Trends and Tremors in the Investor Landscape: New Forces in a New Era
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Why does the for-profit portfolio remain, for the most part, traditionally invested? What forward-looking companies, family offices and foundations have committed to impact investing, and why? How have the multiple benefits of impact investing evolved over the last few years? What are smart ways to equip a company – whether it's the (potential) investor or the (potential) recipient of investment funds – to reap the benefits of socially responsible investing?
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Trends and Tremors in the Investor Landscape: New Forces in a New Era
- 1. Trends and Tremors in the Investor Landscape: New Forces in a New Era Paul Herman, HIP Investor Vincent Siciliano, New Resource Bank Darya Allen-Attar, Morgan Stanley Conrad MacKerron, As You Sow
- 2. A New Vision for Money and Banking June 5, 2013
- 4. Old Economy !!Shareholder focus !!Unconscious !!Unsustainable New Economy !!Stakeholder focus !!Conscious Capitalism !!Sustainable Leadership New Resource Bank Change the way the world thinks about banking!
- 5. Client Sustainability Assessment Competency Low High Commitment Low High Learner Achiever Leader Champion
- 6. !! 22 sustainable banks now in GABV !! TBTF banks not as profitable as sustainable banks !! Risk "control" appears to be missing - e.g. JPMorgan, HSBC, Bangladesh !! Transparency & impact now required to build trust and attract investors Trends and Tremors
- 7. Money as a store of value …..store of your values Money as a medium of exchange …..an agent of change Wholehearted Money Q: Are you spending your money on purpose?
- 8. Where Does Your Money Spend The Night? A Key Question
- 10. !"#$%&$'()*+,$-(./+$0$12,(2345.+$ www.AgeOfVolatility.com !"#$$%&#$'(")*+"*,-./012"*,34""""""6$ 83% 68% 32% 20% 20% 17% 32% 68% 80% 80%
- 12. !"#$%&' ("#$%&' )#*%&' )+,#$-%.' /*,0%' !"#$%&'()&*(+$,$-./01213145$ )6738791:$;113$<1=$*33$":6.>/?.:/>$ Products & Services Operating Metrics Mgmt Practices “How HIP Is This Investment?” HIP = Human Impact + Profit %/=7/.4@A$ "::16791:$B$ (@>C$ -@94791:$ !@40.=$ (.6.:8.$ D1/.:973$ E1F.=$ &1>/$ D1/.:973$
- 13. Category Market Size (U.S. in $) Sustainabili ty Segment Segment Growth Segment Share Food 550 billion Organic 22% 2.5% Electricity 400 billion Renewable (excl. Hydro, Wood) 17% 2% Fuels 1 trillion Alternative 20% 2.6% Health Care 2.3 trillion CAM 17% >1% Building Products 98 billion Green 23% 2.3% Fiber (Apparel) 300 million Organic 50% 1% Automotive 228 billion Hybrids 38% 2% !"#$%&'()*+,-./+0"12-.#/,0'/+0"12-$34/.5'/ 6789:89/;<=>9?/-,.'4"0$'#/,-0"##/,@@/#'-."0#/ Source: Pegasus Capital !"#$%&'#(%)*+,+-../0-.12+3%4+%56789:;+%5<=+++++A/
- 16. !"#$%&'#(%)*+,+-../0-.12+3%4+%56789:;+%5<=+++++!" #$%&'())"*+,-.+/,'0"1'-2,3)&("4'55)&+6)7" 8269"*9+5)9'&7)5":+&;)"<)6;50-" Source: Russell Investment Group, via © Great Places To Work® Institute 1998-2010, ANNUALIZED RETURNS +11.1% +6.7% + 3.9% + 4.3%
- 18. 9 Green Real Estate Can Deliver High Financial ROI Lower Carbon = $$$ Human Impact = $$$
- 19. Transparent and Carbon Efficient Firms Can Beat Market (January 2005 to May 2011)! !"#$%&'#(%)*+,+-../0-.12+3%4+%56789:;+%5<=+++++"#! Source link
- 20. !"#$%#&'$()*+$,-#&.*-/0$$ 123#/.$42$5*'67*2/$.*$5*84#.9:/$;-*+'#</$ !"#$$%&#$'(")*+"*,-./012"*,34"""""==$ >6/42#//$5#8.*-$?@A*6.$1<B&8.C$ D*3#-2<#2.$5#8.*-$1<B&8.$5#8.*-$ ,6<E$D-*@."$$FGEHIJ$ ,6<E$D-*@."$$KIIELHJ$ ,6<E$D-*@."$$KIELHJ$ Source: Bureau of Labor Statistics ; HIP Investor analysis
