Stream 1 How are portfolio managers integrating long- term ... · Pragmatic flexibility to evolve with global climate goals and market dynamics ... , return enhancement and improving

How are portfolio managers integrating long-term sustainability factors into investment

decisions for better returns? 13:00 - 13:50

Milena Glauberzon, Portfolio Manager, Public Equities Portfolio, PSP InvestmentsDomenico Giuliano, Deputy Chief Investment Officer and Portfolio Manager, MFG Asset ManagementModerator: Sarah Cleveland, Founder & CEO, Sarah Cleveland Consulting

Stream 1

ESGFrameworkMilenaGlauberzon

30

Determining investment risks andopportunitiesforPSPClimatechange

Current:• Votinganddialogue• Case-by-caseassessmentofCCrisks• Collaboration andadvocacy:PRI,

CDP,TCFD

Qualityoftheboard

Compensation

Others

• Independence• Appropriateskills,experience,competencies

• Diversity

• Equity-basedcompensation• Advisoryvotesonexecutivecompensation

• Goldenparachutes

• Shareholder rights(e.g.proxyaccess,by-laws,poisonpills)

• Dilutivetransactions• Mergers&acquisitions

31

AddressissuesofcorporategovernanceonwhichPSPvotes

ProxyVotingGuidelines

32

EnhancedDueDiligence– 4assessmenttypes

1. Currentcarbonperformanceversusindustry/peers• Peerrelativecarbonefficiencyassessment• Reliantuponcurrentcarbondata(haslimitationsthough isreadilyavailable)

2. Qualityofclimateriskmanagementversusindustry/peers• Qualitative,peer-relativeassessment• 3rd partydataoncompanygovernanceactivities(e.g.MSCI)• 3rd partyinitiativeswhichranksensitivecompanies(e.g.CDP)

3. Financialresilienceriskassessment• TestsensitivityofNPVtoalternatepricescenariosorashadowcarbonprice• Consider impactofearlyplantclosures• Model reduceddemand forhigh-cost,high-carbonFFresources• Assesscostofproductionvspeers,orCapEx plans

4. FinancialImpactofReputationalrisk

• actorsthatmayposefinancialreputationalrisktocompany(e.g.controversies, countriesofoperation, targetofactivistgroups;TalismanBurma)

GovernmentActionsareImportant!

Source:EPA.gov

Oil&GasInvestmentExample

CompanymeetingandFinancialAnalysis

3rd PartyVerificationwithIndustryExperts

InvestmentCommitteepresentation

InvestmentmonitoringandRebalancing

Revenueimpactofdemanddecline

Finesduetoemissions

CarbonRegistryverification

AuditorReports

Additionalfinesorcapitalexpenditurein

finemitigation.Adjustmentsto

commoditysupplydemandforecast

Analysisoftotalfinancialburdenovertimeand

stresstestwithinvestmenttime

horizon/portfolioriskexposure

GlobalLowCarbonEquitiesRIAmericas2017

6December2017

Private and Confidential / For Institutional Use Only

MFGAssetManagement | 36

Magellan Global Low Carbon Strategy

• ReasonstheGlobalStrategyisinherently

lowcarbon:

• Universeexcludes

pro-cyclicalresources,energyand

materialsstocks

• Seekshighreturnsoncapital;often

leadingtocapital-lightbusinesses

thataretypicallyless

carbonintensive

Global Strategy has a long low carbon history

-

50.0

100.0

150.0

200.0

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16

Carb

on In

tens

ityTo

nnes

CO2

/US$

mre

venu

es

Global Strategy - Carbon Intensity

Note: Emissions intensity calculated using the weighted average intensity method, which is a weighted average of the emissions intensity of all companies in the portfolio. Source: Trucost; MSCI; Magellan Asset Management Limited.

