This document provides a summary of Degroof Petercam Asset Management's (DPAM) proprietary sustainability ranking model for developed countries. The model ranks 35 OECD countries based on 60 indicators across five categories: transparency and democratic values, environment, education, healthcare/wealth distribution, and economics. A Fixed Income Sustainable Advisory Board selects objective criteria and weights. Only the top 50% of countries are eligible for sustainable investment strategies. DPAM is committed to responsible investment and integrates ESG factors across its investment processes and strategies.
Degroof Petercam sustainable OECD country ranking Jurgen Vluijmans
1) Degroof Petercam Asset Management developed an in-house sustainability ranking model in 2007 to assess developed OECD countries on their integration of global sustainability challenges and medium-term objectives.
2) The model analyzes over 60 economic, social, and environmental indicators across five key drivers to produce a composite sustainability score for each country, ranking them based on their performance.
3) Only the top 50% of countries in the sustainability ranking are deemed eligible for investment in sustainable strategies, with the ranking and eligible countries reviewed biannually by Degroof Petercam's Fixed Income Sustainable Advisory Board.
Nearly 80% of European insurers are on track to implement Solvency II by 1 Jan 2016, but there is wide variation in the level of preparedness by country.
Dutch, UK and Nordic insurers are most confident in meeting the requirements, while French, German, Greek and Eastern European insurers are less confident.
Our survey of more than 170 insurance companies across 20 European countries sheds light on key areas of implementing Solvency II, including data and IT readiness, organizational change, regulatory interaction, recovery and resolution planning, and capital optimization.
We will also discuss our other findings:
- Insurers are seeking to improve the effectiveness of their risk management.
- Challenges of reporting and ensuring robust data and information technology (IT) remain very significant.
- Preparedness for Pillar 3 remains relatively low, and action is needed in 2014 to meet the requirements on time.
- Many insurers are not satisfied with the level of support from their regulators in providing timely feedback on plans and interpretation of new requirements. This is due, in part, to the significant resourcing challenges regulators face.
- Automation of many risk management activities, particularly reporting, remains relatively low.
Link to on-demand webcast: http://www.ey.com/GL/en/Issues/webcast_2014-06-03-1500_insurance-european-solvency-ii-survey-2014
Link to survey report: http://www.ey.com/GL/en/Industries/Financial-Services/Insurance/EY-european-solvency-ii-survey-2014
Luigi zingales - Weak Productivity: The Role of Financial Factors and PoliciesStructuralpolicyanalysis
The financial system may have contributed to weakening productivity growth in three ways:
1. By shifting resources from productive investments to housing and consumption. Credit increasingly financed these areas rather than firms.
2. By favoring industry concentration through mergers and common ownership that reduced competition and incentives for investment.
3. In Europe, the combination of existing financial systems and the Euro led to large misallocations of capital through the banking crisis in Southern Europe, reducing investments and growth.
This document discusses macroprudential policy tools for regulating banks' risk and capital levels. It outlines the evolution of macroprudential concepts over time and four key requirements for effective macroprudential policy: identifying imbalances before they become problems, selecting appropriate tools, calibrating tools based on data and coordination. Various tools are described for influencing bank balance sheets, borrowers/lenders, and addressing international spillovers. However, the document notes calibration and governance challenges, and questions the effectiveness of using capital controls as a macroprudential tool.
Ana Gouveia - Financial Policies, financial systems and productivity - Discus...Structuralpolicyanalysis
This document summarizes discussions from a conference on weak productivity and the role of financial factors and policies. It discusses four academic papers and their findings. The first paper finds that restricted credit availability due to the financial crisis led to increased business failure, especially for highly leveraged firms. The second paper finds that weak banks and high firm leverage reduced investment, and this effect was stronger for firms linked to weak banks with high rollover risk. The third paper finds that loose monetary policy increased productivity growth by alleviating credit constraints, while quantitative easing reduced productivity growth. The document then discusses insights from research on Portugal, including definitions of weak banks, mechanisms like the link between weak banks and zombie firms, non-linear effects of leverage on investment
This survey examined risk management practices of non-financial companies in Belgium related to interest rate and foreign exchange risk. The key findings were:
- Most companies face interest rate and foreign exchange risk and manage this risk using derivatives like interest rate swaps and FX forwards. Stabilizing cash flows and earnings were the primary risk management objectives.
- Since 2008, the majority of companies reported no change in their risk tolerance or use of derivatives, contrary to data showing decreased derivatives volumes.
- Companies generally have hedging policies in place, especially for foreign exchange risk, but many policies are not formally written down.
- Large companies typically allow less latitude in hedging decisions than smaller companies. Public entities
Degroof Petercam sustainable OECD country ranking Jurgen Vluijmans
1) Degroof Petercam Asset Management developed an in-house sustainability ranking model in 2007 to assess developed OECD countries on their integration of global sustainability challenges and medium-term objectives.
2) The model analyzes over 60 economic, social, and environmental indicators across five key drivers to produce a composite sustainability score for each country, ranking them based on their performance.
3) Only the top 50% of countries in the sustainability ranking are deemed eligible for investment in sustainable strategies, with the ranking and eligible countries reviewed biannually by Degroof Petercam's Fixed Income Sustainable Advisory Board.
Nearly 80% of European insurers are on track to implement Solvency II by 1 Jan 2016, but there is wide variation in the level of preparedness by country.
Dutch, UK and Nordic insurers are most confident in meeting the requirements, while French, German, Greek and Eastern European insurers are less confident.
Our survey of more than 170 insurance companies across 20 European countries sheds light on key areas of implementing Solvency II, including data and IT readiness, organizational change, regulatory interaction, recovery and resolution planning, and capital optimization.
We will also discuss our other findings:
- Insurers are seeking to improve the effectiveness of their risk management.
- Challenges of reporting and ensuring robust data and information technology (IT) remain very significant.
- Preparedness for Pillar 3 remains relatively low, and action is needed in 2014 to meet the requirements on time.
- Many insurers are not satisfied with the level of support from their regulators in providing timely feedback on plans and interpretation of new requirements. This is due, in part, to the significant resourcing challenges regulators face.
- Automation of many risk management activities, particularly reporting, remains relatively low.
Link to on-demand webcast: http://www.ey.com/GL/en/Issues/webcast_2014-06-03-1500_insurance-european-solvency-ii-survey-2014
Link to survey report: http://www.ey.com/GL/en/Industries/Financial-Services/Insurance/EY-european-solvency-ii-survey-2014
Luigi zingales - Weak Productivity: The Role of Financial Factors and PoliciesStructuralpolicyanalysis
The financial system may have contributed to weakening productivity growth in three ways:
1. By shifting resources from productive investments to housing and consumption. Credit increasingly financed these areas rather than firms.
2. By favoring industry concentration through mergers and common ownership that reduced competition and incentives for investment.
3. In Europe, the combination of existing financial systems and the Euro led to large misallocations of capital through the banking crisis in Southern Europe, reducing investments and growth.
