A major impact on humans and nature

Whenever people undertake large-scale interventions within nature to satisfy their energy needs, this often has major consequences for nature itself. Frequently, this also applies to dams, as sources of renewable energy. Settlements and cultural heritage are flooded, ecosystems are destroyed and, by extension, so too are the livelihoods of many residents. Furthermore, the new control gained over the water also brings the potential of conflict with downstream states.

Three particularly controversial dam projects in recent time were Belo Monte in Brazil, Ilisu in Turkey and Xayaburi in Laos. All were implemented without sufficient consultation with residents and in the face of major resistance. Andritz AG, headquartered in Graz, Austria, was the main supplier of the turbines and generators for all of these hydropower projects – in part after all the other international partners had stepped down due to public pressure. As a supplier, Andritz can only have a limited impact on the construction project itself, but its involvement in these incidents has painted the company in a poor light.

Is Andritz aware of the ESG risks?

The members of SVVK take a long-term approach to their investments. In turn, it is important to them that companies comprehensively factor in ESG risks to safeguard their long-term success. As a result, the SVVK and its engagement partner Sustainalytics sought out direct dialogue with Andritz. After a delayed start, a constructive dialogue developed over the course of two years. The crucial question: how is Andritz currently dealing with projects that may well be attractive but also encompass major sustainability risks? Would the company recognise these risks at an early stage in the future?

A constructive dialogue

Over the course of the discussions, it became clear that certain elements were being practiced but were not formally embedded at the company or being communicated externally. Andritz confirmed that a review of environmental and social impact was a mandatory component of all its major projects and displayed the criteria for this.

The fact that the company is paying more heed to the topic as a whole is also reflected in its more in-depth reporting. In 2020, Andritz stated that ‘compliance with legal and ethical norms’ was its most important ESG topic. An ESG strategy was announced in 2021, with the goal of better integrating ESG risks into the standard systems.

Secondly, Andritz confirmed to us that it had collaborated on the new Hydropower Sustainability Assessment Protocol (HSAP), which was jointly developed by the hydropower industry, environmental associations and developing countries. The protocol serves as a measuring tool and, in particular, is hoped to make national authorities and entities commissioning dam projects aware of compliance with environmental and social standards. The project is also receiving financial backing from Switzerland.

A greater awareness of ESG risks

Finally, a glance at the analyses performed by various research partners shows that Andritz’ controversy level has greatly improved. Since its peak in March 2011, the risk of further incidents has successively dropped since July 2020 and is rated by all providers as low to moderate at present.

All these factors indicate an improved awareness of ESG risks, which enabled the SVVK to conclude the dialogue. SVVK would like to encourage Andritz to report even more transparently on its criteria and processes going forward, and to embed an awareness of ESG risks within its central monitoring system and upper management.