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Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
Presentation by Anat Prapasawad
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Presentation by Anat Prapasawad

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Presentation by Anat Prapasawad, Managing Director - Advance Energy Plus Co., Ltd. - Thailand.

Presentation by Anat Prapasawad, Managing Director - Advance Energy Plus Co., Ltd. - Thailand.

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  • 1. Mark Bytheway CEO, Sustainable Investment Research Institute - SIRIS Presentation to TBLI Asia, May 2006
  • 2. Presentation Agenda <ul><li>Introduction </li></ul><ul><li>Some Definitions </li></ul><ul><ul><li>Values based SRI </li></ul></ul><ul><ul><li>Values Seeking SRI </li></ul></ul><ul><ul><li>Value Enhancing SRI </li></ul></ul><ul><li>Performance Analysis </li></ul><ul><ul><li>Domestic Aust Equities </li></ul></ul><ul><ul><li>International Equities </li></ul></ul><ul><li>Strategies </li></ul><ul><li>Summary </li></ul>
  • 3. <ul><li>Dedicated, specialised investment research and advisory group </li></ul><ul><ul><li>Provides sustainable sustainability and governance research across &gt; 1100 companies across Asian region </li></ul></ul><ul><ul><li>11 Analysts </li></ul></ul><ul><ul><li>Established early 2000 </li></ul></ul><ul><ul><li>Independent </li></ul></ul><ul><ul><li>funding and minority shareholding from financial institutions </li></ul></ul><ul><ul><ul><li>Goldman Sachs JB Were </li></ul></ul></ul><ul><ul><ul><li>IOOF Limited </li></ul></ul></ul><ul><ul><li>Melbourne based </li></ul></ul>Who/What is SIRIS?
  • 4. Some definitions <ul><li>Defining ‘SRI’ and ‘performing’ </li></ul><ul><li>Socially Responsible Investment (SRI) combines investors&apos; financial objectives with their concerns about social, environmental and ethical (SEE) issues (UKSIF) </li></ul><ul><li>Expressions </li></ul><ul><ul><li>Ethical Investing </li></ul></ul><ul><ul><li>Socially Responsible </li></ul></ul><ul><ul><li>Sustainability Investing </li></ul></ul>
  • 5. <ul><li>What is SRI and thus an SRI Fund? </li></ul><ul><ul><li>SRI combines investors’ financial objectives with their commitment to social concerns such as social justice, economic development, peace or a healthy environment” (UK Social Investment Forum) </li></ul></ul><ul><li>Three Expressions 1 </li></ul><ul><ul><li>Values based </li></ul></ul><ul><ul><li>Value Seeking </li></ul></ul><ul><ul><li>Value Enhanced </li></ul></ul><ul><li>1. Kinder @ http://www.kld.com/resources/papers/SRIevolving050901.pdf </li></ul>Some Definitions
  • 6. <ul><li>or mission based (ethical investing) </li></ul><ul><ul><li>the original form of SRI, is about investors seeking to align their portfolio holdings with their beliefs </li></ul></ul><ul><ul><li>combines investors’ financial objectives with their commitment to social concerns such as social justice, economic development, peace or a healthy environment” (UK Social Investment Forum ) </li></ul></ul><ul><li>Investment Proposition </li></ul><ul><ul><ul><li>values separated from investment proposition i.e. </li></ul></ul></ul><ul><ul><ul><li>not concerned if ‘sin sells’ </li></ul></ul></ul><ul><ul><ul><li>- ve screen </li></ul></ul></ul>Values based SRI
  • 7. <ul><ul><li>developed in the late 1990s, </li></ul></ul><ul><ul><li>seeks to identify social and environmental criteria that may affect financial performance and therefore share price </li></ul></ul><ul><ul><li>investment proposition </li></ul></ul><ul><ul><ul><li>benefit from “doing well by doing good” </li></ul></ul></ul><ul><ul><ul><li>doing good is via risk and opportunity management </li></ul></ul></ul>Value seeking SRI
  • 8. <ul><li>sustainability risk analysis fundamental aspect of investment analysis </li></ul><ul><ul><li>incorporates sustainability risk profile into investment decision </li></ul></ul><ul><ul><li>brings externalities into investment assessment </li></ul></ul><ul><li>Investment proposition </li></ul><ul><ul><li>proposition is developing </li></ul></ul><ul><ul><li>by definition a longer term perspective </li></ul></ul><ul><ul><li>Specifically not addressing ethical or values - based investing - except if environmental protection is included as part of value set. </li></ul></ul>Value seeking SRI – Risk Management
