Environmental, social & governance (ESG) investment trends · 12/31/2016 · ESG LEADERSHIP: MSCI...
Transcript of Environmental, social & governance (ESG) investment trends · 12/31/2016 · ESG LEADERSHIP: MSCI...
ENVIRONMENTAL, SOCIAL & GOVERNANCE (ESG) INVESTMENT TRENDS
FROM MSCI ESG RESEARCH LLC.
Michelle Lapolla Friedman, Executive Director, MSCI ESG Research August 2017
INTRODUCING MSCI ESG RESEARCH
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1 Source: MSCI ESG Research as of March 20172 Based on P&I AUM data as of Dec 2015 and MSCI clients as of March 2017
Paris
London
Frankfurt
Geneva
Beijing
Hong Kong
Manila
SydneyCape Town
Mumbai
San Francisco
Boston
New York
Gaithersburg
Monterrey
Toronto Portland
Tokyo
MSCI ESG RESEARCH AWARDED FIRST PLACE IN
13 OUT OF 17 CATEGORIES, INCLUDING:
Best firm for Socially Responsible Investing Research
Corporate Governance Research | Indexes | Data
Fixed Income Research | Emerging Markets Research
170+ ESG analysts1
(280+ staff in 21 offices)
1000+clients
47of 50Global asset managers2
TOP
700+MSCI ESG equity &
fixed income indexes
Stockholm
Chicago
Seoul
ESG LEADERSHIP: MSCI IS THE WORLD’S LARGEST ESG RESEARCH AND INDEX PROVIDER1
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1By number of clients based on public information produced by Sustainalytics, Vigeo/EIRIS and Oekomas of April 2017. And By number of indexes and by assets tracking the indexes compared with publically available information produced by FTSE and S&P Dow Jones as of April 20172. http://www.etf.com/publications/etfr/socially-responsible-etfs-take-root3as of Dec 2016, based on Bloomberg, Morningstar and MSCI data. Active AUM includes
data as of September 30, 2016 as reported on December 31, 2016 by eVestment. 3as of Dec 31, 2016, based on data from Bloomberg
21 ESG ETFs launched in 2016: gathered $750 million in AUM in 20162
MSCI is the number one index provider to equity ESG ETFs globally
144% increase in the number of ETFs tracking MSCI ESG Indexes from 2015 to 2016
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2010 2011 2012 2013 2014 2015 2016
AUM ($B) Number Of ETF's
#O
f ET
F's
$B
n
Growth of AUM and Number of ETFs tracking MSCI ESG Indexes3
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WHAT IS ESG?INVESTOR OBJECTIVES
I believe that incorporating ESG can improve my
investment results.
My investments should reflect
my values.
I want my investments to
make a difference in the world.
BREADTH OF ESG OFFERING
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OUTPUTMSCI ESG RESEARCH
Company, industry, and thematic reports
Portfolio analytics
Data feeds
Ratings on 6,400 companies (11,000 total issuers) and more than 400,000 equity and fixed income securities globally
SUSTAINABLE IMPACT METRICS
IMPACT INVESTING
BUSINESS INVOLVEMENT
SCREENING
NORMS & CONTROVERSIES
SCREENING
VALUES ALIGNMENT
ESG RATINGS
ESG INTEGRATION
Values
Global Sanctions
Controversies
Global Norms
Environment Social
Governance Fund Metrics
Nutrition
Social Finance
Alternative Energy
Sustainable Water
WHAT IS ESG?ESG THEMES
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Environment
E
Climate Change
Natural Capital
Waste
Carbon Emissions
Climate Vulnerability
Water Stress
Biodiversity
Renewable Energy
Green Building
Clean Tech
Social
S
Human CapitalHealth & Safety
Labor Standards
Supply Chain Management
Product LiabilityChemical Safety
Stakeholder Opposition
Product Safety
Controversial Sourcing
Privacy & Data Security
Nutrition & Health
Access to Health CareAccess to Finance
Governance
G
BoardPay
Ownership
Accounting
Corruption
Business Ethics & Fraud
Tax Transparency
Anti-Competitive Behavior
ESG AS A RISK FACTOR
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WEATHERPATTERNS
WATERSCARCITY
DATA SECURITY
DEMOGRAPHIC SHIFTS
UNDERSTAND EXPOSURE TO LONG-TERM SYSTEMATIC RISK FACTORS
ASSESS MANAGEMENT QUALITY &LIMIT SURPRISES AND EVENT RISKS
FRAUD STRIKESACCIDENTS SHUTDOWNS
CORPORATE GOVERNANCE: FOUNDATION OF RISK MANAGEMENT
BOARD PAY OWNERSHIP & CONTROL ACCOUNTING
VolkswagenPrior to emissions cheating scandal, flagged on Governance and accounting concerns
ValeantDowngraded in May ’15 on “Very Aggressive” accounting, drug pricing, & product safety concerns
Wells FargoBottom ratings predating the customer account scandal were driven by major governance concerns, complaint data, and product oversight lapses.
Recent Examples:
RISK EXPOSURE NOT DISCLOSURE
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COMPANY A
Policy: Child Labor Policy: Wages & Hours Compliance Audits Corrective Action Plan Engagement with NGOs
COMPANY B
Policy: Child Labor Policy: Wages & Hours Compliance Audits Corrective Action Plan Engagement with NGOs
1,500 Suppliers
Production in Bangladesh300,000 Units
$20bn Revenue at Risk
200 Suppliers
Production in Italy10,000 Units
$100m Revenue at Risk
!