This document discusses macroprudential policy tools for regulating banks' risk and capital levels. It outlines the evolution of macroprudential concepts over time and four key requirements for effective macroprudential policy: identifying imbalances before they become problems, selecting appropriate tools, calibrating tools based on data and coordination. Various tools are described for influencing bank balance sheets, borrowers/lenders, and addressing international spillovers. However, the document notes calibration and governance challenges, and questions the effectiveness of using capital controls as a macroprudential tool.
Ana Gouveia - Financial Policies, financial systems and productivity - Discus...Structuralpolicyanalysis
This document summarizes discussions from a conference on weak productivity and the role of financial factors and policies. It discusses four academic papers and their findings. The first paper finds that restricted credit availability due to the financial crisis led to increased business failure, especially for highly leveraged firms. The second paper finds that weak banks and high firm leverage reduced investment, and this effect was stronger for firms linked to weak banks with high rollover risk. The third paper finds that loose monetary policy increased productivity growth by alleviating credit constraints, while quantitative easing reduced productivity growth. The document then discusses insights from research on Portugal, including definitions of weak banks, mechanisms like the link between weak banks and zombie firms, non-linear effects of leverage on investment
This survey examined risk management practices of non-financial companies in Belgium related to interest rate and foreign exchange risk. The key findings were:
- Most companies face interest rate and foreign exchange risk and manage this risk using derivatives like interest rate swaps and FX forwards. Stabilizing cash flows and earnings were the primary risk management objectives.
- Since 2008, the majority of companies reported no change in their risk tolerance or use of derivatives, contrary to data showing decreased derivatives volumes.
- Companies generally have hedging policies in place, especially for foreign exchange risk, but many policies are not formally written down.
- Large companies typically allow less latitude in hedging decisions than smaller companies. Public entities
2013 Callan Cost of Doing Business Survey: U.S. Funds and TrustsCallan
The survey found that on average funds spent 54 basis points of total assets to operate in 2012. External investment management fees represented 90% of total expenses, the largest portion. These fees have risen 55% since 1998. Non-investment management external advisor fees, the second largest expense, increased 115% over the same period. Overall, average total fund expenses have increased more than 50% since 1998.
We develop an ordered logit model to examine the dynamic evolution of the credit rating of Greek Government Bonds under various macroeconomic scenarios
Evaluating the Greek Corporate Universe: The Enterprise Rating SystemIlias Lekkos
We develop a four grade rating system for Greek enterprises – the Enterprise Rating System (ERS) –, which provides a holistic mapping of the greek entrepreneurial activity, based on the financial performance derived from the analysis of financial statements.
The implementation of the rating system for enterprises (ERS) to a sample of 3,436 enterprises revealed that in 2015 the structure of the Greek entrepreneurship resembles the shape of a rhomboid. The majority of the enterprises are good (“b”) and medium (“c”) performers with percentages of 36.4% and 40.8% respectively. Outperforming enterprises (“a”) account for only 8.4% whereas underperforming ones (“d”) for 14.3% of our sample.
The document proposes 7 principles to integrate climate risk into bank capital requirements from Basel III to Basel IV. It argues that climate risk is currently undercapitalized and that banks are not incentivized to accelerate their transition to green financing. The principles aim to make climate risk a pillar 1 risk, create a climate stability fund financed by banks, use the fund to absorb unexpected losses from green loans, gradually increase capital requirements for transition risk aligned with IPCC scenarios, and implement a variable capital ratio based on the color of bank assets. It also suggests isolating climate effects on credit risk and reviewing the ASRF model to better anticipate climate crisis impacts.
Isabelle Roland - The Aggregate Eects of Credit Market Frictions: Evidence f...Structuralpolicyanalysis
This document presents the key findings of a study that develops a theoretical framework to quantify the impact of credit market frictions on aggregate output and productivity. The study assesses these impacts using firm-level data on employment and default risk from UK administrative surveys. The main findings are:
1) Credit market frictions substantially depressed UK output between 2004-2012, reducing it by 3-5% annually on average. This impact worsened during the financial crisis and lingered thereafter.
2) Credit frictions can explain 11-18% of the fall in UK productivity between 2008-2009 and 13-23% of the post-crisis productivity gap in 2012.
3) The results are mainly
Annuities have traditionally been used to fully insure pension obligations upon plan termination (buy-out annuities). However, they are now being used as an alternative asset class for ongoing plans through buy-in annuities, which transfer only the pension risk to an insurer. Presenters discussed the business case for purchasing annuities now despite low interest rates, and how the annuity market is evolving with increasing transaction sizes, indexed products, and potential new uses like DC plan payouts. The Canadian market has grown in recent years but pricing and reserving guidance may impact insurer appetite going forward.
Broadridge-Restructuring-for-Profitability-2015Kevin Alexander
Analysts predict that global capital markets institutions will face both opportunities and challenges through 2020. Regulatory pressures are expected to intensify significantly over the next five years, especially in Europe and Asia. While profits are recovering, returns on equity will remain squeezed. To address profit pressures, analysts favor aggressive restructuring and cost cutting, such as adopting new technology and process reengineering, over revenue growth. Regulatory changes like the proposed "Basel IV" rules and annual stress tests are seen as having major impacts on banks through 2020.
1) The document examines how government intervention in the banking sector during financial crises affects long-term productivity.
2) It finds that higher regulatory forbearance (allowing struggling banks to remain open) reduces short-term economic losses but is negatively associated with post-crisis productivity growth, as it allows inefficient firms to remain in operation.
3) In contrast, tougher policies like bank restructuring that force struggling banks to close are found to yield higher long-term job creation, wages, and economic growth, suggesting financial crises can "cleanse" economies of inefficient firms and banks when governments take a stricter approach.
1) The study examines whether high levels of corporate debt and short-term debt held back private corporate investment in Europe during the crisis.
2) The findings show that investment was linked to higher leverage, increased debt service costs, and relationships with weak banks. Firms with more long-term debt, which lowers rollover risk, increased investment more, especially if linked to weak banks.
3) Having a relationship with a weak bank negatively impacted investment, but this effect disappeared once demand shocks were controlled for. Debt overhang and rollover risk explained about 60% of the actual decline in aggregate corporate investment during the crisis period.
Filippos Petroulakis - Discussion on “Financial frictions and within firm per...Structuralpolicyanalysis
This document summarizes discussions from a conference on financial factors and productivity. It discusses three papers that found credit frictions have significant negative impacts on firm productivity. More bank forbearance during crises leads to less "cleansing" of unproductive firms but also less growth after crises. While bank recapitalization aims to strengthen banks, it can also act like forbearance. The document discusses reconciling these results and their implications for policies that preserve credit supply.
Opportunities for Optimism? A New Vision for Value in Asset ManagementState Street
Asset managers are playing for high stakes. A rising market creates opportunities on multiple fronts, but the industry's optimism may be tested by new risks, changing client demands and non-traditional competitors. Our research identifies four emerging "value drivers" that may shape the industry's future success.
The Pepperdine Private Capital Markets Project, available at http://bschool.pepperdine.edu/privatecapital, is the first comprehensive and simultaneous investigation of the major private capital market segments. The initial research survey examined the behavior of the private capital market participants, investment types, expected and historical rates of return, financial ratio thresholds, coupon rate distributions and other investment characteristics.
