Magyar balazs

Sustainable Swiss Private Banking since 1841.

Sustainable Fulfilmentof Sovereign Obligations

Sustainability and performance of sovereign bondsBalazs Magyar, Bank SarasinTBLI Conference™ EuropeNovember 2011

2

Agenda

Sustainable investment at Bank Sarasin

Sustainability rating of sovereign bonds

Effects of sustainability on performance

3

Sustainable Investment at Bank Sarasin & Co. Ltd

Leading Swiss private bank – founded in 1841

Investment advice and asset management for private and institutional clients as our core business

Majority shareholder Rabobank has a triple-A credit rating*

Represented at more than 20 locations around the world, in Switzerland, Europe, the Middle East and Asia

*Standard & Poors issues credit ratings of corporations: AAA is the best rating and denominates reliable and stable borrowers

4

Sustainability research since 1989 Continuous build-up of staff Very low fluctuation Responsible for CHF 13,7 billion / EUR 11,2 billion assets

The team:

54 employees 30 portfolio manager 10 sustainability analysts

On average: 39 years of age 14 years of work experience

Number of employees working in sustainable investment

Sustainable Investment at Bank Sarasin –Significant Resources & Experience

Source: Bank Sarasin, as at 30.06.2011

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

0

10

20

30

40

50

60

5

Agenda




6

Sovereign Bonds

Investor Government

one-off payment

today

EconomicActivities

tax revenue

government spending

Debt repayment requires sustainable tax revenues

interest and principal payments

in the future

7

Economic Activities

Sustainable tax revenues require sustainable economic activities

(Limited) Resources

Qualityof life

Economic system

Transformation efficiency

Process efficiency

8

Sustainability Rating ofSovereign Bonds 2010

Assessment of emerging and developed countries for the first time on the basis of the same indicators:

Over 150 countries About 50 indicators in the fields of:

– Environment– Economy– Social

Focus of analysis:– Availability of resources

• mainly natural resources• but also human and financial res.

– Efficiency• in transforming resources into quality of life• of the economic, political and social processes

9

Sustainability-Matrix

Sarasin Sustainability-Matrix® for sovereign bonds

Availability of resources

Res

ou

rce

effi

cien

cy

low high

low

high Investment

universe

10

Availability of Resources – Horizontal Axis

Environment Biocapacity (absolute and relative to

the Ecological Footprint of production) Nuclear power Water scarcity Biodiversity Climate change risks

(extreme weather events, agriculture, sea level rise)

Society & economy Demography Wealth (tangible and intangible capital) Public debt Net foreign assets


Re

sou

rce

effi

cie

ncy

low high

low

high

not covered directly bythe Ecological Footprint

11

Natural ResourcesAre Being Overused

Humanity actually requires c1.5 planetsto support its lifestyles

Most of the developed countries have an ecological deficit*

Source: Global Footprint Network

Reserve

Deficit * Biocapacity minus Ecological Footprint

Biocapacity

0.0

0.5

1.0

1.5

19

61

19

66

19

71

19

76

19

81

19

86

19

91

19

96

20

01

20

06

Num

ber

of

Ear

ths

Built-up land

Forest land

Fishing grounds

Grazing land

Cropland

Carbon footprint

Biocapacity

Bra

zil

Su

rina

me

Sw

ed

en

Ch

ina

Au

stra

lia

Ru

ssia

Sw

itze

rlan

d

So

uth

Afr

ica

Po

lan

d

UK

Gre

ece

Ge

rma

ny

Jap

an

Ne

the

rlan

ds

US

A

Qa

tar

-15

-10

-5

0

5

10

15

Glo

ba

l he

cta

res

pe

r p

ers

on

97.5

Ecological deficit

Financial and Human Resources Are Also Often Limited

Over-indebtedness Over-ageing

12

0102030405060708090

100110

0% 2% 4% 6% 8% 10%

Share of population

Age

(5-yea

r gr

oups

)

J apanGermany

Optimum

USAPoland

2050

0102030405060708090

100110

0% 5% 10% 15% 20%

Share of population

Age

(5-yea

r gr

oups

)

China

Brazil

OptimumSouth Africa

Uganda

2050Mongolia

Zimbabwe

Japan

JamaicaItaly

Singapore Greece

USA PortugalGermanyNetherlandsNorway UK Poland

SpainSwitzerland BrazilSwedenSouth Africa

China Australia BulgariaRussiaQatar Estonia0

50

100

150

200

-150 -100 -50 0 50 100 150

Foreign debt (net, % of GDP)

Publ

ic d

ebt (g

ross

, %

of G

DP)

Source: United Nations, SarasinSource: IMF, OECD, CIA, Sarasin

2008 2050

13

Resource Efficiency – Vertical Axis

Transformation efficiency Quality of life

– Material well-being (GDP)– Education– Health

Resource consumption– Ecological Footprint of consumption– Nuclear power– Water consumption

Process efficiency Economic structure

(industrial heterogeneity, inflation, adj. savings, etc.) Governance

(political stability, corruption, etc.) Social conditions

(income equality, gender empowerment, etc.)

deviation from the norm


Res

ourc

e ef

ficie

ncy

low high

low

high

14

Transformation Efficiency

Source: Sarasin (as of 2006)

UK

USA

Sudan

South Africa

SwitzerlandSweden

Russia

Portugal

Poland

Peru

Niger

Netherlands

Congo (Dem.)