IP038

MSCI World


Magellan Global Low Carbon StrategyGlobal Strategy’s history shows low carbon need not come with lower alpha

Observations(Gross)1 TotalReturn(%p.a) Beta DownsideCapture

3years 10.37 0.68 0.34

5years 12.93 0.78 0.38

7years 15.06 0.68 0.35

10years 11.82 0.73 0.53

eVestment Percentiles (Gross)1 TotalReturn Beta DownsideCapture

3years 22nd 83rd 83rd

5years 24th 85th 86th

7years 2nd 92nd 95th

10years 1st 91st 98th

Source: eVestment, quarterly returns period ending 30 September 2017. The eVestment Global Large Cap Equity peer group presented contains 354, 314, 249, and 179 observations for 3, 5, 7 and 10 years respectively.IP061


Low Carbon FrameworkA proprietary three tiered approach to portfolio construction

3

1

2

Portfolio emissions cap

Company Scope 1 & 2 emissions cap

Fossil fuels exclusions (Scope 3)Pragmatic flexibility to

evolve with global climate goals and market dynamics

Definitions:Scope 1 emissions: directly emitted by companiesScope 2 emissions: indirect emissions from energy suppliers (eg electricity)Scope 3 emissions: other indirect emissions from non-energy suppliers or use of products sold

IP038


Technology

HealthcareFinancials

ConsumerDefensive

ConsumerDiscretionary

Infrastructure

Cash

38%15%

12%

10%

14%

3%

6%

2%

Mass-MarketRetail

Data as at 30 September 2017. Any trademarks, logos, and service marks contained herei n may be the registered and unregistered trademarks of their respective owners. Nothing contained herei n shoul d be construedas granting by implication, or otherwise, any license or right to use any trademark displayed without the written permission of the owner.

Consumer platforms: 13%

Payments: 14%

Enterprise software: 7%

Semi-conductors: 2%

eCommerce: 2%

38%ofportfolio inglobaltechnology, yetwelldiversified

IP061

How Are We Positioned?Global Low Carbon Strategy

How are portfolio managers integrating long-term sustainability factors into investment

decisions for better returns? 13:00 - 13:50

Milena Glauberzon, Portfolio Manager, Public Equities Portfolio, PSP InvestmentsDomenico Giuliano, Deputy Chief Investment Officer and Portfolio Manager, MFG Asset ManagementModerator: Sarah Cleveland, Founder & CEO, Sarah Cleveland Consulting

Stream 1

Water risk: whether it’s too much rain/sea water or too little freshwater, water is becoming a

serious risk to business continuity, viability and insurance.

13:55 - 14:45

Hugh Brown, Corporate Governance Analyst, Office of Investment Programs & Governance, State Board of Administration (SBA) of Florida Stephen Kibsey, Vice President, Emerging Risk Management, Caisse de dépôt et placement du Québec (CDPQ) Emilie Mazzacurati, Founder and Chief Executive Officer, Four Twenty SevenModerator: Siobhan Collins, Manager, Water Program, Ceres

Stream 1

cdpq.com

Challenges with Water Risk Assessments

STEPHEN KIBSEY, VICE-PRESIDENT OF EMERGING RISK

MANAGEMENT

RI Americas | New York

December 6-7, 2017

Challenges with Water Risk Assessments43

New Era in Sustainable Investing

Impacts(Effects &

Outcomes)

Returns(%,$)

Risks(VaR, Betas,

etc.)

Residual

Intentional

Impacts- need to be measured


Source :UNITED NATIONS


Process for judging materiality of the risk

Industry Operations

Location and

Physical Attributes

Regulatory Reputation

Analytic tool concept

Strategy Governance Conscience/ Stewardship

Vulnerability

Resilience

Impact X Probability = Risk

cdpq.com

Thank you for listening

STEPHEN KIBSEY

VICE-PRESIDENT OF EMERGING RISK MANAGEMENT

RI Americas | New York December 6-7, 2017

+

© 2017 Four Twenty Seven - CONFIDENTIAL

Assessing Climate Risk in Financial Portfolios: The Example of Water Risk

Emilie Mazzacurati, Founder and CEO, Four Twenty SevenResponsible Investors Americas, December 2017

