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Sustainable Finance Strategic Insights – Media Briefing
Research commissioned by HSBC
2H 2016
INTERNAL
Slide 2
Research Methodology: key elements
% of Total Corporates/
Issuers Investors
(N: 553) (N: 277) (N: 276)
Europe 27.2 25.3 27.9
Americas 27.0 26.0 29.3
Asia 27.3 31.0 23.6
Middle East 18.5 17.7 19.2
TOTAL 100.0 100.0 100.0
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Slide 3
Research Methodology: key elements
Corporates/ Issuers Investors
(N: 277) (N: 276)
Annual Turnover
Up to US$10Bn 35.0
Over US$10Bn 65.0
Sample-wide Average Turnover US$18.6Bn
Funds Under Management
Up to US$10Bn 37.3
Over US$10Bn 62.7
Sample-wide Average FUM US$13.9Bn
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Slide 4
Strategy: Issuers and Investors
Strategy currently in place for reducing environmental impact % of Total
75,5
52,8
36,0
26,5
48,7
80,5
56,8 56,9
32,1
58,7
0
10
20
30
40
50
60
70
80
90
Europe Americas Asia Middle East Total Market
Issuers Investors
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Slide 5
Disclosure: Corporate Issuers
54,7
34,2
19,4 15,4
19,4
43,4 37,0
41,4
27,8
15,1 8,2
28,9 21,1 23,8
Europe Americas Asia Middle East Up to US$10Bn Over US$10Bn Total Market
Currently disclose environmental strategy Currently disclose environmental impact
Current and future plans to disclose environmental strategy and impact % of Regional Total
50,0
32,0 32,0
9,1 13,8
44,6
34,1 37,5
60,0
48,0
81,8
62,1
18,2
52,9
41,50 32,7
17,80
6,70
29,00 21,10 23,70
Europe Americas Asia Middle East Up to US$10Bn Over US$10Bn Total Market
Will disclose strategy in the coming year Unsure if strategy will be disclosed in coming year
Will disclose impact in the coming year
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Slide 6
Disclosure: Institutional Investors
Barriers to increasing climate related/low carbon investments % of Total
82,2
63,9
45,0
44,6
16,3
2,0
0 10 20 30 40 50 60 70 80 90
Lack of credible investment opportunities available
Poor research/analysis available
Lack of a standardised set of sector definitions
Poorer yields relative to the broader market
Lack of internal understanding of asset class
Other
Sums to over 100 per cent due to multiple responding allowed
• 65.2% of investors plan to increase low carbon investments however three quarters (73.9%) of all investors encounter barriers
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Slide 7
Disclosure: Institutional Investors
Inadequate levels of current disclosure by issuers and what investors see driving increased
disclosures % of Regional Total
0
20
40
60
80
100
0
20
40
60
80
100
Europe Americas Asia Middle East
Regulation Risk of negative publicity Stakeholder pressure
Best practice Inadequate levels of disclosure
Sums to over 100 per cent due to multiple responding allowed
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Slide 8
Sustainability Investment Plans and Financing Strategy
- Issuers
20,0 15,3
9,3 6,1
3,1
18,3
13,0
80,0 84,7
90,7 93,9
96,9
81,7
87,0
77,1
70,8
51,2
26,5
67,0
53,9 58,5
0
10
20
30
40
50
60
70
80
90
100
Europe Americas Asia Middle East Up to
US$10Bn
Over
US$10Bn
Total Market
Yes No Current investment plans in place to make own business more sustainable
Do you have a green/sustainable financing strategy to raise capital for green initiatives/
investments? % of Regional Total
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Slide 9
Impacts of the Paris Agreement - Investors
Changes in holdings as a direct results of the Paris Agreement to limit climate change to two
degrees
2,44
2,59
2,19
2,92
2,68
2,33
2,02
12345
Total
Over US$10Bn FUM
Up to US$10Bn FUM
Middle East
Asia
Americas
Europe
5 — — — 4 — — 3 — — 2 — — — 1
(No Change) (Major Change)
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Slide 10
Business Impact of 2015 Paris Agreement - Issuers
0
10
20
30
40
50
60
70
80
90
100
Europe Americas Asia Middle
East
Up to
US$10Bn
Over
US$10Bn
Total
Market
No
Unsure
Yes
Do you believe the Paris Agreement will result in loss of value for certain types of economic
activity or assets in your industry? % of Regional Total
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Slide 11
Awareness and Engagement
Investors are more likely to integrate ESG performance into their portfolio when they believe
they play an important role in the transition to a ‘2 degrees’ economy
1,00
2,00
3,00
4,00
5,000
10
20
30
40
50
60
70
Europe Americas Asia Middle East
5 —
— —
4 —
— 3
— —
2 —
— —
1
(No
t Im
po
rta
nt)
(
Ve
ry I
mp
ort
an
t)
% o
f R
eg
ion
al T
ota
l re
ESG
inte
gra
tio
n
Integration of copmanies' ESG performance as an investment factor
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Slide 12
Awareness and Engagement
■ +/- 98%: very high interviewee participation rates
■ East & Partners’ participation rates usually sit above industry standards at +/- 85%
■ Evidence of high level of engagement with sustainable finance as a subject
■ European issuers and investors much more aware and engaged with green finance
compared to global counterparts – Are European governments more vocal in support?
■ The Middle East has to date been relatively slow to engage with sustainable finance
solutions – have companies been using Islamic Finance to fund similar initiatives or are
they hesitant due to a traditional reliance on fossil fuels?
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Slide 13
Awareness and Engagement
■ “We’ve been evaluating and investing in this sector for several years as part of our
‘responsible investment platform’ and feel we’re more advanced than most firms –
actually well ahead of the game in our understanding of these”, Chief Investment
Officer, GBP15Bn London institutional investor
■ “Need to be very careful in selecting specific investments in the sector as there’s a lot of
sub-par opportunities being presented; one of the reasons we don’t actually disclose
even though we have a sizeable portion of the portfolio committed”, Portfolio Head,
US$28Bn, Hong Kong asset manager
■ “Very keen to get into green issuance, having trialled Shariah financing recently as a
way of diversifying our debt funding; we think we have some special projects that will
appeal to the markets”, CFO US$12Bn US resource company
■ “Have found it hard finding quality advice on issuing paper into the ESG sector; demand
seems to be high but getting a proposition together for a first try has been challenging”,
Group Treasurer, US$13Bn European manufacturer
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Slide 14
Disclaimer
While East & Partners endeavours to ensure the quality of this Publication, East & Partners does not accept
any responsibility for the accuracy, completeness or currency of the material included in this Publication,
and will not be liable for any loss or damage arising out of any use of, or reliance on, this Publication.
INTERNAL
Sustainable Finance Strategic Insights – Media Briefing
Research commissioned by HSBC
2H 2016
INTERNAL