Social Innovation Facility: Fostering ... - ACCA Global

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Social Innovation Facility:Fostering Intrapreneurship


Social Innovation Facility (SIF) at BarclaysCreated in 2012, SIF supports Barclays to launch new products and services by connecting the purpose, profit and people agendas

Purpose

Profit PeopleLeveraging Barclays’ talent,

corporate assets and expertise2,500+ colleagues engaged

Products with societal purposeAligning with the Paris Agreement

and the SDGs

Commercially viable products accelerating a greener more

social economyInvested in 60+ Products

Social Innovation

Opportunities


Understanding the SIF’s Role in BarclaysSIF collaborates with BUs to create new products and services that face development barriers

High upfront investment Long-term ROI Low Credit Risk Appetite

• No dedicated headcount to implement

• New platform development required

• Significant funding required to achieve scale

• Lower priority as compared with purely commercial or BAU initiatives

• Pilot required to determine:

o Client / customer demand

o Product / service functionality

o Longer payback time horizons

• Entering a new market

• Financing an early-stage company without proven track record

• New innovative financing structures need to be tested

SIF Helps Overcome Barriers to Innovation when…

…and Supports Propositions that Have…

Social ImpactContributes in a

measurable way to addressing a specific social

or environmental issue faced by an identifiable

community or group

CommercialityCreates long-term economic value for

Barclays, growing revenues, saving considerable costs

and / or opening new markets

ScalabilityLong-term growth

prospects and the potential to apply new technology,

consumer insight or product development

across multiple regions and/or businesses

Strategic Alignment

Complements our current or future business strategy

and has the support of business leadership, as

evidenced by their willingness to co-invest

Impact Series


Impact Series (1/2)

• Investment Bank Research delivers integrated, cross-asset class perspectives on economic, political and market developments

• Barclays’ thought-leading Impact Series provides analysis and insight on the social impact of economic, demographic, and disruptive changes affecting markets, sectors and society at large, while commercialising the bank’s Research product

Barclays Social Innovation Facility funded the launch of an Impact Series produced by the Barclays Research team, designed to explore the impact of economic, demographic, and disruptive changes on markets, sectors and society at large

OverviewBusiness Impact

• The platform differentiates Barclays’ perspective from competitors, and lends a halo of quality, authority, and innovation to enhance the bank’s core research offering

• By becoming recognised as thought leaders on issues and topics that materially impact business and society, the Impact Series elevates and enhances the commercial value of Barclays’ research

• While the content inherently provides social utility to a broad range of stakeholders, this effort also helps commercialise the Investment Bank Research product by establishing alternative client touch points through the ways in which the content is distributed

Social & Environmental Impact

• Provide insightful, cutting-edge research content with a societal focus

• The development of the Impact Series positions Barclays as a first-mover on important issues impacting future economic and business sustainability and growth projects

Impact

• Solution: Leverage Barclays’ global IB Research platform across all asset classes to address the scale and pace of change, highlighting the social impact of wide-ranging economic, demographic and technologically disruptive shifts in society

Editions2 3 5 61 4

Business Impact


EconomyEnvironmentDemography

Technology


Impact Series (2/2)

• The study is authored by the Quantitative Portfolio Strategy team within the Investment Bank’s Research department

• The research shows that a high-ESG portfolio outperforms a low-ESG portfolio over a 7-year horizon, with the governance score leading to the strongest impact on performance and credit quality

• Broadly similar results were observed using ratings from the two ESG providers considered in the report, despite significant differences between their methodologies

The inaugural report, Sustainable Investing and Bond Returns, explores the relationship between Environmental, Social and Governance (ESG) investing and bond portfolio performance. The fourth report builds on this, examining how the effect of ESG investing may vary by industry sector and bond market

1st Report Findings

“If ESG attributes are aligned with bond returns as our study suggests,we can expect the move to sustainable investing to endure.”

Jes Staley, Group Chief Executive

“Investing for social good is no longer simply a morally responsiblestrategy, it also makes sense from an economic perspective […].Today, investors expect companies to consider the effects of theiractivities on the global environment and wider society. This inauguralImpact Series report powerfully illustrates the benefits – both socialand financial – of an ongoing commitment to ESG investing in creditmarkets.”

Jeff Meli, Co-Head of Research

• In response to questions raised following the inaugural report, Barclays extended the analysis to address these points and identified the following findings:

• High-ESG portfolios have outperformed in both US and euro IG credit markets

• The euro IG market has a stronger relationship with ESG than the US market

• The effect of ESG investing varies according to the industry sector, with governance most important in the banking sector and environment in the energy & transportation sector

4th Report Findings

USD IG Market Euro IG Market

27

43

0 20 40 60

SustainalyticsHigh-low ESG

MSCIHigh-low ESG

43

51

0 20 40 60

SustainalyticsHigh-low ESG

MSCIHigh-low ESG

Average Basis Points per Year Average Basis Points per Year

Portfolios of High-ESG Issuers Have Outperformed Low-ESG Portfolios in the Euro and US IG Markets (2009–2018)

