Sustainability Guide 2013 - Long Finance

Sustainability Guide 2013

Company and Sector Analysis of the STOXX® Europe 50 IndexFeaturing the new Inrate Sustainability Assessment

1Inrate Sustainability Assessment

The publication of the 2013 Inrate Sustainability Guide of companies and sectors in the STOXX® EUROPE 50 index is an important step in the validation of our work. It is the outcome of a three year Research and Development project which has brought to fruition developments in our methodology we have long believed in.

Sustainability analysis is often criticized, for focusing too much on the facade erected by companies rather than on the true impact of the building which lies behind it. This approach was perhaps justified in the beginning, when sustainability initiatives reflected a genuine awareness and commitment on the part of companies. But as soon as environmental and so-cial communication became fashionable it was often the case the more the building was cracked, the more the facade was decorated.

The phenomenon of green washing is one reason why highly controversial companies are sometimes found at the top of current sustainability rankings. Another reason is the im-proper application of best-in-class methodology which sim-ply establishes industry rankings (and not true sustainability). A portfolio may include an oil company with a slightly higher ranking than its peers but exclude a software company with a lower peer group ranking for purely sector allocation reasons. But the software company is inherently more sustainable than the oil company and any sustainability analysis needs to reflect that fact.

That is why Inrate places the environmental and social impact at the heart of its sustainability analysis. It means we must

Philippe Spicher, CEO Inrate

first analyze and understand a company’s business activi-ties as well as the environmental and social issues at stake. For example, child labor is a fundamental issue for clothing brands and chocolate manufacturers but it is marginal for many other companies. Global warming affects the entire economy but not always to the same extent. To complicate matters further, few companies are confined to a single busi-ness activity and many companies have diversified their busi-ness over several industries.

The developments in our methodology, which form the back-bone to the 2013 Sustainability Guide, were not undertaken lightly and we are particularly proud of what we have achieved. But our efforts will not stop here: we are committed to further innovation and development so we can address the needs of the broader investment industry by focusing on the issues of materiality and the financial risks related to sustainability. We look forward to sharing these developments with you in due course.

Impact is at the heart of the Inrate Sustainability AnalysisForeword


• Daimler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

• DeutscheBank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

• DeutscheTelekom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

• Diageo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

• E.ON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

• ENI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

• Ericsson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

• GlaxoSmithKline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

• GlencoreXstrata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

• HSBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

• ImperialTobaccoGroup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

• INGGroup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

• LVMH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

• NationalGrid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

• Nestlé . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

• Novartis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

• ReckittBenckiser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

• RioTinto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

• Roche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

• RoyalDutch-Shell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

• Sanofi-Aventis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

• SAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

• SchneiderElectric . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

• Siemens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

• StandardChartered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

• Telefonica . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

• Tesco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

• Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

• UBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

• Unilever . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

• Vodafone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

• ZurichInsuranceGroup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Inrate analyst team and sector responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Inrate contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Interview with Tobias Jung: “Inrate identifies market players which are on a sustainable path” . . . . 4

Overview of the STOXX® Europe 50 sectors . . . . . . . . . . . . . . . 7

• Chemicalsector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

• Clothingsector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

• Communicationsector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

• Energysector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

• Financialservicessector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

• Healthsector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

• Householdandpersonalproductssector . . . . . . . . . . . . . . . 14

• ITequipmentandelectronicssector . . . . . . . . . . . . . . . . . . . . . . . . 15

• Machineryandindustrialequipmentsector . . . . . . . . . . 16

• Nutritionsector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

• Resourcessector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

• Softwaresector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

• Transportationsector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Overview of the STOXX® Europe 50 companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

• ABB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

• AirLiquide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

• Allianz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

• Anheuser-BuschInBev . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

• AstraZeneca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

• BancoSantander . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

• Barclays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

• BASF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

• Bayer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

• BBVA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

• BGGroup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

• BHPBilliton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

• BNPParibas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

• BP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

• BritishAmericanTobacco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

• CompagnieFin.Richemont . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

• CreditSuisseGroup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Table of contents

4 Inrate Sustainability Assessment

“Inrate identifies market players which are on a sustainable path”Interview with Tobias Jung, Head of Research, on the methodology of the new Inrate Sustainability Assessment

Inrate assesses sectors and companies. What’s the conceptual basis for your company assessment?

Assessing the sustainability performance starts with a proper understanding of the company and its activities. For that, we categorize the various activities of a company according to a proprietary classification. Based on our analysis of sectors, we then identify the most relevant sustainability challenges that the company faces.

We assess the impact of the company on environment and so-ciety. This includes the impact of its operations, of its supply chain and of its products once they’re in the hands of consum-ers. Furthermore, we analyze what steps the company under-takes to monitor and mitigate those impacts.

We also take into account the strategy followed by the com-pany for moving towards a sustainable economy, which can be achieved in different ways. Generally speaking, it’s through a combination of technological gains, efficiency improvements and behavioral changes.

Can you give some concrete examples of your assessment?

Harmfulproductssuchastoxictoyscanhardlybeclassifiedas sustainable. The same can be said of a company that does not respect the health of workers or uses business practic-es with detrimental effects on society, such as bribery or tax avoidance.Lastbutnotleast,governanceofcompaniesmat-ters, as was expensively illustrated by the financial crisis that hit developed economies five years ago.

Inrate has defined a specific sector concept. How does it work?

The concept of Inrate Sectors is a different way of focusing on the purpose of the products and services provided by a com-pany. Therefore, the allocation of a company to an Inrate Sec-tor may differ from traditional classification systems used by stock exchange indexes.

For example, a car manufacturer would be assigned to the Inrate Sector “Transportation”, because ultimately that is the purpose of the company’s product. So car manufacturers are compared with other means of transportation such as rail-ways or air transport.

What’s the consequence of this?

Ourkeyquestioniswhichcompanieswithinasectorrespondto a specific consumer need in the most sustainable way. To this end, we identify the most relevant sustainability issues for each sector. Then we assess the way companies within this peer group respond to those issues. By analyzing companies within the frame of our proprietary Inrate Sector, we widen the spectrum of solutions and take innovative approaches to sus-tainability into consideration.

How do you measure a company’s sustainability performance?

We focus on the company-specific sustainability issues iden-tified as being important. For some of them we rely on metrics. For example, regarding climate change, which is a major chal-lenge for most companies, we calculate the greenhouse gases generated by the operations and along the entire value chain of products and services.

For other issues there are no metrics applicable. Here, weneed to come up with an analytical and consistent judgment, basedonqualitativeinformation.Inadditiontotheissues,weapply an analysis grid with indicators selected according to a company’s activities.

From the perspective of results, there is a trade-off between consistency and relevance: When you apply a universal analy-sis grid, companies are treated in a consistent way across all sectors. And when you analyze a sector’s companies in a tailor-made way you gain more relevance while losing consis-tency between sectors.

Tobias Jung, HeadofResearch


How does Inrate deal with this trade-off?

This needs to be managed carefully. The social and environ-mental impacts, which are main pillars in our assessment, are analyzed consistently across sectors. The worst software company is very likely to be more sustainable than the best oil company and our methodology takes that into account.

But sustainability is a multi-dimensional concept and com-panies are very diverse. Most companies conduct a mix ofactivities, often spread across different industries. That’s why using a universal analysis grid alone is not enough and why particular sector issues trigger a special focus in our assess-ment.

Another important step of our process is the final layer laid down by our experienced analysts. They crosscheck the plau-sibility of results with an in-depth qualitative assessment.It is this final step that ensures the relevance of our results: our research becomes based less on corporate reporting and more on our analysis of what a company actually does.

Category Grade Explanation

A A+ Through its practices, products or services, the company already contributes to

the reduction of the social or environmental imbalances of the economy and makes possible the global transition towards a long-term sustainable economy.

A

A–

B B+ The activity of the company is compatible with a long-term sustainable economy,

butitsproducts,servicesorpracticesdonotmeetalltherequirementsofsustain-ability yet. The company demonstrates the willingness and ability to improve its sustainability performance.

B

B–

C C+ The activity of the company is currently not sustainable. Its products, services

or practices exert a heavy social or environmental burden, but the company demonstrates the willingness and some ability to modify its products or practice in order to diminish that impact.

C

C–

D D+ The activity of the company is not sustainable. Its products, services or practices

contribute to a rapid deterioration of environmental or social conditions. The company has no possibility or demonstrates no willingness to reduce its burden.

D

D–

The Inrate assessment scale

Can you explain the meaning of your grades? Is A+ the sustainability equivalent of the triple A’s awarded by rating agencies?

If you want a financial analogy, you might say that A is a safe asset.Bisquitegood,CisofconcernandDisveryproblemat-ic. There are two major differences with financial analysis: the first one is that you can’t use that single and very convenient metric called money. The second one is that you end up with very few A’s because only few companies actively contribute to a sustainable economy.

In your sector reports, you mainly speak about negative ecological and social impacts. Isn’t this a rather negative perspective?

Sustainability ratings map the risk situation in terms of sus-tainability. We provide valuable additional insights for sus-tainability-oriented investors. By assessing the negative im-pacts and identifying those market players which are already on a sustainable path, Inrate builds the basis for redirecting investment flows toward a more sustainable economy. This is a very positive and future-oriented role.


Overview of the STOXX® Europe 50 sectors

Sector Number of companies in the MSCI World Index

Number of Stoxx® Europe 50 companies

Page

Chemical sector 59 3 8

Clothing sector 43 2 9

Communication sector 104 3 10

Energy sector 193 7 11

Financial services sector 231 12 12

Healthcaresector 119 5 13

Householdandpersonalproductssector 20 1 14

ITequipmentandelectronicssector 88 2 15

Machineryandindustrialequipmentsector 55 2 16

Nutritionsector 112 7 17

Resources sector 80 3 18

Software sector 23 1 19

Transportation sector 139 1 20


Products made by companies in the chemical sector are om-nipresent in our everyday life and considered a necessity in manyeconomicareas.Morethan100,000chemicalsareusedworldwide. Some of them are known to be highly damaging toecosystemsandhumanhealth.However,theextentoftheoverall impact of chemicals on the environment has always been disputed, because many of their possible interactions and long-term toxicities still remain unknown.

The environmental impact of different chemical products varies according to tenuous differences in the production processes, the composition of the products, as well as their application areas. In general, the production of chemicals is energy and resource-intensive and roughly 95 % of the raw materials are found in the fossil sources of oil, gas and coal.

Safetyrequirementsfortheproductionandhandlingofchem-icals are high and form an important aspect of good working conditions in the chemical industry. Furthermore, impacts on communities neighboring chemical production sites need to be considered when assessing the sustainability of compa-nies in the chemical sector.

Chemical sector

Key issuesSustainability challenges in the chemical sector:

• Impacts of products on ecosystems

• Energy consumption during production processes

• Healthimpactofproductsduringapplicationandif released into the environment

• Healthandsafetyofemployeesandcontractorsaswell as of communities neighboring chemical production units

5 largest Grade Market cap MSCI companies (billion USD)

Bayer C– 98BASF C– 883MCompany B 82Monsanto D+ 56DupontE.I.deNemours&Co D+ 54

Stoxx Europe 50® Grade Market capcompanies (billion USD)

Bayer C– 98BASF C– 88AirLiquide C+ 43

Engagement topicsInvestors should encourage companies to:

• Carefully assess and improve negative impacts of prod-ucts along their entire life cycle

• Phase out substances when there are reasonable grounds for concern

• Substitute certain substances if alternatives with lower impact on ecosystems or human health are available

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sustainable not sustainable

Number of companies in the MSCI World Index

Market cap(billion USD)

A+ A A- B+ B B- C+ C C– D+ D D–

Company grade

Inrate Sustainability Assessment and market capitalization of companies in the chemical sector (59 companies)


The clothing sector is characterized by long supply chains en-compassing various production steps: the growing of cotton or the manufacturing of synthetic fibers, the transformation of fibers to yarns and fabrics and finally the production of a wide variety of clothing and luxury goods. Environmental impacts can occur at any stage. The manufacture of synthetic fabrics from polyester-fibers, which are derived from crude-oil and are currently the most widely used manufactured fibers, is an energy-intensive process that contributes to global warm-ing due to CO2 emissions. Furthermore, air pollutants includ-ing volatile organic compounds are emitted, which can cause respiratory diseases. The cultivation of cotton in plantations can also impact the environment: for example, cotton produc-tionaccountsforaquarterofoverallpesticideuseintheU.S.

The world textile market is huge and one of the most global-ized sectors; it provides employment opportunities to more than 60 million people. These are predominantly unskilled workers such as young women, migrants or workers on short-term contracts in developing countries and emerging mar-kets. Unfair working conditions and unreasonable hours and demands are common issues of concern: there are numerous reports of workers being forced to work long hours for low pay under dangerous and unhealthy working conditions. For companies selling luxury goods, such as gold and diamonds, responsible procurement is another major issue. Gold, silver and diamonds used in luxury goods are often mined in regions affected by conflicts or instability with insufficient safety standards for the miners.

Clothing sector

Key issuesSustainability challenges in the clothing sector:

• Environmental impact of textile processing

• Working conditions in supply chain

• Ecological impact of raw material sourcing


LVMH B 100Inditex B– 96Hennes&Mauritz B– 72Nike,Inc. B– 65CompagnieFin.Richemont B+ 58


LVMH B 100CompagnieFin.Richemont B+ 58


• Implement measures to reduce the use of water, pesti-cides and fertilizers for cotton production

• Responsible supply chain management: ensure working conditions do respect basic human rights and guarantee at least minimal health and safety standards

• Provide assurance regarding the procurement of gold and diamonds

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A+ A A- B+ B B- C+ C C– D+ D D–

Company grade

Inrate Sustainability Assessment and market capitalization of companies in the clothing sector (43 companies)


Using different types of communication technologies is an indispensable part of modern business and private life. Over the past decades, communication networks and services have become a vital element to create economic growth and a prosperous society. The communication sector encompasses telephone, television and internet service providers, media and online companies as well as companies providing tele-communications infrastructure – such as fiber, cable, and satellites.However,companiesengagedintheproductionofsoftware or communication devices like computers and mo-bile phones belong to the software and electronics sectors respectively.

Communication services, for example broadband internet, cloud computing or search engines, promote substitution processes leading to dematerialization or teleworking. Fur-thermore, they enable the use of infrastructure such as smart buildings or smart grids, as well as new services such as e-commerce, e-government and e-health. They thereby help to increase efficiency and the ability to innovate in many parts of business, public and private activities and also improve competitiveness. On the other hand, communication activi-ties are associated with a vast array of increased negative en-vironmental and social impacts; well-known are greenhouse gas emissions resulting from energy consumption at data centersaswellas inequalities inrelationtoaccesstocom-munication services.

Communication sector

Key issuesSustainability challenges in the communication sector:

• Energy consumption at data centres and networks and related greenhouse gas emissions

• Electromagnetic radiation from mobile antennas and Wi-Fi

• Anti-competitive practices and abuse of market position

• Privacy of the individual – security of data and information, cybercrime

• Support of oppressive regimes (censorship, provision of user data)


GoogleInc C+ 291AT&T C+ 182Vodafone C+ 170Verizon C 133FacebookInc C+ 121


Vodafone C+ 170Telefonica B 71Deutsche Telekom C 63

Inrate Sustainability Assessment and market capitalization of companies in the communication sector (104 companies)


• Reduce energy consumption of communication networks

• Enforce initiatives to reduce resource use of communication devices and to increase their recyclability

• Foster ecological and efficient use of ICT (Green ICT)

• Enforce protection of personal data

• Support initiatives to reduce negative social effects, in particular against digital divide and social exclusion

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A+ A A- B+ B B- C+ C C– D+ D D–

Company grade


Energy, either in form of electricity or heat, is a fundamental need for industry and consumers. Energy stems from fos-sil sources like oil, gas and coal, from nuclear power plants or from renewable sources like solar, wind, and hydropower. The overall impact of the energy sector on the environment is rather high, caused by a large portion of “not sustainable” companies (see graph on the right): the majority of big com-panies in the energy sector are engaged in the extraction and provision of fossil energy carriers, i. e. coal, oil and gas. Their impact on the environment is caused mainly by CO2 emissions from the combustion process, but also by pollution or land-scape destruction when using controversial mining and un-conventionalextractiontechniques.

Companies involved in nuclear power production also face se-rious unresolved issues, related to radioactive waste from nu-clear energy production and the enormous damage potential in case of accidents. Renewable energy production in general bears the least environmental impact.

Considering the social dimension of sustainability, the ben-efits of the energy sector for society – providing fuels, elec-tricity and heat – are in contrast to the risks of energy proj-ects and their often negative effects on the surrounding local communities. These impacts can be offset by careful planning and implementing measures to minimize environmental and social risks.

Energy sector

Key issuesSustainability challenges in the energy sector:

• Percentage of renewable energy in electricity mix of electric utilities

• Climate change: CO2 impact of products along their entire life-cycle

• Environmental pollution, e. g. oil spills, gas flaring, emis-sions of chemicals to groundwater due to gas fracking and controversialminingtechniques

• Healthandsafetyconditionsforemployeesandcontrac-tors

• Bribery and corruption


ExxonMobilCorporation D 383Chevron Corporation D 236Royal Dutch - Shell D– 214Total SA D 138BPPLC D 133


Royal Dutch - Shell D– 214Total SA D 138BPPLC D 133ENI D+ 83BGGroup C+ 65NationalGridplc C+ 43E.ONSE C+ 36


• Implement concrete action plans and strategies to en-able the transition to a low carbon economy and foster the phasing out of nuclear energy

• Communicate transparently about environmental impacts linked to unconventional extraction practices such as deepwater drilling or gas fracking

• Engage in fair discussion over health impacts on communi-ties neighbouring extraction operations

• Improve health and safety standards and reduce fatality rate

• Improve business ethics standards and programs to avoid bribery and corruption

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60 sustainable not sustainable



A+ A A- B+ B B- C+ C C– D+ D D–

Company grade

Inrate Sustainability Assessment and market capitalization of companies in the energy sector (193 companies)


The major sustainability impacts of the financial services sec-tor occur mainly outside the activities of financial companies: They are indirectly involved in sustainability impacts through their finance and insurance activities. At the moment the majority of companies in this sector cannot be regarded as sustainable because they do not systematically assess, pre-vent and disclose sustainability risks. They are still involved in financing and insuring controversial activities – such as the production of fossil and nuclear energy or weapons – or infra-structure projects that violate human rights.

Some companies do lead the way and systematically exclude these activities from their business. Other financial compa-nies foster sustainability effectively by preventing conflicts of interest and both managing and disclosing investment and insurance risks.

Sustainable investments in the financial services sector are still rare, with the exception of a few sustainability leaders specializing on Socially Responsible Investments (SRI). Al-though there is a trend towards increasingly integrating en-vironmental, social and governance (ESG) criteria into invest-ment and lending decisions, the importance of ESG criteria in the decision process mostly remains unclear.

Financial services sector

Key issuesSustainability challenges in the financial services sector:

• Financing and insuring activities which cause harmful environmental or social impacts

• Sustainability risks caused by company’s own investments

• Business ethics behavior, especially regarding fiscal compliance, money laundering or conflicts of interest

• Fair and transparent financial business practices, especially regarding customer consulting or fees


WellsFargo&Company C– 219HSBC C– 202J.P.MorganChase&Co. C 195Bank of America C– 149Citigroup Inc. C– 148


HSBC C– 202BancoSantander C+ 91BNPParibas C+ 84UBS C 78Allianz B+ 72Barclays C+ 69BBVA B– 63Standard Chartered B– 58Credit Suisse Group C 48DeutscheBank C+ 47INGGroup C+ 43ZurichInsuranceGroupAG B+ 38


• Increase product responsibility by not financing and insuring controversial activities; improve monitoring of ESG impacts of project financing

• Increase share of assets under management invested according to socially responsible principles and ESG-related proxy voting and engagement activities

• Improve responsible marketing and transparency of finan-cial services, especially disclosure of risks and fees

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A+ A A- B+ B B- C+ C C– D+ D D–

Company grade

Inrate Sustainability Assessment and market capitalization of companies in the financial services sector (231 companies)


The health care sector primarily includes pharmaceutical companies as well as companies ranging from providers of health insurance to biotech andmedical equipmentmanu-facturers. It is undisputable that the health care sector ben-efits society by directly contributing to prolonging and mak-ingpeople’slivessafer,butitisnoteasytoquantifythesocialbenefit of health care products. In industrialized countries, aging populations and the wish for long and healthy lives are key triggers for the health care sector, whereas in develop-ing countries unmet medical needs are more important. One of the key topics for sustainable development, therefore, is to grant access to basic medical treatment for broad sec-tionsofsociety.Healthcarecompaniescansupportthisgoalwith appropriate pricing policies for their products and the production and support of inexpensive generic versions of well-known drugs, which are no longer protected by patents. Healthcarecompaniesmustalsoprovideclearcommunica-tion to consumers and other stakeholders in the event of un-expected side effects caused by their products.

The environmental impact of health care products varies sub-stantially with the composition of the products, differences in the production processes, and their field of application. For example, drugs washed out with the sewage which then contaminate surface waters in the natural environment are sometimes of ecological concern.

Health care sector

Key issuesSustainability challenges in the health care sector:

• Side effects of products on consumers

• Prices and patents policies, notably in developing economies

• Relationships with doctors and healthcare systems

• Business ethics behaviour in commercial operations


Johnson&Johnson B– 244Roche B 232Novartis B– 208Pfizer C+ 188Merck&Co C+ 144


Roche B 232Novartis B– 208Sanofi-Aventis B– 134GlaxoSmithKline B+ 124AstraZeneca B 65


• Improve disclosure over clinical testing results and potential side effects

• Engage in fair discussion with governments over pricing of health care products and services

• Improve business ethics guidelines and programs to ensure transparent relations with national healthcare systems

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A+ A A- B+ B B- C+ C C– D+ D D–

Company grade

Inrate Sustainability Assessment and market capitalization of companies in the health care sector (119 companies)


Householdandpersonalproductsarepresentineverydaylife.They are used for different purposes, such as washing, clean-ingandpersonalcare.Householdandpersonalproductsarecomposed of a variety of ingredients, among them active in-gredients and additives. Some commonly used raw materials have negative impacts on the environment, for example petro-chemicals or uncertified pulp. Other ingredients such as sili-cones, which are widely used in shampoos and body lotions, are not biodegradable. Furthermore, there are human health concerns about certain active ingredients and additives, for example chemicalUV filtersused tomake sunscreenprod-ucts. These substances are commonly referred to as “chemi-cals of concern”.

