Post on 13-Jan-2022
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
FROM SRI to ESG
Source: Forbes
SRI based on ethical
& moral criteria
ESG factors have
financial relevance
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
THE RISE AND RISE OF ESG
ESG FUNDS OUTPERFORM NON-ESG FUNDS
Companies with robust ESG targets often have
LOWER costs of capital LOWER volatility,
Fewer instances of CORRUPTION,
bribery or fraud
Source: Edison, Morningstar, MSCI
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
THE RISE AND RISE OF ESG
ALIGN WITH PERSONAL VALUES
Investments dedicated to solving
social & environmental problems
$15tn - $20tn over the next 20 – 30
years, doubling the size of the current
US equity market
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
THE RISE AND RISE OF ESG
MORE PUBLIC INTEREST IN ENVIRONMENTAL & SOCIAL ISSUES
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
THE RISE AND RISE OF ESG
INCREASED COMMITMENT & SUPPORT
Signatories to UN Principles for
Responsible Investment grow to more
than 3000
October 2020 = highest at $36 billion
ESG monthly flows on record
Business Roundtable signed by 181
CEOs commit to lead their companies
for the benefit of all stakeholders
Global AUM that apply to ESG data
doubled over the last 4 years
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
STOCKS OF SUSTAINABLE COMPANIES TEND
TO SIGNIFICANTLY OUTPERFORM
Source: IRESS
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
PARTICIPANT POLL
Do you think frameworks are a help or a hinderance?
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
THE RISE AND RISE OF APPLE
(source: IRESS,
Business Day)
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
TYPICAL ESG FUND CONSTITUENTS
Low-impact, clean businesses
MSCI world ESG leaders index
Top 3 companies are involved in software technology
and green automotive, mainly in the US
TOP 10 CONSTITUENTS (10.3%)
• Microsoft Corp (3.1%)
• Alphabet A (1.0%)
• Tesla (1.0%)
• Alphabet C (1.0%)
• Johnson & Johnson (0.8%)
• Visa A (0.7%)
• Procter & Gamble (0.7%)
• Walt Disney (0.6%)
• Nvidia (0.6%)
• Mastercard A (0.6%)
(source: MSCI, iShares )
FTSE4Good Emerging Index
Top 3 companies involved in internet, semiconductor
and energy businesses, in the Far East/Asian region
TOP 10 CONSTITUENTS (30.8%)
• Taiwan Semiconductor (13.9%)
• Naspers (2.7%)
• Reliance Industries (2.6%)
• Ping An Insurance (2.2%)
• China Construction Bank (2.2%)
• Infosys (1.9%)
• Housing Development Fin (1.8%)
• MediaTek (1.2%)
• Hon Hai Precision Industry (1.2%)
• WuXi Biologics (1.2%)
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
REPORTING ON ESG MAY NOT BE ENOUGH
(source: IRESS, company reports)
42-Page Sustainability Report
Global Reporting Initiative (GRI) Standards
Applied advanced level reporting criteria of the United
Nations Global Compact (UNGC), meeting
21 advanced criteria
Independently assessed
Constituent of MSCI South Africa ESG Leaders Index0
100
200
300
400
500
600
2015 2016 2017 2018 2019 2020 2021
Ran
d/s
hare
SHARE PRICE
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
REPORTING ON ESG MAY NOT BE ENOUGH
Retained inclusion in FTSE4Good Index Series & the
FTSE/JSE Responsible Investment Index
FTSE4Good Emerging Index Series with an ESG rating of
4.5 out of 5.0
Included in Dow Jones World Sustainability Index for the
ninth year in succession
(source: IRESS, company reports)
20
40
60
80
100
120
2015 2016 2017 2018 2019 2020 2021
Ran
d/s
hare
SHARE PRICE
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
PARTICIPANT POLL
Do you think ESG is considered in the context of
capital allocation?
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
“ESG has become an ever-increasing
overlay in our decision-making criteria.
We have a rigid set of voting guidelines
that we apply to our voting process.
Our clients are increasingly demanding
that we apply a rigorous ESG filter on
our investments.”
“All companies have no option but
to comply as they compete for
capital pools which have
increasingly stringent ESG
requirements.”
ALLOCATION OF CAPITAL
MANAGEMENT’S PRIMARY OBJECTIVE
Are you prepared to accept a lower return if
the company’s efforts make the world a
better place?
Lower returns would have to be compensated
by better performance through increased
efficiencies
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
Communication matters
The long-lasting benefit of building trust
FROM ACRONYM
TO MAINSTREAM
Determine how ESG can
underpin & support
commercial strategies
Create a competitive
advantage
QUANTIFY THE
VALUE
Growth driven by
brands with purpose, &
innovation.
Over €1 billion costs
avoided
Total shareholder return
of over 230%.
CLOSING THE
LOOP
Ensure a dialogue
Leads to reasonable &
informed expectations
Mutual understanding
between providers &
users of capital
A VIEW OF THE
FUTURE
Safety, health
& gender
diversification
To culture & the role of
technology
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
ABOUT APRIO IRSpecialist Investor Relations Advisory & a member of the Aprio Group of Companies
Market rewards effective communication, visibility & transparency in the long run
IR STRATEGY STATUTORY COLLATERAL STAKEHOLDER ENGAGEMENT CLOSING THE LOOP
DEVELOP MESSAGES TO
CLEARLY ARTICULATE YOUR
STORY
OPTIMAL USE OF
MANAGEMENT TIME
CLEAR IR PLANS WITH
ADEQUATE RESOURCES
EARNINGS ANNOUNCEMENTS
RELATED PRESENTATIONS
REFERENCE DECKS
RANGE OF COMMUNICATION
PLATFORMS
MODERN & IMPACTFUL
FORMATS
PACKAGE FEEDBACK INTO
EASILY-DIGESTIBLE INFO
ACTIONABLE PLANS
INFORMED DECISIONS
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ESG IN THE CONTEXT OF CAPITAL ALLOCATION
PARTICIPANT POLL
Does your corporate strategy integrate ESG?