Jeanette became the MP for Coromandel from 1999-2002 and has been co-leader of
the Green Party since 1995. Jeanette has been Chairperson of the Local Government
and Environment Select Committee since 1999 and she was a member of the
Transport and Environment Select Committee from 1996-1999. She was previously a
member of the Values Party was the Alliance Deputy Leader and Policy Committee
Convenor from 1994-1996.

Jeanette’s background includes lecturing at the Department of Planning, Auckland
University from 1980-1992, where she taught Environmental Studies and Energy
Planning. She became a consultant to local authorities, regional councils and
government departments on waste management, packaging, climate change,
resource management, hazardous activities and energy management. Jeanette has
written extensively on environmental issues, energy, ecological and economic
sustainability, ecological agriculture and technological change.

Jeanette’s current Parliamentary roles include the spokesperson’s and cospokesperson’s
role on a wide range of issues such as climate change, conservation,
Crown Research Institutes, energy, the environment, fisheries, genetic engineering,
local government, research, science and technology, sustainable development,
sustainable economics and transport.

Jeanette is married with two adult sons, and she and her husband run an organic farm
near Thames.

Abstract

Over the last half century environmental damage has become global in its impacts and
the effects are now widely separated from the causes in both space and time. They
include climate change, ozone depletion, persistent poisons accumulating in the food
chain, loss of biodiversity, loss of soils, forests and fisheries, depletion of energy and
water resources and the risk of long term and unpredictable genetic changes.

New Zealand needs to improve its performance particularly in sustainable energy,
reducing greenhouse gases, minimising waste, protecting endangered species,
managing freshwater quality and the impacts of fishing on marine ecosystems.
Issues of social justice and environmental destruction are inextricably linked both
because depleting resources are very unequally allocated across the globe and
because the thought processes, company goals and lack of awareness that lead to
abuse of people also lead to abuse of the environment.

Solutions require long-term thinking and a change in the way we view the relationship
between the economy and the environment. Concepts like eco-efficiency, zero waste,
cleaner production and the Natural Step provide guidance for businesses wanting to
be environmentally responsible.

Triple (and quadruple) bottom line reporting and sustainability reporting provide useful
information to potential investors but to avoid greenwash and PR spin common
standards of what to measure and how to measure it are needed. Ethical investors
can use negative screening, best of sector or positive projects approaches to
assessing companies. The growth of ethical investment is encouraging but little of it
yet is based on comprehensive analysis of full environmental and social performance.

Environmentally Responsible Investment

Jeanette Fitzsimons
List member of Parliament, Green Party
Co-Leader, Green Party

Human activities have always had local environmental impacts, visible to and suffered
by the same people who create them. This has been the main safeguard.

What has changed only in the last half century is that some of these impacts are now
global in their effects and can only be controlled by global action. In particular we are
seeing global changes to the composition of the atmosphere and the oceans, as well
as local depletion of natural resources and pollution which have become so large
scale that they have global implications.

Pre-eminent among global environmental threats, and hardest to address, is climate
change from the build up in the atmosphere of greenhouse gases – mainly carbon
dioxide, but also methane, nitrous oxide and freons released by human activities. It is
the ultimate challenge to global co-operation because no nation can protect itself from
climate change unless all nations agree to act together.

A similar challenge was posed and to a large extent met when nations agreed to
phase out ozone depleting chemicals in order to protect us from ultra violet radiation
and the consequent skin cancers, blindness and reduction in agricultural productivity.
The Montreal Protocol was a landmark in international environmental co-operation but
the gases that were phased out were of narrow application and readily replaced.

Addressing climate change challenges our energy use and goes to the heart of
industrial society and our way of life. Disputes over ratification of the Kyoto Protocol,
itself a very small first step to reduce greenhouse gases, shows how hard it is and
progress is unlikely to be fast enough to protect us from substantial changes in rainfall
and temperature patterns, sea level rise and flooding and extinctions of many species
– some have predicted a million, worldwide.

