Presentation by Geoffrey Mazullo

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Geoffrey Mazullo, Director - East-West Management Institute, Inc. - Poland

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Presentation by Geoffrey Mazullo

  1. 1. August 2003 Partners for Financial Stability (PFS) Program Geoffrey Mazullo Di re c tor www.pfsprogram.org TBLI Europe 2007 November 15 -16, 2007 – Paris, France Sustainable Investment in Central and Eastern Europe Emerging Markets Workshop Thursday, November 15, 2007 14:30 – 16:15 Salle Eiffel
  2. 2. Questions <ul><li>Although the capital and financial markets in Central and Eastern Europe (CEE) are relatively small, per annum GDP growth in most of the CEE economies is greater than in most old EU Member States. What opportunities exist for sustainable investment in energy, infrastructure, manufacturing, organics, real estate, transportation and other sectors? </li></ul><ul><li>How do CEE domestic institutional investors approach SRI? </li></ul><ul><li>2) What role does CEE play in European and global SRI instruments? </li></ul>
  3. 3. Questions <ul><li>Although the capital and financial markets in Central and Eastern Europe (CEE) are relatively small, per annum GDP growth in most of the CEE economies is greater than in most old EU Member States. What opportunities exist for sustainable investment in energy, infrastructure, manufacturing, organics, real estate, transportation and other sectors? </li></ul><ul><li>How do CEE domestic institutional investors approach SRI? </li></ul><ul><li>2) What role does CEE play in European and global SRI instruments? </li></ul>
  4. 4. Real GDP Growth Rates (Source: Eurostat) ^Estimate EBRD *Estimate Eurostat 5.7% 6.1% 6.3% 7.3% 6.0% Average 4.0% 4.3% 4.3% 5.7% 4.1% Slovenia 6.5% 8.4% 8.5% 8.3% 6.0% Slovakia 6.3% 6.0% 6.7% 7.7% 4.1% Romania 5.5% 6.0% 6.1% 6.1% 3.6% Poland 6.3% 6.5% 7.3% 7.7% 7.9% Lithuania 7.9% 9.0% 9.6% 11.9% 10.6% Latvia 2.6% 2.5% 2.4% 3.9% 4.1% Hungary 8.2% 8.5% 8.7% 11.2% 10.2% Estonia 4.9% 4.9% 4.9% 6.4% 6.4% Czech Republic 4.5% 4.7% 4.8% 4.8% 3.3% Croatia 6.2% 6.0% 6.1% 6.1% 6.2% Bulgaria 2008* 2007^ 2007* 2006 2005
  5. 5. Questions <ul><li>Although the capital and financial markets in Central and Eastern Europe (CEE) are relatively small, per annum GDP growth in most of the CEE economies is greater than in most old EU Member States. What opportunities exist for sustainable investment in energy, infrastructure, manufacturing, real estate, organics, transportation and other sectors? </li></ul><ul><li>How do CEE domestic institutional investors approach SRI? </li></ul><ul><li>2) What role does CEE play in European and global SRI instruments? </li></ul>
  6. 6. Investor Relations Online: Survey of the Websites of the Largest Listed Companies in Central and Eastern Europe (CEE) In 2001, the PFS Program launched a regional survey to analyze the online disclosure practices of listed companies in eight CEE countries: Investor Relations Online: Survey of Websites of the Largest Listed Companies in Eight CEE Countries. The survey analyzes corporate governance and investor relations information available online on the websites of the largest listed companies (by market capitalization). Since summer 2001, the survey has been conducted semi-annually. Since 2004, each edition of the survey includes a comparison with another peer group; we have compared the largest listed companies in 11 CEE countries with peers in Greece and Turkey (2004); Portugal and Spain (2005); and BRIC and Ukraine (2006 and 2007). The 13th edition was published on September 4, 2007.
  7. 7. Excerpt from Database – August 15, 2007
  8. 8. Improved Disclosure – Company Websites
  9. 9. Survey of Reporting on Corporate Social Responsibility (CSR) by the Largest Listed Companies in Central and Eastern Europe (CEE) In 2003, the PFS Program launched a second regional survey: Survey of Reporting on Corporate Social Responsibility (CSR) by the Largest Listed Companies in Eight CEE Countries. This survey analyzes companies’ disclosures in English (in the English-language annual report and on the English-language company website) on the following three topics: corporate governance, environmental policy and social policy. Since summer 2003, this survey has also been conducted semi-annually. Since 2004, each edition of the survey includes a comparison with another peer group; we have compared the largest listed companies in 11 CEE countries with peers in Greece and Turkey (2004); Portugal and Spain (2005); and BRIC and Ukraine (2006 and 2007). The ninth edition of the survey was published on October 9, 2007.