Dan Andrews - Breaking the shackles:Zombie Firms, Weak Banks and Depressed Re...Structuralpolicyanalysis
1) The document discusses evidence that zombie firms, which are firms that are financially distressed but remain in operation, are more likely to be connected to weak banks.
2) It finds that zombie firms are more likely to be clients of banks that are in poorer financial health, as measured by various indicators of bank balance sheet strength. This is consistent with the hypothesis that weak banks continue to support zombie firms through forbearance to avoid realizing losses.
3) It also discusses how insolvency regimes that make corporate restructuring more difficult can strengthen banks' incentives to engage in forbearance with zombie firms. The negative relationship between bank health and zombie firms is stronger in countries with less restructuring-friendly insolvency
The document discusses several global megatrends and challenges facing the world economy such as fragility and violence, shifts in the global economy, climate change, urbanization, and technological disruptions. It notes that while overall global economic growth recovered in recent years, investment growth has been weak, especially in emerging and developing economies. It also discusses the opportunities and challenges presented by the Sustainable Development Goals (SDGs) framework for countries, including financing sustainable development and leveraging opportunities in Islamic finance and other sectors.
Financial frictions likely contributed to the sharp and persistent productivity slowdown observed in advanced economies since the Global Financial Crisis (GFC).
The study finds that firms with higher pre-GFC debt vulnerabilities, such as larger amounts of debt maturing in 2008, experienced larger post-GFC declines in productivity growth compared to less vulnerable firms. This negative effect was stronger in countries where credit conditions tightened more severely after the collapse of Lehman Brothers.
The results suggest financial frictions hampered investment in intangible assets at vulnerable firms, reducing productivity. In contrast, such relationships were not observed following past recessions that did not involve banking crises, indicating the GFC had distinct and longer-lasting impacts
The document summarizes discussions from three papers presented at a conference on weak productivity and the role of financial factors and policies.
The first two papers examine the real effects of credit constraints on firms during the global financial crisis. One finds that investment declined more for highly leveraged firms borrowing from weak banks. The other finds higher exit rates for firms borrowing from weak banks, especially highly leveraged and more productive firms. The document discusses potential drivers of these results and suggestions for further analysis.
The third paper analyzes how monetary policy shocks that flatten the yield curve can negatively impact productivity growth by reducing efficient reallocation of factors across sectors. The document questions the theoretical basis and interpretations of this finding, noting little interest rate variability
Six trends are disrupting healthcare and health insurance: (1) the chronic disease crisis, (2) the move to outcomes and value-based care, (3) the rise of m-health technologies, (4) the big data revolution, (5) increased customer centricity, and (6) underwriting pressures. Payers, employers, and governments lack incentives to change long-term health behaviors. While change has begun, it has been slow and fragmented. Insurers also face challenges of limited customer data and information asymmetry despite new sources of health information.
Regulatory capital requirements pose a major challenge for financial institutions today.
As the Asian financial crisis of 1997 and rapid development of credit risk management revealed many shortcomings and loop holes in measuring capital charges under Basel I, Basel II was issued in 2004 with the sole intent of improving international convergence of capital measurement and capital standards.
This paper introduces Basel II, the construction of risk weight functions and their limits in two sections:
In the first, basic fundamentals are presented to better understand these prerequisites: the likelihood of losses, expected and unexpected loss, Value at Risk, and regulatory capital. Then we discuss the founding principles of the regulatory formula for risk weight functions and how it works.
The latter section is dedicated to studying the different parameters of risk weight functions, in order to discuss their limits, modifications and impacts on the regulatory capital charge coefficient.
The document provides an overview of the current economic and regulatory environment for financial institutions. It notes that while the US and UK economies grew in 2014, the Eurozone, Japan, and some emerging markets like China saw weaker growth. Regulatory reforms continue to sweep the industry globally, with requirements becoming more stringent in areas like capital adequacy, liquidity, risk management, and conduct. Complying with multiple and sometimes conflicting regulations across jurisdictions poses ongoing challenges for large financial institutions.
In this presentation, we showed, using a case study, how a thought process towards choosing parameters and calibration of an ESG could impact pricing results compared to traditional methods. While real world ESGs can provide valuable information, it is critical that actuaries understand the assumptions, strengths and weaknesses of their ESGs in order to make the right business decisions.
The Global Sustainable Competitiveness Index is the most comprehensive global ranking of the competitiveness of individual nation-economies in the present and into the future
Technological advances and globalization have led to major advances for many, but have seen others income and well-being stagnate or even decline. These disparities, both real and perceived - are more broadly, how to make growth inclusive - are some of the greatest challenges facing the world today. Support for inclusive growth - that is, economic growth that is broad-based, sustainable, and provides opportunities for all to participate in its benefits - is gaining momentum. The hoped-for result: dramatic reduction of poverty and inequality. As the world seeks to address these challenges, there is significant potential for private sector actors to pursue unique opportunities that support inclusive growth.
The Inclusive Growth Opportunities Index, developed by The Economist Intelligence Unit with the Morgan Stanley Institute for Sustainable Investing, seeks to connect the need for inclusive growth solutions with investment opportunity. A first-of-its-kind, the Inclusive Growth Opportunities Index offers an analytic framework to rate and rank countries, identifying investment opportunities in technology-based solutions to support inclusive growth.
2013 Callan Cost of Doing Business Survey: U.S. Funds and TrustsCallan
The survey found that on average funds spent 54 basis points of total assets to operate in 2012. External investment management fees represented 90% of total expenses, the largest portion. These fees have risen 55% since 1998. Non-investment management external advisor fees, the second largest expense, increased 115% over the same period. Overall, average total fund expenses have increased more than 50% since 1998.
We develop an ordered logit model to examine the dynamic evolution of the credit rating of Greek Government Bonds under various macroeconomic scenarios
Evaluating the Greek Corporate Universe: The Enterprise Rating SystemIlias Lekkos
We develop a four grade rating system for Greek enterprises – the Enterprise Rating System (ERS) –, which provides a holistic mapping of the greek entrepreneurial activity, based on the financial performance derived from the analysis of financial statements.
The implementation of the rating system for enterprises (ERS) to a sample of 3,436 enterprises revealed that in 2015 the structure of the Greek entrepreneurship resembles the shape of a rhomboid. The majority of the enterprises are good (“b”) and medium (“c”) performers with percentages of 36.4% and 40.8% respectively. Outperforming enterprises (“a”) account for only 8.4% whereas underperforming ones (“d”) for 14.3% of our sample.
The document proposes 7 principles to integrate climate risk into bank capital requirements from Basel III to Basel IV. It argues that climate risk is currently undercapitalized and that banks are not incentivized to accelerate their transition to green financing. The principles aim to make climate risk a pillar 1 risk, create a climate stability fund financed by banks, use the fund to absorb unexpected losses from green loans, gradually increase capital requirements for transition risk aligned with IPCC scenarios, and implement a variable capital ratio based on the color of bank assets. It also suggests isolating climate effects on credit risk and reviewing the ASRF model to better anticipate climate crisis impacts.
