socially responsible investment. page 2 agenda adding shareholder value using sustainable...
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Socially Responsible Investment
Page 2
Agenda
Adding shareholder value using sustainable development
Focusing investments
Developing appropriate retail and institutional products
Engagement
Page 3
Sustainable Development
“Development that meets the needs of the present without compromising the ability of future generations to meet their
own needs”
- Bruntland Commission 1987
Page 4
Why Sustainable Development?
World Economic Growth continues, UK GDP/capita doubles (1950 - 2000)
Page 5
Environmental Costs
Pollution
Climate change
Ozone destruction
Acid rain
Toxic pollutants
Fresh water pollution
Radio-active wastes
Resource depletion
Biodiversity
Deforestation, flooding
Fisheries on brink
Freshwater shortages
Topsoil losses
Page 6
Climate Change
Severe weather, and more to come…
Impacts - insurance - ‘exceptional’ losses, - electricity generation - agriculture- energy industries
Solutions: renewable energies, fuel cells, energy efficiency, rail transport...
Searching for sustainable investment solutions
Page 7
Endocrine Disrupters
Exposure to a cocktail of chemicals
Disturbing evidence: early puberty in girls, low sperm counts, gender distortion in wildlife
Industries at risk: chemicals, consumer products, retailers and insurance
Friends of the Earth campaign- Boots a key target
Page 8
Social Costs
Inequality
Regional conflicts increasing
Diseases reappearing (TB, Malaria, Aids)
Diseases of the developed world: Obesity, Heart Disease, Depression
Page 9
Index of Sustainable Economic Welfare
Page 10
Five World Economy
Energy
Materials
Linear Economy
Products and Services
Fossil Fuels,Nuclear
Rich Ore Deposits,Ancient Forests,
Oil Reserves etc..
Heavy metalsCarcinogens,EDCs
CO2, Nox,SOx
DEPLETION POLLUTION
OVER CONSUMPTION
Page 11
One World Economy
Energy
Wastes
Cycling Economy
Quality of Life Enhancers
RenewableSources
SustainablyManaged
Resources Bio-degradable
wastes
Materials
Page 13
Key driver to investment performance
“As investors, we increasingly believe that good environmental and social practice is synonymous with good management of companies and, in turn, good share price performance.”
- Keith Jones, Managing Director of Morley
Society
Economy
Environment
Sustainable Development
Page 16
Appraisal Process
Profile each company to:
identify environmental and social opportunities & risk
judge suitability of a company for the SRI funds
highlight areas suitable for progressive engagement
Judge suitability of a company based on grading system surrounding 2 key elements:
Business sustainability
Management vision and strategy
Page 17
Business Sustainability grading:
A: core business is sustainability solution
……..
E: business is fundamentally in conflict with sustainable development
Management Vision & Strategy Grading:
1: Excellent - clear vision of sustainable development and actively working to
achieve it……..
5: Poor - company is hostile to the concept of corporate social responsibility
How We Rate Companies - Sustainability Matrix
Page 18
Engagement
Good social and environmental practice
Good business practice
Good financial performance
Page 19
Paying the Price of Poor Practice
Compensation claims
Damage to reputation
82% drop in share price
Page 20
Summary
SRI must add shareholder value to succeed
Traditional negative screening simply restricts where you invest
Corporate Governance and engagement are an extension SRI.
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