20110606 intro sin_co_f_poa.pptx


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Slidedeck by SinCo for POA Winter 2011 conference covering high-level ESG input and sustainable investment research.

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20110606 intro sin_co_f_poa.pptx

  1. 1. Sustainable Investment Consulting Designing and developing world-class ESG architecture for institutional investment since 2006 graham.sinclair@sinclairconsult.com twitter.com/esgarchitect REGULATORY INFORMATIONNo part of this proposal suggests or should understood to suggest endorsement or advice on any investment approach, strategy or offering. Therights and obligations of the investor are set out in the relevant policy contract. Market fluctuations and changes in rates of exchange or taxationmay have an effect on the value, price or income of investments. Since the performance of financial markets fluctuates, an investor may not getback the full amount invested. Past performance is not necessarily a guide to future investment performance.Designing and developing world-class ESG architecture for institutional investment since 2006 | sincosinco.com ©2011 1
  2. 2. MSCI Emerging Markets Index DRAFT MSCI Emerging Markets Index - Country Market Capitalizations [$ million at 31 December 2010; Total market capitlization: $3,918,577.24; Source: MSCI, May 2011] Brazil Chile China 8% Colombia 16% Czech Republic 2% Egypt 11% Hungary 2% Indonesia 2% India Korea Morocco 6% 17% Mexico Malaysia 2% Peru 1% Philippines 1% 5% Poland 1% 3% Russia 8% 0% Thailand 0% 14% Turkey 2% 0% 0% Source: SinCo analysis, MSCI May 2011. Taiwan South Africa SinCo | Sustainable Investment Consultants | ©2009-2011 2
  3. 3. African Stock Exchanges DRAFT Top 5 African Africa stock exchanges by market capitalization (above USD 10bn) Other Africa stock exchanges Source: Adapted from Jens Shleuniger, Portfolio Manager, EM Equities, DWS Invest Africa, correspondence with authors May 2010. SinCo | Sustainable Investment Consultants | ©2009-2011 3
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  5. 5. Drivers: Performance Impact of ESG Factors 3-10 Years Performance impact of ESG Factors 3-10 YearsDRAFT [n= 97 investors (51 PE investors) + 46 stakeholders; forced ranking 14 answers, very/somewhat/marginally/not important; Jan10-Feb11; SinCo analysis 2010-11] Corporate Governance. 44 37 34 DRAFT DRAFT DRAFT Inf rastructure Development. 31 32 37 Employee Relations, Saf ety and Worker Rights. 29 20 16 Environmental Management 24 17 15 Water scarcity or sanitation. 21 27 31 DRAFT DRAFT Jobs creation [“decent paying” jobs]. 21 22 17 DRAFT DRAFT DRAFT Private Equity - Very Important Human and Indigenous Peoples Rights. 18 16 16 Investors (excluding PE) - Very Product Health, Saf ety and Nutrition Issues. 17 15 12 Important Stakeholders - Very Important Broad-Based Black Economic Empowerment 16 21 8 HIV/AIDS. 13 24 23 DRAFT DRAFT DRAFT DRAFT Emissions of greenhouse gases. 12 13 18 Gender Diversity. 8 12 5 Micro-f inance, micro-insurance. 6 12 11 Biodiversity. 6 9 15 Source: SinCo+RisCura data; SinCo analysis 2011 0 20 40 60 80 100 120 140 Survey results show governance as the ESG factor dominating performance impact – despite differences between investors and stakeholders for issues such as water scarcity of HIV/AIDS. SinCo | Sustainable Investment Consultants | ©2009-2011 5
  6. 6. Drivers: Making Sustainable Investment Attractive DRAFT Perceived Key Drivers to Sustainable Investing in Sub-Saharan Africa open-ended; n= 41 asset owners & managers + 43 PE investors + 43 stakeholders; Jan10-Jan11; Interviews SinCo analysis 2010-11 Asset Owners and Asset Private Equity Stakeholders Managers Good Investment / Financial 35% Good Investment / Financial 44% Good Investment / Financial 37% Returns Returns Returns More Information Available 28% Tangible ESG Benefits / Impact 22% = Tangible ESG Benefits / Impact 28% = Incentives from governments, regulators Incentives from governments, 21% Demand from clients; investor 17% More information available 16% regulators mandate; shareholder pressure Demand from clients; investor 19% Incentives from governments, 12% Proven risk reduction 14% mandate; shareholder pressure regulators Explicit SI/ESG Impact 16% More information available 7% Demand from clients; investor 9% mandate; shareholder pressure Source: SinCo+RisCura data; SinCo analysis 2011 Investments return remain the key driver across all respondent categories. Impact importance varies SinCo | Sustainable Investment Consultants | ©2009-2011 6
  7. 7. Market: Sustainable Investment in 2011 DRAFT Estimated total AUM in sustainability/ESG investment $billions Sub-Saharan Africa, 2010  European Union, 2010 United States of America, 2010 Canada, 2008 Brazil, 2009 Middle East North Africa, 2010 Australasia, 2010 China, 2009 South Korea, 2009 India, 2009 Source: SinCo+RisCura data; SinCo analysis 2011 Market dominated by largest investment markets, Western Europe and North America. SinCo | Sustainable Investment Consultants | ©2009-2011 7
