Good governance companies - taking a sector view
For companies that do not naturally fit within one of our six green investment themes, we look at how proactively they manage key environmental and social issues on a sector basis. Before considering a company for investment in our green funds, we evaluate it in terms of its environmental and social policies and activities. We also assess it in the context of the challenges its sector faces from issues such as climate change. Below we highlight how companies in the telecommunications and insurance sectors are responding.

 Telecommunications
 Insurance

Smart communications
As the way we communicate becomes quicker, easier and cheaper, we often forget how much energy is demanded to power the devices we use to keep in touch. The global Information and Communication Technology (ICT) industry currently accounts for about 2% of global emissions of CO2, according to estimates by Gartner, a leading information technology research and advisory company. Wider mobile phone and internet use combined with rapid uptake of broadband are set to increase the sector's demand for energy almost three fold by 2020* under a business-as-usual scenario.

While the direct contribution this sector makes to green-house gas emissions is significant, ICT services also have the potential to deliver climate change solutions by replacing high-carbon activities with alternatives wherever possible. A recent study by the Global eSustainability Initiative highlights the opportunities from extensive adoption of smart ICT technologies, such as video conferencing, energy monitoring and logistics management tools. These could yield emissions savings five times greater than the sector's own carbon footprint, by 2020.

We believe companies that successfully manage the energy performance of their own operations, while also providing innovative products and services, will find themselves well positioned to deal with the transition to a lower carbon economy.

BT has been developing a range of innovative solutions. For example, in order to reduce the energy consumption associated with broadband use, the company is driving through new standards that will enable 'always on' broadband to be replaced with 'always available' broadband. This has consequent energy and cost savings for the customer.

Vodafone is working with their suppliers to improve the energy efficiency of network equipment. The average energy efficiency of new network equipment has improved by more than 35% since 2005/06**. In remote locations not served by an electricity grid, the company is testing the viability of replacing or supplementing diesel generators with on-site renewable energy systems. Vodafone offers a range of services to customers that improve efficiency, including remote monitoring of utility meters and in-car technology to help drivers optimise their route by providing traffic information. The company also supports a range of providers who offer 'Machine to Machine' services, which enable one machine to remotely communicate with another, improving energy management.

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A climate for better insurance
The insurance sector is also looking at developing products to meet customer interest in climate change and energy saving.

Aviva has identified climate change as being of key importance to its business and has signed up to the sector's Climate Wise Principles. Under these principles Aviva is committed to developing innovative new products. In line with this commitment it launched 'pay as you drive' car insurance in the UK. In-car GPS devices track exact distances travelled, the time of day and the type of road used. This product provides an average reduction of 30% in premiums***.The product will also be launched in France.

Royal & Sun Alliance is also a signatory to the Climate Wise Principles and has plans to help tackle the energy performance of existing UK housing stock. The company plans to offer financial incentives to home insurance customers who reduce their energy usage. The company has released a product which gives insurance premium discounts for drivers of hybrid and alternative fuelled cars in the UK and Ireland. Royal & Sun Alliance is also looking at solutions for customers dealing with increased risk of extreme weather events related to climate change. The company has developed flood management technology systems. These provide early warning signals to customers and enable shorter response rate times to deal with those affected customers.

*Global eSustainability Initiative Report, Smart 2020, pg 6
**www.vodafone.com
***www.aviva.com

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Note: Parallel research into financial, environmental and social performance of companies is an ongoing process. Companies mentioned are not necessarily held by our funds and our assessment of their environmental and social performance may also change.