AIChE Sustainability Index (sm) Benchmark for Industry

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  • These are the new screening criteria Golder proposes based upon available information.
  • These are the new screening criteria Golder proposes based upon available information.
  • AIChE Sustainability Index (sm) Benchmark for Industry

    1. 1. Benchmarking Sustainability for the Chemical Industry: The AIChE Sustainability Index Calvin Cobb Former Chair, Institute for Sustainability Beth Beloff President, BRIDGES to Sustainability Institute Sustainability Consultant, Golder Associates SEF - August 29, 2008
    2. 2. <ul><li>A community of sustainability “practitioners” </li></ul><ul><ul><li>Companies </li></ul></ul><ul><ul><li>Professionals—industry and academic </li></ul></ul><ul><ul><li>Youth </li></ul></ul><ul><li>Organized under the American Institute of Chemical Engineers (AIChE) </li></ul><ul><ul><li>Professional membership organization </li></ul></ul><ul><ul><li>Non-profit 501c(3) </li></ul></ul>The Institute for Sustainability
    3. 3. “ Sustainability is a path of continuous improvement, wherein the products and services required by society are delivered with progressively less negative impact upon the Earth” Defined by AIChE Institute for Sustainability November ‘04-July ‘05 Grassroots Project, Earl Beaver, Chair IFS
    4. 4. Purpose of a Sustainability Index <ul><ul><ul><li>Investment guides </li></ul></ul></ul><ul><ul><ul><ul><ul><li>Ethical investment/SRI </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Long-term return (“stock picks”) </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Stock market indices </li></ul></ul></ul><ul><ul><ul><li>Stakeholder ratings </li></ul></ul></ul><ul><ul><ul><li>Benchmarks for company management </li></ul></ul></ul>
    5. 5. Examples of Financial SI’s Investment Guide? Market Index? Manage-ment Benchmark? Consult to Companies? DJSI     FTSE- 4Good     GS- Sustain     Innovest    
    6. 6. An Example The Dow Jones Sustainability Index (DJSI) <ul><li>Investment guide </li></ul><ul><ul><li>Includes only companies that meet DJSI criteria – governance, transparency, accountability </li></ul></ul><ul><li>Stock market index </li></ul><ul><ul><li>Track market performance of DJSI components </li></ul></ul><ul><ul><li>Subset of corresponding broader indexes </li></ul></ul><ul><ul><ul><li>DJSI World, subset of Dow Jones World Index </li></ul></ul></ul><ul><li>Benchmarking </li></ul><ul><ul><li>Inclusion, being sector leader </li></ul></ul><ul><ul><li>Consulting services through SAM – analysis and recommendations for companies who want to be included, improve ratings </li></ul></ul>
    7. 7. Used for Market Tracking Source: SAM, Dec 2007
    8. 8. Focus of Financial SI’s <ul><li>Dow Jones Sustainability Indices </li></ul><ul><ul><li>Governance, transparency, accountability </li></ul></ul><ul><li>FTSE4Good </li></ul><ul><ul><li>Management and reporting processes commensurate with ESG (environmental, social, governance) risk exposure </li></ul></ul><ul><li>GS SUSTAIN </li></ul><ul><ul><li>“ Stock picks” based on ESG performance, industry positioning, and financial returns </li></ul></ul><ul><li>Innovest </li></ul><ul><ul><li>ESG risk/opportunity assessment </li></ul></ul>