As far as working conditions in the household and personal products industry are concerned, most companies in the sec-tor are aware of their responsibility and have implemented comprehensive health and safety management systems.

Household and personal products sector

Key issuesSustainability challenges in the household and personal products sector:

• Environmental impact of products

• Responsible sourcing

• Healthandsafetyconditionsforemployeesand contractors

• Healthimpactofproducts


Procter&GambleCompany B– 207L’Oreal B+ 104Colgate Palmolive B 55ReckittBenckiserPlc. B+ 53HenkelKGaA B+ 41


ReckittBenckiserPlc. B+ 53


• Work towards improved product declaration to enable consumers to make informed choices regarding carbon footprint, origin of raw materials or “chemicals of concern”

• Expand the range and market share of environmentally friendly products

• Implement measures to phase out “chemicals of concern”

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A+ A A- B+ B B- C+ C C– D+ D D–

Company grade

Inrate Sustainability Assessment and market capitalization of companies in the household and personal products sector (20 companies)


Companies in the IT equipment and electronics sector pro-vide products and services to industrial customers from vari-ous sectors as well as to end consumers. During production, a diverse range of raw materials are processed, among them heavy metals such as lead, arsenic, cadmium, silver and mer-cury,aswellasrareearthmetals.Manyofthesemineralsaremined in developing countries where environmental protec-tion laws are weak and pollution of land and water adjacent to the mining sites is a common occurrence. Working conditions at mining sites are harsh and in the case of so-called “conflict minerals”, human rights violations are common. These miner-als are mined under conditions of armed conflict, mostly in the eastern provinces of the Democratic Republic of the Congo.

IT equipment and electronic componentsmay also containsubstances hazardous to human health and the environment, suchaspoly-brominatedbiphenyls,PVCandhalogenateddi-oxins.Therefore, themajor issues for the IT equipment andelectronics industry are health and safety of workers at pro-duction and recycling sites as well as the phase out and re-placement of hazardous substances during production and in the end products.

Manufacturersof ITequipmentandelectronicscancontrib-ute to environmental protection if they assume responsi-bility for the products at the end of their life cycle and offer take-back programs to guarantee state-of-the-art recycling. Furthermore, they can reduce their environmental impact by designing energy-efficient products which reduce electricity consumption during their use.

IT equipment and electronics sector

Key issuesSustainabilitychallengesintheITequipmentand electronics sector:

• Use of hazardous substances in products

• End of life phase: recycling of products

• Energy consumption of products during use

• Working conditions in supply chain

• Origin of mineral resources


CiscoSystems,Inc. C+ 125Qualcomm B 116Intel C+ 114Siemens C 106DanaherCorporation C+ 48


Siemens C 106Ericsson C+ 44


• Setquantitativetargetstophaseouthazardoussub-stances in products

• Implement take-back programs and consciously recycle products at their end-of-life

• Improve energy-efficiency of products during use

• Ensure working conditions in the supply chain respect basic human rights

• Implement a company-wide “conflict minerals” policy that applies to suppliers and contractors

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A+ A A- B+ B B- C+ C C– D+ D D–

Company grade

Inrate Sustainability Assessment and market capitalization of companies in the IT equipment and electronics sector (88 companies)


The machinery and industrial equipment sector acts as aprovider of virtually all intermediate inputs to other produc-ing industries. It is highly dependent on energy and raw mate-rial inputs, which cause environmental impacts during their extractionandmining.Subsequently,efficiencyofmanufac-turing processes is a priority. The end purpose of the final product is crucial when deciding whether there are additional environmental impacts. For example, if machines are used to produceaircraftpartsthesubsequentenvironmentimpacts– CO2 emissions of airplanes – will be worse than if machines are used to produce parts for wind power plants leading to carbon neutral energy production.

Themachinery and industrial equipment industry hasbeenofhistorical importance formanyOECDcountries.However,cost pressures and increased product demand from outside OECD countries in recent years have caused some structural changes with the sector transferring many production sites to developingandemergingcountries.Healthandsafetyandla-bor conditions for employees and suppliers need to be closely monitored in these markets.

Machinery and industrial equipment sector

Key issuesSustainability challenges in the machinery and industrial equipmentsector:

• Energy efficiency of manufacturing processes

• Purposeofmachineryandequipmentasdriversofsocialand environmental impact

• Safety and reliance of products

• Healthandsafetyconditionsforemployeesandcon-tractors

• Restructuring of businesses with socially acceptable terms, such as social plans or involvement of unions


Caterpillar, Inc. C– 55ABB B– 55Schneider Electric SA B 47EmersonElectricCo. C+ 47FanucLtd B– 40


ABB B– 55Schneider Electric SA B 47


• Improve disclosure over environmental characteristics ofmachineryandindustrialequipment,forexamplelife-cycle assessments

• Implement programs and targets to reduce energy consumption and carbon footprint

• Implement formal management systems for health and safety issues

• Improve monitoring systems for suppliers to ensure fair employment conditions

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A+ A A- B+ B B- C+ C C– D+ D D–

Company grade

Inrate Sustainability Assessment and market capitalization of companies in the machinery and industrial equipment sector (55 companies)


With the rapidly growing world population it has become in-creasingly important to cultivate arable soils and fishing grounds sustainably and to minimize the impacts of fertiliz-ers and pesticides to the air and water. In recent years, com-petition for arable soils initiated by the biofuels industry has been an additional challenge to companies closely linked with agricultural production. Furthermore, they have to face the consequencesofglobalwarming:forexample, incertainre-gions, agricultural practices need to be adapted because of a change in climate conditions.

In industrialized countries, the effects of an unhealthy diet are of growing concern: for example, there are countries where more than half of the population is already overweight. Companies selling fast-food and unhealthy products push that trend further. Companies manufacturing alcohol and to-bacco products contribute to the social costs associated with unhealthy lifestyle and addiction also.

Recently, the topic of food waste gained public attention: one third of food produced worldwide gets lost before it even reaches the end consumer. Wholesale, processing industries and retail together account for more than a third of total food loss – and are encouraged to take action to rectify this situ-ation.

Along the whole value chain of food production, working con-ditions and health and safety standards need to be closely monitored. An appropriate supply chain management is re-quired, too. Although widely condemned, child labor is stillwidespread in the nutrition sector’s supply chain, for example, in the production of cocoa.

Nutrition sector

Key issuesSustainability challenges in the nutrition sector:

• Impacts on ecosystem: pollution of soil, water and air

• Recyclable packaging material

• Working conditions and health and safety standards for employees and contractors

• Supply chain management


Wal-MartStoresInc. D+ 243NestléSA C– 226Coca-ColaCompany C+ 169Anheuser-Busch InBev C 160PhilipMorrisInternationalInc. D+ 142


NestléSA C– 226Anheuser-Busch InBev C 160British American Tobacco plc C– 102DiageoPlc. C+ 80Unilever B+ 67Tesco C– 47Imperial Tobacco Group plc C 36


• Increase share of organic and fair trade products

• Inform in detail about composition of products

• Implement formal management systems to guarantee high environmental and labour standards at own opera-tions, and monitor working conditions in the supply chain

• Reduce food waste

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A+ A A- B+ B B- C+ C C– D+ D D–

Company grade

Inrate Sustainability Assessment and market capitalization of companies in the nutrition sector (112 companies)


The resources sector includes companies engaged in the production of mineral resources encompassing metals (e. g., copper, gold, silver, nickel), industrial minerals (e. g., salts, gyp-sum), as well as rocks and soils. Companies engaged in the production of wood and paper are included in the resources sector also. Companies engaged in the exploitation of energy resources (crude oil, natural gas, coal and uranium), however, are considered to be part of the energy sector.

Extraction and processing of mineral resources often exert substantial impacts on the environment due to acid mine drainage, impacts on water resources, CO2 emissions, loss of biodiversity and landscape destruction. Furthermore, there are many cases of bad labor conditions reported as well as controversies related to the situation of local communities near theminingsites.Mineral rawmaterialsareoftennon-renewable. Nevertheless, many metals (e.g., copper) are100% recyclable: their quality remains constant after theyhave been used and recycled. Recycling is less energy-inten-sive than processing the raw materials from ores: recycling aluminum,forexample,requiresonly5%oftheenergyneed-edforextractingprimaryaluminum.However,recyclingisnotalways possible because a large portion of metals are used in infrastructure projects or incorporated into complex products such as computers.

The production of wood and paper products causes less harm to the environment but unsustainable forest plantations and illegal loggings can damage sensitive ecosystems. Environ-mental certification of timber plantations and paper recycling are two potential approaches towards greater sustainability.

Resources sector

Key issuesSustainability challenges in the resources sector:

• Damage to sensitive ecosystems by pollution of the air, soil and water

• Healthandsafetyconditionsofworkersatmining operations, including contractors and suppliers

• Social and environmental management of projects with regards to local communities

• Transparency of royalties distribution and tax payments in countries where raw materials are exploited


BHPBilliton D+ 107GlencoreXstrataPlc D+ 72RioTinto D+ 69Freeport-McMoRanCopper&Gold D+ 34AngloAmerican D+ 34


BHPBilliton D+ 107GlencoreXstrataPLC D+ 72RioTinto D+ 69


• Implement measures to avoid pollution and transparently report on environmental incidents

• Improve health and safety standards and labor conditions at mining sites and urge suppliers and sub-contractors to follow suit

• Systematically engage with communities before starting new projects including while the operation is being run and closed down

• Become a supporting company to the Extractive Industry Transparency Initiative and openly communicate on tax-related matters

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18sustainable not sustainable



A+ A A- B+ B B- C+ C C– D+ D D–

Company grade

Inrate Sustainability Assessment and market capitalization of companies in the resources sector (80 companies)


The term “software” refers to all non-physical function com-ponents of a technical subject that contains at least one microprocessor. Because software works alongside the cor-responding hardware, it is an essential part of any digital technology and a driving force for positive development, for example regarding production, accounting and management in many sectors.

However,softwareproductscanalsoexertnegativeimpactson society, such as defense-related software products or soft-ware products that are used by oppressive regimes to support censorship which prevents free access to information.

Another societal issue of concern influenced by the software industryistheeconomicinequalityintermsofaccesstoandknowledge of information and communication technologies, often referred to as the “digital divide”.

Software itself exerts a minimal impact on the environment; however, energy consumption by the corresponding hardware can be a concern. The amount of energy consumed depends onthesystemrequirementsofthesoftwareandthetypeandqualityofthehardware.

Software sector

Key issuesSustainability challenges in the software sector:

• Contribution to eco-efficient products and processes

• Contribution to reduction of digital divide

• Production or development of defense-related software products

• Trade with oppressive regimes and support of censorship


MicrosoftCorporation B 278Oracle Corporation B 156SAP AG A 91VMware,Inc. B– 35SALESFORCE.COM B+ 31


SAP AG A 91


• Use technological knowledge to find and foster solutions for environmental and social topics such as products to manage customers’ own sustainability activities

• Reduceinequalitiesinrelationtoaccesstocommunica-tion technologies and information

• Enforce practices to improve privacy protection of personal data and on the internet

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A+ A A- B+ B B- C+ C C– D+ D D–

Company grade

Inrate Sustainability Assessment and market capitalization of companies in the software sector (23 companies)


Companies in the transportation sector enable or support mobility of passengers and freight.Most of themare asso-ciated with road transportation, such as automotive or car parts producers. The overall impact of the sector on the envi-ronment is rather high because road transportation is a major consumer of petroleum and hence an emitter of greenhouse gases and air pollutants which lead to global warming and health impacts. Shipping and aviation also rely almost entire-ly on oil leaving electric rail transportation as an exception. As a result, the fuel efficiency of transport vehicles is a major is-sue to evaluate the companies’ impacts on the environment.

Beside the social benefits of transportation, this sector has severe negative impacts on society: every year about 1.24 mil-lion people die and between 20 and 50 million more people suffernon-fatalinjuriesasaresultoftrafficaccidents(WHO2013). These impacts can be mitigated by implementing high safety and quality standards. Negative impacts on societyare also exerted by companies making products for defense and military purposes. Another societal issue of concern is the outsourcing of various production steps to lower-income countries with a risk of poor working conditions.

Transportation sector

Key issuesSustainability challenges in the transportation sector:

• Greenhouse gas emissions per passenger kilometer

• Laborconditionsforworkersandcontractors• Healthandsafetyimpactoftheproducts


ToyotaMotorsCorporation C– 220Volkswagen C 107Boeing C– 89UnitedParcelServiceInc. C+ 86Daimler C+ 83


Daimler C+ 83


• Demonstrate efforts to promote green techno logies increasing fuel efficiency or reducing emissions

• Implement a comprehensive and credible monitoring system to ensure that working conditions in the supply chain do respect basic human rights

• Transparently communicate about the results of product qualityandsafetytests

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A+ A A- B+ B B- C+ C C– D+ D D–

Company grade

Inrate Sustainability Assessment and market capitalization of companies in the transportation sector (139 companies)


Overview of the STOXX® Europe 50 companiesCompany name ISIN Inrate grade Market cap (billion USD) PageABB CH0012221716 B– 55 22

AirLiquide FR0000120073 C+ 43 23

Allianz DE0008404005 B+ 72 24

Anheuser-Busch InBev BE0003793107 C 160 25

AstraZeneca GB0009895292 B 65 26

Banco Santander ES0113900J37 C+ 91 27

Barclays GB0031348658 C+ 69 28

BASF DE000BASF111 C– 88 29

Bayer DE000BAY0017 C– 98 30

BBVA ES0113211835 B– 63 31

BG Group GB0008762899 C+ 65 32

BHPBilliton GB0000566504 D+ 107 33

BNPParibas FR0000131104 C+ 84 34

BP GB0007980591 D 133 35

British American Tobacco GB0002875804 C– 102 36

Compagnie Fin. Richemont CH0045039655 B+ 58 37

Credit Suisse Group CH0012138530 C 48 38

Daimler DE0007100000 C+ 83 39

Deutsche Bank DE0005140008 C+ 47 40

Deutsche Telekom DE0005557508 C 63 41

Diageo GB0002374006 C+ 80 42

E.ON DE000ENAG999 C+ 36 43

ENI IT0003132476 D+ 83 44

Ericsson SE0000108656 C+ 44 45

GlaxoSmithKline GB0009252882 B+ 124 46

Glencore Xstrata JE00B4T3BW64 D+ 72 47

HSBC GB0005405286 C– 202 48

Imperial Tobacco Group GB0004544929 C 36 49

INGGroup NL0000303600 C+ 43 50

LVMH FR0000121014 B 100 51

NationalGrid GB00B08SNH34 C+ 43 52

NestléSA CH0038863350 C– 226 53

Novartis CH0012005267 B– 208 54

Reckitt Benckiser GB00B24CGK77 B+ 53 55

Rio Tinto GB0007188757 D+ 69 56

Roche CH0012032048 B 232 57

Royal Dutch - Shell GB00B03MLX29 D– 214 58

Sanofi-Aventis FR0000120578 B– 134 59

SAP DE0007164600 A 91 60

Schneider Electric FR0000121972 B 47 61

Siemens DE0007236101 C 106 62

Standard Chartered GB0004082847 B– 58 63

Telefonica ES0178430E18 B 71 64

Tesco GB0008847096 C– 47 65

Total FR0000120271 D 138 66

UBS CH0024899483 C 78 67

Unilever GB00B10RZP78 B+ 67 68

Vodafone GB00B16GWD56 C+ 170 69

ZurichInsuranceGroup CH0011075394 B+ 38 70

Environment

B+

Labour

C+

Society

C-

Governance

A-

Key sustainability issues concerning the company Environmental and social impact of purpose of the machinery / equipment Energy consumption and energy sources used as well as energy efficiency during use

phase Resources used for construction of machinery Working conditions for employees and suppliers (health and safety) Anti-competitive practices

Key considerationsAs an operator in robotics, in the power and in automation technologies areas, ABB is one of the largest engineering companies as well as one of the largest conglomerates in the world. ABB develops and manufactures electricity grids and power technologies which are the key components for the production, transmission and distribution of electricity. Therefore, the company plays a crucial role in the optimization of performance with lower environmental impact. ABB is answering to this market opportunity and has become one of the leaders in the development of smart grid technologies, while global demand of electricity is growing continuously.

ABB is also known for its energy-efficient turbines and generators, for hydropower plants or for gas turbines (as well as combined electricity/heat-coupled solutions, which could serve as a transition technology for a future energy system). The company provides a comprehensive porfolio of standard and customer-tailored products, solutions and services for increased productivity and energy efficiency among industrial, utility and building industry customers.

Companies like ABB have to pay particular attention to the safety of their employees as work on machineries and manufacturing facilities might be dangerous for workers. In that respect, the company has implemented the OHSAS 18001 certification for some of its sites. The company focuses on a health strategy to ensure an active management of occupational hygiene issues such as exposure to hazardous substances, noise and vibration. However, there is no formal safety management system on a group-wide level. An improvement could be made in that respect.

Although ABB's Code of Business Conduct addresses anticompetitive practices and bribery, and zero tolerance of illegal or unethical behavior is enforced, the company is involved in controversies regarding unfair business practices. For example, ABB is involved in price-fixing in Europe and Australia and corruption cases in Mexico and Iraq.

Analyst: Fanny [email protected]

Assessment date: 11.02.2013Report generated on: 17.10.2013

The Inrate Sustainability Assessment is a measurement of and an opinion about the environmental and social impact of an issuer. It rates companies on a scale from A+ to D-.

Stock informationCH0012221716 ISIN

7108899 SedolABBN.VX RICABBN VX Bloomberg Ticker

Key figures146'100 Employees39'336 Revenues (M USD)

Business descriptionABB Ltd (ABB) is engaged in power and automation technologies committed to improving performance and lowering the environmental impact for utility and industry customers. The Company provides a broad range of products, systems, solutions and services that are designed to power grid reliability boost industrial productivity and enhance energy efficiency. The Companyʼs power businesses focus on power transmission, distribution and power-plant automation, and support electric, gas and water utilities, as well as industrial and commercial customers. Effective September 27, 2013, ABB Ltd acquired Baldor Electric India Pvt Ltd.

Source : Reuters, updated 04.10.2013

Inrate Sustainability Assessment Evaluating company products and services along the whole value chain

COMPANY GRADE B-

ABBELECTRICAL EQUIPMENT - Switzerland

Inrate | Sustainability Assessment | © Copyright 201322 Inrate Sustainability Assessment


Society

LabourGovernance

Environment


Environment

C+

Labour

B-

Society

C+

Governance

B+

Key sustainability issues concerning the company Health and safety of employees, contractors and surrounding communities Energy consumption of operational processes Health impact of products Impacts of products on ecosystems Business ethics behaviour in commercial operations

Key considerationsAir Liquide is a chemical company focusing on providing different types of gases and services related to these products. The impact of such activity occurs along the production line as the company needs to protect the health and safety of workers and of communities living around its sites. At the same time, it has to manage the heavy environmental impacts of its production processes. Life cycle assessments of products are also important as they might have serious consequences on the health and safety of users and on the environment.

Among its products, it is worth highlighting that Air Liquide serves some sectors with a positive environmental impact such as solar energy, water purification or air pollution control.

At the operational level, Air Liquide started to address some of the major social and environmental issues at stake for its activities. Regarding social aspects, main concerns relates to protection of employees during production. The company has taken this challenge seriously and has a health and safety management. Some sites are OHSAS 18001 certified. For a chemical company, the health impact of production process not only concern employees, but also communities living around its sites. Air Liquide has taken several steps to ensure that these communities are informed about these risks and their management.

The company has an environmental management system partially certified according to ISO 14001. Air Liquide has implemented programs to manage its major challenges in that area and quantitative targets have been set to improve its performance, notably to improve energy efficiency.

The chemical industry has also been hit in the past years by investigations and fines for controversial business ethics practices. Behaviour in commercial operations is therefore also a topic for a company operating in such sector. Air Liquide has a Code of Conduct addressing, among others, controversial behaviour such as bribery and corruption or anti-competition. It ensures implementation by providing channels for employees wishing to report cases not complying with the code.

Analyst: Vanessa [email protected]



Stock informationFR0000120073 ISIN

B1YXBJ7 SedolAIRP.PA RIC

AI FP Bloomberg Ticker

Key figures50'000 Employees

15'326.3 Revenues (M EUR)

Business descriptionAir Liquide SA is a France-based company engaged in the production of oxygen, nitrogen, hydrogen and other industrial and medical gases. The Company divides its activities between Gas and Services and Engineering and Construction. Gas and Services activities are divided by customer segments: large industries, which manages production units for customers in the steel, chemicals and refining industries; industrial merchants, which supplies gases and services to industries of all sizes requiring variable quantities; healthcare, which supplies medical gases, hygiene products, equipment and services to hospitals and patients; and electronics, which supplies gas and services for the production of semi-conductors, flat panels and photovoltaic panels. In May 17, 2013, it acquired a 73.3%share of Healthy Sleep Solutions. In July 2013, the Company acquired HELP! and Ventamed. In September 2013, it finalized acquisition of Voltaix Inc, an electronics materials company.



COMPANY GRADE C+Air Liquide

CHEMICALS - France

Inrate | Sustainability Assessment | © Copyright 2013

Chemical sector

Environment

Society

LabourGovernance


Environment

B

Labour

A

Society

B-

Governance

A

Key sustainability issues concerning the company Sustainability impacts of company's own investments Fairness and transparency of insurance contracts and consulting services Fair and transparent financial business practice Sustainability impacts of insurance products

Key considerationsAllianz is an international financial service company offering insurance solutions and asset management services to customers in more than 70 countries. As such, the company is more and more involved in both financial and reputational sustainability risks.

Allianz is a member of the Insurance Working Group (IWG) working on the Principles for Sustainable Insurance (PSI). The IWG's aim is to create an effective framework for changes in the development of international insurance standards concerning sustainability. According to the company, the group conducted a global survey on the integration of ESG considerations into underwriting and product development. Allianz also co-chairs the Climate Change Working Group (CCWG). Additionally, Allianz manages part of its funds according to socially responsible principles and provides micro-finance services.