+ From water and climate data to financial intelligence: asset-level analysis

+KEPCOPower PlantScore: 21

China MengniuDairy FacilityScore: 34

Semen GresikCement Plant Score: 5

Yue YuenClothingScore: 19

+ Identify high risk corporations for engagement and risk management

KEPCOUtilitiesClass: AverageScore: 40

China Mengniu DairyFood & BeverageWorst-in-classScore: 12

Semen GresikCapital GoodWorst-in-classScore: 0

Yue YuenConsumer DurablesWorst-in-classTotal score: 29

© 2016 Four Twenty Seven – All rights reserved

50

Climate intelligence for financial institutions, business and government

Emilie Mazzacurati – 427mt.com – [email protected]

Ceres’ Investor Water Toolkit: A Resource for Investors by Investors on Water Integration

For more information: www.ceres.org/investorwatertoolkit

Water risk: whether it’s too much rain/sea water or too little freshwater, water is becoming a

serious risk to business continuity, viability and insurance.

13:55 - 14:45

Hugh Brown, Corporate Governance Analyst, Office of Investment Programs & Governance, State Board of Administration (SBA) of Florida Stephen Kibsey, Vice President, Emerging Risk Management, Caisse de dépôt et placement du Québec (CDPQ) Emilie Mazzacurati, Founder and Chief Executive Officer, Four Twenty SevenModerator: Siobhan Collins, Manager, Water Program, Ceres

Stream 1

Afternoon networking break14:45 - 15:15

Sponsored by:

Smart beta: ESG issues are the under-researched value factors that investors are

searching for!15:15 - 16:05

Brian Rice, Portfolio Manager, California State Teachers’ Retirement System (CalSTRS)Tony Campos, Head of ESG Americas, FTSE RussellModerator: Dan Winters, Head of Americas, GRESB

Stream 1

FTSERussell 55

SmartBetaSurvey2017:keythemes

Outlook

Weexpect growthinsmartbetatocontinueatarobustpace,astheadoptionexpectationsofassetownerswhoarecurrentlyevaluatinginitialoradditionalsmartbeta allocationsremainsstrongandsatisfactionwithsmartbetaamongcurrentusersremainshigh.Inparticular,weseestronggrowthprospectsintheusageofmulti-factorcombinationstrategiesandtheapplicationofESGconsiderationstosmartbeta.

Smartbetaevolution

andadoption

Smart betaadoptionratesincreasedfrom2016to2017;now,nearlyhalfofassetownerssurveyedhaveasmart betaallocation.Adoptiongrowthwasfueledbyarecord numberofassetownersevaluatingsmartbeta in2016.Lookingforward,thepipelineofassetownersevaluatingsmartbeta remainsstrongandiscomprisedoffirst-timeevaluators,re-evaluators,andassetownerswithanexistingsmartbetaallocationwhoareconsideringallocations.

Global adoption

2015 2016 2017

26%36%

46%

Equitysmartbeta

strategies

Thisyear,multi-factorcombinationstrategies havebecomethemostpopularsmartbeta equitystrategy used;theyarealsothemostwidelyevaluatedsmartbetaequitystrategy. Amongsinglefactorstrategies, ValueandLowVolatilityaremostwidelyusedandevaluated.

Useofmulti-factorstrategies

2017

20%

2016

2015

37%

64%

Fixedincomesmartbeta

strategies

Newin2017,weintroduceananalysisofsmartbeta evaluationandusageforfixedincome.Industryconsensusaboutawell-definedsetoffactorsthathavehistoricallyrewarded investorshasnottakenplaceyetforthedebtmarkets; assuch,farfewerassetownersindicatedtheyhaveevaluated smartbeta forfixedincome.Weexpect evaluationandusageoffixedincomesmartbetastrategies togrowfromthisyear’sbaseline.

