Relevance of non-financial information for mainstream investors Felix Schnella, CFA Paris, 16 Nobvember, 2007
Ownership structure <ul><li>Strong and supportive ownership </li></ul><ul><li>Boutique investment culture within strong an...
Global Research Global Sector Fundamental Research Headcount* Steve Berexa, CFA & Gunnar Miller; Co-Heads of Global Resear...
Distinguishing Characteristics <ul><li>Unique Dual Research Platform </li></ul><ul><ul><li>Global research platform - 65 c...
Why do non-financial information matter Example: Discounted cash flows   <ul><li>Analysts estimate future cash flows utili...
How is information transformed into value Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow Financial data Financial data ...
Current situation <ul><li>Very broad set of non-financial information is being put into financial markets </li></ul><ul><l...
DVFA* established Committee Non-Financials <ul><li>Multi-stakeholder approach including  </li></ul><ul><ul><li>Fund manage...
Goals of the DVFA Committee Non-Financials <ul><li>Defining requirements of mainstream investment professionals for non-fi...
Approach of DVFA Committee Non-Financials <ul><li>STEP 1 </li></ul><ul><ul><li>Limit analysis and definition to three indu...
Structure of Underlying Model 3 Areas of Performance 11 Categories of Measurement
Structure of KPI’s <ul><ul><li>Examples include : </li></ul></ul><ul><ul><li>- Health & Safety of products </li></ul></ul>...
Structure and Definition of Individual KPI KPIs are typically described at a comprehensive level … …  and then defined at ...
Investor Survey to identify relevance Broad range of feedback
Investor Survey to identify relevance Broad range of feedback
Perceived relevance of KPI‘s  Overview Investors perceive Governance KPI more important than social and environmental KPI’S
Perceived relevance of KPI‘s  Governance criteria
Perceived relevance of KPI‘s  Social criteria
Perceived relevance of KPI‘s  Environmental criteria (ex Emissions)
Perceived relevance of KPI‘s  Environmental criteria (Emissions only)
Perceived relevance of KPI‘s  Environmental criteria (Emissions only)
Next steps <ul><li>Continue development of sector specific KPI‘s </li></ul><ul><li>Continue to review the existing set of ...
 
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Relevance of non-financial information for mainstream investors.

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Felix Schnella, Vice President - Allianz Global Investors - Germany

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  • The left-hand side graph is expressing „Categories“ then dissected in the right hand side
  • The left-hand side graph is expressing „Categories“ then dissected in the right hand side
  • The left-hand side graph is expressing „Categories“ then dissected in the right hand side
  • The left-hand side graph is expressing „Categories“ then dissected in the right hand side
  • The left-hand side graph is expressing „Categories“ then dissected in the right hand side
  • The left-hand side graph is expressing „Categories“ then dissected in the right hand side
  • Relevance of non-financial information for mainstream investors.