On the operational level, the company has taken measures to reduce its direct ecological impacts by reducing energy consumption and introducing green procurement measures. Even if Allianz is not active in a sensitive sector regarding employees, the company has implemented relevant programs to ensure proper working conditions. Comprehensive employee programs have been adopted, such as regular surveys to monitor employee satisfaction, part-time working hours and integration programs for minorities.

Allianz consciousness for customer needs is translated into an efficient and effective customer relationship management tool. Moreover, formal and systematic customer satisfaction surveys are carried out regularly. Unfortunately, these measures still show some deficiencies as controversies over irregular practices in relation with products and services (e.g. on irregular contract practices) were raised in the past years.

Despite the implementation of a code of conduct addressing bribery, corruption and anti-competition rules, the company was involved in business ethics-related controversies. In fact, Allianz reached a USD 12.4 million settlement in 2012 with the US Securities and Exchange Commission for having bribed governmental officials in Indonesia between 2001and 2008. No other business-ethics related breach was reported since, which is a positive sign in an industry that repeatedly hit the news in recent years. Analyst: Daniela Perito

[email protected] date: 18.03.2013

Report generated on: 17.10.2013


Stock informationDE0008404005 ISIN

5231485 SedolALVG.DE RIC

ALV GR Bloomberg Ticker

Key figures145'538 Employees101'760 Revenues (M EUR)

Business descriptionAllianz SE is a Germany-based financial services provider and the holding company of the Allianz Group. It has two main business operations: Insurance Operations and Asset Management. Within the Insurance Operations include a portfolio of property/casualty and life/health insurance products for both private and corporate customers. The core markets for insurance operations are Germany, France, Italy and the United States. Within the Asset Management operations, the Company manages mainly PIMCO and AllianzGI under Allianz Asset Management (AAM). Furthermore, it has also banking and alternative investments operations, which support the its insurance business and includes the operations of Oldenburgische Landesbank AG (OLB). The banking products are offered in Germany, Italy, France, the Netherlands and Bulgaria. The banking operations are part of Corporate and Other segment that engages central holding functions. It operates in approximately 70countries with major operations in Europe.



COMPANY GRADE B+

AllianzINSURANCE - Germany



Environment

Society

LabourGovernance


Environment

B

Labour

C

Society

C-

Governance

B

Key sustainability issues concerning the company Energy consumption and greenhouse gas emissions Management of water and waste water during production Information on health impact of products Health and safety management for workers and suppliers Anti-competitive practices and price-fixing

Key considerationsAs one of the main Belgium brewers, Anheuser-Busch Inbev is a key actor of the alcoholic beverage industry and has many issues to tackle. On the environmental side, the major contributors to beer carbon footprint are related to the production of malt, the brewery greenhouse gases emissions and the packaging. Anheuser-Busch Inbev is aware of these challenges and has set up measures to address them. On its malt plant in Brazil, the company has started to implement more sustainable agricultural practices including the donation of tree saplings to barley growers to help create a green belt in the fields and in unexplored areas. The plantings help to increase biodiversity, reduce CO2 emissions and buffer crops from wind damage. On its production sites, the company has also started to use renewable energy alternatives (solar, wind and other biomass sources) and plans to reduce its energy use per hectoliter by 10% in two years. Finally, water consumption is also a big concern for the company who has implemented programs and targets to contribute to water preservation.

However, despite these efforts, a formal environmental management system reinforced by a certification would be more than welcome. The same is valid for employees and suppliers. For a company with more than 100ʼ000 employees, more formalization around sensitive issues such as health and safety and employment conditions would be expected.

The social impact of breweries is not to be neglected. Crucial issues are at stake, such as the impact on health of alcoholic beverages and the communication to consumers, especially the young ones. In that respect, Anheuser-Busch Inbev has developed a comprehensive policy on marketing practices addressing responsible drinking and underage drinking in particular. To be effective, its responsible drinking initiatives require a significant commitment. Since 1982, the company has invested more than 875 million USD toward these efforts in the United States. In 2010, the company more than tripled its media placement investment globally in responsible drinking advertising.

Finally, the company has also been involved in some price-fixing schemes, in Brazil in particular. A strong policy on anti-competitive practices would be expected to complete the actual declaration of compliance with legislation.




Stock informationBE0003793107 ISIN

4755317 SedolABI.BR RICABI BB Bloomberg Ticker


Business descriptionAnheuser-Busch InBev SA, formerly Anheuser-Busch InBev SA/NV, is a brewing company. The Company produces, markets, distributes and sells a balanced portfolio of approximately 200 beer brands. These include global flagship brands Budweiser, Stella Artois and Beckʼs; multi-country brands, such as Leffe and Hoegaarden, and many local champions, such as Bud Light, Skol, Brahma, Quilmes, Michelob, Harbin, Sedrin, Klinskoye, Sibirskaya Korona, Chernigivske and Jupiler. The Company also produces and distributes soft drinks, particularly in Latin America. The Company operates in seven segments: North America, Latin America North, Latin America South, Western Europe, Central & Eastern Europe, Asia Pacific and Global Export & Holding Companies.



COMPANY GRADE C

Anheuser-Busch InBevBEVERAGES - Belgium


Nutrition sector

Society

LabourGovernance

Environment


Environment

A-

Labour

A-

Society

C

Governance

A

Key sustainability issues concerning the company Relations with doctors and health care systems Business ethics behaviour in commercial operations Side effects of products on customers Accuracy and objectivity of information provided to customers Clinical trials on humans (notably in emerging markets) Health and safety for workers and contractors Environmental contamination through product residuals Water consumption in the production process Hazardous waste management

Key considerationsAs a global pharmaceutical company, AstraZeneca has a positive social impact as its products cure and might save peopleʼs lives, but it also has challenging sustainability issues to address. In that context, AstraZeneca has been managing most of its potential negative effects for several years now and does it in a competent manner with the exception of business ethics where the company has been mentioned in some important controversies.

Ethical behaviour in commercial operations is a major topic in the health sector, which has been hit by several scandals, notably for pricing or promotion of products or for its fraudulent relations with national healthcare systems. In that respect, AstraZeneca has developed a comprehensive code of conduct and provides employees with clear channels to report irregularities. This good initiative is nevertheless overshadowed by the company's involvement in important controversies in relation to illegal marketing of drugs for off-label use and in relation to bribery practices in some countries. This highlights that the group still needs to improve its management of business ethics in commercial operations.

Regarding its social impact, AstraZeneca offers its employees good working conditions: the group has comprehensive health and safety programs and has set targets to improve its performance. Employee satisfaction is measured regularly with a survey. Environmental impacts of the company's production processes are also taken care of seriously as shown by the different programs and targets implemented.

Overall, AstraZeneca has a good management of its major sustainable impacts, but should still improve its performance related to business ethics.




Stock informationGB0009895292 ISIN

989529 SedolAZN.L RIC

AZN LN Bloomberg Ticker


Business descriptionAstraZeneca PLC (AstraZeneca) is a global biopharmaceutical company. AstraZeneca discovers, develops and commercializes prescription medicines for six areas of healthcare: Cardiovascular, Gastrointestinal, Infection, Neuroscience, Oncology, and Respiratory and Inflammation. It has a range of medicines that includes treatments for illnesses, such as its antibiotic, Merrem/Meronem and Losec/Prilosec for acid related diseases. AstraZenecaʼs products include Crestor, Atacand,Seloken/Toprol-XL, Plendil, Onglyza, Zestril, Symbicort and Zoladex. The Company owns and operates a range of research and development (R&D), production and marketing facilities worldwide. AstraZeneca operates in over 100countries, including China, Mexico, Brazil and Russia. In July 2013,AstraZeneca PLC has sold its toxicological laboratory in Gartuna to Acturum. On July 18, 2013, the Company acquired Omthera Pharmaceuticals. In October 2013,AstraZeneca Plc completed its acquisition of Amplimmune.



COMPANY GRADE B

AstraZenecaPHARMACEUTICALS - United Kingdom


Health care sector

Environment

Society

LabourGovernance


Environment

C+

Labour

B

Society

C-

Governance

A+

Key sustainability issues concerning the company Sustainability impacts of investment products Sustainability impacts of company's own investments Business ethics behaviour (fiscal compliance, money laundering, conflicts of interest) Transparent and fair customer counseling Adequate and transparent service fees

Key considerationsPresent in more than 40 countries, Banco Santander serves several millions of clients in developed and emerging markets. Thus, Banco Santander is regularly confronted with the sustainability issues of its industry, such as the sustainability impacts of its financial products and its own investments.Banco Santander has voluntarily adopted the Equator Principles, which shows the company's awareness for sustainability topics. The principles are a set of standards for assessing and managing social and environmental risks in project finance. Moreover, Banco Santander has developed guidelines to identify environmental and social risks in lending practices and has microfinance activities.

However, the bankʼs involvement in numerous controversies in relation with controversial project financing (e.g. the Jaitapur nuclear power plant and the HydroAysen hydropower project) could be a sign that the good intentions that Banco Santander has taken, are not yet fully implemented.

Besides, even though Banco Santander has policies on bribery, corruption and money laundering, the companyʼs involvement in money laundering, tax evasion investigations, and terrorist financing could be an indication of weaknesses in its business ethics management system.

Like most big financial institutions, Banco Santander has implemented some employee and environmental programs at the operational level. Climate change and green procurement are at the heart of the attention the company pays to the environment. Employee satisfaction monitoring systems are in place. Unfortunately, the company's health and safety programs do not address ergonomics or psychic conditions, which are sensitive themes for banks.

Analyst: Daniela [email protected]



Stock informationES0113900J37 ISIN

5705946 SedolSAN.MC RICSAN SM Bloomberg Ticker


Business descriptionBanco Santander SA is a Spain-based commercial bank. The Bank operates principally in Spain, the United Kingdom, Portugal, the Latin American countries and the United States. It operates four segments: Continental Europe, the United Kingdom, Latin America and Sovereign. Continental Europe segment covers all retail banking business, wholesale banking and asset management and insurance conducted in Europe, under such names as Santander Totta, Santander Consumer Bank and Bank Zachodni WBK, among others. The United Kingdom includes retail and wholesale banking, asset management and insurance. Latin America includes the specialized units in Santander Private Banking, as an independent globally managed unit. Sovereign includes all the financial activities of its subsidiary Sovereign Bank in the United States, which includes retail and wholesale banking, asset management and insurance. In June 2013, the Bank created its Retail Banking division.



COMPANY GRADE C+

Banco SantanderCOMMERCIAL BANKS - Spain



Environment

Society

LabourGovernance


Environment

C+

Labour

A-

Society

C-

Governance

B-

Key sustainability issues concerning the company Sustainability impacts of investment products and own investments Business ethics behaviour (fiscal compliance, money laundering, conflicts of interest) Transparent and fair customer counseling Adequate and transparent service fees

Key considerationsBarclays is a global investment bank with international presence. As for most financial companies, its main environmental and social impacts arise indirectly from the company's banking activities, i.e. the impacts of investments that are either directly financed by the company or that it facilitates as a financial intermediary. Thus it is crucial that environmental and social criteria are taken into account in lending and investment decisions.

Barclays has recognized this responsibility by signing the Equator Principles, a set of standards for assessing and managing social and environmental risks in project finance.Moreover, Barclays has developed guidelines to identify environmental and social risks in its lending practices and has incorporated microfinance activities.

However, the bank is involved in numerous controversies in relation with controversial financing, e.g. the Sakhalin II Oil and Gas projects the Bauxite mine Niyamgiri Hills, as well as the nuclear and cluster munitions industries. This could be a sign that the good resolutions Barclays has taken, are not yet fully implemented.

Moreover, Barclays faces numerous controversies over business ethics issues. Even if there are tools in place like business ethics policies and codes of conducts, the company is involved in cases over bribery, improper payments, tax avoidance, money laundering, the manipulation of banking rates (LIBOR) and the misrepresentation in sale of mortgage securities in the US. This indicates among others, the company's insufficient prudence toward fair customer counseling.

On the other hand, Barclaysʼ operational level is backed by numerous programs and policies in relation to environmental protection and employee issues. Climate change and green procurement are at the heart of the attention the company pays to environment. For example, the company has implemented energy management programs and embraced energy efficient design for its buildings. Employee satisfaction monitoring systems are in place, and most employees are represented by collective labour agreements and take part in work councils. Analyst: Daniela Perito





3134865 SedolBARC.L RIC

BARC LN Bloomberg Ticker

Key figures139'900 Employees25'522 Revenues (M GBP)

Business descriptionBarclays PLC (Barclays) is a global financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services. The Companyʼs operations include its overseas offices, subsidiaries and associates. The Company operates in eight segments: UK Retail and Business Banking (UK RBB), Europe Retail and Business Banking (Europe RBB), Africa Retail and Business Banking (Africa RBB), Barclaycard, Barclays Investment Bank, Barclays Corporate Banking, Wealth and Investment Management, and Head Office and Other Operations.



COMPANY GRADE C+

BarclaysCOMMERCIAL BANKS - United Kingdom



Environment

Society

LabourGovernance


Environment

D+

Labour

C-

Society

C-

Governance

A+

Key sustainability issues concerning the company Health and safety of employees, contractors and surrounding communities Energy consumption of operational processes Health impact of products Impacts of products on ecosystems Business ethics behaviour in commercial operations

Key considerationsBASF is a diversified chemical company offering various products and services to several sectors. The impact of such activity occurs along the value chain: in fact, the company needs to protect the health and safety of workers and of communities living around its sites, but also to manage and reduce the heavy environmental impact of its production processes. Life cycle assessments of products are also important as they might have serious consequences on the health and safety of users and on the environment. In that respect, it is important to highlight that BASF has developed some products with a clear environmental benefit as, for example, products to develop energy-efficient housing such as insulation materials or products for the solar industry. The company also offers catalytic converters that are key detoxification of private and industrial emissions.

As usual for a company of this size, BASF provides a comprehensive reporting on its sustainability initiatives. The company has a comprehensive Code of Conduct addressing business ethics issues, but also labour and environmental issues. It also has set the relevant programs and targets to mitigate its main operational impacts, notably in relation to health and safety. Their implementation through the group is ensured with the support of the Sustainability Council reporting directly to the Board of Executive Directors.

However, this good performance on the operational management framework is overshadowed by the numerous controversies related to labour or environmental issues. For example, its activities at two sites in the Netherlands were suspended due to failure in safety systems. In the US, BASF was already fined several times for violations of pollution regulations. Such examples show that the company still needs to improve the implementation of its guidelines and programs. Then, some products promoted by the company are clearly not in line with a sustainable business model. In fact, BASF, mainly through its subsidiary BASF Plant Science, is one of the few major global contributors to an industrialized agriculture based on genetically modified seeds and plants.




Stock informationDE000BASF111 ISIN

5086577 SedolBASFn.DE RIC

BAS GR Bloomberg Ticker


Business descriptionBASF SE is a German chemical company. It diversifies its activities into five business segments: Chemicals, providing basic products and specialties including nitric acid and methanol, basic chemicals including ethylene and butadiene and intermediates, among others; Performance Products, providing products for the coatings and paints industry, cosmetics, detergents, cleaners industry, vitamins, enzymes, products for the paper industry and performance chemicals, among others; Functional Materials & Solutions that develops coating products, catalysts and construction chemicals, among others; Agricultural Solutions, providing active ingredients and formulations for the improvement of crop health and yields, and Oil & Gas segment (exploration, production and natural gas trade). The segment Plastics (producing engineering plastics, polyamides and polyurethane solutions), divested as of January 1, 2013, is since then incorporated into segments Chemicals and Functional Materials & Solutions.



COMPANY GRADE C-

BASFCHEMICALS - Germany


Chemical sector

Environment

Society

LabourGovernance


Environment

C-

Labour

D-

Society

C-

Governance

A+

Key sustainability issues concerning the company Health and safety of employees, contractors and of surrounding communities Energy consumption of operational processes Health impact of products Impacts of products on ecosystems Business ethics behaviour in commercial operations Relations with doctors and health care systems Accuracy and objectivity of information provided to customers

Key considerationsBayer is a diversified chemical company offering various products and services to several sectors. The impact of such activity occurs along the production line as the company needs to protect the health and safety of workers and of communities living around its sites, but also to manage the heavy environmental impacts of its production processes. Life cycle assessments of products are also important as they might have serious consequences on the health and safety of users and on the environment. Among its different business lines, one is dedicated to health care: this activity has a positive social impact as it cures and might save peopleʼs lives, but it also has challenging sustainability issues to address.

As usual for a company of this size, Bayer addresses most of the sustainability challenges at stake considering its activities. Management of such issues is dealt with at group level with the Chief Sustainability Officer being a member of the Board of Management. The companyʼs principles and policies are spread through the group with the Corporate Compliance Policy that addresses, in a comprehensive way, business ethics issues, but also environmental and labour issues. Bayer has the relevant programs and targets to reduce its major environment impacts.

However, this good record is overshadowed by two main aspects. First, Bayer is criticized for some of its chemical products and its business model to promote them: this is particularly the case for the genetically modified organisms even if the company operates within regulatory requirements. Then, the company is too often involved in controversies related to the way it manages its business. Regarding employees, Bayer was still criticized in 2010 for using child labour in India and for not trying to solve the problem. Since then, the company has taken action to tackle the issue. However, such cases tend to show that the different policies and programs of the company are not working efficiently yet and that the group still needs to improve their implementation in order to reach a better sustainability performance. Analyst: Vanessa Ardenti




Stock informationDE000BAY0017 ISIN

5069211 SedolBAYGn.DE RICBAYN GR Bloomberg Ticker


Business descriptionBayer AG is a German management holding company with core competencies in the field of health care, nutrition and high-tech materials. It's business operations are organized into three subgroups: HealthCare, involved in the research, development and manufacture of health products for people and animals, CropScience, engaged in the crop protection and non-agricultural pest control, and MaterialScience, that provides polymers, and develops solution for a range of applications, supported by the service companies Bayer Business Services, Bayer Technology Services and Currenta. It operates through numerous subsidiaries, affiliated companies as well as joint ventures located in Europe, Latin America, Africa, Middle East, North America as well as the Asia/Pacific region, such as Bayer Chemicals AG in Germany, Cotton Growers Services Pty. Limited in Australia and Bayer Israel Ltd in Israel, among others. In July 2013, it acquired Steigerwald Arzneimittelwerk GmbH.



COMPANY GRADE C-

BayerPHARMACEUTICALS - Germany


Chemical sector

Environment

Society

LabourGovernance


Environment

B-

Labour

A-

Society

C-

Governance

A+

Key sustainability issues concerning the company Sustainability impacts of financial products Sustainability impacts of company's own investments Business ethics behaviour (fiscal compliance, money laundering, conflicts of interest) Transparent and fair customer counseling Adequate and transparent service fees

Key considerationsBBVA is among Spainʼs main financial institutions. The company has business activities in over 30 countries, with a strong presence in Central and South America. Serving over 50million customers, BBVA has a major responsibility for the sustainability impacts of its financial products and own investments.

BBVA takes ESG criteria into account within its lending and project financing decisions. In fact, it has adopted the Equator Principles (a set of standards for assessing and managing social and environmental risks in project finance). Moreover, in 2009, it has implemented a manual integrating environmental tools and procedures in the credit risk decision-making process.

Unfortunately, BBVA is involved in financing environmentally and socially controversial projects such as the Ilisu dam project and the Angra 3 nuclear power plant. This indicates, that companyʼs measures in relation to the environmental assessment of its projects investments and loans, are still insufficient.

The company is aware of the importance of customer relations, as it has a customer satisfaction monitoring system in place at group level. However, customer relations were overshadowed by a lawsuit BBVA faced in 2012, charging it for fraudulently manipulating customersʼ checking-account transactions in order to get overdraft fees.

Like all financial companies, BBVA is confronted with the risk of bribery, corruption and money laundering. These risks are faced through the implementation of a code of conduct and the adoption of channels to report business ethics related breaches.

On the operational side, BBVA addresses environmental and employee issues. For example, it has set up programs to reduce CO2 emissions, and regular employee satisfaction surveys provide management with information to build up positive working relations. Moreover, collective labour agreements and close relationship with unions help ensure favorable exchange with employees. Analyst: Daniela Perito




Stock informationES0113211835 ISIN

5501906 SedolBBVA.MC RICBBVA SM Bloomberg Ticker


Business descriptionBanco Bilbao Vizcaya Argentaria SA (BBVA) is a Spain-based international financial group with presence in 32countries. The Companyʼs activities are focused in such business units as banking, pension and insurance in Spain and Portugal, Mexico and South America. In the USA and Puerto Rico, the Bank only comprises banking business. In addition The Company has two cross-sectorial business units, Corporate and Investment Banking and Global Retail & Business Banking, which includes retail banking, commercial and small and medium enterprises (SMEs) banking, payment systems, consumer finance and private banking, among others. BBVA is a parent company of Grupo Banco Bilbao Vizcaya Argentaria, which comprises such entities as BBVA Banco Frances SA and BBVA International Limited, among others. In October, 2013, the Company announced that it has completed the sale of its entire 64.3%stake in Administradora de Fondos de Pensiones Privadas SA (AFP Provida) to MetLife Inc's subsidiaries.



COMPANY GRADE B-

BBVACOMMERCIAL BANKS - Spain



Environment

Society

LabourGovernance


Environment

C-

Labour

B-

Society

B+

Governance

A+

Key sustainability issues concerning the company CO2 impact of final product Environmental pollution (spills, including flaring) Health and safety conditions of workers(incl. contractors and suppliers) Labour conditions of workers (incl. Contractors and suppliers) Share of turnover from gas on the overall fossil fuel business Unconventional extraction practices Involvement in controversial (pipeline) projects / controversies over local communities Corruption and anti-competitive practices Royalties distribution transparency

Key considerationsBy being active in the fossil-based energy industry, BG Group is obviously facing many significant environmental issues. The company has nevertheless a smaller impact on climate change than most of its industry peers because its core business is related to natural gas, which emits during combustion less CO2 per unit than other fossil fuels.

From an environmental perspective, the activity of the company is still considered as not sustainable. The involvement of the company in unconventional extraction operations in the USA and Australia and the USD 21 million fine it had in 2010 in western Kazakhstan for excessive waste dumping reinforce this assessment.

Labour related issues are well managed by the company which has implemented credible health & safety programs for its employees. BG Group provides clear and comprehensive health and safety data regarding its employees and contractors. It also launched a system to screen contractor companies in order to reduce the risk of a breach of its Business Principles (for example about bribery and corruption).

