PRI Asia Environmental Investment Focus
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Transcript of PRI Asia Environmental Investment Focus
08 January 2009 Designator | author 1
Fortis Investments
ESG. An International Investment Perspective.
Florian Sommer, Head of Sustainability ResearchPRI Workshop, January 2009
Fortis Investments | 2
Contents
About Fortis InvestmentsOur PRI Approach Asian Environmental Investment Perspective
Fortis Investments | 3
About Fortis Investments
Fortis Investments | 4
Business OverviewKey Facts & Figures
The asset manager of the Fortis groupFocusing exclusively on investment managementStrictly autonomous
M2 rating awarded by Fitch Ratings (reaffirmed in October 2008)Active investment manager, fundamental research-basedGlobal network of some 40 dedicated investment centresEur 192 billion of assets under managementDiversified client base (retail vs. institutional; by country) and asset mix
1711 Institutional clients 1979 Distribution Partners clients
Over 2000 employeesSolid profitability
*Per September 30 2008
Fortis Investments | 5
Business OverviewGeographical Operating Model
Global footprint …
…servicing a diversified client base strongly geared to external sources …
…with a well diversified asset mix of top quartile products
BostonNew York
TorontoChicago
AmsterdamBrusselsDüsseldorfFrankfurtGenevaLondonLuxembourgParis
MadridMilanViennaWarsawZurichAthens
AlmatyOsloStockholmHelsinkiCopenhagenSt PetersburgMoscow
BeijingHong Kong
ShanghaiTaipei
Istanbul
Mumbai
JakartaSingapore
MelbourneSydney
Americas Europe Nordics, Russia and CIS
Asia, Middle East, Africa,and Turkey
SeoulTokyo
Sao Paulo
Dubai
Buenos Aires
Santiago
Fortis Investments | 6
Latin America 2%
Asia Pacific 11%
N. America 7%
Europe 80%
AUM by geography
Business OverviewAssets under management mix
All figures per September 30 2008; the breakdown per asset class is currently an estimation for the combined entity and may be revised
AUM by distribution channel
DistributionPartners 45%
Others 6%
Institutional49%
AUM per asset class
Bonds 31%
Balanced 25%
FoF 2%
Equity 21%
Money Market 14%
Fix Funds 7%
Fortis Investments | 7
-24.9
-18.2
-30
-25
-20
-15
-10
-5
0
Net asset flow Return effect
Business Overview Assets under management
(*) For ease of comparison, 1999 and 2000 have been re-calculated to take into account a transfer of Group Assets to the in-house insurance companies of Fortis which was effective end Q3 2001 and involved AUM of euro 28.1 billion
Evolution
AU
M in
EU
R b
n
EUR
bn
Asset growth breakdownEnd Q3 2008
69.282.2 79.4 72.7 77.9
87.1105.1
121133
192.4
0
50
100
150
200
250
1999* 2000* 2001 2002 2003 2004 2005 2006 2007 EndQ3
2008
Fortis Investments | 8
Our PRI Approach
Fortis Investments | 9
Principles for Responsible Investments (PRI)Fortis Investments Approach
Fortis Investments has signed the PRI in 2007. The Principles are based on the premise that ESG issues can affect investment performance and that the appropriate consideration of these issues is part of delivering superior risk-adjusted returns and is therefore firmly within the bounds of investors’ fiduciary duties.
The investment division of Fortis Investments is made up of 40 autonomous investment centers that are specialised in different asset classes and product areas.
The SRI investment center, supported by the Board / Executive Committee, acts as a centre for excellence in terms of establishing the link between ESG issues and investment consequences, and mainstreaming the PRI principles across Fortis Investments.
InvestmentCentre
InvestmentCentre
InvestmentCentre
InvestmentCentre
Board / Executive Committee Leadership
InvestmentCentre
SRI Investment Centre
PRI Co-ordination
Fortis Investments | 10
SRI Investment Center
12 sustainable investment experts, from 9 different countries, with 117 years professional experience and fluent in 10 languages.
Truly integrated team combining both sustainability and investment expertise.
Autonomous investment centre based in Frankfurt.
12 sustainable investment experts, from 9 different countries, with 117 years professional experience and fluent in 10 languages.
