The Evolution of Aggregation and Reporting of ESG Data: Observations from a Leading Practitioner

THE EVOLUTION OF AGGREGATION & REPORTING OF ESG DATA

SUSTAINABLE BRANDS −NEW METRICS 2015

WE RECOGNIZE THAT WHAT IT MEANS FOR A COMPANY TO ENGAGE IN SUSTAINABILITY HAS CHANGED…

Before: Reactive Philanthropic donations targeted to local institutions and driven by interest of senior management

Community engagement / support for local public interest projects and issues

Employee volunteer programs to support

Social Investment Social Investment Strategic Sustainability

Now: Proactive Aligning philanthropic support with business activity

Managing operations to enhance bottom line and provide social / environmental benefit

Developing products and services which enable companies to do good while doing well

AT BLOOMBERG, WE FOCUSED ON INTERNAL OPERATIONS / EMPLOYEES; NOW, WE ARE EXTENDING OUR EFFORTS TO OUR PRODUCT AND SERVICES

Areas of Service/Activity - Principal Customers: Internal Primary Function: Integrate Sustainability considerations into all global operations when and where it makes sense

▪ Supply Chain & Waste Reduction▪ Marketing, Purchasing, INK▪ Markets Magazine, Businessweek▪ Engineering, Asset Management ▪ Facilities & Technology▪ Info Sys, Broadcast, Networks▪ R&D Systems, Data Centers▪ Facilities, Leasing

▪ Reporting & Analysis▪ Employee Business Travel▪ Distribution▪ Carbon Footprint

Philanthropy Leverage our Philanthropic assets to partner with thought leading NGOs to accelerate the sustainability integration into business and investment decisions

Areas of Service/Activity - Principal Customers: External

Primary Function: Integrate Sustainability considerations into all products /services when and where it makes sense

▪ Core Terminal▪ Equities / Portfolio Analytics▪ Commodities, Fixed Income▪ Foundational Applications

▪ News & Multimedia▪ Print News, Markets▪ Bloomberg Businessweek.com/mobile/TV

▪ Data Products▪ BNEF/BNA/BGOV▪ Data License

WE’VE USED THESE PRINCIPLES TO CREATE A ROADMAP FOR A MORE COMPREHENSIVE APPROACH TO SUSTAINABILITY IN ALL THAT WE DO

BSUSTAINABLE 2020

A COORDINATED, AGGRESSIVE UNIQUE APPROACH TO ALIGN OPERATIONS, PRODUCT AND PHILANTHROPY TO AMPLIFY OUR ‘SUSTAINABLE IMPACT’

EMISSIONS

REDUCTION

INVESTMENTS

DEMONSTRATE THAT INTEGRATING SUSTAINABILITY INTO BUSINESS DECISIONS MAKES SENSE

DEMONSTRATE THAT INTEGRATING SUSTAINABILITY INTO INVESTMENT DECISIONS MAKES SENSE

SUPPORT EFFORTS TO DEVELOP STANDARDS AND METHODOLOGIES THAT ENABLE BOTH OF THE ABOVE

SUSTAINABLE

FINANCE PRODUCT

STRATEGY

SUSTAINABILITY DATA

AND

ACCOUNTING STANDARDS

OPERATIONS

PRODUCT

PHILANTHROPY

OPERATIONAL EXCELLENCE

MARKET DEVELOPMENT

PARTNER ENGAGEMENT

THOUGHT LEADERSHIP

FINANCIAL INTEGRATION

October 2, 2015

ESG TRENDS IN CAPITAL MARKETS


RAPID GROWTH IN BLOOMBERG’S ESG USERS AND DATA CONSUMPTION CORROBORATES GROWING CORPORATE INTEREST

ESG UNIQUE USERS (12 MONTHS ROLLING, MONTHLY, AS OF 8/30/2015)

YTD GROWTH: 26%

YOY GROWTH: 60%

718MN+ DATA HITS (12 MONTH ROLLING)

AS A RESULT, PRODUCTS AND INITIATIVES ARE NOW PROLIFERATING ACROSS ASSET CLASSES, TYPES AND ORGANIZATIONS

THE RANGE OF INSTITUTIONS INTEGRATING ESG INTO THEIR BUSINESS ILLUSTRATES UPTAKE:

MUTUAL FUNDS (EQUITY AND FIXED INCOME)

SELL-SIDE RESEARCH

INDEX PRODUCTS

EXCHANGE TRADED PRODUCT

STOCK EXCHANGES

PRIVATE EQUITY

SUSTAINABLE FINANCE HAS EMERGED AND DIVERSIFIED INTO AN INCREASINGLY MAINSTREAM, BUT ALSO INNOVATIVE, MARKETPLACEEQUITY INDEX/ETF FIXED INCOME PRIVATE EQUITY REAL ESTATE FINANCIAL INNOVATION

SOCIALLY RESPONSIBLE INVESTMENT

▪ NEGATIVE SCREENING▪ VALUES-DRIVEN INVESTING▪ HEAVY CORPORATE ENGAGEMENT

▪ ESG SCORES AND DATA▪ VALUE NOT VALUES▪ “SUSTAINABLE” ALPHA▪ RISK OVERLAYS

▪ FUNDS, INDICES, ETFS▪ GREEN/THEMATIC BONDS▪ ESG IN FIXED INCOME▪ REAL ESTATE, PE▪ STRUCTURED FINANCE

Climate, water & ag funds

Fossil fuel free funds Carbon efficient strategies

Green bonds & indices Solar lease securitization Green city bonds

Vaccine & gender bonds REITs, Yieldcos & debt Green REITs & REIT debt Green RMBS & CMBS

BROAD

SUSTAINABLE

FINANCE

SUSTAINABLE &

RESPONSIBLE

INVESTMENT

SUSTAINABILITYREPORTING


FOCUSING SPECIFICALLY ON U.S.-LISTED COMPANIES, HOW SATISFIED ARE YOU WITH THE INFORMATION CURRENTLY BEING PROVIDED BY THESE COMPANIES ON THE FOLLOWING TOPICS?