MEETING THE INSTITUTIONAL DEMAND FOR ESG INTEGRATION
ASSET MANAGEMENT
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Qualitative Fundamental
Analysis
Fundamental Valuation
ESG Integration
Asset AllocationEngagement &
Voting
Risk Management
Quantitative Models
Financial Returns
Selected ESG Factors
Incorporate selected factors to enhance long term return
INTEGRATE RISKS
VALUE
ESG INTEGRATION: USE CASE 1RISK MANAGEMENT
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Location: U.S.
ESG SPECIALISTS PORTFOLIO MANAGERS
INTEGRATION SCOPE ESG STAKEHOLDERS DATA USAGE
ESG integrated into risk management process
Portfolio Managers
ESG Specialists x 2 (within Risk Management)
ESG Data reviewed alongside traditional risk tools in Barra
ESG analytics reports
Data, company and industry reports through ESG Manager & FactSet
Assess & integrate relevant ESG factors into portfolio construction
Client’s consultants access ESG data on MSCI Barra and create ESG portfolio analytics reports
DEFINE ESG APPROACH PROMOTE & IMPLEMENT ASSESS IMPACT
Client’s ESG specialists aim to deliver long term and sustainable investment strategies through ESG integration
2 people in Risk Management Team
Global Risk Consultants
90+
ESG INTEGRATION: USE CASE 2FUNDAMENTAL ANALYSIS
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RI COMMITTEE RESEARCH HEADS EQUITY & CREDIT ANALYSTS
<=B
INTEGRATION SCOPE ESG STAKEHOLDERS DATA USAGE
ESG integrated into fundamental research process
60+ Equity & Credit Analysts
RI Committee
ESG ratings flow into internal platform
Data, company, and industry reports accessed through ESG Manager
Analysts assess impacts of ESG factors for all companies with MSCI ESG Rating of <=B.Portfolio-based alerts set up in ESG Manager for timely updates on holdings.
Equity
Promotes ESG Integration during fundamental research process
DEFINE ESG APPROACH PROMOTE ESG INTEGRATION ASSESS IMPACT
Drives ESG approach, implementation and reporting
Credit
60+
Location: U.S.
RESOURCES ON MSCI.COM
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APPENDIX
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MSCI ESG RATINGS OVERVIEW
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IDENTIFY THE OUTLIERS
UNDERSTAND THE RISKS
SUPPORT YOUR CLIENTS’ ESG OBJECTIVES
In-depth data and analysis
on key ESG risk and
opportunities
In-depth Governance
analysis and raw data
Robust controversy and
event analysis
Industry context & peer
comparisons
Daily updates of significant
ESG events
SUSTAINABLE IMPACT METRICS
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Alternative Energy Energy Efficiency
Green Building
Sustainable Water Pollution Prevention
SOCIAL IMPACT THEMES
CLEAN TECH THEMES
Affordable Housing
Nutrition
Major Diseases
Sanitation
Social Finance Education
Affordable housing
Identifying publicly traded companies that generate revenue from the following sustainable impact themes
The Sustainable Impact Themes are in alignment with U.N. Sustainable Development Goals
BASIC NEEDS
EMPOWERMENT
CLIMATE CHANGE
NATURAL CAPITAL
GOVERNANCE
NO POVERTY
ZERO HUNGER
GOOD HEALTH & WELL-BEING
CLEAN WATER & SANITATION
SUSTAINABLE CITIES &
COMMUNITIES
QUALITY EDUCATION
GENDER EQUALITY
DECENT WORK &
ECONOMIC GROWTH
REDUCEDINEQUALITIES
INDUSTRY, INNOVATION
& INFRA-STRUCTURE
AFFORDABLE & CLEAN ENERGY
CLIMATE ACTION
RESPONSIBLE CONSUMPTION &
PRODUCTION
LIFE ON LAND
LIFE BELOW WATER
PEACE, JUSTICE & STRONG
INSTITUTIONS
PARTNERSHIPS
ActionableImpact Themes
Source: MSCI ESG Research
ABOUT MSCI
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About MSCI ESG Research Products and Services
MSCI ESG Research products and services are provided by MSCI ESG Research Inc., and are designed to provide in-depth research, ratings and analysis of environmental, social and governance-related business practices to companies worldwide. ESG ratings, data and analysis from MSCI ESG Research Inc. are also used in the construction of the MSCI ESG Indexes. MSCI ESG Research Inc. works with 47 of the top 50 global asset managers, according to the most recent P&I ranking. MSCI ESG Research Inc. is a Registered Investment Adviser under the Investment Advisers Act of 1940 and a subsidiary of MSCI Inc.
About MSCI
For more than 40 years, MSCI’s research-based indexes and analytics have helped the world’s leading investors build and manage better portfolios. Clients rely on our offerings for deeper insights into the drivers of performance and risk in their portfolios, broad asset class coverage and innovative research. Our line of products and services includes indexes, analytical models, data, real estate benchmarks and ESG research. MSCI serves 97 of the top 100 largest money managers, according to the most recent P&I ranking.
For more information, visit us at www.msci.com.
NOTICE AND DISCLAIMER
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