Truly integrated team combining both sustainability and investment expertise.
Autonomous investment centre based in Frankfurt.
Fortis Investments | 11
PRI Implementation
Action:Launched an online ESG Portal enabling all investment centres at Fortis Investments to access company ESG analysis. The analysis, compiled by SRI investment centre, helps to identify both ESG related investment risks and opportunities.
Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes
Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.
Action:Integrated specific ESG criteria in the company wide Proxy Voting policy. Improved reporting on ESG related Proxy Voting.
Fortis Investments | 12
PRI Implementation
Action:Request for appropriate ESG disclosure according to GRI guidelines is integrated in company wide Proxy Voting policy. Selected engagement with companies on ESG disclosure issues.
Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.
Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.
Action:Ongoing dialogue with data providers and brokers on specific ESG issues / research requests.Launched tailored ESG investment solutions.
Fortis Investments | 13
PRI Implementation
Action:Fortis Investments actively participates in a number of networks aimed at delivering the Principles (e.g. PRI Emerging Markets group, Carbon Disclosure Project).Presentations at PRI events in Frankfurt and Asia.
Principle 5: We will work together to enhance our effectiveness in implementing the Principles.
Principle 6: We will each report on our activities and progress towards implementing the Principles.
Action:Framework for understanding ESG investment risks and opportunities outlined on SRI website www.sri.fortis.com. Completed PRI Reporting and Assessment questionnaire.
Fortis Investments | 14
Asian Environmental Investment Perspective
Fortis Investments | 15
Rising Food Prices
Social Access & Poverty
Human / Labour Rights
Product Safety
Urbanisation
Demographic Change
Water Scarcity
Air Pollution
GHG Emissions
Natural Resource Depletion
Waste Problem
Eco-Toxicity
Transparency & Disclosure
Shareholder protection
Non compliance with environmental and social regulation
Bribery & Corruption
Sources: Fortis Investments
Environmental, social and governance issues Closely interlinked
Fortis Investments | 16
Environmental Challenges in Asia …
China is set to overtake the US to become the world’s largest energy consumer soon after 2010, and even earlier is set to become the world’s largest carbon emitter.
India has 16 percent of the world's population, 2.5 percent of the land mass and 4 percent of the world's water resources.
Over 90% of waste in most parts of Asia is still dumped or land filled.
16 of the world’s 20 most polluted cities are in China.
Governments are increasingly concerned that the environmental crisis could lead to social unrest.
Sources: Fortis Investments
Fortis Investments | 17
… Threathening Economic Growth
Sources: Fortis Investments
Fortis Investments | 18
Fortis Sustainability RadarSustainability dynamics: Emerging Asia
Sustainability Issues
Sources: Fortis Investments
EMERGING MOMENTUM ESTABLISHED
Gre
enho
use
Gas
es (E
)
Air
Po
llutio
n (E
)
Nan
ote
chno
log
y (E
)
Wat
er S
carc
ity (E
)
Bio
div
ersi
ty (E
)
Fo
od
Cri
sis
(S)
Asb
esto
s (S
)
Fortis Investments | 19
Fortis Sustainability RadarHow do sustainability issues develop?
EMERGING MOMENTUM ESTABLISHED
Legislation in place
Voluntary Codes
Calls for tighter
legislation
Growing Political/ Media
Attention
Strong Scientific EvidenceSome
Scientific Evidence
Sustainability Issues
Fortis Sustainability Radar™
Sources: Fortis Investments
Fortis Investments | 20
Fortis Sustainability RadarCompany response
PRODUCTSTRATEGIC
WORSTPRACTICES
BESTPRACTICES
Companies who achieve competitive advantage through
better practices
Companies with a defensive or minimalist approach
Companies with products or services that solve the
problem
Fortis Sustainability Radar™
Sources: Fortis Investments
Fortis Investments | 21
PRODUCTSTRATEGIC
WORSTPRACTICES
BESTPRACTICES
Business Response
Sustainability IssuesEMERGING MOMENTUM ESTABLISHED
PARAMETERS ARE NOT CLEAR –
TOO EARLY
PARAMETERS ARE VERY CLEAR –
TOO LATE
SustainableWinners
UnsustainableLosers
INVESTMENTOPPORTUNITY ZONE
Fortis Sustainability RadarThe Investment Opportunity Zone
Sources: Fortis Investments
Fortis Sustainability Radar™
Fortis Investments | 22
EMERGING MOMENTUM ESTABLISHED
PRODUCTSTRATEGIC
WORSTPRACTICES
BESTPRACTICES
Business Response
Sustainability Issues
Asian Environmental Strategy
Sources: Fortis Investments
AsianEnvironmental
Strategy
Fortis Sustainability Radar™
Fortis Investments | 23
Fortis L Fund Green TigersInvestment Philosophy
The Asian environmental space has so far remained under-researched and under-exploited from an investment point of view.
