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Cooperativa Editoriale Etica

Year 1 number 1 july 2016


€ 4,00


Magazine of social economy, ethical finance and critical shareholders


critical shareholders



new economy

9 788899 095222

ISBN 978-88-99095-22-2

Poste Italiane S.p.A. Spedizione in abbonamento postale D.L. 353/2003 (conv. in L. 27/02/2004 n. 46) art. 1, comma 1, NE/VR.

ethical finance

International disinvestment campaigns are speeding up the death of fossil fuels. Those who have kept investing in this area have suffered huge losses. And stranded assets increase

Bye-bye, oil


valori international / YEAR 1 NO. 1 / JULY 2016





opinion leader, author and politician. As member of the European Parliament from 1999 to 2009, he focused on issues related to climate change, environment, development cooperation and humanitarian affairs. He is a member of the Christian Democrats, part of the European People’s Party European Democrats group. Anders has been a member of the Swedish parliament, secretary general of the Swedish Red Cross, and president of the International Red Cross Disaster Relief Commission. Anders Wijkman is vice President of Club of Rome and the Tällberg Foundation. He is a member of the Royal Swedish Academy of Sciences and he is also a councillor for the World Future Council.


have politics to thank for much in my life. The work as a member of a parliament is rich and diverse.Eight years in the Swedish parliament and then ten years in the European Parliament have given me unique insights into how political parties think and work. In spite of my positive experience, I am very concerned about the current state of politics, particularly the development of political parties. Society’s increased complexity ought to be addressed through a broader perspective, increased learning, new institutions, greater expression for the principle of global solidarity and justice and a more long-term attitude in decision-making. But we see little of this. Instead, political decisions continue to be dominated by tunnel vision and shortsightedness. Seen from my perspective, the current political system is poorly equipped to deal with many of the complex problems our societies face. An economic model that worked well during the post-war period does not automatically provide the right framework for today’s increasingly globalized world. I have witnessed how politics has become increasingly symbolic, while its content has been watered down. The media’s obsession with people, rather than with ideas, contributes strongly to this dilution. Personality, manners of expression and timing have become far more important than the message itself. When the scope for decisions also becomes short-term, the responsibility for many critical issues ends up compromised. Why has it come to this? Many different factors come into play. Firstly, the societal goals from the early 1900s – to eliminate poverty and develop a common welfare state – have essentially been achieved in most developed countries. Few political parties have managed to formulate a coherent vision for the future. Second: Interest in party politics is declining fast. Young people do not lack interest in political issues but they have little interest to join political parties.

valori international / YEAR 1 NO. 1 / JULY 2016

One reason is the aforementioned lack of vision, another has more to do with the ways parties work. Third: Financial market deregulation in the 1980s sharply reduced government control over the economy. The structure of the financial sector suffers serious deficiencies when it comes to the ways new credit is created and the ability – read inability! – to take the social and environmental risks into account. Such risks are instead passed on to society. Fourth: The myth of continuous material growth and thus the unwillingness to recognize that we need to re-think both the goals of the economy and how we organize it. Political parties usually have only one approach to development – growth in material terms. They do not want to accept that for reasons of climate change, environment and natural resources, we cannot continue to live as we have. Continued material growth is not sustainable from an environmental and climate perspective. Fifth: The growing commercialization of the media. Newspapers try to offset declining newsstand sales (due to most of the content being available online) with content that is oriented to the superficial and sensational. News coverage becomes shallower and deteriorates. Political issues are squeezed out; entertainment becomes much more important than in-depth analysis and discussions on vital issues for the society. Of course, all of this changes the conditions for both politics and recruitment to it. One can argue that shortcomings in the media are balanced by the rich opportunities to seek information online. But this requires the competence to know where to look. For the average person, this increasing deterioration of news media coverage leads to a weakening basis for forming opinions. ✱ * The contents of this editorial resume the concepts expressed by the author in some of his books. 3



July 2016 monthly magazine year 1 issue 1 Registro Stampa del Tribunale di Milano # 304 dated April 15, 2005 ROC # 13562 dated March 18, 2006 Publisher Società Cooperativa Editoriale Etica Via Napo Torriani, 29 - 20124 Milan, Italy Promoted by Banca Etica Membership Fondazione Culturale Responsabilità Etica, Arci, Acli Milano, FairTrade Italia, Mag 2, Editrice Monti, First Cisl Nazionale, Cooperativa Sermis, Ecor, Cnca, First Cisl Brianza, Federazione Autonoma Bancari Italiani, Publistampa, Federazione Trentina della Cooperazione, Circom soc. coop. Board of Directors Sabina Siniscalchi, Roberto Grossi, Mauro Scarin, Maurizio Gemelli, Emanuele Patti, Paolo Ricotti, Filippo Miraglia, Donato Dall'Ava, Fabio Silva ( General Management Giancarlo Roncaglioni (


phototale 01/04


Abandoned tankers and huge car graveyards have been swallowed up by the vegetation over the decades. Two hypothetical scenarios of what increasing disinvestments in fossil sources could lead up to. For the time being, two sources of environmental damage and social tragedy. From Bangladesh to the heart of old Europe.

Foundations, Churces, sovereign funds, big universities: more and more groups are deciding to stop investing in fossil fuels, inspiring the world energy market. And meanwhile stranded assets are increasing.

ethical finance

Board of Auditors Mario Caizzone, Danilo Guberti, Giuseppe Chiacchio (presidente) Executive editor Andrea Di Stefano ( Editor-in-chief Emanuele Isonio (

OECD lashing out at tax evaders. But not too hard Bank fines: a future full of doubts The red gold of multinationals

19 22 24

“Erin” and his brothers NIM Challenge for ethical banks Investment funds: a farewell to arms? EFSA’s criteria: so many doubts

31 36 37 39

critical shareholding

Assignment editor Via Napo Torriani, 29 - 20124 Milan, Italy ( Contributors Andrea Barolini, Alberto Berrini, Matteo Cavallito, Corrado Fontana, Luca Martino, Mauro Meggiolaro, Andrea Vecci Translator Maurizio Boni (

giganten new economy


Green energy: investors love steadiness How to corrupt the scientists Circular economy: all against Juncker

45 48 50

tax values bancor

52 54

Graphic design, layout and printing Publistampa Arti grafiche Via Dolomiti 36, Pergine Valsugana (Trento), Italy

United Church of Canada  5.9 million USD (4.7% of total investments)  Completed

Roskilde Municipality  Amount unknown  Completed


PFZW  Amount unknown  Subtotal (all coal companies by 2020; 30% less investments in all fossil fuels)






Among the things it does, the Forest Stewardship Council® (FSC®) makes sure wood and wood products do not come from forests of special value, illegally cut or clear-cut harvested or from areas where civil rights and local traditions are breached.

valori international / YEAR 1 NO. 1 / JULY 2016

GOs / 13%


Corporations / 3%

Axa  500 million euros (by the end of 2015)  Subtotal (coal)

by Emanuele Isonio

Foundations / 24%

Allianz  4 billion euros, 90% of which in bonds  Subtotal (companies with>30%of turnover from coal)

Münster Municipality  Amount unknown  Completed


Pension funds / 13%

University of California  200million USD  Subtotal (coal and tar sands only)

A journey through over 500 institutions and next to 3 thousand and a half billon USD. Dozens of states involved, from Europe to North America, via Australia and New Zealand. The most obvious proof of how real the chance of changing the world may be – not just the social world but the economic and business worlds too and even steering the choices of the industrial fabric – by “voting with one’s purse”. The phenomenon of disinvestments in arguably controversial, inappropriate and immoral industries is no longer something that has to do with snow-white souls and incurable idealists. From religious institutions, it has spread into many universities of the Anglo-Saxon world and has even affected the investments funds of dynasties that until then had built their empires on oil. And now, maybe for less ethical but more pragmatic reasons, the fever has even caught the investment funds and insurance companies. A swollen river that slowly but inexorably is drying up the fossil industry’s funds. And promises instead of putting wings on those industries that try to put the words “profit” and “sustainability” in the same sentence.

PFA Pension  Amount unknown  Subtotal (investments in tar sands)

WWF UK  No investments in fossil fuels since 2006  Completed

University of Washington  Amount unknown  Subtotal (coal only)

28 the map of the month


Faith-based groups / 27%

Union Theological Seminary  Amount unknown  Completed

Lund University  Amount unknown  Subtotal

BMA (British Medical Association)  Amount unknown  Completed

Anglican Church  12 million pounds  Subtotal (coal and tar sands)

Colleges, universities, schools / 12%

Rockefeller Brothers Fund  45 million USD  Completed*

City of Uppsala  Amount unknown  Completed

NGOs / 6%



Guardian Media Group  Amount unknown. 5-year disinvestment  Completed

Canadian Medical Association  1.8million USD  Completed

other than oil


University of Glasgow  18million pounds in 10 years  Completed



Government Pension Fund of Norway  52 coal companies left out  Subtotal (coal only)

City of Oslo  Amount unknown. 7 million USD disinvested from coal only  Total


City of San Francisco  583million USD disinvested since 91  Completed

No part of this publication may be reproduced without quoting the source. Despite our attempts, we may have failed to find the original source of a picture; in this case please contact the publisher, which will be prepared to fulfil all of the relevant formalities.


The divesting world

Other / 0%

Distribution Press Di - Segrate (Milan, Italy)

numbers from the earth

Healthcare / 1%

Photos and illustrations Greenpeace; Ugo Panella; Cesar Sangalang, Tim De Waele, Thomas Geersing, Stefan “Stoipi” Seger (; Shareaction; Boston Library (NYT) (

German Presseversorgungswerk  Amount unknown  Subtotal (companies with>30%of turnover from coal)


Ecumenical Church Council  Amount unknown  Completed

World Lutheran Federation  Amount unknown  Completed

NGO Foundation Pension fund Religious order Public body Publishing group University Trade association Insurance company Investment fund


Hunter Hall Investment Management  Amount unknown  Completed*

Australian National University  Amount unknown  Subtotal (only companies with >20% of turnover from coal)

 Planned disinvestments Type of disinvestment


Victoria University of Wellington  Amount unknown  Total

Presbiterian Church of New Zealand  Amount unknown  Total

 * Coal, oil, gas

valori international / YEAR 1 NO. 1 / JULY 2016


The energy used to make this magazine is 100% from renewable sources, traced and guaranteed at the source by the GO certification system.


From Europe to North America, via Australia and New Zealand: a journey through over 500 institutions and next to 3 thousand and a half billon USD to discover the phenomenon of disinvestments.

phototale 02/04

Not only environmental catastrophes but social and human disasters too are associated with the many industries that are under the radar of disinvestment campaigns. Those portrayed on this page in Ugo Panella’s photos take us to Chittagong, the second largest town in Bangladesh. A trip down memory lane that brings us back to the age of the Pharaohs and their slaves. Photos that are unconceivable to us Western people, born of the worst sides of our development model. Here, huge oil tankers and big cargo ships come from all over the world to be stripped. 6

An expensive operation, because it is hazardous for humans and for the environment, if done in the West. But in Bangladesh (which, with India and Pakistan, account for 90% of the market), the price is ridiculously low, and inspections non-existent. The few rules that there are can be sidestepped by dint of bribes. Demolishing a ship takes 80 to 90 days of exhausting work. Every morning, for less than two dollars the labourers climb up the chains of these huge anchors, go up the wrecks, strip them and carry every single piece down to the ground. A scene that wouldn’t look out of place in one of Dante’s circles.

«You see dozens and dozens of men carrying heavy loads on their shoulders, walking in the mud, but only where the sandy soil dries up first. Otherwise, you are sucked under by quicksand», the photographer tells us. Children are used for shearing jobs, torches in their hands. No safety device for them, nor for anyone else. Zero helmets or first-aid kits. Everything happens with them often working barefooted or barehanded. An upsetting situation, which – Greenpeace estimates – has killed over one thousand people, in accidents alone. The victims of exposure to toxic substances are instead incalculable.

All hell broke loose: six shots by photo-reporter Ugo Panella in Chittagong, Bangladesh, the place where huge tankers and cargo ships are stripped in the mud by workers with no safety devices and meagre wages.


valori international / YEAR 1 NO. 1 / JULY 2016

valori international / YEAR 1 NO. 1 / JULY 2016



phototale 03/04 Bangladesh like Lilliput. Every day, cargo ships that must be stripped are towed ashore by hand by thousands of men, feet soaked in mud and water, like slaves in Egyptian times. If they don’t walk where the ground is less wet, they might die: the danger of being sunk under the quicksand is huge. “As I didn’t know that – the photo reporter, Ugo Panella, said –, I was swallowed up myself up to my waist”.

10 / Oil & Gas Sellers’ intuition 12 / Renewables make oil collapse 14 / Divesting: a political statement 16 / Stranded assets, danger zone


uGO panella

Foundations, Churches, sovereign funds, universities: more and more groups are deciding to stop investing in fossil fuels

A feeling that may inspire the world energy market. And the COP21 agreements are making stranded assets increase



Oil & Gas Sellers’ intuition by Matteo Cavallito

Investors reduce exposures to oil. An increasingly widespread choice. Driven first and foremost by sensible reasons


oundations, religious groups, universities. As well as sovereign funds, pension funds and corporations. It is the increasingly varied universe of the financial players who decided to disinvest all or part of their fossil sources. The most up-to-date list drawn up by the Fossil Free initiative ( speaks of an overall operation worth 3.4 trillion USD, which so far has involved 516 players. There are, on one side, the “historical” activists, such as the World Council of Churches and the Lutheran World Federation; on the other side, the investors you wouldn’t expect, such as the Norwegian sovereign fund – which disinvested some of its assets – and the Rockefeller Brothers Fund, “heir” to a long-established wealth paradoxically built on oil. Maybe such figures are enough to get an insight into the unprecedented scope of this phenomenon. What used to be a niche transaction, after all, seems to have turned into a mainstream trend in the last few years. An evolution that has been largely driven by new,

pressing reasons. “In the past, disinvesting one’s fossil sources was mainly due to ethical reasons”, explains Gianni Silvestrini, president of Green Building Council Italia and scientific director of Kyoto Club and the magazine QualEnergia. “Nowadays, though, economic factors have their weight too, as shown by the choices made by some big investment funds”. In other words, economic reasons are weighing more and more. And that’s why what used to be a principled stance in the past seems to look different now: a market intuition. Or, a timely escape from an industry in distress.

COLLAPSING OIL PRICES Since summer 2014, oil prices have burnt up approximately 60% of their market value (see CHART 1 ). A collapse that has been driven by multiple factors – the slowdown of the developing countries as well as an increase in renewables, fuelled by political choices (COP 21 and more), and a progressive decrease in their cost (see ARTICLE page 12) – which re-

ChArt 1 SteeP drOP in Oil PriCeS

FOnte: SOuRce: WORlD Bank, cOmmODity maRketS RevieW, maRch 2016 in ychaRtS (httpS://ychaRtS.cOm).

120 100 80 60 40 20 0 2012*

[Figures in USD]. *March 2012. 10




2016 valori international / yeaR 1 nO. 1 / July 2016


sulted in an excessive supply of oil, and will probably keep doing so. “The U.S. Energy Information Administration has predicted a surplus supply of 1.5 million barrels of oil a day all through 2016 and a price of 37 $ per barrel” explains Fabio Galeotti, analyst at Saxo Bank, a problem which might also be compounded by other critical factors: the failure of the OPEC summit in Doha (see BOX ) and Iran’s new role after the end of the sanctions. “Iran’s comeback on the Western markets may bring major changes in the current scenario”, explains Luigi De Paoli, professor of energy economy and environmental economy at Bocconi University, in Milan. “Nowadays, Teheran produces approximately 3 million barrels per day, 1.5 of which are exported. Such exports may rapidly increase to 2 million”.

AN UNSUSTAINABLE PRICE From a historical perspective, the current scenario looks paradoxical. Today’s prices seem to have brought oil back down to last century’s average levels and to being a negotiating tool (see CHART 2 ). But, unlike what happened in the past, such levels are no longer sustainable. “The current market price is actually close to the historical average price, but right now, however, it does not repay the more expensive extraction methods”, goes on De Paoli, speaking of the impact of the fall in oil prices on non-conventional extraction methods, “such as shale oil or deep offshore or inhospitable regions, such as the Artic”. An obvious problem, especially for US companies. “The breakeven point of US shale oil, according to Morgan Stanley, is close to 65$/billion, calculated as the mean cost of different extraction methods”, adds Fabio Galeotti, “and is still one of the highest on the market, especially compared with that of the Middle Eastern countries, estimated at 27 $/billion on average”. The figures show the weight of the geopolitical factor, aptly embodied by the unsolved fight between Washington and Riyadh. But their implications go beyond that. And cannot help affecting the financial industry. Which is now one of the main victims of the fall in oil prices.


No agreement between producers. This is the outcome of last April’s Doha summit. A summit that was expected to deliver a long-awaited plan that should have stabilised oil prices and that ended up instead aggravating tensions within OPEC. Too far are for the moment the positions of Saudi Arabia and Iran about the key issue all this matter revolves around: that cut-down in production that should push oil prices back up and give respite to many producer countries. Riyadh, which in the last two years has avoided any cut in the attempt, as many people think, to damage the united States and shale oil producers – for whom an excessively low price would be unsustainable after all – is now ready to accept reducing its production. This option is strongly opposed to by Teheran, which for some time has been saying it intends to increase its production up to pre-sanction levels. The fight is still open.

oil crisis – along with the end of the monetary expansion in 2015 – mainly impacts on the energy companies’ debts, thus increasing insolvency risks. Since summer 2014, as the Financial Times pointed out in March, global investors have lost at least 150 billion dollars on the market value of gas and oil corporate bonds. In the same period, 300 leading listed companies have burnt up 2.3 trillion dollars on the Stock Exchange, that is, 39% of their assets. And the forecasts for this year do not bode well. “Fitch sources”, finds Fabio Galeotti of Saxo Bank, “tell that the US companies have taken on 40 billion’s debts and are very likely to default in 2016”. These are just the key figures that account for the disinvestments chosen by many players. And that go hand in hand with the increased competitiveness of renewable sources. A factor, the latter, that, as we are going to explain in the next pages, has a much heavier impact on oil now than in the past. ✱ ChArt 2 Oil PriCeS And lOng-term AverAge

SOuRce: Bp StatiStical RevieW OF WORlD eneRGy 2015 (WWW.Bp.cOm); Opec, aveRaGe annual Opec cRuDe Oil pRice FROm 1960 tO 2016 in StatiSta (WWW.StatiSta.cOm), acceSS apRil 2016; pROceSSeD By uS.