Pollution has also until the last century been predominantly local but with the advent of
extremely long-lived poisons which bioaccumulate it has now become global. For
example, DDT is present in the fat of polar bears in the Arctic, even though it has not
been used within thousands of miles. Pollutants entering the global food chain affect
us all and there is no away to run to.

It is also possible – indeed likely - that genetic changes to species as a result of
unpredictable effects of genetic engineering will change the global environment. Some
island states like New Zealand have the opportunity, with great vigilance, of
maintaining a protective barrier at the border (though at present we are choosing not
to take it!)

Other processes of environmental damage are felt locally but in the last fifty years
have accumulated to have a global impact. According to Lester Brown of the
Worldwatch Institute, as good an authority as you can get, a third of the world’s
cropland is declining in productivity because of soil loss; half the world‘s grasslands
are deteriorating into desert because of over grazing; half the world’s forests have
gone since the beginning of agriculture and yet they are still being cut and burned; two
thirds of oceanic fisheries are being fished beyond their capacity to regenerate and
aquifers are being over pumped in many food producing areas, especially China, India
and the US.

We can break down the big global environmental problems into:

At this stage one has to admit that there can be no distinction between environmental
sustainability and social justice. The thought processes, company goals and lack of
awareness that lead to abuse of people also lead to abuse of the environment. The
reality of our consumption in the west is shown up by the calculation that if China were
to eat fish at the same per capita rate as Japan it would take the entire world fish
harvest. If it were to eat feedlot beef at the same rate as the US it would take the
entire US grain harvest just to feed Chinese cattle. If it were to consume oil at the US
per capita rate it would need more than the total world oil production every year – and
that’s at current production rates which will soon begin to decline.

This is, of course, a recipe for war as we have already seen in Iraq – war, which brings
its own extreme environmental damage. One can think of agent orange and its effects
still felt in IndoChina; nuclear radiation in Japan; oil well fires in the Middle East and
depleted uranium shells in several recent US led wars.

How much should investment policy in New Zealand attempt to address global, as
distinct from local, environmental problems? There might once have been a case,
when finance was mainly local and we were talking about NZ companies operating in
NZ, for putting our local environment first. But New Zealand’s enthusiastic participation
in the global economy means we must also participate in protecting the global
environment. We must take responsibility if our timber use is destroying tropical
forests in the Pacific and South East Asia; if our oil use is contributing to war in Iraq; if
our cars are made from metals mined in a way that displaces local communities and
destroys habitat for endangered species.

New Zealand’s environmental crises are related but have important differences.
We produce around twice the world per capita rate of carbon dioxide but eight times
the rate of methane which in this country contributes more than half our greenhouse
emissions. That comes almost entirely from farm animals. Not only our energy use but
also our agriculture must change if we are to protect our most important economic
asset – our climate. We are more economically dependent on climate than any other
developed nation as primary production is still 60% of our exports.

Our most urgent environmental problem is the rapid loss of biodiversity. Eleven per
cent of the world’s endangered birds are New Zealand birds. The kiwi, while still quite
numerous is an ageing population because very few chicks in the wild survive stoats
and other predators. As the present population ages and dies it will not be replaced.
Most extreme is our marine biodiversity because we don’t even know what is there
yet. Protection of the sea lags several decades behind conservation on land and it’s
very much a case of “out of sight out of mind”. We have only tiny areas of marine
reserves where all species are allowed to flourish in their natural state.

Because we were one of the first countries to bring in a quota management system for
fisheries and theoretically all species are now managed within their sustainable yield,
we congratulate ourselves that our marine activities are sustainable. This is far from
the truth. First, we don’t have the knowledge yet for more than a few species to know
what the sustainable yield is. Second, we largely ignore the effects of fishing on other
species which are not commercially important. There are few controls on fishing
methods – it is still normal to dredge the bottom of the sea for one species, creating a
marine desert and throwing everything else back dead. Long lining kills hundreds of
endangered marine birds like albatrosses and petrels every year as well as marine
mammals like sea lions. Scientific investigations of seamounts and in Spirits Bay
discovered whole communities of organisms never before described by science, which
were already being unknowingly trashed by fishers.

