sam sustainable asset management - instituto ethossam sustainable asset management seefeldstrasse...
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SAM
SustainableAsset Management
Seefeldstrasse 215
8008 Zürich
Tel. +41 1 397 10 10
Fax +41 1 397 10 80
www.sam-group.com
SAM Sustainable Asset Management
Valuing and promoting sustainable business- An investor prospective
Edoardo Gai
São Paulo, June 21, 2006
1Presentation for Ethos Conference 21.06.2006© SAM Research AG
Independent Asset Manager (1995):HQ: Zürich , Rep: Mailand, Milan, Stockholm, Montreal, San Francisco, Melbourne
International Client Base:Banks, insurance companies, pension funds, foundations, private clients
Strong Growth of Assets under Management CAGR since YE 2002: 45%, to approx EUR 2 bn (CHF 3 b n)
Global Leader in Sustainable Investing for 3rd party Institutionals:- Global & European Equities- Theme Equity Investments- White Label Co-operations
Largest Private Equity Investor Globally in the Field of “CleanTech”:Energy, water, resource efficiency
Our Company
0
500
1000
1500
2000
2500
3000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006actual
AUM 1997 – March 06
2Presentation for Ethos Conference 21.06.2006© SAM Research AG
Value Creation by SustainabilitySustainability Assessment is simply “enhanced analytics”
Value Creation StakeholdersAssets
Financials
Brand & Reputation
Intellectual Capital
Human & Social
Environmental
Investors
Customers
Employees
Communities
NGO’s
Suppliers &Partners
Traditional Analysis
Sustainability Assessment
(measuring tangibles and intangibles)
3Presentation for Ethos Conference 21.06.2006© SAM Research AG
From ethical to sustainability investments ...
• Boycotts and ethical motivation
• Exclusion of industry groups
• Focus on a narrow selection of social and environmental criteria
Ethical Investments
Sustainability Investments
• Adding shareholder value
• Future-driven• Best of class and
industry-specific• Integrating economic,
environmental and social criteria
Mercer survey finds that the majority of investment managers worldwide expect SRI practices will become a common component of mainstream investment processes within 10 years.Mercer Press Release – 7 April 2005
4Presentation for Ethos Conference 21.06.2006© SAM Research AG
Early Identification of Business Risks
Po t
entia
l for
eco
nom
ic d
a mag
e s/r
even
ues
1960 1980 2000 2020
Asbestos• massive damage
claims in the US• Royal & Sun
Alliance: accrual of 371 Million GBP
• ABB: accruals exceeding 1bn USD
CorporateGovernance• Enron, Worldcom,
Tyxo• Arthur Andersen• Swissair
ClimateChange/CO2• Implementation of
Kyoto Protocol by 2008• National CO2 emission
reduction targets• Renewable energy• Adoption strategies
2040
Demographics• Ageing population in
industrialized countries: health care, pension systems, scarcity of workforce
• Population growth in developing countries: Resource scarcity:Energy, water, food
Sustainability Leaders minimize their riskand recognize opportunities
Nano-technology
Gene-technology
5Presentation for Ethos Conference 21.06.2006© SAM Research AG
Climate ChangeCDP Project Revealed That Only 35-40% of Companies Taking Actions
The CDP3 study found climate change and shareholder interest are becoming more closely intertwined. 89% of companies responded to CDP3.
CDP3: “The 155 Signatories to the Carbon Disclosure Project’s third information request (CDP3) represent over $21 trillion in assets, a doubling from CDP2 (95 investors with $10 trillion in 2004) and quadruple that of CDP1 (35 investors with $4.5 trillion in 2003)...”
Source: Munich Re, Topics Geo 2005
6Presentation for Ethos Conference 21.06.2006© SAM Research AG
Correlation of Climate Change and Water
Source: European Environment Agency, 2004; IPCC 2001. BUWAL 2004.
Expected Change of Average Summer Rainfalls(until 2050 compared to 1961 – 1990)
More rain (10%)
Less rain (20%)
Summer months:
But:increase of flood water events
7Presentation for Ethos Conference 21.06.2006© SAM Research AG
Water HeadlinesWater events accumulate and have economic consequences
Source: Swiss Farmers Union, Media, Swiss Underwriting Association
Too much
Switzerland 2003: - CHF 500m less crop yield
Spain 2005:- EUR 6m receivables from Portugal
Switzerland 2005: - CHF 1.3bn estimated losses
Mexico/USA 2005:- Economic losses, human tragedies
Too little
8Presentation for Ethos Conference 21.06.2006© SAM Research AG
Disclosure of CO 2 Data – Observed TrendsDisclosed Data in Annual DJSI Assessment
Source: SAM
Numbers of companies where trend in CO2 was analyzed
0
50
100
150
200
250
300
350
400
450
2002 2003 2004 2005
DJSI assessment
num
ber
of c
ompa
nies
9Presentation for Ethos Conference 21.06.2006© SAM Research AG
Disclosure of CO 2 Data – Observed Trends (cont.)Disclosed Carbon Data in Annual DJSI Assessment
Source: SAM
Percentage of companies with trends in CO2 emission Intensity
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2002 2005
Deteriorating emission intensity
Constant emission intensity
Improving emission intensity
10Presentation for Ethos Conference 21.06.2006© SAM Research AG
How does the Industry react?
