Talk by Xavier De Bayser
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Talk by Xavier De Bayser

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Xavier de Bayser, President - IDEAM - France

Xavier de Bayser, President - IDEAM - France

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Talk by Xavier De Bayser Talk by Xavier De Bayser Presentation Transcript

  • SOCIALLY RESPONSIBLE INVESTMENT AND FINANCIAL MARKETING Xavier De Bayser November 10, 2006
  • SOCIALLY RESPONSIBLE INVESTMENT…
    • … a good way to match Faith and Performance
  • WHAT IS THE REAL MEANING OF PERFORMANCE?
    • Achievement
    • to perform from the French word : parformer
    • to achieve
  • PERFORMANCE ANALYSIS SRI: a tri-dimensional approach to performance
    • A holistic view of performance
    Return Risk Achievement Traditional
    • SRI = portfolio management which takes into account this third dimension
    • SRI has brought another view to the risk concept
    PERFORMANCE ANALYSIS SRI: a tri-dimensional approach to performance
  • SOCIALLY RESPONSIBLE INVESTMENT Brings innovation to financial markets in focusing to performance with a tri-dimensional approach to investment
    • Sustainable development is now challenging financial markets
    • ‘ Global warming could melt your portfolio’
      • (Fortune, 21st March, 2006)
    • ‘ Sustainable development will be the primary driver of industrial and economic change over the next 50 years’
    • (Al Gore, The Wall Street Journal, 28th March, 2006)
  • SOCIALLY RESPONSIBLE INVESTMENT Brings innovation to financial markets in focusing to performance with a tri-dimensional approach to investment
    • How do financial markets react to this change?
    • Valuation of listed companies is evoluating drastically
  • VALUATION TODAY
    • Based on short term profits
    • Short term volatility is the corner stone of risk
    • Account for capital goods
    • Not taking into account future cost of externalities (air pollution, green house gas, water…)
    • Cold and scientific approach of valuation: PER, EBITDA
    • Important influence of brokerage firms and large hedge funds
  • VALUATION TOMORROW
    • Durability is the corner stone of risk
    • Long term risk will be included in the stock picking
    • Importance of intangible value of companies
    • Account for immaterial and human resources
    • Profit of tomorrow will depend on the behaviour of companies for environment, human potential and ethics
    • Investors will wait for other dividends than cash dividends
    • Important influence of Institutional Investors, NGOs…
  • INTANGIBLE VALUE Evolution to performance
    • ‘ The traditional accounting system is focused on transactions and historical costs. To determine the future value of a company, you don't look at past history. You need new measures to project forward.’
      • (Sharon Oriel, director of intellectual asset management for Dow Chemical)
      • Data source : DNV
  • INTANGIBLE VALUE Evolution to performance
    • Today only 20 percent of a company’s market value is reflected in its accounting system. The largest portion of companies’ economic activities, with which they create value for stockholders and stakeholders, is no longer captured systematically. Accordingly, it is not transparent internally or externally.
  • INTANGIBLE VALUE What is a company’s true value? ICEBERG ENVIRONMENTAL RISK INNOVATION / BRAND / REPUTATION HUMAN CAPITAL CORPORATE GOVERNANCE QUALITY OF MANAGERS
    • Short term
    • Volatility
    • Tactical approach
    • Market trends
    • Difficult to add value
    RISK Long term Durability Strategic approach Company by Company Source of added value Risk
  • TYPOLOGY OF MAIN NON-FINANCIAL RISKS Main non-financial risks Social risks Societal risks Governance risks Reputation risks Legal risks Technology risks Industrial and Environmental risks
  • ACHIEVEMENT Different approaches of this dimension
    • Negative screening sector exclusion
    • Positive screening best in class approach
    • Engagement
  • SRI - ACHIEVEMENT
    • Return:
    • Risk:
    • Achievement:
  • PRIME TOOLKIT P rimer for R esponsible I nvestment M anagement of Endowments
    • PRIME Toolkit has been created in a partnership between:
      • European Social Investment Forum (Eurosif),
      • Bellagio Forum for Sustainable Development in cooperation with the European Foundation Centre,
    • and is intended for trustees, officers and directors of Foundations
    • The purpose of the Toolkit is to help foundation trustees better understand and integrate SRI into mandates they give to asset managers entrusted with the management of their endowments
    • The toolkit provides readers practical overview to Responsible Investment:
      • Background
      • Strategy options for Foundation Boards
      • Guide for Foundation CFO’s: Getting Started
        • Walk the talk : discuss, promote, decide, draft, follow-up
        • Case study: The IDEAM Eurosocietal Fund for Foundations
  •