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Investors urge Ferrovial to take the environmental lane in Polish road conflict

GES Newsletter
June 1, 2007

A controversial road project in Poland has taken the expressway to the European Court of Justice, as well as to the agenda of several international institutional investors. Spanish construction company Grupo Ferrovial is associated to endangering distinct wildlife when building a by-pass through an EU Special Protection Area (SPA). The investors will now try to influence the company based on advice from GES Investment Services, who believes the prospects of successful engagement are good.


"This is an extremely important case for investors to engage in, since it concerns one of the last remaining virgin lands in Europe. The planned routing can be associated to violations of EU environmental laws as well as the UN Convention on Biological Diversity. Such violations of international norms pose a considerable reputational and financial risk to the company and its investors", says Magnus Furugård, President and Managing Director of GES Investment Services, which provides analyses and consultation for institutional clients with an estimated amount of assets of more than €220 billion.

Grupo Ferrovial and its Polish subsidiary Budimex are two of four new-comers to GES' latest list of companies to engage with or exclude, according to the analysis model GES Global Ethical Standard which is based on international norms for environment, human rights and business ethics.

Budimex has been contracted by the Polish government to build part of the Via Baltica expressway, an EU instigated road project running the length of Poland to improve transport connections between the Baltic countries and the rest of Europe. During early 2007, the European Commission repeatedly sent warning letters to the government regarding its choice of routing where a controversial part will by-pass the Rospuda river valley, which has been assigned by the EU as a SPA protected by two pieces of legislation – the Birds Directive and the Habitats Directive.

This area contains unspoilt habitats within one of the largest and best maintained primeval forests in Central Europe. A number of extremely rare species of animals and plants are endangered by the road project, e.g. lynx, wolf and fen orchid. Reportedly, an independent Strategic Environmental Assessment states there are alternative routings that would not harm protected areas.

As no satisfactory response was received from the government within due time, the commission publicly announced in March that it took Poland to the European Court of Justice.

"On the positive side, the prospects are good for making Grupo Ferrovial seriously address the environmental risks associated to this project. The company is committed to the UN Global Compact principles and has a fairly comprehensive environmental management system in place. The remaining challenge is to integrate it fully into every subsidiary and project. In addition, we believe our Polish subsidiary GES Research Centre will be of invaluable assistance in our engagement with Budimex", says Helene Regnell, Research Director of GES Investment Services.