DESPITE ALL OF THE MARKET DEVELOPMENT IN THE ESG SPACE, MANY INVESTORS STILL FEEL DISSATISFIED WITH THE CURRENT STATE OF DISCLOSURE

Source: PwC Sustainability Goes Mainstream, May 2014

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Satisfied Dissatisfied

How risks and opportunities are identified and quantified in financial terms

Comparability of sustainability reporting between companies in the same industry

Relevance and implications of sustainability risks issues

How the company identifies social and environmental impacts in its supply chain

Key performance indicators related to each identified material issue

Sustainability strategy that is linked to business strategy

Internal governance of sustainability issues

Process used to identify material sustainability issues

DISSATISFACTION AMONG INVESTORS STEMS PERCEPTION OF RELEVANCE; EVIDENCE OF FINANCIAL IMPACT IS CRITICAL TO GAIN ADOPTION

FINANCIAL

FINANCIAL/

SUSTAINABILITY

SUSTAINABILITY

MATERIALITY

TIME

LOW

WELL KNOWN,

FULLY DISCOUNTED

HARDER TO DEFINE,

BUT VERY VALUABLE

LONG TERM,

UNKNOWN EFFECT

HIGH

NEAR FAR

ROBUST STANDARDS CAN ACCELERATE DISCLOSURE OF COMPARABLE DATA AND ADOPTION OF BEST PRACTICES; FOR BOTH CORPORATES AND INVESTORS

EARLY

STAGE

AD

OP

TIO

N

DEVELOPED

TODAY

INNOVATION

INITIAL ACTIVITY

INFORMATION / ANALYTICS

BEST PRACTICES IDENTIFIED

BENCHMARKS ESTABLISHED

MEASUREMENT / MANAGEMENT

FINANCIAL ANALYSIS / INTEGRATION

MAINSTREAM APPLICATION

“DERIVATIVE” FINANCIAL INSTRUMENTS

STANDARD EVOLUTION

STANDARDS-SETTING

PHASE

SUSTAINABILITY RISK /

OPPORTUNITY FOR

COMPANIES AND INVESTORS

STANDARDIZATION /

NORMALIZATION

BEGINS

QUALITY,

COMPARABLE

DATA EMERGES

FOCUSING ON STANDARDS HELPS PRODUCE QUALITY DATA IN THE MEDIUM-TERM AND DEVELOPMENT OF ‘SUSTAINABLE FINANCE’ IN THE LONG-TERM

Standard Setter

4

5

6

1

2

3

•  Issue Identification •  Multi Stakeholder

•  Issue Prioritization •  Targeted Stakeholders

•  Measurement •  Performance

•  Financial Integration •  Capital Flows

•  Application •  Certification

•  Implementation •  Validation

•  Integration of Financial and Sustainability Reporting

Value Proposition Future State

NGOs / Companies

Industry / Regulators

Raters / Research

Asset Owners / Managers

Analysts / PMs / planners

Companies / Communities

Companies / Accountants

7

Sustainable Finance

GISR UN PRI

SASB

CERES

GRI

USSIF

IIRC

WRI [water]

[carbon]

CDP

SIGNATURE INITIATIVE

SIGNATUREINITIATIVE

SASB IS SEPARATE, BUT COMPLIMENTARY TO A NUMBER OF OTHER REPORTING INITIATIVES; ALIGNMENT IS CRITICAL

Corporate Reporting Dialogue (CRD) § Financial Accounting Standards Board (FASB)

§ Global Reporting Initiative (GRI)

§ Carbon Disclosure Project (CDP)

§ Climate Disclosure Standards Board (CDSB)

§ International Accounting Standards Board (IASB)

§ International Integrated Reporting Council (IIRC)

§ International Public Sector Accounting Standards Board (IPSASB)

§ International Organization for Standardization (ISO)

§ Sustainability Accounting Standards Board (SASB)

KEY DIMENSIONS

1. VOLUNTARY / COMPULSORY

2. NATIONAL / GLOBAL

3. FINANCIAL / NON-FINANCIAL

Corporate Reporting Dialogue (CRD)

Financial Accounting Standards Board (FASB)

Global Reporting Initiative (GRI)

Carbon Disclosure Project (CDP)

Climate Disclosure Standards Board (CDSB)

International Accounting Standards Board (IASB)

International Integrated Reporting Council (IIRC)

International Public Sector Accounting Standards Board (IPSASB)

International Organization for Standardization (ISO)

Sustainability Accounting Standards Board (SASB)

AS A FIRST STEP, WE REPORTED OUR 2014 PERFORMANCE USING BOTH GRI AND SASB STANDARDS

WHAT DOES THE FUTURE HOLD? A HYPER-TRANSPARENT WORLD WILL AFFECT DISCLOSURE

1. ASSET LEVEL INFORMATION HAS EMERGED AS A NEW FRONTIER

2. SUPPLY CHAIN INFORMATION IS CHALLENGING BUT INCREASINGLY IN DEMAND 3. RISK AND OPPORTUNITY EVALUATION GOES BEYOND THE SUPPLY CHAIN RELATIONSHIP 4. CURRENT FRONTIER LEVERAGES NEWS/SOCIAL MEDIA WITH DATA SCIENCE

The Evolution of Aggregation and Reporting of ESG Data: Observations from a Leading Practitioner

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