Pri Switzerlandpresentation5 100323194526 Phpapp02


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Pri Switzerlandpresentation5 100323194526 Phpapp02

  1. 1. United Nations Principles for Responsible Investment<br />
  2. 2. oikos PRI Young Scholars Finance Academy 2010:Mainstreaming responsible investment<br />January 31 – February 05, 2010, Gais (Switzerland)<br />On Corporate Strategy:<br />Role of Corporate Environmental Governance and Strategy <br />as Drivers to Company Stock Value Growth<br />Jose Antonio Chaves<br />Candidate at Business School Lausanne<br />
  3. 3. Empirical evidences that ESG policies and strategies <br />can influence Companies Stock Growth<br />E1SGI<br />DJI<br />2003<br />2004<br />2005<br />2006<br />2007<br />Dow Jones Sustainability Europe Composite Index versus Dow Jones Industrial Average Index <br />Source: Yahoo! Finance<br />
  4. 4. Research Main Objective<br />Can High Stock Price Growth % be correlated to the High Level of Corporate Environmental Governance & Strategy?<br />Can Low Stock Price Growth % be correlated to the Low Level of Corporate Environmental Governance & Strategy?<br />
  5. 5. Research Methods and Tools<br />Fundamental Analysis<br />Morphological Analysis<br />Fuzzy Logic<br />
  6. 6. Research Work Steps<br />Testing Hypotheses<br />First Surveys’ Morphological Consolidation<br />Second Surveys’ Morphological Consolidation<br />Early Findings<br />Seminaries<br />Literature Review<br />Fundamentalist Analysis<br />Fuzzy Logic Analysis<br />Conclusions & Final Procedures<br />Seminaries<br />Corporate Papers<br />Industry & Companies Targeting<br />Publication of Papers <br />& Corporate Conferences<br />Benchmarking & ESG Standards Consolidation<br />
  7. 7. Targeted Industries<br />Selected from the 20th<br />Largest Companies by<br />Market Capitalization<br />Leaders<br />Laggards<br />Ranked by Last Five-Year<br />Stock Growth %<br />
  8. 8. Iron & Steel Industry<br />Leaders Stock Price Growth (%)<br />Gerdau<br />Posco<br />Mechel<br />Simec<br />S&P 500<br />Source: interactive platform<br />
  9. 9. Iron & Steel Industry<br />Laggards - Stock Price Growth (%)<br />Arc Mittal<br />Carpenter<br />S&P 500<br />Haynes<br />Worthington<br />China Steel<br />Source: interactive platform<br />
  10. 10. Metal & Mining Industry<br />Leaders Stock Price Growth (%)<br />Vale<br />Southern<br />Cameco<br />Alum China<br />S&P 500<br />Source: interactive platform<br />
  11. 11. Metal & Mining Industry<br />Laggards Stock Price Growth (%)<br />S&P 500<br />HorseHead<br />Alcoa<br />Alumina<br />Palladium<br />Denison<br />Source: interactive platform<br />
  12. 12. Electric Utilities Industry<br />Leaders Stock Price Growth (%)<br />CPFL<br />Eletricidad<br />Enersis<br />Sempra<br />S&P 500<br />Source: interactive platform<br />
  13. 13. Electric Utilities Industry<br />Laggards Stock Price Growth (%)<br />American<br />S&P 500<br />Progress<br />Edison<br />DTE<br />Source: interactive platform<br />
  14. 14. Oil & Gas Integrated Industry<br />Leaders Stock Price Growth (%)<br />Petrobras<br />Hess<br />Suncor<br />China P&C<br />PetroChina<br />S&P 500<br />Source: interactive platform<br />
  15. 15. Oil & Gas Integrated Industry<br />Laggards Stock Price Growth (%)<br />BP<br />Conoco<br />Eni SPA<br />S&P 500<br />Shell<br />YPF<br />Source: interactive platform<br />
  16. 16. Early Findings from ESG Surveys Consolidation <br />McKinsey – Boston College joint Survey <br />Valuing corporate social responsibility<br />238 CFOs <br />127 CSRs and institutional investment professionals<br />December 2008. <br />Source: The McKinsey Quarterly, January 2009 Edition<br />McKinsey Global Survey Results: Valuing corporate social responsibility<br />
  17. 17. Early Findings from ESG Surveys Consolidation <br />Boston Consulting Group – MIT Sloan School of Management<br />The Business of Sustainability: <br />What It Means to Managers Now<br />Interviewed: <br />50 global thought leaders <br />1,500 worldwide executives<br />fall of 2009.<br />Source: MIT Sloan Management Review, Fall 2009. <br />
