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Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research
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Korea-specific Characteristics of Corporations and Implications for SRI/ESG Research

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Andy Gebhardt, Director - Solability Ltd. - South Korea

Andy Gebhardt, Director - Solability Ltd. - South Korea

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  • 1. ESG trends & performance in Korea TBLI Asia 2009 May 2009
  • 2. Overview of presentation
    • Short overview of the Korean ESG market & trends
    • ESG performance
    • Linkages and correlations between CSM (corporate sustainability management), ESG research and financial performance
  • 3. SolAbility Founded 2005 Ltd since 2007 Currently 7 full-time staff
    • ESG research services
    • Company reports
    • Sector reports
    • Training & capacity building
    ESG research
    • Analysis & benchmark of sustainability levels
    • Development of corporate sustainability strategy
    • Specialized services:
    • Risk management
    • GHG services
    • Project-related sustainability analysis & evaluation
    • Stakeholder engagement
    Corporate sustainability services
  • 4. Corporate sustainability: ESG-related reporting Number of stand-alone Environmental and/or Sustainability Reports published in Korea
  • 5. Drivers & status of corporate sustainability in Korea
    • Comparable late introduction of CSM compared to global level
      • … but fast catching up
    • Government driven
      • Government drive under previous administration: government controlled companies & agencies required to publish sustainability report
    • International trends
      • Copying of international trends
      • Inclusion of Samsung SDI (2004) and POSCO (2005) & SK Telecom (2008) in the DJSI increased awareness for sustainability management issues
    • Compliance drive
      • Compliance with regulation & public perception
    • Most recently: “Green growth”
      • Economic stimulus package officially label “80% green”; however: “green” depends on the definition
      • Focus on selected technologies (energy efficiency, new renewable technologies, materials)
  • 6. Drivers & status of corporate sustainability in Korea
    • Sustainability seen as must…
      • … in terms of reporting
    • Little strategic integration of sustainability into core product/service development until recently
      • Traditional approach: Improving governance systems, increasing environmental awareness and management systems
      • low anticipation of business value of CSM management on top-management level
      • But little strategic integration as of yet
      • Ne development: seizing sustainable business opportunities without relevant management systems
  • 7. ESG-related retail funds in Korea Source: KOSIF, SolAbility ESG/”SRI” retail funds and ESG related theme funds
  • 8. ESG related AuM in Korea - cumulated Source: KOSIF, SolAbility estimation
    • National Pension Fund announces public bidding for U$ 300 ml ESG fund
    • AMs launch SRI retail funds
    • Launch of several thematic funds
    • Decline of KOSPI following sub-prime crises
    • Chinese gold rush
    • Disappointing performance of thematic fund
    • National Pension Fund increases ESG mandates
    • Renewed interest in clean-tech investment
  • 9. Latest ESG developments
    • Public bidding by the NPS to managed assets against EGS criteria, 2006/2007
    • Strong, but short rally of ESG-related retail funds, Summer 2007, however: enthusiasm dried quickly
    • Recent developments
    • National Pension Service expected to sign to the UN PRI
    • Public Sustainability Index on the KRX, Q4 2009
    • Korea-specific DJSI Index, Q4 2009
    • Korea-specific Accountability Rating, January 2009
    • Sustainability ranking published by major newspaper
  • 10. Backtracked performance Backtracked performance 2002 -2009: 118% outperformance
  • 11. Performance since inception Performance since April 2007: 10% outperformance Actual fund performance (actively managed): 16% outperformance
  • 12. Are sustainable companies more profitable or … … are profitable companies more sustainable?
  • 13. Methodology: ESG linkages to financial bottom-line
    • Methodology characteristics:
    • Two –step screening
    • Best-in-class
    • Positive screening
    • Pioneer-screening
    • MarketCap adjustment
    • Performance verification
  • 14. In-depth analysis: 150 equities ESG Investment universe
    • Starting universe
    • Total equities : 350
    • KOSPI: 260
    • KOSDAQ: 85
    • KOSPI200 : 175
    SolAbility SRI 평가 대상기업 현황 Starting universe: 350 equities ESG “pre-assessment” ESG-in-depth Assessment Investment portfolio Financial analysis
  • 15. Korean specific issues for ESG research
    • Only limited number of Large Cap companies
      • Need to differentiate lower reporting levels of smaller companies
    • Late absorber of corporate sustainability trends
      • however: catching up fast
    • Governance structure
      • Historical & cultural differences
      • Cross-ownership structure of large conglomerates
    • Legislation
      • E.g. Korea not required to cap emissions under Kyoto – but probably will be required under post-Kyoto agreement
    • Aging society
      • Birthrate decreased dramatically over last 30 years
  • 16. “ Chaebol” Structure: Samsung Samsung Group cross-ownership structure : => Founding family exerts full control with minority ownership (3%)
  • 17. Indicator correlation – Corporate Governance
  • 18. Low energy efficiency
    • High dependence on imported energy carriers
    • Low energy efficiency compared to OECD levels
  • 19. Indicator correlation – resource efficiency
  • 20. Indicator correlation – HR development All assessed companies: limited information
  • 21. Indicator correlation – HR development Full information
  • 22. Conclusions from criteria relations
    • Visible correlation between sustainability performance and share price development
    • However: low r-value-correlation, wide spread => high scores in ONE criteria does not necessarily mean good performance in all cases
    • Financial performance is more closely related to sustainability score if a company scores high throughout all ESG factors/criteria
    • Lack of information (insufficient reporting): affects research outcome
  • 23. Sustainable companies are… => Sustainability = business Intelligence
    • Not only “responsible”
    • Do more than comply
    • Have more than awareness
    • Have a wider and longer horizon
  • 24. The future: climate change risks, resource constraints, etc… => Correlation between sustainability performance and financial performance is expected to increase in the future Environmental degradation Human Capital Management Vision & Capability Corporate Sustainability Cost and revenues Profitability Climate Change Aging population Bottom of Pyramid markets Changing perceptions Resource scarcity
  • 25.
    • Thank You.
    606 FloStar 756-1 Janghang-dong, Ilsan-gu, Goyang-Si 410-380 Gyeonggi-Do, South Korea www.solability.com [email_address] Tel ++82 31 811 3578

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