Sustainable Finance Strategic Insights Media Briefing Research - PowerPoint PPT Presentation

Sustainable Finance Strategic Insights – Media Briefing Research commissioned by HSBC 2H 2016 INTERNAL

Research Methodology: key elements Corporates/ % of Total Investors Issuers (N: 553) (N: 277) (N: 276) 27.9 Europe 27.2 25.3 Americas 27.0 26.0 29.3 23.6 Asia 27.3 31.0 Middle East 18.5 17.7 19.2 100.0 TOTAL 100.0 100.0 INTERNAL Slide 2

Research Methodology: key elements Corporates/ Issuers Investors (N: 277) (N: 276) Annual Turnover Up to US$10Bn 35.0 Over US$10Bn 65.0 Sample-wide Average Turnover US$18.6Bn Funds Under Management Up to US$10Bn 37.3 Over US$10Bn 62.7 Sample-wide Average FUM US$13.9Bn INTERNAL Slide 3

Strategy: Issuers and Investors Strategy currently in place for reducing environmental impact % of Total Issuers Investors 90 80,5 80 75,5 70 58,7 60 56,8 56,9 52,8 48,7 50 40 36,0 32,1 30 26,5 20 10 0 Europe Americas Asia Middle East Total Market INTERNAL Slide 4

Disclosure: Corporate Issuers Current and future plans to disclose environmental strategy and impact % of Regional Total Currently disclose environmental strategy Currently disclose environmental impact 54,7 43,4 41,4 37,0 34,2 28,9 27,8 23,8 21,1 19,4 19,4 15,1 15,4 8,2 Europe Americas Asia Middle East Up to US$10Bn Over US$10Bn Total Market Will disclose strategy in the coming year Unsure if strategy will be disclosed in coming year Will disclose impact in the coming year 81,8 62,1 60,0 52,9 50,0 48,0 44,6 41,50 37,5 34,1 32,7 32,0 32,0 29,00 23,70 21,10 17,80 18,2 13,8 9,1 6,70 Europe Americas Asia Middle East Up to US$10Bn Over US$10Bn Total Market INTERNAL Slide 5

Disclosure: Institutional Investors Barriers to increasing climate related/low carbon investments % of Total • 65.2% of investors plan to increase low carbon investments however three quarters (73.9%) of all investors encounter barriers Other 2,0 Lack of internal understanding of asset class 16,3 Poorer yields relative to the broader market 44,6 Lack of a standardised set of sector definitions 45,0 Poor research/analysis available 63,9 Lack of credible investment opportunities available 82,2 0 10 20 30 40 50 60 70 80 90 Sums to over 100 per cent due to multiple responding allowed INTERNAL Slide 6

Disclosure: Institutional Investors Inadequate levels of current disclosure by issuers and what investors see driving increased disclosures % of Regional Total Regulation Risk of negative publicity Stakeholder pressure Best practice Inadequate levels of disclosure 100 100 80 80 60 60 40 40 20 20 0 0 Europe Americas Asia Middle East Sums to over 100 per cent due to multiple responding allowed INTERNAL Slide 7

Sustainability Investment Plans and Financing Strategy - Issuers Do you have a green/sustainable financing strategy to raise capital for green initiatives/ investments? % of Regional Total Yes No Current investment plans in place to make own business more sustainable 96,9 100 93,9 90,7 87,0 90 84,7 81,7 80,0 77,1 80 70,8 67,0 70 58,5 60 53,9 51,2 50 40 30 26,5 20,0 18,3 20 15,3 13,0 9,3 10 6,1 3,1 0 Europe Americas Asia Middle East Up to Over Total Market US$10Bn US$10Bn INTERNAL Slide 8

Impacts of the Paris Agreement - Investors Changes in holdings as a direct results of the Paris Agreement to limit climate change to two degrees Europe 2,02 Americas 2,33 Asia 2,68 Middle East 2,92 Up to US$10Bn FUM 2,19 Over US$10Bn FUM 2,59 Total 2,44 5 4 3 2 1 5 — — — 4 — — 3 — — 2 — — — 1 (No Change) (Major Change) INTERNAL Slide 9

Business Impact of 2015 Paris Agreement - Issuers Do you believe the Paris Agreement will result in loss of value for certain types of economic activity or assets in your industry? % of Regional Total 100 90 No 80 70 60 Unsure 50 40 30 Yes 20 10 0 Europe Americas Asia Middle Up to Over Total East US$10Bn US$10Bn Market INTERNAL Slide 10

Awareness and Engagement Investors are more likely to integrate ESG performance into their portfolio when they believe they play an important role in the transition to a ‘2 degrees’ economy Integration of copmanies' ESG performance as an investment factor (Very Important) 70 1,00 % of Regional Total re ESG integration 5 — — — 4 — — 3 — — 2 — — — 1 60 2,00 50 40 3,00 (Not Important) 30 20 4,00 10 0 5,00 Europe Americas Asia Middle East INTERNAL Slide 11

Awareness and Engagement ■ +/- 98%: very high interviewee participation rates ■ East & Partners’ participation rates usually sit above industry standards at +/ - 85% ■ Evidence of high level of engagement with sustainable finance as a subject ■ European issuers and investors much more aware and engaged with green finance compared to global counterparts – Are European governments more vocal in support? ■ The Middle East has to date been relatively slow to engage with sustainable finance solutions – have companies been using Islamic Finance to fund similar initiatives or are they hesitant due to a traditional reliance on fossil fuels? INTERNAL Slide 12

Awareness and Engagement ■ “We’ve been evaluating and investing in this sector for several years as part of our ‘responsible investment platform’ and feel we’re more advanced than most firms – actually well ahead of the game in our understanding of these”, Chief Investment Officer, GBP15Bn London institutional investor ■ “Need to be very careful in selecting specific investments in the sector as there’s a lot of sub- par opportunities being presented; one of the reasons we don’t actually disclose even though we have a sizeable portion of the portfolio committed”, Portfolio Head, US$28Bn, Hong Kong asset manager ■ “Very keen to get into green issuance, having trialled Shariah financing recently as a way of diversifying our debt funding; we think we have some special projects that will appeal to the markets”, CFO US$12Bn US resource company ■ “Have found it hard finding quality advice on issuing paper into the ESG sector; demand seems to be high but getting a proposition together for a first try has been challenging”, Group Treasurer, US$13Bn European manufacturer INTERNAL Slide 13

Disclaimer While East & Partners endeavours to ensure the quality of this Publication, East & Partners does not accept any responsibility for the accuracy, completeness or currency of the material included in this Publication, and will not be liable for any loss or damage arising out of any use of, or reliance on, this Publication. INTERNAL Slide 14

Sustainable Finance Strategic Insights – Media Briefing Research commissioned by HSBC 2H 2016 INTERNAL