  18. 18. Early Findings from ESG Surveys Consolidation <br />Some companies does not understand what sustainability is <br /> <br />Making sustainability work is the very challenge <br />Semiotic communication misleading sustainability undertanding<br />There is a visible gap between the sustainability strategy (when it exists) <br />and its execution<br />Managers at all levels don’t know about:<br />The correlations between sustainability risk and financial performance <br />How to track sustainability value from where it is created <br />How it sustainability initiatives are converted into shareholder value <br />How to measure return on sustainability strategy <br />
  19. 19. Next ESG Surveys Consolidation <br />Modeling Investment Strategists Perspective <br />A shareholder value-based survey will be <br />Conducted addressing to capture the <br />Investment strategists perspective.<br /> <br />Consolidation process ends with a morphological <br />analysis seminar - Lausanne, Switzerland.<br />Modeling C-Suite Executives Perspective <br />A shareholder value-based survey will be <br />conducted addressing to integrate C-Suite <br />executives perspective, mainly CEOs and CFOs.<br /> <br />Consolidation process ends with a morphological <br />analysis seminar – Venue to be defined.<br />
  20. 20. Research Perspective: <br />Sustainability Value-Based Strategy<br />ESG Strategy<br />Value-Creation <br />Goals Measuring<br />Executive Compensation Parameters<br />Business Strategy<br />Financial Strategy<br />Shareholder Engagement<br />Investor Strategy<br />IPO, M&A<br />Private Equity<br />Project <br />Finance<br />Divestiture<br />Cash Flow <br />Contribution<br />
  21. 21. Return on Sustainability Strategy Framework<br />Sustainability Value-Based ROI<br />Net Profit & Dividend<br />Valuation Multiple<br />Free Cash Flow<br />Revenue Growth<br />Cost of Capital Reduction<br />Margin Improvement<br />Market <br />Share Growth <br />New <br />Market s Entry<br />Differentiation <br />Price Premium<br />Risk <br />Reputation Premium<br />Market <br />Ratings Grade<br />Operation Cost & Productivity<br />Public <br />Support<br />Image-Based Power Pricing<br />ESG <br />Capex-Opex Modeling<br />Reputation Branding<br />ESG <br />Knowledge Capital<br />Ecotech-Based Products <br />Social-Focused Products<br />Stakeholder Engagement<br />ESG <br />Risk Mapping <br />& Strategy<br />ESG <br />Accounting <br />& Reporting<br />ESG <br />Innovation &<br />Adaptability <br />Value-Chain ESG Risk & Opportunities<br />ESG <br />Long-Term Strategic View<br />ESG <br />Leadership Initiatives<br />. . .<br />ESG Performance Standards<br />Capturing Sustainability Value-Creation Drivers and Levers<br />
  22. 22. Corporate Sustainability-Risk Framework<br />Corporate Sustainability-Risk Map<br />Company’ BI Platform<br />Human Capital<br />Operation Protection<br />Technology<br />Financial<br />Business<br />Continuity<br />Implementation<br />Funding<br />Feasibility<br />Operation<br />Divestiture<br />IPO, M&A<br />Legal & Financial <br />Diligences<br />Organisation & Legal <br />Arrangements<br />Marketing & Sales<br />Project Finance<br />Local Arrangements<br />Plant Building <br />Production<br />Private Equity<br />Global Feasibility<br />Logistics Up & Down<br />Infrastructure <br />Equipment & Facilities<br />Core Business Design<br />Value-Chain Design<br />Domain of the Traditional Risk Management<br />Sustainability-Based ROI Performance Metrics System<br />Domain of Corporate Sustainability-Risk Management<br />Value-Chain Stakeholders<br />Legal & Regulatory<br />Changing Leadership<br />Global-Local Reputation<br />ESG Strategies<br />Benchmarking<br />
  23. 23. Value-Chain Sources of Sustainability Advantages<br />Support Activities & Knowledge Capital<br />Company Infrastructure<br />Sustainability BI & analytics platform; Capex-Opex sustainability-based decisions; Corporate Sustainability Governance Structure <br />Human Capital<br />Creating and internalizing a culture for sustainability; Developing capabilities on sustainability-based management ; Corporate Sustainability Education; Sustainability-oriented Compensation System<br />Margin<br />Innovation and<br />R&D Capital<br />Environmental-based design; Clean technologies development; Environmental material specifications<br />Leadership<br />Capital<br />Promptness and ability to convert Sustainability Strategy into Shareholders/Stakeholders Value; <br />Stakeholder-Based Management Approach; Stakeholder Sustainability Education initiatives<br />Corporate Sustainability Mainstream<br />Life-cycle process<br />Corporate image <br />& reputation<br />Responsible suppliers, Distributors & outsourcers<br />Carbon & Water Footprint<br />Stimulating less-harmful material safe storage, transportation , packaging and waste disposal<br />SV-B ROI<br />Stimulating ethical and anti-corruption competing practices, fraud prevention, striving for upstream-downstream ESG internationally acceptable standards adoption<br />Upstream <br />Logistic & <br />Supply Chain<br />Primary Activities<br />Inbound <br />Logistic & Operations<br />Downstream <br />Logistic & Channels<br />Marketing <br />& Sales<br />End-Cycle <br />Services<br />