  10. 10. Excerpt from Database – September 15, 2007 No. No. Does the company disclose and report on its internal Code of Business Conduct/ Code of Ethics? Yes. See: http://www.tallinnavesi.ee/files/Pohikiri%20(ENG)%2006-03-22%20(for%20website).doc, (Investor/Corporate governance/Articles of Association). No. Does the company disclose its policy on shareholder rights? Yes. See: http://www.tallinnavesi.ee/pages.php/02030305, (Investor/Corporate governance/Auditor), audited by Deloitte Audit Eesti. Yes. See: &quot;Annual Report 2006&quot;, page 64, audited by AS Deloitte Audit Eesti. Does the Company disclose audit relation information? Yes. See: http://www.tallinnavesi.ee/files/Corporate%20Governance.pdf, (Investor/Corporate governance/Corporate governance report). Yes. See: &quot;Annual Report 2006&quot;, pages 66 - 68. Does the company report on compliance with a Corporate Governance Code? Yes. See: http://www.tallinnavesi.ee/pages.php/02030301, (Investor/Corporate governance/Management board). http://www.tallinnavesi.ee/pages.php/02030302, (Investor/Corporate governance/Supervisory board). http://www.tallinnavesi.ee/files/Pohikiri%20(ENG)%2006-03-22%20(for%20website).doc, (Investor/Corporate governance/Articles of Association). Yes. See: &quot;Annual Report 2006&quot;, pages 70 - 73. Does the company disclose details on its corporate governance structure? Corporate Governance and Reporting Website Annual Report 2006 Source: Yes. Assured by DNV Certification Oy/Ab. (see page 63). Does the ESG report include an assurance statement? 2006 Year of publication of ESG report European eco Management and auditing system (EMAS), ISO 9001, ISO 14001. Standards used for ESG report Yes. &quot;Environmental Report 2006&quot;. See: http://www.tallinnavesi.ee/files/TV_environmental_report%2004_07(5).pdf Does the company have a stand alone English-language ESG report? Estonia Primary Countries of Operation: IFRS (&quot;Annual Report 2006&quot;, page 47). Financial Statements prepared in accordance with: Water supply and wastewater services Industry Specification: www.tallinnavesi.ee Website: Tallinna Vesi COMPANY :
  11. 11. Excerpt from Database – September 15, 2007
  12. 12. Excerpt from Database – September 15, 2007
  13. 13. In addition to conducting its regional surveys, the PFS Program provides PFS Program grants to research institutions in CEE countries to co-finances country surveys that analyze a greater universe of companies and use a more detailed questionnaire. Between 2002 and 2004, country surveys IR Online and Reporting on CSR were conducted in Czech Republic, Hungary and Poland. In early March 2007 the Zagreb School of Economics and Management (ZSEM) published third annual editions of two Croatian surveys: IR Online and Reporting on CSR. On September 20, 2007 Economics Policy Institute (EPI), Sofia, Bulgaria published inaugural Bulgarian surveys. Program Country Surveys Co-financed by PFS Program Grants
  14. 14. Impact – Improved Disclosure - ESG Reports
  15. 15. Environmental Policy <ul><li>Does the company state whether it complies with industry-specific, national and/or international regulations regarding environmental standards? </li></ul><ul><li>Does the company disclose the names of individuals (management and/or board members) or the department responsible for environmental management and compliance? </li></ul><ul><li>Does the Company report on energy and water use? </li></ul><ul><li>Does the company report on its environmental performance, including efficient use of resources, emissions and waste? </li></ul><ul><li>Does the company integrate environmental aspects into its supply chain management policy? </li></ul>
  16. 16. Does the company state whether it complies with industry-specific, national and/or international regulations regarding environmental standards? Excerpt from Database – September 15, 2007
  17. 17. Does the company disclose the names of individuals (management and/or board members) or the department responsible for environmental management and compliance? Excerpt from Database – September 15, 2007
  18. 18. Does the Company report on energy and water use? Excerpt from Database – September 15, 2007
  19. 19. Does the company report on its environmental performance, including efficient use of resources, emissions and waste? Excerpt from Database – September 15, 2007
  20. 20. Does the company integrate environmental aspects into its supply chain management policy? Excerpt from Database – September 15, 2007
  21. 21. Opportunities - Energy Biofuels Production Technology Emissions Trading Energy Efficiency Consulting Technology Hydro Wind Spain claims it is now the second-largest producer of wind energy in Europe. What is the potential in CEE?