We have protected the last of our native forests in public ownership from logging but
unless we improve pest management they, too, are at risk.

We are famous for producing more solid waste per capita than New York. We recycle
and reuse less than most developed countries. Our freshwater quality is deteriorating
rapidly in many catchments as a result of agricultural run off. Despite the efforts of
regional councils and some farmers and community groups the increase in agricultural
intensity, particularly dairying, is outstripping the protection gained by fencing and
planting of waterways.

Our energy use is particularly wasteful with a very low uptake of energy efficient
technologies. This already leads to our high carbon dioxide emissions but for the same
level of energy use emissions will get much worse as more coal is burned to replace
the depleted Maui gas field and the loss of hydro water in dry winters. We are
particularly dependent on transport and have the second highest rate of car ownership
in the world.

Air quality has finally been recognised as a killer even though our industry seems
cleaner than many overseas and we are told that vehicle emissions, especially fine
particles from diesel, kill as many people each year from respiratory and heart disease
as the road toll.

Having laid out the problems, I’d like to turn to some ways of thinking about them
which might be helpful for investors wanting to make a difference.

The first is to take a much longer time frame. For many important environmental
issues Nature has at least a twenty-year lag time. That’s about how long it takes for
CFCs released at ground level to reach the stratosphere and complete their
destruction of ozone. It will take a similar time for carbon dioxide released now to
gradually warm the oceans and raise sea level. Fortunately managed funds especially
for superannuation purposes can afford to have a longer horizon than an individual
and so can take a lead in looking to the future.

Secondly, we need a shift in thinking similar to the Copernican revolution which took
decades to convince society that the earth revolved around the sun and not the other
way round. The shift we have to accomplish is to turn on its head the conventional way
of thinking about the relationship between the environment and the economy.

Conventional economics shows a closed loop (figure 1) between production and
consumption – a kind of perpetual motion machine that doesn’t have to get its natural
resources from anywhere or discharge its wastes anywhere.



Little better is the model referred to as “weak sustainability” (figure 2) which shows the
economy, society and the environment as three equal circles – or in this version
ellipses - overlapping at the centre – usually with the economy sitting on top of the
others! This is the model used by the Business Council for Sustainable Development
and until they change it we must be sceptical of the level of their understanding of
ecology.

The truth of course is that the economy exists as a subset of society, which carries out other
activities which are not economic, and society in turn exists entirely inside the environment.
(figure 3). The environment is fixed in scale – fixed quantities of solar input which drives all
photosynthesis and so all primary production; fixed quantities of minerals and water; fixed
rates of throughput of renewable resources like timber and fish. These limits simply cannot
be exceeded. The economy draws all its raw materials and energy from the environment
and discharges all its wastes there. If the economy grows too large it will come up against
those limits. There are of course no limits to human ingenuity, imagination, creativity. To the
extent that a business can draw on these without drawing on more physical materials or
energy, it can grow within the constraints of the natural world.


Another way of growing a business without hitting these limits is the principle of ecoefficiency.
Replacing old commercial lighting fixtures with state of the art modern
fluorescent tubes and reflectors can reduce the power use by ninety percent – that’s
right, not to ninety per cent, by – for the same or better lighting quality and brightness.
That in turn reduces the waste heat load in the building and the air conditioning
system can be scaled down and used less for the same level of comfort. Very
significant reductions in energy use are possible with no loss of comfort or productivity
and sometimes with increases. Modern construction techniques use only a quarter of
the cement that used to be necessary for the same structural strength. A vast range of
technologies will deliver the same end result for much less water.

