Numerous local branches : Belgium, Netherlands, Luxembourg, France, Italy, Spain, Switzerland, Germany, Austria, Scandinavia, Australia
Significant growth of assets managed by Dexia AM (billion euros)
10.1 billion euros in SRI at the end of June 2005, including :
€ 2.4 billion in sustainable management
€ 7.7 billion managed respecting ILO norms
SRI assets managed by Dexia AM (million euros) 32 43 53 61 55 62 71 81,4 1998 1999 2000 2001 2002 2003 2004 Juin 05 244 330 587 796 1,233 1,505 7,905 10,141 1998 1999 2000 2001 2002 2003 2004 Juin 05
Why should companies and investors bother about Sustainability?
Why should a company bother about Sustainability…?
“ The business of business is business”
So why bother about Sustainability issues? About Stakeholders other than the shareholders?
Sustainability Issues are early indicators of business risks and opportunities
Expectations from stakeholders act as signals of
evolutions in society which ultimately impact business performance
unmet social needs and “externalities”
It’s a matter of sound long term strategy
L. R. Sorensen, CEO of Novo Nordisk: “I believe that our company must have a long-term strategic focus. To my mind, this is not altruism or charity, but simply a question of looking at factors that determine the future of our company with a very long-term perspective”
I. Davis, worldwide Managing Director of McKinsey & Company: ”Large companies need to build social issues into strategy in a way which reflects their actual business importance. […] social issues can have the potential fundamentally to alter their strategic future”
Why should an investor bother about a company’s handling of Sustainability issues?
Attention to the long-term
A company’s value creation is a long term process
A company’s market value depends on expected cash flows beyond the short term horizon
Widened scope of analysis
Taking into account more relevant information
Systematic analysis of long term risks and opportunities
… backed by both in-house and independent research
In-house studies show that sustainable management performance is equivalent or superior to traditional management.
Orlitzki & al.:
End 2003, research carried out by M. Orlitzky et al., analysed the results of 52 studies. The research paper demonstrated a positive and significant relationship between social responsibility and a company’s financial performance.
Dexia AM’s global sustainable management versus the MSCI World index October 98 (launch) – June 2005 There is a Sustainable Alpha! Rendements Composite MSCI World 60 80 100 120 140 160 180 200 220 Oct 98. Jul 99 May 00 Mar 01 Jan 02 Nov 02 Sep 03 Jul 04 May 05 Rendements GIPS Composite MSCI World 60 80 100 120 140 160 180 200 220 Oct 98. Jul 99 May 00 Mar 01 Jan 02 Nov 02 Sep 03 Jul 04 May 05
The two fundamental pillars of sustainability analysis
Employees 4. Environment
Customers 5. Suppliers
Shareholders/bondholders 6. Society
Risks and opportunities = transmission mechanisms
- Legal action - Gain of goodwill
- Regulatory pressures - Process improvements
- Process deterioration - Product i nnovation …
- Loss of reputation…
A Business relevant Sustainability Analysis Long-term economic growth cannot be conceived without respect for stakeholder interests Interaction with stakeholders is a source of risks and opportunities
Two-tier sustainability analysis for stock selection Sector studies Company analysis and rating Stock selection
What are the issues related to sustainability in each sector?
What is their relevance in terms of corporate risks and opportunities?
Weightings in each sector of the differents themes/dimensions of sustainability
How does a company integrate the sustainability-related issues specific to its sector?
Intra-sector ranking of companies
1. Sector Studies : The same starting point for all sectors Then Zoom in on sector relevant issues ….
Process related impacts
Employees Customers Environment
Impacts / products & services
Life-cycle analysis (LCA)
Use related impact (inculding climate change)
Recycling related impact
Access to product/service
Quality management & Product/service safety
Product / service safety (traceability, recall procedures)
Freedom of association
Non-discrimination / diversity
Remunerations and compensation
Quality of contracts
Supply Chain Labour relations and employee dialogue
Health & safety Suppliers Relationship management Shareholders
Composition and independence of the board of directors
Audit and reporting
Process related impacts
Impact on local economies
Social licence to operate
Impacts / products & services
Bribery & corruption
… to arrive for each sector at suitable relative domain-weightings Weighting of sustainability domains based on business relevance : * incidents & expressed concerns by stakeholders * the financial impact via transmission mechanisms 19% 18% 10% 17% 18% 16% 8% 20% 24% 16% 21% 13% 0% 20% 40% 60% 80% 100% Energy sector Textile & Luxury sector Shareholders/ Bondholders Clients Employees Suppliers Society Environment
2. Company analysis and rating In-depth company analysis
T - transparency
Does the company communicate on sector issues?
What is the extent of its communication / reporting?
Is that communication checked by third parties?
Has the company defined its sustainability indicators?
S - strategy
Does the company have a defined sustainability strategy?
Does its policy cover all the relevant issues?
Does the company refer to international standards?
Are the responsibilities for strategy implementation defined?
Is there a monitoring process?
P - performance
What is the company’s performance in comparison to its peers in the sector?
What is the trend of the performance?
Are there incidents which could affect that performance adversely?
Company scores reflect the T-S-P analysis for each relevant sustainability issues (i.e. sub-domains of the sector study)
These scores are formalised in the in-house sustainability database
These scores are then aggregated for each company
Sustainability rating of each company in the MSCI World
3. Stock selection Construction of the sustainable universe