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RepRisk AG, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark.
RepRisk ESG Business Intelligence An ESG risk analyst’s view on the extractive industries in Latin America
TBLI Latin America, Buenos AiresMay 29, 2015
Tamara Melina Tisminetzky, ESG Research Analyst, RepRisk [email protected]
Agenda
About RepRisk
My job as a RepRisk ESG research analyst
Extractive industries: the external view
Main ESG issues for the extractive industries in Latin America
2
About RepRisk
RepRisk is a leading business intelligence provider on ESG risks
Global research and business intelligence provider specializing in dynamic ESG risk analysis and metrics
Founded in 1998 as environmental risk consultancy
Launch of RepRisk ESG database in 2006 as a due diligence tool and early warning system for the financial sector
Today, runs most comprehensive database on ESG risks related to companies, projects, sectors and countries worldwide
Data used by global banks, insurances, asset managers and multinationals for risk management, compliance, supply chain, as well as monitoring reputation, peers, NGOs and issues
4
Headquarters and Analyst Hub
Analyst Hub
Headquarters in Zurich and over 40 risk analysts in North America, Europe and Asia
LondonZurich
Bishkek
Manila
Seoul
Tampa
Washington DC
Montreal
Stockholm
Tokyo
Brussels
Beijing
5
Vienna
Research partner: Ethix
Research partner: JRI
Milan
Research partner: SRQ
Amsterdam
Buenos Aires
RepRisk’s broad language coverage supports the early identification of risks
German
Dutch
English
French
Korean
Portuguese
Spanish
Danish
Finnish
Norwegian
Chinese
Italian
Japanese
6
Russian
Swedish
RepRisk serves over 100 global clients, helping them to manage and mitigate ESG risks
7
8
RepRisk partners with key sustainability index providers and initiatives to advance ESG issues
More coming in 2015…
My job as a RepRiskESG Research Analyst
Big data: How can we help to navigatethe endless stream of open-source intelligence?
10
Source: cloudtimes.org
My job is to analyze stakeholder data to support transparency and informed decision-making
Print media
NGOs
Blogs
Think tanks
Gov’t agencies
News sites
Newsletters
Extracting relevant ESG risk information that supports informed decision-making
Risk-based approach:Criticism, negative incidents,
violation of international standards, controversies
+80,000 sources in 15 languages
11
RepRisk follows a strict, rules-based approach to capture ESG and reputational risks
1. Screen2. Identify3. Filter4. Analyze5. Quantify
12
Projects
Sectors
Companies
Issues
Gov’t bodies
Countries
NGOs
Topic Tags
Reputational and ESG
Risks
+12,000
All sectors
+50,000*
28 ESG issues
+7,000
All countries
+9,000
36 ESG Topic Tags
* Approx. 37,000 privately-held; 13,000 publicly-traded
Daily 5-step rules-based
process
RepRisk’s scope of 28 ESG issues guides the risk screening and identification process
Environmental Social Governance
Environmental Footprint
CommunityRelations
Employee Relations
Corporate Governance
Global Pollution (Inc. Climate Change and GHG Emissions)
Human rights abuses, corporate complicity
Forced labor Corruption, bribery, extortion, money laundering
Local pollution Impacts on communities Child labor Executive compensation
Impacts on ecosystems and landscapes
Local participation issues Freedom of association and collective bargaining
Misleading communication, e.g., “greenwashing”
Overuse and wasting of resources
Social discrimination Discrimination in employment
Fraud
Waste issues Health and safety issues Tax evasion
Animal mistreatment Poor employment conditions Tax optimization
Anti-competitive practices
Controversial products and services
Product-related health and environmental issues
Violation of international standards
Violation of national legislation
Supply chain
13
Note: All 10 Principles of the UN Global Compact map to
RepRisk’s ESG scope
OECD Guidelines for Multinational Enterprises
Universal Declaration of Human Rights
RepRisk selects, defines and assesses ESG issues in line with key international standards
The Equator Principles
UN Convention Against Corruption
