Expect the unexpected

Transcription

1 Expect the unexpected Building business value for Copper sector in a changing world March 2013

2 Global sustainability megaforces Awareness and comprehension is vital New forces are shaping a new scenario for business 2

3 Global sustainability megaforces Megaforce impact to increase over the next 20 years Business-as-usual global projections to 2035 Energy-related CO 2 emissions Climate Change 20% Primary energy demand Energy & Fuel 30% Raw materials extraction Material Resources 55% Demand for water withdrawal Water 53% Total population Population 20% Middle class purchasing power Wealth 172% Urban population Urbanization 44% Aggregate food demand Food 50% Human ecological footprint Ecosystems 13% Amazon forest loss Deforestation 55% Source: IEA, SERI, Water Resources Group, UN, OECD, FAO, Global Footprint Network, WWF. 3

4 Global sustainability megaforces Sustainability megaforces are connected outcomes are unpredictable Problems cannot be solved with same approaches Climate Change s o o s Water Security o s o s o s Food Security s Human Security s s s s s o Ecosystem Security o Energy Security o Forest Security Key: Same direction Opposite direction. Source: KPMG (2012). Expect the Unexpected: Building business value in a changing world. Businesses need to understand the causes of what affects their operations, not just the symptoms 4

5 But today I have not come to talk about justice, ethics or the need to conserve biodiversity value at risk 5

6 Global sustainability megaforces Awareness and comprehension of each is vital transformation of emerging economies value at risk 6

7 Global sustainability megaforces Top Copper production by country 7

8 Global sustainability megaforces Awareness and comprehension of each is vital transformation of emerging economies Ranking by GDP CHILE CHINA PERU USA AUSTRALIA RUSIA ZAMBIA CANADA INDONESIA MEXICO CONGO Source IMF 8

9 Global sustainability megaforces Corruption index by Transparency International Map of corruption perception. Transparency International

10 Global sustainability megaforces Human development Index by United Nations Very high High Medium Low No information 10

11 Implications for business Average external environmental costs 41 US cents per US$ of earnings According to TrueCost 64% EBITDA does not include environmental externalities that mining sector produces US$ in billions % % % 43% % 224% Airlines Automobiles Beverages Chemicals Electricity Food Producers 71% Industrial Metals 26 59% Marine Transportation 134 Mining 64% 23% Oil & Gas Producers % Telecom & Internet 2010 EBITDA 2010 total environment cost as a % of EBITDA Source: Trucost

12 Implications for business Automobiles, chemicals and electricity closest to decoupling economic growth from environmental impact Environmental intensity 120% percentage improvement in environmental intensity Automobiles 100% 80% 60% Chemicals 40% 20% (40)% (20)% 0% 20% 40% 60% 80% 100% 120% 140% 160% (20)% (40)% (60)% (80)% Electricity Industrial Metals Oil & Gas Producers Airlines Telecom & Internet Beverages Marine Transportation Food Producers Mining growth in environmental costs Key: Size of circle depicts the sector s total external environmental costs in 2010 in USD. Source: Trucost

13 Global sustainability megaforces Awareness and comprehension of each is vital 13

14 Implications for business Big as countries Ranking by GDP BHP Billiton ltd ,00 Rio Tinto ltd ,00 Xstrata plc ,00 Anglo American plc ,00 Freeport-McMoran Corp ,00 62 Ecuador 68 Croatia 86 Kenya 88 Panama 100 El Salvador Teck Resources Limited ,00 Eurasian Natural Resources Corp ,00 Southern Copper Corp ,00 Antofagasta plc 6.076,00 First Quantum Minerals Ltd ,00 14

15 Why Sustainability is in the business agenda now? Environment Governance Social Biodiversity Corruption Human rights Challenges Water management Sanitation Climate change Forest and land management Resources scarcity management Waste and recycling Corporate governance Lobbying Incentives Transparency and accountability Long and short term management Legacy Legitimacy Security forces Licence to operate Reputation management Social impacts Business 4Poor How to measure philanthropy Biobanking Universal jurisdiction Ruggie s UN report Looking for trust and licence to operate Understanding the role of business in the society

16 Trust is one of the most valuable asset Society New owners of intangible assets Define success Targets Reporting Assurance Understand signals Dialogue Inventories Diagnosis Company Integrate into strategy Strategic planning Training Specific plans Sustainability scorecards Outsourcing Turn understanding into opportunity Vision Risk assessments Opportunity valuations Scenario planning

17 Ingredients of TRUST Price/Book value BHP BILLITON FREEPORT-MCMORAN RIO TINTO ANGLOAMERICAN BLOOMBERG

18 Ingredients of TRUST Edelman Trust barometer

19 If this were true, investors would prefer to invest in sustainable companies.

20 Ingredients of TRUST Beyond a nice to have approach Wharton s study provides direct empirical evidence in support of instrumental stakeholder theory s argument that increasing cooperation and reducing conflict with stakeholders enhances the financial valuation of a firm holding constant the objective valuation of the physical assets under its control. 26 gold mines owned by 19 publicly traded firms over the period ,000 stakeholder events from media reports to develop an index of the degree of stakeholder cooperation or conflict for these mines. By incorporating this index in a market capitalization analysis, they reduce the discount placed by financial markets on the net present value of the gold controlled by these firms from 72 to 9 percent. 20