Japan

GreeceGermany

Cyprus

China

Brazil

Australia

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

Resource consumption

Qua

lity

of li

fe

high middle

low

high

effi

cien

cy

15

Process Efficiency –Sample Indicators

CorruptionIncome distribution

Source: World Bank (latest year available)Source: Transparency International (as of 2009)

unequaldistribution

middleto high

corruption

0

2

4

6

8

10

Bur

ma

Rus

sia

Chi

na

Bra

zil

Gre

ece

Sou

th A

fric

a

Pol

an

d

US

A

UK

Japa

n

Ger

man

y

Aus

tra

lia

Net

he

rla

nds

Sw

itze

rlan

d

Sw

ed

en

New

Zea

lan

dCo

rru

ptio

n P

erc

ep

tion

s In

de

x

0.0

0.2

0.4

0.6

0.8

1.0

Nam

ibia

Sou

th A

fric

a

Bra

zil

Chi

na

US

A

Rus

sia

UK

Aus

tra

lia

Pol

an

d

Gre

ece

Sw

itze

rlan

d

Net

he

rla

nds

Ger

man

y

Sw

ed

en

Japa

n

Den

mar

k

Gin

i co

effi

cie

nt

16

Process Efficiency

Source: Sarasin (as of 2007)

0%

20%

40%

60%

80%

100%D

en

ma

rk

Sw

ed

en

Sw

itze

rlan

d

Ne

the

rlan

ds

Ge

rma

ny

Au

stra

lia

Jap

an

UK

US

A

Po

lan

d

Gre

ece

Bra

zil

Ch

ina

So

uth

Afr

ica

Ru

ssia

Zim

ba

bw

eIn %

of

the

high

est

rat

ing

Social Governmental Economic

17

USA

UK

Switzerland

Sweden

Netherlands

Germany

Spain

Australia

Japan

Poland

China

Peru

Brazil

South Africa

Greece

Russia


Res

ourc

e effi

cien

cy

AAAAAABBBBB and lower

Credit rating*:

low high

low

high

Final Sustainability Ratings inComparison to Credit Ratings

risk ofcredit

downgradesin the

long run

* Lowest assessment of the rating agencies Moody’s, Standard & Poor's and Fitch for long-term foreign-currency bonds as of March 18, 2010.

18

Agenda




Sustainability and Performance – Sovereign Bonds of Developed Markets

Citigroup World Government Bond Index15 sustainable and 10 non-sustainable countriesSustainable countries nearly 20% higher…mainly since the start of the sovereign debt crisis

Switzerland

Sweden

Netherlands

Australia

USA

Portugal

Greece


Res

ourc

e effi

cien

cy

low high

low

high

Source: Datastream, Sarasin

80

100

120

140

160

12/ 05 12/ 06 12/ 07 12/ 08 12/ 09 12/ 10

Tota

l ret

urn

(inde

xed

in U

SD

)

sustainable non-sustainable WGBI

Sustainability and Performance – Sovereign Bonds of Emerging Markets

JPMorgan Government Bond Index-EM9 sustainable and 11 non-sustainable countriesSustainable countries over 70% higher…despite the slump during the subprime crisis

Source: Datastream, Sarasin

Poland

Chile

Brazil

South Africa

Russia

China


Res

ourc

e effi

cien

cy

low high

low

high

80

100

120

140

160

180

200

220

12/ 05 12/ 06 12/ 07 12/ 08 12/ 09 12/ 10

Tota

l ret

urn

(inde

xed

in U

SD

)

sustainable non-sustainable GBI-EM

Sustainability Ratings as an Indicationfor Changes to Credit Ratings?

Source: Moody’s, Standard & Poor’s, Fitch, Sarasin Period: 31.12.2009 - 30.06.2011

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Important Information

This publication has been prepared by Bank Sarasin & Co. Ltd, Switzerland, (hereafter “BSC”) for information purposes only. It contains selected information and does not purport to be complete. This document is based on publicly available information and data (“the Information”) believed to be correct, accurate and complete. BSC has not verified and is unable to guarantee the accuracy and completeness of the Information contained herein. Possible errors or incompleteness of the Information do not constitute legal grounds (contractual or tacit) for liability, either with regard to direct, indirect or consequential damages. In particular, neither BSC nor its shareholders and employees shall be liable for the opinions, estimations and strategies contained in this document. The opinions expressed in this document, along with the quoted figures, data and forecasts, are subject to change without notice. A positive historical performance or simulation does not constitute any guarantee for a positive performance in the future. Discrepancies may emerge in respect of our own financial research or other publications of the Sarasin Group relating to the same financial instruments or issuers. It is impossible to rule out the possibility that a business connection may exist between a company which is the subject of research and a company within the Sarasin Group, from which a potential conflict of interest could result. This document does not constitute either a request or offer, solicitation or recommendation to buy or sell investments or other specific financial instruments, products or services. It should not be considered as a substitute for individual advice and risk disclosure by a qualified financial, legal or tax advisor.This document is intended for persons working in countries where the Sarasin Group has a business presence. BSC does not accept any liability whatsoever for losses arising from the use of the Information (or parts thereof) contained in this document. © 2011 Copyright Bank Sarasin & Co. Ltd. All rights reserved.

Sustainable Swiss Private Banking since 1841.

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Magyar balazs

Economy & Finance

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