Adoptionandevaluation

7%Allocatednow

20%Willevaluateallocation

73%Noallocationorplan

IMPROVEDIVERSIFICATION

RISKREDUCTION

RETURNENHANCEMENT

ESGconsiderationsof

smartbeta

Interest inapplyingESGconsiderationstosmartbeta ismeasurable,withthegreatest interest comingfromEuropeanassetownersandassetownerswithover$10billioninAUM.Primarymotivationsforusingasmartsustainabilitystrategyareinvestment-ledrather thanregulatory orsocial/ethical.

Interestisworldwide

EUROPE

20%

N.AMERICA

60%

Primary objectives

Whysmartbeta?

Oursurveyresultsindicatethatriskreduction,returnenhancementandimprovingdiversificationpersistastheprimaryobjectivesforuseofsmartbeta.Costsavingscontinuestogrowinimportance,indicatingthatsmartbeta isincreasinglybeingusedinplaceofactivestrategies.

FTSERussell 56

WHATISSMART

SUSTAINABILITY?

Theinclusion

ofsustainability

considerations within

alternativelyweighted

indexmethodologies

Simple:SmartBetaweightingappliedafterESGusedtoscreen

Sophisticated:ESGpartofSmartBetaweightingscheme

DEGRE

EOFSU

STAINAB

ILITYAD

JUSTMEN

TS

MktCap SmartBeta

Screening

Integration

“IwanttoimprovespecificESGexposures”

“IwanttoreflectcertainESGpreferences”

“Iwanttoachievespecificinvestmentoutcomes”

DEGREEOFMOVEMENTAWAYFROMMARKETCAP

“Iwanttoaligninvestmentandsustainabilityobjectivesand

outcomes”

Smartbetaandsustainability

SmartSustainability

Source:FTSERussell

FTSERussell 57

SmartSustainabilityconstruction

Source:FTSERussell

Smart beta: ESG issues are the under-researched value factors that investors are

searching for!15:15 - 16:05

Brian Rice, Portfolio Manager, California State Teachers’ Retirement System (CalSTRS)Tony Campos, Head of ESG Americas, FTSE RussellModerator: Dan Winters, Head of Americas, GRESB

Stream 1

THEENDOFDAYONE

Applying a long-term sustainable approach to fixed income investing.

09:40 - 10:30

Marcelo Jordan, Senior Portfolio Manager (ESG), The World BankTessie Petion, Vice President, Responsible Investment Research, Domini Impact InvestmentDel Anderson, Credit Research Analyst, PIMCOModerator: Carol Jeppesen, Senior �SNetwork Manager, Principles for Responsible Investment (PRI)

Stream 1

Morning networking break10:30 - 11:10

Green & sustainable bonds: After the initial excitement, what is holding back issuance?

11:10 - 12:00

Judith Moore, Head of Sustainability Research and Policy, Affirmative Investment ManagementDaniel Shurey, Analyst, Bloomberg New Energy FinanceIrene Sánchez Aizpurúa, Head of Division, Investor Relations and Marketing, European Investment BankModerator: Tony Hay, Publisher, Responsible Investor

Stream 1

Green bonds overviewRI Americas 2017

Dan Shurey

December 7, 2017

71 December 7, 2017

Green bond issuance ($bn)

0.5 0.9 7.2 3.4 4.314.7

36.849.9

98.3

144.3

0

20

40

60

80

100

120

140

160

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$ bn

ExtrapolatedABS/MBSMunicipalProjectCorporatesFinancialsGovernment agenciesSovereignsSupranationals

Source: Bloomberg New Energy Finance


11:10 - 12:00


Stream 1

73 December 7, 2017

Reported proceeds breakdown

Source: Bloomberg New Energy Finance Note: Proceeds for reported bonds 1H 2014-1H2016

