The document discusses Environmental, Social, and Governance (ESG) criteria. Over the past five years, the financial industry has adopted ESG as the standard terminology to evaluate extra-financial data that investors increasingly consider during comprehensive investment reviews. ESG criteria codify what companies disclose across environmental, social, and governance issues. Socially Responsible Investing (SRI) refers to how investors analyze companies based on their ESG disclosures and Corporate Social Responsibility (CSR) practices.
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Environmental social governance (esg)
1. ESG
Environmental
Social and
Governance
Peter Schellinck www.schellter.eu
2. Environmental, Social and Governance (ESG)
Criteria
Over the past five years, the financial
industry has adopted the acronym ESG
(Environmental, Social and Governance) as
the standard terminology for the group of
extra-financial data that investors increasing
evaluate as part of their comprehensive
investment review.
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3. CSR / ESG / SRI
Corporate Social Responsibility (CSR)
Explains how the company behaves
Environmental, Social and Governance (ESG)
criteria
Codify what the company discloses /
reports
Socially Responsible Investing (SRI)
How investors analyze companies
according to their CSR practices and ESG
disclosures
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4. How should this information be organized?
1. Financial
Annual Report
Audit
Bond Issues
Cash Flow
Crop Insurance
Dividend
Fair Trade
Financial Statement
Market Share
Share Price
Transportation
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5. How should this information be organized?
2. Environmental
Climate change
Deforestation
Environmental
Report
Fruit vs. Juice
Location of raw materials
Groves
Organic Certification
Pesticides
Sustainability
Water Use
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6. How should this information be organized?
3. Social 4. Governance
Health & Safety Annual General
Human Rights Meeting
Labor Standards Board Members
Management
Management
Discussion and
Analysis
Supply Chain
Management
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7. How should this information be organized?
Extra - Financial
Financial
Environmental Social Governance
Annual Report Climate change
Audit Deforestation Annual General
Bond Issues Environmental Meeting
Cash Flow Report Board Members
Crop Insurance Fruit vs. Juice Health & Safety Management
Dividend Location Raw Materials Human Rights Management
Fair Trade Groves Labor Standards Discussion and
Financial Statement Organic Certification Analysis
Market Share Pesticides Supply Chain
Share Price Sustainability Management
Transportation Water Use
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8. Structure of Underlying Model
KPIs
Non-Financials
3 Areas of E S G
Environmental Social Governance
Performance
Emissions, Human Rights Compliance
Effluentes
Resources Societal Sustainability of
11 Categories of Performance Success Factors
Measurement Waste Training &
Qualification
Environmental Product &
Compatibility Health/Safety
Employee
Management
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9. The need: objective, transparent and comparable data
Standardised units across companies
- Consistent approach to the data
Timely, on-going updates
- Relevant, current information must be reported
Information broken into smaller units to measure
performance
- Policies and outcomes
Common starting point for customised uses of the
data
Have access to all sides of the data
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10. Relevancy of data
Relevance differs greatly across sectors
ESG reports are for various stakeholders
Marketing for customers, employees, general public
Responding to problems and pressure
A reflection of leadership and management quality
Necessity to cut through noise and stories
Policies must be broken down, and the extent of
implementation
must be measured
Objective variables must be carefully considered
Contradicting controversies must be incorporated
Biases of the data must be considered: market cap
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11. Trends in ESG risk assessments
Research providers and rating agencies
Sector reviews
Corporate compliance assessments
Risk monitoring getting started
Brokerage research
Picking themes to uncover value & risk for long-term
performance
Convergence between ESG analysis and financial
analysis
Getting underway where ESG factors have an impact on
valuation
Progress in information and tools available
ESG – proxy for quality management
Avoid systematic risk
Identify opportunity
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12. Investment priorities matrix” ®
Businesses with a For-profit
Businesses
single bottom line social enterprises Nonprofit
with a single
that practice social enterprises
bottom line (pure plays
corporate social (chameleons)
(financial) and migrators)
responsibility
Traditional
investors FIRST SECOND THIRD NOT A
seeking PRIORITY PRIORITY PRIORITY PRIORITY
financial returns
Socially
responsible
investors NOT A FIRST SECOND THIRD
seeking both social PRIORITY PRIORITY PRIORITY PRIORITY
and financial
returns
Social investors
seeking both NOT A THIRD FIRST SECOND
social and financial PRIORITY PRIORITY PRIORITY PRIORITY
returns
Social investors
primarily NOT A THIRD SECOND FIRST
seeking social PRIORITY PRIORITY PRIORITY PRIORITY
impact
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