- 23. !"#$"%#&&'()*"+," -./0-"%#'12&3" •! 4*2*5'16" •! 0785297*2*5'16" HIP SCORE EXPLAINED City of San Diego Water = 60% :;"#$"%#&&'()*"<," =>?@-="%#'12&3" •! A5'1B'16"C82*5" D#1287'18E#1F" '1D)GH'16"1'2582*" 81H"IG#5'H*" •! >J?"K'#)8E#1&" +<"#$"%#&&'()*"" <,">?.-="%#'12&3" •! -5*827*12"2*DL1'MG*" •! @*8B86*" •! J*5"%*5"C82*5" G&86*" •! /&*"#$"5*DND)*H"C82*5""" O"#$"%#&&'()*"+," >P/?@Q-R"%#'12&3"" •! S*1H*5"H'K*5&'2N"#1" 2L*"(#85H"81H" *T*DGEK*" 78186*7*12" 60%
- 24. Comparison of Bond Ratings in Water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ll HIP Scores are subject to change based on new information or refinement of weightings
- 25. IMPACT and PERFORMANCE REPORT “HEAT MAP”
- 28. Published 2010! (John Wiley & Sons) *Amazon.com *BetterWorldBooks * Wiley.com Business Book Bestseller List 18 University Curricula Global Libraries on 5 Continents !"#$$%&#$'(")*+"*,-./012"*,34""""""!"#
- 30. Shareholder Advocacy Mobilizing Financial Markets for Social Change Corporate Engagement Shareholder Proposals Proxy Voting
- 32. !"#$%&'(')*+$,-".")$/0$1234$ Political Spending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
- 34. The Basel Action Network estimates 80% of e-waste collected is exported
- 35. Shareholder Engagement Successes Electronic Waste !""#$%&'($$)%*+%*(,"#$%*&-$%.&/-%(&*$% 0$)*%012%&'($$)%*+%3($$%*&-$%.&/-%"(+'(&4%&*%&##%56%)*+($)% 7+8%$9'&'$:%8,*;%!4&<+9=%>&('$*=%?&(*%
- 39. !"#$%%&'()"*(+,-# ! !! ! ! ! !!
- 40. !"#$%&'(')*$ !!Shareholder focus !!Unconscious !!Unsustainable +,-$%&'(')*$ !!Stakeholder focus !!Conscious Capitalism !!Sustainable Leadership New Resource Bank Change the way the world thinks about banking!
- 42. !! !!"#$#%&'(&)*+")&(,#"(-."'("/012" !! 3134")&(,#"(-%"&#"56-7%&)*+"&#"#$#%&'(&)*+")&(,#" !! 8'#,"9:-(%6-*9"&55+&6#"%-")+";'##'(<"="+><>"?@A-6<&(B"CD1EB" 1&(<*&F+#G" !! 36&(#5&6+(:H"I"';5&:%"(-."6+J$'6+F"%-")$'*F"%6$#%""&(F"&K6&:%" '(L+#%-6#" !"#$%&'($%'!"#)*"&'
- 44. Money as a store of value …..store of your values Money as a medium of exchange …..an agent of change !"#$%"%&'(%)*+#,%-* Q: Are you spending your money on purpose?
- 48. !"#$%&'%()*+',)-%.&$"%(/0#1$2% •!!"#$%!"#$%&"'()*+,(!-./0+(&'(&)*+%,)-)&+$%+.)%/)01)2%+.3+%1(4)$+',$%&3(% /5106%3(%1(4)$+7)(+%*',8'01'%+.3+%&'($16),$%$'&130%3(69',%)(41,'(7)(+30% 1$$5)$%1(%3661:'(%+'%;(3(&130%*),2',73(&)%*'+)(:30%3(6%317$%+'%1(&',*',3+)% +.)%43,1)6%3**,'3&.)$%+.3+%)<1$+%2',%$5&.%1(4)$+7)(+%$+,3+)=1)$>% 1! Social Investment Forum Foundation, Report on Socially Responsible Investing Trends in the United States, 2010 2! Global Impact Investing Network (GIIN) Investing with Impact - an investment approach that aims to generate risk- adjusted financial returns while supporting positive environmental and/or social impact SRI – An investment discipline that considers environmental, social and governance criteria to generate financial returns and positive social impact.1 Can use positive and/or negative screening. Strategies can be active or passive. ESG/Sustainable Investing – Considers environmental, social and governance criteria when making investments using both active and passive strategies. Impact Investing – Investments made “with the intention to generate social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets.”2 Current opportunities tend to be in private equity and private debt.
