In collaboration with the German NGO Germanwatch, onValues this week published a report that assesses the observed and expected impacts of the current financial crisis on the financial industry’s efforts to integrate ESG and climate change-related issues in investment decisions. The report was distributed at this week’s Bonn climate change talks. Over the short term the authors expect set-backs in the industry’s efforts in this area. These set-backs will be particularly pronounced if the crisis persists for a longer time period, i.e. if financial markets do not stabilise by the end of 2009. The Copenhagen Climate Conference in December 2009, in combination with an ongoing financial crisis, could become the ‹make or break› tipping point for the market’s continued efforts to integrate ESG and climate issues, at least for the short- to mid-term. The mid- to long-term prospects for integration, on the other hand, are seen as positive given a series of strong underlying trends, among others the change in attitude of the US market and the increasing manifestation of the financial implications of environmental and climate change impacts.
Download the report
«Observed and expected impacts of the current financia crisis […]»
Mistra, The Foundation for Strategic Environmental Research, has published a summary of its 2008 review of external asset managers. The review, which was carried out by onValues on behalf of Mistra, investigated the steps forward taken by Mistra's asset managers in their integration of ESG issues into investment decision-making and active ownership. Following the review detailed feedback was presented to Mistra's investment committee, and constructive criticism shared with the asset managers. The public summary (downloadable below) summarises the key findings as a measure of transparency and accountability to Mistra's stakeholders.
The 2008 review, the fourth of its kind, observed that in most cases the ESG component had a positive or no effect on financial return, with risk levels that were in line with the reference portfolio chosen by the manager. The strong showing of Mistra's managers on active ownership was also notable, with 66% of the managers receiving the top rating for engagement with companies on ESG and broader strategic issues.
Mistra's endowment, which is currently valued at SEK 2.8 billion (US$ 350 million), is invested through eleven mandates and funds managed by eight different asset managers. All the investment management agreements explicitly require the manager to take account of environmental, social and governance issues.
Download the «Public summary report»
onValues today released results of the latest survey of the Swiss sustainable investment market. The report shows that, due to the financial crisis, the strong growth trend experienced by the sustainable investment market in the past years has been stopped and for the first time since inception of the survey the market has contracted considerably. The size of the sustainable market per end of 2008 was 20.9 billion CHF (funds, mandates, structured products), which corresponds to a decrease of 38.7% compared to the same value per end of December 2007. If we take sustainable funds only, the assets decreased by 35.3%. In comparison, the Swiss fund provider assets under management for comparable fund categories decreased by 40.2% in the period Dec. 2007 to Dec. 2008.
The asset inflow in existing and new sustainable funds in 2008 (especially in lower-risk broadly diversified equity, strategy and fixed-income funds) more than compensated the outflow (especially pronounced for some higher-risk theme funds).This resulted in a net asset inflow in sustainable funds of approximately 8.5%, compared to a net outflow of 6.4% experienced by the average Swiss fund provider in 2008. In relative terms, the net inflow experienced by microfinance and fixed-income/strategy funds was particularly marked.
«Sustainable investments in Switzerland 2008»
Today the final report of the Who Cares Wins Initiative, entitled ‹Future proof? Embedding environmental, social and governance issues in investment markets›, was launched at the World Economic Forum Annual Meeting in Davos, Switzerland.
The report contains a detailed assessment of the industry's progress in the field and a series of strategic recommendations to advance the integration of ESG issues into mainstream investment decision-making and ownership practices. The report was authored by onValues and sponsored by IFC, the UN Global Compact and the Swiss Government. It builds on more than four years of engaged discussions among industry practitioners that took place under
the Who Cares Wins umbrella.
«Future Proof? Embedding environmental, social and governance issues in investment markets»
The four-year review report prepared by onValues was presented at a meeting of sell-side and independent research providers and EAI members in Paris. It provides a detailed analysis of the progress made in terms of the volume and quality of extra-financial research since the EAI's inception in 2004. The report concludes that EAI has been very successful in helping extra-financial research establish itself and that in a next phase this type of research should aim at expanding its reach and becoming a part of the mainstream offer.
To support this aim, EAI is joining forces with a larger and more international initiative: the Principles for Responsible Investment (PRI). The PRI has announced that it will launch the first global, non-commercial database, dedicated to showcasing investment research that includes material environmental, social and governance (ESG) issues. onValues is supporting PRI in designing and testing the database.
«EAI – Four years of the Enhanced Analytics Initiative»
Ivo Knoepfel and Gordon Hagart are among the co-authors of a new book entitled, ‹Sustainable Investing: The Art of Long Term Performance›. Bringing together leading practitioners from around the world, the book examines the state-of-the-art in ESG-inclusive investments, and their prospects for the years ahead.
The book (ISBN: 1844075486) is available through the usual retail channels, including Amazon
At a meeting in Maastricht on 18 September 2008, the UN Principles for Responsible Investment in collaboration with the European Centre for Corporate Engagement (ECCE) launched the first global academic network dedicated to research on ESG issues in investment. Leading research institutions including Boston College, ECCE, Saint Mary’s College, Umea University, Gothenburg University and University of St. Andrews took part in the launch event. onValues and Mistra presented lessons learned from the academic programme on sustainable investments that was launched by Mistra already in 2005, and highlighted practitioners’ requirements for this type of academic research.
For further information: www.corporate-engagement.com
On 12 June 2008 onValues ran a workshop on environmental and social issues in real estate investments on behalf of Mistra, The Foundation for Strategic Environmental Research.
Workshop participants believe that E&S issues will increase in importance in the future due to, among other factors, rising resource prices, regulatory incentives aimed at combating climate change, and the renewed market focus on fundamentals after the real estate boom years. Participants noted that the financial costs and benefits of resource efficiency investments are not evenly distributed among different actors (owners, tenants, developers, other agents) and that this represents an important (but not insurmountable) barrier to investments in this area.
Participants also highlighted the fact that resource efficiency is not the only value driver. Better locations, increased occupant comfort, brand and reputation leading to higher building values, occupancy rates and rental yields can all make significant contributions to increasing the return and reducing the volatility of real estate investments (and should be explained better by developers).
The workshop report below includes an introductory chapter on the relevance of environmental and social issues from the point of view of real estate investors, as well as a summary of the most interesting findings from the presentations and discussions.
«The value of environmental and social issues to real estate investors»
The US$ 14 trillion Principles for Responsible Investment (PRI) Initiative recently published its second assessment that captures in significant detail how signatory investors are integrating environmental, social and governance (ESG) issues within investment decision making and ownership practices. Selected key results include:
- 32% of respondents said they would now revisit relationships with service providers in light of ESG issue-related capabilities. A 68% increase on the number of signatories willing to do this last year.
- 70% of signatories ask companies to produce standardized reporting on their ESG policies, practices or performance
- Principle 1 of the PRI, which focuses on incorporating ESG issues into investment analysis and decision making was ranked the most difficult to implement.
«PRI Report on Progress 2008»