120 100 80 60


valori international / yeaR 1 nO. 1 / July 2016

40 20 0

1866 1872 1878 1884 1890 1896 1902 1908 1914 1920 1926 1932 1938 1944 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 2010 2016*

It should be borne in mind that the “after Lehman” years have not only been the years of a booming demand, but also, or above all, the years of quantitative easing. The Federal Reserve’s ultra-expansive policy, as everyone knows, has driven companies to borrow more, with the energy companies top of the list. It is no coincidence than the shale

*Figures in USD 2014.



Renewables make oil collapse by Matteo Cavallito

The development of renewables drives oil prices down. A cause/effect relation that is expected to become even clearer in the future


he most obvious understanding of the long downward trend in oil prices usually blames two key factors: excessive supply and the “crisis” of global demand. Two complementary issues that involve well-known phenomena, such as the price war between producer countries and the slowdown of the developing countries. But there could one more factor behind the collapse in oil prices since Summer 2014: the development of renewable sources. This is the assumption that is fuelling the analysts’ growing interest and that largely revolves around a strictly economic variable: the actual level of competition.

THE FIGURES OF THIS EPOCHMARKING CHANGE The fact, claims Gianni Silvestrini, president of Green Building Council Italia and scientific director of Kyoto Club and the magazine QualEnergia, is that “for more and more countries, renewables are by now the cheapest solution”, in other words the best energy investment. “Renewable generation costs continue to fall, particularly in photovoltaic”, highlighted the latest report from UNEP/ Frankfurt School of Finance & Management/ Bloomberg Energy Finance (“Global Trends in Renewable Energy Investment 2016”); “In the second half of 2015, the global average levelled cost of

glObAl new inveStment in renewAble energy

SOuRce: FRankFuRt SchOOl-unep centRe/BneF. 2016. GlOBal tRenDS in ReneWaBle eneRGy inveStment 2016, http://WWW.FSunep-centRe.ORG (FRankFuRt am main). Data in $Bn. *excluDinG laRGe hyDRO-electRic pROjectS OF mORe than 50mW.

350,0 300,0 250,0 200,0 150,0 100,0 50,0 0,0


2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

60% 50% 40% 30% 20% 10% 0% -10% -20%

electricity for crystalline silicon PV was $122 per MWh, down from $143 in H2 2014”. The oil price slump had negative impacts on investments in biofuels (3.1 billion new investments in 2015, -35% from last year, according to the report) and in biomasses (6 billion, -42%), two areas that are traditionally boosted by the high market price of crude oil. But the bearish trend of oil has not been detrimental to wind and solar energy, which has seen new investments increase by 4% (109 billion) and by 12% (161 billion) a year, respectively. A strong expansion that last year made renewables attract 278.5 billion global investments, 5% more than in 2014, “taking it above – the report points out – the previous record of $278.5 billion in 2011” (see CHART ). It is these figures that now suggest this must be a veritable turning point: after years of substantial “dependence” on oil market trends, the main areas of renewables have become veritably independent variables. In other words, renewable sources have become competitive enough to eat up large shares of the oil market: thus reducing the demand, and therefore the market price, of oil.

TRANSPORT Obviously, the issue is still open for discussion and involves multiple variables, first and foremost “mobility”. According to Luigi De Paoli, professor of energy economy at Bocconi University, the assumption that renewables may be an oil-depreciating factor “is an interesting idea but only in a long-term perspective”. Nowadays, the professor explains, “two thirds of oil are used in transport, an industry in which renewables are not an established option yet. The real revolution, in this respect, would be a massive development of electric cars. But this is not going to happen soon”. Actually, that of electric cars is still a niche market. But the turning point might be nearer than expected. “Over the last few years, we have seen battery prices literally collapse, valori international / yeaR 1 nO. 1 / July 2016



The difference between what consumers pay for energy and the real cost of energy (including tax), such as the cost of supply and human and environmental damage. This is briefly the broad definition of “energy subsidies” as provided by the International Monetary Fund (IMF, “Counting the Cost of Energy Subsidies”, July 2015). A burden, for the fossil industry, of 5,300 billion uSD, 10 the COSt OF FOSSil FUelS SUbSideS in the wOrld

SOuRce: Fmi, “cOuntinG the cOSt OF eneRGy SuBSiDieS”, july 2015. OuR elaBORatiOnS.

times as much as the nominal value, which is mainly accounted for by China, which in 2015 should pay close to 2.3 trillion. Behind the Asian giant, the IMF finds, there are the united States, with a 700 billion expenditure, more than what Russia and India would pay together. Quite a different matter are per capita subsidies (the burden that is ideally placed on every citizen’s shoulders), with the Persian Gulf top of the list, and the ratio of subsidies to GDP, which provides an even more surprising list, with Eastern Europe at the top.

SERBIA  14.91 •  34.70 •  2,081.22  2.14 •  3.24 •  3,747.17


UKRAINE  82.63 •  60.73 •  1,935.84

 7.57 •  36.98 •  1,959.59


RUSSIA  335.44 •  15.98 •  2,334.31


JAPAN  157.09 •  3.22 •  1,239.60

 699.18 •  3.82 •  2,176.53

CHINA  2,271.88 •  20.13 •  1,652.33


Top 6 - absolute value Top 6 - % of GDP Top 6 - per capita Other

 28.96 •  6.58 •  3,022.85


 277.31 •  12.34 •  217.28

 3.94 •  11.23 •  3,224.74

KIRGHIZISTAN "2.18 •  26.41 •  378.13

 Absolute value [billion US$]  % of GDP  Per capita cost [in US$]

IRAN  108.53 •  26.01 •  1,374.33

BULGARIA  19.50 •  33.85 •  2,720.74

UZBEKISTAN  17.85 •  26.29 •  576.31

ITALY EU  329.84  1.75  651.65

WORLD  5,301.72  6.53  748.98

 13.27 •  0.62 •  220.32

SAUDI ARABIA  106.56 •  13.23 •  3,395.03

as batteries are following the same trend as that which photovoltaic panels have been experiencing for a while” goes on Silvestrini, who also points to a rise in investments by new players who are interested in the development of this industry, “such as Google, Tesla and Apple, big groups that have enough capitals to compete with traditional car manufacturers”. A phenomenon that is supported by the figures. UNEP found that between 2014 and 2015 the average price of electric car batteries decreased by 35%, the greatest drop since the start of the survey. In 2010, the average price of such batteries was about 1,000 dollars per kilowatt-hour (kWh). Last year, it was $350.

POLITICS AND SUBSIDIES The reduction in oil prices and the expansion of renewable sources are also driven by environmental policies, the impact of which seems bound to increase even more in the next few years. Two factors will be especially important: the carbon tax and the reduction in subsidies for fossil fuels. On one hand, there is the increasingly concrete possibility of a global tax on emissions, which is already valori international / yeaR 1 nO. 1 / July 2016

QATAR  14.47 •  6.37 •  5,995.25

KUWAIT  14.10 •  7.79 •  3,429.95

one of the causes of the current surplus supply (“The key question is: how much will fossil resources be worth in 20-30 years’ time if there is a chance they cannot be used any longer when stricter environmental policies are implemented? If in doubt, then, it’s better to dispose of such resources now, even if at a low cost”, goes on Silvestrini). There is, on the other hand, the expectation that subsidies for fossil fuels may be progressively reduced: a global impact worth 510 billion dollars as estimated by the International Energy Agency, the real cost of which, though, as claimed by the International Monetary Fund, would be worth ten times as much: 5.3 trillion dollars (see BOX ). A damage for the environment, of course. And that’s not all. The governments’ support to fossil fuels, as recalled by an OECD report in 2015, seems to be “costly and distortive too (…) and a source of inefficiencies in the production and use of energy, in economic terms”. That’s why, the critics claim, repealing such subsidies would make alternative sources more competitive, thus paving the way, maybe once and for all, to a full transition to renewable energy. ✱ 13


Divesting: a political statement by Mauro Meggiolaro

More than 500 universities, foundations, religious institutions, insurance companies all over the world are selling their investments in coal, oil and gas, taking the climate battle to the field of finance


he students did it again. Thousands of American college students have joined forces in the battle to rid their universities from shareholdings and investments in oil, gas and coal extraction companies and to drive a wedge between them and the fossil fuel giants like Exxon, Shell, Peabody Energy or even Eni, widely regarded as the companies most responsible for global warming. “Fossil fuels are the new Apartheid”, said Thomas Nowak, financial consultant for Quantum Financial Planning to the New York Times. “The number of clients wanting to invest only in fossil-free shares and bonds portfolios is constantly growing”.

THE NEW APARTHEID Let us now take a trip back to the 1970s and 1980s. In these days the “divestment” weapon was a key factor in the US universities’ campaigns against the South African Regime and Apartheid. One of the key targets was Barclays Bank, accused to be in business with the South African regime. Students urged everybody who had an account at Barclays to close it down and this caused Barclays to lose about 10% of its market share in just two years. In about 10 years around 350 million dollars worth of investments were withdrawn from South Africa by Barclays and other companies. We all know how this story ended: in 1990 Apartheid was abolished and while there is no doubt that it ended for social and political reasons nobody ever questioned the role played by divestment campaigns. For example Barclays had decided to pack up and leave South Africa as early 14

as in 1986, “for business-related reasons”, they said, but everyone knew that investors’ pressure had increased to the point it was just impossible to carry on. The same divestment strategies used for the South African regime are used today to convince universities, foundations, religious institutions, local authorities, pension funds or insurance companies to withdraw their investments in fossil fuels. It all started in 2012, also thanks to the American activist Bill McKibben, founder of “”, the association that since its inception has coordinated divestment campaigns all over the world. The name comes from “350 particles per million (ppm)”, the threshold of CO2 in the air that must not be exceeded, at global level, in order to prevent further climate change that would be incompatible with the survival of human civilisation. Today CO2 in the air already exceeds 400 ppm. The first to join the campaign were the Universities of Stanford, Maine, Washington and California, joined soon afterwards by the Rockefeller Brothers Fund, the City of San Francisco, the Franciscan Sisters of Mary and the United Church of Christ of Massachusetts. Not all of those who joined divested completely from fossil fuels: universisties usually sold only shares in coal mining companies and kept oil and gas shares, other divested only from tar sands, others divested from all fossil fuels except for gas, regarded as a “transitional” energy source i.e. one that will help transition to renewable sources. As the campaign went on, it found more and more supporters in Europe, the most important being the Norwegian Governvalori international / yeaR 1 nO. 1 / July 2016


ment Sovereign Wealth Fund (the world’s largest sovereign wealth fund, totalling 850 billion USD in investments). In 2014 the fund removed from its investment portfolio 32 coal mining companies, allegedly because of the risk that new climate protecion laws might have a serious impact on future earnings. Later on the fund tightened its selection criteria and excluded all companies whose turnover is produced by at least 30% from coal, thus raising the number of excluded companies to 52. Norway’s example was then followed by the German insurance giant Allianz that, at the end of 2015, disclosed its plan to divest 4 billion Euro from coal (following the 30% turnover rule) and the French insurance company Axa, that announced a 500 million Euro divestment from coal by the end of 2015. In Germany, in November 2015, the City of Münster (in North Rhine - Westphalia) was the first German City to divest from all fossil fuels (see BOX ).

A PROFITABLE CHOICE As of today, 516 institutions all over the world have divested completely or partially from fossil fuels and in the last months this group has been joined by the first Italian investors: the Comboni missionaries and Focsiv, the Federation of Chris-

tian Institutions Supporting International Volunteer Service. It is however still difficult to estimate the real amount of divestments. The site reports 3.4 trillion dollars, an amazing figure that is, however, the total assets under management of the institutions, meaning the actual divested amount is much lower. “There is not a lot of transparency with the participating institutional investors. We don’t know how much they were holding in fossil fuels”, declared Brett Fleishman, Senior Global Analyst at to Valori International. “So the option of reporting the value of divested funds was off the table. However, this is how the industry talks. Any initiative or collective shareholder engagement talks about themselves as collective assets under management. That number speaks their language”. In any case, anyone who divested from fossil fuel in the last 4 years has profited from it. The price of crude oil (Brent) has been decreasing since June 2014 and it is currently 43% lower than in 2014. In April Peabody Energy, the largest American coal company, troubled by high debt, low prices and falling demand sought Chapter 11 bankruptcy protection. Today, more than ever before, divesting from fossil fuels is good for the environment but also for financial reasons. ✱

germAny ACtiviStS engAge mUniCiPAlitieS In November 2015, Münster was the first city to sell all its investments in fossil fuels. Now activists are targeting Berlin “First we take Mü nster, than we take Berlin”. On november 4th 2015, a few days before the Paris COP21, the municipal council of Mü nster, in northern Rhineland-Westphalia, made the announcement: the city's two municipal funds (for a total €30m) will no longer be allowed to invest in the gas, oil and coal industry from 2016. The funds have then sold the shares and bonds of German electricity giant RWE, and of the Italian company Enel. The announcement followed up on a resolution of the City Council, which gave in to the demands of the Fossil Free campaign, that for one and a half years has being negotiating with the majority and opposition parties. Mü nster won't just divest from fossil fuels, it will also introduce a number of negative criteria for municipal investments, excluding the weapon industry, GMOs and industries suspected of using child labour. “We hope Mü nster will now have a valori international / yeaR 1 nO. 1 / July 2016

domino effect on Germany”, said Otto Reiners, a municipal councillor of the Green Party. “We have been the first to prove that divesting is possible in municipalities too. Now, other campaigns targeting municipalities will be certainly be more powerfu”. Actually, in many other cities the feeling is that of being much closer to the target than beMathias von fore. Fossil Free movements have sprung up Gemmingen of Fossil like mushrooms all over the country in the last Free Berlin two years: Hamburg, Stuttgart, Frankfurt as well as smaller and less known towns, such as Bad Vilbel or Wernigerode. And then Berlin, the capital, which is a municipality but also a land (region), where around thirty Fossil Free volunteers have met local politicians, of any political party, dozens of times since January 2015. “We want Berlin to be the first Region to say yes to divestment. We could send a very powerful message to the rest of Germany and to the world”, Mathias von Gemmingen of Fossil Free Berlin explains to Valori. “Fossil sources are a wall that must fall as soon as possible”. And since there will be elections in September, the Berlin's activists must act quickly. After the elections, power relations within the parties might change. And for Fossil Free this might mean having to start all over again. [M.M.] ✱ 15


Stranded assets Danger zone by Matteo Cavallito

“Fossil fuel companies risk wasting up to $2.2 trillion in the next decade in the face of international action to limit climate change to 2°C”, according to a report by Carbon Tracker Initiative


n the next decade, huge stores of oil, coal and gas might turn into stranded assets, that is, basically tied-up as unable to produce any return on investments. This is the alert given by the Carbon Tracker Initiative (CTI), a London-based financial analysts’ think tank, at the end of last year. A serious problem, as pointed out by the CTI’s survey (“The $2 trillion stranded assets danger zone: How fossil fuel firms risk destroying investor returns”), for the fossil industry as a whole, and particularly for the oil industry. The starting point is comparatively simple: for quite a few years the high oil prices had led companies to make huge investments in extraction, developing extremely expensive projects, first and foremost on shale oil and Arctic oil. The collapse in prices that began in summer 2014 has already troubled the best part of such investments, damaging industry giants and investment funds (see across) and paving the ground to bankruptcy for the weaker players. Things that happen, one might be tempted to say, especially in a traditionally volatile market as the oil one. But speaking just of an unlucky contingency in terms of market prices would be like playing it down, though.

THE GREEN FACTOR “The energy business is entirely familiar with the concept of stranded assets”, Nick Butler, Visiting Professor and Chair of the Kings Policy Institute at Kings College London and former Group Vice President for Policy and Strategy Development at BP, wrote on the columns of the Financial Times in September. “Now, however, a new concept has been introduced: the idea that some assets, specifically hydrocarbons, will inevitably be stranded and left undeveloped as the world reduces its hydrocarbon consumption in order to avoid the risks of climate change”. The decisive variable then lies in the environmental policies and the transition to renewable sources, which will obviously reduce the need for fossil-fuel capital expenditures (capex). “No new coal mines will be needed, oil demand will peak around 2020, and growth in gas will disappoint industry expectations”, the Carbon Tracker’s report claims, revealing “the danger zone between industry business-as-usual strategies and action that would be needed to meet the UN commitment to limit climate change to 2˚C”.

