Floris Lambrechtsen & Masja Zandbergen Double Dividend From Policy to Portfolio TBLI Academy Integrating ESG
Jun 17, 2015
Floris Lambrechtsen & Masja Zandbergen Double Dividend
From Policy to PortfolioTBLI Academy Integrating ESG
65 67 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 ..... 30........50
3,5
3,0
2,5
2,0
1,5
1,0
0,5
0
Projections
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Source: Goldman Sachs commodities research, Double Dividend
Food scarcity
Source: Goldman Sachs commodities research, Double Dividend
Climate change impact?!
Risks- Increasing uncertainty and volatility food prices.
Opportunities- Investments in increasing efficiency agriculture.- Increasing commodities trade.
Demand
Yield
Arable land
2
091006-ICC-TT-Duurzaamheid-BD
Energy scarcity
Source: International Energy Agency, Clean Edge, New Energy Finance
Risks- Increasing uncertainty and volatility oil prices
Opportunities- Investments in clean technologies
120
100
80
60
40
20
01990 2000 2010 2020 2030
USD Billion
Mb
/d
New Investment in Renewable Energy
400
300
200
100
0
3
Trends are interlinked
Source: Netherlands Environmental Assessment Agency, Growing within Limits, 2009
Integrated approaches are needed, leads to impasse and predictable surprises
4
} Impasse
Today’s investments shape tomorrows economy
5
clean energy & efficiency
2030
091006-ICC-TT-Duurzaamheid-BD
Source: Goldman Sachs commodities research, Double Dividend
20 year investment horizon requires incorporation of long term risks
nominal Correction for inflation
Expected Payments
6
Evolution in responsible investing
7
StrategyStrategy Process redesignProcess redesign Process supportProcess support FilterFilter
Management of RI of a pension fund
8
RI SupportRI Support
RI ControlRI Control
What is ESG integration?
Obtaining ESG capability within the investment process at all levels – conviction, research, portfolio construction, risk management and reporting
versus
Removing from further consideration in the investment process possible investments which do not meet specified criteria related to ESG (negative
screening)
9
Levels of ESG capability
10
Manager screening on ESG integration
11
• Managers are ranked according to development in RI: Risk Management, Integration and Value Creation
Manager screening on ESG integration
12
0102030405060708090
ScoreValue Creation
Integration
Risk Management
ESG Capability
2008Relative
performance
2009 Relative
performance
1st quartile 9,25 6,19
2nd quartile 3,40 2,52
3rd quartile -4,16 -0,38
4th quartile -1,50 -1,16
Relative performance per quartile
Examples of ESG best practice in non-SRI asset managers
•2-6 RI analysts support portfolio managers
•ESG analysis in Global Equity Buy List
•Platform for ESG analysis available to all portfolio managers
•Training of portfolio managers on ESG risks and opportunities
•Compliance/Risk Management involvement
•Reporting to clients on ESG analysis and decisions (on demand)
13
• Involvement of portfolio managers
• Availability of ESG data in Emerging Markets and Small Caps
• Assessment of government bonds
• ESG integration in investment modeling
• Short term incentives structure
Dilemma’s and challenges
14