Investor perspective; the importance of corporate water stewardship and disclosure

Transcription

1 Investor perspective; the importance of corporate water stewardship and disclosure 26 th March Page 1

2 Agenda Introduction to CDP and Boston Common Asset Management The importance of corporate water stewardship and disclosure to Boston Common Investor use of CDP water data Investor demand for more data Why CDP is the best place for disclosing corporate water data Q&A Page 2

3 What is CDP? Page 3

4 A global economic system that operates within sustainable environmental boundaries and prevents dangerous climate change. Page 4

5 How does CDP work? Investors Information Authority Authority Information Corporations Page 5

6 To eliminate the negative effects of water use and catalyse meaningful action to protect the resource - Vision, CDP s water program Page 6

7 Water investor signatories US$63 trillion in assets Page 7

8 Investors are waking up to water risk CDP investor signatories hold companies accountable for the economic, environmental and human consequences of their water use and management. CDP uses their significant voice to move companies beyond business as usual, to protect assets from current and future water-related risk. Page 8

9 Constantina Bichta, PhD Manager, ESG Research Boston Common Asset Management Page 9

10 Firm Overview Employee owned firm (offices in Boston & San Francisco) Over $2.1 billion in assets under management as of 12/31/2014 Company commitment to responsible practices: carbon neutrality, diversity, community involvement CDP investor member, CDP and UNPRI signatories Focused on financial, environmental, social and governance (ESG) integrated investing Fundamental analysis, thorough research, active ownership Long-only equity investing with a focus on the long term International, U.S. and Global equity strategies Page 10

11 Why Boston Common cares about corporate water disclosure Page 11

12 An unprecedented global crisis Our climate is changing and we are facing unprecedented global economic challenges: By 2030 the global population is expected to increase by 18.5% to 8.3 billion; As a commodity, water faces challenges on the supply and demand side; and A global shortfall of 40% is expected for water supply versus demand by Page 12

13 Water is a material issue for investors Page 13

14 Water is a business issue now Water will have more rapid and unavoidable consequences for some businesses than carbon; CDP s 2014 global water report found: 68% Global 500 companies report exposure to substantive water risks, 43% of which are anticipated to impact now or in the next 3 years; Almost one quarter (22%) report that water could limit the growth of their business; and One-third expects that constraint to be felt in the next 12 months. Page 14

15 Key concerns Water availability and scarcity poses limits to growth and license to operate questions for investors; Companies and suppliers face disruptions in their business if water runs out; and Companies run the risk of finding themselves in conflict with communities over access to water. Page 15

16 Key questions Are any of your operations or critical suppliers exposed to water risks regulatory, operational or reputational? What systems do you have in place to manage your water risks in direct operations and supply chain? How confident are you that you will have access to the quantity and quality of water required to operate now and in the future? Page 16

17 Realizing the true value of water Page 17

18 Water is a business issue - the case of VF Corp VF Corporation - Global apparel manufacturer with 29 company-owned facilities and 2,000 contracted factories in 60 countries A quarter of revenues comes from the Jeanswear business VF Corp has not participated in CDP s water questionnaire The information in this document should not be considered a recommendation to buy or sell any security. It should not be assumed that any securities discussed were or will prove to be profitable. Past performance does not guarantee future results. All investments involve risk, including the risk of losing principal. Page 18

19 Water is a business issue - the case of Veolia Water Veolia Water is the water division of Veolia Environment, an environmental solutions company focusing on water, energy and waste management services Veolia Water provides drinking water to over 100 million people The company changed its business focus to generate future growth from industrial vs. municipal clients Ensure the company maintains its commitment to promote access to water and sanitation under the new business model The information in this document should not be considered a recommendation to buy or sell any security. It should not be assumed that any securities discussed were or will prove to be profitable. Past performance does not guarantee future results. All investments involve risk, including the risk of losing principal. Page 19

20 How are investors using CDP s water data? Page 20

21 CDP s water data Large pool of companies to analyse: 1064 companies 79% increase compared to 2013 Historical comparison* Risks and Opportunities Financial impacts Water accounting Governance * Historical analysis can be challenging due to questionnaire changes Page 21

22 CDP s water data Materiality Financial impacts of water related events Cost of mitigation strategies Facilities at risk and production loss due to water risks Comparability All companies report risks and opportunities from the same categories All companies use similar units when disclosing water withdrawals, discharges, etc. Page 22

23 Water impact on valuation models Page 23

24 Investor Water Reports Page 24

25 CDP provides the most comprehensive collection of water data, including qualitative information and quantitative metrics. This data is being used by a variety of investment professionals to support investment related decisions and activities. Page 25

26 Investor use of data examples Pension funds -engagement -shareholder resolutions e.g.: CalSTRS, CPPIB Active equity managers -stock selection -proxy voting and company meetings e.g.: Legg Mason, Neuberger Berman SRI funds -screening equity universes -carbon sensitivity of portfolios e.g.: Calvert, Domini, Rockefeller Investment advisors -risk models -country/sector/company analysis e.g.: First Affirmative Passive equity managers -proxy voting -meetings with company management e.g.: BlackRock, State Street Index providers -carbon efficient equity indices -carbon efficient bond indices e.g.: Markit, Nedbank (South Africa) Broker dealers -buy/sell recommendations -sector analysis e.g.: GSSustain Data providers -ESG data within financial databases e.g.: Bloomberg Third party research -research and ESG ratings -environmental risk analysis e.g.: MSCI, Trucost Academia -studies on non-financial reporting -correlation analysis e.g.: Harvard Business School