Most relevant societal issues are also addressed by BG Group. For example, it acknowledged that revenue transparency is an increasingly important issue for its stakeholders. Therefore, the company discloses in its public reporting payments made to countries it is active in as recommended by the Extractive Industries Transparency Initiative (EITI).

Analyst: Alexandre [email protected]




876289 SedolBG.L RIC

BG/ LN Bloomberg Ticker


18'933 Revenues (M USD)

Business descriptionBG Group plc (BG Group) is a natural gas company. The Company is engaged in the exploration, development and production of natural gas and oil. It operates in three business segments: Exploration and Production (E&P), Liquefied Natural Gas (LNG) and Transmission and Distribution (T&D). Effective January 1, 2012, the Company was managed across three regions: Americas and Europe; Africa, Central and South Asia, and Australia and East Asia, supported by Global Energy Marketing and Shipping (GEMS) and BG Advance. The Company has interests in 25countries on five continents. During the year ended December 31, 2011,the Company acquired an interest in, and operatorship of, offshore blocks L10A (BG Group 40%) and L10B (BG Group 45%) in Kenya. During 2011,the Company acquired additional Marcellus shale properties in partnership with EXCO Resources, Inc. (EXCO). In June 2013, BG Group PLC announced that it has completed the sale of its 65.12% holding in Gujarat Gas Company Limited (GGCL).



COMPANY GRADE C+BG Group

OIL, GAS & CONSUMABLE FUELS - United Kingdom


Energy sector

Environment

Society

LabourGovernance


Environment

D+

Labour

D-

Society

D+

Governance

A+

Key sustainability issues concerning the company Environmental management of mining operations Labour conditions of workers at mining operations (incl. contractors and suppliers) Health and safety conditions of workers (incl. contractors and suppliers) Tax payment practices in resources-producing countries Traceability of origin of precious metals Fair practices in business acquisition Social and enviromental management of projects

Key considerationsMining extraction has strong environmental and social impacts. BHP Billiton rightly recognized important issues such as pollution prevention, climate change and biodiversity and therefore implemented detailed environmental performance reporting tools and mitigation measures. Nevertheless, several water pollution incidents occurred during the last years. For example in Peru in 2012, more than 200 local people including children, suffered from headaches, vomiting and other symptoms after coming into contact with water polluted with copper concentrates .

By being a significant provider of fossil fuels such as coal (about 20% all sales) oil and heavily controversial uranium (an estimated 1.5% of all sales), the company not only contributes to the deterioration of the environment but also supports an unsafe nuclear industry.

On the social level, the company has implemented policies and programs regarding health and safety, and communicates directly with its employees through trade unions. However, several fatal accidents occurred during last years. BHP Billiton also faced many controversies regarding employment conditions that often resulted in strikes. In February 2012, about 3ʼ000 workers in Queensland State (Australia) decided to down tools to uphold their safety and working conditions.

BHP Billiton supports the Extractive Industries Transparency Initiative (EITI), a global initiative to improve governance in resource-rich countries through the verification and full publication of company payments and government revenues from oil, gas and mining activities. This is a progressive step, but some important countries of operations such as Chile, South Africa, Algeria and Pakistan are not covered by this initiative yet.

The company has undertaken many initiatives to address most sensitive issues with better practices but a gap still remains between the companyʼs rhetoric and the reality on the ground.





56650 SedolBLT.L RIC

BLT LN Bloomberg Ticker


Business descriptionBHP Billiton plc is diversified natural resources company. The Company generally operates through customer sector groups (CSGs). The Company operates in nine segments: Petroleum, Aluminium, Base Metals, Diamonds and Specialty Products, Stainless Steel Materials, Iron Ore, Manganese, Metallurgical Coal and Energy Coal. As of June 30, 2012, the Company was working in more than 100 locations worldwide. During the fiscal year ended June 30, 2012(fiscal 2012), the Company total petroleum production was 222.3millions of barrels of oil equivalent. During fiscal 2012, its aluminium had a total production in 1.2 million tones (Mt) of aluminium. In August 2011, the Company acquired Petrohawk Energy Corporation. On September 30, 2011,it acquired HWE Mining Subsidiaries from Leighton Holdings. On September 7, 2012, the Company announced the sale of its 37.8 % non-operated interest in Richards Bay Minerals.



COMPANY GRADE D+

BHP BillitonMETALS & MINING - Australia


Resources sector

Environment

Society

LabourGovernance


Environment

C+

Labour

B

Society

C-

Governance

A-


Key considerationsEven if BNP Paribas shows the willingness and the ability to diminish its impact, its practices exert an important burden on the environment and on the society.

As a financial institution with a worldwide presence, the social and environmental effects of its investments and loans have a key role to support progress toward sustainable development.

Actually, the bank offers SRI funds to its clients (accounting for 2.2% of assets under management) as well as green loans to promote the use of energy-efficient equipment and materials in the construction sector. However, BNP Paribas is among the world`s major provider of nuclear energy financing. It also finances coal mining, the oil & gas sector and tar sand projects.

In addition, BNP Paribas is involved in financing several socially damaging projects, such as the HydroAysen hydrpower project in Chile. Furthermore the company is involved in financing companies which are active in Burma, such as Petrochina or DongPheng, which penalizes the sustainable assessment of the company.

On the other hand, BNP Paribas adopted requirements that forbids investment into companies that conflicts with its proper values as investor. In fact, it does not provide financial services to companies involved in « controversial weapons » (cluster munitions, antipersonnel mines, chemical/biological weapons).

The company is aware of its impacts on the operational level and implemented relevant programs to ensure proper working conditions. Comprehensive employee programs were adopted (as for example regular surveys to monitor employee satisfaction, part-time working hours and integration of disabled employees). Moreover, the company has collective labor agreements in place in most countries and implemented a comprehensive sustainable purchasing program.





7309681 SedolBNPP.PA RIC

BNP FP Bloomberg Ticker


Business descriptionBNP Paribas SA is a France-based bank group with four core businesses: Retail Banking, Corporate & Investment Banking, Investment Solutions and Other Activities. Retail Banking comprises the French retail banking division, Banca Nazionale del Lavoro in Italy, BeLux Retail Banking, Europe-Mediterranean, all BNP Paribas Group retail banking businesses out of Euro Zone: in the United States, in Asia, in the Mediterranean Basin and Africa, in Turkey, Central and Eastern Europe, personal finance and equipment solutions. The Corporate & Investment Banking business provides to its clients financing, advisory and capital markets services. The Investment Solutions division offers private banking, asset management, securities services, real estate and insurance services. In November 2012, Euronet Worldwide Inc through its Ukrainian subsidiary, Euronet Ukraine LLC, announced the acquisition of automated teller machines (ATMs) from UkrSibbank, a subsidiary of BNP Paribas.



COMPANY GRADE C+

BNP ParibasCOMMERCIAL BANKS - France



Environment

Society

LabourGovernance


Environment

D-

Labour

D

Society

D-

Governance

B-

Key sustainability issues concerning the company CO2 impact of final product Environmental pollution and spills (including flaring) Health and safety conditions of workers (incl. contractors and suppliers) Labour conditions of workers (incl. Contractors and suppliers) Share of turnover from gas on the overall fossil fuel business Unconventional extraction practices Environmental and social management of projects Corruption and anti-competitive practices Royalties distribution transparency

Key considerationsAs an Integrated Oil & Gas company, BP is active in a very sensitive industry, whose products and services are based on non-renewable energy sources, and therefore are emitting large quantities of CO2 during their combustion. The company indeed decided to increase its production of natural gas, a resource that release less CO2 than other fossil fuel during combustion but regrettably plans to sell its wind energy business in the US in the near future.

Production practices in the Oil & Gas industry also have a strong environmental impact. BP is pursuing deep-water drilling and unconventional oil & gas exploration. The risks of deep-water drilling clearly came to light by the Deepwater Horizon disaster in 2010 that turned out to be one of the worst oil spills in history. Shale gas and tar sands exploitation not only emits more greenhouse gases than conventional extraction methods, but it also uses a lot of water and potentially pollutes it with chemicals used in the extraction process. BP however recognizes that climate change is a major global challenge and has taken many initiatives to reduce the impact of its activities on this pressing issue. It has established a detailed environmental policy addressing most relevant issues and implemented programs to improve the efficiency of its operations. Despite all that, the company faced a huge amount of significant controversies in recent years.

On the social level, BP has implemented policies and programs regarding health & safety, which is a major issue in the Oil & Gas industry. Nevertheless, some accidents with fatalities occurred during the last years resulting sometimes in controversies regarding the respect of safety standards. For example, in July 2012, BP agreed to pay USD 13 million in fines to settle more than 400 safety violations at its Texas City refinery. Finally, the numerous positive initiatives taken by BP in order to engage with local communities impacted by its projects are overshadowed by many severe controversies affecting the company. As such, in May 2010, Colombian indigenous communities submitted a complaint against BP for allegedly having forced them off their land through illegal acts.





798059 SedolBP.L RIC

BP/ LN Bloomberg Ticker



Business description BP p.l.c. (BP) is an integrated oil and gas company. The Company provides its customers with fuel for transportation, energy for heat and light, lubricants and the petrochemicals products used to make everyday items as diverse as paints, clothes and packaging. The Company operates in two business segments: Exploration and Production, and Refining and Marketing. The segment comprises three main businesses: fuels, lubricants and petrochemicals. Effective March 21, 2013, the Company acquired a 5.66% interest in OAO Neftyanaya Kompaniya Rosneft. In September 2013, UGI Corp announced that its subsidiary, Flaga GmbH, has completed the acquisition of the liquefied petroleum gas (LPG) distribution business of BP in Poland.



COMPANY GRADE D

BP PLCOIL, GAS & CONSUMABLE FUELS - United Kingdom


Energy sector

Environment

Society

LabourGovernance


Environment

B

Labour

D+

Society

D

Governance

A+

Key sustainability issues concerning the company Land and resources used (notably in relation with deforestation) Water consumption and waste water Child labour in the production process Health and safety management among employees and suppliers Business ethics practices (in relation with lobbying and black market) Information on health impact of products

Key considerationsAs one of the main company of the tobacco Iidustry, British American Tobacco (BAT) has to be aware of the major issues environmantal and social issues of tobacco production.

From beginning to end, the process used by manufacturers to turn tobacco seeds into packaged cigarettes is energy intensive. Furthermore, the improper disposal of cigarettes has serious environmental consequences. BAT, through its comprehensive Environment, Health & Safety (EHS) management system which has been in place for many years, shows awareness on its main environmental issues. It also has an internal reporting system that monitors group-wide performance on its key environmental measures. BAT has also taken several measures to address its increasing environmental challenges such as climate change and deforestation. Such measures were implemented following accusations in August 2010 of deforestation in Uganda. Water use is also a major concern for tobacco production and in that respect BAT shows an exemplary behavior with strong programs and targets to reduce its consumption.

On the labor side, the company has an exemplary reporting on labour issues for employees and contractors with strong measures to improve employment conditions. However, controversies over poor employment conditions of illegal workers in Uganda or over child labour in Brazil highlights that programs are not fully spread through the group.

Finally, the impact of smoking cigarettes on human health is the major issue of tobacco companies. Even though, the company cannot change its product, it can try to manage this effect with truthful information to consumers and fair business practices. Despite standard measures such as a policy on responsible marketing, the company has been repeatedly criticized for its wrongful practices such as illegal advertising or unscrupulous marketing. Analyst: Fanny Sulmoni





287580 SedolBATS.L RIC

BATS LN Bloomberg Ticker

Business descriptionBritish American Tobacco p.l.c. (British American Tobacco) is a holding company. The Companyʼs four principal brands include Dunhill, Kent, Lucky Strike and Pall Mall. The Company has many other famous international and local brands, including Rothmans, Vogue, Viceroy, Kool, Peter Stuyvesant and Benson & Hedges. The Companyʼs brands are sold in over 180 markets. The Companyʼs products include Cigarettes, Smokeless snus and Cigars. The Company has over 44cigarette factories in 39 countries. In addition to cigarettes, the Company makes cigarillos, roll your own and pipe tobacco.



COMPANY GRADE C-

British American Tobacco plcTOBACCO - United Kingdom


Nutrition sector

Society

LabourGovernance

Environment


Environment

A-

Labour

B+

Society

B-

Governance

A-

Key sustainability issues concerning the company Origin of animal products Textile processing Water and energy consumption for production Sourcing of raw materials (notably gold and diamonds) Working conditions in supply chain

Key considerationsAs a company active in the luxury industry, Richemont needs to tackle severalenvironmental impacts, notably in relation to its supply chain.

As a member of the Responsible Jewelry Council (RJC), the company is aware that it needs to source raw materials in a responsible manner. In fact, gold and diamonds are often mined in regions affected by conflict or instability. Thus, Richemont Model Supplier Code of Conduct ensures that its suppliers provide assurance regarding the origin of such materials. Moreover, the company expects that its Maisons, which account for 86% of the Group sales, will be RJC certified by end of 2013.

Endangered species and leather products manufacturing are also formally addressed by Richemont, which fully complies with the Convention on International Trade in Endangered Species (CITES). Furthermore, efforts are taken to manage its resourcesʼuse, such as water and energy consumption.

Working conditions in supply chain can be considered as the companyʼs main issue on the social. Indeed, the luxury industry reputation cannot be damaged with sweatshop scandals and thus, needs imperatively to produce its goods in a fair and responsible way. Richemont Model Supplier Code of Conduct regulates the working conditions, which must respect fundamental human rights. In addition, systems have been implemented to ensure that the Code is really put into practice. However, it is unfortunate that the company is not certified according to the SA 8000 standard. In addition, there is room for improvement on the monitoring systemsʼ side as they actually do not apply to the whole supply chain.

Overall, Richemont shows a strong awareness of its social and environmental responsibilities and is considered as a leader within its industry. This fact is even worth mentioning that the companyʼs approach towards CSR has been developed in an efficient way within these past three years.

Analyst: Isabelle [email protected]




B3DCZF3 SedolCFR.VX RICCFR VX Bloomberg Ticker


Business descriptionCompagnie Financiere Richemont SA is a Switzerland-based luxury goods company. The Company operates, along with its subsidiaries, in three segments: Jewellery Maisons, Specialist Watchmakers and Montblanc Maison. The Jewellery Maisons segment engages the design, manufacture and distribution of jewellery products, which comprise Cartier and Van Cleef & Arpels. The Specialist Watchmakers segment covers the design, manufacture and distribution of precision timepieces, and the segment comprises Piaget, A. Lange & Soehne, Jaeger-Lecoultre, Vacheron Constantin, Officine Panerai, IWC, Baume & Mercier and Roger Dubuis. The Montblanc Maison segment engages the design, manufacture and distribution of writing instruments. The Companyʼs other operating segments include Alfred Dunhill, Lancel, Chloe, Net-a-Porter, Purdey, textile brands and other manufacturing entities. The Company operates in Europe, the United States and Asia, among others.



COMPANY GRADE B+

Compagnie Fin. RichemontTEXTILES, APPAREL & LUXURY GOODS - Switzerland


Clothing sector

Society

LabourGovernance

Environment


Environment

C+

Labour

C

Society

D+

Governance

B-


Key considerationsCredit Suisse Group is an international company offering financial services in over 50countries. As such, the bank accepts the link between banking activities and their environmental and social impacts.

In fact, the bank's lending decisions are not only based on financial criteria but also on environmental and social principles and the integration of the Equator Principles in its project financing decision process is systematic. With the voluntary adoption of this international industry standard, project finance at Credit Suisse Group is subject to environmental and social assessment before providing financial support. Moreover, the bank has some of its assets under management invested according to socially responsible principles.

However, these measures are undermined by the company's involvement in financing controversial projects like the Sakhalin II gas project in Russia or the Phulbari coal mine in Bangladesh. Furthermore, Credit Suisse Group is among the top providers of financial services to the nuclear and to the coal industry.

Additionally, the respect of business ethical practices is also a matter of concern at Credit Suisse Group. Actually, the bank is involved in numerous cases, such as the LIBOR rate conspiracy case, tax evasion investigations in Germany and the US, fraudulent business practices, and predatory lending cases in connection with the controversial sub-prime mortgages in the US. The adoption of a code of conduct as well as the implementation of channels to report business ethics related breaches seem not to be sufficient measures to prevent the company from such concerns.

On the other hand, the operational level is backed by numerous programs and policies in relation with environmental protection and employee issues. Climate change and green procurement are at the center of the attention the company pays to the environment and all company sites are certified according to the ISO 14001 standard. Employee satisfaction monitoring systems are in place and regular customer satisfaction surveys show Credit Suisse Group's attention for customer needs.





7171589 SedolCSGN.VX RICCSGN VX Bloomberg Ticker

Key figures46'300 Employees22'191 Revenues (M CHF)

Business descriptionCredit Suisse Group AG (Credit Suisse) is a global financial services company. The Company operates in three segments: Private Banking, Investment Banking and Asset Management. In Private Banking, it offers advice and a range of financial solutions to private, corporate and institutional clients. Investment Banking provides a range of financial products and services, with a focus on businesses that are client-driven, flow-based and capital-efficient. Asset Management offers products across a range of asset classes, including alternative investments such as hedge funds, private equity, real estate and credit, and multi-asset class solutions, which includes equities and fixed income products. On April 30, 2011, Credit Suisse completed the acquisition of ABN AMRO Bankʼs (formerly Fortis Bank Nederland) hedge fund administration business. In February 2012, the Company sold an interest in Aberdeen. On March 24, 2011, Credit Suisse Group AG owned 100%interest in Neue Aargauer Bank AG.



COMPANY GRADE C

Credit Suisse GroupCAPITAL MARKETS - Switzerland



Environment

Society

LabourGovernance


Environment

C

Labour

B+

Society

C-

Governance

A

Key sustainability issues concerning the company Fuel efficiency of the product Health and safety impacts of the product Labour conditions for workers and contractors Anti-competitive practices and price-fixing Bribery and corruption

Key considerationsWith its divisions Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans, Daimler Buses and Daimler Financial Services, the Daimler Group is one of the biggest producers of premium cars and the worldʼs biggest manufacturer of commercial vehicles with a global reach.

The automotive industry carries major environmental risks, mainly through their products. Road transport is one of the biggest consumer of petroleum and hence emitter of air pollutants and greenhouse gas emissions. For that reason, emissions reduction through improved fuel efficiency is a major issue. Daimler is conscious of this challenge and strives to develop fuel-efficient, and environmentally compatible drive technologies for all of its automotive divisions. In addition, Daimler is contributing to research alternative fuels. Among them, Daimler is contributing research and development of vehicles that consume purified biomethane as fuel. Furthermore, the company has set the target to reduce the CO2 emissions of its new-vehicle fleet in Europe to 125 grams per kilometer by 2016.However, in the United States, Daimler paid between 2005 and 2007 several fines for violating fuel efficiency requirements.

Regarding its social challenges, the company has taken good efforts and addresses for example the theme health & safety, for which Daimler has implemented policies for both, its own employees and its contractors. However, health and safety certifications for contractors are missing. Furthermore, the company fails to collect and publish data on accidents at its contractor's sites.

Actually, Daimler displays public commitment to business ethics issues. The company's integrity code addresses the main issues within this area, which is of vital importance in an industry sensitive to ethical issues, such as bribery and corruption or anti-competitive practices. Nevertheless, Daimler is currently under investigation being involved in a fraud case in Nigeria. Additionally, it has been accused of bribing Nigerian officials to supply vehicles and tools between 1998 and 2005. Furthermore, Daimler is accused of corruption in Russia, and other bribery allegations coming from Turkmenistan. Analyst: Gina Spescha





5529027 SedolDAIGn.DE RIC

DAI GR Bloomberg Ticker


Business descriptionDaimler AG is a Germany-based company that develops, manufactures and distributes a range of automotive products, mainly passenger cars, trucks, vans and buses, as well as manages the Daimler Group. It also provides financial and other services relating to its automotive businesses. It operates in five segments: Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans, Daimler Buses and Daimler Financial Services, which includes a range of automotive financial services including financing, leasing, insurance and fleet management. The Company offers its products and services under such brand names as Mercedes-Benz, Smart, Maybach, Fuso, Western Star, Setra, Mercedes-Benz Bank and Mercedes-Benz Financial, among others. The Company has production facilities throughout the world and distributes its automotive products and related financial services through its own sales network of German sales-and-service centers, foreign sales subsidiaries and through third parties.



COMPANY GRADE C+

DaimlerAUTOMOBILES - Germany


Transportation sector

Environment

Society

LabourGovernance


Environment

C+

Labour

C+

Society

C-

Governance

B+


Key considerationsDeutsche Bank is Germany's biggest financial institution. The company is present in over 70 developed countries and emerging markets. Thus, Deutsche Bank is confronted with the sustainability issues of its industries, such as the sustainability impacts of its products and its own investments.

The bank has reacted to these topics. In fact, it has adopted a "Green Filter" tool to include the carbon impacts into its lending and investment decision-making processes. Moreover, it has incorporated microfinance activities, and a small percentage of its assets under management are invested according to socially responsible criteria.

However, Deutsche Bank's sustainable performance is overshadowed by its involvement in numerous controversies. The company finances controversial projects (e.g. HidroAysén dam project, Canadian tar sands) and provides funds to the nuclear and the cluster munitions industry. Moreover, employee relations are dimmed by discrimination cases. Furthermore, there are numerous business ethics breaches, such as the LIBOR rate conspiracy case, tax evasion, bribery, and sub-prime predatory lending cases.

Numerous programs have been implemented at the operational level addressing for example environmental protection, human resources or business ethics issues. As a matter of fact, Deutsche Bank has implemented energy reduction programs and has set up CO2-emission reduction targets at group level, notably to achieve carbon neutrality in 2013. To achieve this goal, Deutsche Bank procures electricity from renewable sources and compensates GHG emissions through purchasing Certified Emission Reductions (CERs), issued through the UN Clean Development Mechanism (CDM).

Comprehensive employee programs have been adopted, such as regular surveys to monitor employee satisfaction, part-time working hours and integration programs for minorities. Most employees are represented by collective labour agreements and take part in work councils.

Like all financial institutions, Deutsche Bank is confronted with the risk of bribery and money laundering. The company addresses these topics in its code of conduct and has made reporting channels available to report business ethics related breaches.





