ESG Risk Assessment
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ESG Risk Assessment

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Talk by Henrik Steffensen, ASSET4

Talk by Henrik Steffensen, ASSET4
Vice President Marketing, Co-founder.

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ESG Risk Assessment Presentation Transcript

  • 1. Henrik Steffensen, ASSET4 Vice President Marketing, Co-founder TBLI Conference Yokohama May 27-28 2009 ESG Risk Assessment
  • 2. ASSET4 の ESG データとフレームワーク 全体的な成果
    • 顧客への忠誠心
    • 業績
    • 株主への忠誠心
    • 資源の削減
    • 排出量の削減
    • 製品の開発
    • 雇用の質
    • 衛生と安全
    • 訓練と育成
    • 多様性
    • 人権
    • コミュニティ
    • 製品責任
    • 取締役会の構造
    • 補償方針
    • 取締役会の機能
    • 株主の権利
    • ビジョンと戦略
    経済的成果 環境関連の成果 社会的成果 コーポレート・ガバナンス による成果 会社の全体像 分類 指標 重要な柱 公開データソースにリンク 250 以上の 主要業績評価指標 / 900 のデータ・ポイント 初期の情報構造
  • 3.
    • Risk Assessment -- Can ESG Really Do the Job?
    • ESG risks – how are they covered today?
    • How does ESG complement financial risk assessment?
    • What are the key considerations – from a data perspective?
  • 4. Are you at risk if you invest in companies that:
    • Have the highest level of CO2 emissions in their industry
    • Deprive employees of freedom of association
    • Have suppliers using child labour
    • Ignore international health and safety standards
    • Cause severe environmental damages
    • Have excessive levels of remuneration for their senior executives
    • Fail to provide transparent reporting to their shareholders
    • Rely on extortion and bribery
    • Etc.
    Do you think these companies will outperform in the long run?
  • 5. Are you comfortable if you can monitor whether your portfolio companies:
    • Comply with fundamental international norms, such as the Global Compact
    • Are best-in-class in reducing carbon and other emissions as well as waste
    • Make efficient use of natural resources
    • Have high levels of employment satisfaction and low levels of employee turnover
    • Invest in developing new innovative products
    • Have a competent and independent board of directors
    • Develop a strong brand through strong relations with communities and other stakeholders
    • Manage their business in accordance with a long-term, sustainable strategy
    • Clearly report on issues that have a material impact on their business success
    Do you think this would limit financial risk?
  • 6. Trends in ESG risk assessments
    • Research providers and rating agencies
      • Sector reviews
      • Corporate compliance assessments
      • Risk monitoring getting started
    • Brokerage research
      • Picking themes to uncover value & risk for long-term performance
    • Convergence between ESG analysis and financial analysis
      • Getting underway where ESG factors have an impact on valuation
    • Progress in information and tools available
    • ESG – proxy for quality management
      • Avoid systematic risk
      • Identify opportunity
  • 7. A key insight of CR Reporting: The quality of a company’s management
        • 80% of CFOs and Professional Investors believe that ESG information can serve as a proxy for the quality of a company’s management.
    • Companies defending the interests of various stakeholders are less likely to run into negative publicity and companies considering its stakeholders view gains competitive advantage.
    Source: The McKinsey Quarterly, Feb. 2009
  • 8. Unique challenges of ESG data – differences with financial data
    • Reports are voluntary
    • Variables are un-audited and not standardised
    • Scope and timing are inconsistent
    • Relevancy of data differs across sectors and industries
    • Reports are produced for a variety of reasons
    Global Scope Local Scope
  • 9. Relevancy of data
    • Relevance differs greatly across sectors
    • ESG reports are for various stakeholders
      • Marketing for customers, employees, general public
      • Responding to problems and pressure
      • A reflection of leadership and management quality
    • Necessity to cut through noise and stories
      • Policies must be broken down, and the extent of implementation must be measured
      • Objective variables must be carefully considered
      • Contradicting controversies must be incorporated
      • Biases of the data must be considered: market cap
  • 10. Data availability: Improvement in CO 2 reporting Percentage of Companies Reporting on CO 2 Emissions Source: ASSET4
  • 11. The need: objective, transparent and comparable data
    • Standardised units across companies
      • Consistent approach to the data
    • Timely, on-going updates
      • Relevant, current information must be reported
    • Information broken into smaller units to measure performance
      • Policies and outcomes
    • Common starting point for customised uses of the data
    • Have access to all sides of the data
  • 12. Importance of monitoring extra-financial risk Average 2002-2006 5% 15% 6% 17% 5% 17% 6% 19% 3% 16% ROIC ROE ROIC ROE ROIC ROE ROIC ROE ROIC ROE ESG assessment Market cap today Market cap, May 2007 Merrill Lynch Lehman Brothers Morgan Stanley Goldman Sachs Bear Stearns B B- A- A- D Acquired $0 $30B $68B $0 $90B $50B $90B $100B $17B Credit Ratings 2006 Aa3 AA- A1 A+ Aa3 A+ Aa3 AA- A1 A+ S&P S&P S&P S&P Moody‘s S&P Moody‘s Moody‘s Moody‘s Moody‘s