US hedge FUndS, the FirSt viCtimS OF the COllAPSe in Oil PriCe Famous victims include tycoon Carl Icahn’s fund, which lost 373 million USD in 2014, and Paulson & Co. While smaller funds lost up to 40%

It seems in 2015 hedge funds kept their energy exposure down to a minimum, in the attempt to protect themselves from further losses. This was reported a few months ago by the website which revealed the figures of this phenomenon: “By the end of last


year – an article published on March 29th states – the total hedge fund allocation for energy averaged a paltry 6.1 per cent, which is the lowest recorded since 2008, according to data compiled by Bloomberg”. A downsizing of investments, as the result of the crisis that has been going on since the second half of 2014 when the oil prices began to steeply collapse. “The recent slide in oil prices has caused sharp losses among some of Wall Street’s biggest names, the latest in a series of bad bets made by star investors during 2014”, the Wall Street Journal valori international / yeaR 1 nO. 1 / July 2016


The total number of endangered projects would be worth over 2 trillion USD until 2025: about 220 billion USD in coal, over 520 billion USD in gas, and as many as 1.4 trillion USD in oil. “The US – the report points out – has the greatest financial exposure with $412 billion of unneeded fossil fuel projects to 2025 at risk of becoming stranded assets, followed by Canada ($220bn), China ($179bn), Russia ($147bn) and Australia ($103bn) (see MAP ).

ENDANGERED COMPANIES The figures tell that over one third (772 billion USD) of the total amount of unneeded capex for 2015-25 would come from only 20 big corporations. “Due to the relatively low capital intensity of coal”, the report explains, “only the oil and gas companies make it into this top 20 list”. (see TABLE ). These majors “appear at the top of the list due to their size, with unneeded capex ranging from $21.5bn for ConocoPhillips to $76.9 billion for Shell over the next decade. This represents around 20-25% of total potential capex across oil and gas to 2025 for these companies”. Obviously, the big corporations have the means to overcome the challenges they are most exposed to. On condition, though, they quickly change their tack. So far, “too few energy companies recognise that they will need to reduce supply of their carbon-intensive products to avoid pushing us beyond the internationally recognised carbon budget” said James Leaton, head of research and co-author of the report. “Clean technology and climate policy are already reducing fossil fuel demand – misreading these trends will destroy shareholder value. Companies need to apply 2˚C stress tests to their business models now”. ✱

rAnking OF COmPAnieS by Unneeded CAPex 2015-25 ($bn)

SOuRce: caRBOn tRackeR & eta analySiS OF RyStaD ucuBe & WOOD mackenzie ltD Gem in caRBOn tRackeR initiative, “the $2 tRilliOn StRanDeD aSSetS DanGeR zOne: hOW FOSSil Fuel FiRmS RiSk DeStROyinG inveStOR RetuRnS”, nOvemBeR 2015. Data in $Bn.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 TOP 20

Company Pemex Shell ExxonMobil Rosneft BP Chevron NIOC PetroChina Gazprom Petronas Eni Total CNRL Suncor PDVSA Inpex ConocoPhillips Pertamina Devon Statoil

Total 77.0 76.9 72.9 53.3 45.5 44.8 44.2 42.8 38.8 38.3 37.4 30.1 25.6 23.0 22.4 21.8 21.5 20.0 18.2 17.8 772.3

Oil 77.0 46.7 38.0 52.4 26.2 27.3 27.6 36.0 35.3 13.6 20.5 27.7 25.6 19.7 15.4 8.2 8.7 4.9 14.6 11.0 536.4

StrAnded ASSetS: COUntrieS with the greAteSt FinAnCiAl exPOSUre

Gas 0.0 30.3 34.9 0.9 19.3 17.4 16.7 6.8 3.4 24.8 16.8 2.4 0.0 3.3 7.0 13.6 12.8 15.2 3.6 6.7 235.9

Coal 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

SOuRce: caRBOn tRackeR initiative, "the $2 tRilliOn StRanDeD aSSetS DanGeR zOne: hOW FOSSil Fuel FiRmS RiSk DeStROyinG inveStOR RetuRnS", nOvemBeR 2015. Data in $Bn.

RUSSIA $147bln CANADA $220bln

CINA $179bln

US $412bln

wrote in December two years ago, speaking of some specific cases. One of such cases was the story of billionaire Carl Icahn’s investment fund, Icahn Associates Corp. At the end of 2014, the fund closed the year with a total loss of 373 million dollars, largely due to the very bad performance of a stock portfolio with plenty of energy companies, such as Chesapeake, Transocean and Talisman Energy. The Wall Street Journal estimated Icahn’s loss on Talisman shares to be approximately 290 million dollars in 2014. But, in such a troubled year as 2014, Icahn was certainly not the only victim. In that year, the Wall Street Journal went on, the hedge giant Paulson & Co. had suffered substantial losses in that area. “The $19 billion firm run by billionaire John Paulson had one of its largest losses of the year on a gamble that big oil firms would gobble up smaller ones, according to investors and people briefed on the valori international / yeaR 1 nO. 1 / July 2016

Country Mexico Netherlands, UK USA Russia UK USA Iran China Russia Malaysia Italy France Canada Canada Venezuela Japan USA Indonesia USA Norway

AUSTRALIA $103bln trade”, the newspaper wrote. “Instead, some smaller energy stocks held by Paulson & Co. plunged in value amid weak crude prices”. The extent of such losses is not known, but those plunges must have been quite substantial, though. “This year – the WSJ wrote in December 2014 –, several of the funds controlled by Mr. Paulson, who became famous for his successful bet against the housing market just before the financial crisis, experienced double-digit-percentage losses, according to an investor”. Also according to the uS newspaper, some smaller funds that are particularly exposed to energy markets lost up to 40%, thus contributing to the moderate performance of the overall hedge industry for that year. In January 2015, the Barclay Hedge Fund Index (no relation to Barclays Bank) had estimated an average yearly return of nearly 4% versus the approximately 11% of 2013. [M.Cav.] ✱ 17




W by Andrea Barolini

The international Organisation for Economic Cooperation and Development announced it is going to issue a set of rules to fight tax evasion by the big companies. But the NGOs think these steps are not tough enough valori international / YEAR 1 NO. 1 / JULY 2016

e cannot certainly say the problem has been fixed, but at least a small step forward has been taken in the fight against tax evasion by multinational corporations. Not enough, according to Non-Governmental Organisations, but helpful maybe to change tack. Last October, the Organisation for Economic Cooperation and Development (OECD) disclosed the new rules that the G20 countries (along with another seventy countries) will have to adopt in the next few years in the attempt to lay down fairer taxes for big companies. And reduce the use of tax havens. According to the international organisation, companies will be called to provide the tax authorities of the country where their parent company is based with a separate statement of accounts for every country they work in. This is the so-called country-by-country reporting that has been loudly asked for, and for quite a while, by the 19

ethical finance tax evasion

NGOs themselves. This will have to be done as from 2017, and the information that will have to be disclosed will include the company’s turnover, number of employees, revenues earned, and tax paid. The goal is to understand if multinationals pay their tax elsewhere or are only trying to hide their earnings to evade tax.

NOT FOR EVERYONE So far, so good, then. But more transparency would not have gone amiss. Not all of the disclosures made by the companies will be publicly available (to citizens, associations and media). Only information about groups with a turnover in excess of 750 million US dollars will be disclosed, which narrows the circle to about 10% of the companies. A pity, even if, as the OECD points out, they still account for approximately 90% of the total turnover. “This is the main weakness of the reform – explained Antonio Tricarico of Re:Common – because for many companies such disclosures will not be pub-

lic, they will only be shared with the public authorities. This will remove the deterrent factor that prompted, for instance, the decision of Cameron’s government in the UK to take action after the Starbucks, Amazon and Google scandals. Secondly, the 750 million limit might leave out too many companies. Having said that, however, in principle the fact that a decision has been taken at last to implement a form of international cooperation on this problem cannot but be welcomed, of course”.

A BLUNT WEAPON Of course, for the scheme to work, we will have to see how the governments will respond: probably some of them will not do much, and that’s precisely why OECD executive Pascal Saint-Amans already announced that the system will be revised in 2020: so, until then, it will be enforced as a sort of trial. After the first fiveyear term, the scheme will be reviewed, and above all we will see how many gov-

ernments will have promptly implemented these new rules in their domestic legislations. The Non-Governmental Organisations, though, are not so sure about this set of rules: “The reform will not prevent the multinational companies from sidestepping the tax rules to avoid paying their tax”, explained Manon Aubry of Oxfam’s Tax Justice service, in a comment. Instead, the coordinator of the Tax Haven platform of the French association CCFD-Terre Solidaire, Lucie Watrinet, pointed out that, “if the OECD countries had really wanted to reform the international tax system, they would have had to dig deeper into the methods that the big companies use to split their profits over different jurisdictions”. Conversely, Angel Gurria, general secretary of OECD, said he is very optimistic: “All countries experience the problem of seeing their taxable base eroded, and profits disguised. These practices subtract precious resources to the economies, which

THE HEDGE FUND YOU WON’T EXPECT TO SEE: APPLE IS THE BIGGEST IN THE WORLD Does the Cupertino-based giant build computers? Of course it does. But it is doing really well in financial speculations too. This has been revealed by the French Multinationals Observatory and by the Dutch centre Somo. The IT giant Apple is in fact a giant hedge fund. This has been revealed by a report published last Autumn by the Dutch NGO Somo – Centre for Research on Multinational Corporations, called Rich corporations, poor Societies: The financialisation of Apple. But let’s take a step back and let’s try to put together the puzzle that led the Dutch association to judge Apple so harshly. 20

At the end of 2015, the Cupertino-based company entered into an agreement with the Italian tax authorities: a tax amnesty to settle a controversy worth approximately 880 million euros, which, according to Milan’s public prosecutor, had been evaded by the Cupertino-based giant between 2008 and 2013. Actually, the group had not submitted to the Italian Revenue Office its tax return with the profits earned in that period. To do this, it had used a system that revolved around a number of companies: Tech Data Italia, owned by the US Td Corp., which in turns buys from Apple Sales International and Apple Distribution International, both based in Ireland. A country in which, as everyone knows, the tax regime is particularly soft with companies. Then, its position with the Italian authorities was settled by paying 318 million

euros: an amount that is far lower than the 880 million euros’ Corporate Income Tax that had been first claimed from it. Which did not go down so well with someone (if that had been a taxpayer owing 3 thousand euros, they would have probably asked him to pay everything, down to the last cent...). The amounts at stake are still impressive, though. According to the Dutch research centre, the company “is a case in point, in the way multinational corporations have been increasingly able to make profits that are infinitely higher than their ability to reinvest in real economy. Actually, these huge amounts of cash mainly feed the financial markets. With crazy consequences: the big companies are full of cash as they have never been before, without almost no benefits at all for anyone. Neither for the economies, in terms of investments, nor for valori international / YEAR 1 NO. 1 / JULY 2016

tax evasion ethical finance


could be invested to revive growth, to overcome the world crisis, and to give more opportunities to their citizens”. In addition, the executive added, evasion “undermines people’s confidence in the tax systems. That’s why we have come up with the most important international reform in almost one century, a reform that can beat the tax planning devices used by some groups”. One further step forward concerns tax agreements between the big companies and some countries: among those found out in the last few years, there’s an agreement between Ireland and Luxembourg (that resulted in the LuxLeaks scandal). From 2017, the countries concerned will have to automatically inform the countries in which the multinationals come from. While more new things will be launched to tackle the problem of the so-called “dummy companies”, based in tax havens, in which the US multinationals alone hide approximately 2 thousand billion USD. ✱

the governments, in terms of inland revenue. This is alarmingly increasing mass unemployment, inequalities, and austerity policies”. A survey about multinational companies, published by the French Observatory, mentions the exponential growth that Apple has experienced in the last few years. The company has grown from 1.8 billion USD of

By the end of January, the European Commission came up with a plan to fight against the multinationals’ “tax optimisation” scheme that will now have to be voted on by the 28 member states and that has been designed to fight against those practices that – according to a survey by the European Parliament – enable the big companies to dodge 50 and 70 billion euros’ tax a year. The “package” should include two directives and two recommendations to strengthen transparency and the exchange of information between the public authorities, and to make the big multinational corporations pay as much tax as the smaller companies are called to pay (usually the former manage to pay about 30% less than the latter). Above all, one of such measures tries to stop the (frequently used) practice of transferring the profits of a parent company to some dummy companies based in less greedy countries: actually the US States will be able to ask a company to pay tax when the tax rate asked for elsewhere is less than 40% of the same tax in Europe. In addition, the European Commission is trying to suppress the mechanism that enables companies to “lighten up” their tax returns with structured financial instruments. As with the OECD rules, however, even the new things that the EU wants to enforce will not make such disclosures public. In other words, such information will not available to the general public. Which, according to Manon Aubry, a tax law expert at Oxfam France, “blunts just the most important weapon: deterrence”.

haves like a bank or a hedge fund. The biggest in the world, though”. In addition, Apple had put together 194 billion USD (at the end of the first quarter of 2015): a huge amount, most of which is used in transactions with funds and sovereign or corporate bonds. Often, the Dutch NGO concludes, in Ireland or in other countries outside the USA. [A.Bar.] ✱

profits before tax in 2005 to 54 billion USD in 2014: “And this, by keeping an extremely low level of wages mainly through offshoring; as well as through tax optimisation schemes”. As to the former issue, that of the Chinese Foxconn has been one of the most famous scandals. This huge mass of funds, therefore, “is invested – Somo’s survey goes on – in financial assets. Apple be-





















valori international / YEAR 1 NO. 1 / JULY 2016




Cisco Systems


Long Term Investments







Cash and Short Term Investments












ethical finance banking crimes

Bank fines: a future full of doubts by Matteo Cavallito

In five years, the major banks of the Planet have paid over $ 300 billion in legal fees. But there are doubts about how really effective these penalties are and how they can be a valid deterrent against illegality


rom the outbreak of the crisis to date, banks and finance companies that had sold toxic mortgage securities in the US market were fined for an overall amount of $64 billion. This was reported by the Financial Times which then further updated the fines total after the agreement announced in February between the US authorities and Morgan Stanley. Accused of “deceptive practices”, Morgan Stanley admitted hiding key information to customers on the quality of the loans backing its securities and agreed to pay a 3.2 billion dollar fine. The agreement - which follows the same trends of other very similar settlements already entered into in the past by other Wall Street top banks including Bank of America (almost $ 17 bn in fines), JP Morgan ($ 13 bn) and THE COSTS OF MISCONDUCT: 2010-14


Société Générale 0.94 Standard Chartered 1.01 National Australia BG 2.83 UBS 5.41 Credit Suisse 5.85 Goldman Sachs 6.13 Banco Santander 6.94 BNP 7.76 HSBC 8.68 Deutsche Bank 9.38 Royal Bank of Scotland 10.90 Barclays 12.59 Citigroup 14.75 Lloyds 15.62 JP Morgan 32.91 Bank of America 64.05 Totale 0.00 50.00 100.00


205.75 150.00



Citigroup ($ 7 bn) has rekindled once again the debate on financial crimes and the costs they entail for banks involved in them and for the economic system as a whole. A “hot” topic that inevitably ends up raising the well known question: how much those misdeeds cost globally?

THE CONDUCT PROJECT COST The cost is difficult to assess because, apart from the US and the UK, the general rule for the authorities is to not make public the data on costs and expenses borne by individual banks. However, some “international” study is available, although the scope of its field of analysis is obviously biased. Such is the case of the Conduct Cost Project, an initiative launched in 2013 by the London School of Economics and later inherited by the CCP Research Foundation. In the 2010-14 period, as highlighted by the latest edition of the research, 16 of the leading banks of the planet have incurred costs related to misconduct (legal fees, fines and provisions and contingent liabilities in anticipation of future proceedings) for an overall amount of 205.75 billion pounds, about $300 billion (see GRAPH ). The detailed results, published in the summer, are a blend of lights and shadow. On one hand there is the worrying growth of the grand total, the highest – over five years – reported since the start of the research. On the other hand, the reduction in the value of provisions is, to date, perhaps the only tangible positive sign. Between 2010 and 2014, the amounts set aside by institutions in anticipation of future legal costs (including fines) amounted to 45 billion pounds compared to 65 of the 2009-13 five-year period. Is this a sign of a possible future change? Maybe. “The valori international / YEAR 1 NO. 1 / JULY 2016

banking crimes ethical finance

Period ‘09-13’ vs ’10-14’ showed a decrease in conduct cost-related provisioning which would suggest that firm’s assessment of their conduct risk is decreasing. Whether this translates into crystallized conduct costs remains to be seen,” told the research director Chris Stears to Valori International. “In so far as banks’ provisions as reliable – we know that this is not always the case – this does suggest that things are improving”. To find out more, in any case, it will be necessary to look at the latest annual reports from banks to be released from April onwards on which the Conduct Cost Project is beginning to work now. The Bank of England, for his part, did not show great optimism, predicting a further increase in sanctions by 2020 (see BOX ).

