Matthew Kiernan Speech

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Transcript Matthew Kiernan Speech

CDP Panel Discussion
New York City
September 24, 2007
Dr. Matthew J. Kiernan, Innovest Strategic Value Advisors
SEPTEMBER 07
Climate Change is Driving a Global Industrial Restructuring…
“There will be a large creation and re-distribution of shareholder value in the
transition to a low carbon economy – there will be winners and losers at sector
level, and within sectors at company level.
The winners are more likely to be those businesses that take the time to
understand and address this complex area.”
Tom Delay, Chief Executive, The Carbon Trust
“Climate Change and Shareholder Value” Report
March, 2006
SEPTEMBER 07
Carbon Disclosure Project – The First 5 Years
What Have We Learned So Far?
 The global industrial restructuring towards a “low carbon” future has already begun
 Response rates from corporates and support from investors continues to grow
 Risks – and opportunities – are much more broadly – and unevenly — distributed than previously
thought
 Corporations are closing the awareness/action gap rapidly
 Both companies and investors can in fact make money from climate change – and some are
already doing so!
 For investors, climate risk has four dimensions, not just one! Analysis must consider:
 Risk/carbon footprint
 risk management capability;
 market-driven upside opportunities
 Performance improvement vector
 While more & more investors are now paying attention, most are a long way from integrating the
net climate exposure of their assets into actual investment strategies and decisions
SEPTEMBER 07
Key 2007 Findings:
 Highest response rate ever – 77% (72%)
 Improved carbon accounting; more robust responses
 Corporates closing the awareness/action gap
 Strategic opportunities as well as risk (82%)
 Wide variations in risk exposure – between and within sectors
 Increased FT500 commitment to renewables and energy efficiency
 Investors are not yet matching improved awareness and information with ACTION
SEPTEMBER 07
“Carbon Beta™” Varies Widely – Both Between and Within Sectors
CO2 Regulatory Cost of Compliance
as Percentage of EBITDA
30.00%
25.24%
Cost of Compliance as EBITDA%
25.00%
American
Electric
Power
21.45%
Xcel
20.00%
15.94%
International
& Flavours
Fragrances
15.00%
Mylan
Laboratories
10.49%
Eastman
Chemicals
10.00%
9.72%
Alcoa
Union Pacific
9.09%
7.76%
Praxair
5.00%
Exelon
1.23%
Du Pont
PG & E
Newmont
Mining
3.11%
1.42%
CSX Corp.
2.92%
1.14%
0.10%
Johnson &
Johnson
0.04%
0.00%
Electric Power
Companies - N.
America
Multi-Utilities &
Unregulated Power
Diversified
Chemicals
Specialty Chemicals
Max case
Metals & Mining
Surface Transport
Pharmaceuticals
Min case
Investors need to know which is which!
SEPTEMBER 07
Beyond Disclosure . . .
250
Innovest Carbon Performers
MSCI World (Free)
Difference ISVA Cbeta - MSCI
200
CLI Performers
CLI underperformers
Difference ISVA Cbeta - CLI
150
100
50
Jun2004
Sep2004
Dec2004
Mar2005
Jun2005
Sep2005
Dec2005
Mar2006
Jun2006
Sep2006
Dec2006
Mar2007
Jun2007
(50)
SEPTEMBER 07