Assessing Carbon Risks and Opportunities

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Assessing Carbon Risks and Opportunities Through
the Innovest Model
Innovest Uncovering Hidden Value for Strategic
Investors
New York Paris Toronto London San
Francisco Sydney Tokyo
Eric Kane, Analyst SPN Event September 18, 2007
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Presentation Outline

• Innovest Company Overview
• Driving Forces for Corporate Action
• Corporate Response to Climate Change
• Innovest Research
• Future Impacts of Carbon Regulation

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Company Overview

• Founded in 1995, Innovest Strategic Value
  Advisors is an internationally recognized
  investment research and advisory firm
  specializing in analyzing companies' performance
  on environmental, social, and strategic
  governance issues, with a particular focus on
  their impact on competitiveness, profitability,
  and share price performance.
• Core activities Specialized investment research
  and ratings
• Consulting
• Sub-advisory asset management services
• Screening

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Our Approach

• Our research focuses on extra-financial
  drivers of investment risk and return, including
  companies performance on environmental, social,
  and strategic governance (ESG) issues.
• Our analysis is designed to assist our clients in
  constructing and managing portfolios that
  out-perform the market. We do this by tracking
  company performance and strategic positioning on
  factors that are not captured or explained by the
  traditional, accounting-driven securities
  analysis.
• Many clients use Innovests environmental,
  social, and governance (ESG) research and
  subsequent ratings to supplement their
  traditional financial assessment of a company,
  resulting in a well-rounded and comprehensive
  appraisal of a companys risk and opportunity
  profile relative to sector peers.
• Despite our growth, we believe that our data and
  research remains relatively unmined - open to
  huge asset management and investment product
  opportunities with few competitors

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Driving Forces for Corporate Action

• Investor and Stakeholder Action
• Carbon Disclosure Project (CDP) 5 gains the
  support of 315 investors with assets of 41
  trillion, a ten-fold increase from CDP 1
• 42 global warming shareholder resolutions were
  filed with US companies in the 2007 proxy season
• Regulatory Developments
• The 110th Congress has made climate change a
  top-tier issue
• States continue to develop renewable portfolio
  standards, and regional greenhouse reduction
  programs such as Regional Greenhouse Gas
  Initiative and Western Regional Climate Action
  Initiative
• Massachusetts v EPA decision requires the EPA to
  regulate greenhouse gas emissions
• Shifting Markets
• In 2006, global investments in sustainable energy
  reached USD 70.9 billion, an increase of 43 from
  2005
• Market revenues for the four benchmark
  technologies solar photovoltaics, wind power,
  biofuels, and fuel cells are forecasted to
  increase to USD 226 billion by 2016
• Installed wind power capacity increased by 32 in
  2006, while installed solar capacity increased by
  19 between 2005 and 2006

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Corporate Response to Climate Change

• Voluntary Greenhouse Gas Reductions
• 76 (n286) of FT500 companies that responded to
  CDP reported implementing a GHG emissions
  reduction initiative compared to 48 in CDP4
• New Products, Technologies, and Services
• 82 (n315) of FT500 companies that responded to
  CDP consider climate change to represent
  strategic opportunities for new and existing
  products and services
• Support for Climate Change Regulations
• United States Climate Action Partnership (US
  CAP), a coalition of companies from across
  sectors that have announced their collective
  support for federal legislation on climate change

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Innovest Carbon Research

• Carbon Disclosure Project
• Authors of CDP1-CDP5 FT500 reports
• ISVA Ratings
• ISVA ratings for over 2,200 companies take into
  account carbon performance
• Carbon Beta Platform
• JENI Carbon Beta Index
• Carbon Beta scores for 2,200 companies and over
  800 with Carbon Beta Profiles

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Carbon Beta Platform

• Carbon Management
• Carbon Risk Exposure
• Strategic Carbon Opportunities
• Improvement Trend
• Carbon Emissions Data
• Carbon Intensity

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Carbon Beta Profile Example
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Carbon Beta Profile Snapshot
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Performance of Top Carbon Beta Companies
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Future Impacts of Carbon Regulation

• Material Carbon Costs
• Product and Service Differentiation
• Additional Exposure to Risks and Opportunities