ARE THE PENALTIES EFFECTIVE? Figures are not everything, especially when the object of discussion is another key issue: the real effectiveness of the penalties. Are we really sure, one wonders, that fines can constitute a valid deterrent against unlawful behavior of the operators? Probably not, as Anat Admati, an economist at Stanford University suggested in September 2014 when asked about the issue by the Financial Times: “The fines can be viewed as a ‘cost of doing business’,” he told. “They don’t get at the heart of the problem, and aren’t effective to change behaviour, because the strong incentives by individuals within the banks to keep engaging in the same practices remain in place”. In 2013, The Financial Times remembered, despite the overall more than $52 billion fines already administered to them the top six US banks – JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs – reported an overall profit of 76 billion $. A figure slightly lower than the peak reached in 2006. It is also in the light of these figures that the issue of deterrents has entered the political debate in recent years. In November 2014, as reported by the newspaper The Guardian, the Bank of England’s deputy governor Nemat Shafik told the Treasury Select Committee of the UK Parliament that the threat of prison would be more effective than a simple fine in discouraging traders to violate the rules. “In some of the research that’s been done on deterrents” she said, “criminal sanctions are top of the list in terms of dissuading people from doing certain things. Making them pay is further down the list in terms of impact”. The issue has not, of course, been settled so far. And it is also very difficult to evaluate. “I would limit my comment to an observation,” Chris Stears explained to Valori International: “We have seen the valori international / YEAR 1 NO. 1 / JULY 2016


The legal costs incurred by British banks in the next five years could increase by another 40 billion pounds. This was reported last December by the Evening Standard basing on data released by the Bank of England. The figure, calculated during the stress tests whose results were released in late November, is equal to twice the amount already set aside by UK institutions to support the costs related to the court proceedings, either concluded or in progress. According to the analysis, conducted on “the currently available” information, three-quarters of that amount should be employed in the two years to come. The figure estimated by the Central Bank, however, does not fully represent the extent of the worstcase scenario. The total amount of the legal costs incurred by 2020, in other words, may ultimately be even higher. Only in the first six months of this year, the newspaper pointed out, the seven major banks in the country – those involved in the stress tests – have already set aside another 6 billion pounds in anticipation of expenses related to the legal proceedings. CONDUCT COST - OVERVIEW BY CAUSE


Governance / management failure* 62.800 Failure to disclose as required by law or regulation 40.800 Mis-selling other than PPI (e.g. swaps) 27.300 PPI provisions, as published by bank 25.800 Defective internal controls 14.500 Sanctions contravention 7.600 Market abuse related issue 7.600 Operational Risk* 5.200 Egregious loss due to bad judgment 4.400 Payment related to tax irregularity 3.700 Money-laundering related issue 3.600 Adverse judgement /settlement in class action v bank 2.000 Employment issue 0.500 Client money failling 0.080 Breach of confidentiality 0.004 Human Rights issue 0.002 Total 205.750 0.00 50.00 100.00 150.00 200.00 250.00

consequences of misconduct over the recent past to be predominantly institutional – conduct costs levied against firms. Any policy that seeks to redress perceived imbalances in deterrence, needs to recognise this. This has, in no small part, been the driving force behind the UK’s implementation of the Senior Manager’s regime (the regulation that is expected to bring about a real crackdown on the responsibilities of the financial company managers in the UK, editor’s note). The increased prospect of civil sanctions levied at individuals may well result in people thinking twice. But more needs to be done. There are a lot of grey areas in conduct that conventional regulation does not necessarily address. Considering these with a view to developing best practice, outside of regulatory risk, should be part of the industries agenda to restore trust and further professionalise its activities”. ✱ 23

ethical finance new fields for vultures

The red gold of multinationals by Corrado Fontana

For South-Eastern Asia, palm oil is a huge source of wealth: it has taken the food industry by storm and is feeding the biofuel one. But it is almost only the corporations that are taking the biggest slice of the pie




ndonesia, Malaysia and Thailand will hardly ever want to stop exploiting the manna that is palm oil down to the last drop, despite the incalculable and irreversible cost its production has for the environment or the health hazards that excessive consumption may have. To understand this, you just have to read the list published by the US Department of Agriculture about the greatest producer countries of 2014, constantly led by those three countries, with 33 million, nearly 20 million, and 2 million tons, respectively. Africa and South-America are there too but a long way down. A river of palm oil (the most precious, the reddish one, is extracted from the palm fruit; the inferior one, Palm Kernel Oil, is extracted from palm kernels) that is collected by destroying wide

ARCHER DANIELS MIDLAND Owner, along with Cargill, Bunge and Dreyfus, of large shares of the global food market, from farming and breeding materials to processing. It has over 33 thousand employees and customers in more than 140 countries, with hundreds of storage and manufacturing facilities. It is based in Chicago (Illinois, USA), and in 2014 its official profits were 81.2 billion USD. On its website, it puts Oilseed Processing at the top of the list of its core businesses.


areas of rainforest and marshland in south-East Asia, razed to the ground by controlled fires and deforestation (thus producing huge amounts of CO2, both directly through fire and indirectly by reducing the vegetation that could absorb it) in a vicious circle, in which profits from the oil and profits from the thriving timber market (Indonesia is the world’s number one exporter) support each other. The river of oil is flowing through such countries as China and India so much that it is making them dependent on imports (about 7 to 8 tons each, between 2014 and 2015); and in the last twenty years it has met an exponentially increasing global demand, boosted by the progressive fall of its price, which has made this raw ingredient


A division of Darby Group, a Malaysian holding with operations in 26 countries and 130 thousand employees working in 5 key industries. Palm oil is the main one: 108 thousand employees and 1.2 billion USD profits in June 2015. A member of Rspo, it is the greatest producer of certified sustainable palm oil, with a production of 2.03 and 0.47 million tons of fruit oil and seed oil in 2014 from its 527 thousand hectares of plantations in Malaysia and Indonesia.


With over 90 thousand employees, 1.16 billion USD net profits in 2014, a turnover and net worth estimated at 43 billion dollars, the Singapore-based company has palm oil as its core business (Unilever is one of its most important customers). Wilmar is trying to expand in Africa, where it runs 59 thousand hectares grown with palm trees, but it also uses a total of 283 thousand hectares of ‘red gold’ plantations all over the world (70% in Indonesia, 24% in Malaysia), according to official 2014 figures. valori international / YEAR 1 NO. 1 / JULY 2016


List of the top 10 producer countries and the 10 countries that are most rapidly expanding their palm oil production

COLOMBIA 4  1,108 3  6.54% ECUADOR 7  575




RSPO: 90%

Biological: 2%


THAILAND 3  2,000

8,184,201 37,688

MALAYSIA 2  19,800

HONDURAS 9  470 5  4.44%

PHILIPPINES 1  10.66%

GUATEMALA 10  440 4  4.76%

INDONESIA 1  33,000 2  8.20%

NIGERIA 5  930 1 1

GHANA 8  495

 Production by country [in thousands of tons]  % annual growth rate by country

competitive for the manufacturing industry (food and more) and for the production of vegetable fuels. The red gold is used basically everywhere (margarine, soap, lipsticks, cooking oils, ice-cream, snacks, industrial lubricants) and is mostly consumed in Europe and in the USA, at an average – as revealed by the Oil World 2013 report – of 60 and 55.3 kilos per person; while in 2014 the production of biodiesel used up 9.7 million tons, about 16% of the world’s production. According to 2015 figures processed by the British monitoring project Sustainable Palm Oil

GENTING PLANTATIONS A division of Genting Group, specialising in palm oil. After opening its business in April 1980 by taking up about 14 thousand hectares of plantations in mainland Malaysia, it has now 7300 employees and has extended its business by taking over a few companies in other areas of the country, so that it now has 71 thousand hectares of plantations under its control.

valori international / YEAR 1 NO. 1 / JULY 2016


Transparency Toolkit, those who mainly benefit from all this are the multinationals, first and foremost the food commodity leaders: the four richest companies range from Archer Daniels Midland worth 21 billion USD to Genting Plantations worth 11.9 billion USD (Sime Darby Plantation and Wilmar International come second and third); while the top four farmland owners are, once again, Sime Darby, with close to one billion hectares, followed by Felda Global Ventures (741.5 ha), Golden Agri Resources (451 ha) and Eagle High Plantations (425 ha). ✱

FELDA GLOBAL VENTURES Incorporated in Malaysia in 2007 and listed on the Indonesian Stock Exchange since 2012, FGV calls itself the world’s greatest producer of Crude Palm Oil and Malaysia’s second biggest refinery. With 19 thousand employees, it works in Indonesia, China, Turkey and South-Africa as well, though a joint-venture with IFFCO, a multinational food company based in the Arab Emirates.


A Singapore-based company – like Wilmar International – on 30th September 2015 the total surface grown with palm trees was officially 484.221 hectares. Listed on the Indonesian Stock Exchange since 1999, it is worth 2.9 billion USD and has operations in China and India too. As well as producing palm oil for industrial applications, it produces cooking oil, margarine, noodles as well.

 LINK Rainforest Action Network Greenpeace International Roundtable on Sustainable Palm Oil (RSPO) – Palm Oil Innovation Group

EAGLE HIGH PLANTATIONS An Indonesian company specialising in palm oil, it extracts oil from both the palm fruit and the palm seeds. It has rights on a total surface of about 419 thousand hectares of land and plantations in the provinces of Kalimantan, Sulawesi, Papua and Sumatra, in Indonesia. Listed on the Indonesian Stock Exchange since October 2009.



new fields for vultures ethical finance

ethical finance new fields for vultures

A chain reaction from Norway? I

by Corrado Fontana

After years of accusations from ecologists, selling shares is top of the agenda in the controversial palm oil industry. Prompted by the decision of an Oslo-based billionaire pension fund

t all (nearly) started last August, when the Norwegian Pension Fund threw a real financial bomb on the global palm oil industry. With its 870 billion USD capital, the most powerful sovereign fund in the world (according to the Financial Times, it owns on average 1.3% of every listed share on Earth) actually sold its interests in four companies working in such business. It got rid of its shares of the industrial group Daewoo – of which it owned 0.3% (worth approximately 9 million dollars by the end of 2014), because the South-Korean company owns the controversial Indonesian campaign PT Bio Inti Agrindo, which is cutting down tropical forests to extend palm tree plantations. Then, the Norwegian fund decided to sell the shares of its parent company, the steel multinational Posco (0.9% shares, worth approximately 198 million dollars), too, and two Malaysian groups: Genting (0.4% shares, worth 41 million dollars) and IJM (1.6% shares, worth 46 million dollars). A SLIPPERY GROUND FOR FINANCE A rock worth as much as 294 million dollars thrown in the increasingly lucrative pond that is the palm oil industry. And this happens after that, in April 2013, following a few criticisms about a certain bureaucratic inactivity in exclusion procedures on ethical grounds, the fund had sold at last another 23 shareholdings in companies involved

PALM OIL EXPANSION 1990-2011 Area of Oil Palm [Millions of Acres]



45 40 35 30 25 20 15 10 5 0









in the production of palm oil, considered to be environmentally unsustainable and non-amendable, even if the company committed to specific standards. So, these are dramatic political and financial decisions that have attracted attention, especially because they have not been so widely imitated yet. As pointed out, for instance, by the WWF in last May’s report on sustainable finance in South-East Asia (mainly Singapore, Indonesia and Malaysia), only three of the eighteen banks that have interests in raw materials from forestry made any disclosure about the sustainability of their loans, and only four of them include responsible environmental and social management criteria as to the lines of credit they grant their customers. However, this item is on the agenda in many circles that count, from Wall Street to Tokyo and Peking Stock Exchanges. And amidst accusations of green-washing and actual efforts (mainly driven by fears of reputational repercussions), the economic world boasts it has been in the forefront of this battle since as early as 2004, since the Roundtable on Sustainable Palm Oil, which gathers few investors and banks (Abn Amro, Hsbc, Bnp Paribas, Ubs, Citi Group, Credit Suisse) and thousands of companies that produce or process palm oil, was born. A weighty group whose members would cover 20% of global production (11.6 million tons of oil) while adhering to certified sustainable criteria. And something else is moving just in the midst of the oil palm regions. Not for environmental reasons, Ptt Pcl, Thailand’s leading energy provider, announced it is going to sell its shares of those operations that have to do with the palm oil business in Indonesia, considered no longer strategic, compared with the time it had invested in them. An announcement that meant it walked out of seven companies working in nearly 80 thousand hectares of land in Eastern Kalimantan, on the Isle of Borneo, including palm plantations and refineries. ✱ valori international / YEAR 1 NO. 1 / JULY 2016

ethical finance



2.28 billion dollars for an initial investment of just 177 million USD. This means a return of next to 1,200%. This gives a measure of the exceptional profits made by the Distressed NML fund, an offshore company (resident in the tax haven that is the Cayman Islands), owned by Elliot Management of US financer Paul Singer that in 2001 had brought a lawsuit against Buenos Aires to recover the entire value – plus interest and penalties – of the defaulted Argentine bonds. A sensational result, due to a final agreement between the parties that was ratified by the Argentine Senate last April.


485,000 HECTARES

An area of England three times as big as London, worth 170 billion pounds or about 220 billion euros, in the hands of offshore companies. This has been revealed by Global Witness based on data collected by Private Eye just when the British Government is trying to come up with measures against tax havens, following the discovery of the Panama Papers.


 THE BOOK Income inequalities have increased in all developed countries and are one of the key problems of our time. Despite the many papers published so far, there is still no persuasive explanation for such phenomenon. A book by Maurizio Franzini and Mario Pianta provides an explanation that puts at the centre four “drivers of inequality”: the power of capital over work, the rise of “oligarchic capitalism”, the individualisation of economic conditions, the withdrawal of politics. Processes that are changing the economic and political worlds alike. DISUGUAGLIANZE. QUANTE SONO, COME COMBATTERLE di Maurizio Franzini e Mario Pianta - Laterza, 2016

THE BEST TWEETS @JosephEStiglitz: Are markets efficient, or do they tend towards monopoly? The verdict:

May 19th 2016 World Economic Forum @wef

Americans throw away 280 lbs of edible food every day- each!! May 18th 2016 Feedback @feedbackorg

US added more than 70 times as much #renewable capacity as natural #gas this year


Big finance against antibiotic use in livestock

54 big investors take a stance against antibiotic use in livestock. This has been reported by the Financial Times. They are savings funds and pension funds, which together manage about one thousand billion USD. They contacted some of the biggest names of international catering, asking them to stop working with meat and chicken suppliers who use antibiotics, because they are not only harmful for human health but they could even cause economic damage as they could spread incurable antibiotic-resistant bacterial epidemics. A bomb ready to go off, as the World Health Organisation has been warning for a long time. valori international / YEAR 1 NO. 1 / JULY 2016

May 18th 2016 Carbon Tracker @CarbonBubble

In 2014, #Koch-Funded AFP Sent Out Mailer with Incorrect Voting Info, Accused of Voter Suppression May 17th 2016 #BoycottKoch @GoodbyeKoch


numbers from the earth

The divesting world UK

University of Glasgow  18million pounds in 10 years  Completed


United Church of Canada  5.9 million USD (4.7% of total investments)  Completed

Guardian Media Group  Amount unknown. 5-year disinvestment  Completed

Canadian Medical Association  1.8million USD  Completed


Rockefeller Brothers Fund  45 million USD  Completed*

City of San Francisco  583million USD disinvested since 91  Completed Union Theological Seminary  Amount unknown  Completed

BMA (British Medical Association)  Amount unknown  Completed Anglican Church  12 million pounds  Subtotal (coal and tar sands)

University of Washington  Amount unknown  Subtotal (coal only)

University of California  200million USD  Subtotal (coal and tar sands only)

by Emanuele Isonio A journey through over 500 institutions and next to 3 thousand and a half billon USD. Dozens of states involved, from Europe to North America, via Australia and New Zealand. The most obvious proof of how real the chance of changing the world may be – not just the social world but the economic and business worlds too and even steering the choices of the industrial fabric – by “voting with one’s purse”. The phenomenon of disinvestments in arguably controversial, inappropriate and immoral industries is no longer something that has to do with snow-white souls and incurable idealists. From religious institutions, it has spread into many universities of the Anglo-Saxon world and has even affected the investments funds of dynasties that until then had built their empires on oil. And now, maybe for less ethical but more pragmatic reasons, the fever has even caught the investment funds and insurance companies. A swollen river that slowly but inexorably is drying up the fossil industry’s funds. And promises instead of putting wings on those industries that try to put the words “profit” and “sustainability” in the same sentence. 28

WWF UK  No investments in fossil fuels since 2006  Completed


 500 million euros (by the end of 2015)  Subtotal (coal)


PFZW  Amount unknown  Subtotal (all coal companies by 2020; 30% less investments in all fossil fuels)





valori international / YEAR 1 NO. 1 / JULY 2016

other than oil




Government Pension Fund of Norway  52 coal companies left out  Subtotal (coal only)

City of Oslo  Amount unknown. 7 million USD disinvested from coal only  Total


City of Uppsala  Amount unknown  Completed

Lund University  Amount unknown  Subtotal


Other / 0% Foundations / 24%

Faith-based groups / 27%

Corporations / 3%

Münster Municipality  Amount unknown  Completed

GOs / 13%

Allianz  4 billion euros, 90% of which in bonds  Subtotal (companies with>30%of turnover from coal)

Pension funds / 13%


Colleges, universities, schools / 12%

PFA Pension  Amount unknown  Subtotal (investments in tar sands)

Healthcare / 1%

NGOs / 6%

Roskilde Municipality  Amount unknown  Completed

German Presseversorgungswerk  Amount unknown  Subtotal (companies with>30%of turnover from coal)


Ecumenical Church Council  Amount unknown  Completed World Lutheran Federation  Amount unknown  Completed

NGO Foundation Pension fund Religious order Public body Publishing group University Trade association Insurance company Investment fund


Hunter Hall Investment Management  Amount unknown  Completed* Australian National University  Amount unknown  Subtotal (only companies with >20% of turnover from coal)

 Planned disinvestments  Type of disinvestment * Coal, oil, gas

valori international / YEAR 1 NO. 1 / JULY 2016


Victoria University of Wellington  Amount unknown  Total

Presbiterian Church of New Zealand  Amount unknown  Total









From 7 to 18 November the representatives of world governments will meet WILL FOCUS AN ENTIRE ISSUE to prepare the enforcement ON THE EVENT. of the agreements signed Enquiries, insights and analyses to delve in the French capital into the issues and challenges at hand, and the one year before. best practices to follow; the best of investigative journalism at the service of the environment, sustainable development and responsible investors. For further info and to get your copy of Valori international, write to





by Elisabetta Tramonto

Experiences of active shareholding are flourishing in Europe. The new-born is the European Responsible Investors Network of non institutional shareholders who attend meetings to improve corporate social, environmental and governance factors valori international / YEAR 1 NO. 1 / JULY 2016

eady, steady, go. The season of shareholders’ meetings has started in listed corporations all over Europe again, this year, as well as in the United States. This is one of the highlights for responsible investors who want to make the most of active shareholding in a bid to improve social, environmental and corporate governance factors (the so-called ESG factors). By attending shareholders’ meetings, they can have their say in the way a company works. Every country has its own rules, but usually to attend a meeting and speak up you only need to have one share (to submit a resolution to be voted on at a meeting, the limit is much higher: in Italy it is 2.5% of the capital, which is out of reach for a small shareholder). But a critical shareholder who speaks up can still have an impact even if that would be by no means binding on a company. It may attract public attention on something that is relevant to the local community (if made known to the public at large)

An image of the campaign "Living Wage", promoted by the Living Wage Foundation to ask for minimum wages for all employees of Uk companies (see intervieW at page 34). 31

critical shareholding divestment

or more often than not it can spark off an exchange of views with the management. This is (or should be) the real goal of an active shareholder: to engage in a long-term dialogue with a company to change the way it behaves on some assumedly relevant matter. “Through active shareholding, the ethical investor starts a structured, long-term dialogue with the management of the company he/she has shares in, by constantly monitoring its environmental, social and governance factors in the attempt to pro-

mote long-term sustainable and responsible behaviour that may help create value for the economy and for society as a whole”, explains Francesca Colombo, director of SGR Ethic Research, who has been engaged in active shareholding for years.