This makes it possible to grow output without growing inputs. But the rub is that rapid
growth in output is overwhelming eco-efficiency and pollution and resource depletion
is still growing. Cars in the US are now much more energy efficient than they were in
the seventies but there are so many more of them and they travel so many more miles
that fuel use and greenhouse gases are still rising. However, there are many
opportunities for eco-efficiency that are still ignored and this is one test than can be
applied by environmentally responsible investors.

The concept of “zero waste” has over taken the concept of “recycling” which was often
a con in terms of the environmental benefit it actually delivered. Zero waste aims to
mimic the behaviour of natural ecosystems where there is no such thing as waste – all
materials discarded by one organism become raw materials for another. The natural
cycle is that photosynthesis creates complex proteins out of simple elements and the
sun’s energy, leading to the growth of complex organisms, followed by the death of
those organisms which are broken down into simple elements again by bacteria and
fungi. It is the basis of all life but is not well understood in our industrial society which
thinks in straight lines – resources in, wastes out, more resources in.

Some businesses have achieved startling gains for both the environment and their
bottom lines by thinking zero waste – it is never quite zero of course, but it signals a
state of mind that considers the eventual environmental fate of every input to
production. It includes recycling of course, but in a hierarchy:

Zero waste has to be designed into products and processes rather than considered
only at the landfill stage.

“Cleaner production” is a concept that creates value for a business by reviewing its
production system from cradle to grave and cutting out waste of materials and energy,
replacing more toxic with less toxic substances, and redesigning production
technologies to reduce environmental impact. It combines the approaches of ecoefficiency,
zero waste and human creativity. The measures range from better
housekeeping to innovative technology. Its success stories in improving the bottom
line should attract all forward thinking businesses.

For businesses genuinely wanting to improve their environmental performance the
organization “the Natural Step” provides guidance and support. Their workshops,
based on the international work of Swedish researcher and physician Karl-Henrik
Robert, identify four key questions to guide investment strategy:

Keeping these big questions in mind while planning a business or a product can
produce real financial gains by reducing waste of all kinds and protecting long-term
viability.

So as environmentally responsible investors we are looking for businesses that use all
resources, and especially energy and water with maximum efficiency; aim at zero
waste of all materials; leave soils, forests and fisheries in at least as good a state as
they found them; and do not encroach on natural ecosystems in a way that will reduce
natural habitat.

The big question is, how are we to know and judge their efforts?

Environment has been a marketing tool for at least three decades and PR companies
are adept at persuading you of the merits of their clients. The advertising used to say
“biodegradable” to which the environmentally conscious investor will answer, “into
what, and how soon?” Even DDT is biodegradable over a very long term but its
breakdown products are equally toxic.

Products are labelled “recyclable” but for many there will never be any practical
system for consumers to use.

An electricity company is currently promoting its giant hydro scheme, Project Aqua, as
“renewable energy” because water will keep falling from the sky in perpetuity and
running down the valley. But it is hardly environmentally responsible to take three
quarters of the water out of our largest braided river, the Waitaki, into a huge canal
construction, destroying the character of the river, its habitats for several endangered
birds, its trout and salmon fishery and the protective role it pays against coastal
erosion. The company’s serious efforts to run its earth moving machinery on biodiesel,
adopt energy efficiency in its operations and recycle its office paper can’t really
compensate for the environmental effects of its core activity. Large braided rivers are
not a renewable resource.

This is why, while we welcome and encourage triple bottom line reporting we should
also be wary of it. It is certainly high time that social and environmental, as well as
financial policies, practices and outcomes were reported to shareholders. Quadruple
bottom line that also includes cultural impacts is a further step forward. It is true that
what gets measured and counted gets valued and noticed. The information given to
shareholders helps them decide where to invest their money and encourages them to
demand better performance at shareholders’ meetings. But the environmental
performance of Shell Oil is not determined primarily by whether it recycles its paper
and has energy efficient office buildings. Its product is the problem and thinking more
laterally about investment strategy might lead them to invest in developing renewable
alternatives to their current products.