Lord John Brown, CEO BP
Demand increase, higher prices (higher costs)
Increasing temperatures (“hotter seas”)
Energy consumption causes g lobal warming
“ There is a limit”
We shall:
“… conserve energy”
“… reduce CO2 emissions”
“…open up and develop new energy sources”
Source: Interview Lord Brown, September 2005
11Presentation for Ethos Conference 21.06.2006© SAM Research AG
How does the Economy react?
12Presentation for Ethos Conference 21.06.2006© SAM Research AG
Automotive Manufacturers and Climate ChangeImpact of increased CO2 measures on profits (EBIT)
Source: SAM Research, Changing Drivers Study, October 2003
Ford
GM
BMW
Peugeot VW
Daimler C.Honda Nissan
Renault
Toyota
-12%
-8%
-4%
0%
4%
8%
12%
13Presentation for Ethos Conference 21.06.2006© SAM Research AG
40
60
80
100
120
140
160
180
31/1
0/20
03
31/1
0/20
04
31/1
0/20
05
Share price development of Toyota and GMOctober 2003 – October 2005 (indexed)
Source: Bloomberg
14Presentation for Ethos Conference 21.06.2006© SAM Research AG
Trends Cause Discontinuities and Challenges
Economic
• Interconnectivity• Deregulation • Accountability• Innovation speed • Global trade• Access (information, capital)• Ageing infrastructure
Ecological
• Instability of ecological systems
• Climate Change• Biodiversity• Scarcity of natural resources
(water, energy, soil)
Socio-cultural
• Transparency• Healthy living• Ageing population• Demographic changes• Social tensions • Urbanization
Trends
Sector / Issue / Markets
Discontinuities / Challenges
Sector Challenges
15Presentation for Ethos Conference 21.06.2006© SAM Research AG
Trends Lead to Sustainability Challenges and Criter ia
Trend
Innovation SpeedDeregulation
Criteria
Human Capital DevelopmentBusiness Opportunities
Link to financial performance
Revenues, costs
Challenge
Capitalizing on new issuesAlignment financial products
16Presentation for Ethos Conference 21.06.2006© SAM Research AG
Market DevelopmentsA look at the performance of DJSI additions and deletions
17Presentation for Ethos Conference 21.06.2006© SAM Research AG
Linking Intangibles and Shareholder Value
Source: SAM Sustainability Yearbook 2005http://www.sam-group.com/htmle/research/output/studies/sam_sustainability_yearbook.cfm
18Presentation for Ethos Conference 21.06.2006© SAM Research AG
SAM explicitly considers the Sustainability criteri a in the valuation methodology
*can be negative
Traditional valuation
Impact of sustainability aspects on value *
Relevant company‘s value
Value
Analysis process
Sustainability Criteria as long term value drivers
19Presentation for Ethos Conference 21.06.2006© SAM Research AG
Market DevelopmentsBrokerage Research
20Presentation for Ethos Conference 21.06.2006© SAM Research AG
DJSI World – Brazilian Companies (I)Number of invited and particip. companies for the R eviews 2003-2005
0
5
10
15
20
25
2003 2004 2005
InvitedParticipated
21Presentation for Ethos Conference 21.06.2006© SAM Research AG
DJSI World – Brazilian Companies (II)DJSI Members since launch
99/00 00/01 01/02 02/03 03/04 04/05 05/06
Embraer-Empresa Brasileiras de Aeronautica YES YES YES
Banco Itau Holding Financiera YES YES YES YES YES YES
Companhia Energetica de Minas Gerais (CEMIG) YES YES YES YES YES YES
Itausa-Investimentos Itau YES YES
Aracruz Celulose YES
Unibanco-Uniao de Bancos Brasileiros YES YES
22Presentation for Ethos Conference 21.06.2006© SAM Research AG
DJSI World – Brazilian Companies (III)Performance of earliest Brazilian DJSI members
0
50
100
150
200
250
300
350
400
09/00 09/01 09/02 09/03 09/04 09/05
Banco Itau DJ World Banks Index
0
50
100
150
200
250
300
350
400
09/00 09/01 09/02 09/03 09/04 09/05
CEMIG DJ World Utilities Index
23Presentation for Ethos Conference 21.06.2006© SAM Research AG
DJSI World – Performance 03/01 - 03/06, USD, Total Return Index
60
70
80
90
100
110
120
130
140
150
03/01 09/01 03/02 09/02 03/03 09/03 03/04 09/04 03/05 09/05 03/06
DJSI World MSCI World
24Presentation for Ethos Conference 21.06.2006© SAM Research AG
Investing is changing
Recent scandals; economic, environmental and social trends are shaping market opportunities and risks
Companies MUST
• Address these challenges?
• Minimize the risks?
• Harvesting the opportunities?
25Presentation for Ethos Conference 21.06.2006© SAM Research AG
is Carbon Neutral®
Mr. Edoardo Gai
+41-44-397 1040
www.sam-group.com
www.sustainability-indexes.com
26Presentation for Ethos Conference 21.06.2006© SAM Research AG
Products
InvestmentFunds
Investment Company
Mandates Private EquitySustainability
Indexes
• European Equities
• Global Equities
• Balanced Mandates
• Sustainable Performance Group (SPG)
• Sustainability Index Fund
• Sustainability Pioneer Fund
• Sustainable Water Fund
• SAM Smart Energy (SMA)
• Bâloise Anlagestiftung Sustainability
• Special Funds and Funds for 3rd party banks
• Sustainability Private Equity
• Sustainability Energy
• Dow Jones Sustainability Index
• DJ STOXX Sustainability Europe Index
• Dow Jones Sustainability North America Index