FROM AMERICA TO THE OLD CONTINENT The United States are the pioneers of critical shareholding and still the most active at shareholders meetings with re-

sponsible investment giants, such as ICCR, the Interfaith Centre on Corporate Responsibility, a group of nearly 300 religious orders, responsible investors, universities, pension funds and trade unions, with an asset portfolio of over 100 billion USD. As well as pension funds such as Calpers (see inFOGrAPHiC ) or the New York State Common Retirement Fund, the Connecticut Retirement and Trust Plans or the New York City Comptroller’s Office. Groups that attend dozens of meetings a year (the ICCR attends hundreds of

PENSION FUNDS ARE ALL ABUZZ Norway Government Pension Fund Global COMETA A responsible U-turn in italy’s world of private pensions. Cometa, a pension fund for the engineering industry, italy’s biggest one, has implemented new manager selection criteria. For the first time ever, a social security institute too will be rated in terms of Sri/esg standards as well as compliance with the Principles for responsible investment initiative (Pri). Cometa’s interest in social, environmental and governance responsibility had been clear for some time now, as is reflected in its effective engagement, or dialogue, with the companies it invests in. “Let’s say we are at a stage of pre-active shareholding – explains Maurizio Agazzi, CeO of Cometa –. We don’t speak up at the meetings of the companies we invest in, but we try to talk with the companies in the portfolio on issues that we consider relevant, in social, environmental or governance terms. We join international consortia, for instance with Chevron after the environmental catastrophe the company had caused in the north-east of ecuador in 2011. in 2014, we joined an initiative of the boston Common Asset Management (bCAM) on ‘climate risk’ assessments for banks, by sending a letter to the banks to understand how well their loans and investments reflect climate-related risks. As to human rights, we sent a letter ‘calling’ the international companies working in industries that are most exposed to the problem of child labour and to the italian companies listed on the FtSe Mib, to disclose how and to what extent the protection of children’s rights is inbuilt in their corporate processes”. [E.T.]

Cometa, a national private pension fund for the engineering industry HQ: Milan, Italy MeMberS: 400 thousand POrtFOLiO: 9.6 billion euros 2015 retUrn: 3.07%


GPFG is the main investment vehicle of the norwegian Government. the third largest public investment fund (and the first largest sovereign fund) on the planet, according to the latest survey of the Sovereign Wealth institute (USA, June 2015), GPFG adheres to an active shareholding policy on environmental, social and governance issues. “in 2015, we focussed our efforts on the mechanisms whereby the board of directors are appointed, the fair treatment of shareholders, corporate reforms, corruption and sustainability issues” explains Marthe Skaar, spokesperson for the norges bank investment Management, which runs GPFG. the selection and revision of the investments are driven by risk assessments and ethical considerations. “Sometimes, our approach to responsible investments may lead us to disinvest those companies in which we have found long-term risks”, goes on Skaar, who points out, however, that the fund does not join boycotts. “Our disinvestments – Marthe Skaar explains – are based on an analysis of environmental, social and governance risks”. [M.Cav.] HQ: Oslo (Norway) eMPLOYeeS: 500+

Government Pension Fund Global

POrtFOLiO: 7,475 billion krone 851.1 billion USD*] 2015 retUrn: 2.4%


CalPERS Getting “sustainable risk-weighted returns” by factoring in “environmental, social and governance issues” as well. it is one of the avowed goals of the California Public employees’ retirement System (CalPerS), the US’ main pension fund, that along with another 19 institutional operators promoted and signed the Principles for responsible investment launched in 2005 with the support of the Un. “We have learnt that shareholders may be helpful in pushing companies to responsible citizenship”, reads March 2015’s Statement Of investment Policy for Global Governance. Calpers think that environmental, social and corporate governance factors may affect the performance of the investment portfolio”. Generally speaking, the fund does not implement any disinvestment plans as it believes that such practice “is ineffective in pursuing political and social goals” if not actually counterproductive (“operators who disinvest lose the power to make the company behave responsibly”, the July 2015’s “total Fund investment Policy” document states). [M.Cav.]

California Public Employees’ Retirement System HQ: Sacramento, California (USA) eMPLOYeeS: 2,765

MeMberS (PAYerS And reCiPientS): 1.8 million POrtFOLiO: 301.9 billion USD 2015 retUrn: 2.4% valori international / YEAR 1 NO. 1 / JULY 2016

divestment critical shareholding

them) and uphold resolutions on human rights, labour and environmental issues, equal opportunities, and general corporate governance. The issues are similar to those of Europe’s active shareholders, where experiences of critical shareholding are not so well developed as the US ones. On one hand, institutional investors (pension funds, savings management funds), on the other hand civilian groups such as NGOs, environmentalist associations, trade unions, religious orders (see MAP ), en-

gaged with companies on every level, taking part in international campaigns and very often speaking up at shareholders meetings to raise awareness of ESG issues. The country with the most striking number of active shareholders is Great Britain, where this phenomenon is deeply rooted. It is no coincidence that Erin (European Responsible Investment Network), a group with no institutional investors but civilian groups with an interest in responsible investments, was created by a British group, ShareAction,

last November. “For one year, we have been building this network in the attempt to bring together NGOs, religious organisations and trade unions keen on responsible investments and critical shareholding”, explains Friederike Hanisch, in charge of ShareAction Europe (see bOx on page 34). “Europe-wide coordination helps share experiences and skills and be more effective, especially with multinational corporations, even more so if they are based in a country that is not that of the critical shareholder”.

EUROPE’S KEY CRITICAL SHAREHOLDERS Some of the groups that attend meetings and ask for a more sustainable behaviour SOURCE: VALORI.


Government Pension Fund Global




The London Mining Network

Amnesty International

Greenpeace UK

Global Witness No Tar Sands



Aviva Investors F&C Asset Management


VBDO the vereniging van beleggers voor duurzame Ontwikkeling (vbdO), or investors’ Association for Sustainable development, is a dutch company that has been working in active shareholding for two decades. As mentioned by a recent document of the ShareAction’s european network, the company has a wide base, which includes banks, private and institutional investors, nGOs, trade unions and consulting firms. every year, the vbdO attends dozens of meetings, where it questions the companies on social, environmental and governance matters.


Amis de la Terre Phitrust



Mirova Responsible Investing

Ecofi Investessement it is the savings fund of the French institutes Groupe Crédit Coopératif and btP banque. Opened in 1983, when the first “mutual” funds were launched, ecofi – the specialist website points out – invests in a universe of companies, which are rated on the basis of their eSG factors (environmental, Social and Governance) as well as more specific criteria (including responsible customer relations, longterm supplier relations, non use of tax havens). the company runs over 30 funds. Civilian groups (nGOs, trade unions, environmentalist associations, foundations)

institutional groups (pension funds, SGrs, etc.)

valori international / YEAR 1 NO. 1 / JULY 2016

Facing Finance


Fondazione Culturale Responsabilità Etica Etica Sgr


Greenpeace Switzerland Actares

Ethos Foundations born in 1997 on the resolve of two pension funds, the ethos foundation for sustainable investment includes 215 members, such as pension funds, private people, public bodies, and manages 207 billion Swiss francs’ worth of assets (189 billion euros). ethos lays down ethical selection criteria, which managers must adhere to, and votes at meetings on behalf of pension funds.

Kritische Aktionäre Founded in Cologne in 1986, the dachverband der Kritischen Aktionärinnen und Aktionäre e.v. (Coalition of Critical male and female Shareholders) includes 26 organisations acting as critical shareholders in Germany at the meetings of Adidas, bayer, daimler, deutsche bank and other German listed giants. the key items on the agenda are environmental protection, human rights and workers’ rights, and criticism of arms manufacturing and export.


critical shareholding divestment

ACTIVE SHAREHOLDING FOR ETICA SGR There are two groups in Italy that, each one in its own way, are engaged in active shareholding: Etica and Fondazione Culturale Responsabilità Etica (Fcre). Both

are part of Banca Popolare Etica. The former is a savings fund, so it is an institutional investor that attends and votes on its customers’ behalf at meetings of the company it has invested in. A different approach is the one of Fondazione di Banca

LEARNING FROM SHAREACTION AN ARMY OF ACTIVE SHAREHOLDERS It is one of the UK’s most active responsible investors and critical shareholders. Friederike Hanisch tells Valori which methods it uses when it speaks at meetings and what it teaches to its “students”. “In our experience, attending shareholders’ meetings is a very effective way to bring our claims to the attention of a company’s management and to pave the way to dialogue”, states Friederike Hanisch, director of ShareAction Europe. Can you make some examples of the results you achieved by attending a shareholders meeting? A case in point is the “Living Wage” campaign, an initiative of the Living Wage Foundation against low wages in Great Britain, to give all the company’s employees the minimum wages to have a dignified lifestyle. In 2011, when we started to support this campaign, only 2 of the top 100 British companies on the FTSE had joined the initiative. After five years of speaking up at meetings and meeting the company’s boards, 30 companies have joined in. Are there any other effective tools to get a company to do something? Public protests, petitions, lobbying and above all a direct dialogue with the company are certainly effective too. From the perspective of active shareholding, a method to make oneself be heard is joining forces with other investors, making them aware of one’s initiatives and its importance for them too. Getting support from institutional investors can help too. Are your efforts targeted to companies only, or to pension funds as well? To pension funds and big investors as well. We often involve them to organise far-ranging campaigns. An example is RE100, an initiative of the Climate Group and the CDP (Carbon Disclosure Project), which we support to ask the companies to get to use 100% renewable sources. In this area, we are coordinating a group of 22 big investors that altogether manage a portfolio of 352 billion pounds (444 billion euros, editor’s note) so that they can support us as we go on with this petition. Do you organise courses to become critical shareholders? Yes, for organisations and individual investors, either British or from other European countries. In the United Kingdom, we have already created a nice “army” of critical shareholders, who attend meetings and speak up with our support. It is a way to make your efforts more effective if you’re trying to get a company you have an interest in to change its conduct. And if you want to attend a meeting you don’t even have to buy a share, we or other active investors will lend them. The key recommendation we give to those who want to attend a meeting is: ask short, clear questions and ask the company to provide evidence of their answers. [E.T.] ✱ 34

Etica, which instead is not a “professional” investor but has bought shares of some companies just to be able to attend the shareholders meetings and try to change conducts that it considers out of tune with its values. “We have been pioneers of active shareholding in Italy”, explains Francesca Colombo of Etica Sgr. “What we propose to the companies is a more farsighted corporate approach, which may improve their long-term economic sustainability, with a positive impact on all shareholders. This work is made of patient, constant and continued talks, which have already delivered good results: some companies have drawn up their first sustainability balance-sheet, others have implemented ESG criteria (Environmental, Social and Governance) in their supplier selection procedures, and others have joined initiatives for responsible water consumption or against climate change”. And climate change is precisely one of the key issues that Etica Sgr is going to address this year at Italian and foreign meetings in order to extend the “post Cop21” policies: from the calculation of product and process carbon and water footprints, to the role of fossil fuels, to specific environmental reports. “In addition, we will keep tackling the issues we have always been keen on – Francesca Colombo goes on –, such as socio-environmental reporting, top management’s wages, the protection of human rights along the supply chain, sustainable sourcing of palm oil and the use of GMOs, tax evasion and IT and technological security”.

BANCA ETICA FOUNDATION “Fcre has attended meetings of Eni (oil & gas) and Enel (electricity) since 2008”, says Mauro Meggiolaro, in charge of Critical Shareholding at the Foundation. “We chose these two companies because awareness-raising campaigns and protests had already been brought against Enel by Greenpeace Italia, and against Eni by Re:Common and Amnesty Italia. This year, we began to voice the Campagna Banche Armate and the Rete per il Disarmo at the meeting of Finmeccanica, Italy’s biggest armament manufacturer. At the meeting of Eni, on May 12th, we voted valori international / YEAR 1 NO. 1 / JULY 2016

divestment critical shareholding

Etica Sgr and Banca Etica Foundation are two branches of the main group of Italian ethical investors. Their propose to the companies a more faresighted approach and cast a critical eye on unethical choices of some giants of the energy sector against the adoption of the balance-sheet: despite a record-breaking loss of 8.8 billion euros, the company decided to pay the shareholders the same dividend as in 2015 (when it had earned 1.3 billion euros profits by the end of the year). To do this, it will cut its costs and will sell 13 billion euros’ assets. It is an absolutely unsustainable choice, which shows they have no smart strategies at all for the future. Eni should cut down on the dividend and keep the money in its pockets, then invest it in alternative technology, such as electric mobility, and phase out fossil fuels in the best possible way before the process becomes too expensive. We ask Enel in-


“The most effective way to engage with companies is to remind all players that both investors and companies have similar goals: seeing a profitable business grow and create value for the community through the company’s products and practices. When engagement practices are built on such perspective, both parties join forces to achieve a shared goal. Even when they disagree about something, long-term respectful dialogue will solve any problem”. This is what engagement means, according to Laura Berry, for eight years CEO at ICCR, a NY-based organisation that brings together about 300 international responsible investors, both religious and non religious, to influence corporate management strategies and promote social justice at shareholders meetings. In December last year, she joined the Ethics Committee of Etica Sgr.

Does dialogue really bring in good economic and financial results as well? Absolutely. Positive examples of dialogue between companies and investors are countless. There are two sides of the same coin: the greater profits provided by innovation and feedback, and reduced risk. By factoring environmental, social and governance issues into their dialogue with the companies, the investors may gain a better insight into the company’s risk-management practices and promote a “culture of innovation”. From the company’s standpoint, the responsible investors’ demands may help the top management steer clear of pointless risks, by singling out the company’s most vulnerable areas and developing good corporate management practices.

stead to give us details of the coal they bought in Colombia to feed the Italian power plants. And we will get back to emissions from power plants that still use coal, the main culprit of climate change”. ✱

critical shareholding banking strategies

NIM Challenge for ethical banks A

di Emanuele Isonio

The debt produced by a reduced spread on rates forced German player GLS to ask 5 Euros per month to its current account holders. Italy fares better, thanks to the choice of Banca Etica to diversify its revenue sources

solidarity contribution for all clients with the goal of tackling the lower revenues caused by very low interest rates: the Board of GLS-bank, the first social and ecological bank in Germany made the announcement. The number itself is far from staggering (€60 per year spread over 12 instalments of € 5 each) nevertheless the news caused some concerns regarding one of the most important players in the European ethical finance business: indeed GLS was founded over 40 years ago and currently finances over 23 thousand projects and enterprises in several segments, ranging from sustainable development to green economy and solidarity economy. The decision made by CEO Thomas Jorberg will be submitted to the approval of an extraordinary shareholders meeting open to all 32,400 shareholders. If the meeting should approve the motion, then the measure will become effective as of 1 January 2017. The problem arises when, because of the financial crisis the ECB lowered interest rates and therefore the gap between interest rate receivables earned by banks from the loans issued and the interests payables owed to current account holders decreased gradually. The spread is currently at 1.74%


2.600 2.400 2.200 2.000 1.800 1.600 1.400 1.200 1.000 800 600 400 200 0



230 2008







2015 apr. ’16

and is believed to further decrease: down to 1.54% by year-end and to 1.43% in 2017. This is a problem for any bank which had decided to base its revenues on this item: the German financial newspaper Handelsblatt revealed that in the case of GLS Bank, 85% of revenues are connected with interest margins. For some time, in ethical finance some have sought ways to break loose from Net interest margin, by differentiating more on commission business. Time proved this choice a sound one. The case of Banca Etica in Italy is pretty significant: in 2007 88% of revenues were generated by Net interest margin. Last year this percentage went down to 53.9%. The rest is generated by commissions on securities transactions; the secret to this change of course is to do with the asset management company Etica SGR, founded by Banca Etica in 2000, which over the years launched a number of ethical funds targeted to private and institutional investors. At every fund purchase a share of the management fee is paid to Banca Etica and today 75% of revenues from commissions is ensured by the fees paid by Etica Sgr to the holding company. The exponential increase in terms of assets under management and number of clients (increased over tenfold between 2008 and April 2016) did the rest. ✱


150.000 140.000 130.000 120.000 110.000 100.000 90.000 80.000 70.000 60.000 50.000 40.000 30.000 20.000 10.983 10.000 0 2008 2009







