warning
Important - persons using the names AMP Capital Limited and AMP Capital Investors Limited Company are purporting to be a part of the AMP Capital or AMP group and are making unsolicited contact with members of the general public in Europe and the UK. AMP Capital Limited and AMP Capital Investors Limited Company are not part of the AMP Capital or AMP groups.

AMP Capital has been made aware that persons using the names AMP Capital Limited and AMP Capital Investors Limited Company are purporting to be a part of the AMP Capital or AMP group and are making unsolicited contact with members of the general public in Europe and the UK. AMP Capital Limited and AMP Capital Investors Limited Company are not part of the AMP Capital or AMP groups. Please ensure that you carefully establish the identity of any person or entity purporting to act for AMP Capital or AMP. 

 

Contact us: internationalclientservices@ampcapital.com

Responsible Investment

ESG Wrap Nov/Dec 17

By AMP Capital

Key points

check_circle

Investment management: New investment tool shows growing focus on managing climate change risks

check_circle

Utilities: Cyber security threat: Is Australia's power grid safe from hackers?

check_circle

Gambling: Landmark report says key 'addictive' pokie feature should be banned

check_circle

Energy: Bitcoin’s Energy Consumption Index

Investment management: New investment tool shows growing focus on managing climate change risks 

  • Deutsche Bank has developed a tool to forecast where its investments across the globe may be impacted by natural disasters brought on by climate change.
  • Factors such as sea level rise, droughts, flooding and cyclones pose an immediate and measurable threat to investment portfolios.
  • The modelling also estimates that if carbon emissions aren't reduced throughout this century, per capita GDP will decrease by 23 per cent from what it otherwise would be.
  • Early research has pinpointed Asia as highly vulnerable, stating that 80 per cent of people occupying the most 'at risk' climate zones globally reside in Asia, with 145 million people in China alone living on land threatened by rising seas.

So What?

  • The assessment of physical climate change risk is one of the more challenging aspects to assess, especially for global asset managers. Deutsche Bank’s work will put pressure on other asset managers and asset owners to do similar analysis.
  • This analysis may also encourage more disclosure from companies on supply chain risks tied to climate change, in line with the Financial Stability Board’s Task Force on
  • Climate-related Financial Disclosure (TCFD) guidelines released earlier this year.
  • AMP Capital recently released the carbon footprint of over 50 of its funds which is available on our website.

Source: Sydney Morning Herald, November 2017

Utilities: Cyber security threat: Is Australia's power grid safe from hackers?

  • More than 80 per cent of power and utility companies worldwide responding to EY's Risk Pulse Survey considered business interruption from cyber attacks as their top concern.
  • Over the last few years, we have seen distributed denial-of-service (DDoS) on critical infrastructure globally, including energy systems in the Ukraine, Ireland and Saudi Arabia and on nuclear plants in Iran and the US.
  • In 2016/17, the Australian Cyber Security Centre reported that 7283 cyber security incidents affected major Australian businesses, as well as 734 cyber incidents affecting private sector systems of national interest and critical infrastructure providers.

So What?

  • It is positive to see that within Australia, many companies have taken steps to secure their business against cyber threats.
  • AGL has created a cyber threat intelligence and incident manager role to recognise and protect against these kinds of intrusions.
  • Origin regularly commissions independent penetration tests and carries out other security reviews to test its security and improve controls.
  • The real damage of any attack will be in the changed perception of the company, which can have a flow-on effect to the company’s stock market valuation and profits.
  • The question for utilities is not only testing e.g. penetration tests but also having contingency plans on how to respond. The response will be significantly different depending on whether the attack is on customer data, trading room data or systems and engineering controls of operations.
  • Another key challenge for companies is that the cyber security skill set of senior management and the Board is not at the level required. To give us as investors confidence, we need to see that companies are either hiring people with these skills or equipping management and board members with the tools to mitigate cyber risk.

Source: Sydney Morning Herald, 11 November 2017

Gambling: Landmark report says key 'addictive' pokie feature should be banned  

  • A landmark report into the harm caused by gambling in NSW has recommended banning a controversial feature of poker machines known as "losses disguised as wins", blamed by experts for fuelling addiction. Losses disguised as wins refers to a poker machine feature where music and celebratory graphics are played when a player wins an amount, despite it being less than what was gambled. 
  • Meanwhile, in a Federal Court case, Crown and Aristocrat are defending allegations that a poker machine called Dolphin Treasure is misleading, deceptive and in breach of consumer law. This is in addition to recent accusations that Crown have tampered with their pokies.
  • Also, earlier this week, the state Labor Opposition in Tasmania announced it would remove poker machines from pubs and clubs if Labor wins next year’s state election in that state. This follows the release of a report from the Australia Institute which reveals Australia is home to 76 per cent of the world's poker machines in pubs, clubs and non-casino venues.

So What?

  • It is understood that the "losses disguised as wins" feature – banned in Queensland and Tasmania - is common to most poker machines elsewhere in Australia and so any finding on this will have a significant impact on gambling revenue in Australia and also on poker machine makers.
  • As outlined in AMP Capital’s “Gambling Position Paper”, there have been numerous studies which have found that the sector’s profitability is obtained by a relatively small percentage of all gamblers but the social impact is much more significant.

Source: Sydney Morning Herald, 13 December 2017

Energy: Bitcoin’s Energy Consumption Index

  • According to Digiconomist’s Bitcoin Energy Consumption Index, the energy consumption of Bitcoin mining continues to rise and currently takes 27 times more energy than the entire global Visa network.
  • Bitcoin mining consumes more energy than a number of countries as you can see from the chart below.
      
  • Mining took off recently in Venezuela, where bitcoins make an attractive alternative to the local currency, largely worthless now because of hyperinflation. The drain from mining caused a backlash amid the country’s severe electricity shortages.

So What?

  • So far the world’s power grids have been able to manage with the energy leeching Bitcoin due to all the energy efficiency gains of mining hardware over the last decade.
  • However, these efficiency gains are unlikely to continue at the same pace as the adoption of Bitcoin and other cryptocurrencies.
  • The cryptocurrency world is currently largely unregulated but we will likely see this change. Governments around the world may need to intervene to ensure what happened in
  • Venezuela doesn’t happen elsewhere. Bitcoin may also be directly affected by the likely increasing cost of carbon. As a result, cryptocurrencies may have a higher associated cost than many people currently assign to the digital currency.

Source: Digiconomist, 2017

  • ESG Wrap
  • Environmental Social Governance (ESG)
  • Opinion
  • Responsible Investment

Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

Head

Title

Cookies & Tracking on our website.  We use basic cookies to help remember selections you make on the website and to make the site work. We also use non-essential cookies, website tracking as well as analytics - so we can amongst other things, show which of our products and services may be relevant for you, and tailor marketing (if you have agreed to this). More details about our use of cookies and website analytics can be found here
You can turn off cookie collection and/or website tracking by updating your cookies & tracking preferences in your browser settings.