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3iG International Interfaith Investment Group
 

3iG International Interfaith Investment Group

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    3iG International Interfaith Investment Group 3iG International Interfaith Investment Group Presentation Transcript

    • 3iG International Interfaith Investment Group TBLI Faith Consistent Investment Seminar New investments for the Faiths: opportunities or sources of conflict? Mark Campanale, 3iG, Member of Advisory Board Thursday 9 November 2006
    • 3iG International Interfaith Investment Group
      • Approaches to SRI
      • Growth across Europe
      • Mission/faith consistent investment
      • Investing in social value creation
    • Wide range of SRI providers and approaches
    • Sustainable and responsible investment (SRI)
      • Europe characterised by four concurrent SRI agendas:
        • Negative screening
        • Thematic investing, characterised by investments in businesses with direct social or environmental benefit
        • Shareholder accountability strategies,
        • CSR/sustainability/enhanced analytics analysis – the business case
      • Institutional investors typically focus on ‘the business case’ or engagement strategies
      Grappling with different agendas 3iG International Interfaith Investment Group
    • European SRI retail market: number of SRI funds Source: Avanzi SRI Research / SiRi Company (2005) From the period of 1980-2005 (as of 30 June 2005) 3iG International Interfaith Investment Group
    • Total European SRI funds under management Source: Avanzi SRI Research / SiRi Company (2005) Note: The total amount of SRI assets grow by about 27%, from €19bn at mid 2004 to €24.1bn at the end of Q2 2005 SRI assets grow by 27% from 2004 - 2005 € Billion 3iG International Interfaith Investment Group
    • Cash Public Equity Fixed Income Cash Private Equity Guarantees Senior Loans Subordinated Loans Grant Support Market-Rate Investments Below-Market Investments Equity “ Should a private foundation be more than a private investment company that uses some of its excess cash flow for charitable purposes? ” Luther Ragin Mission related investment continuum The F.B Heron Foundation – lessons Source: FB Heron Foundation,Skoll.EVPA/ACF Seminar 8 th September 2005 3iG International Interfaith Investment Group
    • Public Equity Market-Rate Investments Below-Market Investments Long history of “socially-screened” stock investments and proxy activity: - Avoiding the bad - Investing in the good - Turning the bad into the good Mission related investment continuum How tight is the fit with values or mission? 3iG International Interfaith Investment Group
    • Which investments can align with values? MSCI World Index: mega corporations dominate index Source: FactSet Pirce/Henderson Global Investor, data as at 8 March 06 Top 10 US traded companies from the MSCI World Index Exxon Mobil Corp. 2.7 General Electric Co. 2.6 Microsoft Corp. 2.1 Citigroup Inc. 1.7 Bank of America Corp. 1.5 Procter & Gamble Co. 1.4 Pfizer Inc. 1.4 Wal-Mart Stores Inc. 1.4 Johnson & Johnson 1.3 American International Group Inc. 1.3 3iG International Interfaith Investment Group
    • Which investments can align with values? MSCI World Index: mega corporations dominate index Source: FactSet Pirce/Henderson Global Investor, data as at 8 March 06 Top 10 European traded companies from MSCI World Index BP PLC 2.6 Royal Dutch Shell PLC (A & B Shares) 2.4 HSBC Holdings PLC 2.2 Total S.A. 1.8 GlaxoSmithKline PLC 1.7 Novartis AG 1.7 Vodafone Group PLC 1.5 Sanofi-Aventis S.A. 1.3 Nestle S.A. 1.3 ENI S.p.A. 1.3 3iG International Interfaith Investment Group
    • Which investments can align with values? FTSE 100 82.4% Mining – 5.6% Pharma – 7.6% Oil & Gas – 15.9% Banks – 16.6% FTSE All Share: top ten stocks dominate UK index Source: FactSet Pirce/Henderson Global Investor, data as at 11 Jan 06 Top 10 UK Companies equal 41.7% of total BP £133.4bn Royal Dutch Shell £126.7bn HSBC £107.7bn GlaxoSmithKline £86.4bn Vodafone £81.9bn Royal Bank of Scotland £57.8bn AstraZeneca £46.1bn Barclays £40.7bn HBOS £37.0bn Anglo American £30.5bn Rest of – 17.6% Index 3iG International Interfaith Investment Group
    • Equities-based faith consistent investment
      • An equities portfolio can be an extension of mission
      • Its what companies <do> that counts
      • Foundations have different areas of focus
        • Alignment can be around a social benefit agenda e.g health & education
        • Can also focus on poverty alleviation e.g access to finance or suitable housing
        • Or a broad sustainability agenda
      • Some Foundations have focused on one sector, e.g healthcare technology or cleantech
      • Foundation’s traditional investments are diversified, so an MRI strategy ought to be diversified
      Knowing where to look on stock markets 3iG International Interfaith Investment Group
    • Mainstream classification methodology
      • Researchers focused on total universe of 50,000+ and sought companies in specific mission aligned sectors
      • 4,765 stocks in our mission aligned universe have a total market cap of US $4.7 trillion
      Researching companies aligned with values Source: Henderson Global Investors Note: As at 31 December 2005 3iG International Interfaith Investment Group
    • Mission or values as an investment theme 4,765 stocks in 10 mission aligned themes 3iG International Interfaith Investment Group Industries of the Future Health Knowledge Quality of Life Safety Social Property & Finance Sustainable Transport Environmental Services Efficiency Cleaner Energy Water Management
      • Cleaner Energy Sources of energy that combat the effects of global warming, increase the use of renewable energy and help pave the way to a hydrogen economy
      • Efficiency Products and processes that reduce energy consumption, make more efficient use of resources and increase efficiency in business
      • Environmental Goods and services that improve the quality of the environment and reduce pollution Services and waste
      • Health Goods and services that help people live longer, healthier lives
      • Knowledge Supplying educational goods and services that enhance quality of life and improve opportunities for full-time students and those in employment
      • Quality of Life Goods and services that promote sustainable lifestyles among all age groups, including children and the elderly
      • Safety Minimising the risk of safety incidents at work, at home and in the community
      • Social Property Providing property for social benefit, access to housing, regeneration, and better &
      • and Finance wider access to financial services
      • Sustainable Transport Shifting to less polluting forms of transport, and cleaner transport technologies.
