Adam seitchik


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Adam seitchik

  1. 1. AURIEL CAPITAL MANAGEMENT ESG data and ratings: The good, the bad and the indifferent Adam Seitchik, Ph.D., CFA Auriel Capital TBLI Europe November 2010 EUROPEAN EQUITY FUND RESPONSIBLE INVESTMENT STRATEGIES
  2. 2. AURIEL CAPITAL: FIRM OVERVIEW  Auriel Capital Management was established in 2004 to provide absolute return strategies based on empirical research - Core focus: To combine thoughtful quantitative research with leading portfolio construction & risk management to produce uncorrelated absolute returns - Regulation: Authorised and regulated by the FSA; SEC – registered investment advisor and a designated Qualified Professional Asset Manager (ERISA) - ESG: Research and integrate Environmental, Social and Governance (ESG) into equity platform with focus on return-seeking and risk management EUROPEAN EQUITY FUND 2 RESPONSIBLE INVESTMENT STRATEGIES
  3. 3. UN PRINCIPLES FOR RESPONSIBLE INVESTMENT  As institutional investors, we have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role, we believe that environmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time). We also recognise that applying these Principles may better align investors with broader objectives of society. RESPONSIBLE INVESTMENT STRATEGIES EUROPEAN EQUITY FUND 3
  4. 4. ESG Data & Ratings: The Bad • Voluntary disclosures • Missing data • Inconsistent standards, both within and across companies • Factor biases • Infrequent and lagged updates RESPONSIBLE INVESTMENT STRATEGIES EUROPEAN EQUITY FUND 4
  5. 5. ESG Data & Ratings: The Good • Data providers forcing uniformity • Rating companies focusing on consistency and materiality • Feedback to companies is improving the data • Additive to financial data & ratings • Some mandatory disclosures now RESPONSIBLE INVESTMENT STRATEGIES EUROPEAN EQUITY FUND 5
  6. 6. ESG Data & Ratings: The Indifferent Reuters/Asset4 has 270+ ESG Indicators which aggregate to a single score! Client Loyalty, Economic Performance, Shareholder Loyalty, Resource Reduction, Emission Reduction, Product Innovation, Workforce/Employment Quality, Health & Safety, Training & Development, Diversity & Opportunity, Human Rights, Community, Product Responsibility, Board Structure, Board Compensation, Board Functions, Shareholder Rights, ESG Vision & Strategy RESPONSIBLE INVESTMENT STRATEGIES EUROPEAN EQUITY FUND 6
  7. 7. Focus on financial materiality – Chemicals Example Five key challenges for Chemicals (Eurosif sector report): • Climate change regulation • Resource use • Chemicals of concern in products • Process safety • Marketplace conduct RESPONSIBLE INVESTMENT STRATEGIES EUROPEAN EQUITY FUND 7
  8. 8. AURIEL CAPITAL: ESG Research Process Research on materiality (3-5 year view) Data cleaning, checking and integration Robustness testing Additivity RESPONSIBLE INVESTMENT STRATEGIES EUROPEAN EQUITY FUND 8
  10. 10. AURIEL CAPITAL: DISCLAIMER This document is issued and approved by Auriel Capital Management LLP (“Auriel”), which is authorised and regulated by the Financial Services Authority (the "FSA"). This document may refer to the Auriel European Equity Fund (the "Fund') which is Irish domiciled. This information contained in this document is strictly confidential. The Fund is an Unregulated Collective Investment Scheme (“UCIS”) for the purposes of the Financial Services and Markets Act 2000 of the United Kingdom (the 'Act") and as a consequence its promotion is restricted by law. In addition investors may not have the benefit of the Financial Services Compensation Scheme and other protections afforded by the Act or any of the rules and regulations made there under. This document is a marketing communication and is intended solely for distribution to professional clients, eligible counterparties and those persons to whom the promotion of UCIS is permitted under the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 and COBS4.12 of the FSA’s Handbook. Interests in the Fund will be offered for sale only pursuant to the offering memorandum of the Fund and investment into the Fund may be made solely on the basis of the information contained therein. Any analysis of potential trading strategies is used purely for illustrative purposes and does not represent a recommendation to buy or sell and does not represent Investment advice. The information contained herein does not constitute an offer to sell or the solicitation of any offer to buy or sell securities and or any derivatives and may not be reproduced, further distributed or published by any recipient without prior permission from Auriel Capital Management LLP or Auriel Capital Ltd. The information and opinions contained in this document are for background purposes only and do not purport to be full or complete. Nor does this document constitute investment advice. No representation, warranty, or undertaking, express or limited is given as to the accuracy or completeness of the information or opinions contained in this document by any of ACM, its partners or employees and no liability is accepted by such persons for the accuracy or completeness of any information or opinions. As such, no reliance may be placed on the information and opinions contained in this document. The value of investments and any income generated may go down as well as up and may be affected by fluctuations in exchange rates. Past performance is not necessarily a guide to future performance and there can be no assurance that the Fund's objective will be met. Investors may not get back the amount invested. Please refer to the offering document for further details of the financial commitments and risks involved in connection with investment in such funds. Data sources: Auriel, PFPC, Bloomberg, Thomson Financial, Reuters/Asset4, MSCI/Riskmetrics, EIRIS, Trucost RESPONSIBLE INVESTMENT STRATEGIES 10 EUROPEAN EQUITY FUND