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Aldo bonati

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Head of Research Department - ECPI Milan - Italy

Head of Research Department - ECPI Milan - Italy
ESG Investing: Opportunities in Emerging Markets

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Aldo bonati Aldo bonati Presentation Transcript

  • EARTH CAPITAL PARTNERS TBLI Better structure allows for better distribution 11 th November 2010, London
  • CONTENTS
    • Where have we come from?
    • Drivers Behind Sustainable Investment
    • Platform & Products
    • Investment focus
    • Integration of Environment, Social & Governance (ESG)
    • Conclusion
  • AVERAGE OF 36M CORRELATIONS Note: The data provided above for "Equity Market Neutral" does not take into consideration the impact of fraud-related hedge fund blow ups. Correlations are based on monthly performances Source: Dow Jones Credit Suisse , Bloomberg 31 January 1994 to 31 December 2009 Source: Credit Suisse Liquid Alternatives ,Alpha Strategies Group
  • CRISIS CORRELATIONS – A SEA OF RED EMERGES…. 31 January 2007 to 31 December 2009 Note: The data provided above for "Equity Market Neutral" does not take into consideration the impact of fraud-related hedge fund blow ups. Correlations are based on monthly performances Source: Dow Jones Credit Suisse , Bloomberg Source: Credit Suisse Liquid Alternatives ,Alpha Strategies Group
  • LAST 36M CORRELATIONS – LITTLE RED UCTION BUT SOME…. 30 September 2007 to 31 August 2010 Note: The data provided above for "Equity Market Neutral" does not take into consideration the impact of fraud-related hedge fund blow ups. Correlations are based on monthly performances Source: Dow Jones Credit Suisse , Bloomberg Source: Credit Suisse Liquid Alternatives ,Alpha Strategies Group
  • SUSTAINABLE INVESTING
      • Ethical considerations
      • Seeking interesting return properties
            • Outperformance
            • Correlation properties
            • Lower risk
      • Respecting legal or regulatory constraints
      • Minding one’s reputation as an investor
  • SUSTAINABLE INVESTING
    • Thematic approach:
    • clean energy, clean technology, water and waste water management
    • Screening:
            • Negative Screening
    • exclude environmentally harmful companies
            • Positive screening
            • “ Best-in-Class”: select environmental leaders in each sector
    • Engagement:
    • Establish a dialogue on environmental and sustainability issues with the companies to change their practices.
  • SUSTAINABLE INVESTING
    • “ Is environment protection an investment theme for you?”
      • 86.3% of respondents consider environment protection an investment theme, 13.7% do not
      • Small-size investors are more concerned about green investing than medium size investors
            • 100% of small-size investors (AUM <100mn)
            • 23.6% of middle-size investors (AUM between 100mn and 10bn) do not consider this factor.
    EDHEC-Risk survey released February 2010 97 European Institutional Investors, approx € 300bn AuM
  • SUSTAINABLE INVESTING
    • “ Is sustainable development a specific investment sector?”
      • 62.1% consider as an investment criterion across all sectors
      • 21.1% consider it as a specific sector
      • 16.8% consider it as both .
      • Most investors consider screening approaches across sectors rather than or in addition to thematic investments.
    EDHEC-Risk survey released February 2010 97 European Institutional Investors, approx € 300bn AuM
  • SUSTAINABLE INVESTING
    • “ Do you differentiate between sustainable development (SD) and socially responsible investing (SRI)?”
      • For 61.9% SD and SRI are two identical concepts.
      • Among the remaining 38.1% of respondents:
            • 60% consider that SRI encompasses issues beyond SD (such as social and corporate governance issues).
            • 25% believe that SD encompasses issues beyond SRI.
            • 15% think that SRI and SD refer to two distinct sets of issues.
    EDHEC-Risk survey released February 2010 97 European Institutional Investors, approx € 300bn AuM
  • SUSTAINABLE INVESTING EDHEC-Risk survey released February 2010 97 European Institutional Investors, approx € 300bn AuM
      • “ Some so-called socially responsible investing is effectively PR-seeking and a poor use of fiduciary funds.”
      • “ We are working towards the integration of ESG factors…in order to help create returns that are sustainable in the long-term.”
    Different respondents have conflicting views on the motivations behind sustainable investing, as evidence by the following statements of two survey participants…….
  • SUSTAINABLE INVESTING EDHEC-Risk survey released February 2010 97 European Institutional Investors, approx € 300bn AuM 50% of respondents consider that a lack of credible standards is the biggest obstacle for them to adopt green investing criteria.
  • CONTENTS
    • Where have we come from?
    • Drivers Behind Sustainable Investment
    • Platform & Products
    • Investment focus
    • Integration of Environment, Social & Governance (ESG)
    • Conclusion
  • Socio-economic security Food Value? Energy Water Climate $ $ Increasing population Rising living standards 20th Century 21st Century ‘ Health’ ‘ Resource’
  • CONTENTS
    • Where have we come from?
    • Drivers Behind Sustainable Investment
    • Platform & Products
    • Integration of Environment, Social & Governance (ESG)
    • Conclusions
  • EARTH CAPITAL PARTNERS LLP Strong, scalable infrastructure and governance ECP Platform CLEAN-TECH / VENTURE FINANCE FUNDS Joint Ventures Co-investments Managed Accounts Special Purpose Vehicles (Administration, risk management, sustainability, compliance, etc.) FORESTRY & AGRICULTURE FUNDS RENEWABLE ENERGY FUNDS WATER FUNDS ENVIRONMENTAL COMMODITIES FUNDS Investors Projects
