being HESTA’s Eco Pool offering - a return of 10.3 per cent per annum.

ESG top performers

  • HESTA Eco Pool - 10.3 per cent

  • Australian Ethical Superannuation Fund Employer International Shares option - 9.79 per cent

  • UniSuper Sustainable High Growth option - 9.74 per cent

Other key metrics include:

  • Balanced ESG superannuation options outperformed other balanced options in the 12 months to April 2019 (Rainmaker data)

  • ESG options perform as well as investment options that do not take ESG principles into account

  • ESG investment product fund inflows annual grew by 37 per cent in the 12 months to December 2018 (total of $30 billion being held in super fund ESG strategies)

  • UniSuper has the largest investment in ESG options with $3.87 billion, followed by AustralianSuper with $2.34 billion, HESTA about $862 million, and VicSuper with $465 million.

New ethical fund rating system set up by advisers

The Ethical Advisers Co-op is setting up its own rating system for ethical funds. The 35 financial advisers who run the co-op say that superannuation funds aren’t doing very well in providing ethical and sustainable investment options. Greenwashing and accounting for the wide variation in definitions is required to adequately rate a fund.

The advisers wanted a list of funds they could safely recommend to ethically minded clients, so they made their own. Fund managers can comment on their rating, and the rating may be adjusted accordingly.

Funds are given a green leaf rating based on their level of ethics, however there is no such thing as a five leaf fund just yet.

Top funds with 4.5 leaves so far:

  • Future Super

  • Australian Ethical’s Emerging Companies Fund

  • BetaShares Australian Sustainability Leaders ETF

  • BetaShares Global Sustainability Leaders ETF

  • WHEB Sustainability Impact Fund

No country for women - yet

There aren’t any countries on track to achieving the United Nations’ gender equality targets, though Australia seems to be doing all right. The target, as part of the UN’s 17 sustainable development goals (SDG) that countries have pledged to meet, is to achieve gender equality by 2030.

No country is currently doing enough to improve the lives of its women and girls, according to an index created by the Equal Measures 2030 organisation to track progress. The SDG Gender Index shows that nowhere in sub-Saharan Africa, the Middle East, North Africa, Latin America or the Caribbean even scored a ‘good’ rating.

Countries are scored on a rating system of 0 to 100, with 100 meaning equality has been reached. There are specific targets, such as access to safe water or the internet. A score of 90 or more means a country is well on track; 59 or less means poor (or no) progress.

Denmark, the best performing country, has a score of just under 90, with 20 other countries ranking this well. Europe and North America dominate.

The worst performers are sub-Saharan African country, Chad, with the bottom 10 countries also called ‘fragile states’, with conflict, violence, or famine. The average score of all countries is 65.7, which is poor on the index.


Global ESG Updates

Facebook dropped from S&P 500 ESG Index

After a series of scandals brought Facebook’s ethics into question, the company has been dropped from the S&P 500 Environmental, Social and Governance (ESG) Index. Some other major companies dropped include IBM, Oracle and Wells Fargo.

The S&P 500 ESG Index ranks companies in industry-based groups based on their ESG performance, with each company given a score out of 100. Facebook got just 21 as its overall score, despite having an environmental score of 82. The high environmental score was not as important for the company and its line of work - being environmentally friendly wasn’t as much of a big deal as ranking high in the other two areas.

  • Environmental - 21

  • Social - 22

  • Governance - 6

The major concerns with Facebook were regarding privacy concerns and a lack of transparency in terms of what information Facebook collects from users and what it shares. Privacy issues have been at the fore in the previous two years for the social media company, including allowing over 150 companies access to personal data, the Cambridge Analytica scandal, and 50 million accounts being hacked.


ESG Research Updates

Why we need a four-day work week - for the planet!

A reduction in working hours could help us save the planet, and not a moment too soon. Higher productivity and employee satisfaction have been demonstrated too many times to ignore, but that’s not the only benefit of a shorter work week.

Our current lifestyles, a World Economic Forum article by Philipp Frey says, are ‘deeply intertwined with a fundamentally unsustainable economy’, with huge demands on our time and resources - overpriced housing, carbon-intensive, frozen foods, long commutes. These factors all contribute to using up our resources more quickly, just to keep up.

If we are going to interrupt irreversible climate disasters, big changes are needed - now. Moving to a four-day work week will, in many cases, drop a commute, for example, from five days a week down to four. If everyone drops a day of carbon-producing transportation to work off their to-do list (as a minimum), we have that much less carbon to deal with each day.

Frey authored a paper for think tank Autonomy entitled The Ecological Limits of Work: on carbon emissions, carbon budgets and working time. The paper offers a thought experiment that results in us working a nine-hour work week. The illustration is that a sustainable economy needs work far beyond cutting down fossil fuel use, more in line with changing out economic models. This means a ‘radical reduction in working hours’.

Frey goes on to say, ‘…we are reminded that a vast expansion of non-work time should be considered less of a luxury and more of an existential urgency.

‘In this spirit, one concrete and wide-ranging step following the declaration of a climate emergency in the UK could be the immediate introduction of a Four-Day Week as a transitional step: not just to improve the wellbeing and jobs of workers, but also to curb resource usage and greenhouse gas emissions to ensure a decent future for future generations.’