We take advantage of this by a bottom-up stock picking approach designed to identify companies with the strategies, management and means to become the long-term sustainable winners.
Our aim is to deliver superior long term equity returns by investing mainly in high growth, vibrant companies directly exposed to the demand for sustainable solutions in Asia Pacific
Sources: Fortis Investments
Fortis Investments | 24
A wealth of opportunitiesRenewable Energy in China set to grow by 20% p.a.
Sources: Fortis Investments
Renewable energy is expanding in China.
Driven by energy security concerns, the climate change challenge, and providing access to energy in remote areas.
Renewable energy sources (including hydropower) are set to account for 10% of total energy consumption by 2010 and further to 15% by 2020.
China’s development plan for renewable energy
Fortis Investments | 25
A wealth of opportunitiesHighest wind capacity additions in India
Expected growth in different countries
Sources: Goldman Sachs Research, Fortis Investments
Fortis Investments | 26
Clean Energy Focus AsiaPolicy Infrastructure for Renewable Energy
Feed-in-tariff Tax reductions or credits
Public loans / financing
Renewable Energy Target
IndonesiaIndonesia seeks to generate 5% of its energy from
renewable sources by 2020.
KoreaKorea has a renewable target for electricity generation
of 5% by 2010.
MalaysiaMalaysia seeks to generate 350 MW renewable energy by 2010. Main potential is biomass based on palm oil.
PhilippinesMain goal is to increase self-sufficiency to 60% and to double renewable energy capacity to around 5GW by
2013.
SingaporeGovernment focuses on waste to energy, biomass cogeneration, and solar power offering up to 50%
public financing for innovative projects.
TaiwanTaiwan has a target of achieving 10% from renewable
energy by 2010.
Thailand5% of all new capacity must come from renewable sources. Main projects are using biomass, such as
sugar cane and rice husks.
Sources: Goldman Sachs Research, Fortis Investments
Fortis Investments | 27
Clean Energy Focus Asia Forecasted solar and wind capacity additions
Solar Energy -Forecasted capacity additions until 2010
Wind Energy -Forecasted capacity additions until 2010
IndonesiaRooftop solar has potential as the island’s geography means
that grid connection is difficult.Total wind potential estimated at just 448 MW. No clear
government guidance or targets available.
Korea628 MW
Government has budgeted W1.9tn for R&D, subsidies, and feed-in tariffs until 2012.
2250 MW (by 2012)Government has budgeted W1.6tn for R&D, subsidies, and
feed-in tariffs until 2012.
MalaysiaEnergy Commission state limited grid connection for solar,
but rooftop programs could be important.Energy Commission state that wind potential is not high due
to low average wind speed.
Philippines But plans to become key manufacturer. Cypress Sunpoweropened a US$ 300 mn plant in 2004.
392 MWDepartment of Energy estimates a total 76,000 MW of
potential wind energy.
SingaporeHas plans to install 50,000 m2 of solar thermal capacity by
2012. Seeks to become a solar manufacturing hub. Wind is not considered a viable source of energy.
Taiwan20 MW
Actively promoting innovate solar PV systems.
2,049 MWStrong potential in Taiwan Strait: Taipower plans a further
546 offshore turbines between 2010 and 2020.
Thailand142 MW
Environmental groups believe Thailand has potential to provide 30% of energy needs from solar by 2020.
52 MWGovernment does not consider wind as priority due to low
wind speeds.
Sources: Goldman Sachs Research, Fortis Investments
Fortis Investments | 28
A wealth of opportunitiesRising demand for water infrastructure
China ranks among the 13 lowest countries in the world on its per-capita water resources.