      • Water Management Managing and conserving water, and minimising pollution
      Ten Investment Themes Investment opportunity in a sustainable world 3iG International Interfaith Investment Group
    • Cleaner energy – stock example
      • Unique process for manufacturing solar cells
      • Process requires up to 50% less silicon in manufacture than existing methods
      • Undertook joint venture with QCells in Germany to prove manufacturing process
      Evergreen Solar Inc. 31 December 2002 to 31 December 2005 Evergreen Solar (US) Source: FactSet Pirce/Henderson Global Investor data as at 31 Dec 05 3iG International Interfaith Investment Group
    • Healthcare - stock example
      • Supplier of hearing aid products and services, selling over 500,000 in 2004
      • Amplifon is well-positioned to benefit from ageing populations, growing noise pollution and the application of digital technologies
      Amplifon 31 December 2002 to 31 December 2005 Amplifon (Italy) Source: FactSet Pirce/Henderson Global Investor data as at 31 Dec 05 3iG International Interfaith Investment Group
    • Social finance - stock example
      • Provides free impartial advice and appropriate debt management solutions to individuals with debt problems
      • IVA’s are an alternative to bankruptcy, enabling debtors to repay a proportion of their debts whilst avoiding potential financial exclusion
      Debt Free Direct plc Debt Free Direct 31 December 2002 to 31 December 2005 Source: FactSet Pirce/Henderson Global Investor data as at 31 Dec 05 3iG International Interfaith Investment Group
    • Quality of Life - stock example
      • Child care is a growth market in Australia and ABC Learning provides 644 centres
      • ABC Learning provides day care for children between six weeks and five years old
      • From 1999 and 2002, children using child care increased by 27% to 732,100. By 2004 this figure had risen to 752,800.
      ABC Learning Centres (Australia) ABC Learning 31 December 2002 to 31 December 2005 Source: FactSet Pirce/Henderson Global Investor data as at 31 Dec 05 3iG International Interfaith Investment Group
    • Performance and risk
      • Investment portfolio in the educational, healthcare, social housing or environmental sectors can be aligned with social value creation
      • Investment risk has to be carefully managed
        • Business profitability-test – do these businesses make money?
        • Valuations relative to the stock market (typically p/e) – buy or leave alone?
        • Sector relative valuation – is it expensive compared to other businesses?
      • Social investing is still investing…. it is not philanthropic works, even though it is more closely aligned.
