Embed Size (px)
DESCRIPTION
Marlys Appleton, Head of Sustainability Initiatives - AIG Global Investment Group - USA.
Citation preview
A Presentation to
AIG Global Investment Group comprises a group of international companies which provide investment advice and market asset management products and services to clients around the world.
AIG Global Investment Group Sustainable Investment Initiative
TBLI Triple Bottom Line Bangkok
May 24-25, 2007
By
MARLYS APPLETONVice President
Chair, Sustainability Steering [email protected]
2
Lessons > AIGGIG Integrating Principles of Sustainable Investment
Why is sustainability valuable for an asset manager?
Engaging talented investment professionals
Improving process of identifying risks and opportunities. All risks may not be rewarded.
Current best practice varies across asset classes. Dark spaces in private equity.
Seeking new avenues to capture risks and exploit opportunities. Mapping to time horizons and velocity of investing approach.
Independent informed opinion of underlying valuation is critical. Develop better breakpoints.
What process and approach will contribute to successful integration?
Powerful leadership by CEO of investment unit and leaders in each asset class/business unit
Clarify internal investment decision process from market-facing distribution, approaches to ESG differ.
Anticipate a range of personal opinions by educated, influential and ego-driven investment professionals.
Anticipate challenges of understanding the investment decision-making process. AIGGIG adopted Six P model from ESG Architect.
Develop staged project, move quickly to establish early wins and build momentum.Leadership required. Articulate and market value to investment
professionals. Staged integration. Endurance trumps enthusiasm.
3
AIGGIG > Our Asset Management Businesses are Truly Global
For our clients, we invest from 44 asset management offices located worldwide, complemented by the extensive network and resources of AIG, which operates in
130 countries and jurisdictions with nearly 200 analysts worldwide
AtlantaBirminghamDallasHartfordHoustonLos AngelesMexico CityNew YorkSan FranciscoSan JuanToronto
NORTH AMERICA
Buenos AiresSantiagoSão Paulo
SOUTH AMERICA
JohannesburgNairobi
AFRICA
Melbourne
AUSTRALIA
EUROPE
BangkokHong KongJakartaJerusalemKuala LumpurManilaMumbaiSeoulShanghaiSingaporeTaipeiTokyo
ASIA
Data as of 30 September 2006.
BarcelonaBerlinBucharestBudapestDublinIstanbulLondonMadridMilanMoscowPragueRomeViennaWarsawZurich
4
AIG > Understanding AIGGIG Lines of Business
AssetManagement
GeneralInsurance
Life Insurance & Retirement
Services
FinancialServices
AIG Global Investment
Group (AIGGIG)
AIGGIG Global Wealth
Management
AIG SunAmericaAsset Mgmt
Corp.
AIG Advisor Group, Inc.
Real EstateFixed IncomeEquity Alternatives
5
AIGGIG > Insurance Portfolio and Asset Management
American International Group, Inc.
DomesticLife InsuranceBusiness Unit
Insurance Companies
ForeignLife InsuranceBusiness Unit
Insurance Companies
DomesticGeneral Insurance
Business UnitInsurance Companies
ForeignGeneral Insurance
Business UnitInsurance Companies
Insurance Portfolio Management
Investment Grade Corporates MBS/CMBS/ABS Municipal Bonds Derivatives
Private Placements CDO/CDS Multi-Currency Global Equities
High Yield Corporates Sovereign Debt Money Markets Alternative Investments
Asset Management
MatchedInvestment
Program
Bank Loans Emerging Market Debt Mortgage Loans Real Estate
6
AIGGIG > Milestones in AIGGIG Sustainable Investment
Fall 200
6Innovative Sustainable Future PE fund created
AIGGIG becomes first investment arm of an insurer to join Investor Network on Climate Risk (INCR)
Project AIGGIG asked to consider policy options
Aug 200
6
Agreement obtained for Policy from CSR Committee
Spring
2005Question re emissions, climate, SRI
Initial ESG vendor assessment
Planning and funding proceed for implementation
Autumn 2004
Oct 2005
Shareholder requests to AIG seeking disclosure on climate change is directed to AIG
AIGGIG policy of sustainable investment written
Sustainable Investment Steering Committee [SC] established
Nov 2006
Policy of Sustainability recommended to AIGGIG Executive Mgmt Jan
2006
Policy to AIG CSR Board
Jan 2007
Feb 200
7
Mar 200
7
SC develops protocols and formalizes its governance structure
Asset Class review, Presentation to Dubai Conference
7
Project AIGGIG on Sustainability > A Call To Action at AIGGIG
Project AIGGIG [2005]: It’s time to speak of the elephant in the room……. Sustainability and its implications for investing evident as
recurring theme.