  8. 8. Defining SI: Sustainable Investment Strategies and Methodologies Sustainable investment strategies and methodologies: key terms by SinCo 2011 Investment Theme/Strategy Description Stage Removing companies involved in unethical activities from the investment set, such as the Ethical/religious/ 1 manufacturing of armaments, tobacco, etc. norms-based Screening Only investing in companies that lead their peer groups/industry/sector in ESG performance at a given 2 Positive/best-in-class time. Thematic investing based on trends/risks/opportunities arising from the pursuit of sustainable 3 Sustainability/ESG development. Ideas Investment enabling capital to be allocated to companies/projects that lead directly to sustainable development, new business models, new market segments. Includes community investing and impact 4 Sustainable finance investing. Investment that includes ESG factors in valuations models. Applied to equity, fixed income, PE, andAnalysis 5 Integrated analysis alternative asset classes. Communication and collaboration between investors and management that encourages improvements Constructive 6 to ESG performance. engagement Holding The use of shareholding to launch public campaigns against specific corporate practices. 7 Shareholder activism Go/no-go decision for continued holding of existing portfolio position or 0-100% weighting. Exit 8 Investment exit Source: Graham Sinclair/SinCo 2011; Informed by work of Julie Hudson/UBS 2005; Mike Tyrell et al Citigroup 2008 and others. SinCo | Sustainable Investment Consultants | ©2009-2011 8
  9. 9. ESG-integrated Optimal Active Asset Ownership Asset universe bounded by investment parameters including legal/technical asymptotes Expected returns Liability structure Economic Risk tolerance, ESG risks, and risks for asset (replicating valuation of assets e.g. available risk opportunities classes portfolio) and liabilities capital scenarios Optimal asset allocation Investment policy Investment committee Systemic influence Sell Decision Buy Hold Active ownership
  10. 10. Promoting sustainable long-term investment performance 10
  11. 11. Sustainable investment consulting firm with global practice •  SinCo at a Glance •  Experienced –  Bespoke investment advisory focused on –  Established boutique in Boston in Q4 2006 : sustainable investment architecture Inaugural engagement for Wall St proprietary –  Architect + analysts with support team and third party manager with USD 900bn operating projects with partners in Geneva, AUM, 200 analysts, mutli-asset classes Seattle, London, Nairobi, Washington DC, –  Since 2006, SinCo has delivered sustainable Cape Town, Istanbul investment architecture globally to pension –  Word-of-mouth, below-the-radar approach funds, asset managers and international organizations integrating ESG factors into investment practice. •  Philosophy –  Public projects and confidential “dark” –  SinCo is a boutique investment advisory firm projects for proprietary clients in listed specializing as an ESG investment architect equity, hedge funds, investment product for sustainable investment in frontier and R&D, investment bank derivative emerging markets. instruments, ESG impact metrics. –  SinCo helps clarify questions, design & develop answers, and project manages •  Proven Project Leader thinking into action. –  Multi-year, multi-stakeholder, multi-country –  SinCo promotes answers to sustainability emerging from talent in frontier and emerging projects markets, as well as developed countries. –  Developed framework for 25 country rollout by PRI in EM project As the sustainable investment architect we consider sustainability – environmental, social and governancefactors – are integrated in all investment decisions.Working with SinCo our clients have access to world- class strategy and plans to solve the challenges in making sustainable investment work. 11
  12. 12. Credentials: testimonials for SinCo •  … is an exceptional professional in all that he does. His work is at the crossroads of business intelligence, finance and investments and sustainability. His ability to clarify objectives and execute on solutions has demonstrated the fruitful success of the business case for sustainability. –  Director and Senior Investment Analyst, global institutional asset manager, New York City. •  … served as a strategic adviser to a large US Asset manager as we worked together on developing their sustainable investment strategy. He provided on-going support to their internal team and served as a knowledgeable and helpful sounding board as their staff tried to move sustainability