Less than 50% of the Chinese population is connected to sewerage systems.
The government has made the securing of drinking water resources a top priority.
Sources: Fortis Investments, www.china.org.cn, Citi Group, Credit Suisse
Rmb 1trillion to be spent between 2006-10
Fortis Investments | 29
A wealth of opportunitiesHigh Growth in Water Investment in India
Sources: Fortis Investments, Goldman Sachs
% annual average growth in investment in water & wastewater between 2005 – 2015E.
Growth in India will outpace growth in developed economies more than two-fold.
Fortis Investments | 30
A wealth of opportunitiesGrowing demand for waste management solutions
China has surpassed the US as the world’s largest waste generator driven by rapid urbanisation and rising GDP per capita.
Annual Municipal Waste Generation has grown 8% pa per capita between 1980-2000 compared to 1% in the US.
Over 90% of waste is still dumped or land filled. In its 11th five year plan the Chinese government states that it plans to invest Rmb 51.6 billion in sold waste treatment pants between 2006-2010. Incineration will play a key role in Chinese waste management strategy.
.
Sources: Fortis Investments
Fortis Investments | 31
A wealth of opportunitiesChina unveils USD 586 billion stimulus package
Sources: Fortis Investments, FT
In November 2008, China called for “accelerating the transformation of our mode of economic development”.
US$586bn fiscal stimulus package earmarked to boost the economy.
Fully 25% of the total (US$146 billion) is allocated for environmental protection.
Big winners will be water infrastructure, green energy infrastructure, railways,.
Fortis Investments | 32
– Integrated business model for total wind power solutions
– Annual growth rate ~20%– Strong market position in
growth areas– Built the world’s largest
wind park in Asia
Zhongde Waste
– Well positioned in the market for Waste incineration
– Market seen at ~ 15% cagrfrom now to 2030
– Proprietary technology, high sustainable margins and high ROE compared to peers
– Leading player in both desalination and water treatment
– Proprietary membrane technology
– Superior-quality portfolio of water assets expected to generate strong growth and steady cash flow
– Global player in the field of recovered materials
– Benefits from steady growth on increase of waste recycling volume in Asia
– Growing its overseas operations in Thailand and China
Fortis L Fund Green Tigers
Suzlon Energy
Matsuda Sangyo
Hyflux
Sou
rces
:For
tis In
vest
men
ts
Fortis Investments | 33
Why Asia Environmental Focus Now
The Asian region is facing growing environmental challenges as a result of population growth, rapid industrialisation, and natural environmental constraints.
Governments across Asia have started to act realising that the growing environmental problem is beginning to undermine economic growth and social stability.
The global climate change debate is adding additional international political pressure. These developments create a whole range of environmental investment opportunities.
Investors face a need to take Asia’s diverse nature of environmental challenges and opportunities into account.
Fortis Investments | 34
Thank you for your attention!
Singapore, Kuala [email protected]
+65 6593 [email protected]
+65 6593 5173
Jakarta [email protected]
+62 212521574
+49 69 70799841
Fortis Investments | 35
Appendix
Fortis Investments | 36
Fortis L Fund Green TigersBottom up investment process
Step 1
Sustainability research and idea generation
Leverage of our on-the ground Asian research capabilities
Investable Universe
Have we identified something the mainstream has not?
Step 2
Fundamental analysis (DCF, P/E)
Environmental benefits analysis to identify the pure plays
Risk Factors
Portfolio Construction
Is the team convinced of the investment case?
Step 3
Diversification across region, theme and technology
Review of current holdings, price targets
Review of portfolio risk compositions
FLF Green Tigers
Have we delivered the most attractive risk/return profile?
Sources: Fortis Investments
Fortis Investments | 37
Fortis L Fund Green TigersDedicated team and local resources
Stewart Armer
Back up Portfolio Manager
Dr. Francois Perrin6 dedicated analysts, diverse background, 70 years of
combined investment experience
SRI Investment Center
More than 100 on-the-ground
investment professionals
China, India, Japan and Australia
5 experts on environmental, regulatory and emerging
market issues
SRI Committee
Global Environmental Capabilities
Local Research NetworkPortfolio Management Team
Portfolio Manager
Unravelled resources and experience for managing the strategy
Sources: Fortis Investments
Fortis Investments | 38
International SRI Advisory Committee
High level sustainability experts with different areas of focus: science, policymaking, development, governance, global SRI industry, etc.