  • 9. Value seeking SRI – Opportunity Management <ul><li>Thematic investing </li></ul><ul><ul><li>Investing behind the opportunities generated by ESG analysis </li></ul></ul><ul><ul><ul><li>I.e. companies that, develop and offer sustainable technologies, products and/or services </li></ul></ul></ul><ul><ul><ul><li>Ostensibly growth investment/small cap opportunity </li></ul></ul></ul>
  • 10. Value seeking SRI – Opportunity Management <ul><li>Opportunities Include: </li></ul><ul><li>Material Efficiency Development and improved management of scarce resources </li></ul><ul><li>including renewable energy and energy efficiency developments. </li></ul><ul><li>Remediation technologies </li></ul><ul><ul><li>including clean technology, waste and emission reduction, waste management reduction and recycling systems, technologies and services </li></ul></ul><ul><li>Products with improved environmental performance </li></ul><ul><li>Human health and well being including, medical technologies, healthcare products and services, </li></ul><ul><li>recreation, tourism and leisure </li></ul>
  • 11. Value-enhancing SRI <ul><li>is about using shareholder activism to maintain and increase the value of one&apos;s investment, and its focus is almost exclusively on corporate governance </li></ul><ul><ul><li>PV </li></ul></ul><ul><ul><li>Shareholder Activism/Engagement </li></ul></ul>
  • 12. ‘ SRI Map’ Time Values V Return Trade Off Strict Financial Analysis Ethical Investing Traditional Investment Process <ul><li>Values based investing </li></ul><ul><li>Negative preclusive screening </li></ul><ul><li>Tobacco / alcohol </li></ul><ul><li>Gambling etc. </li></ul>Socially Responsive Investing <ul><li>Notion of a responsible company generally includes: </li></ul><ul><li>Negative screening </li></ul><ul><li>Positive screening </li></ul>Sustainability Investing <ul><li>Notion of risks/ opportunities </li></ul><ul><li>Generally low priority on negative screening </li></ul><ul><li>Strong positive screen perspective </li></ul>Thematic Investing <ul><li>Changing regs and consumer prefs generating new products services and asset lasses </li></ul><ul><li>Renewable energy/clean tech/leisure </li></ul>PV Engagement Values seeking investing Values enhancing investing
  • 13. Performance <ul><li>There is a significant and increasingly critical mass of research on values based and value seeking funds. </li></ul><ul><li>But this is risk management or non-thematic funds </li></ul>
  • 14. Are SRI Funds Performing? <ul><li>“… almost all of the funds have outperformed both the FTSE All Share Index and FTSE4Good across all time periods shown…”. </li></ul>1. Does Socially Responsible Investment (“SRI”) Add Value?, Mercer Investment Consulting, November, 2004
  • 15. Are SRI Funds Performing? Source : http://www.merceric.com/referencecontent.jhtml?idContent=1210735
  • 16. SRI Fund Performance cont. Source : http://www.merceric.com/referencecontent.jhtml?idContent=1210735
  • 17. SRI Fund Performance cont. Source: Capital SRI Industry Performance Study
  • 18. SRI Find Performance cont . Source: Ethical Investor Magazine from data provided by Standard &amp; Poors
  • 19. SRI Find Performance cont. Source: Ethical Investor Magazine from data provided by Standard &amp; Poors
  • 20. SRI Find Performance cont. Source: Ethical Investor Magazine from data provided by Standard &amp; Poors
  • 21. Are SRI Funds Performing? <ul><ul><li>… ..there is no evidence to prove that UK equity SRI funds will perform better, or worse, than mainstream investments. On the basis of our findings to date, we do not see such a trend developing….. </li></ul></ul><ul><ul><li>… . we continue to believe that the “skill” of the fund manager probably carries even more weight for SRI funds than for mainstream investments </li></ul></ul><ul><ul><li>… .From a theoretical standpoint, we continue to have some sympathy with the argument that “socially responsible” companies are likely to be the better performers, over the long term, relative to competitors with lower standards…. </li></ul></ul>Does Socially Responsible Investment (“SRI”) Add Value?, Mercer Investment Consulting, November, 2004
  • 22. Are SRI Funds Performing - What about the ‘SR’ in SRI <ul><li>Difficulty </li></ul><ul><ul><li>In measuring net social benefits </li></ul></ul><ul><ul><li>for market to place private $ value on improved social benefits (valuing and internalising an externality ) </li></ul></ul><ul><li>Accounting for change in contribution from SRI </li></ul><ul><ul><li>Conceptually very difficult </li></ul></ul><ul><ul><ul><li>Again, problem of measuring &amp; applying $ value </li></ul></ul></ul><ul><ul><ul><li>Also - isolating SRI as the catalyst agent of change </li></ul></ul></ul>