Isabelle Roland - The Aggregate Eects of Credit Market Frictions: Evidence f...Structuralpolicyanalysis
This document presents the key findings of a study that develops a theoretical framework to quantify the impact of credit market frictions on aggregate output and productivity. The study assesses these impacts using firm-level data on employment and default risk from UK administrative surveys. The main findings are:
1) Credit market frictions substantially depressed UK output between 2004-2012, reducing it by 3-5% annually on average. This impact worsened during the financial crisis and lingered thereafter.
2) Credit frictions can explain 11-18% of the fall in UK productivity between 2008-2009 and 13-23% of the post-crisis productivity gap in 2012.
3) The results are mainly
Annuities have traditionally been used to fully insure pension obligations upon plan termination (buy-out annuities). However, they are now being used as an alternative asset class for ongoing plans through buy-in annuities, which transfer only the pension risk to an insurer. Presenters discussed the business case for purchasing annuities now despite low interest rates, and how the annuity market is evolving with increasing transaction sizes, indexed products, and potential new uses like DC plan payouts. The Canadian market has grown in recent years but pricing and reserving guidance may impact insurer appetite going forward.
Broadridge-Restructuring-for-Profitability-2015Kevin Alexander
Analysts predict that global capital markets institutions will face both opportunities and challenges through 2020. Regulatory pressures are expected to intensify significantly over the next five years, especially in Europe and Asia. While profits are recovering, returns on equity will remain squeezed. To address profit pressures, analysts favor aggressive restructuring and cost cutting, such as adopting new technology and process reengineering, over revenue growth. Regulatory changes like the proposed "Basel IV" rules and annual stress tests are seen as having major impacts on banks through 2020.
1) The document examines how government intervention in the banking sector during financial crises affects long-term productivity.
2) It finds that higher regulatory forbearance (allowing struggling banks to remain open) reduces short-term economic losses but is negatively associated with post-crisis productivity growth, as it allows inefficient firms to remain in operation.
3) In contrast, tougher policies like bank restructuring that force struggling banks to close are found to yield higher long-term job creation, wages, and economic growth, suggesting financial crises can "cleanse" economies of inefficient firms and banks when governments take a stricter approach.
1) The study examines whether high levels of corporate debt and short-term debt held back private corporate investment in Europe during the crisis.
2) The findings show that investment was linked to higher leverage, increased debt service costs, and relationships with weak banks. Firms with more long-term debt, which lowers rollover risk, increased investment more, especially if linked to weak banks.
3) Having a relationship with a weak bank negatively impacted investment, but this effect disappeared once demand shocks were controlled for. Debt overhang and rollover risk explained about 60% of the actual decline in aggregate corporate investment during the crisis period.
Filippos Petroulakis - Discussion on “Financial frictions and within firm per...Structuralpolicyanalysis
This document summarizes discussions from a conference on financial factors and productivity. It discusses three papers that found credit frictions have significant negative impacts on firm productivity. More bank forbearance during crises leads to less "cleansing" of unproductive firms but also less growth after crises. While bank recapitalization aims to strengthen banks, it can also act like forbearance. The document discusses reconciling these results and their implications for policies that preserve credit supply.
Opportunities for Optimism? A New Vision for Value in Asset ManagementState Street
Asset managers are playing for high stakes. A rising market creates opportunities on multiple fronts, but the industry's optimism may be tested by new risks, changing client demands and non-traditional competitors. Our research identifies four emerging "value drivers" that may shape the industry's future success.
The Pepperdine Private Capital Markets Project, available at http://bschool.pepperdine.edu/privatecapital, is the first comprehensive and simultaneous investigation of the major private capital market segments. The initial research survey examined the behavior of the private capital market participants, investment types, expected and historical rates of return, financial ratio thresholds, coupon rate distributions and other investment characteristics.
Dan Andrews - Breaking the shackles:Zombie Firms, Weak Banks and Depressed Re...Structuralpolicyanalysis
1) The document discusses evidence that zombie firms, which are firms that are financially distressed but remain in operation, are more likely to be connected to weak banks.
2) It finds that zombie firms are more likely to be clients of banks that are in poorer financial health, as measured by various indicators of bank balance sheet strength. This is consistent with the hypothesis that weak banks continue to support zombie firms through forbearance to avoid realizing losses.
3) It also discusses how insolvency regimes that make corporate restructuring more difficult can strengthen banks' incentives to engage in forbearance with zombie firms. The negative relationship between bank health and zombie firms is stronger in countries with less restructuring-friendly insolvency
The document discusses several global megatrends and challenges facing the world economy such as fragility and violence, shifts in the global economy, climate change, urbanization, and technological disruptions. It notes that while overall global economic growth recovered in recent years, investment growth has been weak, especially in emerging and developing economies. It also discusses the opportunities and challenges presented by the Sustainable Development Goals (SDGs) framework for countries, including financing sustainable development and leveraging opportunities in Islamic finance and other sectors.
Financial frictions likely contributed to the sharp and persistent productivity slowdown observed in advanced economies since the Global Financial Crisis (GFC).
The study finds that firms with higher pre-GFC debt vulnerabilities, such as larger amounts of debt maturing in 2008, experienced larger post-GFC declines in productivity growth compared to less vulnerable firms. This negative effect was stronger in countries where credit conditions tightened more severely after the collapse of Lehman Brothers.
The results suggest financial frictions hampered investment in intangible assets at vulnerable firms, reducing productivity. In contrast, such relationships were not observed following past recessions that did not involve banking crises, indicating the GFC had distinct and longer-lasting impacts
The document summarizes discussions from three papers presented at a conference on weak productivity and the role of financial factors and policies.
The first two papers examine the real effects of credit constraints on firms during the global financial crisis. One finds that investment declined more for highly leveraged firms borrowing from weak banks. The other finds higher exit rates for firms borrowing from weak banks, especially highly leveraged and more productive firms. The document discusses potential drivers of these results and suggestions for further analysis.
The third paper analyzes how monetary policy shocks that flatten the yield curve can negatively impact productivity growth by reducing efficient reallocation of factors across sectors. The document questions the theoretical basis and interpretations of this finding, noting little interest rate variability
Six trends are disrupting healthcare and health insurance: (1) the chronic disease crisis, (2) the move to outcomes and value-based care, (3) the rise of m-health technologies, (4) the big data revolution, (5) increased customer centricity, and (6) underwriting pressures. Payers, employers, and governments lack incentives to change long-term health behaviors. While change has begun, it has been slow and fragmented. Insurers also face challenges of limited customer data and information asymmetry despite new sources of health information.
Regulatory capital requirements pose a major challenge for financial institutions today.
As the Asian financial crisis of 1997 and rapid development of credit risk management revealed many shortcomings and loop holes in measuring capital charges under Basel I, Basel II was issued in 2004 with the sole intent of improving international convergence of capital measurement and capital standards.
This paper introduces Basel II, the construction of risk weight functions and their limits in two sections:
In the first, basic fundamentals are presented to better understand these prerequisites: the likelihood of losses, expected and unexpected loss, Value at Risk, and regulatory capital. Then we discuss the founding principles of the regulatory formula for risk weight functions and how it works.
The latter section is dedicated to studying the different parameters of risk weight functions, in order to discuss their limits, modifications and impacts on the regulatory capital charge coefficient.
