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Plain reasons to turf tobacco

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As Australian legislation comes into effect requiring companies to sell cigarettes in plain packs, there are risks that come from investing in tobacco. Just as governments across the world replicated the New York smoking ban, it seems likely the same will occur with regard plain packaging, which will hit tobacco revenue.

Some investment funds already exclude cigarette companies and there is growing pressure in Australia – and across the world – for others to follow suit. Smoking is increasing in emerging markets where regulation is extremely low. It is also alarming the extent to which packet design is presently used to imply lesser health risks and to appeal to children, which serves as a reputational risk for tobacco investors especially due to the rise in child smokers from developing countries.

Finally, there is evidence from the UK that local governments are unaware of their option to divest from tobacco companies, which serves as a reminder to ESG professionals of the need to make clear to investors the options they have with regard investment risks around tobacco.

Although legal, cigarettes are a unique product that kills half of all those that consume them. From the December 1 2012, Australia required tobacco companies to use plain, olive green packets with no branding, standardised font and large vivid health warnings. After a failed challenge in the High Court, Japan Tobacco International, British American Tobacco, Philip Morris International and Imperial Tobacco were unable attempt to block the legislation. This defeat has global implications for the industry.

Australia’s move on plain packaging has led to the possibility of tobacco companies losing revenue as a domino effect among governments emerges. After New York City in 2003 proved a public smoking ban could work, governments across the world took notice and now Australia, New Zealand, India and many European countries have passed similar laws. Likewise, there is already evidence that as a result of Australia’s ground-breaking regulation, countries such as the UK, France, New Zealand and
India are considering plain packaging.

One concern is that, with a few exceptions, this tougher attitude on the part of governments is not being replicated in poor- and middle-income countries which are the home to the majority of today’s smokers. The Centre for Global Tobacco Control at Harvard University has indicated that while there were 100m deaths from smoking in the 20th century, there are likely to be one billion in the 21st century, mostly from developing countries. Just as the US saw smoking levels rise in line with economic development and a lack of awareness of health dangers, so too is this likely to be the case in emerging market countries.

Tobacco has long been a focus of the responsible investment community as one of the sin stocks which is regularly excluded from portfolios. However, there are signs that mainstream investors are also shying away from the sector. First State Super announced it had divested from all tobacco manufacturers, partly due to pressure from health workers who make up 40% of the fund’s members.

The $80 billion superannuation fund for Australian federal public sector employees, the Future Fund, has announced it is considering removing tobacco companies from its portfolio. At the state level the Australian Capital Territory government has banned all such investment and the treasurer of New South Wales has asked state agencies to divest from holdings in tobacco stock worth $250m.

Part of the reason why tobacco packaging as it stands is a problem is the way companies use packet design to appeal to consumers. A study by academics at the University of Stirling in Scotland found that “brightly coloured and attractive branded packs can reduce perceptions of the harmfulness of cigarettes.” A commonly held belief among many smokers is that certain types of cigarettes, as implied by packet design, are better for those trying to quit and have varying levels of health risks. Plain-packaging therefore allows consumers to be better informed and to understand that regardless of the brand, cigarettes are damaging to health.

A further problem is the use of cigarette packaging to appeal to young people. Obviously if a company produces a product which kills or causes illness among users, there is a requirement to find new consumers to replace them. Young people offer a great opportunity to tobacco companies as they are generally less able to calculate risks, more impressionable and less likely to have the confidence to resist peer pressure.

Clear evidence exists showing tobacco companies use branding to appeal specifically to children. In 2006 British American Tobacco said new packs were designed to attract the ‘iPod generation’. Slimmer cigarettes which come in more floral, pastel coloured-packets are designed to appeal to girls as they are associated with perfume and make-up. Studies have shown that for young children in general, bright packet colours are seen as attractive while plain packets are seen as less impressive and therefore hold less social status.

As a result, Australia’s plain packaging legislation looks set to reduce the number of young smokers which will mean less customers and less money for Tobacco companies. The reputational risk of being associated with child smokers is likely to grow as the young people in developing countries do not encounter the health warnings and legal restrictions enforced in the West. It is estimated that Indonesia has five million child smokers.

It is worth remembering that there are still challenges to avoiding investment in tobacco. For instance, there have been recent calls on local government councils in the UK to drop tobacco from their investment portfolios, partly because from 2013 they will have a legal responsibility to lead local quit smoking campaigns. This creates a conflict of interest as councils face the task of discouraging the use of a product which they invest in.