2015 apr. ’16

valori international / YEAR 1 NO. 1 / JULY 2016

against weapons critical shareholding

Investment funds: a farewell to arms? Growing pressure on divestment from the weapons sector. US activists wants stricter rules on firearms ownership and use. Europe looks at the international market and makes pressure against cluster bombs

US CAMPAIGNS The British newspaper The Guardian noted that recently some of the larger municipal pension funds such as Philadelphia’s and Chicago’s “adopted resolutions vowing to sell off their firearms investments altogether or to do so if the latter didn’t publicly accept stringent new rules and regulations”. This decision is in line with the resolutions taken by the trustees of the California State Teachers Retirement System (CalSTRS) after the massacre of the Sandy Hook elementary school (December 2012, 26 dead) and the governor of Rhode Island, Gina Raimondo, who “oversaw the decision to sell off the state pension fund’s $20m stake in a firearms distributor”. In the past, as pointed out in January by the Canadian news magazine The Tyee the pacifist and anti-nuclear movements advocated and lobbied in favour of divestments from the weapons valori international / YEAR 1 NO. 1 / JULY 2016

sector. But today it really seems that “a new generation of social media-driven campaigns has put America’s domestic handgun, automatic and semiautomatic gun industry in their crosshairs, taking cues from other successful movements”. This conclusion is based in particular, by the US advocacy coalition Campaign to Unload that, after similar initiatives for tobacco and fossil fuels, has launched a campaign to promote the divestment of employee mutual funds by three gun and ammunition manufacturers: Sturm, Ruger & Co, Smith & Wesson and FINANCIAL INSTITUTIONS INVESTING IN NUCLEAR WEAPON PRODUCERS 2012-15


35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

Capital Group State Street BlackRock Vanguard Bank of America JPMorgan Chase Citigroup Evercore Wells Fargo T Rowe Price Wellington Management BNP Morgan Stanley Goldman Sachs Fidelity Investments Mitsubishi UFJ Bank of New York Mellon Royal Bank of Scotland Sun Life Financial Northern Trust Crédit Agricole Franklin Resources Barclays Invesco Société Générale UBS TIAA-CREF Deutsche Bank Longview Asset Management HSBC US Bancorp Old Mutual Life Insurance Corporation of India


mericans activists, who have been fighting for years for stricter rules on the firearms market, may have found in recent times a new and powerful ally: financial investors. This is quite evident if one looks at the current status of the debate on this issue, fuelled by both the primaries campaign and as well as the shootings and other recent events. The pressure is growing steadily, as pointed out by some observers. The well known invitation “to immediately divest from funds that includes assault weapon manufacturers”, aimed at pension funds and private operators by the mayor of New York, Bill de Blasio on last December in response to the San Bernardino massacre (14 dead), is anything but an isolated case.

by Matteo Cavallito


critical shareholding against weapons



14% growth compared to the previous five-year period. This is an estimate of the growth of import/export volume in the world market of armaments as portrayed by the latest report of the Stockholm International Peace Research Institute (SIPRI). The whole market is driven forward mainly by Asia and Oceania, home of 6 of the top 10 importers: India (14% of global imports), China (4.7%), Australia (3.6%), Pakistan (3.3%), Vietnam (2.9% of the market with a 699% growth in 2006 to 2010) and South Korea (2.6%). The report also highlights a strong growth also in purchases of Middle Eastern countries, increased by 61% over 2006-10. In the same period Saudi Arabia, the world’s second biggest buyer, has reported a 275% which Qatar topped with 279%. Overall purchases increased also in the United Arab Emirates (35%) and Egypt (37%). European imports have decreased instead: -41% in the period under review. In terms of exports the United States is still the global leader (33% of the market) – an increase of 27% comparing the two five year periods – ahead of Russia (25%, +28% compared to the 2006-10 period). The major European manufacturers do not follow this trend: Germany halved its sales while French exports fell by 9.8%. China exports increased by more than 88%, surpassing France.

Olin. The value of the investments at stake, pointed out The Tyee , is $ 1.9 bn.

EUROPEAN INITIATIVES In Europe, where the existing rules on trade and possession of firearms are much stricter, these American campaigns are inevitably almost overlooked. However, there have been several awareness-raising initiatives about financial activities that support weapons. The Belgian NGO Netwerk Vlaanderen (now FairFin) and the Dutch PAX, for example, have issued several reports on the finan38

cial institutions involved in cluster bombs manufacturing; at the same time a large group of associations in several European countries has made available information on the activities of credit agencies and national and international banking groups that provide services for the export of arms and military systems. A third front, finally, was opened by the International Campaign to Abolish Nuclear Weapons (ICAN, of which PAX and other associations are members) which released two reports on the activities of public and private financial institutions that support industries involved in production, maintenance and modernization of nuclear weapons. This market, which according to the latest PAX study (November 2015) has featured 382 investors over the last 4 years (banks, insurance companies, investment funds and so on – see GrAPH ) from 27 countries with an overall turnover of nearly half a trillion dollars ($ 493 bn). Different campaigns each with their own peculiar problems. “Promote divestment from companies that produce bombs with devastating effects and that, moreover, are banned by international treaties such as landmines or cluster bombs is also essential to lead the governments of those countries that have not yet done so to ratify these treaties and thus to end the production,” explains Giorgio Beretta, an analyst of the pressure campaign that targets “Armed Banks”, an initiative launched in Italy in 2000 thanks to the efforts of Catholic social magazines (Missione Oggi, Mosaico di pace and Nigrizia). For nuclear weapons subject to the Nuclear Non-Proliferation Treaty, the situation is inevitably more complex. “In Western countries nuclear weapons are produced by companies listed on the stock exchange and on which shareholders can act” explains Beretta, “while in most other countries these weapons are state-produced: in this case divestment campaigns have no power.” The problem, he adds, “is similar also as regards manufacturers of conventional arms that also manufacture military systems used in the defence and security of their own country: in this case all campaigns, including divestment campaigns are more effective if they aim to stricter and more transparent regulations and rules on the exports of those products to at least try to promote the principles of the Arms Trade Treaty.” Between 2011 and 2015, said the latest report of the Stockholm International Peace Research Institute (see bOx ), the global weapon market trading volume has reportedly grown by 14% compared to the previous five year period. ✱ valori international / YEAR 1 NO. 1 / JULY 2016

glyphosate & co. critical shareholding

EFSA’s criteria: so many doubts All fingers pointed at the EU Food Safety Agency for its decisions about the famous pesticide. But that’s not the only controversial case: suspicions are all on the procedure they used to justify their decisions


he issue is quintessentially a technical one, and may be that’s why it has been overlooked by the Italian media. But this does not mean it cannot have serious consequences on the European citizens’ life (and health): all fingers are pointed at EFSA, the European Food Safety Agency that is in the spotlight for the decision it took last November, challenging the ruling of Iarc (International Agency for Research on Cancer) that defined glyphosate as “probably carcinogenic”. After a widely-debated decision about the world’s most commonly used herbicide (it has been found in 1% of food samples tested all over Europe), many parties have mentioned the conflict of interest that may be inbuilt in Efsa, which the EU institutions have taken plenty of measures against (the latest one being a ruling from the European Ombuds-

man). But solving the problem of the grey areas in the potential partnerships between scientists and corporations, no matter how important, might still fail to prevent it from happening again.


1,000 800

* the data in this chart are the most recent available to us. We asked for an upgrade to the press office of eFSA but to no avail.


Requests for permission Other opinions / scientific reports

400 200 0



Last March, the European Commission was prepared to support the use of glyphosate, the controversial herbicide contained in many products used in traditional farming, first and foremost Roundup by Monsanto, for another 15 years. But pressure from public opinion, environmentalist associations and some EU states had had the authorisation reduced to nine years. But not even this new proposal has dispelled all doubts. The European Union is still at a deadlock, and the 28 member states seem to be unable to reach an agreement. When the EU Cabinet voted on the EU Commission’s proposal, Italy and France voted against, and Germany, Sweden, Slovenia, Portugal, Luxembourg, Austria and Greece abstained. At this point, as explained by a spokesman of the Brussels Commission, “if no decision is taken before June 30th, the current licence will expire, and valori international / YEAR 1 NO. 1 / JULY 2016

by Emanuele Isonio








glyphosate will be banned. The member states will therefore have to repeal all the authorisations for all the products that use that pesticide”. Opposing opinions on the potential carcinogenicity of the pesticide weigh heavily on the indecisions of many countries: while the WHO’s International Agency for Research on Cancer (Iarc) had classed it as “probably carcinogenic” last year, EFSA (European Food Safety Agency) had said the opposite. And a few days ago, the report of FAO’s and WHO’s Expert Committee on pesticide residues in food and the environment went in the same direction, as they stated that “the intake of glyphosate through diet is unlikely to be carcinogenic for humans”. This is exactly why some European groups are thinking of reaching a temporary compromise: extending by one year the authorisation for glyphosate, while waiting for the assessment that the European Chemicals Agency (ECHA) will have to issue in 2017. 39

critical shareholding glyphosate & co.


Augustiner, Beck’s, Bitburger, Erdinger, Franziskaner, Hasseroeder, Jever, König Pilsener, Krombacher, Oettinger, Paulaner, Radeberger, Veltins, Warsteiner. It’s a long list, that of the German beers that, according to the tests of the Munich-based Environment Institute, have been contaminated with the herbicide glyphosate. There’s no max limit on beers but the levels found in the tested brands range between 0.46 and 29.74 micrograms, up to 300 times higher than the 0.1 microgram limit on drinking water. The German Federal Risk-Assessment Institute (BfR, mentioned on page 36) immediately pointed out that “an adult should drink one thousand litres of beer a day to take in enough glyphosate to suffer health problems” but defined the herbicide levels found in the beers as “scientifically reasonable”. The German Brewers’ Association pointed the finger instead at imported barley malt. Whatever the reason, there’s no denying that the reputation of the historical drinks has received a very bad blow. But that’s not the first time the reputation of a food is endangered by pesticides. Three years ago, it was the turn of France: the consumer association Ufc-Que Choisir had 92 bottles of wine, sold at 2 to 15 euros, tested. Traces of pesticides were found in all of them. The highest amount (14 different herbicides) was found in a 2010 Bordeaux wine sold at 10.45 euros. And these concerns last to this day: it was precisely in Bordeaux, on Valentine’s Day, that a rally was held to protest against the use of pesticides in vineyards, which 70% of phyto-sanitary agents is produced for, even if they account for as little as 7% of Europe’s farmland. The protesters asked the European institutions to investigate the “cumulative effect” of pesticides on human health. The fact that in France Parkinson’s and Alzheimer diseases are acknowledged as vine-growers’ occupational hazards does not bode well at all.

A REPORT FILED IN 2009 There are, behind Efsa’s controversial opinions, the criteria they use to decide whether to grant or ban the sale of a substance. The report is an authoritative one, it was signed by 36 European, US and Japanese biologists (including the Italian Stefano Parmigiani and Paola Palanza from the University of Parma, and Francesca Farabollini, from Siena). What is most upsetting is the date of the article, published on Environmental Health Perspectives, the journal of the US environmental hygiene association: 3rd March 2009. As early as seven years ago, scientists had already reported a similar case: that of bisphenol A (Bpa), a substance widely used in plastic containers – from water bottles to baby bottles – suspected of being a dangerous endocrine disruptor, which could damage the human and animal hormone systems.

HOW ARE STUDIES SELECTED? On that occasion, Efsa, along with its US counterpart, the Food and Drug Administration, had authorised the use of Bpa, based on two studies conducted by commercial laboratories instead of considering the hundreds of research papers by

CONFLICT OF INTEREST: THE EUROPEAN OMBUDSMAN CRITICIZES EFSA Listening to a British NGO’s report: the Food Safety Agency will have to set forth stricter rules “Efsa failed to make sure its experts from the academic world reveal any useful information”, and therefore “it should change its rules on conflict of interest and the instructions that are currently used to fill in the Conflict of Interest statements”. The European Ombudsman, the EU body that investigates reports of bad governance in the EU institutions, adds up to the long list of agencies that over the years have taken position against potentially inappropriate relationships between the agro-chemical corporations and the technicians of the European Food Safety agency. The decision taken against Efsa comes after a two-year procedure. In 2013, Genewatch, a British NGO that monitors gene technology 40

studies, reported to the European Ombudsman the case of a researcher from Efsa’s GMO workgroup, Michael Bonsall, who had not revealed that his university (the prestigious Oxford University) received funds for biotech research tests from a corporation that produces genetically-modified insects for agronomic applications, Oxytec (holder of a 12.5% share in the English university, which therefore could have earned a lot of money from the sale of those insects). The expert team had worked on GMOs from 2010 to 2013. In front of the Ombudsman, Efsa defended itself from the NGO’s charges by claiming that a university position is enough to hold a scientist exempted from conflict of interest.

UNIVERSITIES, NOT ALWAYS SO INDEPENDENT A position rejected by the European Ombudsman, the Irish Emily O’Reilly: “The fact that universities work in close contact with cor-

porations to do research and sell the results – she argued, in her decision – is happening more and more often. The traditional belief that a university is necessarily and automatically independent should be revised to reflect the new, deep relationships that exist between the academic world and the productive fabric”. A requirement accounted for by the need to make sure that Efsa’s selected experts are “free to provide advice without being unduly influenced by any party”, because, “in the eyes of the citizens, any suspect of any non-independence should be avoided”. A cold shower, which came once the European Agency had revised its policy on conflict of interest in July 2014 to make it even stricter. In the new rules, it had decided to equate the researchers’ consulting jobs to permanent posts. And it had decided to consider only those organisations with a public ownership of over 50% as “public organisations” to select scientists from, for the testing teams. [Em.Is.] ✱ valori international / YEAR 1 NO. 1 / JULY 2016

glyphosate & co. critical shareholder

the national health institutes of many countries. Why? Efsa and FDA decided to base their opinions only on those studies that adhered to the socalled “Good Laboratory Practices” (GLP). “Such method – explains Carlo Modonesi, professor of human ecology and coordinator of the pesticide workgroup at Isde, an association of doctors that work in support of the environment – has been created to test drugs and encompasses a number of internationally-accepted rules that should protect the quality, reliability and integrity of research, traceable data and reliable conclusions”. Assumedly, the best method to protect consumers from the risk of toxicity. But what applies to drugs and laboratories does not necessarily apply to substances that have been designed for use in the environment. It is like doing with food the same things that happened with the car emission tests, those that put Volkswagen into trouble: “This is a perfect example to understand the experts’ doubts – Modonesi points out – because laboratory conditions hardly ever happen in real life, especially for those substances that, if put in the environment, may be involuntarily taken in by humans”. In addition, even in the 2009 article, the 36 authors pointed out that the GPL approach “does not say anything specific about the quality of a research project, the technicians’ skills, the sensitivity of the instruments, or whether those methods are new or obsolete. The fact that the European and US regulatory agencies are prepared to accept imperfect, obsolete and industry-funded studies as evidence of safety, while regarding the results of a very high number of academic and governmental surveys as ungrounded, is a source of concern”. Seven years after that report, little or nothing has changed. From bisphenol to glyphosate, the problem of the testing method is still the same. And it could undermine the reliability of an authority that is becoming more and more crucial to public health and is called to pass five times as many opinions as it did just a few years ago (see GrAPH ). “The technical panels that review the applications – Modonesi admits – are always composed of high-profile scientists, whom I respect a lot. But the assessment procedures are inadequate. To save time and money, it has been decided that Efsa should assess and compare the results of studies conducted by other organisations instead of enabling them to conduct their own tests. But merely comparing different scientific literature data is not always enough”. Public health might be sacrificed on the altar of (shortterm) thrift. ✱ valori international / YEAR 1 NO. 1 / JULY 2016

A PRO-GLYPHOSATE DECISION: EXPERTS’ NAMES ARE TOP SECRET Only 14 of the 73 scientists who decided not to include the famous pesticide in the list of carcinogenic substances authorised Efsa to reveal their identities. No Germans in the group. Suspicions about connections with chemical giants are rekindled They tried to find out the names of the people who, on 12th November last year, decided that glyphosate is not carcinogenic for humans, but more often than not they met a curt rejection. The attempt was carried out by the Corporate Europe Observatory (Ceo), a Dutch research group that asked Efsa to have access to their files to find out the names of the 73 national experts who had taken part in the review of the world’s most commonly used pesticide. But at such request only 14 authors (less than 20%) let their names be publicly revealed. And, to the astonishment of the CEO team, those 14 people do not include any expert from Germany, the country that had drawn up the pro-glyphosate ruling. The EU pesticide agency that strictly cooperates with Efsa is the German BfR (Federal Risk Assessment Institute), which based on its own criteria gives employees of chemical companies free access to its assessment panels. “Its pesticide workgroup – CEO reveals – includes chemical giants, such as Bayer and Basf”. Despite BfR replying that “the assessments are made by BfR staff, while third-party experts can only act in an advisory capacity, but are not involved in any level of the re-assessment of the active agent glyphosate”, they might actually be the ones that hide behind the classified names in Efsa’s list. THE GREY AREAS OF BERLIN’S BFR Criticisms in Germany are rife, especially from environmentalist groups. On 28th September 2015, BUND (an association that supports the environment and the protection of nature) published a review of the glyphosate-assessment procedure, in which the BfR is openly accused of being very close to the chemical industry. Roland Solecki, director of the “Pesticide Safety” department at BfR, is accused of having “cooperated with industry representatives for years, and at least until 2015”, the report claims. In 2006, he co-authored a study for ILSI/HESI (an environmental and health science association, funded by big chemical and farming corporations) along with representatives of Basf, Bayer CropScience, Dow AgroSciences, DuPont Crop Protection, Monsanto and Syngenta. As chance would have it, the study was about “simplification of pesticide tests”. In addition, Solecki coordinated a number of workshops for the European Centre for Eco-Toxicology and Toxicology of Chemicals (ECETOC), an association that represents the interests of chemical and oil multinationals, and until 2015 he had been a member of the workgroup for ILSI/HESI’s “Risk21” project, “an industry-funded initiative where new risk-assessment procedures are developed for pesticides”. The workgroup includes researchers from Monsanto, Syngenta and Dow Chemical. “Those very companies – BUND’s report goes on – that submitted the glyphosate-assessment files to the BfR department directed by Roland Solecki”. Since 2015, Solecki has also been sitting in Efsa’s scientific committee but, in his conflict of interest statement, he seems to have forgotten to mentione his cooperation with ILSI/HESI. So we should not be surprised if, as stated by the German Green MP, Harald Ebner, “BfR keeps misinterpreting the principle of “precaution” that its reviews are supposed to be based on”. The only precaution they have taken, Ebner explains, seems to be “not publishing critical results about some substances”. [Em.Is. and M.M.] ✱ 41

critical shareholding



On 16 April, some residents of Olugboboro in the State of Bayelsa, Nigeria, have called for investigation into the March 26 explosion that killed three oil workers in an oil field operated by Nigeria Agip Oil Company (NAOC). Another blast occurred in the company's oil field at Azuzuama on July 9, 2015 leaving 14 people dead. Peter Irabor, Director-General,

National Oil Spills Detection and Response Agency, NOSDRA, attributed it to poor safety procedures at the oil field. Ebidimie Ugbe, spokesperson of Olugboboro Community Development Committee, said that the explosions that took 17 lives within eight months in the area cast doubts on the safety measures taken by the oil firm. “The actual cause of the frequent blasts should be properly investigated rather than some people insinuating that the fire was caused by explosives", said Iboro Biekiri, another resident of the area. Officials of NAOC and its parent company, Eni, have declined comments on the incidents.