The document provides an overview of the current economic and regulatory environment for financial institutions. It notes that while the US and UK economies grew in 2014, the Eurozone, Japan, and some emerging markets like China saw weaker growth. Regulatory reforms continue to sweep the industry globally, with requirements becoming more stringent in areas like capital adequacy, liquidity, risk management, and conduct. Complying with multiple and sometimes conflicting regulations across jurisdictions poses ongoing challenges for large financial institutions.
In this presentation, we showed, using a case study, how a thought process towards choosing parameters and calibration of an ESG could impact pricing results compared to traditional methods. While real world ESGs can provide valuable information, it is critical that actuaries understand the assumptions, strengths and weaknesses of their ESGs in order to make the right business decisions.
The Global Sustainable Competitiveness Index is the most comprehensive global ranking of the competitiveness of individual nation-economies in the present and into the future
Technological advances and globalization have led to major advances for many, but have seen others income and well-being stagnate or even decline. These disparities, both real and perceived - are more broadly, how to make growth inclusive - are some of the greatest challenges facing the world today. Support for inclusive growth - that is, economic growth that is broad-based, sustainable, and provides opportunities for all to participate in its benefits - is gaining momentum. The hoped-for result: dramatic reduction of poverty and inequality. As the world seeks to address these challenges, there is significant potential for private sector actors to pursue unique opportunities that support inclusive growth.
The Inclusive Growth Opportunities Index, developed by The Economist Intelligence Unit with the Morgan Stanley Institute for Sustainable Investing, seeks to connect the need for inclusive growth solutions with investment opportunity. A first-of-its-kind, the Inclusive Growth Opportunities Index offers an analytic framework to rate and rank countries, identifying investment opportunities in technology-based solutions to support inclusive growth.
This document introduces Project Delphi, which aims to enhance ESG integration in asset management. It developed the Delphi Framework to clarify the ESG investment process. Version 1.0 will be launched in Q1 2016. The framework provides a list of the most material ESG Factors per sector organized into three value drivers: Growth, Return on Capital, and Governance & Risk Management. It was designed by a committee of experts to focus on the most meaningful factors by industry classification. Project Delphi seeks to explain the gap between market value and book value for companies, where ESG factors contribute to intangible assets and earnings growth. It aims to improve the dialogue between investors and companies on material ESG issues.
How are EMEA investors responding to changing macroeconomic and regulatory environments, stakeholder objectives and pressures, and market conditions? Based on a survey of 200 institutional investors in the region, this report takes a detailed look.
Improtance of blended finance in the modern world.pptxprabinkafle6
This document provides an overview of responsible investment and the Principles for Responsible Investment (PRI). It discusses the increasing demand and policy support for sustainable finance and responsible investment. Key points include:
- Interest in ESG factors among investors has grown exponentially in recent years due to concerns about risk management, client demand, and fiduciary duty.
- Regulators and policymakers around the world have increasingly recognized the importance of sustainable finance and are implementing policies to support further adoption.
- Going forward, mainstreaming responsible investment practices will require investors to understand regulatory obligations, client preferences, and how to integrate ESG factors into their investment processes and decisions.
Improtance of blended finance in present context.pptxprabinkafle6
The document discusses responsible investment and why sustainable finance is inevitable. It provides the following key points:
1) Interest in ESG factors among investors has increased exponentially as evidenced by rising search trends, with ESG now seen as important to risk management, meeting client demand, and fulfilling fiduciary duty.
2) Demand for responsible investment is growing among institutional and retail investors alike, with sustainable investing increasingly required in RFPs.
3) Regulatory policies supporting consideration of ESG factors have become widespread globally, though implementation remains a challenge.
4) The PRI works with investors to implement responsible investment practices through its six principles and growing global network, which has seen asset growth among its signatories
The sustainable future: Promoting growth through sustainabilityEnel S.p.A.
The document summarizes the key findings of a research report on corporate sustainability practices:
1) Sustainability is becoming increasingly important to companies globally, and especially in developing countries, where awareness has grown the most over the past three years. Customers are seen as the strongest influence on sustainability policies.
2) While most executives see sustainability as important for long-term growth, many view short-term financial pressures as the main obstacle. Reporting on sustainability goals and performance is still limited.
3) There are indications that sustainability may contribute to better financial results, though few executives see a strong link to short-term performance yet. Integrating sustainability into risk management and long-term strategy is an area for further
The document proposes using data envelopment analysis (DEA) to measure countries' progress toward achieving the UN Sustainable Development Goals (SDGs). DEA can evaluate countries' performance on multiple goals simultaneously based on their effective use of resources. It would provide a single score representing each country's multidimensional development. This framework could help identify policy priorities and allocate aid more efficiently to support countries in meeting SDG targets. It would also allow monitoring of development trends over time to help work towards a more sustainable future.
There is growing evidence that suggests that Environmental, Social and corporate Governance (ESG) factors, when integrated into investment analysis and decision making, it may offer investors potential long–term performance advantages. The number of companies disclosing information on their environmental, social and governance performance has grown very significantly in recent years. For large multinational companies, disclosure of ESG information has become a mainstream phenomenon It has become shorthand for investment methodologies that embrace ESG sustainable factors as a means of helping to identify companies with superior business models. ESG factors offer portfolio managers added insight into quality of a company’s management, culture, risk portfolio and other characteristics. By taking advantage of the increased level of scrutiny associated with ESG analysis, managers’ portfolios seek to identify companies based on performance indicators like
• Whether that company exhibits leadership in their industries.
• Whether that company is better managed and more forward thinking.
• Whether that company is better at anticipating and mitigating risk, meet positive standards of corporate responsibility.
• Whether that company is focused on the long term.
The applications of Sustainable Accounting, Reporting and Standardizations have taken a slow pace. The process began during early 1970s when it focused on social responsibility. During mid-late 1970s, it was shifted to employees and unions. 1980s saw explicit pursuit of economic goals with a thin veneer community concern and redefinition of employee rights as the major theme. In the 1990s attention shifted to environmental concern. Slowly, ‘environment reporting’, ‘triple bottom line reporting’, ‘sustainability reporting’ came into light.
This document summarizes the key points from a presentation on the global economy, Indian economy, performance of corporations, types of risks, risk management process, growth strategies, operations management, organization structure, financial management, and reporting and monitoring. Some of the main points include that global growth is projected at 3.3% in 2013 and 4% in 2014, recovery has not been consistent in advanced economies, and there is increased volatility in asset markets. For India, growth potential has reduced to 8% from 10% due to structural changes, and inflation has impacted purchasing power. Risk management should focus on both qualitative and quantitative risks, and complement internal controls. Cash generation and conservation should be priorities for financial management.
Finance is the lifeblood and lifeline of any business entity either commercial or non-commercial. The
Survival, Stability and Sustainability of a firm is highly associated with its financial wellness. It can be observed through its ability to pay(re) short-term as well as long term liabilities, meeting the regular financial obligations, to increase the value of firm and ability to generate profit. Financial analysis, evaluation, and assessment help in determines the financial position and financial strength of a firm. Among the plenty of methods and tolls available for financial performance, ratio analysis is more useful and meaningful. These ratios make it possible to analyze the evolution of the financial situation of a firm (trend analysis), cross-sectional analysis and comparative analysis.