forward –  - Senior Client Relationship Manager, Global ESG ratings and research provider, London •  "For many investors, getting to grips with ESG issues in emerging markets is a top priority. [He] was crucial in encouraging new partnerships in diverse markets..." –  Clean tech private equity fund manager and former Executive Director, ASRIA, Hong Kong. •  … has shown a fantastic drive and commitment to the PRI initiative. He clearly helped promote the ESG thematic to the top of our priorities. –  - Chief Risk Officer, hedge fund-of-funds investment house, Zurich. •  ”… is one of our leading thinkers on SRI. The work that Graham is doing will transform SRI and take it to the next level." –  Managing Director, equity investment manager, Boston. •  "Graham Sinclairs work is excellent." –  Executive Director, billion-dollar global foundation, Philadelphia. 12
  13. 13. About SinCo team •  Graham Sinclair is a sustainable investment strategist, ESG architect and global project leader at SinCo. Graham has eight years specialist experience in sustainable investment globally after eight years in pensions consulting and investment banking in Africa. Recent consulting engagements in sustainable investment include: –  Leading IFC-funded research into private equity and liquid equity ESG strategies in sub-Saharan Africa in South Africa, Kenya and Nigeria to be published in 2011. –  Developing innovative financing mechanisms strategy and ESG index architecture for developed, emerging and frontier markets for a Swiss-based international organization. –  For a global institutional investment firm in New York with a USD 1 trillion AUM portfolio, designing ESG architecture across private equity, liquid and global real estate portfolios covering philosophy and process innovations and investment strategies. –  As consultant to the UN, developed strategy for 25 emerging markets and launched PRI in Emerging Markets project in Q3 2007 for UNEP FI, creating a network infrastructure, building relationships with 108 investor stakeholders including in Africa through 2008. –  Lecturing on ESG in investment strategies at investment practitioner symposia and leading business schools in Europe, Africa and the US. Currently developing case studies on ESG investment in emerging markets for his forthcoming book. •  Before starting his eponymous investment advisory boutique SinCo in 2006, he was Product Manager at KLD Research & Analytics, Inc, based in Boston. He is a former contributor to the CSR Initiative at Harvard Kennedy School, Distinguished Member of Net Impact, alum of WWF One Planet Leaders programme and the Tallberg Forum New Leaders Program. He holds diplomas in retirement funds and insurance law, and in 1998 he was one of the youngest ever dual-FILPAs. He currently leads the AfricaSIF Project building a not-for-profit Africa Sustainable Investment Forum network. •  Graham earned his MBA on scholarship at Villanova University USA where he co-managed the Arnone-Lerer SRI Fund equity portfolio in 2004. He holds a B.Com from the University of Natal and LL.B from the Howard College School of Law as well as numerous industry specialist certifications. 13
  14. 14. About SinCo team Roselyne Yao is an Analyst at the sustainable investment architecture firm SinCo, where she conducts sustainable investment strategy research and analysis. Roselyne joined SinCo in October 2010 as Analyst on the IFC-commissioned research project, Sustainable Investment in sub-Saharan Africa 2010. She previously was a Research Analyst for JPS Global Investments (a California-based money management company focusing on sustainable investing) and an Intern for the Social Research and Advocacy team at Walden Asset Management (a Boston-based socially responsible investing company). Roselyne is also an AfricaSIF Steering Committee member. Roselyne passed the CFA level I exam in June 2009 and plans to sit for the CFA level II exam in June 2011. She holds a Master in Business Administration (with a double concentration in Finance and Marketing), a Certificate in Global Business Culture, and a Certificate of Excellence in Sustainable Management and Technology from the University of Illinois. She currently resides in Dakar, Senegal. Cherie Vale is an [Intern] Creative at SinCo supporting the SinCo team with creative and graphic design projectwork. During her studies she has worked part time photographing Sports, with the main focus in Cycling. Capturing an image is not just simply pressing the button it is how you capture a moment that will tell a story. Through her photography she wants to make a difference in peoples lives and help connect people from different life styles. Cherie attained a Bachelor of Arts Degree in Applied Design specializing in Photography at the Stellenbosch academy of Design and Photography. 14 14