ILO Conventions
World Bank Group (IFC) Performance Standards
World Bank Group Environmental, Health and Safety Guidelines
United Nations Principles for Responsible Investment (UN PRI)
14
United Nations Global Compact (UNGC)
RepRisk’s scope also includes 36* Topic Tags –specific ESG “hot topics” and themes
Agricultural commodity speculation
AlcoholAnimal
transportation
Automatic weapons
Cluster munitions
Coal-fired power plants
Conflict minerals
DiamondsEndangered
speciesForest burning Fracking
Genocide/ethnic cleansing
High conservation value forests
Illegal loggingIndigenous
people
MonoculturesMountaintop
removal miningNegligence Nuclear power
PornographyPrivacy
violationsProtected areas Sea-bed mining
15
* An additional 4 Topic Tags will be added by June 2015: Hydropower (dams); Migrant labor; Predatory lending; Tax optimization
Abusive/illegal fishing
Arctic drilling
Deep sea drilling
Gambling
Land grabbing
Oil sands
Tobacco
Asbestos
Depleted uranium
munitions
GMO
Landmines
Palm oil
Water scarcity
Risk incident
RepRisk’s analysis process is strict and rules-based, ensuring consistent data over time
16
1st level analyst
Identification and filtering
2nd level analyst
Analysis and summary
Senior analyst
Print media
News websites
NGOs
Blogs
Think tanks
Gov’t agencies
Newsletters
Screening
Risk incident
Risk incident
Risk incident
Risk incident
Key criteria: In scope? Is it a risk? Severity threshold
Analysis parameters: Reach of source Severity Novelty
Incidents added only once unless there is: Story development Source escalation Reoccurrence after
6 weeks
Published in database
Quality assurance
Database grows daily as new risk information is screened, identified and analyzed
Risk incidents linked to relevant
entities
Risk incident
Risk incident
Risk incident
Risk incident
Projects
Sectors
Companies
Issues
Gov’t bodies
Countries
NGOs
Topic tags
Entities in database* RepRisk coverage Database growth
+12,000
All sectors
+50,000**
28 ESG issues
+7,000
All countries
+9,000
36 Topic tags
+7 per day
+10 per day
+2 per day
+2 per day
Added based on client requests
17** 37,000 privately-held; 13,000 publicly-traded
* Each entity has its own Profile Page, with both qualitative and quantitative data
After analysis, ESG risk exposure is quantified using the RepRisk Index (RRI)
The RRI is a proprietary algorithm that quantifies reputational risk exposure related to ESG issues
Calibrated from 0-100, it is a metric available for companies, projects, sectors and countries
Calculated as a function of severity, reach and novelty of the risk incidents, as well as the number and timing of the incidents
18
Quantification
Current RRI: current level of criticism Peak RRI: highest level of risk exposure
over the last two years RRI Change: change over the last 30 days
3 key RRI metrics
Extractive Industries:The external view
Two megatrends: Increased stakeholder attention and transparency amplify ESG issues
20
Increased and rapidly changing stakeholder expectationsEnvironmental, social and governance
(ESG) issues have evolved from tangential importance to material
relevance over the last decade
Increased transparency and disclosure
The internet and social media create a hyper-transparent and hyper-connected
world, which serves to amplify stakeholders’ expectations about ESG issues
Financial risksReputational risksCompliance risks
E.g. Direct impact on cash flows and capital, including credit or investment risks, business continuity, etc.
E.g. Risks to earnings and capital from adverse
public perception
E.g. Violation of policies, commitments, international standards
A new business imperative: ESG risks can translate into bottom-line impacts
21
Environmental, social and governance (ESG) risks
E.g. Environmental degradation, human rights abuses, corruption and fraud
Country-Sector Analysis
22
Most exposed projects in the extractive industries sector
23
Main ESG issues for the extractive industries in Latin America
Key ESG Issues
25
Key ESG Topic Tags
26
RepRisk AGStampfenbachstrasse 428006 ZurichSwitzerland
Tel: + 41 43 300 54 40Fax: + 41 43 300 54 46Email: [email protected]