  24. 24. Corporate Sustainability Strategy Plan Framework<br />Benchmarking<br />Goals Setting<br />Financing-Based ESG Risk Assessment<br />Corporate Sustainability-Risk Strategic Mapping<br />ESG Legal & Compliance Framework<br />Project Financing-Based ESG Assessment<br />Stakeholder-Based Management<br />Investor-Based Management<br />External Impacts Measuring and Accounting<br />Risk Strategy<br />Risk Strategy<br />ActionPlan<br />Governance Framework<br />Detailing & Métrics<br />Goals’ Detailing <br />& Metrics<br />Sustainability<br />Value-Based <br />ROI<br />Balanced ScoreCard<br />Framework<br />Sustainability Perspective<br />Business Drivers<br />Dashboarding<br />Implementation & Monitoring<br />Business Strategy Goals<br />Business Perspective<br />Shareholders Engagement <br />Stakeholder <br />Engagement <br />Stakeholders Engagement <br />Corporate Finance Goals<br />Finance <br />Perspective<br />Sustainability<br />Communication <br />Communication <br />Competitive Scope<br />Investor-Based Management Goals<br />Shareholder Perspective<br />Sustainability <br />Reporting<br />Reporting<br />Creating and Internalizing the Culture of Corporate Sustainability <br />
  25. 25. Knowing a Sustainable Company from looking within<br />Managers at all level naturally consider sustainability initiatives as part of their job;<br /> <br />Corporate strategy includes ESG goals and makes money from that;<br /> <br />Sustainability goals are detailed, quantified and monitored;<br /> <br />Sustainability performance is attached to financial performance; <br /> <br />Managers are rewarded for its sustainability performance;<br /> <br />Changing management terminology: accountability, environmental accounting, shareholder engagement; water and carbon footprint; reputation management, etc.;<br /> <br />Company regular partnership with outside stakeholders;<br /> <br />New products originated from environmental and social initiatives.<br />
  26. 26. Knowing a Sustainable Company from an External Perspective<br />Improve and enhance accountability, transparency and investor trust;<br /> <br />Evolve corporate risk-management to a corporate sustainability platform perspective;<br /> <br />Identify and explore in the entire value-chain new sources of competitive advantage by differentiation throughout ESG innovative product and service development;<br /> <br />Assure capital markets prime access by sustainability governance standards achievement;<br /> <br />Outperform shareholder’s ROSS – Return on Sustainability Strategy;<br /> <br />Create visible, measurable, reportable and communicable ESG value for all stakeholders;<br /> <br />Measure reputation in terms of cost of capital, exports revenue increases and brand value;<br /> <br />Develop the best practices on knowledge and talent capital attracting and retention.<br />
  27. 27. Jose Antonio Chaves<br />Doctor of Business Administration Candidate at <br />Business School Lausanne, Switzerland<br />Thesis Advisor<br />Dr Alkis Tsiklis, Professor at the Business School Lausanne, Switzerland<br /> <br />Thesis Co-Advisor<br />Dr Katrin Muff, Dean at the Business School Lausanne, Switzerland<br /> <br />Advisory Committee<br />Dr Laércio Couto, Adjunct-Professor at the University of Toronto, CA<br />Dr Carlos Alberto Nunes Cosenza, Professor Emeritus at the Federal University of Rio de Janeiro, BR<br />Business School Lausanne<br /><br />Av. Dapples 38 - P.O. Box 160 - 1001 Lausanne - Switzerland <br />Phone: +41 21 619 06 06 – Fax: +41 21 619 06 00 – <br />Email:<br />Jose Antonio Chaves<br />Rua Carvalho de Almeida, 48 Apto 23 – Cidade Jardim<br />CEP 30380-160 – Belo Horizonte – MG – Brazil<br />Phone: +55 31 3231-4688 - Mobile: +55 31 9312-4688 <br />Email:<br />