Women in Leadership Index


Women in Leadership Index (1/2)

• Women comprised only 16.9% of boards and directors of Fortune 500 companies in 2013

• However, a growing body of research suggests that companies with the most women board directors outperform those with the least in terms of profitability and stock price returns

Barclays’ Women in Leadership Index provides investors with access to US companies that have gender diverse leadership. Barclays is the first investment bank to offer gender-focused investment products

Overview

• Measured profitability for the Investment Bank as AUM in the Index and ETN achieve significant scale

• Leading the way: Barclays is the first investment bank to offer gender-focused investment products and is positioned as a thought leader

• Potential to bolster relationships with institutional investors who are increasingly focused on socially responsible investing

• Highlighting Barclays’ product innovations

• Positive brand awareness and enhancement through support for diversity initiatives

Social & Environmental Impact• Build awareness of the importance of gender parity among

corporate leadership

• Offer investors a commercially-viable way to invest in gender-diverse companies

Impact

• Solution: An Exchange Traded Note that will track the Barclays Women in Leadership Total Return Index

• The Women in Leadership Index is composed of companies that have a female CEO and/or at least 25% female representation on their corporate board, among market capitalisation requirements and trading volume thresholds


Business Impact


Women in Leadership Index (2/2)The Exchange Traded Note tracks companies run by a female CEO or with at least 25% female members on their board of directors

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Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16

Barclays Women in Leadership Total Return IndexS&P 500® Total Return Index

Research suggests a correlation between strong gender-diversity in leadership positions and strong corporate performance

Return on Disability ETNs


Return on Disability ETNs (1/1)

• These ETNs are designed to provide investors with exposure to US-based companies that have acted to attract and serve people with disabilities – and their friends and family – as customers and employees

• They are linked to an index which uses a quantitative ranking methodology to measure a company’s publicly observable activities relating to people with disabilities across three key areas: talent, customer and productivity

Barclays successfully launched its Return on Disability Exchange Traded Notes (ETNs) on the NYSE Arca Stock Exchange in September 2014

Overview

• The Return on Disability ETNs were Barclays second investment product in the socially-responsible investing space, following the launch of the Women in Leadership Index and ETNs in July 2014

• The Return on Disability ETNs and the Women in Leadership ETNs both support Barclays' Citizenship and Diversity & Inclusion agendas, and are examples of the importance that the4 bank places on the way it does business

Impact

• Solution: A first-of-a-kind investment product, linked to the performance of an index developed in conjunction with The Return on Disability Group


Business Impact

• At the time of launch, an estimated 57 million people in the US had a disability – around 19% of the population

• Builds awareness of the importance and benefits of diversity and inclusion

The chart above shows the historical performance of the ETN and the Index from the ETN Inception Date which was September 10, 2014 to the previous days closing price

Multi-Impact Growth Fund


Multi-Impact Growth Fund (1/5)

• The Multi-Impact Growth Fund offers investors of any size a single-access means of gaining exposure to leading impact funds and investments

• Funds and investments are selected for their approach to impact and blended together using Barclays’ institutional asset allocation and portfolio construction expertise

• The Multi-Impact Growth aims for long-term value creation, targeting risk-adjusted investment performance1

• Offers diversification across asset classes, regions and investment styles

• Offered within the UCITS regulatory regime in the UK and with daily liquidity

An innovative, award-winning investment product that gives clients the opportunity to achieve their financial objectives whilst making a positive contribution to the world

OverviewBusiness Impact

• First impact investing product of its kind from a major UK bank

• Recipient of a number of awards in recognition of innovation

• Exemplifies notion that impact innovation can incorporate consideration of impact without compromising financial returns


• Generated >90,000 MWh of renewable energy

• Displaced 4,000 tonnes of coal in Asian cities

• Supported 12 registered housing providers

• Created >3,300 FTE job equivalents in the US

• Associated with a weighted average carbon footprint intensity of 178, compared to 202 for the MSCI All Country World Index

Impact

• Solution: A set of best-in-class funds that consider the impact of their investments and blends them together in a single overall Fund (i.e. an UCITS fund of funds)

• The strategy provides global diversification, with a focus of long-term growth

1) As with all investments, initial capital is not guaranteed and its value may go down as well as up

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Business Impact


Multi-Impact Growth Fund (2/5)How Companies Generate ImpactUnderstanding their sources of impact gives insight into how to value listed investments relative to their peers or given potential for future growth from new growing markets and customer segments

Superior organisational practices & culture that secures a license to operate (Less prone to scandals/fines)

Operational effectiveness through leading sustainability practices

Cost management with focus on resource efficiency

Climate change

Secular and demographic trends

Government regulatory changes

Competitive advantage vs. Peers

Creation of new markets or serving new client segments

These Factors Can Create Value Through

Management performance on the following aspects:

Physical capital (E)

Human capital (S)

Financial capital & strong governance (G)

Environmental challenges

Social issues

Data/Info Around

Revenues generated from activities addressing

Evidence of Impact Can be Identified by

Impact Generated Through

How they Operate

Goods/Services they produce

Responsible Behaviours

Positive Outcomes


Multi-Impact Growth Fund (3/5)How We Communicate This ImpactAcross a range of social and environmental challenges, Barclays have identified key themes around which to organise the investment proposition, and mapped these to the United Nations’ Sustainable Development Goals

Industries and businesses that have a direct contributions to the SDGs represent a $12tn

market opportunity1

1) UNDP. Better Business, Better World, report. 2017.