5750355 SedolDBKGn.DE RIC

DBK GR Bloomberg Ticker


Business descriptionDeutsche Bank AG is a global investment bank. The Company offers a variety of investment, financial and related products and services to private individuals, corporate entities and institutional clients around the world. The Company divisions include Corporate & Investment Bank (CIB ), Private Clients and Asset Management ( PCAM ) and Corporate Investments ( CI ). As of December 31, 2010, the Company operated in 74 countries out of 3,083 branches worldwide, of which 68 % were in Germany. In March 2010, the Company closed the acquisition of Sal. Oppenheim Group. In April 2010,the Company acquired commercial bank business in Holland from ABN AMRO Bank N.V. (ABN AMRO). In November 2010, the Company acquired 51.98% interest in Deutsche Postbank AG. In February 2011, the Company sold its 9% stake in RTS OAO. Effective March 4, 2013, the Company acquired a 4.561% interest in JC Penney Co Inc.



COMPANY GRADE C+

Deutsche BankCAPITAL MARKETS - Germany



Environment

Society

LabourGovernance


Environment

B+

Labour

D+

Society

C-

Governance

B-

Key sustainability issues concerning the company Competition practices Transparency of pricing structure Impact of radio frequency radiations Customer relations Working conditions of employees Digital divide Health & safety of employees

Key considerationsAs a provider of telecommunication and IT services, Deutsche Telekom has to address and manage several issues, particularly social concerns related to its customers, employees and local communities adjacent to its facilities.

Deutsche Telekom takes care of client relations with regular customer satisfaction surveys, which are carried out four times a year to evaluate the customer loyalty. Moreover, it seeks to acquire new customers by expanding mobile broadband networks to remote areas in Germany, which also enables those regions to keep up with technological developments. The companyʼs social reporting is therefore quite good, leaving aside the fact that Deutsche Telekom does not address the potential impact of its operations and services on communities (e.g. waves and antennas; use of Internet by children). However, rather problematic are the numerous anti-competition disputes that the company had to face in recent years, despite a code of ethics covering all the fair business practices.

A comprehensive range of policies and programs are dedicated to health and safety of employees. The company also promotes labour relations between management and employees, mostly covered by collective bargaining agreements. It is however regrettable that Deutsche Telekom does not address in its reporting the minimum living wages and maximum working hours of employees. In addition, the company recurrently encountered controversies related to freedom of association. Deutsche Telekom would be therefore expected to improve the management of the labour relations issue.

Considering the environment, the company strives to mitigate its impact by having implemented policies and action plans such as CO2 emission reduction programs and recycling collection of used devices.

In summary, Deutsche Telekom commits to corporate social responsibility issues in its reporting and takes measures to preserve its employees, customers and communities. However, to take a step towards more sustainability, the company should make efforts to improve labour relations in its daily business.

Analyst: Gael [email protected]




5842359 SedolDTEGn.DE RIC

DTE GR Bloomberg Ticker


Business descriptionDeutsche Telekom AG is a Germany-based integrated telecommunications provider offering its customers around the world a portfolio of services in the areas of telecommunications and information technology (IT). The Company diversifies its activities into three geographical segments: Germany, Europe and USA; as well as operates the Systems Solutions, and Group Headquarters & Shared Services operating segments. The Systems Solutions operating segment provides customized ICT (Information and Communication Technology) solutions for corporate customers through T-Systems, which include Computing & Desktop Services and Systems Integration. The Group Headquarters & Shared Services operating segment comprises management functions, among others. The Company's product portfolio comprises fixed-network lines, broadband lines, as well as mobile communication networks. The Company's USA segment provides mobile network services in the United States.



COMPANY GRADE C

Deutsche TelekomDIVERSIFIED TELECOMMUNICATION SERVICES - Germany



Environment

Society

LabourGovernance


Environment

B+

Labour

B+

Society

D+

Governance

A+

Key sustainability issues concerning the company Energy consumption and greenhouse gas emissions Management water and waste water Information on health impact of products Health and safety management for workers and suppliers Anti-competitive practices and price-fixing

Key considerationsAs one of the major world distiller, Diageo has a major role to play in the alcoholic beverages industry regarding social and environmental concerns.

On the environmental side, Diageo seems to have embraced its responsibility by having set up strong programs with targets to reduce its major environmental impact, meaning water and energy use. For example, regarding water, the company is working actively to reduce its impact on water in its productions facilities and its supply chains. This involves improving water efficiency in its facilities, absolute reduction of water use in water-stressed from its accommodations and reducing the polluting power of wastewater from its facilities and finally engaging directly with suppliers in water-stressed countries where it operates to encourage more sustainable strategies for agriculture. According to the company all these measures would lead to an improvement of water efficiency by 30%.

Regarding its employees and contractors, Diageo also shows an exemplary behavior by having implemented different measures to improve employeesʼ well-being and safety. As the manufacturing environment includes working with machinery, chemicals, flammable vapors and high pressure steam, it offers a wide range of hazards to which employees can be exposed, therefore safety might be an important concern. Diageo has understood that and is aiming to reduce by 50% its lost-time accident frequency rate and to achieve this goal, a number of initiatives have been taken by the company such as developing a model for measuring, understanding and improving the prevailing safety standards at every site.

One of the biggest concerns of a company involved in the production of alcoholic beverages is the impact of its products on customers. In that respect, Diageo recognizes that alcohol beverages may be consumed irresponsibly creating problems for the individual and for society and publishes a policy on responsible marketing.

However, all efforts made by the company towards sustainability are tainted with major recent controversies in particular over price fixing allegations in Turkey and bribery accusation in India. Analyst: Fanny Sulmoni





237400 SedolDGE.L RIC

DGE LN Bloomberg Ticker


Business descriptionDiageo plc (Diageo) is engaged in drinks business. The Companyʼs business is organized under the business areas of North America, Europe, Africa, Latin America and Caribbean, Asia Pacific and global Supply. Diageo sells products in more than 180 markets around the world. On July 5, 2011, Diageo completed the acquisition of a 50% equity controlling stake in Rum Creations Products Inc. On July 14, 2011,Diageo acquired an additional 4%equity stake in Sichuan Chengdu Quanxing Group Company Ltd. On November 25, 2011, Diageo completed the acquisition of SABMiller Africa BV's 20% interest. In December 2011, Diageo completed the acquisition of Carlos Palanca Group's 49% non-controlling equity stake in Diageo Philippines Inc. On 9,August 2012, Diageo completed the acquisition of 100% of the equity of Ypioca Bebidas S.A. In May 2013,Relay BV a wholly owned subsidiary of Diageo Plc acquired a 27.142%stake in United Spirits Ltd.



COMPANY GRADE C+Diageo Plc.BEVERAGES - United Kingdom


Nutrition sector

Environment

Society

LabourGovernance


Environment

C

Labour

C-

Society

B-

Governance

A-

Key sustainability issues concerning the company CO2 intensity of electricity mix & renewable energy development Environmental pollution of production Health and safety of neighboring communities Health and safety conditions of workers Fairness and transparency of business practices Social and environmental management of projects

Key considerationsAs a one major European energy utilities company, E.ON is not only an important electricity supplier, but also a significant natural gas producer, transporter and distributor. The company owns a 15.5% stake in Nord Stream pipeline that connects the large gas reserves of Russia to Germany through the Baltic Sea.

Conventional electricity generation still constitutes the most significant part of the companyʼ s energy mix and accounts for 88% of the companyʼs own generation in 2012. In this same year, a third of all electricity produced by E.ON was generated by CO2-intensive coalbased power plants. The company has undertaken efforts in order to enhance the efficiency and flexibility of conventional generation by converting former coal generating units to biomass and by investing in the development of carbon capture and storage (CCS) pilot projects in Wilhelmshaven, Germany. However, both technologies remain extremely controversial at the moment. While nuclear based electricity still accounted for 22% of the companyʼs own production 2012, it tends to decrease since. Nuclear industry is more criticized than ever since the Fukushima Daiichi disaster in 2011. E.ON actually decided to withdraw from new nuclear-power projects, which is an encouraging choice in terms of sustainability. It is also worth to note that wind and other renewables account for an increasing share of the companyʼs energy mix, representing already 5% of all electricity generated in 2012.

The prevention of health & safety risks, is a major issue on the workersʻ side. E.ON has adopted a relevant Responsible Procurement Policy addressing working condition rules to be respected by employees and suppliers and has implemented health and safety programs for employees. However, some controversial event that happened in Colombia may be a hint that some of the companyʼs contractors have been neglected. In July 2010,DanWatch alleged that the Cerrojon coal mine – which is one of the companyʼs providers – produces high concentrations of particulate matter, which is causing respiratory diseases among mine workers and local people.




Stock informationDE000ENAG999 ISIN

4942904 SedolEONGn.DE RICEOAN GR Bloomberg Ticker


142'938 Revenues (M EUR)

Business descriptionE.ON SE is a Germany-based provider of energy solutions. It manages the E.ON Group, which consists of five global units and 12regional units. Global units consist of Generation, Renewables, Gas, Trading (which are also Company's business segments) and New Building & Technology that comprises project management and engineering related to construction of power plants and the operation of existing plants across the Group, and research and development projects for the E.ON Innovation Centers. Generation segment consists of the Group's conventional (fossil and nuclear) generation assets in Europe. Renewables segment comprises the carbon-sourcing and renewables businesses. Gas segment is responsible for gas procurement, including its gas production, and for project and product development in gas storage, gas transport, liquefied natural gas and technical asset support. Trading segment comprises the trading activities on energy exchanges. In June 2013, it started venture capital activities.



COMPANY GRADE C+

E.ON SEELECTRIC UTILITIES - Germany


Energy sector

Environment

Society

LabourGovernance


Environment

D

Labour

C-

Society

D-

Governance

A-

Key sustainability issues concerning the company CO2 impact of final product Environmental pollution (spills, including flaring) Health and safety conditions of workers (incl. contractors and suppliers) Labour conditions of workers (incl. Contractors and suppliers) Share of turnover from gas on the overall fossil fuel business Unconventional extraction practices Environmental and social management of projects Corruption and anti-competitive practices Royalties distribution transparency

Key considerationsAs an Integrated Oil & Gas company, ENI is active in a very sensitive industry whose products and services are based on non-renewable energy sources. Most of the products offered by the company cannot be considered as sustainable because they emit large quantities of CO2-emissions in the use-phase (combustion of fossil fuels).

Considering the companyʼs production processes, ENI has nevertheless undertaken some efforts and developed policies, programs and innovations in order to mitigate the negative impact of its activities. By promoting the use of natural gas and developing a network of efficient combined-cycle power plants in Italy, the company offers a solution for the transition from fossil energy production to renewable energy systems. Operational energy efficiency, including a relevant gas flaring reduction program, is also addressed by the company. However, these positivie initiatives are undermined by strategic choices that lead to climate damages such as investing in tar sands oil exploration in Congo.

On the social level, ENI has implemented a system to closely monitor the implementation of its labour policies for contractors. However, it faced a controversy in Nigeria in 2012 for not having employed local youths while the company had pledged to do so.

Finally, the sustainability performance of ENI is also overshadowed by its involvement in important controversies related to the main societal issues at stake for the sector. In the last few years, the company has for example been investigated over bribery and corruption cases in Italy, Kazakhstan, Algeria, Lybia and Nigeria.




Stock informationIT0003132476 ISIN

7145056 SedolENI.MI RICENI IM Bloomberg Ticker



Business descriptionEni SpA is an Italy-based multinational oil and gas company. It operates though seven segments. The Refining & Marketing segment focuses on refining and marketing of petroleum products. The Eni Trading segment covers group services in commodity trading, shipping and derivatives. The Chemicals segment covers the production and sale of petrochemical products. The Engineering & Construction segment includes the services for the oil and gas industry. The Exploration & Production segment focuses on exploration, development and production of oil and natural gas. The Gas & Power segment covers the supply, regasification, transport, storage, distribution and marketing of natural gas, power generation and electricity sales. The Other Activities segment handles the corporate, financial and service components. On September 30, 2013, it sold a 20%stake in Isontina Reti Gas; as a result of the transaction it holds a 50% stake in Isontina Reti Gas.



COMPANY GRADE D+

ENIOIL, GAS & CONSUMABLE FUELS - Italy


Energy sector

Environment

Society

LabourGovernance


Environment

B

Labour

D-

Society

B-

Governance

A-

Key sustainability issues concerning the company Origin of resources (conflict minerals, rare earth elements) Use of hazardous substances in products Working conditions in supply chain Anti-competitive practices

Key considerationsAs a provider and operator of telecommunications networks, television and video systems, and related services, Ericsson needs to tackle major sustainability issues.

Ericsson has taken formal steps to reduce the environmental footprint of its products at all life cycle stages, e.g. during R&D, production, product use and end-of-life phases. A group carbon footprint reduction objective was set for in-house activities and life-time operations of delivered products. The company also complies with the EU RoHS and REACH directives in order to reduce the use of hazardous substances in its products. Free take-back equipment at the end of productsʻ life is also offered. Nevertheless, in 2010, Ericsson Chinese suppliers were accused of being heavy polluters through their release of heavy metals.

Working conditions in the supply chain are a sensitive issue as many Ericsson components are produced in countries where violations of workersʼ rights are a common practice. A Code of Conduct addressing labor standards has been adopted and monitoring systems have been implemented to ensure the respect of its suppliersʼ policies. Nevertheless, the company has been criticized for the poor working conditions at its suppliers, particularly at Foxconn, known for its severe human rights violations. This tends to show that initiatives taken by the company are still not sufficient.

The use of « conflict minerals » in Ericsson products is another important issue as such minerals are often mined in countries where human rights violations occur. Although it has a specific policy banning such minerals, NGOʼs criticized the company in 2010 for not ensuring more transparency within its supply chain.

The respect of ethical business practices is also a matter of concern. The companyʼs Code of Business Conduct and Ethics addresses bribery and corruption as well as competition. Monitoring systems are available to ensure the respect of the code.




Stock informationSE0000108656 ISIN

5959378 SedolERICb.ST RICERICB SS Bloomberg Ticker

Key figures111'805 Employees227'779 Revenues (M SEK)

Business descriptionTelefonaktiebolaget LM Ericsson (Ericsson) is a supplier of equipment, integrated solutions, multimedia applications and services to operators worldwide. The Company is a provider of communications networks, related services and multimedia solutions. Through its joint ventures ST-Ericsson and Sony Ericsson, it also provides handsets. It offers a portfolio of telecommunication and data communication systems, multimedia solutions and professional services, covering a range of technologies. The Company operates in five segments: Networks, Professional Services, Multimedia, Sony Ericsson and ST-Ericsson. During the year ended December 31,2009, the Company acquired Nortelʼs code division multiple access (CDMA) and long-term evolution (LTE) operations in North America. In September 2013, it completed the acquisitions of Microsoft's Mediaroom business and television solution, and Airvana Network Solutions' EVDO business.



COMPANY GRADE C+ERICSSON

COMMUNICATIONS EQUIPMENT - Sweden



Environment

Society

LabourGovernance


Environment

A

Labour

A-

Society

C

Governance

A-


Key considerationsAs a company active in the pharmaceutical industry, GlaxoSmithKline has a positive social impact as its products cure and might save peopleʼs lives. Nevertheless, the pharmaceutical sector has important sustainability issues to tackle as products might also have negative impacts either on society with the questions of pricing or promotion or on the environment. GlaxoSmithKline has a comprehensive approach of the various challenges it has to face, but is still the target of criticisms or lawsuits that show its performance still needs to be improved.

GlaxoSmithKline has developed a comprehensive code of conduct that include, among others, guidelines related to promotion of pharmaceutical products. The group has implemented channels to allow employees to report irregularities. Despite these efforts, it has been involved in important lawsuits over its practices: it notably agreed to pay USD 3billion in July 2012 to settle a US lawsuit over illegal medication marketing. Such behaviours stress that GlaxoSmithKline still needs to improve the implementation of its guidelines.

GlaxoSmithKline offers good working conditions that include, among others, comprehensive health and safety programs and targets, flexible working arrangements or regular employee surveys. In relation to environmental management, the company also has an encompassing approach with most of its major impacts being addressed through programs.

Finally, it is worth mentioning that sustainability issues are dealt with at the highest level within the company as the Board of Directors has a Corporate Responsibility Committee. Such initiative shows the companyʼs seriousness in addressing these topics. Nevertheless, the involvement in several controversies indicate that GlaxoSmithKline still needs to improve its performance and that its commitments are not well spread through the organization yet.





925288 SedolGSK.L RIC

GSK LN Bloomberg Ticker


Business descriptionGlaxoSmithKline plc (GSK) is global healthcare group, which is engaged in the creation and discovery, development, manufacture and marketing of pharmaceutical products, including vaccines, over-the-counter (OTC) medicines and health-related consumer products. GSKʼs principal pharmaceutical products include medicines in therapeutic areas: respiratory, anti-virals, central nervous system, cardiovascular and urogenital, metabolic, antibacterials, oncology and emesis, dermatology, rare diseases, immuno-inflammation, vaccines and human immunodeficiency virus (HIV). The Company operates in three primary areas of business: Pharmaceuticals, Vaccines and Consumer Healthcare. On January 30, 2013, GSK acquired additional 29.3% interest in GlaxoSmithKline Consumer Healthcare Ltd. In May 2013,GlaxoSmithKline PLC acquired Okairos AG.



COMPANY GRADE B+

GlaxoSmithKlinePHARMACEUTICALS - United Kingdom


Health care sector

Environment

Society

LabourGovernance


Environment

D+

Labour

D-

Society

D

Governance

B+

Key sustainability issues concerning the company Environmental management of mining operations Labour conditions of workers at mining operations (incl. contractors and suppliers) Health and safety conditions of workers at mining operations (incl. contractors and

suppliers) Tax payment practices in resources-producing countries Traceability of origin of precious metals Bribery and corruption Social and environmental management of projects Royalties distribution transparency

Key considerationsAs a multinational commodity trading and mining company, Glencore Xstrata produces and supplies metals, minerals, oil, coal, natural gas and agricultural products to industrial customers. Mining extraction and commodities trading are both very controversial activities as they often have strong environmental and social impacts.

Glencore Xstrata rightly recognizes that its global operations, including exploration, production, processing, transportation or marketing of natural resources, have significant impacts on the environment, notably on climate change and water consumption. It has therefore implemented environmental performance reporting tools and mitigation measures. However, the companyʼs willingness to modify its practices was marred by recent conclusions by a team from the U.N. Development Program sent to Loma Miranda (Dominican Republic) in order to provide a sustainability assessment of one of the companyʼs nickel mining projects. According to those experts, the companyʼs study at this site failed to consider the social and environmental impact of extraction at the mine.

Labour conditions of workers are generally a big concern for most companies in the mining industry. Tensions are extremely high between workers and management, notably in South Africa and in Colombia where many strikes occurred in the past years. While 18 fatal accidents happened worldwide in 2010, Glencore Xstrata recently also faced severe child labour accusations in the Democratic Republic of Congo.

The company supports the Extraction Industry Transparency Initiative (EITI), a global initiative to improve governance in resource-rich countries through the verification and full publication of company payments and government revenues from such activities. It however does not provide any details on a country by country basis. Finally, controversial statements from the Glencore's director of agriculture trading saying that the global food crisis was a "good business opportunity" contribute to undermine the companyʼs statements related to sustainability management.




Stock informationJE00B4T3BW64 ISIN

B4T3BW6 SedolGLEN.L RIC

GLEN LN Bloomberg Ticker



Business descriptionGlencore Xstrata Plc is a diversified natural resource company. The Company operates in three segments: Metals and Minerals, which includes copper, nickel, zinc/lead, alloys, alumina/aluminum and iron ore; Energy Products, which includes controlled and non-controlled coal mining and oil production operations and investments in strategic handling, storage and freight equipment and facilities, and Agricultural Products, which focuses on grains, oils/oilseeds, cotton and sugar. The Companyʼs operations consist of over 150 mining and metallurgical sites, offshore oil production assets, farms and agricultural facilities. The Company is a producer and marketer of over 90commodities, such as mobile phones, bicycles, cutlery, plastics and electricity, to customers in industries ranging from automotive to food processing and power. In July 2013,the Company announced that it has completed the merger of Mutanda Mining Sarl (Mutanda) and Kansuki Sarl (Kansuki).



COMPANY GRADE D+

GLENCORE XSTRATA PLCMETALS & MINING - United Kingdom


Resources sector

Society

LabourGovernance

Environment


Environment

C

Labour

D-

Society

C-

Governance

A


Key considerationsPresent in more than 80 countries, HSBC serves millions of clients in established and emerging markets. Thus, HSBC is regularly confronted with sustainability issues of its industry, like the impacts of its products and its own investments. The fact that HSBC has developed guidelines to identify environmental and social risks in lending practices and offers microfinance services shows the company's awareness for these topics. Moreover, HSBC has adopted the Equator Principles.

However, the companyʼs involvement in numerous controversies in relation with controversial project financing (e.g. the Belene nuclear power plant or the HydroAysen hydropower project) and the fact that HSBC is among the top 10 providers of financial services to the nuclear industry could be a sign that HSBCʼs good purpose is not yet fully implemented.

Besides, even though HSBC has set up (un-published) policies on bribery, corruption and money laundering, the companyʼs involvement in a money laundering case in Angola, terrorist financing, tax evasion investigations, price-fixing and anticompetitive behaviour could be an indication of weaknesses in its business ethics management system.

Like most big financial institutes, HSBC has implemented some employee and environmental programs at operational level. Climate change and green procurement are at the heart of the attention the company pays to environment. Employee satisfaction monitoring systems are in place, but unfortunately the company's health and safety programs do not address ergonomics or psychic conditions, which are sensitive issues for banks. Moreover, HSBC faced some concerns in relation with employment conditions (wrongful termination, employee data handed over to US authorities).





540528 SedolHSBA.L RIC

HSBA LN Bloomberg Ticker


Business descriptionHSBC Holdings plc (HSBC) is a global banking and financial services organizations. As of December 31,2012, it provided a range of financial services to around 58 million customers through four global businesses: Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Global Private Banking. In June 2012, the Companyʼs indirect wholly owned subsidiary, HSBC Iris Investments (Mauritius) Ltd, sold its 4.73% interest in Axis Bank Limited and 4.74% interest in Yes Bank Limited. In July 2012, its subsidiary, HSBC Europe (Netherlands B.V.), sold its 100% interest in HSBC Credit Zrt, to CentralFund Kockazati Tokealap. On March 31, 2013, Enstar Group Ltdʼs subsidiary completed the acquisition from Household Insurance Group Holding Company of HSBC Insurance Company of Delaware and Household Life Insurance Company of Delaware, as well as its three subsidiary insurers.