- 50. !"#$%"&'$()$*"+,-$ Key Attributes Values Alignment & ESG Integration Thematic focus Sustainable thematic investments may focus on an industry, such as water, energy, affordable housing; or a specific topic, such as serving those at the economic base of the pyramid or conservation financing Managers making sustainable thematic investments often operate under an ESG policy Sustainable thematic investment managers often commit to some form of impact reporting Key Attributes Sector Exposure & Impact Investing Screening Exclusion (using negative screens) or inclusion (using positive or best-in-class1 screens) of sectors or companies for investment based upon ESG criteria Environment, Social and Governance (ESG) Integration Overlaying financial analysis by factoring in the long-term implications of material ESG risks and opportunities Active Share Ownership and Engagement Investors can vote their proxies and file shareholder resolutions to support corporate initiatives that promote positive ESG behavior Shareholders can engage with companies in order to influence behavior related to sustainability through dialogue with company executives, letter writing and email campaigns and participation in multi-stakeholder communications and coalitions 1! Social Investment Forum Foundation, Report on Socially Responsible Investing Trends in the United States, 2010
- 51. !"#$$%&%'(( )*+#(,-.+$/(0()*+#(!"#$$%/( –! !"#$$%&%'()*$%(#$+,-.+(&%(./$($-&0&%12)%()#(&%"-,+&)%()3(+)0$(&%4,+.#&$+()#( ")051%&$+( •! 6$'127$(!"#$$%&%'8(9%7$+.(-$++:()#(%)./&%':(&%(&%4,+.#&$+()#(")051%&$+(./1.( 01;(<$(")%+&4$#$4()<=$"2)%1<-$( •! >)+&27$(!"#$$%&%'8(9%7$+.(0)#$(&%(./)+$(")051%&$+(./1.(1#$(<$-&$7$4(.)( ")%.#&<,.$(.)(+)-7&%'(?!@(5#)<-$0+( –! A1%;(&%7$+.0$%.(01%1'$#+(,+&%'(+"#$$%+($05-);(5)#B)-&)()520&C12)%( .$"/%&D,$+(.)(#$<1-1%"$(5)#B)-&)+(#$-127$(.)(1(51#2",-1#(<$%"/01#E( Leading 2010 Screening Criteria Incorporated by Money Managers 1 1! Social Investment Forum Foundation, Report on Socially Responsible Investing Trends in the United States, 2010
- 52. •! Land Use & Biodiversity •! Toxic Spills & Releases •! Energy and Climate Change •! Water Management •! Operational Non- Hazardous Waste •! Impact of Products & Services •! Supply Chain Management •! Other controversies •! Anti-Competitive Practices •! Marketing & Advertising •! Product Quality & Safety •! Concerns •! Customer Relations •! Other controversies •! Business Ethics – •! Bribery & Fraud •! Governance Structures •! Controversial Investments •! Other controversies •! Adverse Impact on Local Communities •! Support for Controversial Regimes •! Burma & Sudan •! Support for Controversial Regimes •! Other Countries •! Freedom of Expression & Censorship •! Human Rights Abuses •! Other controversies •! Labor Management Relations •! Employee Health & Safety •! Collective Bargaining & Unions •! Discrimination & Workforce •! Diversity •! Child Labor •! Supply Chain – Other •! Contraventions •! Other controversies !"