VALORI POPUP News, charts aNd tweets seLected FrOM the web



Worldwide military expenditure on the rise again, up to nearly 1.7 billion USD in 2015, 1% up from 2014. This figure has been revealed by the International Peace Research institute of Stockholm (SiPRi) in its yearly update, which found therefore the very first overall rise since 2011. Such expenditure is growing in Asia and Oceania, in Central and Eastern Europe, and in some Middle Eastern countries; it is stabilising in the West, while it is decreasing in Africa, Latin America and in the Caribbean. The United States are still by far the world’s top spenders in 2015, despite a 2.4% reduction, which feels like drawing a 596 billion USD cheque.

THE BEST TWEETS #FinmeccanicaAGM votes on balance sheet. 99.96% for. 3 against. Ours… You have to start somewhere, after all.. Apr 28th 2016 FCRE @FcreFondazione

In 2014, #Koch-Funded AFP Sent Out Mailer with Incorrect Voting Info, Accused of Voter Suppression May 17th 2016 #BoycottKoch @GoodbyeKoch

BP: $3bn loss in 2015 Shell: biggest loss in 10 yrs Exxon: profits halve End of Big Oil? May 17th 2016 Carbon Tracker @CarbonBubble


valori international / YEAR 1 NO. 1 / JULY 2016



The colossus beats the hedge funds by Mauro Meggiolaro

A world famous David Bowie 1970s pose featuring one of the equally worldwide famous sneaker models Adidas has manufactured than 30 million pairs of.

nce upon a time there were two brothers, Rudolf and Adolf Dassler. Born at the turn of the century in Herzogenaurach, a 20 thousand inhabitants Bavarian town, the brothers began producing sports shoes in the early 1920s. After the war, the brothers parted ways: Rudolf founded Puma in 1948, while in 1949 Adolf invented the brand Adidas by attaching his own nickname Adi to the beginning of his family name. Adidas and Puma competed fiercely one with each other for years, yet they never moved from Herzogenaurach, a place far, far away from the glamorous international sporting world. Adidas won: today it employs more than 53 thousand workers with a 2014 turnover of € 14.5 billion and is the second largest manufacturer of sporting goods in the world after Nike. Puma instead ranks third but it is five times smaller than the rival “sibling”. Adidas has a broad shareholder basis, whereas Puma is firmly (74%) in the hands of François Pinault’s Kering holding company. This historical introduction is necessary because Adidas, even today, has a lot of “local” blood running in its way, a fact that the locusts, vultures, sharks and all the


valori international / YEAR 1 NO. 1 / JULY 2016

other fearsome predators of the international financial bestiary hate with all their guts. In September of 2014 a group of hedge funds, concerned about the near-flatline performance of the Adidas stocks, announced a harsh attack on the company. They wanted to buy shares on the market and then ask for the immediate resignation of CEO Herbert Hainer, the sale of the Reebok brand (acquired by Adidas in 2005) and of TaylorMade (golf accessories), both in big troubles. “We need a radical change,” the hedge funds thundered. Adidas at the time was faring very badly especially in the US, where the American competitor Under Armour had knocked it down from the second place. The US market is tough and unforgiving for the giants of the German economy, and it is not by chance that here even Volkswagen was hit really hard. It is a hectic, too fast market always looking for the next trend and model, a market which wreaks havoc with the thoughtful, conservative Germans and their phlegmatic pace. Upon the hedge funds’ announcement, Adidas’ stocks immediately rose by 4%. But it was just a blaze that the disappointing quarterly results put off quickly. Adidas, however, kept treading firmly on its path. It announced to be looking for a successor to Hainer (himself a true Bavarian, at Adidas’ helm for 15 years) but also said he would remain in charge until the end of his term, in 2017. It strengthened its hold on both Reebok and TaylorMade. Meanwhile, Adidas welcomed in other top notch investors like the American Mason Hawkins, the Belgian Albert Frère and the Egyptian billionaire Nassef Sawiris (the brother of Naguib, known in Italy for having acquired Wind). In the meantime in 2015 Adidas rose by more than 60%, the best among the thirty members of the German stock exchange index DAX; it took back the United States and keeps scoring record sales in China. The sports giant has gone full throttle on marketing, which is now worth 14% of turnover compared to the 11% average of the competitors. Adidas also invested heavily on typical North American sports such as hockey and American football. Since 2016 is the year of both the Olympics and the European Football Championships, this growth trend is expected to continue. “The new investors are not putting any pressure on us”, said chief financial officer of Adidas Robin Stalker at year end. And they know better not to. The giant has awakened, and it does not tolerate the peace of the village to be perturbed. ✱ 43




phototale 04/04

Not just ships and oceans. If investors keep saying farewell to fossil fuels, the repercussions could heavily disrupt the car market, still dominated by diesel and petrol engines. Seeing graveyards of unsold cars as a result of a lack of buyers is perhaps the dream of environmentalists and those who believe in clean sources applied to mobility. In fact, for years Europe has had dozens of veritable “car graveyards”: ideal sets for a horror film as well as suggestive proofs of the way Mother Earth can swallow up the carcasses of a human era gone by. Exposed to the 44

elements, humbled by humidity, ravaged by rust and buried under the brush, from Sweden to Switzerland, via Belgium, these graveyards are increasingly attracting the attention of tourists and photographers. The best-known one is probably that of Chatillon, 200 km south of Brussels. 500 abandoned cars, most of them dating to the 2nd World War: after the victory, the US troops left behind the cars they had been driving until then, since taking them home would have been too expensive. “Autofriedhof Franz Messerli” was born instead in Kaufdorf,

near Berne, Switzerland, in the Thirties, after the Great Depression. A full-time mechanic and a racing driver in his spare time, Messerli decided to stack up cars behind his garage. There are 795 specimens there, now (including a Rolls-Royce Silver Cloud). But not even Scandinavian forests are immune to car dumping grounds: in Bastnas, Sweden, nature has taken back over 1,000 cars that two brothers had heaped up over there to repair and resell them.

From left, clockwise: Châ tillon, Belgium; Bå stnä s, Sweden; Kaufdorf, Switzerland.

valori international / YEAR 1 NO. 1 / JULY 2016




by Elisabetta Tramonto

Bureaucracy, certain and stable laws, political stability: these are the factors that set the odds, cost and payout of betting on renewable energy. The DiaCore report draws a chart valori international / YEAR 1 NO. 1 / JULY 2016

billion USD. This is the total amount of investments in renewable energies in 2015. This record figure has been reported by a Bloomberg New Energy Finance report called Clean Energy Investment. The investments, the report explains, grew up to 6 times compared to 2004. Major increases were in China, USA, Africa, Latin America and India, whereas Europe suffered a decrease. China leads with 110.5 billion USD (+17%) for solar and photovoltaic energy as part of the country’s plan to reduce reliance on coal. USA too increased their investments by 8% up to 56 billion, while Europe decreased them by 18% compared to 2014, dropping down to 58.5 billion. Of these, 23.4 billion are from UK alone (+24%). Germany reduced investments by 42% to 10.6 billion, France reduced them by 53% dropping them to 2.9 billion. 45

new economy green energy


sions are bureaucracy, the economic scene and the certainty and stability of laws. These elements set the cost of any plant and the risk of investments. This is one of the findings of the report The im-

Which are the main factors that lead an investor to choose the country to invest their money for a “green” energy project in? The core factors influencing deci-



Costs the company is required to bear to collect capitals from the investors

Under 6.0% 6.0-6.9% 7.0-7.9% 8.0-8.9% 9.0-9.9% 10.0-10.9%



Over 11.0%

6.4-13% 9.3% 5-6.5%




6-6.7% 5-6%

8.7-10% 3.5-4.5% 8% 8.1% 6.5%


5.7% 11%

11.1% 12%



10% 12%









Wind Biomass and waste-to-energy Small hydroelectric power plants





300 250
















Marine 0.2


pact of risks in renewable energy investments and the role of smart policies, which contains the conclusions of the DiaCore project developed by Fraunhofer Istitut, Ecofys, Eclareon, Epu-Ntua, Lei and TU Wien on behalf of the European Commission. Bureaucracy and uncertainty raise the price a lot especially for renewable energy plants that require very high startup investments and whose economic sustainability depends heavily on incentives (and, therefore, on the laws in force). The fact that in a given country authorising or connecting a plant is easier or harder and the presence of solid, reliable policies and of a more stable general economic context is mirrored by investment costs whose relevance and effect differs greatly among the 28 EU countries. For a wind farm the WACC (Weighted Average Cost of Capital) ranges from 3.5% in Germany to 12% in Greece (see MAP), while the actual cost of capital ranges from 6% (Germany) to 15% (Estonia, Greece, Latvia, Lithuania, Romania and Slovenia). The cost of capital, the researchers explain, is often influenced by the investors’ risk perception. In such countries like Germany, where the renewable energies support policies are strongly bound to a law with long term goals the risk is lower, the cost of capital in turn is lower and the debt/equity ratio required to start a project is higher. In other countries, where changes in policies and laws (sometimes retroactive) are quite common (for example in Spain, Italy and


Q3 2009 Q3 2010 Q3 2011 Q3 2012 H1 2014 Solar - crystalline silicon Parabolic through with heat accumulation system Offshore wind energy Onshore wind energy valori international / YEAR 1 NO. 1 / JULY 2016

green energy new economy

Greece) risk increases and so do investment costs. Policies, therefore, play a crucial role in reducing investment risk: the virtuous, stable policies (as the report points out) allow saving up to 15% with the same power generation.


Highest risk perception


CARBON PRICING AND ELECTRIC CARS “OIL TYCOONS RISK LOSSES” Silvestrini (Kyoto Club): “The fossil fuel multinationals plans are all based on demand growth. But deposits and shares might still depreciate” Development of renewable energies? A solid trend. Gianni Silvestrini, President of Green Building Council Italy and scientific director of Kyoto Club and the magazine QualEnergia explains why to Valori. What drives the growth of investments in renewable energies? Mainly economic reasons, but “flexibility” is the key factor. On one hand, for an increasing number of countries renewable energies have become the cheaper solution. On the other, in such an uncertain context as the one we are living in, investing in sectors that take many years to yield a suitable result (for example nuclear energy) is risky. All operations on renewable energies, on the contrary, can be implemented quickly thus valori international / YEAR 1 NO. 1 / JULY 2016

making it possible to follow demand evolution and adapt to it in a more reactive way. Do environmental policies matter? Yes they do. In the medium-long term fossil investments will be increasingly more penalised by Carbon Pricing measures. The assumption is that introducing a carbon tax or of various systems of emissions trading will not affect technologies like wind energy and photovoltaic energy that therefore will gain competitive edge. There is also another key question: what will in 20-30 years the fossil fuel reserves be worth considering the risk of not being able to use them fully in the future due to increasingly stricter climate policies? It is better to dispose of them now, at low costs, than to have to face a drastically smaller demand tomorrow. Saudi Arabia seems to be moving in this direction, at least judging from the economic diversification measures in progress. The problem is that the oil and gas multinational companies, with some exceptions (Statoli and Totail) do not seem to be following suit...

Technical & management risk

Financing risk

Sudden policy change risk

Social acceptance risk

Grid acces risk

Market design & regulatory risk

Administrative risk

Lowest risk perception Policy design risk

It is no surprise to Italian readers that the report found Italy plagued by all kinds of problem: administrative, law system, Internet access, funding changes in laws and regulations, social acceptance and last but not least technical problems. Italy is a middle-ranker in Europe: WACC is 7.9%, cost of capital is 12.2% and debt/equity ratio is 8.5%. As regard the debt/equity ratio, Italy is indeed far from the “safest” countries: 65/35 compared to 80/20 of Germany and France, 75/25 of UK and 70/30 of Poland. ✱

What do we mean? We mean that plans by some fossil fuels giants like Exxon or Eni are based on fossil fuel demand increase. A very risky strategy that could have a backlash on deposits values and on shares values. The great success of the electric car might cause the overall oil demand to partially drop. The decrease, according to Bloomberg estimates, would be about 2 million barrels by 2023 but the decrease is expected to become faster. This phenomenon will endanger oil companies, as it is already happening in the coal sector today. Are electric cars going to become competitive? The outlook is a favourable one both thanks to government policies (as shown by the target of totally removing from the market internal combustion cars effective by 2025, proposed by the Netherlands and Norway), and for the growing quality and competitive edge of electric cars. Recently battery drops are decreasing sharply as it happened for the photovoltaic panels before. This sector also features new investors like Google, Tesla and Apple which have enough capital to become competitors for traditional carmakers. [M.C.] ✱ 47

new economy the greenpeace complaint

How to corrupt the scientists by Andrea Barolini

Posing as representatives of big companies, a group of UK activists have asked renowned scientists to write articles minimizing the climate change problem. The answer? Yes, certainly. Please see the price list


he news came in December, while the Cop21, the World Climate Conference in Paris was in progress. There, on the tables of the delegates from 195 world nations towered piles of scientific studies, analyses, research reports on climate change. But it is very likely that some of those documents were not worth the paper they were printed on. Some of these documents were not the result of meticulous work carried out by independent researchers with intellectual honesty,


Who is Will Happer, the Princeton University physicist contacted by Greenpeace activists posing as emissaries of fossil fuel multinationals and asked to write anti-environmentalist papers? He is a very famous scientist, who was awarded several prizes for his work and which openly rejects the theories that indicate the existence of a climate change on Earth. A specialist in atomic physics, optics and spectroscopy Happer began his academic career at Columbia University. He is at Princeton since 1980 but between 1991 and 1993 he also had an institutional role: he was the Director of the funding allocated to scientific research at the US Department of Energy. Basically, he was the one who ran the offices from which depended on the allocation of a gigantic total budget of about $ 3 billion. In February of 2009 he was called for a hearing in front of the Congress of the United States, during which he declared: “I think that the increase of CO2 is not a cause for alarm and it will be a positive factor for humanity.” He also became one of the promoters of a letter to the American Physical Society, inviting the association to change its official position on climate change. The proposal was supported by only a small minority of the scientific community and was rejected. In March of 2012 he signed an article in the Wall Street Journal eloquently entitled: “CO2, no need to panic.” In an interview with CNBC in July of 2015 he launched into a decidedly bold comparison: “The demonization of carbon dioxide is exactly like that of the Jews in Hitler’s time.” 48

but works ordered “à la carte” by company lobbyists and other stakeholders who wanted some credible “climate sceptic” argument to gain recognition and credit. A group of activists of the English division of Greenpeace dedicated themselves to the task of trying to corrupt scientists for some months. The militants posed as representatives of companies in the coal and oil sectors, asking some wellknown academics to draft scientific papers that supported the exploitation of fossil fuels. All of this for a handsome pay. It is not strange that even in academia there can be some corruption. However, some of the facts uncovered by the Greenpeace initiative are particularly disturbing. First, the ease with which one can “steer” a scientific paper, based on which, in turn, policy makers may make their choices. In addition to that, it is alarming that the professors Greenpeace contacted have been working for years in very prestigious universities such as the universities of Princeton and Pennsylvania. Finally, the ease with which teachers have offered their services and the respective fares is bewildering.

