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"Approaches to ESG integration: An investor's perspective" - Investors' perspectives on ESG (pension funds, endowments) - The importance of building a defined culture to drive the ESG agenda - Addressing ESG issues as a central part of driving returns and mitigating risk in investments - Selected case studies TBLI CONFERENCE™ NORDIC 2014 Our first ESG & Impact Investing conference in the Nordic region, hosted by the BI Norwegian Business School in Oslo. For 2 days, the conference offered a platform to learn about current trends in sustainable investing and CSR in the Nordic region – and ample opportunity to find new business partners. Unique to this event, selected entrepreneurs have been invited to present their innovative green technology and climate change related projects to the investor community.
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Approaches to ESG integration:
An investor's perspective
TBLI CONFERENCE NORDIC 2014 - Oslo, September 10th 2014
Frode Strand-Nielsen
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FSN Capital’s organisation
Thomas Broe-Andersen Partner
Stockholm
København
Oslo
Frode Strand-Nielsen Managing Partner
Knut Kjaer Chairman
Henrik Lisæth Partner
Peter Möller Partner
3 offices 21 investment professionals
EUR 1,1 bn under management
Ulrik Smith
Partner Erik Nelson
Partner
Morten Welo COO
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Who are our ultimate clients?
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“We are decent people making a decent return in a decent way” By decent people we mean that we are trustworthy individuals that behave with integrity
Making a decent return means generating alpha return, i.e. a risk adjusted return which is significantly higher than what our investors can achieve by investing in public market index funds
Generating this return in a decent way means that we operate according to the internal code of conduct we have developed and that we implement similar code of conduct in our portfolio companies and that we adhere to the UN Principles for Responsible Investment
FSN Capital - Ethos
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ESG risk included in FSN Capital’s Risk Framework
FSNC risk categories
Cyclicality FX Commodity
MACRO
Political Competitiveness Substitution
INDUSTRY
WEATHER
Operating leverage Concentration Visibility
COMMERCIAL
Management risk Integration risk Internal / External
OPERATIONAL
Liquidity Leverage Covenants
FINANCIAL
EXIT
Majority shareholder Ultimate control
ACTIVE OWNERSHIP
Multiple sustainability Marketability Dependency on trend shift
Toxic emissions Harmful industrial waste Deforestation
ENVIRONMENTAL
Labor conditions Forced / child labor Harm to health and safety
SOCIAL
Bribery / Fraud Political interference Criminal convictions Regulatory relations
GOVERNANCE
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In 2012, a comprehensive CSR program was implemented and is currently an ongoing process in PM Retail
Internal (PM Retail ) External (Asian Suppliers)
Access to best practices &
advice
Tool for risk analysis
Training for PM team
Review of 46 suppliers
Explained CSR program to suppliers
Factory visits in China
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* +90% response rate
Employee satisfaction*
5.0
4.9
4.8
4.7
0.0 2011
5.00
2010
4.77
2009
4.64
Loyal, satisfied staff is the premise for loyal customers
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"How likely are you to recommend your current service provider to a friend?"
Net Promoter Score (NPS) % Promoters % Detractors
10 9 8 7 6 5 4 3 2 1 0
Passive
"On a scale 0-10, how likely is it that you would recommend company x to a friend or colleague?"
=
9%
22%
29%
40%
0%
10%
20%
30%
40%
CWT American express HRG Via Travel
Promoters 40% 29% 22% 18%
Passive 60% 71% 78% 73%
Detractors 0% 0% 0% 9%
Source: Bain customer interviews 2011
VIA Travel has the highest Net Promoter Score, implying high customer loyalty compared to competitors
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Market share Nordics**
* Recurring EBITDA ** Bain Customer interviews
VIA Travel – doubling market share, mostly organically
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EBITDA 2005-2011
VIA Travel – almost tripling EBITDA, mostly organically
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Sustainable lighting solutions
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Sustainability is fundamental to our long-term business success
2012 Introducing LED & Solutions
2015 Sustainability incorporated
Value proposition: • Long life lamps • Lower replacement and
maintenance costs • Less Mercury
2006 Long life lamps
Value proposition: • 30-50% energy savings • 60% maintenance savings • No mercury
Value proposition: • 80% energy savings • 75% Maintenance savings • CO2 reduction certificates
• 19% of chemicals containing substances from the PRIO list has been phased out
• 66% of our total waste is recycled • 100% green electricity
• 40% of chemicals containing substances from the PRIO list are phased out from production
• More than 95% of all waste is recycled
Sustainability goals
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LED transformation continues to be the focus
LED + Solutions sales as a % of total sales
41%
14%14%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
LED & Solution sales As % of total sales
26%
July
Q
2-14
Q1-
14
15%
Q4-
13
Q3-
13
Q2-
13
Target
Key Retail Customers
Aura Light passed its long term target of 25% LED in Q2
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We won an award for sales growth from Frost & Sullivan and awards for our sustainability initiatives in 2013 and 2014
Frost and Sullivan EU growth award Highest Sales CAGR 2010-2012 among lighting
equipment companies
The Millicom Award For Environmental & Corporate Sustainability
News, Friday, September 5, 2014
Aura Light awarded for sustainability in European Business Awards
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We launched a sustainability report and became an ‘Accredited Supplier’ by Carbon Trust
Suitability report ‘Accredited Supplier’ by Carbon Trust
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In 2014, Prof. Krishna Palepu from Harvard Business School wrote a case study on Aura
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Aura Light continues to outperform the market
Sales Increase (%) (2012-2013)
Lighting Industry Average
Sales Per Employee ($)
Pre-tax profit margin (2013)
13%
$368,000
12%
0.5%
$280,000
3.9%