COMPANY GRADE C-

HSBCCOMMERCIAL BANKS - United Kingdom



Environment

Society

LabourGovernance


Environment

B

Labour

B

Society

D

Governance

A

Key sustainability issues concerning the company Land and resources used (deforestation) Water consumption and waste water Child labour in the production process Health and safety management among employees and suppliers Business ethics: lobbying and black market Information on health impact of products

Key considerationsAs one of the main actor of the Tobacco industry, Imperial Tobacco Group has several issues to tackle on both environmental and social sides.

From beginning to end, the process used by manufacturers to turn tobacco seeds into packaged cigarettes is energy intensive. Furthermore, the improper disposal of cigarettes has serious environmental consequences. The company is aware of its burden and has a strong environmental management system in place with an ISO 14001 certification for more than 65% of its production. In addition, the company requires its suppliers to have an environmental management and has taken different measures to reduce its main impact on the environment, in particular regarding energy and water. However, packaging material and disposal of cigarettes are also major environmental issues of the tobacco industry which are unfortunately not addressed by Imperial Tobacco.

On the labour side, the company has understood the major concerns of its industry and has implemented a health and safety management system in place for its employees and a monitoring system for its suppliers with audits and requirements. Unlike other companies of its sector, Imperial Tobacco Group was not involved in any controversies over labour issues.

Finally, the major impact of a tobacco company is public health. According to WHO, Tobacco use kills more than 5 million people per year. It is responsible for 1 in 10 adult deaths. The WHO considers tobacco use among the five greatest risk factors for mortality, it is the single most preventable cause of death. The company has a code of conduct addressing marketing and advertising requirements. However, evidence of controversies in particular over unscrupulous marketing in Quebec and smuggled cigarettes in Canada and United States shows that the company still has some lacks in addressing these issues.





454492 SedolIMT.L RIC

IMT LN Bloomberg Ticker


Business descriptionImperial Tobacco Group PLC (Imperial Tobacco) is a tobacco company. Through the Companyʼs total tobacco portfolio it provides consumers a range of brands and products, including cigarettes, fine cut tobacco, cigars and snus. Its total tobacco portfolio includes fine cut tobacco, cigars, rolling papers and tubes. Its non-European Union (EU) markets consist of Eastern Europe, Africa and the Middle East and Asia and markets of the United States and Australasia. Its international cigarette brands include Davidoff, Gauloises Blondes and West. It offers services across the whole logistics value chain to its customers, including order reception, storage and stock management, order preparation, transport and distribution, invoicing and collection and customer services. Its business has two aspects: tobacco logistics and non-tobacco logistics.



COMPANY GRADE C

Imperial Tobacco Group plcTOBACCO - United Kingdom


Nutrition sector

Society

LabourGovernance

Environment


Environment

C+

Labour

B+

Society

C-

Governance

A+


Key considerationsING Group serves over 61 million individual and institutional clients in more than 40countries and has a worldwide workforce of over 80,000 employees. As a company with such dimensions, its investment decisions and loan procedures potentially haveconsiderable effects on the environmental and social dimension.

ING Group recognizes this responsibility. It has adopted a "Defence Policy" that prohibits investments in companies producing, maintaining or trading controversial weapons like personnel landmines, cluster munitions or biological weapons. Thanks to this policy, ING Group decided in 2005 to end business relationships with a major weapon producer and since then, several dozens of companies breaching the "Defence Policy" have been fully restricted from investments and loans. The adoption of the Equator Principles (standard for assessing and managing social and environmental risks in project finance), micro-finance activities and some assets under management invested according to socially responsible principles, complete the framework of major steps ING Group has introduced to take care of the sustainability impact of its products or investments.

The company has also taken measures to improve its environmental and social impacts on the operational level. It has implemented programs to reduce its GHG emissions and green procurement measures. Comprehensive employee programs have been adopted, such as regular surveys to monitor employee satisfaction, part-time working hours and integration programs for minorities. As it is the case for all financial institutions, ING Group may be confronted with the risk of bribery and money laundering. The company addresses these topics through the adoption of policies and has made reporting channels available to report business ethics related breaches.

However, ING Group is involved in several controversies in relation with the financing of controversial projects such as the HidroAysén dam, the Grasberg mine in Indonesia or the Nam Theun 2 Hydropower project. Furthermore, the violation of US economic sanctions against Cuba and Iran or anti-competitive behaviour in Turkey are further events penalizing the sustainable assessment of the bank. Analyst: Daniela Perito




Stock informationNL0000303600 ISIN

7154182 SedolING.AS RIC

INGA NA Bloomberg Ticker


Business descriptionING Groep N.V. (ING) is a global financial institution offering banking, investments, life insurance and retirement services to meet the needs of the customers. The Companyʼs segments include banking and insurance. Banking segment includes retail Netherlands, retail Belgium, Retail Germany, Retail Rest of World, and Commercial Banking. Insurance segment includes insurance Benelux, insurance central and rest of Europe (CRE), insurance United States (US), Insurance US closed block VA, and ING investment management and corporate line insurance. In March 2013, it completed the sale of its life insurance units in Hong Kong, Macau and Thailand to Pacific Century Group (PCG). In April 2013, the Company completed the sale of its 70%-stake in ING Funds Berhad. In May 2013, it completed the sale of its investment management business in Thailand.



COMPANY GRADE C+ING Group

DIVERSIFIED FINANCIAL SERVICES - Netherlands



Environment

Society

LabourGovernance


Environment

B+

Labour

B+

Society

C

Governance

A-

Key sustainability issues concerning the company Origin of animal products Textile processing Resources' use in production Sourcing of raw materials Working conditions in supply chain

Key considerationsThe luxury goods industry has some environmental issues to address, including the use of animal products of non-sustainable origin, the resourcesʼ use, textile processing and the sourcing of raw materials.

As a group with many diverse brands, environmental programs are not implemented at group level but at brand level. Most of LVMH brands have programs to reduce their carbon footprint and some have even set quantitative targets in this regard. Even if some brands developed waste-water treatment processes, there is no information on water reduction programs.

At group level, LVMH is a member of the Responsible Jewellery Council, which encourages responsible practices throughout the diamond, gold and platinum supply chain. As these metals are often mined in regions affected by conflict or instability, the RJC has developed a certification system. Some of LVMH jewellery brands such as Bulgari, TAG Heuer and Chaumet have received such certification.

Leather tanning is another major environmental issue as it is a process using many hazardous chemicals as well as high levels of water and energy. Even if LVMH has a joint venture with a leather tannery that supplies the company with hides and leathers tanned with vegetable products, more environmental awareness about leather tanning would be expected.

On the social side, as most of the goods are manufactured in emerging countries often known for their human rights violations, the working conditions at suppliers need a particular care. LVMH has adopted a Supplier Code of Conduct which includes social requirements. Supplier audits based on the SA8000 social accountability standard are conducted by most of LVMH brands. Nevertheless, there is still room for improvement as the company is not actually certified according to the SA 8000 standard.

However, several controversies overshadow LVMHʼs good ESG performance : an executive is under investigation in an inquiry into alleged kickbacks paid to French politicians from arms sales to Pakistan. In addition, Sephora, a LVMH brand, was fined EUR 9.4 million for price-fixing of perfumes in France.





4061412 SedolLVMH.PA RIC

MC FP Bloomberg Ticker


Business descriptionLVMH Moet Hennessy Louis Vuitton SA, (LVMH), is a France-based luxury goods company. It owns a portfolio of luxury brands and its business activities are divided into five segments: Wines and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, Watches and Jewelry, and Selective Retailing. The activities of the wines and spirits sector include the Champagne and Wines branch, and the Cognac and Spirits branch. The Fashion and Leather Goods group includes Louis Vuitton, Kenzo and Rossimoda among others. LVMH is present in the perfume and cosmetics sector through the French Houses Christian Dior and other brands. Watches and Jewelry sells such products as TAG Heuer, Zenith, Dior Watches, Chaumet and Fred, among others. Selective Retailing businesses operate in two segments: travel retail and the seleLVMH ctive retail concepts represented by Sephora and Le Bon Marche. In September 2013, the Company acquired majority stake in Nicholas Kirkwood, a British shoe designer company.



COMPANY GRADE B

LVMHTEXTILES, APPAREL & LUXURY GOODS - France


Clothing sector

Environment

Society

LabourGovernance


Environment

C+

Labour

C+

Society

C-

Governance

A+

Key sustainability issues concerning the company Environmental management of operations Health and safety conditions of workers (incl. contractors and suppliers) Type of power grid managed and developed (conventional or smart grid) Greenhouse gas emissions

Key considerationsAs an electric utility mainly active in the transmission and distribution of gas and electricity, National Grid faces environmental issues mostly related to the long-term impacts of its operations on climate change and more direct impacts on neighbouring communities. The company is well aware of the role it can play in reducing the amount of greenhouse gases released by the use of CO2-intensive energy sources. The nets need to provide for the societyʼs increasing demand for renewable energy that usually cannot be fed into the electricity grids at constant rates. However, the companyʼs investment to develop smart grids is so far limited to pilot projects. Despite the exploitation of a 4.6 MW solar generation asset in Massachusetts, the company still heavily relies on fossil sources (mostly gas but also CO2-intensive coal) as well as nuclear sources to supply electricity to its US customers. The environmental impacts of the company cannot therefore be considered as compatible with a long-term sustainable economy.

National Grid chiefly faced several controversies due to the management of its operations. In December 2011, it was for example fined GBP 4.3 million by British regulators for having failed to meet the targets of getting to potentially dangerous, uncontrolled gas leaks within an hour.

Labour issues are rather well managed by National Grid that has implemented relevant programs to improve health and safety conditions of its employees. However, some recent controversies regarding an accident at London Power Tunnels and a change in final-salary pension schemes of 5ʼ600 workers negatively affect the companyʼs rating.

Finally, there is still much room for improvement on the society level. Although National Grid is aware of the impacts of its activities on local communities, it has nevertheless not implemented a systematic program for engagement or consultation with communities. Despite companyʼs recognition that its networks have to be resilient to various possible extreme weather events, its management of crisis caused by the tropical storms “Irene” and “Sandy” was widely criticized by its customers




Stock informationGB00B08SNH34 ISIN

B08SNH3 SedolNG.L RIC

NG/ LN Bloomberg Ticker


Business descriptionNational Grid Plc is an international electricity and gas company. The Companyʼs segments include UK Transmission, UK Gas Distribution, US Regulated and Other activities. The Company owns the electricity transmission system in England and Wales and is the national electricity transmission system operator, responsible for both the England and Wales transmission system, and the two high voltage transmission networks in Scotland, which the Company does not own. The Company owns and operates electricity distribution networks in upstate New York, Massachusetts, Rhode Island and New Hampshire. Through these networks the Company serves approximately 3.5 million electricity consumers in New England and upstate New York. On July 3,2012, the Company sold its New Hampshire electric and gas distribution businesses (Granite State Electric Company and Energy North Natural Gas Inc.) to Liberty Energy Utilities (New Hampshire) Corp., a subsidiary of Algonquin Power & Utilities Corp.



COMPANY GRADE C+

National Grid plcMULTI-UTILITIES - United Kingdom


Energy sector

Environment

Society

LabourGovernance


Environment

C

Labour

D-

Society

C-

Governance

A

Key sustainability issues concerning the company Purchase and use of palm oil Health and safety management for workers and suppliers Buying practices among supply chain Pollution of air, soil or water Water consumption during production Energy-efficiency in the production process Animal welfare Information on health impact of products Anti-competitive practices and price-fixing

Key considerationsAs one of the biggest food producer in the world, Nestlé faces several major issues, particularly on the sourcing side, with cocoa, palm oil and coffee.

First, in 2001, Nestlé, among other chocolate producers, was criticized because it purchased cocoa from international markets, and cocoa plantations in Ivory Coast supplying beans to those markets used forced and child labour. The company said it could not be held responsible because it relies on its wholesalers to provide cocoa untainted by slave labour. In that respect, Nestlé has set up the Responsible Sourcing program which includes guidelines, external and internal audits as well as assistance for improvement. However, in July 2012, the Fair Labor Association released a report accusing Nestle of violating its own supplier code in relation to child labour, safety and working hours in Ivory Coast in particular.

Palm oil sourcing is also a key issue of the industry as cultivation of oil palm is contributing to deforestation and climate change. Nestlé is member of RSPO (Roundtable on Sustainable Palm Oil) since 2009 and is committed that its products will not be associated with deforestation; this commitment is enforced by guidelines and programs.Nestlé shows other strengths in environmental management both from production and products perspective even if it faces sensitive challenges such as greenhouse gases emissions in food production and reduction of packaging materials.

Anti-competitive practices are also of particular concern for Nestlé as the company was fined more than once for price-fixing in the past. Even though it seems that Nestlé has embraced this issue by setting up an anti-competitive policy, recent occurrence of such controversies shows that these measures are not fully implemented yet. Despite a comprehensive reporting on sustainability, Nestlé keeps being criticized for its unfair practices both on ethics and employment practices which shows that its management of such issues still needs improvements.





7123870 SedolNESN.VX RICNESN VX Bloomberg Ticker


Business descriptionNestle SA is a Switzerland-based holding company of the Nestle Group (the Group) and is principally engaged in the development and production of food and beverage. The Group manages its Food and Beverages business through three geographic zones (Zone Europe, Zone Americas and Zone Asia, Oceania and Africa) and globally for Nestle Waters, Nestle Nutrition and Other Food and Beverages (Others). The Others segment includes activities of Nestle Professional, Nespresso, Nestle Health Science and the Joint Ventures in both Food and Beverages and Pharmaceutical activities. The Group's products are diversified into seven product groups: Powdered and Liquid Beverages; Water; Milk products and Ice Cream; Nutrition and HealthCare; Prepared dishes and cooking aids; Confectionery and PetCare. In addition, the Group manages a number of brands diversified into specific product groups like Baby foods, bottled water, coffee, drinks, food service, sport nutrition and weight management, among others.



COMPANY GRADE C-Nestlé SA

FOOD PRODUCTS - Switzerland


Nutrition sector

Environment

Society

LabourGovernance


Environment

B+

Labour

C-

Society

C

Governance

C+


Key considerationsNovartis is a Swiss company developing and marketing health products. The pharmaceutical sector has a positive social impact as it cures and might save peopleʼs lives. In that respect, producing generics is even more positive as products are then available at a cheaper price. The company also has a division, Sandoz, dedicated to generic products. Nevertheless, the health sector also has challenging sustainability issues to address. In that context, Novartis has been managing its potential negative effects for several years now and does it in a competent manner. This good performance is nevertheless overshadowed by some important controversies, mainly related to business ethics, labour and governance.

Regarding business ethics, Novartis has the relevant policies and programs in place to guarantee its employees have a correct behaviour in commercial operations. However, the company has been criticized and sued in some cases for its controversial practices, as for example, in the US, for cheating the US Medicaid program. Novartis has also been strongly criticized by several NGOs in past years for its position regarding patents, notably in relation to its decision to challenge a decision by an Indian Court rejecting a patent application done by the company for a cancer drug, Glivec, and, therefore allowing the generic version to be used.

Novartis offers its employees good working conditions: the group has comprehensive health and safety programs and employee satisfaction is measured annually through a survey. Nevertheless, the company was also sued for not having paid overtime to some of its employees in the US.

Finally, remuneration of top management is a topic that was heavily debated over the past years by the shareholders of the company as remuneration paid to former Chairman and CEO, Daniel Vasella, drew considerable criticisms. This once again downgrades the companyʼs good performance in relation to governance.





7103065 SedolNOVN.VX RICNOVN VX Bloomberg Ticker


Business descriptionNovartis AG provides healthcare solutions. The Company is a multinational group of companies specializing in the research, development, manufacturing and marketing of a range of healthcare products led by pharmaceuticals. Its portfolio includes medicines, eye care, cost-saving generic pharmaceuticals, preventive vaccines and diagnostic tools, over-the-counter and animal health products. The Company has five segments: Pharmaceuticals, which include patent-protected prescription medicines; Alcon, which include surgical, ophthalmic pharmaceutical and vision care products; Sandoz, which include generic pharmaceuticals; vaccines and diagnostics, which include human vaccines and blood-testing diagnostics, and consumer health, which include over-the-counter medicines (OTC) and Animal Health. On April 8, 2011, the Company acquired the remaining non-controlling interest in Alcon, Inc.



COMPANY GRADE B-

NovartisPHARMACEUTICALS - Switzerland


Health care sector

Environment

Society

LabourGovernance


Environment

B

Labour

A-

Society

B+

Governance

A-

Key sustainability issues concerning the company Greenhouse gases emissions & carbon footprint Responsible sourcing of raw materials Resource protection (e.g. water) Environmental impact of products Health & safety of employees Health impact of products

Key considerationsAs a manufacturer of household and personal care products, Reckitt Benckiser has to tackle several major concerns related to its environment impact as well as the health of employees and consumers.

Reckitt strives to mitigate its impact on the environment with a range of comprehensive policies and action plans covering the main concerns of its industry, such as responsible sourcing of materials and protection of resources. Concerning the procurement of ingredients, Reckitt Benckiser set programs addressing the application of REACH by suppliers and the sourcing of palm oil, among others. Furthermore, the company offers products with non-polluting ingredients, such as safe surfactants (cleaning agents that break down into non-polluting compounds) with no danger for aquatic life. Reckitt also launched electrical plug-in air care devices using less packaging and plastic materials.

Considering the health impact of its products, Reckitt does not report any relevant information about it. But a subsidiary of Reckitt Benckiser in Korea was fined for misleading information to consumers after a woman died because of sterilizers. The company had mentioned on the label that the product did not contain any harmful substances, without conducting prior research to establish this fact.

In addition of a labour policy addressing among others the health and safety of employees, Reckitt Benckiser set up programs at all sites, which are also covering psychic conditions. These programs include quantitative targets concerning accident reduction and the targets are regularly monitored for a follow up action. Moreover, all companyʼs manufacturing facilities are guided by OHS management systems and more than 30% of them are externally OHSAS 18001 certified.

In conclusion, Reckitt Benckiser has showed a great commitment to CSR issues for several years. Given the kind of activities in which Reckitt Benckiser is engaged, its reporting is above expectations. Analyst: Gael Kyriakidis




Stock informationGB00B24CGK77 ISIN

B24CGK7 SedolRB.L RIC

RB/ LN Bloomberg Ticker


Business descriptionReckitt Benckiser Group Plc is manufacturer and marketer of branded products in household, health and personal care, selling a range through over 60 operating companies into nearly 200 countries. The Company analyses its revenue based on health, hygiene, home and portfolio brands together with RB Pharmaceuticals and Food. The Companyʼs geographical segments include: Europe and North America (ENA); Latin America, North Asia, South East Asia and Australia and New Zealand (LAPAC); and Russia and CIS, Middle East, North Africa, Turkey and Sub-Saharan Africa (RUMEA).The Companyʼs key brands include Durex, Gaviscon, Mucinex, Nurofen, Scholl, Strepsils, Airborne, MegaRed, Move Free, Bang, Clearasil, Dettol, Finish, Harpic, Lysol, Mortein, Veet Air Wick, Calgon, Vanish, Woolite and Frenchʼs.



COMPANY GRADE B+

Reckitt Benckiser Plc.HOUSEHOLD PRODUCTS - United Kingdom


Household and personal products sector

Environment

Society

LabourGovernance

Environment

D+

Labour

D-

Society

D+

Governance

A-

Key sustainability issues concerning the company Environmental management of mining operations Labour conditions of workers at mining operations (incl. contractors and suppliers) Health and safety conditions of workers at mining operations (incl. contractors and

suppliers) Tax payment practices in resources-producing countries Traceability of origin of precious metals Bribery and corruption Social and environmental management of projects Royalties distribution transparency

Key considerationsAs a multinational metals and mining corporation, Rio Tinto focuses not only on the extraction of minerals but also on aluminum production, which is energy-intensive. The company addresses most pressing issues of that sensitive industry in its reporting that was externally checked according to the Global Reporting Initiative requirements.

Rio Tinto has implemented programs to mitigate the impact of its operations on the environment, notably it improved the water management, and took steps to reduce the CO2-intensity of processes. Furthermore, the company powers most of its aluminum production plants with low carbon electricity from sources such as hydropower, in order to contribute to the companyʼs target to reduce its greenhouse gas emissions by 6% between 2008 and 2013. Such initiatives have not prevented Rio Tinto from being associated with a significant number of important environmental controversies at some of its production sites. Since 1981, Rio Tinto's Australian uranium mine for example has had more than 150 spills of millions of liters of radioactive water, leaks and license breaches, polluting the world heritage Kakad National Park. The company is also facing legal actions for alleged environmental damages in Papua New Guinea and in British Columbia.

Considering labour relations, the company is much criticized and was sometimes condemned for its poor respect of the principles of freedom of association and of collective bargaining. For example in July 2011, an Australian Federal Court ruled invalid a 2008 non-union collective agreement covering workers put in place by Rio Tinto in the Pilbara site. More recently, Blair Athol mine union members went on strike to protest against the difference of redundancy payments between union and non-union workers.

Despite the implementation of programs for engagement with local communities, NGOs often criticized Rio Tinto for not properly undergoing adequate social and environmental studies before starting a project (open diamond mine in India for example). In the past years, local communities protested for unsatisfactory reimbursement for relocating people to make room for the mines, as it was recently the case in Madagascar.





6220103 SedolRIO.AX RICRIO AU Bloomberg Ticker


Business descriptionRio Tinto Limited (Rio Tinto) is engaged in finding, mining and processing mineral resources. The Companyʼs product group includes aluminium product group, copper product group, diamonds and minerals group, energy product group and iron ore products group. Its products are iron ore, aluminium, copper, diamonds, coal, uranium, gold and industrial minerals (borax, titanium dioxide and salt). Its iron ore businesses delivered record production and shipments, and its copper business showed a second half recovery in copper volumes. In January 2012, it acquired 2% of Ivanhoe Mines Ltd. In August 2012,Orocobre Ltd acquired Borax Argentina S.A. from Rio Tinto Ltd entities, Rio Tinto Minerals Development Limited and Borax Europe Limited. In September 2012, it sold the North American portion of its Alcan Cable business to General Cable Corporation. As of December 31, 2012, the Company had 51%interest in Turquoise Hill Resources Ltd.,formerly known as Ivanhoe Mines.