CORRUPTION CLOSE AT HAND Take for example William Happer, prominent climate sceptic scholar (see Box ). A simple Internet search for his name will return dozens of videos where he “destroys climate change hysteria”, as the title of one of these videos goes. One of the activists of Greenpeace contacted him, posing as a consultant who called from Beirut, Lebanon: “Our client – he said – is an oil company in the Middle East, worried about the possible impact valori international / YEAR 1 NO. 1 / JULY 2016

the greenpeace compliant new economy

of the World Climate Conference in Paris. We believe that, given your important work on this issue and considering your position of renown at Princeton, a short article written by you would allow us to greatly help the cause of the company we represent”. The proposal, in detail, was to emphasise the benefits of oil and gas. Happer accepted the offer with no hesitation and candidly stated his fee: $250 per hour. And that is not all: according to Greenpeace the professor also asked not to be paid directly, but to make a payment to the CO2 Coalition, a climate sceptic think tank that does not directly employ Happer but from which he can receive refunds for expenses. The fake consultant, however set a condition to the professor: to not reveal the source of funding, in order to ensure credibility to the paper: “If I just write the paper,” Happer told to the fake consultant, “I do not think there will be any problem, I will just say that the author has not received any consideration for writing it.” What’s more, during the conversation Happer also revealed candidly that the US coal giant Peabody too paid him to testify before an administrative body in Minnesota. A much similar story is the one of Frank Clemente, a sociologist and professor emeritus at Penn State University in Pennsylvania. Clemente was asked by self-appointed official of an Asian company to draft a report that would “counter the studies linking the use of coal to premature deaths, and in particular the figures of the World Health Organization, according to which 3.7 million people die each year because of pollution caused by the combustion of fossil fuels.” Again the scientist accepted and proposed a tariff: $275 per hour; 15 thousand for an 8-10 pages paper; 6 thousand for an article to be published on newspapers; up to 50 thousand euro for a longer work, which might require several weeks. Clemente, to prove he was the right man, cited a newspaper article referenced in March 2015 by


Greenpeace’s revelation on corruptible scientists has a precedent. In February 2007, the British newspaper The Guardian told how the American Enterprise Institute, a think tank linked to the Oil giant Exxon had offered ten thousand US dollars to any student willing to disagree about the theories that indicate human activities as the main factor accounting for the global average temperature increase. According to the English newspaper the proposals were sent by a man called Kenneth Green, who “admitted that he had also sent letters to renowned economists and political analysts”, who were asked to support “independent” reports “contrasting with the United Nations ones”.

about fifty US newspapers. He also mentioned a testimony rendered to a Tennessee public body to reassure the ‘official’ that “in none of these cases the sponsor was ever identified. I always qualify as an independent scientist.”

A TRIED-AND-TESTED SYSTEM All of this points out to a well-oiled system, a fact also confirmed by the strategies used to let money reach its destination. Happer was in fact asked to explain how he could guarantee that it would not be possible to trace back the “buyer” in any way. The professor then, contacted a colleague of his on behalf of the CO2 Coalition board. The colleague’s name is William O’Keefe, a former lobbyist for Exxon, which suggested the money should flow through the controversial Donors Trust Company, an organization that allows people to collect anonymous donations, dubbed “the dirty money automatic telling machine” said Greenpeace. “This investigation – said John Sauven, director of Greenpeace UK – reveals the existence of a network of professors willing to sell their services to influence the international climate debate, without leaving any trace. The question that we can’t help but ask ourselves is: over the years, how many scientific reports that questioned climate change were actually commissioned by oil, coal and gas companies?”. ✱

From the left: Frank Clemente, sociologist, asked a fee of 275 per hour and William Happer, climatologist, $250 per hour. valori international / YEAR 1 NO. 1 / JULY 2016


new economy negotiations in brussels

Circular economy All against Juncker by Emanuele Isonio and Nicoletta Labarile This reportage has been made in cooperation with the students of the European project BEJoUR (Becoming a journalist in Europe) of Rome’s La Sapienza University, of which quale Valori is a media partner.

The EU Parliament ready to ask for major changes in the draft directive that the President of the EU Commission wanted to have by the end of 2015. The goal? Reducing waste and increasing use of recycled materials


peaking of a head-on fight between the European Commission and the European Parliament might be going too far, but in the new few months the two institutions will definitely be fighting over circular economy. The official step is expected to be taken soon when the rapporteur for the new set of rules that are being reviewed by the Environment Committee of the European Parliament, the Italian Social Democrat Simona Bonafè, will pass her opinions about Claude Juncker’s original text. It will speak volumes about the position the Strasbourg assembly will want to take in autumn, when negotiations with the EU Commission will be resumed. Bonafè’s first statements at a hearing with the Environment and Pub-


Innovative manufacturing techniques, new design and consumption models, revision of the companies’ business strategies, new approaches to the problem of waste. These are the criteria the future actions of the business and political world will have to be built upon, in the attempt to achieve the most ambitious goals offered by circular economy. These suggestions are contained in the 42 pages of Circular economy in Europe - Developing the knowledge base”, a report drawn up by the European Environmental Agency (Eea), the first in a series of documents that the Copenhagenbased European Agency is planning to publish in the next few years to explain the potentials of circular transition, not only to European politicians and national decision-makers, but also to those who work in production, finance and society. The report explains the potential benefits that could be provided by the new model. The environmental advantage is undeniable: EEA 50

lic Works Committee of the Italian Senate are indicative of the direction her proposals to the other MEPs will go. In other words: we want more courage, more vision. “Too weak is the text” that president Juncker submitted to the European Parliament by the end of 2015. “The weak link – Bonafè explains to the members of the Italian senate – lies in the initiatives to prevent any pointless use of waste. It says too little about waste upstream of the chain, except a few general, non-binding measures. It does not lay down anything about food waste, and even the part about secondary raw materials is lacking”. Bonafè gave a foretaste of some of the corrections that the European Parliament will most likely want the EU Commission and the EU Council to

reckons that 48% of greenhouse gases may be removed by 2030 and 83% by mid-century. The same goes for the economy: “for manufacturing companies, the net cost-saving – the report explains – could range from EUR 340 to 630 billion per year in the EU alone, roughly 12-23% of current material input costs in these sectors. For certain consumer goods — food, beverages, textiles and packaging —, a global potential of USD 700 billion per year in material savings is estimated, that is, about 20% of their material input costs. Moreover, the net benefit per year for the companies of the 27 member states (Croatia, the latest arrival, has been left out of such calculations) that use circular economy-based measures will range between EUR 245 billion and EUR 604, an average of 3-8% of annual turnover. But, as for any transition, it is not all a bed of roses. EEA’s survey also lists a number of risks involved in the shift from linear to circular economy: tensions might for instance arise between the manufacturing industries and the loss of jobs in more traditional industries. [Ida Savoca e Giulia Vaccaro] valori international / YEAR 1 NO. 1 / JULY 2016



2014 proposal

Target recycle of urban waste

70% by 2030

Target recycle of packaging

80% by 2030

Approximate target reduction in food waste

30% less food in the dustbin in 2025 than in 2017

Targets for landfills

No more than 5% of household non-hazardous may be disposed of in a landfill by 2030 (approximate). Recyclable or compostable waste may never be disposed of in a landfill

Separate collection of organic fraction Prevention of planned obsolescence

Efficient use of resources (making the same products using less materials) Focus on reducing resources in the eco-design directive

Recycling standards

Compulsory everywhere by 2025 No mention

Approximately 30%, based on consumption of raw materials

There is, even if with no timeline

Not available

make: bringing the target recycling of urban solid waste back to 70% and that of packaging to 75% by 2030. “Compulsory collection of organic waste, of which Italy has some fine examples, will also be dealt with”. “Minimum requirements for producers’ extended responsibility” and “rewards for those who produce with green materials or encourage recycling” will also be planned. As to funding, Bonafé says her proposal “will include specific subsidies as part of Horizon 2020”.

SHY CLAUDE (THE LOBBIES’ FRIEND) If this is not like saying he is going to make a U-turn, well, it comes very close to it. Actually, the proposal submitted in December by the president of the EU Commission, Juncker, that had replaced the one drawn up by his predecessor Barroso, had sounded too shy to many parties, not just to environmentalists but even to the most innovative industries. Comparing the two texts is actually a ruthless exercise (see TABLE ): the target recycling of urban waste has dropped from Barroso’s 70% to 65%, with five-year extensions for some Central European and Baltic countries (Estonia, Greece, Croatia, Latvia, Malta, Romania and Slovakia). The targets for waste disposal in landfills have been downsized: Juncker’s proposal let 10% household waste be dumped there, including recyclable and compostable waste (left out by Barroso who howvalori international / YEAR 1 NO. 1 / JULY 2016

2015 proposal

65% by 2030

Estonia, Greece, Croatia, Latvia, Malta, Romania and Slovakia may ask for a 5-year extension. 75% by 2030

No targets, just a proposal for harmonising the calculation methods and a reference to the UN Sustainable Development Goals

▼ ▼ ▼

No more than 10% of household non-hazardous may be disposed of in a landfill by 2030, including recyclable or compostable waste (binding requirement)


To be organised everywhere by 2025 if technically, economically and environmentally viable

No mention of this target, which the package had been built on

A set of independent tests planned as from 2018 (as part of a non-binding set of measures)

There is, with an approximate timeline

Development of quality standards for secondary raw materials, but as part of a non-binding set of measures

= =

ever had set forth a lower limit, 5%). And the requirement for separate collection of organic waste by 2025 became conditional on “evidence that it was technically and economically sustainable”. Many parties construed such relaxation as bowing to the incinerators’ lobbies, which try to have the part of energy that comes from the combustion of the organic fraction of waste rated as “renewable” and that have always challenged the spreading of door-todoor collection of organic waste, as it would subtract materials from combustion and allocate them to the production of bio-methane and compost. Then, Juncker’s proposals did not contain any specific measure on the removal of toxic substances from products and any rule on an efficient use of resources, while Barroso’s package established a 30% reduction in the use of raw materials in manufacturing. The decision to write off the target reduction of food waste (apart from a general “proposal for harmonising the calculation methods”) is also very controversial, as the 2014’s proposal tried to reduce it by 30% of the 2017’s rate by 2025. The only things that buck the trend are some initiatives against planned obsolescence (products that are programmed by manufacturers to break down after a given time, so people have to replace them) and in support of eco-design. Clearly, too little to powerfully boost the transition to a lower-impact economic and industrial lifestyle. ✱ 51

tax values

A 15 steps recipe worthy of a Nobel prize

More taxes less inequality by Alessandro Santoro

INEQUALITY What Can Be Done? Anthony B. Atkinson May 2015

he increase of inequality is a phenomenon that is accompanying this stage of economic development; inequality rises both within (some of) the developed Western countries and between different countries and even continents. Because of this very often people ask themselves what kind of policies can be adopted to counter these trends. The issue has been raised and dealt with by Thomas Piketty in his now famous book “Capital in the Twenty-First Century” and has been further researched and discussed over more than a decade by a large group of economists, including Piketty, through scientific papers and researches. Among these it is worth quoting Emmanuel Saez (Berkeley University), Peter Diamond (MIT) and, above all, Anthony Atkinson (Oxford University). A common trait of these economists, which sets them apart from others which have also continued to address the issue of inequality in earlier times is that they are internationally renowned researchers and authors of several publications in scientific journals and hence cannot certainly be stigmatised as activists or militants of an ideology or minority current of thought. Anthony Atkinson is the author of one of the most important inequality indexes and he developed the fundamental theorem on indirect taxation together with Joseph Stiglitz. According to many, Atkinson should already have been awarded the Nobel Prize for Economics but that did not happen, rumour has it, only because the Royal Swedish Academy



of Sciences has ultra-conservative views on economics. Atkinson’s last published work is called “Inequality. What can be done?” and it is a true and proper handbook of actions and proposals to reduce inequality. In his work Atkinson lists 15 of them but here we will focus only on the four most purely fiscal ones. The first is return to a more progressive rate structure for the personal income tax, raising the top rate to 65 per cent for UK (currently it is 45%) accompanied by a broadening of the tax base. This proposal is based on the refutation of the opposite idea; the dominant one in the nineties, that is that excessively high rates would discourage the most productive individuals from working more and declaring their income, up to the paradox, expressed by the famous Laffer curve that inspired Reaganomics, that taxation reduces the tax revenue. According to Atkinson, these disincentive effects are uncertain and also they are not powerful enough to prevent an increase in rates whose effect, instead, is increasing tax revenues. Atkinson also notes that the increase in maximum rate serves to expand spaces to increase the rates even on medium-high incomes, possibly increasing the number of tax brackets. Crucial to the redistributive impact of this measure is the widening of the tax base, which is the reduction of all the tax savings (the so-called tax expenditures) the wealthiest individuals benefit from. The second proposal by Atkinson concerns the introduction for the lowest income classes, including the first tax bracket, of an Earned Income Discount, a measure that is strictly connected to the one mentioned above as it would make it possible to “sterilise”, at least for the first part of the would allow to sterilize, for the first part of the job revenues an income tax rate increase, further increasing the progressive nature of the system. The third and fourth proposals concern property. According to Atkinson, inheritance and donations should be taxed under a progressive lifetime capital receipts tax. To be more precise, Atkinson envisages that these revenues are added together and remain exempt from taxes until the total amount remains below a set threshold (for example 100 thousand pounds, i.e. a little less than 130 thousand euro) and then are taxed when exceeding such a threshold, and only for the difference from the threshold. Finally, Atkinson proposes a proportional, or progressive, property tax based on up-to-date property assessments. ✱ valori international / YEAR 1 NO. 1 / JULY 2016

new economy



Raising funds from private people to build a machine that purifies water through solar energy. This is what has been made by Watly, a company that launched a crowd-funding campaign on the web platform Indiegogo to make private people too support the development of a machine that can purify up to 500 litres of water a day through solar energy. A project that received the Horizon 2020 award from the European Union and about 2 million euros’ funds that have been used to build the preindustrial Watly 2.0, tested in the village of Abenta, Ghana. Watly 3 (40 metres long by 15 tons weight) can prevent the emission of one thousand tons of greenhouse gas, i.e. the use of 2,500 barrels of oil, in 15 years.

VALORI POPUP News, charts aNd tweets seLected FrOM the web


Eating 50% less meat would cut greenhouse gas down by 25-40%

For every 100 calories fed to livestock, 17/30 calories come back in the form of meat and milk, and if 50% less meat, milk and eggs were eaten, 25-40% less greenhouse gases would be emitted. These are the key figures revealed by a new debate organised by proVersi, the online platform that hosts discussions and debates, with Professor Giuseppe Pulina, professor of Special Zoo-technics and CEO of aGriS Sardegna, and Dr Annamaria Pisapia, director of CiWF italia Onlus.

SHARE PRICE General Motors April, 2011: $32 April, 2016: $32 Tesla Motors April, 2011: $27 April, 2016: $250

Apr 22th 2016 The Int'l Spectator @intlspectator

#plastica #usaegetta: bans on plastic bags rising all over the world May 14th 2016 Giuseppe Lanzi @lanzigiuseppe

#Landdegradation costs the world up to $10.6tn a year

May 15th 2016 Robert Costanza @Robert_Costanza

UK farmers to cut antibiotic use to combat drug resistance

May 19th 2016 Guardian Environment @guardianeco valori international / YEAR 1 NO. 1 / JULY 2016



Stock markets’ illusory essence


from the heart of the City Luca Martino

ugust 1920 and, in the Boston of Sacco and Vanzetti, the epic of Carlo Ponzi came to an end: migrated from Lugo di Romagna “with 2 bucks in the pockets and a million bucks in hope”, he was such an hardened crook and cheater that when arrested the first time for some fake cheques he told his mother he got a prison officer job. At some point, he thought to have set up the perfect sting: to exchange at the US Post Offices international reply coupons that were bought for much less in the Europe afflicted by the post-war soaring inflation. Promising a beyond belief 50% interest rate every 45 days, he persuaded half of the city to give him some 20 million dollars of that time. Quite a clever arbitrage and an essentially legal business, however his eagerness made the all system unsustainable in short time: 6 thousand times the number of reply coupons more than those actually available across all the States would have been in circulation to fulfil all promises for everyone. Nonetheless, Ponzi convinced clients until the very last day and even the long imprisonment didn’t get to any afterthoughts: indeed, while free on bail, he conceived similar scams, like when he started



selling almost under-watered land tracts in Florida offering a 2 months 200% return. Only just before his death, in Brazil, he admitted the cheat but defended his business calling it “the best show ever staged in the Americas since the landing of the Pilgrims!”. In fact, Mr Ponzi incarnated himself the American dream, for many he was the model of a constant growing society: not workable in reality, as long as others queued to give faith to the same dream, the sting could and had to work. A century later, it is not too different what still happens in our modern equity markets. At stock exchanges, firms attract investors through either long term growth prospects enabling the payout of shareholder dividends (focus of the defensive investors), or, over the shorter term, the opportunity of quick capital gains and profits (true goal of speculators). But, why and for what reasons should small savers participate in a market where bigger investors and smart opportunists (leveraging upon privileged tools such as stock buy-backs, dark pool trading, and shares short-selling, not to mention all kind of derivatives) can easily manipulate the share prices of firms they have sole control of? It seems like a gigantic Ponzi scheme where who, for example, bought Yahoo shares a year ago at 50 dollars (and now may hold them for 30) did so hoping in a rapid rise to 60 and not because of a fair value estimate of 50 or expectations for dividends that the Santa Clara firm has never paid on its ordinary shares. And a fifth of all listed corporations, accordingly to the S&P 500 latest data, do not have a dividend policy, while the rest pay an average return of just above 2%. On the other hand, risks are huge: because of the enormous liquidity recently injected into the system by central banks, accountable also for the zeroing of all saving instruments alternative to investing in stock markets, the constantly growing global debt, a third of which stands at the expense of public firms, now exceeds global output by 4 times (Chinese debt has quadrupled since 2007!). Let’s think twice then before investing in shares: they may tell us “give us your savings, otherwise inflation will erode its purchasing power”; what they won’t tell us is that we will be putting our own actual money at risk. However, should we really not resist the gamble, only is to hope that others will follow us with the same illusion, like in Mr Charles Ponzi’s perfect sting. ✱ valori international / YEAR 1 NO. 1 / JULY 2016




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Valori International n° 1 2016