"Around 50% of all funds under management by Australian asset managers fall under a UN PRI commitment to integrate sustainability considerations into their analyses. AGL’s preparations for a carbon-constrained future are of particular interest to analysts," notes its report.

AGL has achieved its goal for emissions intensity of new generation capacity to be lower than 0.7 tonnes of CO2 per MWh, including commissioning the Qenos cogeneration plant and the Macarthur Wind Farm this year.

But on June 29 last year it bought Loy Yang A Power Station in Victoria. It's a good illustration of what happens when business realities clash with environmental designs. Loy Yang A is a low cost generator and AGL picked it up for a bargain price, but in one step it blew out the emissions intensity of its generation fleet from around 0.3 tCO2e/MWh to more than one tCO2e/MWh – above the market average.

Among plans for the year ahead is developing a cost curve of material energy efficiency and greenhouse gas abatement opportunities at existing operational assets. Perhaps Loy Yang A will be top of the list. It also confirmed its intention to invest in 155 MW of renewable energy projects in 2013-14, adding to its 1,740 MW currently.

The report shows the carbon price had a greater impact in direct costs than in carbon liabilities. The tax added $1 billion to the cost of its electricity and gas inputs over the year, while its carbon exposure totaled 25.3 million tCO2e, or $582 million at $23 per tonne. It acquitted its 75% interim liability in June by surrendered 19.2 million eligible carbon units, including almost 650,000 Australian Carbon Credit Units registered under the Carbon Farming Initiative.

Investors may also be interested that AGL's vulnerability assessments of critical infrastructure are based on average temperature increases of between 0.6 and 1.5 degrees C by 2030 and the expectation of drier conditions marred by intense rainfall events in many areas.

COAL SEAM GAS WATER

AGL aims "to be recognised as a prudent and responsible user of water that seeks to minimise the adverse impact of its operations on local water resources". Coal seam gas is its achilles heel on that front, as it is for the rest of the CSG industry.

Sydney Morning Herald business columnist Micahel West has savaged AGL in recent weeks for the potential salt loads from its planned Gloucester CSG project.

However, the stakeholder survey for its materiality review apparently threw up nothing specifically about CSG, though Compliance was the fourth priority and Reputation fifth. The report does acknowledge CSG later on.

"AGL recognises that many of its stakeholders are concerned about the management of water, particularly whether CSG activities result in reduced water supplies and degradation of water quality. In light of this, during FY2013 AGL continued to expand water monitoring networks across the Gloucester and Hunter CSG exploration areas in New South Wales and the production gas field at Camden," it said.

It says the salinity of produced water is generally less than one-third of that of seawater, though West's sources question the dilution with river water.

PROCUREMENT

Last year AGL created a centralised, company-wide procurement function to ensure consistency in AGL’s approach to sourcing, realise synergies, promote efficiency and generate more financial value from its $4.1 billion annual spend.

In March this year a Sustainable Supply Chain Manager role was created within the procurement team to ensure sustainability values were integral to procurement and that activities aligned with the company’s overall sustainability principles and targets.