Socially Responsible Investment
Page 2 Agenda Adding shareholder value using sustainable development Focusing investments Developing appropriate retail and institutional products Engagement
Page 3 Sustainable Development Development that meets the needs of the present without compromising the ability of future generations to meet their own needs - Bruntland Commission 1987
Page 4 Why Sustainable Development? World Economic Growth continues, UK GDP/capita doubles ( )
Page 5 Environmental Costs Pollution Climate change Ozone destruction Acid rain Toxic pollutants Fresh water pollution Radio-active wastes Resource depletion Biodiversity Deforestation, flooding Fisheries on brink Freshwater shortages Topsoil losses
Page 6 Climate Change Severe weather, and more to come… Impacts - insurance - exceptional losses, - electricity generation - agriculture - energy industries Solutions: renewable energies, fuel cells, energy efficiency, rail transport... Searching for sustainable investment solutions
Page 7 Endocrine Disrupters Exposure to a cocktail of chemicals Disturbing evidence: early puberty in girls, low sperm counts, gender distortion in wildlife Industries at risk: chemicals, consumer products, retailers and insurance Friends of the Earth campaign- Boots a key target
Page 8 Social Costs Inequality Regional conflicts increasing Diseases reappearing (TB, Malaria, Aids) Diseases of the developed world: Obesity, Heart Disease, Depression
Page 9 Index of Sustainable Economic Welfare
Page 10 Five World Economy Energy Materials Linear Economy Products and Services Fossil Fuels, Nuclear Rich Ore Deposits, Ancient Forests, Oil Reserves etc.. Heavy metals Carcinogens, EDCs CO2, Nox, SOx DEPLETIONPOLLUTION OVER CONSUMPTION
Page 11 One World Economy Energy Wastes Cycling Economy Quality of Life Enhancers Renewable Sources Sustainably Managed Resources Bio-degradable wastes Materials
Page 12 De-coupling Energy Consumption from GDP
Page 13 Key driver to investment performance As investors, we increasingly believe that good environmental and social practice is synonymous with good management of companies and, in turn, good share price performance. - Keith Jones, Managing Director of Morley Society Economy Environment Sustainable Development
Page 14 Growth Sectors Climate ChangeAlternative Energy Mass Transportation Energy Efficiency Water Management HealthPharmaceuticals Healthy Eating Fitness Quality of LifeEducation Leisure Housing Telecommunications Media IT
Page 15 Growth Sectors Resource shortagesWater Management Recycling and Environmental Technologies Business efficiencySupply chain management Innovative technologies
Page 16 Appraisal Process Profile each company to: identify environmental and social opportunities & risk judge suitability of a company for the SRI funds highlight areas suitable for progressive engagement Judge suitability of a company based on grading system surrounding 2 key elements: Business sustainability Management vision and strategy
Page 17 Business Sustainability grading: A: core business is sustainability solution …….. E: business is fundamentally in conflict with sustainable development Management Vision & Strategy Grading: 1:Excellent - clear vision of sustainable development and actively working to achieve it …….. 5:Poor - company is hostile to the concept of corporate social responsibility How We Rate Companies - Sustainability Matrix
Page 18 Engagement Good social and environmental practice Good business practice Good financial performance
Page 19 Paying the Price of Poor Practice Compensation claims Damage to reputation 82% drop in share price
Page 20 Summary SRI must add shareholder value to succeed Traditional negative screening simply restricts where you invest Corporate Governance and engagement are an extension SRI.