Ways of Utilizing Financial Resources - The “Spectrum”
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Transcript of Ways of Utilizing Financial Resources - The “Spectrum”
Ways of Utilizing Financial Resources - The “Spectrum”
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Source: Adapted from Social Ventures Hong Kong, Virtue Ventures
Social Enterprises Socially-DrivenBusinesses
Pure Commercial Businesses
Charities/Non-Profit
Grants/donations
Social returns only
“Patient capital” - e.g. venture capital, loans (below market/forgivable/ long repayment)
Social impact and return of principal to allow “recyling” of dollars
Equity/debt - e.g. SRI funds
Financial returns and social and/or environmental impact (i.e. double/triple bottom line)
Equity/debt
Seeking highest possible financial returns (single bottom line)
Responsible Investing
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Source: Dow Jones Sustainability Indexes
RI asset under management is expected to grow from USD5 trillion in 2007 to around USD26.5 trillion in 2015 globally, accounting for 10-20% of total AUM
Portfolio snapshot - Beforeconsisted of mainly cash and traditional investments. ESG compliance was not part of the mandate.
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Commoditiesand realestate
Cash
Private equity/hedge fund
Equities
Fixed income
Traditional approach by asset class
ESG issues were not considered as part of the investment process
No social impact investments
Focused on traditional asset classes in equities, fixed income with emphasis on desired financial returns only
Portfolio snapshot - After… in transition towards ESG integration into entire portfolio
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Commoditiesand realestate
Fixed income
Equities
Social impactequity or debt
Cash
Private equity/hedge fund
ESG approach by asset class
Equity: sustainability index funds and theme based funds (e.g. environmental, responsible consumption) (migrated)
Fixed income: sustainability bond index (migrated)
Social impact investments: micro credit fund; private equity into social enterprises (ongoing)
Commodities: precious/industrial metals funds; agricultural commodities (evaluating)
Real estate: sustainable “green” property fund/assets (evaluating)
Private equity/hedge fund: pre-existing, not termed out
*** Diversification ***
Significant Investments/Grants to-date
5Social Enterprises Socially-DrivenBusinesses
Pure Commercial Businesses
Charities/Non-Profits
Grants/Donations “Patient capital”
Recycling of dollars
Double/Triple bottom line focus
Market rate financial returns
Investments that are screened through ESG lens
Dexia Micro-Credit Fund (managed by Blue Orchard)
Dexia Sustainable World Bond Fund
SEB Ethical Global Index Fund
First State Global Emerging Markets Sustainability Fund
Acumen Capital Markets Fund
Principles of Responsible Investing (“PRI”)
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Source: www.unpri.org
Asset Owners Investment Managers Service Providers
Government Pension Fund of Thailand
PRI was launched in April 2006 by the then UN Secretary-General Kofi Annan in New York
32 institutional investors representing USD2 trillion in assets signed on Launch Day
Today there are over 700 signatories representing ~ USD20 trillion in assets
Principles of Responsible Investing (“PRI”) (continued)
As institutional investors, we have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role, we believe that environmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time). We also recognise that applying these Principles may better align investors with broader objectives of society. Therefore, where consistent with our fiduciary responsibilities, we commit to the following:
1. We will incorporate ESG issues into investment analysis and decision-making processes.
2. We will be active owners and incorporate ESG issues into our ownership policies and practices.
3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
4. We will promote acceptance and implementation of the Principles within the investment industry.
5. We will work together to enhance our effectiveness in implementing the Principles.
6. We will each report our activities and progress towards implementing the Principles.
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Source: www.unpri.org
“Capitalism takes a narrow view of human nature, assuming that people are one-dimensional beings concerned only with the pursuit of maximum profit. The concept of the free market, as generally understood, is based on this one-dimensional human being.”
Muhammad Yunus, Founder of Grameen Bank
“In the real marketplace of life, each one of us has the individual freedom to use our economic power in accordance with our values. We can deliver the benefits of robust free markets without abrogating ethical business practices in fair trade, in human rights, in safe products, and in microfinance lending.”
Jonathan Lewis, CEO of MicroCredit Enterprises
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