tbli conference™ nordic 2014 - managing climate change risks - maximilian horster - south pole
DESCRIPTION
“The climate impact of investments” Increasingly, investors are aware that every Euro invested either finances or combats climate change. Identifying climate-related investment risk and opportunities, positioning towards stakeholders and gaining/ retaining clients are just a few of the business reasons why asset owners and asset managers measure and manage their investments’ effect on the global climate. While a Portfolio Carbon Footprint allows for greenhouse gas emission accounting at a point in time, a forward-looking Climate Impact Assessment helps understand how a portfolio is positioned towards the risks and opportunities of climate change. TBLI CONFERENCE™ NORDIC 2014 Our first ESG & Impact Investing conference in the Nordic region, hosted by the BI Norwegian Business School in Oslo. For 2 days, the conference offered a platform to learn about current trends in sustainable investing and CSR in the Nordic region – and ample opportunity to find new business partners. Unique to this event, selected entrepreneurs have been invited to present their innovative green technology and climate change related projects to the investor community.TRANSCRIPT
The latest on Investment Climate Impact September 2014
Dr. Maximilian Horster – Partner, South Pole Group
This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from South
Pole Carbon Asset Management Ltd. This material was used by South Pole Carbon Asset Management Ltd during an oral presentation; it is not a complete record of the discussion.
2
South Pole Group – Measuring and reducing impact About us
• 2006: Incorporation in Zurich /
Switzerland
• 2014: present on all continents
• 110 carbon pros from 22 countries
• 250+ projects in over twenty-five
countries
• Swiss Social Entrepreneur of the Year
• 2011 to 2014: Best Project Developer
• 1’000+ corporate and public clients
• Numerous health and education benefits
• 20’000 new jobs in developing countries
• 17’000 hectares of forest saved
Our impact for our clients
• 50 million+ tonnes of CO2 savings
• EUR 6bn renewable energy investments
• 35’000 Gwh renewable energy
3
• Investment Impact on the Agenda
• The Business Case
• Case Study
4
Every Euro invested either
finances or reverses Climate
Change
5
Investors in the spotlight
“Investors (…) should increase transparency regarding greenhouse
gas emissions from the assets and businesses that they finance”.
UN Secretary-General Baan Ki-moon
6
Society is getting concerned
Responsibility and magnitude is understood
Source: WWF Sweden 2014
On top of that, through
investments in the global stock
market, through savings and
pension funds, each person is on
average responsible for 7.9 t
CO2/year
The average CO2 emissions /
Swedish person / year amounts
to 10.6 tons
Markets react
Source: HSBC
• Green Bonds at almost EUR 40bn (Ytd 2014)
• Market quadrupeled in 2 years
• A niche of growth in declining bond market
9
• Investment Impact on the Agenda
• The Business Case
• Case Study
It makes financial sense:Climate Risks &
Opportunities of Investments
Source: CDP
• Climate Change effects and policies put your
investments at risk
• Your investees might be part of the problem or the
solution to Climate Change challenges
• Companies prepared for Climate Change effects
can outperform the market
Positive Link between climate engagement
and financial indicators!
Source: CDP & SCIM Linking Climate Engagement to Financial Performance Report 2013
+5.2% return on equity
+18.1% cash flow stability
+1.6% dividend growth
12
Business Case for Climate Impact Measurement
Driving Investments
• Identify and manage climate change related investment risks
• Identify and manage climate change related investment opportunities
• Help investees become climate change resilliant
Driving Positioning
• Position yourself as a transparent investor
• Be a role model for investors globally
• Actively embrace the challenge of changing climate
Driving Business
• Gain/ retain clients
• Emphasize industry and change leadership towards stakeholders
• Put your investments in line with your mission
13
• Investment Impact on the Agenda
• The Business Case
• Case Study
Climate Impact Assessment & Action
Page 14
South Pole Group and
CDP measure the
climate impact of
investments
Investor manages
investment climate
impact and reports to
stakeholders
15
Approach
• Climate Impact of part of the Sweden portfolio:
SEB ETHOS Fund
• Investing the same amount of EUR managed also into the respective
benchmark SIX PX
• QUANTITATIVE vs QUALITATIVE approach
Source: South Pole
16
Investment Climate Resilience
17
Investment Carbon Footprint
Title and Sector Analysis ETHOS
The SEK 458 million invested in ETHOS account for annual
greenhouse gas emissions of 2’901 tonnes of CO2e.
Investing the same amount in the SIX PX
would amount 3’953 tonnes of CO2e (+27%).
19
Climate Impact Assessment
Forward - looking Analysis
Board/ executive level
oversight of climate
change issues
Monetary incentives
related to climate
change targets
Climate Change
integrated into
business strategy
• Setting Climate Targets
• Progress towards Climate Targets
• Engagement with Supply Chain
• Reductions achieved
Other Indicators
21
Risk/Opportunity Management (example)
Source: CDP
Engage on Transparency and Performance
Ticker Company Comment Source of comment
GB0006091408 A & J Mucklow Group Plc Decline to report to CDP CDP
GB00B6774699 Abcam Plc No publicly available GHG data South Pole
GB0000595859 ARM Holdings
Did not achieve emission reductions due to emission reduction
activities in 2012 CDP
GB0000536739 Ashtead Group Poor reporting South Pole
GB0000536739 Ashtead Group Weak reporting of risks and opportunities CDP
GB0000536739 Ashtead Group
Did not demonstrate that climate change issues are integrated into
the overall business strategy CDP
GB0000536739 Ashtead Group
Did not achieve emission reductions due to emission reduction
activities in 2013 CDP
GB0000536739 Ashtead Group Does not report any emission reduction target CDP
LU0552383324 Az Electronic Materials S.A. Decline to report to CDP CDP
LU0552383324 Az Electronic Materials S.A. No publicly available GHG data South Pole
GB00B02L3W35 Berkeley Group
Did not achieve emission reductions due to emission reduction
activities in 2014 CDP
AU000000BHP4 BHP Billiton
Did not achieve emission reductions due to emission reduction
activities in 2015 CDP
AU000000BHP4 BHP Billiton Does not report any emission reduction target CDP
GB0007980591 BP Does not report any emission reduction target CDP
GB00B1P6ZR11 Brown (N) Group Plc Poor reporting South Pole
GB00B0744B38 Bunzl Plc Poor reporting South Pole
GB0031743007 Burberry Group
Did not demonstrate that climate change issues are integrated into
the overall business strategy CDP
23
Establish low carbon investment guidelines
24
Communicate to Stakeholders
• Offset GHG emissions with high quality emission
reduction project in a country the portfolio is
invested in.
• GHG emissions are being reduced locally. Local
population experiences important social and
health improvements.
• Offsetting ETHOS costs 6.8 basis points (0.07%).
Price in Externalities
Offsetting Costs of Selected Benchmarks
Index Country Offsetting in BPS
MSCI UK ALL
CAP UK 25.3
FTSE ALL
WORLD GLOBAL 33.3
STOXX 50 EUROPE 56.9
SMI SWITZERLAND 11
SIX PX SWEDEN 9.4
26
Recommendation Summary
• Create transparency towards stakeholders
• Optimize portfolio by further divesting, stock-picking and focusing
• Engage with non-disclosers, low scorers, top emitters etc
• Manage your asset managers by setting climate change targets/
standards
• Measure progress consistently across all investments
• Act as role model and encourage transparency
27
The Investment Carbon Screeners online
Easy, quick, inexpensive:
• Upload Ticker
• Run Portfolio
• Download Report
yourSRI.com
