ESM 281 Corporate Environmental Management

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ESM 281 Corporate Environmental Management
Socially Responsible Investing

• Magali Delmas

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What is Socially Responsible Investing (SRI)?

• Integrating personal values and societal concerns
  with investment decisions
• Socially Responsible Investing (SRI) is an
  investment process that considers social and
  environmental consequences of investments, both
  positive and negative, within the context of
  rigorous financial analysis.
• Social investors include individuals and
  institutions such as corporations, universities,
  hospitals, foundations, insurance companies,
  pension funds, nonprofit organizations, churches
  and synagogues.

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Content and Method

• Three core SRI strategies measured
• Social and Environmental Screening
• Shareholder Advocacy
• Community Investing

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Screening

• Inclusion or exclusion of corporate securities in
  investment portfolios based on social or
  environmental criteria. Socially concerned
  investors generally seek to own profitable
  companies with respectable employee relations,
  strong records of community involvement,
  excellent environmental impact policies and
  practices, respect for human rights around the
  world, and safe and useful products.

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Assets in SRI - 2005

• SRI strategies
• Screening 1,685 billion
• Shareholder Advocacy 703 billion
• Screening Advocacy (117 billion)
• Community Investing 20 billion
• Total 2.29 trillion

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SRI in the US - 2005
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DJSI World (December 1993 Oct. 2001, USD,
Price Index)
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SAM Corporate Sustainability Criteria
http//http//www.sam-group.com/htmle/main.cfm
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SAM- Economic
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SAM- Environment
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SAM- Social
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SAM information sources

• SAM Questionnaires Specific to each of the DJSI
  industry groups are distributed to the CEOs and
  heads of investor relations of all the companies
  in the DJSI investable stocks universe.
• http//www.sam-group.com/downloads/research/Genera
  l_Questionnaire_2004.pdf
• Company DocumentationSustainability reports,
  Environmental reports, Health and safety reports,
  Social reports, Annual financial reports etc
• Publicly available information Media, press
  releases, articles, and stakeholder commentary
  written about a company over the past year.
• Personal Contact with CompaniesEach analyst
  personally contacts individual companies to
  clarify open points arising from the analysis of
  the questionnaire and company documents.

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SAM

• Opportunities and Risks Assess the opportunities
  and risks deriving from economic, environmental
  and social dimensions of each of the eligible
  companies in the DJSI investable stocks universe.
  
• Diversifying Information Sources For each
  company, the input sources of information for the
  Corporate Sustainability Assessment consist of
  the responses to the Corporate Sustainability
  Assessment Questionnaire, submitted
  documentation, policies and reports, publicly
  available information and analyst's direct
  contact with companies.
• Verification To ensure quality and objectivity
  an external audit and internal quality assurance
  procedures, such as crosschecking of information
  sources are used to monitor and maintain the
  accuracy of the input data, assessment procedures
  and results.

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SAM Chemical Industry Benchmarking
www.sustainability-index.com Industry Overviews
Runner up
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SAM Corporate Sustainability Assessment Company
Benchmarking Report
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EcoValue21 Quantifying Eco-Value
EcoVALUE 21 analyzes 60 key variables using
over 20 data sources

• Historical Contingent Liabilities
• Superfund
• State and hazardous waste sites
• RCRA
• Toxic torts

• Financial Risk Efficiency Capacity
• Balance sheet strength
• Insurance cover adequacy

• Managerial Efficiency Capacity
• Strategic corporate governance
• capability
• Environmental management
• systems strength
• Environmental audit/accounting
• capacity
• Supply chain management
• Training capacity and intensity
• Generic environmental management protocols
• Relationships with stakeholders
• Industry-specific protocols

• Operating Risk Exposure
• Toxic emissions
• Product risk liabilities
• Hazardous waste disposal
• Waste discharges
• Supply chain management risk

EcoVALUE 21 RATING

• Eco-Efficiency and Sustainability Risk
• Energy intensity and efficiency
• Raw materials natural efficiency and
  intensity
• Product life-cycle durability/ recyclability
• Exposure to shifts in consumer values

• Strategic Profit Opportunities
• ability to profit from
• environmentally-driven industry
• and market trends

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EcoValue21
Key variables are summarized in a Scoring
Matrix. Raw scores are weighted using Innovests
proprietary algorithms, and a final score is
generated). This score is based on the companys
environmental performance relative to its
competitive set. In this case, Georgia-Pacific
received the highest score in the Forest Products
sector and Louisiana-Pacific received the lowest.
The scores are converted to alphabetical
ratings similar to the familiar ratings on
corporate bonds (from AAA - best to CCC - worst).
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EcoValue21 Quantifying Eco-Value
Analysis of 60 environmental performance
variables per firm, within an industry, using
publicly available data and interviews with
management, to evaluate each firms
Environmental risk profile, both operating
historic, Environmental management capacity
and strategy, Capacity to capitalize on
strategic environmental business opportunities.
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Conclusion

• Ideally good environmental performance indicators
  should be
• Comparable
• Credible (verification by third party)
• Include Input (organization) as well as Output
  (performance)
• Process and product (i.e. life-cycle of product)
• We are still far from this idealand you have a
  lot to contribute
• Next we will study the competitive landscape of
  SRI