There is also the ethical issue of health workers having a responsibility to discourage people from smoking while their pensions are invested in tobacco stocks. One problem appears to be a lack of knowledge among people outside the investment community about how they can control their portfolios, with some councillors in the UK under the impression that they are unable to screen out tobacco companies.

There are risks investing in the tobacco industry. Many investors are likely to see lower returns from tobacco as plain-packing hits sales and more governments consider replicating the Australian legislation. Moreover there is a growing trend in Australia of superannuation funds excluding tobacco from their portfolios as pressure grows from fund members. A further reputational risk is the fact that cigarette packet design is used to appeal to children.

Either way, there remains a lack of knowledge among members of the public about how they can influence flows of investment money and utilise their ownership rights as either pension fund members or shareholders to avoid the risks associated with investment in the tobacco industry should they feel like saying no to tobacco.

Pete MacLeod is responsible investment analyst at CAER, EIRIS’ global platform partner in Australia. This blog was originally posted on EIRIS’ website.

Further reading:

Local councils defend tobacco investments

Tobacco: investing in death

Tobacco investments: incongruous and unethical

Canadian council to implement responsible investment policy

Economy

How Going Green Can Save A Company Money

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going green can save company money
Shutterstock Licensed Photot - By GOLFX

What is going green?

Going green means to live life in a way that is environmentally friendly for an entire population. It is the conservation of energy, water, and air. Going green means using products and resources that will not contaminate or pollute the air. It means being educated and well informed about the surroundings, and how to best protect them. It means recycling products that may not be biodegradable. Companies, as well as people, that adhere to going green can help to ensure a safer life for humanity.

The first step in going green

There are actually no step by step instructions for going green. The only requirement needed is making the decision to become environmentally conscious. It takes a caring attitude, and a willingness to make the change. It has been found that companies have improved their profit margins by going green. They have saved money on many of the frivolous things they they thought were a necessity. Besides saving money, companies are operating more efficiently than before going green. Companies have become aware of their ecological responsibility by pursuing the knowledge needed to make decisions that would change lifestyles and help sustain the earth’s natural resources for present and future generations.

Making needed changes within the company

After making the decision to go green, there are several things that can be changed in the workplace. A good place to start would be conserving energy used by electrical appliances. First, turning off the computer will save over the long run. Just letting it sleep still uses energy overnight. Turn off all other appliances like coffee maker, or anything that plugs in. Pull the socket from the outlet to stop unnecessary energy loss. Appliances continue to use electricity although they are switched off, and not unplugged. Get in the habit of turning off the lights whenever you leave a room. Change to fluorescent light bulbs, and lighting throughout the building. Have any leaks sealed on the premises to avoid the escape of heat or air.

Reducing the common paper waste

paper waste

Shutterstock Licensed Photo – By Yury Zap

Modern technologies and state of the art equipment, and tools have almost eliminated the use of paper in the office. Instead of sending out newsletters, brochures, written memos and reminders, you can now do all of these and more by technology while saving on the use of paper. Send out digital documents and emails to communicate with staff and other employees. By using this virtual bookkeeping technique, you will save a bundle on paper. When it is necessary to use paper for printing purposes or other services, choose the already recycled paper. It is smartly labeled and easy to find in any office supply store. It is called the Post Consumer Waste paper, or PCW paper. This will show that your company is dedicated to the preservation of natural resources. By using PCW paper, everyone helps to save the trees which provides and emits many important nutrients into the atmosphere.

Make money by spreading the word

Companies realize that consumers like to buy, or invest in whatever the latest trend may be. They also cater to companies that are doing great things for the quality of life of all people. People want to know that the companies that they cater to are doing their part for the environment and ecology. By going green, you can tell consumers of your experiences with helping them and communities be eco-friendly. This is a sound public relations technique to bring revenue to your brand. Boost the impact that your company makes on the environment. Go green, save and make money while essentially preserving what is normally taken for granted. The benefits of having a green company are enormous for consumers as well as the companies that engage in the process.

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Energy

5 Easy Things You Can Do to Make Your Home More Sustainable

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sustainable homes
Shutterstock Licensed Photot - By Diyana Dimitrova

Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.

1. Weather stripping

If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.

Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.

Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.

2. Programmable thermostats

Programmable thermostats

Shutterstock Licensed Photo – By Olivier Le Moal

Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.

Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!

3. Low-flow water hardware

With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.

Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.

Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.

4. Energy efficient light bulbs

An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.

New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.

5. Installing solar panels

Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.

Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.

From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!

These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.

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