Multi-Impact Growth Fund (4/5)Fund ExamplesThe portfolio consists of underlying funds which are selected based on their strong performance and a high quality investment process that integrates their impact considerations

Selected Funds

Impax Asian Environmental Markets Fund

Details

• Assets under management: £92m (as of 30 August 2018)

• Fund inception date: May 2010

• Target geography: Asia Pacific

• Asset class: Emerging Market Equities

Description

• Seeks to achieve sustainable, above market returns over the longer term by investing regionally in Asia-Pacific companies active in the rapidly growing resource efficiency and environmental markets

• Addresses a number of long-term macroeconomic themes: growing populations, rising living standards, increasing urbanisation, rising consumption, and depletion of limited natural resources

• Investments are made in companies which have more than 20% of their underlying revenue generated by sales of environmental products or services in the energy efficiency, renewable energy, water, waste, CO2 emissions, and coal displaced

AXA World Funds Global Green Bonds Fund

Details

• Assets under management: £90m (as of 30 August 2018)

• Fund inception date: November 2015

• Target geography: Global

• Asset class: Developed Government Bonds

Description

• Invests mainly in green bonds, which can offer the same returns as a comparable conventional bond plus the added benefit of enabling projects with environmental benefits in a transparent manner

• The green bond market offers a tangible and transparent route to investing in the low-carbon economy

• AXA believes that investing in sustainable assets can create long-term value and attractive returns, both financially and environmentally

• The Fund benefits from a deep green bond selection process, comprised of responsible investment and credit analysis


Multi-Impact Growth Fund (5/5)Underlying Company ExamplesAll fund managers selected for inclusion within the MGIF seek to invest in companies which operate responsibly, but many also pick companies that actively look to address the world’s social and environmental challenges

Selected Underlying Companies(1)

1. While these companies were part of the MIGF as of 30 August 2018, holdings can change and they may not always be included within the MIGF portfolio.

TomraLee & Man

Description

• Second largest container board producer in China

• Has increasingly shifted towards a vertically integrated operation, which includes recovered paper collection so as to ensure stable raw material supply

• Consumes over 6 million tonnes of recyclable old corrugated containers each year

Impact

• The company’s recovery of materials equates to 31,534,818 tonnes of annual household waste, enabling a substantial annual carbon avoidance

• Despite an inevitably large requirement for water and energy in manufacturing, the company reduces its consumption by adopting efficiency-enhancing and energy-saving processes

• Avoids a net 12.8 tonnes of CO2, equivalent to removing c.5.7m cars off the road for 1 year

Description

• Norwegian recycling solutions provider

• Supports the transition to a circular economy through production of ‘Reverse Vending Machines’ (RVM) for automated collection of used beverage containers

• Tomra’s global installed base of more than 80,000 machines can be found at supermarkets and other types of stores, providing retailers with an effective and efficient way of collecting, sorting and processing these containers

• Looking ahead, the company’s solutions are likely to find new markets, as concerns about the impacts of plastic waste in particular increase

Impact

• Last year, Tomra’s machines facilitated the collection of more than 35 billion empty cans and bottles for recycling

Sustainability-linked Loans


Sustainability-linked Loans (1/1)Barclays acted as the sole sustainability structuring agent on the first syndicated sustainability-linked revolving credit facility for a US corporate borrower

• Sustainability-linked loans are any kind of loans that incentivise borrowers with margin reductions or increases depending on their ability to meet pre-set environmental performance targets

• These loans aim to facilitate and support environmentally and socially sustainable economic activity and growth

Introduction

Transaction Overview

Sole Sustainability Structuring Agent

June 2018

$1,400,000,000

Sustainability-Linked Revolving Credit Facilities

• In June of 2018, CMS Energy closed a $1.4 billion RCF refinancing, including a “sustainability-linked” feature that offers the issuer a pricing benefit for achieving certain sustainability metrics

• This transaction represents the first ever sustainability-linked RCF from a U.S. corporate borrower

• Barclays is serving as the Sole Sustainability Structuring Agent on the facilities and worked with the company to design a structure that was consistent with its corporate objectives

• Barclays considered a range of potential sustainability metrics and ultimately chose a construct that was agreeable to both the company and lenders

• The intention is to reward the company for increasing renewable energy generation (and thereby reducing its carbon footprint), incentivizing improvements through a potential economic benefit

• This has been followed by several other transactions, such as a $3.0 billion RCF refinancing for Carnival Cruises where Barclays acted as Sole Sustainability Coordinator

• One sustainability metrics included in this loan is a targeted CO2 reduction based on an industry target of 40% by 2030

Social Innovation Facility: Fostering ... - ACCA Global

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