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Do Sustanaible Investments Add Value? - Lars Hassel
Do Sustanaible Investments Add Value? - Lars Hassel
Do Sustanaible Investments Add Value? - Lars Hassel
Do Sustanaible Investments Add Value? - Lars Hassel
Do Sustanaible Investments Add Value? - Lars Hassel
Do Sustanaible Investments Add Value? - Lars Hassel
Do Sustanaible Investments Add Value? - Lars Hassel
Do Sustanaible Investments Add Value? - Lars Hassel
Do Sustanaible Investments Add Value? - Lars Hassel
Do Sustanaible Investments Add Value? - Lars Hassel
Do Sustanaible Investments Add Value? - Lars Hassel
Do Sustanaible Investments Add Value? - Lars Hassel
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Do Sustanaible Investments Add Value? - Lars Hassel

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TBLI CONFERENCE™ EUROPE 2012 - Zurich - Switzerland

TBLI CONFERENCE™ EUROPE 2012 - Zurich - Switzerland

Published in: Economy & Finance
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  • 1. Do Sustainable Investments Add Value? TBLI Zurich – November 9th 2012 Lars G Hassel Program Director SIRP is funded by Mistra, the foundation for strategic environmental research
  • 2. SIRP is funded by Mistra, the foundation for strategic environmental research
  • 3. The map below depicts the participating Universities and InstituUmeå School of Business and EconomicsÅbo Akademi UniversityUniversity of GothenburgUniversity of LeedsMaastricht UniversityTilburg UniversityEuroMed Management MarseilleUniversity of PerugiaUniversity of Rome, Tor Vergata 1 av 1 SIRP is funded by Mistra, the foundation for strategic environmental research 2012-05
  • 4. Programme objective• Find out how sustainable investment practices can create added value for institutional investors and identify barriers to mainstreaming such practices• Research on: – Economic value of ESG/SRI – Sustainable value and reporting – Incentive Systems – Fiduciary duty SIRP is funded by Mistra, the foundation for strategic environmental research
  • 5. SIRP vision• Investors expect to create value added through sustainable asset management• But there are barrires because of uncertainty of financial outcomes and the strict financial focus of fiduciary duty• Important because institutional investors have the strength needed to drive companies towards more sustainable development. SIRP is funded by Mistra, the foundation for strategic environmental research
  • 6. ESG and Economic Value• Sustainable business practices add economic value to assets! – Innovest eco efficiency ratings of U.S. firms positively associated with firm value and operating performance (Guenster et al. 2011) – GES environmental ratings of Swedish firms positively associated with firm value and operating performance (Semenova and Hassel, 2011) – Green buildings in U.S. with a LEED or Energy Star certificate have higher rental rates (Eicholtz et al 2010) – Environmental performance associated with higher credit ratings and lower cost of debt of U.S. firms (Hahn and Bauer, 2010) Costs of practices drop (learning and scale) and future benefits increase First mover advantage SIRP is funded by Mistra, the foundation for strategic environmental research
  • 7. SRI Risk/Return• SRI funds and portfolios seem to perform neutrally (Olsson, 2007; Derwall and Koedijk (2009); Herzel at al, 2012)• Performance can be different in different SRI segments (Derwall et al 2011) – Values driven (exclusion) and profit-seeking (alpha) segments• Eco-efficiency portolios have outperformed in the past (Derwall et al 2005) – Investors are learning and mis-pricing of large-cap firms is likely to disappear over time (Borgers et al 2012) As sustainability creates economic value, this value is priced, and does not necessarily result in higher risk-adjusted returns of portfolios. First mover advantage SIRP is funded by Mistra, the foundation for strategic environmental research
  • 8. Risk – Value - Reporting• Environmental incidents bad news’ impact on firm value (Lundgren and Olsson, 2010)• Analysts use more downside risk than environmental opportunity information (Nilsson et al, 2008)• Analysts make better earnings forecasts by including risk related environmental information (Bechetti et al, 2012)• Sustainable Value of Nordic companies varies between and within industries (Figge et al 2012) – Emissions accounting and environmental reporting has limitations SIRP is funded by Mistra, the foundation for strategic environmental research
  • 9. Drivers of a Sustainable Firm• Financial performance and size• Industry risk• Board structure and diversity – External board members – Female board members – Board ownership – Ethical compass of the board• Hassel et al (2012) SIRP is funded by Mistra, the foundation for strategic environmental research
  • 10. Benchmarking• Benchmarking needed when ratings and rankings are not avaliable to asses upside potential for e.g. engagements• Global Real Estate Sustainability Benchmark• Improve transparency and market efficiency by extending benchmarking to – Small-cap firms – Private equity • Venture capital SIRP is funded by Mistra, the foundation for strategic environmental research
  • 11. A closer look at…• Nadja Guenster, Maastricht University – Insights in Risk and Return of Responsible Investing – What We Can Learn for the Future• Frank Figge, Euromed Management/Kedge Business Sch – Is the Emperor Naked? Making Sense of Incomplete and Misleading Sustainability Information SIRP is funded by Mistra, the foundation for strategic environmental research
  • 12. SIRP - Sustainable Investment Research PlatformWHAT IS THE CHALLENGE?More and more actors in financial markets are working to integrateenvironmental, social and governance questions into their investment processesand decisions. »SIRP has fostered the development and publication of research which, I believe, is not only of assistance to other foundations wishing to pursue the same journey but which also has significant relevance to the broader investment community. The need for a long term perspective in the capital markets is greater than ever.« David Blood, Senior Partner Generation Investment Management – The primary aim is to support investors so that they can support sustainable development.We are performing research about ways that institutional investors can createeconomic value added through sustainable asset management, and what barriers Programchef Lars G. Hasselthere are to adopting such practices. Institutional investors have the strengthneeded to drive companies toward more sustainable development.Barriers to sustainable development can include uncertainty regarding thefinancial consequences of sustainable and responsible investment strategies and Programme period:whether sustainable investing can be expected to provide economic returns. 2006-2012The strict financial nature of fiduciary responsibility and the short-termperspectives in evaluation and bonus systems are also barriers, as is the lack of Funding:sustainability data from companies as input to analysts´ recommendations and funded by Mistra, the MSEK for strategic environmental research SIRP is Mistra 103 foundation

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