COMPANY GRADE D+

Rio TintoMETALS & MINING - Australia


Resources sector

Environment

Society

LabourGovernance

Environment

A-

Labour

B-

Society

C

Governance

A+

Key sustainability issues concerning the company Relations with doctors and health care systems Business ethics behaviour in commercial operations Side effects of products on customers Accuracy and objectivity of information provided to customers Clinical trials on humans (notably in emerging markets) Health and Safety for workers and contractors Environmental contamination through product residuals Water consumption in the production process Hazardous waste management

Key considerationsRoche is a company developing and marketing drugs and diagnostic tests. The pharmaceutical sector has a positive social impact as it cures and might save peopleʼs lives, but it also has some important sustainability issues to address. In general, the company has a comprehensive management of the major challenges the industry needs to tackle. However, this good performance is still undermined by some controversies in the areas of ethics.

Ethics in commercial operations is a major topic in the health sector, which has been hit by several scandals, notably for its fraudulent relations with national healthcare systems.Roche has a Code of Conduct and specific guides related to integrity of business transactions and fair competition. The company has implemented mechanisms allowing employees to report irregularities. Nevertheless, as several other pharmaceuticals, the company has been fined in the US for having illegally inflated prices of drug costs and having, therefore, defrauded the Medicaid program. Roche is also under investigation in Serbia for possible bribery of doctors. Such investigations show that the company still has some progress to do to behave in an ethical way.

Regarding labour relations, Roche offers its employees good working conditions: the group has comprehensive health and safety programs and has also implemented measures to increase diversity in its workforce providing, among others, several flexible working arrangements to balance work and life. Since 2011, employee satisfaction is measured every 18 months with a survey. Environmental impacts of the company's production processes are also taken care of in a competent manner as shown by the different programs implemented.

Finally, the approach of its environmental impact by the company is against quite encompassing, the company having implemented an environmental management system and major programs to manage its negative effects.





7110388 SedolROG.VX RICROG VX Bloomberg Ticker


Business descriptionRoche Holding AG is a Swiss pharmaceuticals and diagnostics holding company. It belongs to the Roche Group that operates through subsidiaries and associated companies around the world. It discovers, develops and provides diagnostic and therapeutic products and services from early detection and prevention of diseases to diagnosis, treatment and treatment monitoring. The Company has two divisions: Pharmaceuticals and Diagnostics. Pharmaceuticals are divided into two sub-divisions: Roche Pharmaceuticals and Chugai. It operates in the United States, Western Europe, Japan, CEMAI (Central and Eastern Europe, Middle East, Africa, Central Asia, Indian Subcontinent), Latin America, Asia-Pacific and Other regions. Diagnostics include five business areas: Applied Science, Diabetes Care, Molecular Diagnostics, Tissue Diagnosis and Professional Diagnostics. It operates in five geographical regions: Europe, Middle East and Africa (EMEA); North America; Asia-Pacific; Latin America, and Japan.



COMPANY GRADE B

RochePHARMACEUTICALS - Switzerland

Inrate | Sustainability Assessment | © Copyright 201357Inrate Sustainability Assessment

Health care sector

Environment

Society

LabourGovernance

Environment

D-

Labour

D-

Society

D-

Governance

B-


Key considerationsAs a major global oil company, Shell is concerned with all the pressing issues of that industry, and on several accounts, its record is worse than that of its peers. The biggest area of concern is its strategy regarding renewable energies. Shell used to be a precursor and a significant investor in that area. It is now stopping its investments in that branch of activity and focuses instead on the debatable biofuels in Brazil. Through Raízen, a $12billion joint venture between Shell and the Brazilian firm Cosan, the company is now one of the worldʼs largest biofuel producer and distributor. Environmental groups blame such initiative for driving up food prices and deforestation. Shell recognizes these negative impacts and took measures to mitigate them by buying biofuels covered by environmental and sustainability clauses. Finally, Shell is also investing in other products and technologies such as natural gas and Carbon Capture and Storage.

The company rightly recognized harmful environmental impacts caused by e.g. flaring and spills and therefore implemented detailed environmental performance reporting tools and mitigation measures. Nevertheless, several major environmental pollutions and spills occurred in the last years. Besides being the most involved company in Arctic drilling, Shell increases its investments in unconventional oil & gas production methods such as high-volume gas fracking, tar sands and deep sea drilling in several countries. Those practices not only threaten biodiversity, but also use, and potentially pollute, large amount of water.

Shell also faced several severe controversies regarding employment conditions. For example, in January 2011, Shell Malaysia was accused of having fired and sued employees who denounced the companyʼs supposedly unethical practice. Besides, Shellʼs involvement in the Brazilian sugarcane industry is raising many questions about subcontracted cane cutters' working conditions, denounced in the past as close to slavery by some Brazilian government inspectors.




Stock informationGB00B03MLX29 ISIN

B03MLX2 SedolRDSa.L RIC

RDSA LN Bloomberg Ticker



Business descriptionRoyal Dutch Shell plc (Shell), incorporated on February 5, 2002, is an independent oil and gas company. The Company operates in three segments: Upstream, Downstream and Corporate. Upstream combines the operating segments Upstream International and Upstream Americas, which are engaged in searching for and recovering crude oil and natural gas; the liquefaction and transportation of gas; the extraction of bitumen from oil sands. Downstream is engaged in manufacturing; distribution and marketing activities for oil products and chemicals, in alternative energy (excluding wind), and carbon dioxide (CO2)management. Corporate represents the key support functions. In October 2011, the Company bought a marine terminal on Canada's Pacific Coast as a possible site for a liquefied natural gas export terminal. In January 2012,the Company's 50% owned, Australia Arrow Energy Holdings Pty Ltd acquired all of the shares in Bow Energy Ltd.



COMPANY GRADE D-

Royal Dutch - ShellOIL, GAS & CONSUMABLE FUELS - Netherlands


Energy sector

Environment

Society

LabourGovernance

Environment

A-

Labour

D-

Society

C

Governance

B-


Key considerationsThe pharmaceutical sector Sanofi-Aventis is active in has a positive social impact as it cures and might save peopleʼs lives. In that respect, producing generics is even more positive as products are then available at a cheaper price. Sanofi-Aventis has a division offering generic pharmaceutical products. Nevertheless, the health sector also has challenging sustainability issues to address. The company has good performances in areas like environmental management and ethical behavior concerning clinical trials on humans, which are nevertheless overshadowed by some important controversies, mainly related to business ethics breaches and side-effects of products on consumers.

Regarding business ethics, Sanofi-Aventis has the relevant policies and programs in place that specify how its employees should correctly behave in commercial operations. However, the company has been criticized and sued in some cases for its controversial practices, such as the controversial selling practices of vaccines to paediatricians in the US.

Regarding employees, Sanofi-Aventis offers good working conditions with, among others, comprehensive health and safety programs for employees and contractors. Despite these efforts, the company has been involved in controversies related to health and safety and employment conditions, notably in relation to employees being contaminated by asbestos. It has been recently criticized in France for its restructuring practices. As a possible next step to improve, Sanofi-Aventis could set quantitative targets : this would foster further measures and show the companyʼs willingness to really improve its sustainability performance.

Finally, Sanofi-Aventis has a good performance in relation to environmental management. More than half of its production sites are certified according to the international standard for environmental management ISO 14001. The company has implemented programs to reduce its main impacts, notably its water consumption and pollution.





5671735 SedolSASY.PA RIC

SAN FP Bloomberg Ticker


Business descriptionSanofi SA, formerly Sanofi-Aventis, is a global and diversified healthcare company based in France. The Company discovers, develops and distributes therapeutic solutions focused on patients' needs. The Company focuses on the field of healthcare with six growth platforms: diabetes solutions, human vaccines, innovative drugs, consumer healthcare, emerging markets and animal health. The Company has a portfolio of prescription drugs, vaccines, generics and consumer healthcare products. The Company is active domestically and abroad, including other European countries, North and Latin Americas, Asia, Africa and Middle East. In December 2012,Sanofi announced that it completed the divestiture of its dermatology business, Dermik, to Valeant Pharmaceuticals International, Inc. In April 2013, the Company inaugurated its logistics platform in Casablanca, Morocco.



COMPANY GRADE B-

Sanofi-AventisPHARMACEUTICALS - France


Health care sector

Environment

Society

LabourGovernance

Environment

A

Labour

A+

Society

B+

Governance

A-

Key sustainability issues concerning the company Contribution to eco-efficient processes Contribution to reduction of digital divide

Key considerationsAs a worldwide provider of enterprise software, SAP AG is active in an industry where availability of information and data generation is steadily growing and technology-driven knowledge is more and more requested. Even if not active in a material-intensive or highly polluting sector, products and practices do not systematically meet sustainability requirements.

The company is engaged to corporate social responsibility. SAP AG adopted several commitments (e.g. a Human Rights Commitment) and CSR policies (e.g. Environmental Policy, Health & Safety Management Policy). Furthermore it introduced a supplier as well as a partner Code of Conduct to support its sustainability vision.

SAP AG has taken measures to reduce its direct ecological impacts, for example by implementing programs to reduce its greenhouse gas emissions and by adopting green procurement measures. Comprehensive employee programs have been adopted, such as regular surveys to monitor employee satisfaction, part-time working hours and integration programs for minorities. Most employees are represented by collective labour agreements or take part in work councils.

With locations in over 130 countries, SAP AG deals with the risk of business ethics breaches. This risk is managed through the adoption of a Code of Business Conduct for Employees, where topics such as bribery and corruption and insider trading are addressed. Moreover, anonymous reporting channels are available for business ethics related breaches.

Finally, it is worth mentioning that SAP AG fosters responsible and sustainable business growth in emerging markets through its investments in emerging entrepreneurs for example in Brazil and India. Selected companies receive comprehensive support and grants from SAP AG to facilitate growth and development in their communities.





4846288 SedolSAPG.DE RIC

SAP GR Bloomberg Ticker


Business descriptionSap AG is engaged in enterprise applications in terms of software and software-related service revenue. The Companyʼs core business is selling licenses for software solutions and related services to deliver a range of choices fitting the varying functional needs of its customers. Its solutions cover business applications and technologies, as well as specific industry applications. In-memory technology across its data management offerings enables customers to access the data, which they need, where they need it, when they need it. The Company is structured along Technology & Innovation Platform, Products & Solutions, Global Customer Operations, Chief Operations Office, Global Finance & Administration, Human Resources, and On Device & Sybase. On December 1, 2011, the Company sold Steeb Anwendungssysteme GmbH. In February 2012, the Company acquired SuccessFactors, Inc. In October 2012, it acquired Ariba, Inc. In August 2013, it acquired Hybris AG.



COMPANY GRADE A

SAP AGSOFTWARE - Germany


Software sector

Environment

Society

LabourGovernance

Environment

B

Labour

B+

Society

C

Governance

A

Key sustainability issues concerning the company Environmental and social impact of purpose of the machinery / equipment Energy consumption and energy sources used as well as energy efficiency during use

phase Resources used for construction of machinery Working conditions for employees and suppliers (health and safety) Anti-competitive practices

Key considerationsSchneider Electric is a global provider of solutions and components in the area of automation as well as electricity distribution and grid-management. Its integrated solutions play an important role in the increase of energy efficiency across the energy chain, industrial applications, buildings, transportation, data centers, etc. Moreover, it offers energy optimization audits. Many of the businesses served (such as the building segment, electricity production, transportation) contribute significantly to the worldʼs energy consumption and addressing the environmental issues here is key. Schneider Electric plays an important role in the optimization of performance in term of energy consumption. However, the company also offers solutions applied in nuclear power plants, defense products and other sectors with high environmental and social impact.

Schneider Electric is aware of the environmental issues at stake of its own production and addresses them with a comprehensive action plan comprising programs and targets based on an ISO 14001-certified management system. Its main focus is to lower its greenhouse gas emissions for reducing its impact on climate change. It is worth underlying that Schneider Electric has set up two Sustainability Committees, one being at executive management level, to monitor and steer the groupʼs action plan.

Industrial companies like Schneider Electric have to pay particular attention to the safety of their employees as work on machineries and automation manufacturing facilities might be dangerous for workers. In this respect, the company has implemented an OHSAS 18001certified management system for most of its sites. Emphasis is placed on anticipating professional risks and on integrating preventing measures into company projects to enhance the health and safety of its employees.

It is worth mentioning that the company has adopted “Principles of Responsibility” addressing anti-competitive practices and other business practices. The measures taken seem to show their effect as the company has not been involved in any major controversies recently, while there were several such cases in the past. Analyst: Fanny Sulmoni





4834108 SedolSCHN.PA RIC

SU FP Bloomberg Ticker


Business descriptionSchneider Electric SA is a France-based company that specializes in electricity distribution, automation management and produces installation components for energy management. The Company has five divisions organized by business: Energy and Infrastructure, which includes medium and low voltage, installation systems and control, renewable energies and includes customer segments in Utilities, Marine, residential and oil & gas sector; Industry, which includes automation & control which includes water treatment and mining, minerals & metals industries; Buildings, which includes building automation and security, whose customers are hotels, hospitals, office and retail buildings; Data centres and networks, and Residential which is engaged in solutions for saving electricity bills by combining lighting and heating control features, among others. In March 29,2013, it acquired Electroshield TM Samara.



COMPANY GRADE B

Schneider Electric SAELECTRICAL EQUIPMENT - France



Environment

Society

LabourGovernance

Environment

C-

Labour

C+

Society

D+

Governance

B

Key sustainability issues concerning the company Origin of resources (conflict minerals, rare earth elements) Environmental impact of products Working conditions in supply chain Business ethics behaviour in commercial operations

Key considerationsAs a provider of high technologies to the energy, industrial and healthcare sectors, Siemens faces major sustainability challenges, mainly regarding the environmental protection and the respect of fair business ethics practices.

Siemens offers a range of products and solutions with a positive environmental impact, such as wind turbines and environmental technologies for cleaner water and air, to help customers reduce their environmental footprint and combat climate change. Specific quantitative targets and initiatives to reduce the companyʼs carbon footprint have also been adopted.Nevertheless, although it might divest the nuclear market, Siemens provides technology for nuclear plants, such as turbines and conventional islands.

Regarding production, 81% of Siemensʼ sites are certified according to the ISO 14001standard. In addition, through a specific policy, Siemens requires its suppliers to ensure that purchased metals do not originate from armed conflict regions.

To ensure that fundamental human rights are not violated, Siemensʼ suppliers must adopt a specific policy, addressing relevant labor standards. Formal monitoring systems are in place to ensure the respect of the Code. However, in 2010, a company supplier in China was criticized for its bad working conditions. Siemens also faced protests of its employees. For example, in 2012, Siemens employees massively criticized the companyʼs plans to close down its headquarters in Germany. In addition, in 2012, employees organized a strike over unionising rights in India.

Finally, the prevention of corruption is the greatest matter of concern for Siemens as it has been accused of bribery in many countries these past years. The company is also the subject of several protests over its involvement in controversial projects, such as the construction of windmills in Western Sahara and a power plant in Slovakia. In addition, Siemens has been suspected of anti-competitive practices in Pakistan and Europe.

Globally, although Siemensʼ sustainability reporting is consistent, its involvement in severe controversies tends to show that the initiatives taken by the company are no sufficient. The fact that the company derives a small percentage of revenues from the sale of automation, control and power systems for military navy vessels and submarines is worth mentioning.





5727973 SedolSIEGn.DE RIC

SIE GR Bloomberg Ticker


Business descriptionSiemens AG is an integrated technology company with activities in the fields of industry, energy and healthcare. Siemens operates in six segments: Industry, Energy, Healthcare, Equity Investments, Siemens IT Solutions and Services and Siemens Financial Services (SFS). Industry, Energy and Healthcare are reported along with 14 divisions, which comprise the divisions, Industry Automation, Drive Technologies, Building Technologies, OSRAM, Industry Solutions and Mobility, belonging to the Industry Sector, the Divisions, Fossil Power Generation, Renewable Energy, Oil and Gas, Power Transmission and Power Distribution, belonging to the Energy Sector and the Divisions, Imaging and Information Technology (IT), Workflow and Solutions and Diagnostics, belonging to the Healthcare Sector. In July 2012, it divested a portfolio of over 40 patents and applications related to telecommunication network management and mobile multimedia. In August 2013, it divested its stake in Nokia Siemens Networks.



COMPANY GRADE C

SiemensINDUSTRIAL CONGLOMERATES - Germany



Environment

Society

LabourGovernance

Environment

B-

Labour

A

Society

C-

Governance

A+


Key considerationsStandard Chartered is among UK's major financial institutions and provides products and services across 68 markets. As for all financial institutions, Standard Chartered's primary impact on the environmental and social dimension happens through its lending and investment decisions. Thus, the integration of such aspects is a key issue for banks.

Standard Chartered addresses these topics by systematically assessing the ecological and social risks in credit granting and investment decisions. Moreover, all project finance transactions are assessed according to the Equator Principles. With the voluntary adoption of these internationally recognized principles, the company assesses andmanages social and environmental risks in project finance. At Standard Chartered, microfinance activities are fostered through the support of monetary financial institutions in countries such as Kenya, India or Bangladesh and through the expansion of business activities into microfinance markets (e.g. Indonesia, Pakistan, Philippines).

However, the implementation of these measures has not prevented the company from engaging in financing controversial projects. Actually, Standard Chartered is subject of protests over its involvement in controversial projects such as the Sakhalin II oil and gas project and the bauxite mine in Niyamgiry Hills. Moreover, some involvements in business ethics cases like deficient money laundering controls in India or the collusion of rate settings in Korea show that Standard Chartered has still room to improve its business ethics practices.

Standard Chartered has implemented some employee and environmental programs at the operational level. Climate change and green procurement are at the center of the attention that the company pays to environment. Employee diversity programs are in place and employee policies show awareness for employee well-being. Moreover, collective labour agreements and close relationship with unions should ensure favorable exchange with employees.





408284 SedolSTAN.L RIC

STAN LN Bloomberg Ticker


Business descriptionStandard Chartered PLC is the holding company. The Company operates globally and is principally engaged in the business of retail and commercial banking and the provision of other financial services. The Company operates in two business segments: Consumer Banking, which meets the needs of private, small and medium-sized enterprises (SMEs), priority and personal banking customers across its franchise and Wholesale Banking, which includes lending and portfolio management; transaction banking, including trade and cash management and custody; global markets, including financial markets, asset and liability management, corporate finance and principal finance. As of December 31,2011, it comprised a network of more than 1,500 branches and outlets in 71 markets. On April 8, 2011, the Company acquired GE Money Pte Limited, a specialist in auto and unsecured personal loans in Singapore. On September 2, 2011, it acquired Gryphon Partners Advisory Pty Ltd and Gryphon Partners Canada Inc.



COMPANY GRADE B-

Standard CharteredCOMMERCIAL BANKS - United Kingdom



Environment

Society

LabourGovernance

Environment

A-

Labour

A-

Society

C-

Governance

A+

Key sustainability issues concerning the company Competition practices Transparency of pricing structure Impact of radio frequency radiations Customer relations Working conditions of employees Digital divide Health & safety of employees

Key considerationsAs a provider of telecommunication services, Telefonica has to address primarily social issues related to customer relations, competition concerns, health impact of waves and working conditions of employees. Generally speaking, the company has a very comprehensive corporate social responsibility (CSR) reporting covering all the industry-expected topics.

For the last couple of years, the company deployed a customer satisfaction monitoring that enabled it to identify how their cutomers are and how the customer friendliness of products could be improved. Moreover, Telefonica strives to protect its customers, notably the children by offering their parents tools to prevent access to inappropriate content. Despite a strong commitment to customers and quality of services, the company was accused of insufficient protection of UK customersʼ data. In 2012, Telefonica was criticized for not doing enough to protect customers in case their mobile phones were stolen or lost. In addition, the same year, the company was fined for a huge service outage in Argentina.

Considering the health & safety of its employees and the employment conditions, Telefonica shows a serious commitment. The company implemented health and safety program that includes support in case of psychic problems and for management of stress. It also recognized the freedom of association of its employees. Most of them are covered by collective bargaining agreements.

In the environmental field, Telefonica has a very comprehensive policy, covering all relevant topics. In addition to CO2 emissions reduction action plan, it offers customers a recycling collection program for used devices.

Moreover, Telefonica commits to reduce the digital divide within its activities.

The different elements mentioned above testify the serious engagement of Telefonica concerning CSR issues and make this company rather sustainable.

Analyst: Gael [email protected]



Stock informationES0178430E18 ISIN

5732524 SedolTEF.MC RICTEF SM Bloomberg Ticker


Business descriptionTelefonica SA is a Spain-based company active in the telecommunications and digital services sectors. The Company operates through three business segments: Telefonica Latin America, Tefonica Europa, and Others. It provides public and private telecommunication, media and entertainment services; under such brands as Telefonica, Movistar, O2and Vivo, among others. It offers fixed telephony accesses, Internet and data accesses, mobile accesses and pay television .With presence in Europe and Latin America, it operates in 25countries through such subsidiaries as Telefonica Emisiones SAU, Telefonica Brasil SA, Telefonica Chile SA, Colombia Telecomunicationes SA, Telefonica Europe BV, and MMO2 Plc, among others. The Company acquired infrastructure from Nokia Oys's Nokia Solutions and Networks.



COMPANY GRADE BTelefonica

DIVERSIFIED TELECOMMUNICATION SERVICES - Spain



Environment

Society

LabourGovernance

Environment

C+

Labour

D-

Society

D+

Governance

B+

Key sustainability issues concerning the company Energy efficiency of operations (notably refrigeration process) Management of waste and recycling Selling of labelled products Working conditions for employees (notably in relation to hours and wages) Supply chain management (working conditions for suppliers) Anti-competitive practices

Key considerationsAs an international food retailer, Tesco has major issues to tackles, both on environmental and social sides.

The company has understood its environmental challenges by having implemented programs to reduce its impact. For example, the refrigerant gases used in almost all refrigeration systems – known as hydrofluorocarbons (HFCs) – are a potential greenhouse gas. Tesco has managed to reduce refrigerant emissions across the group. This was mostly achieved through minimizing refrigeration gas leakage. Moreover, the company is starting to use alternative refrigeration systems, known as natural refrigeration systems, across the business. Its store in Shanghai was the first in China to use a natural refrigeration system and it opened its second store with CO2 refrigeration in Beijing. However, despite several isolated measures to improve its environmental fooprint, the company has not yet adopted a formal environmental management system based on an environmental certification which would be more than welcome for an important company such as Tesco. Moreover, the company has been involved in controversies over its damage on the ecosystem.

