CompanyOverview ( · CompanyOverview 2015/2$ The$informaon ......

The informa,on above is expressly subject to the disclaimer at the back of this presenta,on

Standard Ethics Ra#ngs and Sustainability in Governance & Policy

Company Overview

2015/2


In the last two decades, new elements – such as communica,on technologies and Internet – have created open and transparent financial markets, par,cipated by growing segments of non-‐professional investors (through funds and pension funds or trading plaIorms), resul,ng in:

Ø  Greater aMen,on to extra-‐financial issues, tangible and intangible, with repercussions at the level of trust;

Ø  And, new assessments on the quality and long term durability of listed financial products, whether related to companies (stocks / bonds / green bonds) or ins,tu,onal issuers (such as government bonds).

Today, regulated markets, although they can be fallible and vola,le, have evolved and are proving to be the most important and independent system in order to assess the long-‐term sustainability of many human ac,vi,es. The conclusion of Standard Ethics is that we are facing the end of the classic financial era, focused exclusively on economic variables, that’s why the Standard Ethics Ra?ng is a decisive contribu,on to the refinement of strategies, languages and ways in which an issuer operates on the market.

The context


Background of Standard Ethics

q  Standard Ethics Ltd is an independent London-‐based agency, which assigns Solicited Sustainability Ra?ngs (SSR) to companies and sovereign issuers.

q  As a brand, Standard Ethics has been known since 2001 in the world of Sustainable Finance and ESG (Environmental, Social and Governance) studies.

q  Standard Ethics provides a comparable and standardized ra,ng system suited to a modern ra,ng agency in terms of methodology, long-‐term evalua,ons, fairness: the Standard Ethics Ra?ng (SER)

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It’s Independent, because its assignment is incompa,ble with the supply of other services, research and consul,ng ac,vi,es related to data that have been collected. It is also appropriate not to have common financial and economic interests between the ra,ng agency and applicants.

It’s Standard, because any ra,ng it’s always comparable to others because their algorithms are aligned to the same guidelines. For this reason, clients or others third parts, can’t change the agency's principles of evalua,on or change procedures issuing ra,ngs.

It’s Solicited, because it is issued only on request by an applicant, which is recipient of the ra,ng.

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The Standard Ethics Ra,ng, that has been put to the test over the last 14 years, is a Solicited Sustainability Ra,ng (SSR)

Standard Ethics Ra?ng (SER) ©


Standard Ethics Ra?ng, in par,cularly, is a ra,ng that intends to deliver an opinion on the level of compliance by companies and sovereign na,ons in the field of sustainability and corporate social responsibility (CSR) on the basis of documents and guidelines published by:

Ø  The United Na,ons (UN) Ø  The Organisa,on for Economic Coopera,on and Development (OECD) Ø  The European Union (EU)

Standard Ethics Ra?ng (SER) ©


Methodology: top-‐down

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Following a pre-‐assessment and a sharing of the collected data, the client will get a complete assessment and the Ra,ng.

Even though the points of analysis are standard, the evalua,on algorithm is adaptable to the type and the size of the structure under ra,ng.

UE-‐OCSE-‐ONU

Processing and

Schema,za,on

Adjustments, indicators and evalua,on model

STANDARD ETHICS RATING ©

These indica,ons provide standard principles that are classified into macro areas (such as compe,,on, governance, environment, transparency, etc.) and then translated into about 200 points of analysis to measure the distance of the client under ra,ng, compared to ins,tu,onal principles

The methodological principles were released in 2002 through a monograph published by the Sole24Ore. It is a methodology that is based only on the ins,tu,onal guidelines (trea,es, agreements, conven,ons, guidelines, communica,ons and other documents)


Time Required to Issue Ra?ngs

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The ,me required to issue a ra,ng is 5/7 weeks (see diagram below). Ø  Iden,fica,on of contacts & Planning Ø  Data and Informa,on Collec,on (Analysis and discussions with employees: kick-‐off and wrap-‐up mee,ngs) Ø  Final check of data & Ini,al «Gap Analysis» Ø  Ini,al assignment of values to standards and data sharing with Client Ø  Assessment & Issue (9 levels, from EEE to F)

Final check of data & Initial «Gap Analysis»

Data and Information Collection

Identification of contacts & Planning

Data sharing with Client

Assessment & Issue (9 levels, from EEE to F)

Analysis and discussions with employees: kick-off and wrap-up meetings.