  22. 22. Opportunities - Infrastructure Airports Internet Railways and Roads
  23. 23. Opportunities - Manufacturing ISO Certification Logistics Supply Chain Management Consulting Software
  24. 24. Opportunities – Organics Agriculture Cooperatives Fair Trade Retail ISO Certification
  25. 25. Opportunities – Real Estate Energy Efficiency Green Building
  26. 26. Opportunities – Transportation Air Railways and Roads Shipping
  27. 27. Opportunities – Other
  28. 28. Questions <ul><li>Although the capital and financial markets in Central and Eastern Europe (CEE) are relatively small, per annum GDP growth in most of the CEE economies is greater than in most old EU Member States. What opportunities exist for sustainable investment in energy, infrastructure, manufacturing, organics, real estate, transportation and other sectors? </li></ul><ul><li>How do CEE domestic institutional investors approach SRI? </li></ul><ul><li>2) What role does CEE play in European and global SRI instruments? </li></ul>
  29. 29. CEE Domestic Institutional Investors and SRI Substantial progress has been made; infrastructure is in place Corporate governance codes in place Growth in ESG reporting Pension reform; private pension funds are significant owners Yet progress remains to be made in many areas Problem with the S in SRI - Social Cost – benefit analysis Size of local markets a barrier to creation of SRI index
  30. 30. Corporate Governance Codes in CEE       Bucharest Stock Exchange Romania 18 March 2004 5 February 2007 Corporate Governance Code Ljubljana Stock Exchange Slovenia   13 April 2003 Unified Code of Corporate Governance Bratislava Stock Exchange Slovakia 2002 2005 Best practices in Public Companies Warsaw Stock Exchange Poland   2004 Corporate Governance Code Vilnius Stock Exchange Lithuania   2005 Corporate Governance Principles and Recommendations on Their Implementation Riga Stock Exchange Latvia   2004 Corporate Governance Recommendations Budapest Stock Exchange Hungary   2004 Corporate Governance Recommendations of the Tallinn Stock Exchange Tallinn Stock Exchange Estonia       Prague Stock Exchange Czech Republic   2007 Code of Corporate Governance Zagreb Stock Exchange Croatia   2007 Bulgarian National Code For Corporate Governance Bulgarian Stock Exchange-Sofia Bulgaria Initial Version Publication Corporate Governance Code Stock Exchange Country
  31. 31. UNDP: lack of civil trust blocks CSR development Warsaw, Oct. 15: Lack of civil trust in Poland blocks the development of Corporate Social Responsibility (CSR), according to an UNDP report presented on Monday. According to results of an UNDP study carried out in Poland, only half of the polled firms operating in this country have clearly defined strategies of Corporate Social Responsibility. Corporate Social Responsibility means that in all aspects of operations business is taking into account maximum profit, interests of society, environment protection and satisfaction of customers. According to the report firms in Poland are rarely forced to operate applying CSR, and 20 percent do not conduct any dialogue with employers, customers and social environment. CSR concept is still a novelty for Polish business, PAP was told by president of the Responsible Business Forum. The survey covered a sample of 40 firms employing from five to 250 people.
  32. 32. Questions <ul><li>Although the capital and financial markets in Central and Eastern Europe (CEE) are relatively small, per annum GDP growth in most of the CEE economies is greater than in most old EU Member States. What opportunities exist for sustainable investment in energy, infrastructure, manufacturing, organics, real estate, transportation and other sectors? </li></ul><ul><li>How do CEE domestic institutional investors approach SRI? </li></ul><ul><li>2) What role does CEE play in European and global SRI instruments? </li></ul>
  33. 33. What role does CEE play in European and global SRI instruments? Unfortunately little if any at this time Lack of awareness about huge improvements in corporate governance and ESG reporting made in CEE Several corporate governance codes pre-date codes in old EU member states (Perceived) lack of engagement of EU institutional investors on SRI/RI issues in CEE Size of local markets and size of individual companies a barrier to inclusion in global instruments However, change is afoot Increased focus on energy and environmental sectors in CEE
  34. 34. www.pfsprogram.org

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