#$%&'()*+,-&$ .-&/01&+&21+3$4('*125$4+6(*$ –! !"#$%%&'("#)(#*(+,-./."0&1.#2"$"*&$3#$"$340&05#&"1.0)+.")#+$"$6.-0#&"*(-,(-$).# %$)$#$"%#$"$340&0#7(*80.%#("#$#*(+,$"490#"(":2"$"*&$3#$;-&<8).0# –! =00.)#+$"$6.-0#8'3&>.#)/$)#&"7(-+$'("#)(#$%?80)#)/.#*(+,(0&'("#(7#$#,(-@(3&(# –! A/&0#<-($%.".%#$"$340&0#+$4#*(")-&<8).#)(#08,.-&(-#0)(*B#0.3.*'("5#&%."'74&"6# +$"$6.+.")0#C&)/#$#+(-.#/(3&0'*#1&.C#(7#63(<$3#)-."%0# –! D$"4#%$)$#,-(1&%.-0#(E.-#$"$340&0#(7#"(":2"$"*&$3#&"7(-+$'("#7(-#*(+,$"&.0# $"%#0.*)(-0# Example: MSCI ESG Stakeholder ‘Pillars’ and ‘Indicators’ Environment Human Rights & Community Governance Labor Rights & Supply Chain Customers
- 53. !"#$%"%&'&()*&)!"#*+,-./0%&,%1)2,/*,%(3) •!!"#$#%&$#%'&()%*&)+%,-%.'/0#'#(,%&(%.'/&1,2-$.#(,#3% +,$&,#4)% –! 500-1&,#%&%/#$1#(,&4#%-6%&++#,+% –! 7800)%.(,#4$&,#%,"#%9(:#+;(4%*.,"%9'/&1,%6$&'#*-$<%&1$-++%&00%&++#,%10&++#+% –! 93#(;6)%+/#1.=1%9(:#+;(4%*.,"%9'/&1,%/$-381,+%,"&,%"#0/%=00%&(%#>.+;(4%4&/%.(%&% 10.#(,?+%/-$@-0.-%A#>&'/0#+%1-803%.(1083#%B&$4#%C&/%DE8.,)F%7.>#3%9(1-'#F%#,1GH% –! 7-18+%-(%.(:#+,'#(,%-//-$,8(.;#+%*.,"%+/#1.=1%.'/&1,%&$#&+F%1&(%I#%8+#3%,-% &0.4(%.(:#+,'#(,+%*.,"%&%+/#1.=1%'.++.-(% Financial Goals Investing with Impact Mission Goals
- 54. !"#$%&'()*("+& •!,-./01"*2&3&4*5/67)("&)$+&-+"$582&9$1".5$%&:-(;&9<=)/(&%0)7.& –! !"#"$%&'"()*+#(,+-.".(+$"(/0(1+$2,-3+$(&'#"$".#( –! 45"'206()*&,*(+.1",#.(/0(#*"(4'7".2'8()&#*(4%1+,#(9$+%")/$:(+$"(,/%1"33&'8( •!>.()?7-.;&-$1".(<"$(&=7)$&@)$+&-$1".(<"$(&=07-/2&.()("<"$(&A9B'CD& –! !/,-%"'#(6/-$(&'7".#%"'#(.#$+#"86(+'5(&%1+,#(8/+3.( •!>1)76)("&206*&"E-.5$%&=0*F07-0&@)//0*+-$%&(0&(;"&.(*)("%2&06(7-$"+&-$&206*&9B'D& –! ;7+3-+#"("<&.2'8(&'7".#%"'#.(&'(,/%1+$&./'(#/(&%1+,#(1$&/$&2".( –! !"#"$%&'"(&0(/11/$#-'("<&.#.(#/(,/'.&5"$($"+33/,+2'8(&'7".#%"'#.(,/'.&.#"'#()&#*( 6/-$(&'7".#%"'#(.#$+#"86(/7"$(2%"( •!,"1"70=&-<=7"<"$()50$&.(*)("%2& –! =/'.&5"$(+11$/+,*(#/(1/$>/3&/(&'#"8$+2/'(&',3-5&'8($&.:?$"#-$'(,*+$+,#"$&.2,.& –! 45"'206(#*"(@$.#('")(4'7".2'8()&#*(4%1+,#(1$/5-,#(#*+#(%+:".(."'."(#/(&',3-5"(+.( 1+$#(/0(6/-$(&'7".#%"'#(1/$>/3&/( G0<<6$-/)5$%&0$&)$+(/$%0-$%&?).-.( –! A'8/&'8(,/%%-'&,+2/'(&.(#*"(0/-'5+2/'(/0(/-$(.-,,"..0-3(,/33+B/$+2/'()&#*(6/-C(( D"()&33()/$:()&#*(6/-(#/($"7&."(6/-$(.#$+#"86(+'5($"1/.&2/'(6/-$(+.."#.(+.(6/-$('""5.( +'5(8/+3.(,*+'8"(/7"$(2%"(((