Provides strategic advice on existing and emerging sustainability themes.
Validates the robustness and integrity of the core SRI process.
High level sustainability experts with different areas of focus: science, policymaking, development, governance, global SRI industry, etc.
Provides strategic advice on existing and emerging sustainability themes.
Validates the robustness and integrity of the core SRI process.
Prof. Karl-Henrik Robert (Chairman)Founder of The Natural StepLeading Scientist on Sustainability System TheorySweden
Robert RubinsteinFounder and Managing Director, TBLI Group SRI Industry Expert; runs the leading SRI industry conference (TBLI) in Europe and AsiaUS
Raymond Van ErmenDirector of European Partners for the Environment, EU Environmental Policy ExpertBelgium
Dr. Maritta Koch-WeserCEO, Global Exchange for Social InvestmentFormer Head of Social Policy of the World Bank. Germany
Prof. Ethan KapsteinProfessor of Sustainable Development, INSEADLeading Sustainable Business Economist US
Cyril LinManaging Director of IFG Development Initiatives, Corporate Governance Expert for Asian countriesChina
Fortis Investments | 39
Fortis L Fund Green TigersPortfolio Details
Sources: Fortis Investments, 31/12/2008
no „me too“ stocks
clear sector biases
diversified stock bets
Fortis Investments | 40
Fortis L Fund Green Tigers Performance
Source: Fortis Investments, 31.12.2008 figures
Past performance or achievements are not indicative of current or future performance.
The successful implementation of clean technologies in the region coupled with the increased demand for solutions by region’s economies, will result in a major driver for environmental infrastructure.
High levels of domestic savings and current account balances = funding of infrastructure projects intact
Credit crunch has limited impact as 75% of spending announced and sponsored by government and municipal sectors.
Performance (%) Dec Last 3M Since inc.**
FORTIS L FUND Green Tigers (I) -1,99 -25,47 -36,4775% MSCI AC Asia Pacific ex Japan (NR) + 25% MSCI Japan (NR) -3,04 -20,60 -29,58Excess return 1,05 -4,87 -6,89
Risk indicators (annualised) Since inc.**
Fund volatility (%) n.a.Benchmark volatility (%) n.a.Tracking error (%) n.a.Information ratio n.a.all figures gross of fees (in EUR)* annualised perfo rmance
** inception date : 01/08/2008Past performance or achievements are not indicative of current or future performance.
Fortis Investments | 41
Fortis L Fund Green TigersThe right time to invest in the newcomers!
Strong business case: Asian countries are responding to the need for immediate solutions to their significant environmental problems. Companies providing renewable energy technologies, energy efficiency improvements, water infrastructure and purification, sustainable forestry products, emissions control technologies will all be part of the answer.
Strong investment case: Social and regulatory factors are falling into alignment, making now an ideal time to invest in Asia’s environmental well-being.
Unique investment universe: Fortis Investments has identified a broad universe including compelling investment opportunities not covered by competitors
Strong performance: Focused on generating solid investment returns through investing in companies that are reacting proactively to the pressing environmental challenges in Asia Pacific
Proven investment process and dedicated investment centre based in Frankfurt leveraging Fortis Investments on-the ground Asian research capability
Sources: Fortis Investments
Fortis Investments | 42
Fortis L Fund Green TigersFund Details
Name: Fortis L Fund Green Tigers
Reference Index : MSCI Asia Pacific (75%) / MSCI Japan (25%) – Net Return (EUR)
Portfolio management: Stewart Armer
ISIN: LU0374254513 (I-share)
Nationality: Luxembourg
Legal form: Compartment of the Fortis L Fund SICAV
Type: UCITS III
NAV Calculation Agent: FASTNET Luxembourg S.A.
Management fee: 0.80% (I-share)
Launch: 1 August 2008
Fund currency: EUR
Risk Class (0 to 6): 3
Advised Horizon: 10 years
Investor profile: aggressive
The investments in this compartment are subject to market fluctuations and the risks inherent in investments in securities. The value of investments and the income they generate may go down as well as up, and it is possible that investors will not recover their initial outlay.