8
Sustainability as an AIGGIG Value
“Sustainability … the notion that environmental stewardship, social responsibility, ethical behavior and economic viability are all important to the pursuit and attainment of long term growth and value creation.” [Internal Project AIGGIG Task Force Document, October 2005]
Alignment of stakeholder [shareholders, clients, AIG affiliates, employees] interest must take into account and address both short/long term economic costs and benefits relating to activities of a business
• Critical elements in creating long term shareholder value, driving value-added products and promoting the best interest of all of AIGGIG’s stakeholders and the viability of our franchises
ESG-informed behavior will create and safeguard value for all stakeholders, current and future.
Offers a clear path forward for business in face of regulatory, market and societal forces building for corporate responsibility
9
Sustainability in AIGGIG > What It Is and Is Not
IT IS ABOUT
New business reality for all firms. Firms striving to become more competitive, more
innovative, more environmentally responsible
Risk management Complying with emerging values of global
market place
Understanding potential liabilities
Scrutiny by analysts, underwriters and shareholders
New business opportunities Being innovative and seeking returns in
renewable energy, “clean tech”, carbon projects and developing new SRI-related products
Matching moves of peers “Goldman Sachs, Citibank, JPMorganChase, ABN
Amro are embedding social, and environmental criteria in their risk-assessment procedures.” [Bloomberg, WBCSD Summer 2005]
Broader ethical underpinnings New definitions of doing business and
responsible corporate behavior to counter reputation risk
IT IS NOT ABOUT
Arbitrary Limits
Constraining business activity, divesting or identifying “bad” sectors/industries
Riding a trend
Being “green”, negative screening, bad industries, getting religion or tree hugging!
“Sustainability as an Engine of Innovation”
10
Investment Architecture > Critical Design Elements
Clear and compelling value proposition to adjust current philosophy and processes to new dynamics of the business of money management.
Underlying risk management ethos leads to demand for scalable solution that is auditable across organization.
Robust solutions dependent less on “bleeding-edge” approaches and more on tested and reliable components that can deliver against heavy inflows.
Modular to incorporate updating with minimum legacy issues. Ability to operate asset classes independently and inter-dependently.
Develop dashboard to deliver project performance metrics and develop quantitative behavior in an inherently qualitative field.
11
Project Management > Corporate and Reporting Structure
ESG Architect and Advisor
Marlys AppletonVP Sustainability Initiatives
Chair, AIGGIG SI
Steering Committee
[15]
AIG BOARD CSR
AIG Office of Environment
and Climate
Martin Sullivan
AIG PRES & CEO
Win Neuger
AIG CIO
AIGGIG CEO
Investment [AIGGIG]
Corporate [AIG]
Sustainability Initiative
12
Integration - What process and approach leads to success
Powerful leadership by CEO of investment unit and leaders in each asset class/business unit
Clarify internal investment manufacturing or decision-making process from the market-facing BD or distribution. Approaches to ESG differ.
Anticipate a range of personal opinions by educated, influential and ego-driven investment professionals.
Anticipate challenges of understanding the investment decision-making process. AIGGIG adopted Six P model from ESG Architect.
