MEDIA RELEASE
21 July 2003

Also see the position paper and background paper for more information.

Super funds put the spotlight on energy use by Australian companies, and say under-disclosed suggests under-managed

Two leading Australian superannuation funds today called on companies to improve the governance and reporting of energy use, including greenhouse gas emissions.

Governance research, commissioned by the combined Public Sector and Commonwealth Superannuation Schemes (PSS/CSS) and Catholic Superannuation Fund (CSF), shows that a staggering 90% of companies in the S&P/ASX200 Index do not provide information on the management of energy use, including greenhouse gas (GHG) emissions, in corporate disclosures.

The research, performed by BT Financial group and Monash University, also shows that:

• as few as 14 S&P/ASX200 companies have integrated energy and GHG mitigation into corporate environmental management systems;
• only 18 S&P/ASX 200 companies have publicly disclosed commitments to reduce energy use or GHG emissions; and
• only one in 17 S&P/ASX200 companies disclosed GHG reductions at or below Australia’s Kyoto targets.

The research identifies manufacturing, mining, energy, building materials and transport sectors as being most at risk owing to the energy intensive nature of their operations.

“ Due to rising energy costs, insurance costs, regulatory costs and litigation costs, as well as the tangible risk of reputation and brand damage, the management of energy use is no longer the province of environmentalists alone,” said Mr Steve Gibbs, PSS/CSS CEO, and Mr Frank Pegan, CSF CEO, in a joint statement.

“ It is now an area of high and unpredictable risk which impacts the profitability of companies and their long-term shareowner value.

“ In view of the increasing risks associated with energy use, shareowners have a fiduciary duty to take an active interest in this area and company directors have a duty to ensure that sufficient reporting is provided to shareowners.
“ Improved management and disclosure of energy use by companies is a win on two fronts. Firstly, it offers an immediate and measurable reduction in business costs, and thereby improved profits. Secondly, it is a sound approach to long-term risk management.

“ We are surprised that the mainstream investment community has not done more to ensure dialogue on this important matter and will be instructing our governance adviser to constructively engage with a number of companies.

“We are long term investors with investment horizons more than twenty years away.

“ We expect company directors will welcome our long-term investment view in calling for improvement in the governance and reporting of this risk through a three-step process: conducting regular energy risk audits; implementing any appropriate mitigation strategies; and proactively disclosing energy risk management on an ongoing basis.”

Facts on the Public Sector and Commonwealth Super Schemes (PSS/CSS): The PSS and CSS are two of Australia’s leading super funds which: provide retirement benefits and superannuation services to over 260,000 members Australia-wide; have around $10 billion funds under management; safeguard the long-term interests of members through Australia’s first and leading comprehensive governance program, launched in 2001; were the first to raise the governance issue of disclosure of risks such as auditing (April 2002), environmental disclosure (September 2002), and workplace health and safety (April 2003); and are committed to keeping members well informed so they make the most of their retirement opportunities. Facts on Catholic Superannuation Fund (CSF): CSF membership is represented across the teaching profession in Catholic schools and associated agencies in Victoria, Tasmania and the Northern Territory. The CSF commenced in 1971 and represents the interests of approximately 30,000 members with combined investment assets of about A$1.1 billion. CSF formally commenced its investment governance programme in November 2002. Facts on BT Financial Group: BT Financial Group is the wealth management business of Westpac Banking Corporation. BT Financial Group encompasses the three former entities of Westpac Investment Management, Rothschild Australia Asset Management and BT Funds Management. BT Financial Group is one of Australia's largest investment management groups offering a range of investment management solutions to clients. The Governance Advisory Service (GAS) is a leading-edge approach to governance risk management developed with institutional investors to meet the challenge of long-term governance risk management. GAS currently advises clients representing around $3,500 million of Australian share investments.