    9. 9. Reporting of Financial SI’s <ul><ul><ul><li>Dow Jones Sustainability Indices </li></ul></ul></ul><ul><ul><ul><ul><li>Inclusion (in or out), ‘Supersector Leaders’ </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Individual company scores & analysis – to licensees only </li></ul></ul></ul></ul><ul><ul><ul><li>FTSE4Good </li></ul></ul></ul><ul><ul><ul><ul><li>Inclusion (in or out) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Individual company scores & analysis – to licensees only </li></ul></ul></ul></ul><ul><ul><ul><li>GS SUSTAIN </li></ul></ul></ul><ul><ul><ul><ul><li>Ratings: leaders, average, and laggards </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Analysis for sector leaders </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>energy, mining & steel, food & beverage, pharmaceutical, alternative energy, environmental technologies, biotechnology </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Innovest </li></ul></ul></ul><ul><ul><ul><ul><li>Top companies – sector leaders & Global 100 list </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Ratings (AAA to CCC) and analysis, for investor clients only </li></ul></ul></ul></ul>
    10. 10. What a Company Can Get from Financial SI’s <ul><li>Dow Jones Sustainability Indexes </li></ul><ul><ul><li>Benchmarking with peers, advisory </li></ul></ul><ul><li>FTSE4Good </li></ul><ul><ul><li>“ Guidance and support” for companies to work towards inclusion in FTSE4Good – through EIRIS </li></ul></ul><ul><li>GS SUSTAIN </li></ul><ul><ul><li>(none specific to sustainability and its ESG analysis) </li></ul></ul><ul><li>Innovest </li></ul><ul><ul><li>“ Confidential custom benchmarking studies” for companies – operational efficiency and business opportunities per peer analysis </li></ul></ul>
    11. 11. <ul><li>Based on the Wright Killen Refinery Survival Index (Oil and Gas Journal) </li></ul><ul><li>Meant to fill a gap: </li></ul><ul><ul><li>Relies more heavily on quantitative performance indicators </li></ul></ul><ul><ul><li>Provides a heavier weighting applied to various indicators of safety and environmental performance and to technological innovation towards SD </li></ul></ul><ul><ul><li>Available to range of sectors, company size </li></ul></ul><ul><ul><li>The scoring: robust methodology designed to account for subjectivity in a transparent manner . </li></ul></ul><ul><li>Designed to avoid the ‘black box’ problem of other indices </li></ul><ul><li>Intended for executives and directors to manage company business lines </li></ul><ul><li>Global, initially focusing on major chemical companies </li></ul><ul><li>Publication remains silent on individual company ratings </li></ul><ul><li>Companies find it useful to benchmark themselves relative to a set of companies </li></ul>Research funded by United Engineering Foundation Concept of the AIChE Sustainability Index TM
    12. 12. Advisory Panel <ul><li>Mission </li></ul><ul><ul><li>to  protect and promote the soundness, credibility and utility of the AICHE Sustainability Index™ </li></ul></ul><ul><li>Advisors: </li></ul><ul><ul><li>International financial community </li></ul></ul><ul><ul><li>Industrial sector experts </li></ul></ul><ul><ul><li>Media </li></ul></ul><ul><ul><li>Non-governmental Organizations (NGO’s) </li></ul></ul>
    13. 13. Status <ul><li>Needs analysis completed in the Fall of 2005 </li></ul><ul><li>Pilot study performed in 2006 </li></ul><ul><li>Launch </li></ul><ul><ul><li>Methodology Published June ‘07 </li></ul></ul><ul><ul><li>Index for Fortune 500 CPI November ’07 </li></ul></ul><ul><li>Additional pilots underway for Engineering Construction and Energy/ Power Sectors underway </li></ul><ul><li>Companies are interested in participating on individual basis </li></ul><ul><li>First industry roundtable on SI – Nov. 19 in Philadelphia </li></ul>Research funded by United Engineering Foundation