At the very least we should demand that Triple Bottom Line reports – or the next
advance, Sustainability reports – should be conducted to a common set of standards
and audited. It is not enough to report on only the positive factors and remain silent of
the rest and the assumptions underlying the good news need to be stated.
I want to acknowledge the good work that has been done by the Global Reporting
Initiative, as well as organisations such as the Institute of Chartered Accountants,
both here and in Australia, towards standardising what we need to measure and how
we measure it. I look forward to much wider recognition of the need for this.
Investors have typically taken three main approaches to assessing ethical
investments.

There are lots of good news stories around about the growth of ethical investment.
The UN estimates that 12% of all managed investments in the UK are screened in that
way, totalling $640 billion; that SRI funds in France tripled in two years; that 74% of
Dutch pension funds use social or environmental criteria in screening. However a
closer look suggests that the vast majority use only one or a few negative screens, the
major one by far being tobacco. Negative screening, even if several screens are used,
only eliminates the worst, it does not promote the best or encourage the better.

“Best of sector” analysis accepts that some sectors are inherently more
environmentally damaging than others and that until society stops demanding oil, then
oil companies should not be compared with music lessons. In an attempt to compare
like with like, the FTSE and Dow both have best of sector indices which incidentally
outperform the rest financially as well as ethically.

However if we are going to be proactive about sustainable development we also need
to proactively seek out companies that are trying to do positive good rather than just
avoid harm. We need the solar energy industries, the organic production companies,
the eco-buildings, the sustainable forestry and fishing initiatives. A few small
investment funds, mainly but not solely in the not-for-profit sector, are doing this –
notably Prometheus Credit Union and Just Dollars.

This is also what we are trying to do in the Green Futures Superannuation Fund, set
up in 1997 by the Green MPs to invest our own savings. We started by investing in
housing for MPs to live in that was close to Parliament so we can all walk to work.
With the security of the property market as a base we have now also invested in NZ’s
only locally owned and made wind generation company and an organic flourmill,
recognising that a major barrier to organic production is the lack of organically certified
processing plants. We are currently investigating a solar water heating firm and an
organic farm conversion. All very small stuff, as befits the amount we have to invest,
but it has still outperformed larger funds over the last year.

I have been disappointed that the largest investment Fund in NZ, the NZ Superfund, to
which we all compulsorily contribute whether we support it or not, appears to have at
most a small amount of negative screening. Certainly its legislation does not require
anything of it other than to avoid bringing NZ into disrepute – a difficult thing to achieve
given what goes in financial markets these days.

The Greens tried hard to have “social responsibility” and “sustainability” inserted in the
legislation for both the Government Super Fund and the NZ Super Fund. In both cases
our efforts were rejected by Government – the same Government that says it has a
Sustainable Development Programme of Action. We have found this intensely
disappointing and regret that our retirement saving may legally be used to destroy the
planet on which our retirement will depend.

I hope these words do not convey a message of extremism or hopelessness. Our
environmental crisis is extreme. We are insulated from it to some extent and for some
little while in NZ but that will not last.

It’s not as though we would have been the first. Australia, the UK and France all have
laws requiring superannuation funds to declare the extent to which social,
environmental and ethical considerations are taken into account in their investment
policies. Norway has a separate Environmental fund with 1 billion krone to be invested
ethically.

There is international demand by individual investors to know where their money is
going and that it will not be used to do harm. A survey in Australia found that three
quarters of superannualtion fund investors want to know what their money is invested
in, and even more would be concerned if it were being used to support companies
which flout ethical issues such as child labour. All investors wanted 12% of their
investment in ethical investment and about half wanted a quarter of it spent this way.
More and more people are realising that what any of us does in our lives, even if they
are entirely dedicated to changing the current inequitable and unsustainable system
pales into insignificance alongside the power of our money to fund the inequitable and
the unsustainable – even if we have only very modest savings. We need to encourage
and support all those who are trying to put their money where their mouth is.