    1. 1. Relevance of non-financial information for mainstream investors Felix Schnella, CFA Paris, 16 Nobvember, 2007
    2. 2. Ownership structure <ul><li>Strong and supportive ownership </li></ul><ul><li>Boutique investment culture within strong and stable structure </li></ul>Regional Distribution Brands Global Investment Platform Brands USA Germany Other Europe Asia Pacific Global Fixed Income Global Equity Corporate Brand Asset Management Umbrella Brand
    3. 3. Global Research Global Sector Fundamental Research Headcount* Steve Berexa, CFA & Gunnar Miller; Co-Heads of Global Research U.S. Consumer Financials Services Healthcare Industrials Technology Telecom/ Media Sustainability Research (SR) Special Situations Grassroots SM Research Total Europe Asia Pacific Total MDAM** 4 4 2 10 2 6 3 3 12 2 3 4 0 7 1 7 3 1 11 1 3 6 2 11 3 2 1 1 4 1 3 0 0 3 0 1 0 0 1 0 1 4 1 6 0 30 25 10 65* 10 * As of 30 June 2007 ** Meiji Dresdner Asset Management (MDAM), 10% of which is held by Allianz Global Investors, and RCM have entered into a research sharing agreement. RCM utilizes research received from MDAM to help it make decisions on Japanese equities. The analysts shown in this table are employees of MDAM. <ul><li>Innovative and proprietary investment tools </li></ul><ul><li>Analysts manage sector mandates </li></ul><ul><li>Each analyst conducts in average 100 meetings per year with corporate management </li></ul><ul><li>Research identifies the key drivers of each stock, which frames and focuses the analytical process </li></ul><ul><li>Integrated with Grassroots SM Research </li></ul>Research is the cornerstone of our investment philosophy
    4. 4. Distinguishing Characteristics <ul><li>Unique Dual Research Platform </li></ul><ul><ul><li>Global research platform - 65 career analysts providing deep insight into fundamentals </li></ul></ul><ul><ul><li>GrassrootsSM – a sophisticated proprietary market research network </li></ul></ul><ul><ul><li>Research is the cornerstone of our investment process </li></ul></ul><ul><li>Truly global firm </li></ul><ul><ul><li>Over 200 investment professionals located in six offices across the world </li></ul></ul><ul><ul><li>Analyst platform is structured globally by sector </li></ul></ul><ul><li>Team-oriented investment culture </li></ul><ul><ul><li>Investment professionals are held accountable and rewarded for superior performance </li></ul></ul><ul><ul><li>Environment stimulates and develops investment excellence </li></ul></ul><ul><ul><li>Boutique culture with strong and supportive ownership by AllianzGI </li></ul></ul>RCM is a global investment organization consisting of separate affiliated entities, owned by AllianzGI, with locations in key financial centers including San Francisco, London, Frankfurt, Hong Kong, Singapore, Sydney and Tokyo. As of December 31, 2005 these affiliated entities collectively advised or managed approximately $120.3 billion, including [xx.x] billion in [location where being presented]. The RCM global research platform was comprised of 55 research analysts as of December 31, 2005.
    5. 5. Why do non-financial information matter Example: Discounted cash flows <ul><li>Analysts estimate future cash flows utilising </li></ul><ul><ul><li>Current financial information (reporting) </li></ul></ul><ul><ul><li>Industry information (e.g. market prices, market trends) </li></ul></ul><ul><ul><li>Soft factors (e.g. perceived management strength, product quality) </li></ul></ul><ul><ul><li>Additional company information is getting more important </li></ul></ul><ul><ul><ul><li>Traditional non-financial information (e.g. market shares) </li></ul></ul></ul><ul><ul><ul><li>Environmental data (e.g. CO2 emissions for utilities or industrials, product energy efficiency) </li></ul></ul></ul><ul><ul><ul><li>Social data (information on training & education or health and safety of products and employees) </li></ul></ul></ul><ul><ul><ul><li>Information on governance (corruption, customer satisfaction) </li></ul></ul></ul>Non-financial information become increasingly important for traditional investors
    6. 6. How is information transformed into value Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow Financial data Financial data Financial data Non-financial data Discount of cash flows Company Value ?