    14. 14. Elements of the Index <ul><li>Strategic Commitment </li></ul><ul><li>Safety Performance </li></ul><ul><li>Environmental Performance </li></ul><ul><ul><li>Resource Use </li></ul></ul><ul><ul><li>Waste & Emissions </li></ul></ul><ul><ul><li>Environmental liabilities </li></ul></ul><ul><li>Product Stewardship </li></ul><ul><li>Innovation </li></ul><ul><ul><li>Product and service innovation – meeting social needs </li></ul></ul><ul><ul><li>Process innovation </li></ul></ul><ul><li>Value Chain Management </li></ul><ul><ul><li>EHS Management </li></ul></ul><ul><ul><li>Supply Chain Management </li></ul></ul><ul><ul><li>Stakeholder Engagement </li></ul></ul>
    15. 15. Unique Elements <ul><li>Strategic Commitment </li></ul><ul><li>Safety Performance </li></ul><ul><li>Environmental Performance </li></ul><ul><ul><li>Resource Use </li></ul></ul><ul><ul><li>Waste & Emissions </li></ul></ul><ul><ul><li>Environmental liabilities </li></ul></ul><ul><li>Product Stewardship </li></ul><ul><li>Innovation </li></ul><ul><ul><li>Product and service innovation – meeting social needs </li></ul></ul><ul><ul><li>Process innovation </li></ul></ul><ul><li>Value Chain Management </li></ul><ul><ul><li>EHS Management </li></ul></ul><ul><ul><li>Supply Chain Management </li></ul></ul><ul><ul><li>Stakeholder Engagement </li></ul></ul>
    16. 16. Calculations Use Existing Data Sources <ul><li>Company reports </li></ul><ul><ul><li>Annual Corporate Reports </li></ul></ul><ul><ul><li>SEC 10-K Filings </li></ul></ul><ul><ul><li>Sustainability/EHS Reports </li></ul></ul><ul><li>Government Agencies </li></ul><ul><ul><li>EPA </li></ul></ul><ul><ul><li>CSB </li></ul></ul><ul><ul><li>U.S. Patent & Trademark Office </li></ul></ul><ul><li>Company websites </li></ul><ul><li>Media reports </li></ul><ul><li>Independent NGO reports </li></ul>
    17. 17. AIChE Sustainability Index TM for the Chemical Industry November 2007
    18. 18. Effects of Size
    19. 19. Comparing Sub-Sectors
    20. 20. Drill Down View
    21. 21. AIChE Sustainability Index TM <ul><li>Drills down, but remains broad enough </li></ul><ul><li>Based on public data </li></ul><ul><li>Targeted for managers and corporate executives, not investors </li></ul><ul><li>Focused on </li></ul><ul><ul><li>Environmental – performance metrics </li></ul></ul><ul><ul><li>Safety – performance metrics (workplace, process) </li></ul></ul><ul><ul><li>Product stewardship – mgmt system, history </li></ul></ul><ul><ul><li>Value chain management – mgmt system </li></ul></ul><ul><ul><li>Sustainability innovation – initiatives, tools, results </li></ul></ul><ul><li>Social performance and strategic management also covered </li></ul><ul><ul><li>Less than other indexes </li></ul></ul><ul><li>Benchmarked to peers and best practices </li></ul>
    22. 22. Corporate Subscription Program <ul><li>Annual individual company benchmark reports </li></ul><ul><ul><li>Benchmark sustainability performance to peers </li></ul></ul><ul><ul><li>Comparison of company’s performance to industry best practices </li></ul></ul><ul><ul><li>Third-party feedback on public information on the company </li></ul></ul><ul><ul><li>Provide a reference for sustainability planning and review activities </li></ul></ul>
    23. 23. A Comparison of Scope
    24. 24. How is your Company’s Sustainability Performance Viewed? <ul><ul><ul><li>By the community? </li></ul></ul></ul><ul><ul><ul><li>By your shareholders? </li></ul></ul></ul><ul><ul><ul><li>By your customers? </li></ul></ul></ul><ul><ul><ul><li>Versus your peers? </li></ul></ul></ul><ul><ul><ul><li>The AIChE Sustainability Index TM </li></ul></ul></ul>
    25. 25. Contact <ul><li>Darlene Schuster </li></ul><ul><li>[email_address] </li></ul><ul><li>410-458-5870 </li></ul><ul><li>For subscription information email ifs@aiche.org </li></ul>

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