Initial assignment of values to standards

Ra,ngs and level of compliance

Capability to respond appropriately to a reputa,onal crisis

EEE Full Strong EEE-‐ Excellent

EE+ Very strong EE Strong

Good EE-‐ Adequate E+ Insufficient

Low E Low E-‐ Very Low

Weak F Lowest level


Assignments & Fees

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Standard Ethics Ra,ngs are annual and renewable.

•  The cost of ra,ngs depends of the size and type of Applicant. •  From the moment it is assigned, the Standard Ethics Ra,ng belongs to the Applicant. •  It is up to the Applicant to disclose its Standard Ethics Ra,ng. •  Publica,on of SERs grants access to Standard Ethics Indices. •  If agreed by the Applicant, Standard Ethics can supply different types of reports and various suppor,ng

materials to disseminate and communicate ra,ngs. •  Standard Ethics uses an analyst-‐driven ra?ng process, so the work to be carried out does not require

Applicants to fill out forms and ques,onnaires or dran other documenta,on in addi,on to the exis,ng one. Standard Ethics analysts will gather the required data.

•  The ra,ng can be focused on individual ESG bond issues (such as the GREEN BOND, see following slide).


Green Bond Ra?ng

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The Ra,ng on Green Bonds is an opinion on the level of compliance with sustainability and corporate social responsibility (CSR) on the basis of documents and guidelines published by: the European Union (EU); the Organisa,on for Economic Coopera,on and Development (OECD); the United Na,ons (UN). Standard Ethics, to beMer formulate a second opinion on Green Bonds, has decided to integrate its proprietary ra,ng and ESG model with the guidelines recommended by the ICMA’s Green Bonds Principle (Interna,onal Capital Market Associa,on). The evalua,on scheme is based on five main elements of analysis concerning the consistency of the project to "green policies": Use of proceeds; Management of proceeds; Assurance and quality of the second opinion; Quality of the Corporate Bond issue; Investor repor,ng and audi,ng.


Guidelines

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Guidelines used by Standard Ethics analysts will be given to Clients requiring SERs. The objec,ves of these guidelines are two-‐fold: 1) Guiding data collec,on and observa,ons by Standard Ethics’ analysts; 2) Sharing assessments with Clients and helping them to become aware of their poten,al (or gaps), thus

offering Gap Analysis. Once they have been draned with observa,ons and notes by Standard Ethics analysts, guidelines will offer Clients excellent technical support to: Ø  Improve corporate governance; Ø  Make communica?on with stakeholders more efficient; Ø  Protect corporate assets, par?cularly corporate reputa?on.


Corporate Objec?ves

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Corporate objec?ves that can be aMained thanks to Standard Ethics Ra,ngs relate to governance, rela,ons with stakeholders, communica,on and rela,ons with the finance world and the credit sector:

•  Governance and CSR – EU, OECD and UN voluntary guidelines on CSR, sustainability and governance an,cipate future na,onal and OECD legisla,ve requirements. Standard Ethics Ra,ngs prepare companies for the compliance procedures.

•  Stakeholders – Being assisted by a ra,ng agency during this work mo,vates stakeholders and employees to cooperate with their companies to face a common and construc,ve challenge by improving rela,onships in order to achieve op,mum interna,onalisa,on.

•  Communica?on – EU, OECD and UN voluntary guidelines are clear references for the economic world. The market values each effort to comply with these guidelines. In rela,on to other approaches to CSR that are less measurable and comparable, corporate communica,on benefits in terms of incisiveness and clarity.

•  Clients and Shareholders – Standard Ethics Ra,ngs are a symbol of transparency because they offer comparability vis-‐à-‐vis compe,tors. They therefore enhance credibility and reputa,on with clients and shareholders.

•  Finance World and Investors – For many investors and analysts, applying for an SER is, by itself, a mark of seriousness and excellence because it is based on a truly independent assessment performed by a specialised agency that does not mistake analysis with management consultancy, cer,fica,on or audit.