    7. 7. Current situation <ul><li>Very broad set of non-financial information is being put into financial markets </li></ul><ul><li>Low level of structure of information </li></ul><ul><li>Convergence between sustainability and traditional valuation methods </li></ul><ul><li>Corporates demand guidance on which data are relevant to investors and analysts - request mainstream markets to specify which data should be provided </li></ul>
    8. 8. DVFA* established Committee Non-Financials <ul><li>Multi-stakeholder approach including </li></ul><ul><ul><li>Fund managers </li></ul></ul><ul><ul><li>Equity Sell-Side Analysts </li></ul></ul><ul><ul><li>Corporates (IR Managers, CR Managers) </li></ul></ul><ul><ul><li>Auditors </li></ul></ul><ul><ul><li>Scientific community </li></ul></ul><ul><ul><li>Professional associations (issuers, communication, investment professionals, auditors) </li></ul></ul><ul><ul><li>Selected NGOs </li></ul></ul><ul><ul><li>* DVFA is the Society of Investment Professionals in Germany </li></ul></ul>
    9. 9. Goals of the DVFA Committee Non-Financials <ul><li>Defining requirements of mainstream investment professionals for non-financials </li></ul><ul><li>Selecting KPIs on non-financial issues </li></ul><ul><ul><li>are meaningful for investors and analysts </li></ul></ul><ul><ul><li>can be reported by corporates (data available, consolidation possible etc.) </li></ul></ul><ul><ul><li>can undergo meaningful verification (legal audit, assurance) </li></ul></ul><ul><ul><li>Define no more than 50 KPIs in total to avoid data spamming! </li></ul></ul><ul><li>Not defining (yet another) reporting scheme, rather: defining KPIs compatible with and useable in other formats such as G3 </li></ul>
    10. 10. Approach of DVFA Committee Non-Financials <ul><li>STEP 1 </li></ul><ul><ul><li>Limit analysis and definition to three industries: Utilities, Airlines, Automotives; </li></ul></ul><ul><ul><li>Reduce long-list of 600 indicators gathered to 25 KPIs through multiple iterative process involving discussions with </li></ul></ul><ul><ul><ul><li>Mainstream investors, Mainstream financial analysts </li></ul></ul></ul><ul><ul><ul><li>Corporates </li></ul></ul></ul><ul><li>STEP 2 </li></ul><ul><ul><li>Roadshow set of 25 KPIs to a wider circle of mainstream investment professionals in Europe consolidating findings </li></ul></ul><ul><li>STEP3 </li></ul><ul><ul><li>Transfer results to European Committee within EFFAS finalising sectors and set of indicators </li></ul></ul>
    11. 11. Structure of Underlying Model 3 Areas of Performance 11 Categories of Measurement
    12. 12. Structure of KPI’s <ul><ul><li>Examples include : </li></ul></ul><ul><ul><li>- Health & Safety of products </li></ul></ul><ul><ul><li>- Training & qualification </li></ul></ul><ul><ul><li>- Energy efficiency of products and processes </li></ul></ul>General KPI‘s KPI‘s that are relevant to all companies regardless of the industry Sector specific KPI‘s KPI’s that are relevant to a limited number of industries only <ul><li>Sector Airlines </li></ul><ul><ul><li>EExample Fuel consumption </li></ul></ul><ul><li>Sector Automotives </li></ul><ul><ul><li>EExample Product Recalls </li></ul></ul><ul><li>Sector Utilities </li></ul><ul><ul><li>EExample Share of investments in renewables </li></ul></ul>Both general KPI’s and sector specific KPI’s provide key information
    13. 13. Structure and Definition of Individual KPI KPIs are typically described at a comprehensive level … … and then defined at an industry-specific level!
    14. 14. Investor Survey to identify relevance Broad range of feedback
    15. 15. Investor Survey to identify relevance Broad range of feedback
    16. 16. Perceived relevance of KPI‘s Overview Investors perceive Governance KPI more important than social and environmental KPI’S
    17. 17. Perceived relevance of KPI‘s Governance criteria
    18. 18. Perceived relevance of KPI‘s Social criteria
    19. 19. Perceived relevance of KPI‘s Environmental criteria (ex Emissions)
    20. 20. Perceived relevance of KPI‘s Environmental criteria (Emissions only)
    21. 21. Perceived relevance of KPI‘s Environmental criteria (Emissions only)
    22. 22. Next steps <ul><li>Continue development of sector specific KPI‘s </li></ul><ul><li>Continue to review the existing set of KPI‘s </li></ul><ul><li>Identify relevant sector specific and general KPI‘s </li></ul><ul><li>Issue recommendation to corporates </li></ul><ul><li>Foster scientific challenge to review relevance of KPI’s </li></ul>

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