Regarding working conditions, the company seems aware of its major challenges regarding its employees and contractors by having implemented several measures. For example, Tesco has set up a strong auditing system to ensure compliance of labour policies for its contractors based on the ETI (Ethical Trading Initiative) base code. Contractors are then followed and trained on labour issues. However, some important processes are missing such as a formal health and safety management system based on a certification. Finally, to underline these lacks, the company has been involved in labour related controversies over the past years.

Finally, Tesco is starting to ride the wave of the organic and fair-trade by selling a small range of such products. However, this remains too marginal to be considered as a change by the company towards a more sustainable business model. Analyst: Fanny Sulmoni





884709 SedolTSCO.L RIC

TSCO LN Bloomberg Ticker


Business descriptionTesco PLC is an international retailer. The activity of the Company is retailing and associated activities in the United Kingdom, the Peopleʼs Republic of China, the Czech Republic, Hungary, the Republic of Ireland, India, Malaysia, Poland, Slovakia, South Korea, Thailand, Turkey and the United States. The Company also provides retail banking and insurance services through its subsidiary, Tesco Bank. The services it offers in store, such as optician, pharmacy, phone shop or customer restaurant. As of February 25, 2012, it had over 180 opticians. Click & Collect is a component of its multi-channel offering. Its store and distribution networks give customers the opportunity to pick products whenever it suits them from over 770stores, close to where they live or work. As of February 25, 2012, it had 45 stores, which offers grocery Click & Collect. In September 2012, it acquired Mobcast. In March 2013, the Company acquired Restaurant Group Giraffe.



COMPANY GRADE C-

TescoFOOD & STAPLES RETAILING - United Kingdom


Nutrition sector

Environment

Society

LabourGovernance

Environment

D

Labour

D

Society

D-

Governance

B+


Key considerationsAs an integrated Oil & Gas company, Total SA is active in a very sensitive industry as its business is based on non-renewable energy sources.

Basically, most of the products offered by the company cannot be considered as sustainable because they are directly derived from polluting fossil fuels. Even if the company is acquiring stakes in renewable energies companies (investment of USD 1.4billion in Sunpower in 2011), it remains marginal in comparison with investments in fossilfuels. Production practices (notably for the extraction) in the Oil & Gas industry also have a strong environmental impact. Total SA made some efforts to address important issues such as flaring: it has developed relevant technical solutions and has set clear quantitative targets. However, notably through its Canadian subsidiary Total E&P Canada (TEPCA), the company is involved in unconventional extraction practices, such as oil sands. In the USA, Denmark, Poland and Argentina Total SA uses highly controversial hydraulic fracturing techniques to extract shale gas. Both of those practices not only use and potentially pollute water but also emits more GHG than conventional extraction.

On the social level, the company has implemented programs regarding health & safety which is a major issue in the Oil & Gas industry. Nevertheless, several severe accidents, sometimes with fatalities, occurred during last years resulting in controversies regarding the respect of safety standards. Finally, Total SA distinguishes itself by having an especially high rate of employees covered by a collective bargaining agreement.

Lastly, the companyʼs sustainable performance is overshadowed by its involvement in controversies related to the main societal issues at stake for the sector such as royaltiesʼ distribution. In 2012 only, the company has been investigated over tax evasion in Nigeria and agreed to pay the American Justice Department USD 15 million to settle a claim as it knowingly underpaid royalties owed in relation to the natural gas produced from federal and Indian land.





B15C557 SedolTOTF.PA RIC

FP FP Bloomberg Ticker



Business descriptionTotal SA is a France-based integrated international oil and gas company. It is an integrated international oil and gas company and a chemicals manufacturer. Total engages in all aspects of the petroleum industry, including Upstream operations (oil exploration and production, together with activities related to natural gas), Refining & Chemicals (refining, petrochemicals, speciality chemicals, crude oil trading and shipping) and Marketing & Services (focused on the supply and sale of petroleum products, together with activities related to renewable energy). In April 12, 2013, it inaugurated the partnership with Veolia Environnement SA the Osilub plant. In July 2013, it sold its TIGF (Transport et Infrastructures Gaz France), gas transport and storage business. In September 2013, it announced the transfer to The National Gas Company of Trinidad &Tobago of all of its E&P assets in Trinidad through the sale of Total E&P Trinidad B.V and Elf Exploration Trinidad B.V.



COMPANY GRADE D

Total SAOIL, GAS & CONSUMABLE FUELS - France


Energy sector

Environment

Society

LabourGovernance

Environment

C-

Labour

B+

Society

D+

Governance

D+


Key considerationsUBS serves institutional and private clients worldwide through its offices in 50 countries and its 61,000 employees. Social and environmental considerations are thus part of the company's daily business as the bank is confronted with the growing expansion of customers' sustainability awareness.

UBS integrates environmental and social aspects into all of its business activities as it has implemented an environmental and social risk screening process for all of its transactions. Moreover, 11% of its assets under management invested according to socially responsible principles. In addition, it has adopted an exclusion policy prohibiting investments in companies involved in cluster munitions.

However, UBS faces numerous concerns in relation with the respect of business ethics practices and its support of controversial projects. In fact, UBS is criticized over its involvement in projects like the Woodside Petroleum's gas refinery or gold mines in Papua New Guinea. Furthermore, UBS is one of the top 20 providers of financial services to the nuclear industry and among the top 10 providers of financial services to the coal industry. Despite the implementation of a Code of Business Conduct, the involvement in controversies on issues like money laundering or predatory lending shows the company's weakness in its business ethics management system. Moreover, UBS is involved in the LIBOR rate conspiracy case and in tax evasion investigations in France, India and the US.

On the operational level, UBS addresses environmental and employee issues: its commitment to climate change is underlined with a position statement, and programs to reduce CO2 emissions are implemented at company level. Comprehensive employee training programs promote human resources development and employee health and safety programs address psychic conditions.





B18YFJ4 SedolUBSN.VX RICUBSN VX Bloomberg Ticker


Business descriptionUBS AG is a client-focused financial services company that offers a combination of wealth management, asset management and investment banking services on a global and regional basis. UBS AG is the parent company of the UBS Group (Group).The operational structure of the Company consists of the Corporate Center and four business divisions: Wealth Management & Swiss Bank, Wealth Management Americas, Global Asset Management and the Investment Bank. As of December 31, 2011, the Company operated about 877 business and banking locations worldwide, of which about 42% were in Switzerland, 42%in the Americas, 11% in the rest of Europe, Middle East and Africa, and 5% in Asia-Pacific. During the year ended December 31, 2011, it completed acquisitions in Global Asset Management and in the equities business of the Investment Bank.



COMPANY GRADE C

UBSCAPITAL MARKETS - Switzerland



Environment

Society

LabourGovernance

Environment

A-

Labour

B-

Society

B-

Governance

A

Key sustainability issues concerning the company Purchase and use of palm oil Pollution of air, soil and water Water consumption Energy efficiency in the production process Animal welfare Buying practices (green procurement, social requirements for suppliers) Health and safety management among employees and suppliers Production of organic and fair-trade products Anti-competitive practices

Key considerationsAs one of the biggest food and personal care producers in the world with more than 150'000 employees, Unilever faces several major issues, particularly on the sourcing side. In particular, there have been many concerns surrounding the sourcing of palm oil. Indeed cultivation of oil palm is contributing to deforestation and climate change. Vast areas of pristine rainforest is slashed and burned each year in order to make space for oil palm plantations which is catastrophic for the biodiversity and releases large amounts of CO2into the atmosphere. Many orangutans and other wildlife are killed in the process, so that this one vegetable oil can be used in many of our everyday foods. Unilever is member of the Roundtable for Sustainable Palm Oil (RSPO) member since the beginning and shows proactive measures such as setting targets to purchase all its palm oil from certified sustainable sources by 2015.

The working conditions at the suppliers are also a sensitive issue of Unilever as some raw materials, such as cocoa and sugar, are sourced from countries where poor working conditions are almost the norm. Ethical and social criteria are fully part of the companyʼs procurement policy. Unilever also conducts internal and external on-site inspections with regards to human rights, such as health and safety and child labour.

Anti-competitive practices are also of particular concern for Unilever as the company was fined more than once for price-fixing in Europe (for laundry products and powder detergents in particular) in the past. However, it seems than Unilever has embraced this issue by setting up an anti-competitive policy and not being involved in such cases anymore.

We can conclude that despite some minor controversies - compared to its peers - the company is a leader of the industry regarding sustainability issues by addressing most of them in a comprehensive way, with concretes steps.




Stock informationGB00B10RZP78 ISIN

B10RZP7 SedolULVR.L RIC

ULVR LN Bloomberg Ticker


Business descriptionUnilever PLC (PLC) is a supplier of fast moving consumer goods. The two parent companies, Unilever N.V. (NV) and PLC, together with their group companies, operate as the Unilever Group (Unilever). The Companyʼs four product areas are Personal Care, Foods, Refreshment and Home Care. The Company's personal care, which includes sales of skincare and haircare products, deodorants and oral care products; foods, which includes sales of soups, bouillons, sauces, snacks, mayonnaise, salad dressings, margarines and spreads; refreshment, which includes sales of ice cream, tea-based beverages, weight-management products and nutritionally enhanced staples sold in developing markets and home care, which includes sales of home care products. Effective July 4, 2013,Unilever PLC raised its interest to 51.55% from 36.75%, by acquiring a 14.784% interest in Hindustan Unilever Ltd. In October 2013,Pinnacle Foods Inc completed the acquisition of the Wish-Bone salad dressings business from Unilever PLC.



COMPANY GRADE B+

UnileverFOOD PRODUCTS - Netherlands


Nutrition sector

Environment

Society

LabourGovernance

Environment

B-

Labour

C

Society

C-

Governance

A+

Key sustainability issues concerning the company Competition practices Transparency of pricing structure Customer relations Impact of radio frequency radiations Working conditions of employees Digital divide Health & safety of employees

Key considerationsVodafone is the worldʼs second-largest mobile operator in number of subscribers and has worldwide operations. For years, the company has implemented comprehensive policies and programs to tackle CSR issues inherent in the telecom industry. Notwithstanding these measures, Vodafone has been involved in numerous and major controversies related to employment conditions, business ethics and customer relations.

Considering employment conditions, strikes and criticims from unions in the UK resulted by the company's decision to relocate and outsource jobs in low cost countries. In Ghana, Vodafone had also to deal with other disputes related to poor working conditions, low salaries and mass termination of call center operators.

Regarding business ethics issues, Vodafone was repeatedly accused of violating anti-competition laws in Europe and was fined on several occasion, although the company deployed a complete code of ethics covering all business ethics topics. It also faced an important corruption case related to mobile phones licenses in India. Moreover, Vodafone has been involved in numerous controversies related to tax avoidance, notably in UK where it was revealed that the company did not pay any corporation tax in 2011 despite earnings of several hundred million pounds.

In the matter of customer relations, Vodafone implemented a client satisfaction motoring system to get direct feedback from customers. But the company faced numerous criticisms from consumer watchdogs, such as Consumidores en Accion in Spain. In addition, the telecom operator was recurrently sued for misleading customers about the cost of its services.

Vodafone acts in a responsible way according to its policies and action plans. But the disputes and controversies faced by the company in the last years show that substantial efforts remain to be done for sustainability. Analyst: Gael Kyriakidis




Stock informationGB00B16GWD56 ISIN

B16GWD5 SedolVOD.L RIC

VOD LN Bloomberg Ticker


Business descriptionVodafone Group Plc (Vodafone) is a mobile communications company operating across the globe providing a range of communications services. It offers a range of products and services, including voice, messaging, data and fixed-line solutions and devices to assist customers in meeting their total communications needs. It has a global presence, with equity interests in over 30 countries and over 40 partner markets worldwide. It operates in three geographic regions: Europe, Africa and Central Europe; Asia Pacific, and the Middle East, and has an investment in Verizon Wireless in the United States. In March 2012, Verizon Wireless, which is a joint venture of Verizon Communications Inc. and Vodafone, purchased the operating assets of Cellular One of Northeast Pennsylvania from the Company. In May 2013, Vodafone Group Plc announced launch of its carrier services business unit.



COMPANY GRADE C+Vodafone

WIRELESS TELECOMMUNICATION SERVICES - United Kingdom



Environment

B-

Labour

C

Society

C-

Governance

A+

Key sustainability issues concerning the company Competition practices Transparency of pricing structure Customer relations Impact of radio frequency radiations Working conditions of employees Digital divide Health & safety of employees

Key considerationsVodafone is the worldʼs second-largest mobile operator in number of subscribers and has worldwide operations. For years, the company has implemented comprehensive policies and programs to tackle CSR issues inherent in the telecom industry. Notwithstanding these measures, Vodafone has been involved in numerous and major controversies related to employment conditions, business ethics and customer relations.

Considering employment conditions, strikes and criticims from unions in the UK resulted by the company's decision to relocate and outsource jobs in low cost countries. In Ghana, Vodafone had also to deal with other disputes related to poor working conditions, low salaries and mass termination of call center operators.

Regarding business ethics issues, Vodafone was repeatedly accused of violating anti-competition laws in Europe and was fined on several occasion, although the company deployed a complete code of ethics covering all business ethics topics. It also faced an important corruption case related to mobile phones licenses in India. Moreover, Vodafone has been involved in numerous controversies related to tax avoidance, notably in UK where it was revealed that the company did not pay any corporation tax in 2011 despite earnings of several hundred million pounds.

In the matter of customer relations, Vodafone implemented a client satisfaction motoring system to get direct feedback from customers. But the company faced numerous criticisms from consumer watchdogs, such as Consumidores en Accion in Spain. In addition, the telecom operator was recurrently sued for misleading customers about the cost of its services.

Vodafone acts in a responsible way according to its policies and action plans. But the disputes and controversies faced by the company in the last years show that substantial efforts remain to be done for sustainability. Analyst: Gael Kyriakidis




Stock informationGB00B16GWD56 ISIN

B16GWD5 SedolVOD.L RIC

VOD LN Bloomberg Ticker


Business descriptionVodafone Group Plc (Vodafone) is a mobile communications company operating across the globe providing a range of communications services. It offers a range of products and services, including voice, messaging, data and fixed-line solutions and devices to assist customers in meeting their total communications needs. It has a global presence, with equity interests in over 30 countries and over 40 partner markets worldwide. It operates in three geographic regions: Europe, Africa and Central Europe; Asia Pacific, and the Middle East, and has an investment in Verizon Wireless in the United States. In March 2012, Verizon Wireless, which is a joint venture of Verizon Communications Inc. and Vodafone, purchased the operating assets of Cellular One of Northeast Pennsylvania from the Company. In May 2013, Vodafone Group Plc announced launch of its carrier services business unit.



COMPANY GRADE C+Vodafone

WIRELESS TELECOMMUNICATION SERVICES - United Kingdom


Environment

Society

LabourGovernance

Environment

B+

Labour

A-

Society

B+

Governance

B-

Key sustainability issues concerning the company Sustainability impacts of company's own investments Fairness and transparency of insurance contracts and consulting services Fair and transparent financial business practice Sustainability impacts of insurance products

Key considerationsZurich Insurance Group is an internationally active multi-line insurer present in over 170countries and serving individuals as well as business customers of all sizes. As such, the company is more and more confronted with sustainability risks.

To answer the sustainability issues of its industry, the company has developed tailor-made insurance products for ecologically favorable industries and projects and considers ESG criteria in its own investments. For example, the company offers electric vehicle insurance products and provides coverage for construction risks for renewable energy power plants such as for the "Desert Sunlight" project in California (one of the largest photovoltaic solar farm projects in North America).

Zurich Financial Group is a signatory of the UN Principles for Responsible Investment (PRI) and integrates environmental, social and governance (ESG) factors into its investment decision processes. Furthermore, the flood resilience program for communities and the accident prevention programs for private customers are two examples of the company's risk reduction efforts.

The company has taken measures to reduce its direct ecological impacts, by reducing energy consumption and adopting green procurement measures. Some of its sites have obtained the ISO 14001 certification for their environmental management system. Moreover, it has developed a risk profiling methodology providing underwriting guidance and training in four areas of concerns (cluster munitions, dam construction projects, oil and gas construction projects and projects with human rights infringements).

Even if Zurich Insurance Group is not active in a sensitive sector regarding employees, the company has implemented relevant programs to ensure proper working conditions. Comprehensive employee programs have been adopted, such as regular surveys to monitor employee satisfaction and employees take part in work councils.

However, Zurich Insurance Group faced some concerns in 2012, especially in relation with the employees of its subsidiary Farmers Insurance Group (misclassification of employees to independent contractors to avoid tax obligations) and with the violation of Irish data protection laws (possession of personal information of private people).





5983816 SedolZURN.VX RICZURN VX Bloomberg Ticker


Business descriptionZurich Insurance Group Limited is a Switzerland-based holding company engaged in the insurance sector. The Company provides a range of general and life insurance products and services for individuals, small business, mid-sized and large-sized companies, and multinational corporations. The Company offers its products and services through three business segments, namely General Insurance, Global life and Farmers. The General Insurance segment offers motor, home and commercial products and services for individuals, as well as small and large business. The Global life segment offers life insurance, savings, investment and pensions solutions. The Farmers segment includes farmers management services, which provides non-claims management services to the farmers exchange, as well as Farmers Re business, which includes reinsurance assumed from the Farmers Exchange by the Company's group. Furthermore, the Company provides reinsurance and insurance business considered as non-core business.



COMPANY GRADE B+

Zurich Insurance Group AGINSURANCE - Switzerland



Environment

Society

LabourGovernance


Disclosures

IndependenceInrate clients are mainly companies in the financial sector, some of them being part of the analysis coverage of Inrate. This interaction is regulated by Inrate corporate policies on conflict of interest and transparency. In the context of this publication, Inrate confirms it supplies sustainability research to two companies that are featured in this report, namely UBS andBNPParibas.Wedonotconsiderthatourindependenceis affected by this business relationship.

DisclaimerInrate believes that the data, assessments and opinions re-ported in this publication reflect the best informed and fairest opinionthatcanbemadebyoutsideanalysts.However,Inratecannot in any way guarantee the full accuracy or exhaustive-ness of its analyses and cannot therefore accept any respon-sibility in case of reporting of false, inaccurate or incomplete information. Inrate accepts no liability for financial prejudice allegedly resulting from inaccuracy of assessments or data or from the misinterpretation of their scope. The assessments and data reported above are offered by Inrate for general in-formational purposes or for being used by financial profes-sionals. They are in no way recommendations to invest or dis-invest in any financial product or security. They must not be understood as a financial forecast of financial performance of underlying securities of researched companies.

Data used in this publication

MarketcapitalizationasofSeptember30th,2013

STOXX® Europe 50 as of September 30th, 2013


Inrate analyst team

Name Function Experience (years)

Contact

VanessaArdenti HeadofProduction 15 +41(0)[email protected]

StéphaneGenilloud Senior analyst 16 +41(0)[email protected]

MadeleineGuyer Senior analyst 6 +41(0)[email protected]

Tobias Jung HeadofResearch 11 +41(0)[email protected]

GaelKyriakidis Senior analyst 6 +41(0)[email protected]

AlexandreMesserli Senior analyst 6 +41(0)[email protected]

Daniela Perito Senior analyst 14 +41(0)[email protected]

Isabelle Reine Senior analyst 15 +41(0)[email protected]

Judith Reutimann Senior analyst 6 +41(0)[email protected]

Bettina Rüegge Senior analyst 8 +41(0)[email protected]

Regina Schwegler Senior analyst 6 +41(0)[email protected]

Gina Spescha Senior analyst 4 +41(0)[email protected]

MyriamSteinemann Senior analyst 11 +41(0)[email protected]

Fanny Sulmoni Senior analyst 7 +41(0)[email protected]

AnnaVettori Senior analyst 13 +41(0)[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]


Sector responsibilities

Sector Responsible analyst

Chemical sector VanessaArdenti,TobiasJung

Clothing sector Isabelle Reine, Bettina Rüegge

Comfort and appliances sector Isabelle Reine, Bettina Rüegge

Communication sector GaelKyriakidis,JudithReutimann,AnnaVettori

Consulting and commercial services sector IsabelleReine,MadeleineGuyer

Disposal and recycling sector AlexandreMesserli,TobiasJung

Diversified companies sector Daniela Perito, Regina Schwegler

Education sector Daniela Perito, Regina Schwegler

Energy sector AlexandreMesserli,JudithReutimann

Financial services sector Daniela Perito, Regina Schwegler

Healthcaresector VanessaArdenti,JudithReutimann,AnnaVettori

Householdandpersonalproductssector GaelKyriakidis,BettinaRüegge

Housingsector Gina Spescha, Bettina Rüegge

Infrastructure sector Isabelle Reine, Bettina Rüegge

ITequipmentandelectronicssector Isabelle Reine, Bettina Rüegge

Leisuresector Gina Spescha, Bettina Rüegge

Machineryandindustrialequipmentsector Fanny Sulmoni, Tobias Jung

Nutritionsector Fanny Sulmoni, Bettina Rüegge

Resources sector AlexandreMesserli,JudithReutimann

Retail and distribution sector GaelKyriakidis,MadeleineGuyer,MyriamSteinemann

Security sector Daniela Perito, Bettina Rüegge

Software sector Daniela Perito, Judith Reutimann

Transportation sector GinaSpescha,MadeleineGuyer,MyriamSteinemann

Water sector Daniela Perito, Judith Reutimann


Inrate contacts

Stefano [email protected]+41(0)583440006

Natalie ErnstCorporateCommunicationsandMediaRelationsnatalie.ernst@inrate.com+41(0)583440023

About Inrate

Inrate is a leading independent sustainability rating agency active in Europe. It is based in Switzerland and has more than 20 years of experience in linking its know-how on sustainabil-ity with the financial markets.

Inrate provides tailor-made solutions for investors who wish to consider ESG issues in their investments – either on the grounds of socially responsible investment or with the aim of minimizing extra-financial risks in traditional investment.

Inrate Ltd. Sustainable Investment Solutions

Rue de Romont 2 CH-1700FribourgSwitzerland

Binzstrasse 23 CH-8045ZurichSwitzerland

T+41(0)583440000F+41(0)583440001

[email protected] www.inrate.com

Sustainability Guide 2013 - Long Finance

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