Better returns for business.pdf - Oxfam New Zealand

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TENbeverages, metals and mining, food, pulp andpaper, textiles and chemicals) are particularlyexposed. It was agreed that companies andtheir investors would be required to pay muchcloser attention to the social dimensionsof water than they have done in the past.Moreover, their decisions (including whetherto proceed with projects, and the amount ofwater to be used) will need to be based notonly on an assessment of the direct financialcosts and benefits, but also by issues suchas the human rights and needs of localcommunities, the carrying capacity of the local/regional environment, the views of stakeholders(including international NGOs and localcommunities) and the manner in which waterresources are likely to change over time as aconsequence of climate change.Box 2: Farmland FundsThe interest of institutional investors in land-based investments is a relatively newphenomenon, driven both by the expectation of rising returns from agriculture linkedto changing agricultural commodity prices (driven by increasing demand for foodand bio fuels and, potentially, the economic value associated with carbon sinks) andland appreciation, as well as portfolio diversification. According to the World Bank,‘compared to an average annual expansion of global agricultural land of less than 4million hectares before 2008, 45 million hectares worth of large scale farmland dealswere announced even before the end of 2009. More than 70 per cent of such demandhas been in Africa, and countries such as Ethiopia, Mozambique and Sudan havetransferred millions of hectares to investors in recent years.’ 10 While agriculture andparticularly farmland as an asset class is still in its infancy, it is expected that investorswill continue to increase their investments in agriculture globally.The participants in the Better Returns in a Better World workshop on land-basedinvestments 11 raised a series of concerns about the manner in which investors areapproaching these investments, including:• There is a wide variation in investors’ knowledge and understanding of emergingmarkets in general and of individual countries or communities in particular.• There is a shortage of good farm management skills and/or knowledge of the sectoramong institutional investors. This means that investors may not be able to ensure thatenvironmental and social risks are identified and properly managed.• There is a general lack of transparency on the investments that are being made, thesocial and environmental impacts that result and the measures being adopted tomanage risks and maximize the development benefits.• There is frequently a tension between investors’ timeframes (which are generally veryshort) and expectations on investment returns, and the returns that can be reasonablyexpected from such investments.• Key risks like food and water security and the wider consequences of land sales arenot generally considered by investors in their investment decisions.• The interests and rights of local communities are frequently not taken into account. Inmany cases, local communities have no involvement in the sale process.
ELEVENWhile the debates around access to water andagricultural land offer the clearest examples ofthe risks faced by investors, a similar pictureemerges in other areas. For example, emergingeconomies are expected to provide 50 per centof the future pharmaceutical market growthby 2020, 12 This has forced pharmaceuticalcompanies to consider how they can adapttheir business models to address the pricing,research and development, and intellectualproperty issues that impact on access tomedicines in order to protect their long-termshare value. 13PENSION FUNDS AND FUND MANAGERSTHEMSELVES, AS WELL AS THECOMPANIES IN WHICH THEY INVEST, HAVESTARTED TO BECOME THE TARGET OFCIVIL SOCIETY CAMPAIGNS.Bribery and corruption is another major issue forinvestors, which potentially affect all sectors ofthe economy. In the BRBW workshop on briberyand corruption, 14 participants expressed concernabout the mounting hidden cost of corruptioninvestigations. The direct financial cost ofone case study presented in the workshopwas calculated at $293 million; this was inaddition to the unquantifiable costs associatedwith reputation damage and managementdistraction. 15Growing social and regulatory pressureApart from the financial case for action,investors are facing increasing scrutiny andpressure from governments, media and civilsociety as a result of the growing expectationsof investors to be transparent and accountablefor their social and environmental impacts.Perhaps the most high profile example inrecent years has been the campaign for theinternational prohibition of cluster munitions,which has seen investors being explicitlytargeted. These campaigns have beenparticularly successful in the Netherlands andScandinavia where pension funds were directlytargeted. An increasing number of investorsnow have explicit prohibitions on investing incompanies involved in the production of clustermunitions: for example, UBS Global AssetManagement, 16 Norway Pension Fund and theNew Zealand Superannuation Fund, Belgianbank KBC, Dutch bank ING, Dutch Pensionfunds PGGM and ABP.Beyond specific NGO campaigns, there is moregeneral pressure for institutional investorsto take a more responsible approach to themanner in which they conduct their investmentactivities, and these pressures are likely to growover time. Pension funds and fund managersthemselves, as well as the companies inwhich they invest, have started to become thetarget of civil society campaigns. For example,FairPensions 17 in the UK and VBDO 18 in theNetherlands both benchmark pension fundsand fund managers on their performancein managing environmental, social andgovernance issues, and publish the names ofgood and poor performers.“What has changed is thatstraightforward legal complianceis no longer sufficient. Societal,market and investor expectations aremuch higher and are continuing torise. The companies that will be thewinners of the future will be thosethat can anticipate and exceed theseexpectations”. Nick Robins, Headof Climate Change Centre, HSBC
Page 4: 1. Introduction“We can’t afford
Page 7 and 8: SEVENThe fact that the project was
Page 9: NINEOxfam is a rights-based organiz
Page 15 and 16: FIFTEENRole 2: Stock selectionInves
Page 17: SEVENTEENRole 4: Influencing public
Page 21 and 22: TWENTY ONE4.1 Introduction4.2 Struc
Page 24 and 25: TWENTY FOURThe lack of transparency
Page 26 and 27: TWENTY SIXBox 5. Integrating living
Page 28 and 29: TWENTY EIGHTConsensus around perfor
Page 30 and 31: 5. Conclusions and recommendations
Page 32 and 33: THIRTY TWOTO CREATE DEMAND AND IMPR
Page 34 and 35: THIRTY FOURInstituting proper incen
Page 36 and 37: THIRTY SIXGovernment leadership of
Page 38 and 39: THIRTY EIGHTThe other issue that wa
Page 40 and 41: FORTYAs a final reflection on the q
Page 42 and 43: FORTY TWOCivil society organisation
Page 44 and 45: FORTY FOUREndnotes1 See www.busines
Page 46: FORTY SIXOxfam acknowledges the con

Better returns for business.pdf - Oxfam New Zealand

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