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SRI - A Global Revolution Tessa Tennant, Chair 24 October 2003

SRI - A Global Revolution Tessa Tennant, Chair 24 October 2003. Corporate Governance. “ The governance of the corporation is now as important in the world economy as the government of countries ” James Wolfensohn, President, The World Bank Group .... Investor Governance Matters too …

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SRI - A Global Revolution Tessa Tennant, Chair 24 October 2003

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  1. SRI - A Global Revolution Tessa Tennant, Chair 24October 2003

  2. Corporate Governance “The governance of the corporation is now as important in the world economy as the government of countries” James Wolfensohn, President, The World Bank Group .... Investor Governance Matters too… "Investment is the process of foregoing immediate expenditures in order to build a more prosperous future. What kind of future are we now building?" The New Global Investors, Robert Monks 2001

  3. What is Social Responsibility? “Social responsibility is not a question of charity, it’s a question of self-interest – it’s an issue of how we’re going to keep our planet stable so that your businesses survive” James Wolfenson, President of World Bank, Corporate Leaders in Chicago, December 2nd 2002

  4. What is SRI • Mechanism for achieving sustainable economic development worldwide. • The facility for investors to be more consistent in their view of the world and the values they hold. • A risk management tool for reducing beta and enhancing earnings.

  5. Introducing ASrIA Conferences, workshops, seminars 100+ members in first year – global and local Not-for-profit membership association1 Awareness raising – website, media Research – issues and opportunities 1 Sister organisation to UKSIF and US SIF

  6. ASrIA 2001 - 2003 64 Corporate Members and 40 Associate Members • ASrIA is a not-for-profit membership association dedicated to promoting sustainable and responsible investment (SRI) practice in Asia. • over 100 members including investment institutions managing over US$2 trillion in assets. • Held 20 + events around the Asia Pacific Region • Presenting at many events in Asia and Globally • Conducting Research on SRI issues • Significant press coverage – media, TV, radio • Website launch: average 1800 hits per day, 5000 e-bulletin subscribers

  7. ASrIA.org.. the “Go To” site for SRI in Asia FREE news service Chinese Section 5,200 ebulletin subscribers 5400+ hits per day

  8. 4 Reasons why SRI is growing • Fundamental Rationale • SRI product choice and strategies • Performance • Legislation and Pressures for higher corporate governance standards • Investor Demand

  9. Five World Economy Linear Economy Energy Fossil Fuels,Nuclear CO2, Nox,SOx Materials Heavy metalsCarcinogens,EDCs Rich Ore Deposits,Ancient Forests etc.. Products and Services Slide thanks to Morley FM

  10. One World Economy Cycling Economy Energy Renewable Sources Wastes Bio-degradable and reusablewastes Materials SustainablyManagedResources Quality of Life Enhancers Slide adapted from Morley FM

  11. SRI Methodologies • Ethical Investment • Green Investment • Socially Responsible Investment • Sustainable & Responsible Investment • Negative screening • Positive screening • Engagement/Advocacy • Community Investment

  12. Common SRI Criteria Environment Social Ethical Energy Water Use Air Pollution Wastes & Toxics Transport ISO 14000 Resource Productivity Biodiversity Product Impact Profit Sharing Welfare at Work Equal Opportunities Civil/Employee Actions Community & Public Policy Supply Chain Public Disclosure Military Gambling Pornography Alcohol Tobacco Repressive Regimes Genetic Engineering Nuclear Animal Testing

  13. Investors’ Interests – Japan, UK, USA

  14. SRI Globally Canada US$ 32 bn UK: US$2.5 bn in funds plus US$250 bn portfolios Japan US$ 1 bn in funds US$2.16 tn in funds and portfolios Europe €336bn institutional funds US$10 bn funds & church assets ….updated and more precise data coming soon

  15. Global Growth in SRI Funds US$ BN 192 Funds 22% CAGR U.S. US$ MM 67 Funds U.K.1 49% CAGR Source: UBS Warburg - 1999 US Trends Report, USSIF, EIRIS 1 U.K. Retail volume only. Does not include institutional, predicted to be approx. GBP120 billion end 2001

  16. Domini 400 Social Index – S&P 500 Comparative Performance Since Inception in May 1990 to June 2003

  17. 5 Years: July 1998 to July 2003

  18. DJSI World – USD Performance and Risk • DJSI World / DJGI World: • Correlation: 0.9644 Tracking Error: 4.37% • DJSI Volatility: 16.33% DJGI Volatility: 15.10% • December 1993 -June 2003, USD, Price Index 67% 40% http://www.sustainability-index.com/

  19. CARBON DISCLOSURE PROJECT • 35 institutional investors with assets in excess of $4.5 trillion • 31st May 2002, they wrote to the Chair of the Board of the FT500Global. The largest companies in the world as measured by market capitalization • asking them to provide investment relevant information relating to greenhouse gas mitigation. • analysis undertaken by Innovest Strategic Value Advisers, US. Published February 2003 "The project demonstrates that many investors have a very comprehensive view of their fiduciary duties to invest prudently“ Prime Minister Blair, February 2003 www.cdproject.net

  20. SRI and Pensions • SRI about understanding societal risks • Broad Range of SRI styles now exist • SRI and CG enhance fiduciary role • Governments legislating eg UK and Australia Conferences in 2003:　　 The North European Pension & Investing Summit and SRI Congress. Stockholm 3rd June 2003 www.imn.org/a474/agenda.dhtml Long-term Fund Performance: Factoring Engagement and SRI Policies 8th & 9th September 2003: Central London www.marcusevansconferences.com/ Towards a more Sustainable Retirement System: The Quest for new Governance and Asset Management Strategies for Pension Funds. 15th October 2003, Zurich www.sustainability-zurich.org UNEP Finance Initiative Global Roundtable: Defining Sustainable Investment Strategies for Pension Funds 20 October 2003 Tokyo www.unepfi.net/tokyo

  21. 52% 5 - 10 Year Effect on Investments 42% 30% 23% 20% 11% Good Corporate Governance Quality of Consumer Relations Good Employee Practices Communication and Transparency on Social / Ethical Issues Environmental Management Respect for local needs in Developing World UK Trustees Concerns Funds of over €7bn felt more strongly about good Corporate Governance Source: UK Social Investment Forum

  22. Proxy Voting regulations in the USA • SEC regulations passed January 2003 • Affect some 3,700 mutual funds and 6,200investment advisers who have the power to voteshares on behalf of clients. • They must report to their clients and the public: • their policies and procedures for voting incorporate elections; • Andhow they voted on each issue at each company. • New rules in full effect for the 2004 proxy season subject to a final review for burdensomeness by the Office of Management & Budget.

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