Develop staged project, moving quickly to show early wins. Build network of internal advocates and informal network to reflect impact.
13
Integration: The 6P Model
PerformancePrestige
Pitch
ProcessPhilosophy
People
Internal proprietary approach
Understand and interpret ESG influences across investment management
©2007 Sinclair & Company
Delivered to market
Sinclair & Company
14
Simplified Asset Management Architecture
Asset
Class
Manufacturing
Legal/Regulatory Oversight = ComplianceEnterprise Risk Management
Universe/
Disciplines
Investment
Ideas
Valuation
Models
Portfolio
Construction
Buy/Hold/Sell
Decision
Execution
Performance
Evaluation
Review &
Development
Where does the philosophy, process and people integral to AIGGIG’s
approach to investing create opportunities to assess, value and integrate sustainability factors/ESG
inputs?
Environment
Corporate
Governance
Social
Each asset class must map and determine how and where ESG factors may influence the investment management approach, and the steps to make that change happen.
Sinclair & Company
15
Internal Best Practices Model
1. AIGGIG LeadershipIntegrated Strategy ApproachDemonstrate Commitment & FocusIncorporate Sustainability Principles
2. PlanningLegal BasisInstitutional Basis Policy Assessment 4. Monitor/Communicate
•Track Progress Toward Strategies•Understand Sustainability Trends•Learn and Adapt•Feed into AIG Policy
Coordinate with: Budget, Other Strategies, All Levels of Governance
3. Implementation•Accountability•Financing•Mix of Policy/Procedure Initiatives•Process Definition and IT Support•Training/Education
16
Takeaways > AIGGIG Integrating Principles of Sustainable Investment
Why is sustainability valuable for an asset manager?
Engaging talent
Risks and opportunities.
Best practice varies across asset classes, regions.
Seeking new avenues to capture and exploit opportunities.
Develop better inflection points.
What process and approach will contribute to successful integration?
Powerful leadership
Clarify manufacturing from distribution
Anticipate personal opinions and ambitions
Model architecture for ESG
Staging project, momentum.
Leadership required. Articulate and market value to investment professionals. Staged integration. Endurance trumps enthusiasm.
17
AIGGIG SI > Managing a Global Project TeamFortnightly executive sessions at AIGGIG global headquarters, 70 Pine St.Just off Wall St…
18
Thank You
19
Bio
MARLYS APPLETON
Vice President: Sustainability Initiatives
AIG Global Investment Group (AIGGIG)
Ms Marlys Appleton is a Vice President with AIG’s Global Investment Group where she oversees the performance measurement function for Alternatives and Derivatives, and the calculation of option-adjusted risk measures for global fixed income holdings.
In August of 2006, Ms Appleton was appointed to lead the effort to embed principles of sustainable finance, in the form of ESG principles, across the major asset classes of AIGGIG. In 2005, Ms Appleton served as a member of a global task force (Project AIGGIG) charged with looking at business policy issues related to climate change and sustainability . She currently Chairs the Sustainable Investment Steering Committee and Task Force and is executing a work plan agreed upon by senior executive management and developed over a period of some 16 months.
Prior to joining AIGGIG 2001, Ms. Appleton was a Vice President in the Portfolio Analytics Group of BlackRock Asset Management. Before BlackRock, she was a senior fixed income advisor at a privately held interest rate consulting firm started by Professor Thomas S. Y. Ho (author of the pioneering Ho-Lee Model of Arbitrage Free Interest Rates and key rate durations), a firm which was acquired by Barra. At Barra, she continued her work with major insurance companies, asset managers, and broker dealers on implementation, analysis, communication and retention issues for Barra’s risk management applications. Ms. Appleton has worked in institutional fixed income throughout her career, having held positions at Morgan Stanley and Swiss Bank Corporation (now UBS). Ms. Appleton has a BA Economics from the University of Washington in Seattle and received her MS in Management from the Sloan School at MIT in Cambridge