      Aligning with values generates new investment ideas 3iG International Interfaith Investment Group
    • Appendices
    • Back tested performance of the 10 themes Note: FactSet Pirce in USD /Henderson Global Investor Data as at 31 December 2005 Market Cap Weighted Median vs MSCI World Index 1 year 2 year 3 year 4 year 5 year 6 year MSCI World Index 10.0 26.8 69.6 36.5 13.9 -0.8 Cleaner Energy 8.0 32.7 59.8 69.3 59 59.7 Efficiency 19.4 41.6 126.5 79.9 42.8 30.2 Environmental Services 16.1 34.7 88.2 139.6 187.2 201.9 Health 15.9 37.6 92.8 52.2 45.0 115.4 Knowledge -2.2 12.0 46.9 15.7 -11.2 -13.6 Quality of Life 18.0 60.0 115.6 69.7 66.1 29.9 Safety 14.1 27.5 52.4 4.1 0.72 -24.2 Social Property & Finance 7.7 37.4 115.5 106.9 127.6 139.3 Sustainable Transport 19.7 35.1 90.0 61.2 55.5 52.9 Water Management 18.1 56.8 81.8 45.4 31.1 76.6 Total Number of Stocks 4765 4558 4344 4087 3791 3326 Total Weighted Median 12.2 33.5 90.0 59.6 43.4 56.6 3iG International Interfaith Investment Group
    • When SRI funds perform Top eco-funds posted average one year return of 39 percent * For the 12 months ended on May 31. Includes assets of at least $50 million. Returns calcuclated in US dollars. Source: Bloomberg 3iG International Interfaith Investment Group 32.2 UK Jupiter Asset Management Jupiter Ecology Fund 32.7 Luxembourg Activest Investmentgesellschaft Activest EcoTech 33.9 Luxembourg Vontobel Fund Advisory Global Trend New PowerTech 35.9 Japan Sompon Japan Asset Mgmt Sompo Japan Green Open 36.1 Israel Altshuler Shaham Mutual Funds Altshuler Shaham Green 38.6 USA Winslow Mgmt Winslow Green Growth 40.1 Ireland Impax Asset Mgmt Impax Environmental Markets Fund 41.2 Luxembourg Sarasin Investmentfonds New Energy Fund 44.1 Japan Nikko Asset Mgmt Nikko Eco Fund 50.9% France Financiere de Champlain Performance Environnement 1 year return* Country Management Company Fund Name
    • FTSE All Share Market Source: Datastream (total returns) to end May 2006 When SRI doesn’t perform 3iG International Interfaith Investment Group Top 5 FTSE All Share sectors over 1 year 82.1% Mining 75.6% Industrial Metals 58.0% General Industrials 21.3% FTSE All Share 48.9% Chemicals 55.9% General Financial Bottom 5 FTSE All Share sectors over 1 year 21.3% FTSE All Share 1.7% Food Producers -6.8% Leisure Goods -11.4% Healthcare equipment & services 4.4% Software & Computer Services 3.1% Telecoms Top 5 FTSE All Share sectors over 3 years 400.8% Industrial Metals 200.4% Mining 149.2% Aerospace & Defence 63.3% FTSE All Share 127.3% Construction & Materials 145.0% Real Estate Bottom 5 FTSE All Share sectors over 3 years 63.3% FTSE All Share 26.3% Non-life Insurance 23.8% Telecoms 10.8% Leisure Goods 32.3% Software & Computer Services 30.3% Food Producers
    • Worlds largest SRI Managers Source: Capital Bridge, as at 29 June 2006 Asset managers % of total business 3iG International Interfaith Investment Group 9.1 1,200.6 13,260.0 Dexia Asset Management Belgium 1.9 779.8 40,774.2 The Drefus Corporation 80.7 841.4 1,042.5 Hunter Hall Investment Management 22.6 862.4 3,814.7 Bridgeway Capital Management Ltd 0.6 903.7 152,039.8 Capital Guardian Trust Limited 97.5 1,076.5 1,076 Parnassus Investment. 2.8 1,144.0 40,707.3 Delaware Investment Advisors 22.0 1,252.2 5,693.8 Atlanta Capital Management Ltd 93.1 1,346.0 1,445.5 Pax World Management 7.7 1,487.6 19,269.9 Daiwa Asset Management Company Ltd 4.6 1,580.6 34,174.1 Henderson Global Investors 0.4 1,870.8 465,994.9 State Street Global Advisors 4.3 2,031.3 46,915.1 F&C Asset Management PLC 3.0 5,030.8 1668,812.4 TIAA-CREF Investment Management, Inc. 44.1 7,672.6 17,4115 Ariel Capital Management, LLC % SRI SRI Funds $m Total Equity Owned Sm Firm
    • Ethical Investor Analysis - motivation Base: Variable base for each factor (average across all = 1,414)
      • Respondents concerned about returns, but not overly
      • Shareholder advocacy is of greatest importance
      Importance of factors influencing investment in Henderson Ethical Fund Reasons for Investing
    • Ethical Investors – their views on the future
      • Many of the issues revolved around the developing world
      Respondents were asked to state which issues are likely to give rise to social dilemmas in the 21st century 100 2,479 Total number of mentions 4 88 America 4 89 Terrorism/Security 4 92 Non-Renewable Energy Sources 4 103 Fairtrade 5 116 Human Rights 5 118 Global Warming/Climate Change 5 126 Wealth Distribution 7 171 Water 9 216 Genetic Engineering/cloning/GM % Total Mentions Number of Mentions Area of Concern Top 20 Respondent Concerns for the Future
    • Advisory Council Member, 3iG Education : York University BA (Hons) Politics and Economic History Wye Agricultural College, London University MSc Agricultural Economics Career : 1985 Environmental Consultant EC, ERM, World Vision, Band Aid/Live Aid 1989 Jupiter Asset Management SRI Investment Analyst 1994 NPI Asset Management Ltd SRI Investment Analyst 1996 NPI Asset Management Ltd SRI Investment Marketing Manager Mark Campanale 1999 Henderson Global Investors SRI Investment Marketing Manager 2001-2006 Henderson Global Investors Associate Director of SRI Business Development Contact: mark@campanale.co.uk