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Marcus pratsch


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  • 1. Honouring the value of ESG Research
    for the professional investment community
    (TBLI Conference Europe 2010)
    Nachhaltigkeitsgütesiegel des DZ BANK Research
    Marcus Pratsch, Head of Institutional Sustainable Investment Research, DZ BANK AG
  • 2. Not too long ago…
  • 3. … ESG researchers were considered as aliens among
    the analysts.
    Source: Universal Pictures
  • 4. The past
    • Sustainability criteria were largely ignored in equity
    • Investors paid little attention to sustainable share
    investment, considering it as a niche sector and an
    investment vehicle that would generally be
    associated with a reduced return.
  • 5. BUT: The situation has changed
    • Sustainability is becoming ever more a strategic
    competitive factor for corporations operating on a
    global scale.
    • “Non-financial” capital plays an ever more key role in
    the success of a company.
    • Investors with a long term-perspective will hardly be
    able to ignore the issue of sustainability.
  • 6. The market for sustainable investment products is significantly growing
    Source: Eurosif (2010)
  • 7. The performance excuse does not prove true in the long term
  • 8. The growing importance of ESG research
    • The inclusion of sustainability factors in the evaluation
    of companies is a qualitative enhancement of the
    analysis process.
    • It helps to provide information to investors in their bid
    to allocate capital to companies with good prospects
    for the future.
    • This should also influence their willingness to pay for
    such information.
  • 9. Our thesis
    • Creation of in-house sustainable investment research
    will pay off for brokers as demand from both
    institutional and retail investors is growing.
  • 10. Why investors are paying for ESG research
    • Regulatory requirements for pension funds throughout Europe in
    respect of sustainable criteria are tightening
    • Sustainable quota
    • 11. Fund managers must take a “wider” view (more criteria)
    • 12. Extraction of information must be extended beyond pure balance sheet analysis
    • 13. “Quantitative” fundamental analysis must be complemented by sustainable research aspects > only in this way can a complete picture of companies be obtained
  • Why investors are paying for ESG research
    • Helping pension fund managers, fund managers and asset
    managers to handle the information overload in terms of
    • Sustainability is no rigid construct – it is a dynamic process
    • 14. Sustainability criteria have to be reviewed regularly
    • 15. Sustainability is complex - it has many facets
    • 16. Sustainability is more than ecology
  • Why investors are paying for ESG research
    • Pension fund managers, fund managers and asset managers
    cannot limit themselves to discussions with companies:
    • Not realistic in terms of time
    • 17. Sending out questionnaires often fails due to low return rate
    • 18. Green washing by companies
  • ESG research will be also honoured from inside the own organisation
    • However, maintaining an independent sustainable research unit can
    also strengthen the position of research within the organisation.
    • Turning a pure cost centre into an internal profit centre
    • 19. Implementation of investment ideas by means of design and sale of products with a sustainability view
    • 20. Possible acquisition of new investor groups (institutional and private)
    • 21. Creation of specially tailored products for specific customer groups (churches , NGOs)
    • 22. Internal participation in the proceeds (x% of the volume placed)
  • Internal survey
    • We have conducted a survey after the publication of our latest
    Sustainable Investment Research study revealing how commission
    was created and hence showing how institutional clients value ESG
  • 23. Internal survey – Distribution of ESG research
  • 24. Internal survey – Split of institutional investors
  • 25. Internal survey – Commission by pure ESG investors
  • 26. Internal survey – Commission by non-pure ESG investors
  • 27. The challenge
    • In Germany for example there are still very few
    sustainable research teams.
    • ”Shortfall in ESG research supply” offers numerous
    • First-mover effects
    • 28. Build-up of reputation
    • 29. Inclusion of sustainable research criteria in “conventional valuation models”
  • The price for fading out sustainability criteria
    • Pressure on analysts from investors will grow
    • 30. Business only if sustainable research criteria have been taken into account
    • 31. (Temporary) deletion from the broker list
    • 32. Major effects on placing orders and hence allocating commissions
    • 33. Motto: “Challenge (sustainable research) and promote (orders,
  • 34. very much for your attention!
  • 35. DZ BANK Sustainable Investment Research
    Marcus Pratsch
    Head of Institutional Sustainable Investment Research
    If you have any further questions please do not hesitate to contact me!