Dr. Hendrik Garz !
TBLI conference, Amsterdam, October 2014
Trends in ESG Integration
We help clients turn vast quantities of environmental, social and
governance information into insightful, value-added analysis to enable
more informed investment decisions ! understand the Value at Risk
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Sustainalytics: What We Do
Global Thematic Research Team
Providing insights on material ESG issues/themes ▪ Sector reports ▪ Key Issues Series ▪ Bottom Up ideas ▪ Empirical/Quantitative Research ▪ Forthcoming: Pharma, Utilities, Transport,
Aerospace & Defense !!
Building up and managing the Sustainalytics Academic Program !▪ Theses support ▪ Collaborations with academics – More than just delivering data ▪ Aim: Gaining insights on ESG integration !
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▪ Offices in Amsterdam (HQ), Boston, Frankfurt, London, New York, Paris, Singapore, Timisoara, and Toronto !
▪ Representation in Bogota, Brussels, Bucharest, and Copenhagen !▪ Over 180 staff (100+
analysts) !▪ Over 250 institutional
clients globally
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Sustainalytics: Where We Are
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Two ‘Impact’ Dimensions
Extraction Raw
Materials
Design & Production
Packaging & Distribution
Use & Maintenance
Re-Use and Recycling
Sustainability Impacts
ESG Macro Trends
Exposure to Sustainability Impacts
= Potential to
cause E&S impacts
Exposure to Business Impacts
= Potential to
cause business impacts
Exposure to Business Impacts
= Potential to cause business impact
Example of Exposure Graph
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● Assessment of E,S,G controversies ● e.g Operations controversies, Environmental supply chain
controversies
Qualitative performance
!● Targets and quantitative commitments, performance metrics ● e.g. Water Intensity, Environmental Fines and Penalties,
Employee Turnover Rate
Quantitative performance
● Disclosure of key ESG issues as part of industry initiatives ● e.g Scope of GHG Reporting, Tax Transparency per country
Disclosure
● Management systems and policies ● e.g Health and Safety Programmes, Programmes/targets for
Hazardous Waste Generation Preparedness
Company ESG Assessment Framework
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New Client Interface (Feb 2015)
Trends in ESG integration
• Trends within the RI community; not looking at overall market growth/mainstreaming
• Degree of ESG integration at the different levels of value creation: frequency, comprehensiveness, and quality/ sophistication of integration
• How far advanced are we? How far do we have to go? • Scale: 0-10; 10 = full integration (E, S, G)
Trends in ESG integration
- 5y Current +5y
Investment policy 2 3 4
Asset Allocation 0 1 2
Manager selection 2 3 4
Alpha generation 2 2 3
• Investment case - qualitative
2 3 4
• Valuation models 1 1 2
Stewardship 3 4 6
Challenges to integration
▪ Data quality/Non-disclosure ▪ Time horizon ▪ Behavioral – Biases – Incentive structures
▪ Beliefs/Convictions about relevance
Amsterdam | Bogotá | Boston | Brussels | Bucharest | Copenhagen | Frankfurt | London | New York City | Paris | Singapore | Timisoara | Toronto
Antonio Celeste Director Institutional Relations, Europe [email protected]
For more information please contact: !Dr. Hendrik Garz Managing Director Thematic Research [email protected]
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