Ceres Investor Water Toolkit: A Resource for Investors by Investors on Water Integration Robert Fernandez, Breckinridge Capital Advisors Monika Freyman CFA, Ceres Siobhan Collins, Ceres January 11 th, 2018
Webinar Logistics We will leave all phone lines muted You can always type a question at any point into the chat box on the left OR raise your hand and we will call on you during the next Q&A break (unmute line by pressing *7 We will send around a recording to Hub in the days following this webinar We recommend dialing in using a phone line rather than via online Readytalk customer support: US & Canada: 800.843.9166 International: 303.209.1600 2
Investor Introduction Robert Fernandez CFA, Breckinridge Capital Advisors 3
Ceres Tour Guides for The Investor Water Toolkit Monika Freyman Siobhan Collins 3
Investor Water Hub and Contributors 40 Investors, 8 Working Groups, 600 + Hours ACTIAM Agriculture Capital BMO Global Asset Management Bradesco Securities Breckinridge Capital Advisors Brown Advisory Caisse de dépôt et placement du Québec (CDPQ) Castleton Partners Christian Brothers Investment Services (CBIS) Citi Cumberland Advisors Dana Investment Advisors Domini Impact Investments Encourage Capital Goldman Sachs Asset Management Green Century Capital Management Impax Asset Management Interfaith Center on Corporate Resp. (ICCR) KBI Global Investors Macquarie Infrastructure and Real Assets Mercy Investment Services Nephila Advisors LLC Norges Bank Investment Management Regents, University of California Ontario Teachers Pension Plan Park Foundation PGGM Investments Sustainable Insights Capital Management State Street Global Advisors The State Board of Administration of Florida TIAA Treehouse Investments LLC Tri-State Coalition for Responsible Investment Walden Asset Manager Water Asset Management 5
Thank You Other Contributors Ceres Staff, KKS Advisors, SASB, FundVotes 5
What is the Investor Water Toolkit? www.ceres.org/investorwatertoolkit A how-to guide on ESG and water Integration along every step of investor decision-making Focus on methods, not prescriptive At times aspirational Showcases peer case studies Existing tools, datasets, resources 7
Five Steps in Setting Priorities Step 1 Step 2 Step 3 Step 4 Step 5 Establish Leadership Commitment Research and Understand Water Issues Set Priorities Create Belief Statements, Investment Policy Track Progress Against KPIs 8
Spectrum of Investor Water Priorities Improve Water Risk Disclosure Manage Water Risks Mitigate Water Risks Align with Internationally Recognized Norms Promote Positive Water Impact 9
International Norms and Goals 10
Priorities Case Studies 11
Portfolio & Asset Class Analysis Benefits of Portfolio Approach: Uncover Risks Only Visible in Aggregate and Helps Prioritize Security-Level Water Risk Research Portfolio Water Footprinting and Risk Heat Mapping Water Risk in Major Investment Indices Portfolio Water Analysis Should Include Assessment of Ownership, Leverage and Risk Mitigation Opportunities Water Risks Should Also be Assessed Firm-Wide Across All Asset- Classes 25
Ceres Analysis of Four Indices Majority of Indices Exposed to Medium and Higher Risks The majority of industries are classified as medium or higher risks across these four investment indices. Ceres classification and analysis using SASB indicators. 13
Portfolio water-risk heat mapping conducted by Florida SBA using MSCI data and FactSet. Red indicates high risk, black indicates medium risk and green indicates low risk. The squares represent the size of individual holdings. 14
Portfolio Prioritization, Buy/Sell Analysis 15
Key Dimensions of Water Risks Often Revenue-Related and Immediate. Business Case or Materiality Often Related to Lost Opportunity to Operate or Grow Water Risks are Often Social License to Operate Risks Don t Overlook the Materiality of Wastewater or Water Quality Risks Understand Geographic Exposure and Where Water Risks Lie in Value- Chain by Industry Many Benefits to Aggregate Portfolio and Asset Class Analysis Including Geographic and Industry Water Risk Exposures Understand and Support The Human Right to Water and Sanitation and Sustainable Development Goal 6 (SDG 6) 8
Water Risk Dashboard Vulnerability Resilience CONVERSATIONAL Vulnerability What do you do? Where do water risks lie in your value chain? From supply chain to end of product lifecycle? Where do you do it? What are the regions of concern and what water risks are most relevant or material? Resilience What are you doing about it? What is the company s response to these risks? And how much might the company lose due to water risks? 17
Know Where Risks Lie in Industry Value Chains 18
Geography Matters River Basins Mentioned by Companies in CDP Bloomberg s BMAPs and WRI Water Risk Atlas E.g. Dow Locations overlaid on regions of high water stress 19
Inventory of Water Research Resources 20
Business Case & Materiality Best Understood using Scenario Analysis, Stress Testing 21
Private Equity and Municipal Bonds 22
Engagement Resources A Successful Water Engagement Strategy is Aligned with Firm Priorities and Goals Key Water Engagement Questions Consider Collaborative Engagement Use Databases of Shareholder Resolutions and Proxy Voting Guidelines Resources and Groups to Support Productive Engagement on Water Engagement Tools: Private Equity, Equities, Fixed Income Track Engagement Over Time Drive Systems-Level Change Coming Feb 2018: 10+ Year Shareholder Resolution Trends on Water 29
Engagement as a Journey The Importance of Benchmarking Engagement Progress 24
Case Studies 25
Engage Further w/ Ceres & The Investor Water Toolkit Next Webinar Deep-Dive: February 2018: Private Equity Water Due Diligence Introducing the Decision-Tree for Investors Q1 2018: The Importance of Investor Engagement on Water Exploring the Power and Tactics of Shareholder Engagement Get Involved: Join Ceres Investor Water Hub Participate in Expert Webinar Series Contribute a Toolkit Case Study in 2018 26
Q&A 27
For more information, visit us: www.ceres.org/investorwatertoolkit @CeresNews Monika Freyman freyman@ceres.org 32