21 Ingredients of TRUST Beyond a nice to have approach Source: RobecoSAM 21

22 Ingredients of TRUST Beyond a nice to have approach Source: RobecoSAM 22

23 Ingredients of TRUST Beyond a nice to have approach Source: Financial Times

24 Ingredients of TRUST Beyond a nice to have approach. YTD Most profitable Sustainable Funds Source: Morningstar

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26 Institutional investors include new ESG criteria Client challenges What criteria are the investors using? How important in their valuation of the company are these criteria? How to strengthen them? Gestora Nivel de compromiso ESG 1 Aberdeen 1 2 AEGON 1 3 Allianz 2 4 Amundi 1 5 APG 1 6 Avi va 1 7 AXA 2 8 Baillie Gifford 1 9 BBVA Gestión, S.A., S.G.I.I.C BlackRock 1 11 BNP Paribas 1 12 BNY Mellon 3 13 Caisse de Depot et Placement du Quebec 2 14 CCR 2 15 CPP 1 16 Credit Suisse 1 17 Delaware 1 18 Deutsche Bank 1 19 Dexia 2 20 DIAM 3 21 Dimensional 3 22 F&C 2 23 Federal Finance Gestion 2 24 Federis Gestion d'actifs 2 25 Fonditel Gestión S.G.I.I.C., S.A.U Fortis 2 27 Generali 1 28 Geode 3 29 Goldman Sachs Group 3 30 Henderson 1 31 Hermes 1 32 HSBC 1 33 ING 1 34 Insight 3 35 Inter Expansion S.A Irish Life 3 37 J.P Morga n 3 38 KBC 1 39 La Banque Postal Asset Management 2 Política Global ESG Integra ESG en Política de voto y/o Gobierno Coporativo Fondos ESG Source: KPMG, UNPRI EUROSIF mayores inversores

27 Building real trust REAL FOR OTHERS Real /Fake Fake/Real REAL FOR US

28 From compliance to innovation Developing credible improvements DIALOGUES TO IMPROVE TRANSPARENCY SETTING THE EXPECTATIONS CLEAR COMMITMENTS 1. Transparency 2. Corruption & bribery 3. Risk and crisis management 4. Biodiversity protection 5. Climate Strategy 6. Environmental Policy/Management System 7. Mineral Waste Management 8. Operational Eco-Efficiency 9. Mine Closure 10. Occupational Health&Safety 11. Security forces 12. Labor practices 13. Social Impacts on Communities 14. Stakeholder Engagement 15. Standards for Suppliers MAKING THE DIFFERENCE DUE DILIGENCE Assurance Incentives Goals Performance indicators Management system Policy - position Commitments and performance in material country. Commitments and performance on material issues. Crisis management Openness and continuous dialogue Special reports issue/country External report Governance supervision HOW MATERIAL ARE THIS ISSUES? INTEGRATE FROM SHOW TO SHARE 28

29 From compliance to innovation lessons learned Sustainability to add real value to your business needs: Compliance, innovation and dialogue. And these could not be in the same department. Risk asessment and strategy real integration > Corporate government. Be part of the incentives of the executives. Professsionals with technical jugtment and independence. and with professional carreer within the company. Resources, not extra cost. DIALOGUES TO IMPROVE TRANSPARENCY SETTING THE EXPECTATIONS CLEAR COMMITMENTS MAKING THE DIFFERENCE DUE DILIGENCE Commitments and performance in material country. Commitments and performance on material issues. 1. Transparency 2. Corruption & bribery 3. Risk and crisis management 4. Biodiversity protection 5. Climate Strategy 6. Environmental Policy/Management with KPMG System International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any 7. Mineral Waste Management Assurance Incentives Goals Crisis management Openness and continuous dialogue 29

30 Global sustainability megaforces Future scenarios Three tough questions Brown world Growth Sustainable world Constraint How is our organisation contributing to each of these possible worlds? Are our current strategies and Business-as-usual Growth ambition Ongoing erosion of natural systems Unchecked megaforces Regulation and reform Resource substitution Efficiency Conservation Protection structures robust enough to deal with these futures? What capacity do we need for Red world Collapse Blue world Transformation learning, risk management and innovation to navigate these futures effectively? COMPLIANCE Breakdown Conflict Crises Corruption Suffering Disorder Weak institutions Revolutionary transition Innovation Resilience Harmony with natural systems Social justice Community INNOVATION 30

31 José Luis Blasco Partner Head of CC&S for EMA Region 2013 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.