© EIRIS
Ratings and the Long-term
Investor:
The case of Climate Change
Lisa Hayles
EIRIS
Friday November 13th
, 2009
TBLI ...
© EIRIS
EIRIS: Overview
● EIRIS is a not for profit research organisation
specialising in environmental, social and
govern...
© EIRIS
3
3 Questions
• what practical steps can investors take to avoid
investing solely with a short-term perspective?
•...
© EIRIS
4
Investing for the long-term
Source: www.cartoonstock.com
© EIRIS
5
4 steps to focus on the
long-term
• Spend more time on long-term issues –
devote resources(!)
• Find new approac...
© EIRIS
EIRIS Climate Change Toolkit
• Helping investors:
• Quantify a company’s climate change
impact and management resp...
© EIRIS
7
• Score for each
company on a scale
from zero to 100
• Below 50 considered
unmitigated risk
• Above 50 risk is
c...
© EIRIS
8
Example
Carbon
Profile
© EIRIS
9
Climate Change Performance FTSE AWD Index
© EIRIS
10
Carbon Engager Categories
• Opportunity Maximisers - Best practice
companies
• Issues Managed - Good Practice
•...
© EIRIS
11
Advice requested by Asset Owners
• Ask consultants, managers & advisers for
their advice on long-term issues
• ...
© EIRIS
12
Long-term Manager
products
• The ‘Perfect’ Climate Change Fund
– Perhaps a third “solutions” investments
– But ...
© EIRIS
13
Conclusions
• Climate Change shows LT focus is possible
• Many other issues as relevant
– Biodiversity, forests...
© EIRIS
14
Thank you
Lisa Hayles
Senior Client Relationship Manager
lisa@eiris.org
+44 20 7840 5700 (switchboard)
+44 207 ...
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Ratings And The Long-Term Investor - The Case Of Climate Change

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Lisa Hayles, Senior Client Relationship Manager - Ethical Investment Research Services (EIRIS) Ltd. - United Kingdom

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  • For those of you unfamiliar with EIRIS, we are an independent non for profit organisation specializing in environmental, social and governance research on publicly listed companies.
    We were founded over 26 years ago by a group of churches and charities who were concerned in the early 80s about their investments and whether they were inadvertently supporting the apartheid era regime in South Africa.
    We have offices in London, Paris and Boston and work with a network of regional partners including organisations in South Korea and Australia. We research over 3,000 co’s globally.
    Our research covers over 300 research points – covering the spectrum of environmental, social and governance issues.
    Over 100 publicly listed clients – these include asset owners, managers, charities, religious organisations, high net worth individuals stock exchanges and index providers
    Our aim is to provide investors with a suite of resources to implement their own responsible investment strategies.
    During the last 25 years we have seen investor interest and Company reporting on ESG issues have grown exponentially. We have seen RI shift from being a small niche field concerned purely with negative screening towards the mainstreaming of RI and investors actively engaging with companies.
  • The Climate Change Impact assessment is combined with the assessment of Management Response to provide an overall Carbon Risk Factor score for each company. Carbon Risk is measured on a scale of zero to 100, where the mid-point, 50 identifies companies that have adequate risk management systems in place.
    The overall figure seeks to assess the average risk of each company. The premise is that “solution companies” such as pure play, alternative energy firms will provide the lowest risks as their products are designed to reduce or replace typical carbon intensive products. They will by clustered at the top of the scale, scoring between 80 and 100 points.
    Energy- intensive companies with little of no evidence of a strategy for managing their climate change impacts will obtain the lowest scores on the scale.
    The range of possible scores will vary depending on the impact classification of each company – Very high impact companies have the largest range of possible scores – from 0 to 75 reflecting the greater risks and opportunities facing companies with very energy intensive activities.
  • Ratings And The Long-Term Investor - The Case Of Climate Change

    1. 1. © EIRIS Ratings and the Long-term Investor: The case of Climate Change Lisa Hayles EIRIS Friday November 13th , 2009 TBLI Amsterdam Signatory to the
    2. 2. © EIRIS EIRIS: Overview ● EIRIS is a not for profit research organisation specialising in environmental, social and governance research on publicly listed corporations. ● Founded 26 years ago, EIRIS was created as a collaborative research project to assist a group of churches & charities put their principles into practice. ● Our mission is to conduct high quality research on extra-financial issues to encourage improved social and environmental performance. • Global coverage (3,000 companies) - FTSE All- World Developed & MSCI World
    3. 3. © EIRIS 3 3 Questions • what practical steps can investors take to avoid investing solely with a short-term perspective? • How can we apply these practical steps in the case of climate change? • And would the same approach work for other long-term ESG issues?
    4. 4. © EIRIS 4 Investing for the long-term Source: www.cartoonstock.com
    5. 5. © EIRIS 5 4 steps to focus on the long-term • Spend more time on long-term issues – devote resources(!) • Find new approaches to incentivise issues • Asset Owners can seek long-term advice • Asset Mangers can offer long-term products
    6. 6. © EIRIS EIRIS Climate Change Toolkit • Helping investors: • Quantify a company’s climate change impact and management response • Profile risk in portfolios vs. a reference benchmark • Engage with portfolio companies to reduce climate-change related risks
    7. 7. © EIRIS 7 • Score for each company on a scale from zero to 100 • Below 50 considered unmitigated risk • Above 50 risk is considered mitigated • Above 75 considered a ‘carbon solutions company’ Carbon Risk Factor
    8. 8. © EIRIS 8 Example Carbon Profile
    9. 9. © EIRIS 9 Climate Change Performance FTSE AWD Index
    10. 10. © EIRIS 10 Carbon Engager Categories • Opportunity Maximisers - Best practice companies • Issues Managed - Good Practice • First Steps - Some engagement with the issue • Non-Starters -No climate change strategy • Poor Disclosers • Laggards - Bottom quartile performance for their sector
    11. 11. © EIRIS 11 Advice requested by Asset Owners • Ask consultants, managers & advisers for their advice on long-term issues • For their advice on the long-term generally • 5 – 10 year scenarios • Asset allocation implications of long-term issues
    12. 12. © EIRIS 12 Long-term Manager products • The ‘Perfect’ Climate Change Fund – Perhaps a third “solutions” investments – But best in sector rebalancing for diversity – And engagement with laggards for change – Desirably on behalf of whole institution • Attracts clients AND promotes long-term
    13. 13. © EIRIS 13 Conclusions • Climate Change shows LT focus is possible • Many other issues as relevant – Biodiversity, forests, water, governance (including issues like diversity and bribery), sustainable globalisation (human rights, labour standards, access to medicines etc.) • Major potential benefits to all concerned
    14. 14. © EIRIS 14 Thank you Lisa Hayles Senior Client Relationship Manager lisa@eiris.org +44 20 7840 5700 (switchboard) +44 207 840-5727 (direct) web: www.eiris.org

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