Clean energy & energy management, 60.1%

Low-carbon buildings & energy efficiency, 18.3%

Transportation, 9.8%

Waste and pollution, 3.5%

Nature-based assets, 2.2%

Adaptation, 2.5% Water, 3.0%Agency costs, 0.6%

SolarWindGeothermalHydropowerBioenergy (and waste to energy)CogenerationEnergy Distribution & ManagementEnergy StorageMixed EnergyResidentialCommercial & IndustrialPublicUniversities (Private)Data CentersRetrofitEnergy Efficiency ProcessesEnergy Efficiency Products (LED lighting)Mixed Low-Carbon Buildings & EEMass TransitVehiclesCyclingAlternative Fuel InfrastructureMixed TransportationRecyclingDisposalPreventionReusePollution ControlClean CoalMixed WasteAgricultureForests (managed and unmanaged)Fisheries and AquacultureLand RemediationMixed Nature & BiodiversityTerritorial Adaptation (green spaces & tree planting)Water Management - Inland / Flood PreventionCoastal ManagementInsuranceInformation Support SystemsMixed AdaptationBuilt (gray) Infrastructure - Wastewater TreatmentWater Usage Management (Reduction, Recycling & Efficiency)Mixed WaterGeneral corporate purposeAgency costs


11:10 - 12:00


Stream 1

75 December 7, 2017

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Other

ConsumerDiscretionaryEnergy

Industrials

US Municipal

Utilities

Financials

Government

Green bond issuer type (%)

Source: Bloomberg New Energy Finance

76 December 7, 2017

This publication is the copyright of Bloomberg New Energy Finance. No portion of this document may be

photocopied, reproduced, scanned into an electronic system or transmitted, forwarded or distributed in any

way without prior consent of Bloomberg New Energy Finance.

The information contained in this publication is derived from carefully selected sources we believe are

reasonable. We do not guarantee its accuracy or completeness and nothing in this document shall be

construed to be a representation of such a guarantee. Any opinions expressed reflect the current judgment

of the author of the relevant article or features, and does not necessarily reflect the opinion of Bloomberg

New Energy Finance, Bloomberg Finance L.P., Bloomberg L.P. or any of their affiliates ("Bloomberg"). The

opinions presented are subject to change without notice. Bloomberg accepts no responsibility for any

liability arising from use of this document or its contents. Nothing herein shall constitute or be construed as

an offering of financial instruments, or as investment advice or recommendations by Bloomberg of an

investment strategy or whether or not to "buy," "sell" or "hold" an investment.

Copyright and disclaimer

Coverage.Renewable Energy

Power & Utilities

Gas

Carbon Markets & Climate

Negotiations

Energy Smart Technologies

Storage

Electric Vehicles

Mobility and Autonomous Driving

Frontier Power

Emerging Technologies

Bloomberg New Energy Finance is a research firm that helps energy

professionals generate opportunities. With a team of experts spread

across six continents, BNEF provides independent analysis and insight,

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BNEF research and analysis is accessible via web and mobile platforms,

as well as on the Bloomberg Terminal.

[email protected]

about.bnef.com

@BloombergNEF

Dan Shurey

[email protected]


11:10 - 12:00


Stream 1

What are the methods to incorporate sustainability factors successfully within passive

investment? 13:00 - 13:50

Bob Arnold, Director of Global Equities, New York State Common Retirement FundJennifer Sireklove, Director of Responsible Investing, ParametricModerator: Thomas Kuh, Independent Consultant

Stream 1

Why and how are investment consultants and asset owners assessing ESG integration in asset

allocation, manager selection and review? 13:00 - 13:50

Roger Urwin, Global Head of Investment Content, Willis Towers WatsonKaren Lockridge, Principal, MercerKate Starr, Chief Investment Officer, Flat World Partners Moderator: Nalini Feuilloley, Head of Canada, Principles for Responsible Investment (PRI)

Stream 2

Documents

Stream 1 How are portfolio managers integrating long- term ... · Pragmatic flexibility to evolve with global climate goals and market dynamics ... , return enhancement and improving