Australian research highlights

Citi, Water Risks & Challenges: The Growing Impact of Water Scarcity on Mining, 8 May 2012

Elaine Prior, Craig Sainsbury

“Australia, parts of South America, the western US, and parts of China may face increasing scarcity to 2025. Miners must be increasingly “self-reliant” when it comes to water. Project risks may arise if water issues are not appropriately addressed – e.g. regulatory constraints, shortages that impact on production, conflict with local communities that leads to disruptions or even closure. We suspect miners in regions of scarcity will increasingly plan for solutions like desalination from early stages of project development, to avoid conflict and potential delays.”

Citi, Insurance & Extreme Events: Anomaly or Climate Change Trend?, 20 December 2012

Elaine Prior with input from the Insurance Team

“There appears to have been a recent increase in “extreme weather events” around the world, including the October 2012 “Superstorm Sandy” on the US east coast. This may be a “trend” associated with climate change, rather than a temporary anomaly. In this note, we look at the implications for ASX-listed insurance companies if extreme events become more frequent and/or more intense. We also look at the implications for insurers if in fact we are seeing a temporary anomaly in the number of extreme events, at least in the short term, or if the longer term climate change trend is gradual. Whichever of these scenarios eventuates, there will inevitably be volatility around the trend.”


Credit Suisse, $21.4bn in ESG Concerns, 2 July 2012

Sandra Mcullagh
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“We have incorporated an explicit valuation of Environment, Social and Governance issues across our Australian stock coverage. Analysts have identified the percentage downside that is included in their 12-month forward target price for each stock. Analysts have made explicit what was once implicit, giving us insight into their value and the potential upside should these ESG concerns reduce. Analysts’ concerns about ESG issues total $21.4bn downside to the current market cap for the ~200 stocks in our Australian coverage. The sectors that dominate in dollar terms are the Diversified Resources, Media and Retail. In percentage terms, the most impacted sectors are Building Materials, Media, Coal and Retail.”


Macquarie Securities, Employee Engagement Survey, 25 March 2013

Deana Mitchell, Joel Weiss, Aimee Kaye
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Linking employee engagement to company value and performance is gaining increasing traction in the Australian market, with investors considering a broad range of metrics that influence performance. Investors and corporates alike are increasingly drawing on a variety of tools to assess and value human capital. As a standard practice, tangible capital is an asset and reported in the financial statements, whereas human capital is mostly ignored by accountants.

Examples of how employee relations can impact earnings include industrial disputes, which cost Quantas $194m in FY12 and 1-4% of revenue for Asciano, BHP and Sigma. A more costly industrial dispute was avoided by Bluescope after they sought a Federal Court injunction preventing the “dumping‟ of steel. In terms of productivity, Westpac’s higher labour productivity compared to peers equates to additional $1b (6%) of revenue¹. If ANZ Bank improved productivity, this would create an additional $1.5b (8%) of revenue and National Australia Bank’s recent deterioration in productivity equates to forgone revenue of $1.3b (7%) per annum.”