Six growing trends in corporate sustainability 2013Jaime Sakakibara
Earlier this month Ernst & Young and GreenBiz Group released a new study, entitled ‘2013 Six Growing Trends in Corporate Sustainability.’ Based primarily on a survey of the GreenBiz Intelligence Panel of executives and thought leaders engaged in sustainability, this study reveals that “companies are increasingly connecting the dots between risk management and sustainability by making sustainability issues more prominent on corporate agendas.”
Presentation delivered at the Women in Finance Conference, South Africa.
The presentation deals with Integrated Sustainability Reporting, South Africa, 2010.
The document summarizes the findings of a State Street survey on pension funds and asset owners. It identifies five key areas pension funds need to focus on: own the outcome, own the strategy, own the risks, own the efficiency, and own the talent. Regarding own the outcome, the survey found 92% of funds plan to upgrade governance over the next year. Many boards lack expertise in alternative assets and risk assessment. Leading funds are improving board education and transparency. Streamlining decision making between boards and management is also a priority.
Sustainable Reality: Understanding the Performance of Sustainable Investment ...Sustainable Brands
This document discusses a study on the performance of sustainable investment strategies compared to traditional investments. Some key findings:
- Sustainable equity mutual funds and SMAs had equal or higher median returns than traditional funds/SMAs for 64% of periods examined over 7 years. They also had equal or lower volatility for 64-72% of periods.
- One index of firms with high ESG ratings outperformed the S&P 500 by 45 basis points annually since 1990.
- Studies show corporate sustainability practices are linked to lower costs of capital, higher stock price performance, and improved operational performance. Firms scoring highly on ESG criteria tend to outperform over the long run.
- Manager selection is
Sustainable Reality: Understanding the Performance of Sustainable Investment ...Sustainable Brands
This document discusses a study on the performance of sustainable investment strategies. The key findings are:
- Sustainable equity funds and separately managed accounts had equal or higher returns and equal or lower risk than traditional peers for the majority of periods examined over the last 7 years.
- Research shows corporate investment in sustainability is positively related to stock price and operational performance.
- An index comprising firms with high environmental, social and governance scores outperformed the S&P 500 by 45 basis points annually since 1990.
- Manager selection is important for both sustainable and traditional investments, as there is high dispersion of returns across strategies.
Similar to Degroof Petercam sustainable OECD country ranking (20)
The document provides an update on listed European real estate strategies from senior portfolio managers at Degroof Petercam AM. It discusses recent de-rating of the retail real estate sub-sector and solid operational performances of preferred companies. It also mentions that interest rate volatility has hurt the listed real estate sector. The direct property market remains the main driver and has not shown signs of weakness. The base case expectation over the next twelve months is a total shareholder return of around 8% based on dividend yield and NAV growth.
High Yield Bonds in 2018: living in a low-default worldJurgen Vluijmans
1) The global economy is showing signs of synchronized recovery with solid economic activity, growing trade, rising corporate profits and falling unemployment. However, this recovery has not yet translated to clearly rising wages or inflation.
2) In 2017, high-yield bonds performed well with returns around 5% as risk tolerance increased amid low interest rates. Defaults have remained low and are expected to stay low in 2018.
3) Currently, B-rated bonds offer more value after recent spread widening. Overall, the authors still see value in European high-yield bonds given the strength of the global economy, though performance may be impacted as the ECB winds down its bond purchase program.
High Yield Bonds in 2018: living in a low-default worldJurgen Vluijmans
- The global economy is showing signs of synchronized recovery in 2018, with economic activity growing solidly and unemployment falling. However, loose monetary policy has not yet translated to clearly rising wage and inflation levels.
- In 2017, the European high yield bond market performed well, with funds returning around 5% on average. Defaults remained low and are expected to stay low in 2018.
- Spreads have tightened but remain in the lower historical range, offering carry and diversification benefits for fixed income investors seeking yield in the current low interest rate environment. However, spreads may widen again if economic growth accelerates and core rates rise.
Value investors in Europe have outperformed in the last two years compared to the US, which is unusual. This is because the improving European economy contrasted with a disappointing US economy. As a result, investors favored growth stocks in the US and value stocks in Europe, leading to divergence in valuation spreads between the two regions. Looking forward, the document argues that leading indicators now point to better conditions for value stocks, including increased inflation expectations and a positive economic surprise index. Valuation spreads remain high in the US, signaling potential for value stocks to rebound there as well as in Europe.
Degroof Petercam Asset Management's chief economist and asset allocator look into whether the reflation trade is for real and inflation is back in the cards.
De grote Pensioenwerf - het volledige Artikel in Trends. Bart Van Craeynest, hoofdeconoom bij Petercam, legt de uitdagingen van ons pensioenstelsel uit. Feel free to share!
Just out: analyse over de pensioenen in België. Interessant dossier van hoofdeconoom van #Petercam Bart Van Craeynest (@bvancraeynest). Feel free to share!
Just out: analyse over de pensioenen in België. Interessant dossier van hoofdeconoom van #Petercam Bart Van Craeynest (@bvancraeynest). Feel free to share!
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck mari...Donc Test
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck maria r mitchell.docx
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck maria r mitchell.docx
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck maria r mitchell.docx
Economic Risk Factor Update: June 2024 [SlideShare]Commonwealth
May’s reports showed signs of continued economic growth, said Sam Millette, director, fixed income, in his latest Economic Risk Factor Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
In a tight labour market, job-seekers gain bargaining power and leverage it into greater job quality—at least, that’s the conventional wisdom.
Michael, LMIC Economist, presented findings that reveal a weakened relationship between labour market tightness and job quality indicators following the pandemic. Labour market tightness coincided with growth in real wages for only a portion of workers: those in low-wage jobs requiring little education. Several factors—including labour market composition, worker and employer behaviour, and labour market practices—have contributed to the absence of worker benefits. These will be investigated further in future work.
New Visa Rules for Tourists and Students in Thailand | Amit Kakkar Easy VisaAmit Kakkar
Discover essential details about Thailand's recent visa policy changes, tailored for tourists and students. Amit Kakkar Easy Visa provides a comprehensive overview of new requirements, application processes, and tips to ensure a smooth transition for all travelers.
OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
Fabular Frames and the Four Ratio ProblemMajid Iqbal
Digital, interactive art showing the struggle of a society in providing for its present population while also saving planetary resources for future generations. Spread across several frames, the art is actually the rendering of real and speculative data. The stereographic projections change shape in response to prompts and provocations. Visitors interact with the model through speculative statements about how to increase savings across communities, regions, ecosystems and environments. Their fabulations combined with random noise, i.e. factors beyond control, have a dramatic effect on the societal transition. Things get better. Things get worse. The aim is to give visitors a new grasp and feel of the ongoing struggles in democracies around the world.
