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Socially Responsible
Investment
Agenda
Adding shareholder value using sustainable development
Focusing investments
Developing appropriate retail and institutional products
Engagement
Page 2
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 3
Why Sustainable Development?
World Economic Growth continues, UK GDP/capita doubles (1950 - 2000)
OECD Economic Output (Real 1995 US$)
2.50E+07
2.00E+07
US$
1.50E+07
1.00E+07
5.00E+06
Q1 00
Q3 97
Q4 98
Q2 96
Q1 95
Q4 93
Q3 92
Q2 91
Q1 90
Q3 87
Q4 88
Q2 86
Q1 85
Q4 83
Q3 82
Q2 81
Q1 80
Q4 78
Q2 76
Q3 77
Q1 75
Q4 73
Q3 72
Q2 71
Q1 70
Q4 68
Q3 67
Q1 65
Q2 66
Q4 63
Q3 62
Q2 61
Q1 60
0.00E+00
Page 4
Environmental Costs
Pollution
Resource depletion
Climate change
Biodiversity
Ozone destruction
Deforestation, flooding
Acid rain
Fisheries on brink
Toxic pollutants
Freshwater shortages
Fresh water pollution
Topsoil losses
Radio-active wastes
Page 5
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 6
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 7
Social Costs
Inequality
Regional conflicts increasing
Diseases reappearing (TB, Malaria, Aids)
Diseases of the developed world: Obesity, Heart Disease, Depression
Page 8
Index of Sustainable Economic Welfare
Page 9
Five World Economy
Linear Economy
Fossil Fuels,
Nuclear
Energy
DEPLETION
Rich Ore Deposits,
Ancient Forests,
Oil Reserves etc..
CO2, Nox,
SOx
POLLUTION
Materials
Heavy metals
Carcinogens,
EDCs
Products and Services
OVER CONSUMPTION
Page 10
One World Economy
Cycling Economy
Renewable
Sources
Sustainably
Managed
Resources
Energy
Materials
Wastes
Bio-degradable
wastes
Quality of Life Enhancers
Page 11
Sustainable Development
Key driver to investment performance
Economy
Society
Environment
“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
Page 13
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 16
Product
How We Rate Companies - Sustainability Matrix
A
X
B
X
C
X
X
D
X
X
X
X
X
E
X
X
X
X
X
1
2
3
4
5
Management Vision and Practice
Business Sustainability grading:
Management Vision & Strategy Grading:
A:
1: Excellent - clear vision of sustainable development
and actively working to
achieve it
……..
core business is sustainability
solution
……..
E:
business is fundamentally in conflict with sustainable
development
5: Poor - company is hostile to the concept of
corporate social responsibility
Page 17
Engagement
Good social and environmental practice
Good business practice
Good financial performance
Page 18
Paying the Price of Poor Practice
Compensation claims
Damage to reputation
82% drop in share price
Page 19
Summary
SRI must add shareholder value to succeed
Traditional negative screening simply restricts where you invest
Corporate Governance and engagement are an extension SRI.
Page 20