  • RENEWABLE ENERGY KEY DRIVERS
    • Key drivers for renewable energy growth include climate change mitigation, national and regional energy security and increasing energy demand
    • IPCC (2008)
    • ERSTE Group (2009)
    • EIA (2008)
    • HSBC (2009)
    Climate Change Energy security Increasing demand Economic stimulus Long-term renewable capacity growth Oil & gas price volatility (2) Increasing global temperature (1) Economic stimulus spend (biased to 2009-11) (4) Global energy demand forecast (3)
    • Other drivers
    • Falling costs
    • New technologies
    • Distributed generation
    • Limiting future compliance costs
  • MARKET OVERVIEW: INVESTMENT OPPORTUNITY
    • Sustained and significant investment activity to date (1) – looking ahead, an estimated US$5 trillion investment opportunity to 2030 in new renewable energy capacity globally (2)
    • REN21 (2009)
    • World Economic Forum, Green Investing (2009)
    • SEFI (2010)
    • IEA
    WEO refers to World Energy Outlook, an annual report by the International Energy Agency. The different forecasts relate to the amount of spend required to achieve different carbon dioxide targets to limit the impact of climate change. US$ bn “… the future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply.” (4) Annual investment forecast to 2030 Annual investment in renewable energy (2005-09) (3)
  • FORESTRY DEMAND DRIVERS Environmental Services Carbon Example - Estimated Annual Carbon Abatement Potential Sources 2030 (4) Population & Income Growth Industrial Roundwood Use per Capita by Region (1) Energy Efficiency Life Cycle Energy Use Index for Large Storage Structures by Design Type - example (3) Renewable Energy/ Biomass Scenarios for Forecast Global Bioenergy in Primary Energy Supply (2) Long term global timber demand growth Sources: (1) FAO SOWF2009 (2) EC/IIASA (2007) (3)Athena Sustainable Materials Institute (4) Vattenfall (2007) Strong Growth With Income ‘ TRADITIONAL’ ‘ NEW’ Forestry (25%) Other 26.7bnT C02 2000 20 40 60 80 2100
  • Source: ‘Bioenergy and Earth Sustainability (presentation ESSP workshop)’ IIASA (2008) LATIN AMERICA & AFRICA: AVAILABLE, SUITABLE LAND Climatic Suitability for Herbaceous and Woody Lignocellulosic Plants on Available Grass-Scrub-Woodland
  • ECP FUNDS IN THE MARKET
    • RENEWABLE ENERGY FUND
    • € 750m fund deploying capital in the construction and operation of solar and biomass fuelled energy projects
    • Europe, the Middle East and North Africa 
    • Combined skills of ECP and E.ON Climate & Renewables (technical partner)
    • FORESTRY FUND
    • $250m fund deploying capital in mature and green-field timberland (plantation assets)
    • Latin America  
    • Experienced team of private equity and timberland investment professionals  
  • CONTENTS
    • Where have we come from?
    • Drivers Behind Sustainable Investment
    • Platform & Products
    • Integration of Environment, Social & Governance (ESG)
    • Conclusions
  • INTEGRATION OF ESG
    • Sustainable Development Investment Guidelines
    • ‘ No-goes’: Primary Forests; High Conservation Value Forests; Critical Natural Habitats
    • ‘ Minimum Standards’ Sustainable Forest management Practices; Equator Principles; Social Accountability 8000
    • Investment process
    • Investment Committee TOR
    • Earth Dividend TM
    • Methodology benchmarked against and cross-references to international standards
    • SD impact, defining +ve, -ve and neutral impact for 30 ESG indicators
    • Resource Consumption; Ecosystem Services; Pollution; Social & Economic Contribution; Society & Governance
    • Internal and external assurance
    Investment decision making Portfolio monitoring & reporting Benchmarked to recognised international standards, including IFC Performance Standards and Global Reporting Initiative G3 Sustainability Reporting Guidelines – the global standards for SD performance and reporting respectively
  • EARTH DIVIDEND TM
    • Baseline assessed during acquisition due diligence
    • Updated and reported to investors annually
    • Provides investee projects with a practical commercially ‘value-adding’ platform to guide sustainability performance
    • Provides investors with evidence of impact & performance improvement
    Example Earth Dividend TM from a Brazilian forestry plantation Clear measure of the contribution to Sustainable Development -6 0 +6 +6 +6 +6 +6 0 0 0 0
  • The Earth Di vidend TM from a bio fuel plantation in Brazil. Example Earth Dividend TM from a Spanish PV projec t
  • CONTENTS
    • Where have we come from?
    • Drivers Behind Sustainable Investment
    • Platform & Products
    • Integration of Environment, Social & Governance (ESG)
    • Conclusions
  • CONCLUSIONS
    • Statistics work fine until you really need them…..
    • Large scale investment opportunity in sustainable assets
    • Institutional credibility & scale with stable, commercial rates of return
    • Close alignment to the needs of long term investors with long term liabilities to meet
    • Earth Dividend TM – effective measure and reporting of impact
      • Listen to what your clients want…….
  • CONTACT Earth Capital Partners LLP is authorised and regulated by the Financial Services Authority. This material is for distribution only under such circumstances as may be permitted by applicable law. It is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The contents of this document should not be treated as advice relating to legal, tax or investment matters and prospective investors are advised to consult their own professional advisers. Neil Brown Partner [email_address] +44 (0) 20 7811 4500
        • LONDON RIO DE JANEIRO
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        • St James’s Alto da Boa Vista
        • London SW1A 1HD Rio de Janeiro – RJ - Brazil