  • 23. Strategies <ul><li>Segment the market and provide appropriate product </li></ul><ul><ul><li>Values based – investors that wish to investment consistent with values </li></ul></ul><ul><ul><li>Value Seeking – generally investors which are concerned at the implications of not accounting for ESG issues </li></ul></ul><ul><ul><ul><li>concern may/may not specifically manifest as material financial concern </li></ul></ul></ul><ul><ul><li>Value enhancing SRI is about using shareholder activism to maintain and increase the value of one&apos;s investment, and its focus is almost exclusively on corporate governance </li></ul></ul>
  • 24. Strategies <ul><li>Values based </li></ul><ul><ul><li>General product target is faith or philanthropic sector </li></ul></ul><ul><li>Product strategy </li></ul><ul><ul><ul><li>Need to address unacceptable products services </li></ul></ul></ul><ul><ul><ul><ul><li>not concerned if ‘sin sells’ </li></ul></ul></ul></ul><ul><ul><ul><li>- ve screen – precludes products/services not consistent with values </li></ul></ul></ul><ul><ul><ul><li>+ve screen/over weighting – highlights/emphasises positive attributes sought </li></ul></ul></ul>
  • 25. Strategies – Values seeking <ul><li>Product strategies </li></ul><ul><ul><li>Enhancing existing investment process or universe </li></ul></ul><ul><ul><li>- investment outcome </li></ul></ul><ul><ul><ul><ul><li>avoid/substitute </li></ul></ul></ul></ul><ul><ul><ul><ul><li>+ve and -ve screens </li></ul></ul></ul></ul><ul><ul><ul><li>- Not seeing much new product here b/c </li></ul></ul></ul><ul><ul><ul><li>1. Move to thematic investing </li></ul></ul></ul><ul><ul><ul><li>2. Utilisation of information by non-SRI Funds </li></ul></ul></ul><ul><ul><li>Thematic investment </li></ul></ul><ul><ul><ul><li>Seeking investment opportunities arising from changing resource availability, technology regulation and consumer preferences. </li></ul></ul></ul>
  • 26. Thematic Investing <ul><li>Seeing developing environmental asset class – funds investing into environmental investments </li></ul><ul><li>In Aust </li></ul><ul><ul><ul><li>B&amp;B Environmental Fund, </li></ul></ul></ul><ul><ul><ul><li>Babcock and Brown Wind Partners Group </li></ul></ul></ul><ul><ul><ul><li>James Fielding/Mirvac - Australian Sustainable Investments Fund, </li></ul></ul></ul><ul><ul><ul><li>Macquarie Cleantech Fund, </li></ul></ul></ul><ul><ul><ul><li>Viridis Clean Energy Group </li></ul></ul></ul>
  • 27. Strategies – Value Enhancing <ul><li>Also seeing increase in participation in following </li></ul><ul><ul><li>Proxy Voting </li></ul></ul><ul><ul><li>Engagement Strategies </li></ul></ul>
  • 28. Strategies – Value Enhancing <ul><li>Proxy Voting </li></ul><ul><li>3 drivers </li></ul><ul><ul><li>Developing acceptance of the investment proposition of good governance </li></ul></ul><ul><ul><li>Increasing concern over executive remuneration </li></ul></ul><ul><ul><li>Rising requirement by industry pension funds for managers to vote and reconcile basis </li></ul></ul><ul><ul><li>See eg www.unisuper.com.au </li></ul></ul>
  • 29. Value Enhancing SRI <ul><li>Engagement </li></ul><ul><li>Engagement/ “shareholder activism”, investors seek to improve a company&apos;s SEE performance by means of dialogue and/or voting at AGMs. </li></ul><ul><li>Shareholders acting as owners </li></ul><ul><li>typically the methodology used by institutional investors, such as pension funds and insurance companies, but is also used by selected consumer SRI funds, churches and charities. </li></ul>
  • 30. Value Enhancing SRI <ul><li>Benefits </li></ul><ul><li>Avoids alteration to underlying investment process, esp screening </li></ul><ul><ul><li>Used as an overlay </li></ul></ul><ul><li>Enables specific targeting/action focussed on issue(s) of concern </li></ul><ul><li>Signals investors concern to company (at senior level) </li></ul>
  • 31. Summary <ul><li>Three expressions of SRI </li></ul><ul><li>Historically no trade-off and outperformance can be evidenced </li></ul><ul><li>Mercers philosophically supportive </li></ul><ul><li>Would expect financial materiality to be more profound going forward </li></ul><ul><li>Strategies should depend on the market profile seeking to address and investment process wish to adopt </li></ul>

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