9. csr ukraine 31 may 2011_ethix sri advisors

Value of corporate responsibility: The investor perspective

CSR-Ukraine Event

Ulrika Hasselgren, Ethix SRI Advisors

Kyiv 31 May 2011

CSR-Ukraine Event 31 May 2011

Ethix SRI Advisors

• Trusted advisor to institutional investors in the area of sustainable and responsible investment (SRI)

• Help investors with policy development, company research and portfolio monitoring, engagement and company dialogue, and communication

• Pioneers with norm-based screening (2000) and SRI concept for emerging markets (2005). Established research methodologies and SRI tools

• International team from 10 countries, speaking more than 15 languages. Documented competence within human rights, environment, labour standards, corruption. Documented expertise of global arms industry

• Based in Stockholm, Helsinki and London, Ethix serves more than 120 investors in Belgium, Denmark, Finland, France, Luxembourg, the Netherlands, Norway, Sweden and the UK with estimated assets under its advice exceeding €300bn

• Private company established in 1999

First Nordic advisor to sign UN PRI at the Paris launch in 2006

Board member Eurosif, founding board member Dansif and Finsif, board member Swesif


What is SRI?


406 000 000

SRI is…


SRI is …

Water ESG

Sustainable Investment Best-in-class

Integration

Exclusion

Labour standards

UN PRI

CSR

EngagementPositive Scoring

Ethical investment

Cluster munitions

Human rights

Environment

Corporate governance

UN Global Compact

Sustainable Forestry

Alternative Investment

Norm-Based

MicrofinanceTobacco &Alcohol


SRI is … Sustainable and Responsible Investment

Water ESG

Sustainable Investment Best-in-class

Integration

Exclusion

Labour standards

UN PRI

CSR

EngagementPositive Scoring

Ethical investment

Cluster munitions

Human rights

Environment

Corporate governance

UN Global Compact

Sustainable Forestry

Alternative Investment

Norm-Based

MicrofinanceTobacco &Alcohol

SRI brings together all of the strategies used to combine

investors’ financial objectives with their concerns about environmental, social and governance (ESG) issues


How big is SRI?


”… Total SRI capital estimatedto €5tn as of Dec09 – significantjump from €2.7tn as of Dec 07 –

a growth of 87%...”


2002 2005 2007 20100

1000

2000

3000

4000

5000

6000

Source: Eurosif European SRI Survey 2010

SRI market in EuropeTotal SRI capital estimated to €5000 billion as of 31 Dec 2009


Share of capital in EuropeTotal SRI capital estimated to €5000 billion as of 31 Dec 2009

868

148

35

145

Norm-/ values based screening

Best-in-class

Thematic funds

Other positive selection

”Core SRI”

986

1514

2828

Single exclusion

Active ownership

Integration

”Broad SRI”

3000

2000

1000

0

1000

500

0



”Core SRI” ”Broad SRI”

CH

AT

DE

NO

FI

SE

DK

NL

EU

PL

BE

UK

IT

FR

ES

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

75%25%

Nordic andGerman speaking

countries’ SRI markets are characterized as

”Core”

Integrationleads to large ”Broad”

SRI markets inFrance, UK and

Spain

”Core” and ”Broad” share of total / country% of AUM



Main SRI investors

63%

2%

1%

1%

0%

20%

12% Public pension funds or reserve funds

Corporate / occupational pension funds

Religious institutions & charities

NGOs & foundations

Public authorities & governments

Universities, academics

Insurance companies & Mutuals



What is driving SRI?


1Demand from institutional investors

2International initiatives

(UN PRI etc)

3External pressure(media, NGOs, unions)

4Demand from

retail market

Drivers forSRI demand

Market drivers in the next 3 years



External pressure…


Value vs. Values


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Left to invest!

Zimbabwe

Exploitative consumer debtAnti-christian organisations

Conventional weapons

AbortionBurmaChild labourPornographyABC weaponsAlcoholTobacco

Nuclear PowerIraq

Sudan

Embryonic stem cell researchFast food

SRI has implications depending on approachIllustrative example


How do investorsuse CR information?


Corporate responsibility – from an investor’s perspective

Socialdimension

Environmental

dimension

Ethical dimension

Governance and management

Risks & opportunities


How do investors use CR information?Example: Governance of Environmental and Social factors

Responsibility

Policy

Risks

Targets

Strategy

Reporting

0%

20%

40%

60%

80%

100% CompanySector average


How do investors use CR information?Example: Risk management

• Respect for Human Rights

• Respect for Civil Liberties

• Respect for Political Rights

• Discrimination Based on Race, Sex, Disability, Language, or Social Status

• Workers Rights

• Environment

• War/Conflicts/Acts of Terrorism

• Human Rights


How do investors use CR information?Example: Management of GHG emissions

• Robust research is vital for companies and investors seeking to deal effectively with the risks and opportunities presented by climate change.

• Most companies are still developing the management systems and competencies necessary to effectively reduce their GHG emissions. This is a critically important finding and challenges some of our assumptions

• Key conclusions: 1. Ensure that the companies in which we invest are well run. They

should have appropriate climate change governance systems and robust risk assessment processes, and should be able to demonstrate that they are managing and reducing their GHG emissions;

2. Work with policy makers to establish measures that provide incentives to reduce GHG emissions.


It’s not a manifestfor saving the planet,it’s a tool for better

managing risk

Charles Cronin CFA Institute Centre

for Financial Market Integrity, EMEA


Value of corporate responsibility: The investor perspective

“Investment in good quality management teams with

the vision, and the ability, to manage successfully the

environmental, social and governance risks and

opportunities facing their companies.”

David Gait, First State Investment


Thank you for your [email protected]

9. csr ukraine 31 may 2011_ethix sri advisors

Economy & Finance