Stunning art in the small multiples format brings out the spatiotemporal nature of societal transitions, against backdrop issues such as energy, housing, waste, farmland and forest. In each frame we see hopeful and frightful interplays between spending and saving. Problems emerge when one of the two parts of the existential anaglyph rapidly shrinks like Arctic ice, as factors cross thresholds. Ecological wealth and intergenerational equity areFour at stake. Not enough spending could mean economic stress, social unrest and political conflict. Not enough saving and there will be climate breakdown and ‘bankruptcy’. So where does speculative design start and the gambling and betting end? Behind each fabular frame is a four ratio problem. Each ratio reflects the level of sacrifice and self-restraint a society is willing to accept, against promises of prosperity and freedom. Some values seem to stabilise a frame while others cause collapse. Get the ratios right and we can have it all. Get them wrong and things get more desperate.
A toxic combination of 15 years of low growth, and four decades of high inequality, has left Britain poorer and falling behind its peers. Productivity growth is weak and public investment is low, while wages today are no higher than they were before the financial crisis. Britain needs a new economic strategy to lift itself out of stagnation.
Scotland is in many ways a microcosm of this challenge. It has become a hub for creative industries, is home to several world-class universities and a thriving community of businesses – strengths that need to be harness and leveraged. But it also has high levels of deprivation, with homelessness reaching a record high and nearly half a million people living in very deep poverty last year. Scotland won’t be truly thriving unless it finds ways to ensure that all its inhabitants benefit from growth and investment. This is the central challenge facing policy makers both in Holyrood and Westminster.
What should a new national economic strategy for Scotland include? What would the pursuit of stronger economic growth mean for local, national and UK-wide policy makers? How will economic change affect the jobs we do, the places we live and the businesses we work for? And what are the prospects for cities like Glasgow, and nations like Scotland, in rising to these challenges?
2. Responsible Investment Contact
Ophélie Mortier | Responsible Investment Strategist |+ 32 2 287 97 01 | sustainable@degroofpetercam.com @DP_OMortier
degroofpetercam.com
2 |
Sustainability Ranking - DEVELOPED countries
Half-yearly report – March 2017
While sustainable and ESG research on corporates from independent third parties is generally readily
available, reliable information on countries is harder to come by. The sovereign debt crises have
questioned the status of ‘risk-free’ asset class of government bonds. This has led to the emergence of
several analyses of country sustainability.
This in-house developed sustainability ranking is the basis of the eligible investment universe of
government bonds issued by OECD Member States. The proprietary research model, which was
developed by Degroof Petercam Asset Management (DPAM) in 2007, has the track record and credibility
to assess trends and the added value of such analyses.
Sustainability ranking – March 2017
The starting universe is composed from the members of the OECD, therefore each new membership is
included in the starting universe. The sustainability ranking allows the identification of countries which
have fully integrated global challenges in their development of medium-term objectives.
This complements the information gathered from credit rating, which is traditionally used to assess the
short term valuation of sovereign debt. Integrating long-term perspectives, which have no direct impact on
the current valuation of an investment, but will influence medium and long-term performance, allows to
highlight those countries that are expected to outperform and therefore to be solvent.
The sustainability analysis results in a ranking of the different countries under scrutiny. Only the top 50%
performers in the ranking are eligible for investment in specifically sustainable strategies.
3. Responsible Investment Contact
Ophélie Mortier | Responsible Investment Strategist |+ 32 2 287 97 01 | sustainable@degroofpetercam.com @DP_OMortier
degroofpetercam.com
2 |
Sustainability Ranking - DEVELOPED countries
Half-yearly report – March 2017
While sustainable and ESG research on corporates from independent third parties is generally readily
available, reliable information on countries is harder to come by. The sovereign debt crises have
questioned the status of ‘risk-free’ asset class of government bonds. This has led to the emergence of
several analyses of country sustainability.
This in-house developed sustainability ranking is the basis of the eligible investment universe of
government bonds issued by OECD Member States. The proprietary research model, which was
developed by Degroof Petercam Asset Management (DPAM) in 2007, has the track record and credibility
to assess trends and the added value of such analyses.
Sustainability ranking – March 2017
The starting universe is composed from the members of the OECD, therefore each new membership is
included in the starting universe. The sustainability ranking allows the identification of countries which
have fully integrated global challenges in their development of medium-term objectives.
This complements the information gathered from credit rating, which is traditionally used to assess the
short term valuation of sovereign debt. Integrating long-term perspectives, which have no direct impact on
the current valuation of an investment, but will influence medium and long-term performance, allows to
highlight those countries that are expected to outperform and therefore to be solvent.
The sustainability analysis results in a ranking of the different countries under scrutiny. Only the top 50%
performers in the ranking are eligible for investment in specifically sustainable strategies.
4. Responsible Investment Contact
Ophélie Mortier | Responsible Investment Strategist |+ 32 2 287 97 01 | sustainable@degroofpetercam.com @DP_OMortier
degroofpetercam.com
2 |
Sustainability Ranking - DEVELOPED countries
Half-yearly report – March 2017
While sustainable and ESG research on corporates from independent third parties is generally readily
available, reliable information on countries is harder to come by. The sovereign debt crises have
questioned the status of ‘risk-free’ asset class of government bonds. This has led to the emergence of
several analyses of country sustainability.
This in-house developed sustainability ranking is the basis of the eligible investment universe of
government bonds issued by OECD Member States. The proprietary research model, which was
developed by Degroof Petercam Asset Management (DPAM) in 2007, has the track record and credibility
to assess trends and the added value of such analyses.
Sustainability ranking – March 2017
The starting universe is composed from the members of the OECD, therefore each new membership is
included in the starting universe. The sustainability ranking allows the identification of countries which
have fully integrated global challenges in their development of medium-term objectives.
This complements the information gathered from credit rating, which is traditionally used to assess the
short term valuation of sovereign debt. Integrating long-term perspectives, which have no direct impact on
the current valuation of an investment, but will influence medium and long-term performance, allows to
highlight those countries that are expected to outperform and therefore to be solvent.
The sustainability analysis results in a ranking of the different countries under scrutiny. Only the top 50%
performers in the ranking are eligible for investment in specifically sustainable strategies.
5. Responsible Investment Contact
Ophélie Mortier | Responsible Investment Strategist |+ 32 2 287 97 01 | sustainable@degroofpetercam.com @DP_OMortier
degroofpetercam.com
5 |
The lack of information and an associated model encouraged DPAM to develop an in-house research model
in 2007. Given the subjective character of the issue, key principles were defined from the beginning:
1. Existence of an advisory board, consisting of
external specialists providing input to the
model
2. Assessment of the commitment of the country
to its sustainable development: variables on
which the country can have influence through
decisions (for example biodiversity relies
heavily on the location and climate of a
country and cannot always be changed by the
latter)
3. Comparability and objectivity: criteria are
numeric data, available from reliable sources
and comparable for all countries.
The Fixed Income Sustainable Advisory Board (FISAB)
ensures the objectivity of the model
The role of the FISAB is threefold:
1. To select the sustainable criteria which fulfil the preliminary requirements, and are the most relevant
in the framework of sustainability assessment of the OECD universe.
2. To determine the weights attributed to each indicator.
3. To critically and accurately review the model and the ranking to ensure continuous improvement
4. To validate the list of eligible countries
The FISAB consists of eight voting members, four external and four internal. The objective of the board is to
raise awareness on ESG issues among the portfolio management teams. The complementary background of
the members guarantees a high level of expertise and knowledge of the issue in constructing the most
relevant model.
