Ratings And The Long-Term Investor - The Case Of Climate Change
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Transcript of Ratings And The Long-Term Investor - The Case Of Climate Change
© EIRIS
Ratings and the Long-term Investor:
The case of Climate Change
Lisa Hayles
EIRIS Friday November 13th, 2009
TBLI Amsterdam
Signatory to the
© EIRIS
EIRIS: Overview
● EIRIS is a not for profit research organisation specialising in environmental, social and governance research on publicly listed corporations.
● Founded 26 years ago, EIRIS was created as a collaborative research project to assist a group of churches & charities put their principles into practice.
● Our mission is to conduct high quality research on extra-financial issues to encourage improved social and environmental performance.
• Global coverage (3,000 companies) - FTSE All-World Developed & MSCI World
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3 Questions
• what practical steps can investors take to avoid investing solely with a short-term perspective?
• How can we apply these practical steps in the case of climate change?
• And would the same approach work for other long-term ESG issues?
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Investing for the long-term
Source: www.cartoonstock.com
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4 steps to focus on the long-term
• Spend more time on long-term issues –devote resources(!)
• Find new approaches to incentivise issues
• Asset Owners can seek long-term advice• Asset Mangers can offer long-term
products
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EIRIS Climate Change Toolkit
• Helping investors: • Quantify a company’s climate change
impact and management response• Profile risk in portfolios vs. a reference
benchmark• Engage with portfolio companies to
reduce climate-change related risks
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• Score for each company on a scale from zero to 100
• Below 50 considered unmitigated risk
• Above 50 risk is considered mitigated
• Above 75 considered a ‘carbon solutions company’
Carbon Risk Factor
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Example Carbon Profile
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Climate Change Performance FTSE AWD Index
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Carbon Engager Categories
• Opportunity Maximisers - Best practice companies
• Issues Managed - Good Practice• First Steps - Some engagement with the issue• Non-Starters -No climate change strategy• Poor Disclosers• Laggards - Bottom quartile performance for their
sector
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Advice requested by Asset Owners
• Ask consultants, managers & advisers for their advice on long-term issues
• For their advice on the long-term generally• 5 – 10 year scenarios• Asset allocation implications of long-term
issues
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Long-term Manager products
• The ‘Perfect’ Climate Change Fund– Perhaps a third “solutions” investments– But best in sector rebalancing for diversity– And engagement with laggards for change– Desirably on behalf of whole institution
• Attracts clients AND promotes long-term
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Conclusions
• Climate Change shows LT focus is possible• Many other issues as relevant
– Biodiversity, forests, water, governance (including issues like diversity and bribery), sustainable globalisation (human rights, labour standards, access to medicines etc.)
• Major potential benefits to all concerned
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Thank you
Lisa HaylesSenior Client Relationship Manager
[email protected] +44 20 7840 5700 (switchboard)
+44 207 840-5727 (direct)web: www.eiris.org