Standard Ethics Indices

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Publica,on of SERs grants access to one or more Standard Ethics indices according to company’s type and size. For Italy, Standard Ethics has created the following Indices: •  Italian Index (opera,onal since January 2014) – With companies within the FTSE-‐MIB index of the Italian

Stock Exchange that have been assigned a Standard Ethics Ra,ng. •  Italian Banks Index (opera,onal since July 2013) – This is a governance Index with banks listed in the

Italian Stock Exchange. •  Italian MID Index (opera,onal since January 2015) – Composed of the Italian listed companies that have

the Standard Ethics Ra,ng and with a market cap above 250 million euro. •  Italian SMALL Index (opera,onal since January 2015) – Composed of the Italian listed companies that

have the Standard Ethics Ra,ng and a market cap below 250 million euro.

And, planned to launch the followings in 2015: •  European Green Bonds Index – Composed of all major Euro Green Bonds issue. •  French Index – Composed of the largest French listed companies with a Standard Ethics Ra,ng. •  Belgium Index – Composed of the largest Belgium listed companies with a Standard Ethics Ra,ng. •  Swiss Index – Composed of the largest Swiss listed companies with a Standard Ethics Ra,ng.

The way Standard Ethics reports on its indices is unique in Europe because it is based on full disclosure.


Standard Ethics Ra?ng and financial performances

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All companies classified by Standard Ethics as ”sustainable" showed a higher growth rate of the stock price and ROE than those ”non-‐sustainable" and also the MIB (FTSEMIB). Also the Tobin's Q, an alterna,ve indicator of the company's market value compared to the value of its assets, showed a posi,ve correla,on with the ra,ng of the companies in the sample, whi le the nega,ve rela,onship with the price-‐earnings mul,ple, although in contrast with the hypothesis ini,ally formulated, can jus,fy the same concept: sustainable enterprises are worth more than they cost.

(*) Text, data and graphics from: "The Sustainability Ra#ng: Empirical analysis of the Standard Model Ethics" by Filippo Tomasi and Angeloantonio Russo.

Sustainable/Unsustainable groups against MIB index


Standard Ethics and its Guarantee of Impar?ality

Standard Ethics is based in Hanover Street, London W1S 1YJ. The company managers are its shareholders, this ensures the independence from markets and customers. The composi,on of the Board complies with the interna,onal guidelines on diversity of na,onality, professional skills and gender equality. Standard Ethics has a governance model that has been designed to: •  Offer a comparable and standardized system of ra,ngs •  Be suited to a modern ra,ng agency in terms of methodology and long

terms evalua,ons •  Ensure incompa,bility between ra,ngs and other economic ac,vi,es and

reduce any others cases of conflicts of interest •  Reduce the environmental impact of its ac,vity using virtual headquarters to connect easily staff, saving

energy, reducing CO2 emissions, matching ideas and solu,ons in real ,me via web Standard Ethics has a structure supervised by an independent Compliance Officer with powers of inspec,on, authorised to take part in any mee,ng, including Board mee,ngs. Data collec,on and quota,ons for assigning Standard Ethics Ra,ngs are supervised by its Ra,ng CommiMee. Italy has been the first European country where Standard Ethics focused its Ra,ng ac,vi,es on. For any informa,on, please visit the Standard Ethics Hub on www.standardethics.eu.

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[email protected]

Important Legal Disclaimer All rights reserved. Ra,ngs, analyses and statements are statements of opinion as of the date they are expressed and not statements of fact. Standard Ethics' opinions, analyses and ra,ngs are not recommenda,ons to purchase, hold, or sell any securi,es or to make any investment decisions, and do not address the suitability of any security. Standard Ethics does not act as a fiduciary or an investment advisor except where registered as such. In no event shall Standard Ethics be liable to any party for any direct, indirect, incidental, exemplary, compensatory, puni,ve, special or consequen,al damages, costs, expenses, legal fees, or losses (including, without limita,on, lost income or lost profits and opportunity costs or losses caused by negligence) in connec,on with any use of its opinions, analyses and ra,ngs.

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CompanyOverview ( · CompanyOverview 2015/2$ The$informaon ......

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