Selective and objective criteria to assess the sustainability of
countries
The sustainable overlay is characterised by the criteria which governments can utilise to influence their
policies (government, authorities, law). Thus, it avoids data linked to the geography or population density
of the country. The model is quantitative and tracks the current performance of a country, with comparable
data. Only a limited number of treaties are considered as they do not guarantee genuine commitment.
6. Responsible Investment Contact
Ophélie Mortier | Responsible Investment Strategist |+ 32 2 287 97 01 | sustainable@degroofpetercam.com @DP_OMortier
degroofpetercam.com
6 |
Degroof Petercam Best-in-class approach
The sustainability analysis focuses on five main key drivers: Transparency & Democratic Values,
Environment, Education, Healthcare & Wealth Distribution and Economics.
Each criterion gets an assigned weight and each country receives a score ranging from 0 (worst) to 100
(best) based on its relative position compared to other countries (comparison to the difference between
the maximum and the minimum). For binary criterion (death penalty, signing Kyoto protocol, for instance) a
score of either 0 or 100 will apply.
The final and overall score of a country is equal to the weighted average of the scores on each criterion,
using the weights which are decided by the Fixed Income Sustainable Advisory Board.
The selection process results in a ranking of the 35 countries. The final scoring is rounded up to avoid an
excessively unstable universe as decimals are statistically irrelevant.
Specific economic data are taken into account to assess the fiscal situation of a country. Indeed, the
stronger the fiscal and budgetary position, the more a country needs to invest in purposeful governance
programs to manage social and environmental risks and support long-term sustainability goals. Economic
data is therefore an additional key driver (competitiveness index, budget balance, public debt, etc.) but the
weight assigned is lower than the four other key drivers as this type of data are also taken into account by
the investment team in their fundamental research and analysis.
For the sake of comparability, data are historical. To avoid subjectivity in the model, no data based on
future promises (policies, etc.) are considered. Nevertheless, progress and improvement are taken into
consideration through a trend indicator, which provides insights into the robustness of a country’s
commitment to sustainability. The trend is calculated over the previous three years and a 25% weight of
the scoring is allocated to it.
In total, the model has around 60 indicators.
7. Responsible Investment Contact
Ophélie Mortier | Responsible Investment Strategist |+ 32 2 287 97 01 | sustainable@degroofpetercam.com @DP_OMortier
degroofpetercam.com
7 |
The approach is dynamic as the selected criteria are reviewed twice per year, with the intention of
selecting the most appropriate and relevant criteria for each domain. An indicator may be replaced and
adapted, or omitted. New indicators can enter the model and the allocation of the weightings may also
vary. In the event of grave offenses (for example declaration of war, violation of international rights/UN
conventions), countries may be excluded as from the beginning of the sustainable research process (Israel
in 2010 for example).
Sources are internationally recognized
The model aims for highest possible level of objectivity. Accordingly, statistical data to support the analysis
of the country’s sustainability are mainly collected from government databases and international
government agencies such as the International Energy Agency, World Bank, International Monetary Fund,
United Nations Development Programme and US Central Intelligence Agency. Data are complemented by
information drawn from leading non-governmental organisations such as Freedom House, Transparency
International and World Economic Forum.
8. Responsible Investment Contact
Ophélie Mortier | Responsible Investment Strategist |+ 32 2 287 97 01 | sustainable@degroofpetercam.com @DP_OMortier
degroofpetercam.com
8 |
Ranking per individual sustainable criteria
Transparency and democratic values Population, health & wealth distribution
11. Responsible Investment Contact
Ophélie Mortier | Responsible Investment Strategist |+ 32 2 287 97 01 | sustainable@degroofpetercam.com @DP_OMortier
degroofpetercam.com
11 |
Degroof Petercam and its commitment towards
sustainability
Asset management company Petercam Institutional Asset Management (Petercam IAM) is part of the
group Degroof Petercam.
In September 2011 Petercam IAM signed the UNPRI, aiming to encourage the integration of
environmental, social and governance (ESG) issues into investment decision making. Degroof Petercam
Asset Management signed the UNPRI in March 2016 to show the commitment from the merged asset
company to adopting and implementing the six relevant Principles. By signing the UNPRI principles, DPAM
has publicly demonstrated its top level commitment to consistently integrating ESG factors with its
fiduciary duty and to contributing to the development of a more long-term oriented and sustainable
investment approach. Being part of a collaborative and dynamic global network, DPAM gains access to a
better understanding and knowledge of risks and opportunities related to responsible investments.
As testimony of its commitment, DPAM also initiated a Responsible Investment Steering Group comprising
members from diversified business lines within the company who share the same willingness and pro-
activity to enhance sustainable and ESG issues within DPAM.
In addition, DPAM has appointed a fully dedicated Responsible Investor Strategist whose main objectives
are:
1. steer all initiatives, projects and methodologies related to the sustainable aspect of DPAM’s
investment processes
2. be responsible for streamlining initiatives regarding ESG challenges (Environmental, Social,
Governance) on DPAM level.
3. be the privileged contact person for the UN PRI, of which DPAM became a signatory in September
2011 and for other stakeholders (Beama, Eurosif, FIR, etc.).
Today DPAM manages ten sustainable strategies: three active fundamental equity strategies, three
indexing equity strategies, three active fundamental fixed income strategies and a balanced strategy.
Furthermore, DPAM has defined its responsible investor policy and approach to integrate ESG issues within
the buy-side investment research and its mainstream Investment processes.
Finally, DPAM has adopted a voting policy which describes the key principles of corporate governance it
wants to promote. Linked to this, it has adopted an engagement program, to be a responsible and active
shareholder.
12. Responsible Investment Contact
Ophélie Mortier | Responsible Investment Strategist |+ 32 2 287 97 01 | sustainable@degroofpetercam.com @DP_OMortier
degroofpetercam.com
12 |
For more information, please contact:
Ophélie Mortier | Responsible Investment Strategist
o.mortier@degroofetercam.com|Tel + 32 2 287 97 01
Disclaimer
When considering an investment in financial products, such as bonds, equities, and mutual funds or any other financial instrument, potential investors and recipients of
this document are invited to undertake independent investigations, assessments or analysis as deemed appropriate by them. Applications to invest in any fund referred
to in this document can only validly be made on the basis of the current prospectus or simplified prospectus, together with the latest available annual report and
accounts. All opinions and financial estimates herein reflect a situation on the date of issuance of the document and are subject to change without notice. Indeed, past
performances are not necessarily a guide to future performances and may not be repeated. Petercam SA has made its best efforts in the preparation of this document.
The information is based on sources which Petercam SA believes to be reliable. However, it does not represent that the information is accurate and complete. Petercam
SA is acting in the best interests of its clients, without carrying any obligation to achieve any result or performance whatsoever. Petercam SA, its connected persons,
officers and employees do not accept any liability for any direct, indirect or consequential loss, cost or expense arising from any use of the information and its content.
Present document may not be duplicated, in whole or in part, or distributed to other persons without prior written consent of Petercam SA