ESG in the context of capital allocation - Aprio IR

ESG in the context

of capital allocation

FEBRUARY 2021

2

ESG IN THE CONTEXT OF CAPITAL ALLOCATION

FROM SRI to ESG

Source: Forbes

SRI based on ethical

& moral criteria

ESG factors have

financial relevance

3


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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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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MORE PUBLIC INTEREST IN ENVIRONMENTAL & SOCIAL ISSUES

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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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STOCKS OF SUSTAINABLE COMPANIES TEND

TO SIGNIFICANTLY OUTPERFORM

Source: IRESS

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NO CONSISTENT SET OF STANDARDS

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PARTICIPANT POLL

Do you think frameworks are a help or a hinderance?

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THE RISE AND RISE OF APPLE

(source: IRESS,

Business Day)

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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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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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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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PARTICIPANT POLL

Do you think ESG is considered in the context of

capital allocation?

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“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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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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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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PARTICIPANT POLL

Does your corporate strategy integrate ESG?

THANK YOU

[email protected] | www.aprioir.co.za

mailto:[email protected]

ESG in the context of capital allocation - Aprio IR

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