Recent Developments

Climate Advocacy outperforms the market by nearly 3%

The Climate Advocacy Fund has outperformed its benchmark since the funds inception in February 2010. The Climate Advocacy Fund has produced a return of 8.8% to 31 December 2010, compared to the benchmark S&P/ASX 200 return of 5.9%. This is a very good result for Australian Ethical and we look forward to seeing how this fund performs in the future.

First shareholder resolutions on climate change

The Climate Advocacy Fund recently put forward resolutions for consideration to four Australian-listed mining companies.

Two of these companies, Paladin Energy and Aquila Resources held their AGMs in November 2010.Both companies chose not to allow the resolutions to be voted on at their AGMs.

Although both companies chose not to have the resolution voted on, the proposed resolutions and supporting material were included with the AGM papers sent out
to shareholders. As a result, more than 25,000 Paladin shareholders and 4,000 Aquila shareholders were informed of the climate change risks confronting their company.

Following their AGMs both Paladin and Aquila have indicated that they will provide greater disclosure around carbon emissions.

Oil Search and Woodside will be holding their AGMs in the first half of 2011. Oil Search have already indicated they will allow the resolution to be voted on at the AGM. The positive response from Oil Search puts the responses from Paladin and Aquila into context.

The putting of resolutions by shareholders, particularly on environmental issues, is unique in Australia. These are the first resolutions to be submitted to Australian companies on environmental issues for at least five years. The mixed response from these companies having to deal with this for the first time is not unexpected.

Why the Climate Advocacy Fund?

A climate change focus

Climate change is the most important issue to face present and future generations. The scope and potential impact of climate change – environmental, humanitarian, health and political – make it an overarching issue to rival the consequences of war in magnitude.

For this reason climate issues will be the primary initial focus of the Fund, though in time a range of related social and environmental issues will also be addressed.

Corporate change needed

Advocacy is a constructive engagement process used in an endeavour to highlight and reduce the climate risks faced by business. Through advocacy the Climate Advocacy Fund aims to improve the sustainability and financial performance of listed Australian companies.

Encouraging disclosure

In 2008, only 8% of companies in the S&P/ASX 200 disclosed their emissions according to the Greenhouse Gas Protocol, while 60% disclosed no data. This prevents investors from evaluating the carbon intensity of their investments.

The Climate Advocacy Fund seeks to engage companies aiming to improve their commitment to disclose and reduce emissions.

Power in numbers

In order to put resolutions to an Australian company on climate change and related issues, the support of at least 100 shareholders is required.

Arrangements have been made with 100 Australians deeply concerned about corporate responsibility, who are prepared to use a shareholding in support of the Climate Advocacy Fund's aims.

The Fund will also seek to get the wider support of other shareholders.

Themes and issues raised

Climate issues will be the primary initial focus of the Fund, though in time a range of related social and environmental issues will also be addressed. Such issues are outlined in the following principles, which guide all the actions of the Fund:

The Fund will actively use its shareholdings to encourage corporate actions which result in:

• supporting people
  • worker ownership and participation
  • locally-based ventures
  • human happiness, dignity and education
  • alleviating of poverty
• supporting quality
  • high quality products and services
  • appropriate technological systems
• supporting the environment
  • reducing pollution and efficient use of human waste
  • sustainable land use and building practices
  • preserving endangered eco-systems
  • animal welfare

The Fund will actively use its shareholdings to discourage corporate actions which result in:

• damaging the environment
  • pollution
  • destroying or wasting resources
• causing harm
  • products or services that harm humans, animals and the environment
  • militarism and armaments
• disadvantaging people
  • misleading or deceitful marketing of products or services
  • producing and advertising unwanted products or services
  • encouraging financial over-commitment
  • exploiting with low wages or poor working conditions
  • discriminatory employment or marketing practices
  • inhibiting human rights
  • acquiring land or commodities for speculative gain

(From the Climate Advocacy website: http://www.climateadvocacyfund.com.au)