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How ESG drives business performance Benjamin McCarron Managing Director, Asia Research and Engagement Specialist Consultant, Asian Corporate Governance AssociaBon
Sustainable Development Forum October 8, 2015
How ESG drives business performance Benjamin McCarron Managing Director, Asia Research and Engagement Specialist Consultant, Asian Corporate Governance AssociaBon
Sustainable Development Forum October 8, 2015
Making money and sustainability Benjamin McCarron Managing Director, Asia Research and Engagement Specialist Consultant, Asian Corporate Governance AssociaBon
Sustainable Development Forum October 8, 2015
• Studies on the business benefits • What is ‘corporate sustainability’ • Company case studies by value driver
– Turnover growth and innovaBon – Risk management – ProducBvity improvement
Making money and sustainability
MulBple studies find ESG adds value
Source: Arrabesque Partners and Oxford University, From the Stockholder to the Stakeholder, March 2015
Type of study ProporBon where ESG adds value
Cost of capital 90%
OperaBng performance 88%
Stock price 80%
Review of 190 studies on economic relevance of ESG
What is corporate sustainability?
A sustainable business roadmap
Philanthropy
Community Investment
Corporate Responsibility
Sustainable Business
Level 0
Level 1
Level 2
Level 3
The M&S Journey
Philanthropy
Community Investment
Corporate Responsibility
M&S Plan A 2007 -‐ 100 commitments 2010 -‐ 80 commitments 2015 -‐ 100 commitments
Sustainable Business
Zero Carbon, zero waste, fair and healthy
1980 1990 2000 2010 2015 2030
Level 0
Level 1
Level 2
Level 3
Source: Marks and Spencer (adapted)
Turnover growth and innovaBon
Old companies, new growth • GE – ecomaginaBon sales of USD 200 billion in 10 years • Philips – EUR 11.1 billion green product sales in 2014 • Toyota – hybrids >40% of Japan unit sales • Dow – USD 13 billion sustainable advantaged sales in 2014 • BRI – microcredit is 32% of loans
Turnover growth and innovaBon
Toyota -‐ hybrids go mainstream
Source: Toyota 2014 Annual Report, page 11
Dow – boosBng sustainable sales
Source: Dow Chemical Sustainability Summary 2014, page 8
ProducBvity improvement
Resource efficiency • M&S – GBP 160 million savings from Plan A • GE – USD 350 million savings from environmental efficiency
Human capital management • Gender balance • Employee engagement • OccupaBonal health and safety
ProducBvity improvement
M&S – growing net benefits
Source: Marks and Spenceer various reports
-‐50
0
50
100
150
200
2007/8 2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
GBP million
Risk management
ReputaBon/ license to operate and grow • Vedanta • Volkswagen • Lynas • Palm oil
Safety (operaBonal and product) • Oil spill, BP, 2010 • Nuclear incident, TEPCO, 2011 • Food safety scare, Nestle India’s Maggi noodles, 2015 • Malaysia airlines
Risk management
Picking the wrong fight
Source: Survival International
Vedanta – loses the bajle
Source: yahoo finance
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
4-‐Jan-‐10 4-‐Feb-‐10 4-‐Mar-‐10 4-‐Apr-‐10 4-‐May-‐10 4-‐Jun-‐10 4-‐Jul-‐10 4-‐Aug-‐10 4-‐Sep-‐10 4-‐Oct-‐10 4-‐Nov-‐10 4-‐Dec-‐10
FTSE 100 (rebased) Vendata Resources (rebased)
Thank you
Please ask or send me quesBons Ben.mccarron@asiareengage.com
How investors use the informaBon
Screening
Engagement
Integration
Source: Asia Research and Engagement
BNI – responsible lending
Source: BNI Sustainability Report 2013, page 14
To conclude
Corporate sustainability and reporBng helps • idenBfy new growth areas • improve risk management • idenBfy cost/ efficiency savings • have more talented, more producBve staff • ajract longer term investors
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