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SRI - A Global Revolution Tessa Tennant, Chair 24 October 2003 www.asria.org 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 www.asria.org 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 www.asria.org 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. www.asria.org Introducing ASrIA 100+ members in first year – global and local Conferences, workshops, seminars Not-for-profit membership association1 Awareness raising – website, media 1 Sister organisation to UKSIF and US SIF Research – issues and opportunities www.asria.org ASrIA 2001 - 2003 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 64 Corporate Members and 40 Associate Members www.asria.org ASrIA.org.. the “Go To” site for SRI in Asia Chinese Section 5400+ hits per day FREE news service 5,200 ebulletin subscribers www.asria.org 4 Reasons why SRI is growing Fundamental Rationale SRI product choice and strategies Performance Legislation and Pressures for higher corporate governance standards Investor Demand www.asria.org Five World Economy Linear Economy Fossil Fuels, Nuclear Rich Ore Deposits, Ancient Forests etc.. Energy Materials CO2, Nox, SOx Heavy metals Carcinogens, EDCs Products and Services Slidewww.asria.org thanks to Morley FM One World Economy Cycling Economy Renewable Sources Energy Wastes Sustainably Managed Resources Bio-degradable and reusable wastes Materials Quality of Life Enhancers Slidewww.asria.org adapted from Morley FM SRI Methodologies Ethical Investment Green Investment Socially Responsible Investment Sustainable & Responsible Investment Negative screening Positive screening Engagement/Advocacy Community Investment www.asria.org Common SRI Criteria Environment Social Ethical Energy Profit Sharing Military Water Use Welfare at Work Gambling Air Pollution Equal Opportunities Pornography Wastes & Toxics Civil/Employee Actions Alcohol Transport Community & Public Policy Tobacco ISO 14000 Repressive Regimes Supply Chain Resource Productivity Genetic Engineering Public Disclosure Biodiversity Nuclear Product Impact Animal Testing www.asria.org Investors’ Interests – Japan, UK, USA Com parison of Individual Investors' Interests Ministry of the Environm ent Survey 2003 Japan USA UK Consumer health and safety Environmental issues Prevention of corruption Labour/management relations Occupational health and safety Stability of employment Equal opportunity Contribution to community Prevention of child labour Others 0 10 20 30 40 50 60 70 80 www.asria.org 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 ….updated and more precise data coming soon US$10 bn funds & church assets www.asria.org Global Growth in SRI Funds US$ BN $2,500 192 Funds $2,000 U.S. 22% CAGR $1,500 $1,000 $500 $0 1995 1997 1999 2001 U.S. US$ MM 67 Funds $6,000 $5,000 U.K.1 $4,000 49% CAGR $3,000 $2,000 $1,000 $0 1995 1997 1999 2001 U.K. 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 www.asria.org www.asria.org Domini 400 Social Index – S&P 500 Comparative Performance Since Inception in May 1990 to June 2003 www.asria.org 5 Years: July 1998 to July 2003 www.asria.org 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 330 280 230 180 130 67% 40% 80 12/93 6/94 12/94 6/95 12/95 6/96 12/96 6/97 12/97 6/98 12/98 6/99 12/99 6/00 12/00 6/01 12/01 6/02 12/02 6/03 DJSI World (in USD) DJGI World (in USD) http://www.sustainability-index.com/ www.asria.org 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.asria.org www.cdproject.net 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 www.asria.org UK Trustees Concerns 60 52% 5 - 10 Year Effect on Investments 50 42% 40 30% 30 23% 20% 20 11% 10 0 Good Corporate Governance Quality of Consumer Relations Good Employee Practices Communication Environmental and Transparency Management on Social / Ethical Issues Respect for local needs in Developing World Funds of over €7bn felt more strongly about good Corporate Governance Source: UK Social Investment Forum www.asria.org 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 vote shares on behalf of clients. They must report to their clients and the public: their policies and procedures for voting in corporate elections; And how 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. www.asria.org