Fortis Investments | 43
Why an Environmental Focus Now?Current valuations… and momentum!
Our alpha pool in clean energy, water and waste
Source: Fortis Investments, BloombergPeriod: 01/01/04 – 31/12/08
0
100
200
300
400
500
600
700
800
900
1000
1100
1200
1-Jan-04 1-Jan-05 1-Jan-06 1-Jan-07 1-Jan-08
Clean & Efficient Energy Index (EUR)
Clean Water & Pollution Control Index (EUR)
Resources & Waste Management Index (EUR)
MSCI World ND (EUR)
Solar
Wind Operators
All thematic strategies have substantially outperformed the MSCI World over the past 5 years
Post 2008, valuation ratios at historic lows
– despite long term growth prospects
– despite balance sheets quality and low impairment risk
Catalysts for a repricing– Policy makers clearly moving
towards fiscal policies designed to boost economies, favouring those sectors
– Companies are likely to deliver growth ahead of expectations
– Strongest players will gain market share
648 stocks to choose from!
All thematic strategies have substantially outperformed the MSCI World over the past 5 years
Post 2008, valuation ratios at historic lows
– despite long term growth prospects
– despite balance sheets quality and low impairment risk
Catalysts for a repricing– Policy makers clearly moving
towards fiscal policies designed to boost economies, favouring those sectors
– Companies are likely to deliver growth ahead of expectations
– Strongest players will gain market share
648 stocks to choose from!
Fortis Investments | 44
Improving our ESG Performance Fortis Investments
Fortis Investments is committed to improve its own ESG performance. In 2007 the company focussed specifically on the environment. A dedicated Greening Committee was set up.
The Greening Committee agreed 8 environmental headline objectives
1. Minimise business travel2. Minimise commuting impact3. Eco-efficient energy management4. Reduce paper consumption and waste recycling5. Greening procurement and facility management6. Embed ‘Greening philosophy’ in company culture7. Healthy spirit in a health body
Each objective is backed up with specific KPIs.
Fortis Investments | 45
Improving our ESG Performance Fortis Group
Fortis Group is committed to ongoing improvement of its ESG performance under the Corporate Social Responsibility (CSR) umbrella. The CSR team is made up of 12 people and reports directly to the company board.
Fortis Group has agreed the following three year objectives (2007-09):
1. Building on overall strategic themes (sustainable supply chains, climate change, social exclusion)2. Embedding CSR in all parts of the organisation3. Implementation of Carbon Neutrality Programme4. Development and roll out sector policies5. Development of products and services6. Development of a Fortis Human Rights Statement7. Further expansion of Foundation8. Strengthen stakeholder dialogue and communication9. Actively particpate in international debabe on CSR
Further information about these objectives and achieved 2006 milestones can be viewed at www.fortis.com/sustainability
Fortis Investments | 46
Further InformationPRI Co-ordinator
Florian Sommer
Head of Sustainability Research SRI Investment CentreFortis Investments, Germany
0049 69 [email protected] www.sri.fortis.com
Fortis Investments | 47
www.sri.fortis.com
This document has been prepared solely for informational purposes and does not constitute 1) an offer to buy or sell or a solicitation of an offer to buy or sell any security or financial instrument mentioned in this document or 2) any investment advice. Any decision to invest in the securities described herein should be made after reviewing the most recent version of the prospectus, which can be obtained free of charge from Fortis Investments*. Moreover, prospective investors should conduct such investigations as the investor deems necessary and should seek their own legal, accounting and tax advice in order to make an independent determination of the suitability and consequences of an investment in the securities. The opinions contained herein are subject to change without notice.
Investors should ensure themselves that they read the last available version of this document.
Past performance or achievements are not indicative of current or future performance. The performance data do not take account of the commissions and costs incurred on the issue and redemption of units.
For more information, please contact [email protected]
Fortis Investments is the trade name for all entities within the group of Fortis Investment Management. This document has been issued by Fortis Investment Management Belgium N.V./S.A. (address : Avenue de l’Astronomie 14, 1210 Brussels, Belgium, RPM/RPR 0882 221 433).