27 Buy Side Norges Bank ($867 billion) The continued development of CDP s water program and risk related response data, together with the introduction and testing of scoring in 2014, is an important milestone in helping investors secure valuable information in their investment decision process CalSTRS ($185.5 billion) CDP Water Project survey provides a very strong layer of risk management coverage to the CalSTRS Global Equity and total fund portfolios. The companies that receive the CDP Water Project survey represent 18% of our total investment portfolio and 36% of our global equity portfolio. ICCR ($100 billion) ICCR uses CDP s water data to understand companies water-related risk exposure and water stewardship opportunities. Page 27

28 Index Providers Page 28

29 Investors demand more data Page 29

30 Boston Common demands more data Boston Common Asset Management engagement with CDP Water non-responding portfolio companies Launched campaign across its U.S. and international portfolios covering companies that had either not responded or declined to participate in CDP s 2013 water questionnaire Wrote to 20 companies in the Consumer Discretionary, Consumer Staples, Energy, Healthcare, Industrials, Information Technology, Materials and Utilities Sectors Page 30

31 Focus list Consumer Discretionary (Adidas, Honda Motor, Hyundai Motor, Lowe s, Home Depot) Consumer Staples (Costco, Kraft) Energy (ConocoPhillips, Petrobras, National Oilwell Varco, Spectra Energy) Health Care (Gilead, Novo Nordisk) Industrials (ABB, Fanuc) Information Technology (Apple, ASML Holding, Google, Visa, Tencent) The information in this document should not be considered a recommendation to buy or sell any security. It should not be assumed that any securities discussed were or will prove to be profitable. Past performance does not guarantee future results. All investments involve risk, including the risk of losing principal. Page 31

32 Nordea demands more data CDP issued its water questionnaire to 33 of the most highly water dependent companies within Nordea s emerging stars portfolio CDP provided direct support in the form of one-to-one engagement, webinars and guidance CDP analysed responses received, benchmarked these against Global 500 responses and provide this analysis, raw data and accompanying short report of recommendations back to Nordea Nordea will use CDP analysis and company responses to encourage these companies to do more to manage water risks Page 32

33 CDP continues to hear investor demand for data PGGM ($190 Billion) JP Morgan ($2.5 trillion) As the manager of about 140 billion of pension assets, water risk is affecting PGGM investments in a variety of ways. The problem however, is that the business value at water risk remains unclear because company information on water is rarely comparable and meaningful. CDP s work on improving and standardizing water risk disclosure is therefore vital in helping PGGM assess the water risk in our portfolios. Corporate disclosure of water-related risk is seriously inadequate The financial impact of water shortages on sectors and companies is unclear, because information on water use data and impacts is spotty and partial. Page 33

34 CDP is the best place for disclosing corporate water data Page 34

35 Value in CDP s water questionnaire Comprehensive assessment of a company s exposure to water risks Standardized platform for corporate water data disclosure Fosters a water stewardship framework Page 35

36 Benefits of responding Improve performance Lay groundwork for internal goals and benchmarks and enhance existing water management efforts Benchmark peers Compare your performance to industry peers and Global 500 companies Inform investors Provide relevant information to investors and demonstrate your company s ability to operate in a waterconstrained world Reduce reporting burden Report to multiple investors and customers through a standardised, centralised system Page 36

37 CDP s impact CDP has the world s largest database of corporate environmental information spanning 13 years, from more than 5,000 companies, operating in 112 countries across 91 industry subsectors. The climate change scoring methodology is held in high esteem. The CDP Leadership Index was rated the most credible sustainability rating/ranking system in the SustainAbility Rate the Raters Program. CDP has quickly established itself as the pre-eminent platform for corporate environmental disclosure. It provides a standardized, centralized system for companies to report business critical environmental information to their shareholders. CDP s scoring methodologies, leadership indices and benchmarking tools encourage organizations to compete with their peers to outperform and achieve leadership status, hence catalysing a race towards best practice. Page 37

38 Increasing our impact: Scoring With regards to publishing water results this year, CDP s proposals are as follows: Individual company water scores, from both public and private respondents, will be shared with investors via CDP s password protected investor portal. Individual companies will receive their score as well as the ability to benchmark themselves against their peers in an anonymized fashion via score feedback charts. CDP will not release a full Water Index in Instead, we will focus communications on those companies that have achieved Leadership status. Page 38

39 Key takeaways Investors understand the real value of water and that corporate water information collected by CDP s standardized reporting platform helps support value creation Inadequate reporting on water issues hinders investor ability to assess how companies may be affected by the threats or opportunities that water poses Companies that fail to respond to CDP s water program are missing an opportunity to enhance shareholder confidence by demonstrating awareness of, and resilience to, water challenges which have the potential to substantively impact financial performance and shareholder value Page 39

40 Thank you Questions? Page 40

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