spotlight on impact investing...bakeys converts wasted heat into electricity during cement...

Discla imer: This mater ia l that fo llows is a presentat ion of general background informat ion about the Firm’s act iv it ies current at the date of the presentat ion. It is informat ion given in summary form anddoes not purport to be complete. It is not to be rel ied upon as advice to investors or potent ia l investors and does not take into account the investment object ives, f inancial s ituat ion or needs of anypart icular investor. This mater ia l should be considered with professional advice when decid ing if an investment is appropr iate. UOB Asset Management accepts no l iabil ity whatsoever with respect to theuse of this document or its content.

Spotlight on Impact Investing

Victor WongHead of ASEAN Equities UOBAM

17 January 2019

ESG

GIIN

RSPO

UNSDGASFI

PRITCFDCDP

IPCC

NDPEUNEP

MDGVCS

IMPACT INVESTING

Evolution of Impact Investing

1960-1990s

Emergence of Early Ethical/Socially Responsible Investing Model

Investors and fund managers begin to incorporate investment screening based on individual criteria, including avoidance of Sin stocks

2010s

Further Development and Emergence of Impact Investing

Development of investment frameworks and increase in funds targeting impact investments

Source: Goldman Sachs Asset Management

1990s-2000s

Development of Responsible Investing & ESG Models

Launch of the UN Principles for Responsible Investment (UNPRI), focusing on ESG incorporation and active ownership

4

1960-1990s

Emergence of Early Ethical/Socially Responsible Investing Model

Investors and fund managers begin to incorporate investment screening based on individual criteria, including avoidance of Sin stocks

Source: Goldman Sachs Asset Management, Wellington Management

Screening Criteria – Exclusion of “Sin” Stocks

No tobacco No gaming No alcohol


5

Source: Goldman Sachs Asset Management, Principles for Responsible Investment

1990s-2000s

Development of Responsible Investing & ESG Models

Launch of the UN Principles for Responsible Investment (UNPRI), focusing on ESG incorporation and active ownership

There were 1,961 signatoriesas at end April 2018.


6

2010s

Further Development and Emergence of Impact Investing

Development of investment frameworks and increase in funds targeting impact investments

Source: Goldman Sachs Asset Management, Net Impact

Impact Investing

Ethical/Socially Responsible

Investing (SRI)

Sustainable/Responsible

InvestingThematic Investing

Exclusion basis

E.g. UN Sustainable Development Goals

Narrower definition

Wider definition

Incorporating ESG


7

20071972

Impact of ESG

Tobacco advertising was common in motorsport and featured on race cars

Due to tobacco livery ban by the 2005 European Union Tobacco Advertising

Directive, a “bar code” was used instead of Marlboro logo

Source: BMJ Publishing Group Limited

Ferrari F1 Livery

8

20071972

Impact of ESG




Source: BMJ Publishing Group Limited

Ferrari F1 Livery

9

2007 20181972

Replaced with “Mission Winnow”, a global initiative by Philip Morris and

Ferrari to enable a better future




Source: BMJ Publishing Group Limited, Ferrari

Impact of ESGFerrari F1 Livery

10

Source: Mission Winnow, Ferrari

“Mission Winnow is the showcase of the transformation to develop

less harmful alternatives to cigarettes. It is the story of the relentless, passionate pursuit of excellence by winnowing good from bad, truth from fiction to make decisions that deliver

better.”

– Philip Morris

Impact of ESGFerrari F1 Livery

11

Impact of ESGEndangered Orangutans and Palm Oil Industry

12

Pressure has been made on brandssuch as Nestlé, Unilever andMondelēz to stop using dirty palm oilin their products by 2020.

Source: Supply Chain Dive, Market Watch, Independent


13

On 25 March 2016, IOI was suspended by RSPO for allegedly illegally deforesting 11,750 ha. The stock price fell 11% to a low on 13 May 2016, wiping out

MYR 2.1 billion in market capitalization.Source: ValueWalk


14

Shar

e Pr

ice

(MYR

)4.50

4.25

4

3.75

3.50

Source: Principles for Responsible Investment, Bloomberg

US$70 bn

US$36 bn

US$100 bn

US$20 bn

US$6 bn

Estimated market cap. losses

Impact of ESG

15

More than a quarter of US$88 trillion AUM globally is invested

according to ESG principles

Source: McKinsey & Co.

17% growth

rate

Percentage of region’s assets invested according to ESG principles

Europe 52.6%

Australia and New Zealand Over 50%

Canada 37.8%

United States 21.6%

Japan 3.4%

Asia ex. Japan Less than 1%

Impact Investing Business Opportunities

16

>US$22 trillion

Institutional Investors Retail Investors High Net Worth Individuals

Source: Principles for Responsible Investment, TriLinC Global, UBS

Growing demand of institutions placing out ESG-related mandates

86%

79%

67%

Millennials*

GenX

Baby Boomers

*Millennials are born between 1983-2000, GenX1968-1982, Baby boomers 1949-1967

PRI asset owner signatories actively include ESG criteria in their RfPs

Percent who feel sustainable investing is more important now than five years ago

Growing demand from millennials for products that offer social and financial returns

Growing demand from high net worth individuals for impact investments

More than 60%

Percent who see driving social impact investments as

“extremely or very important”


17

Source: Broadridge Insight

Follow the Leader

Target pension funds and SWFs

Insurers emerging as prospects

Look beyond equities

Private banks up sustainability game

Largest investors tend to be early adopters. In Asia – GPIF in Japan, GPF in Thailand, KWAP in Malaysia, KIC in Korea and Australia Future Fund.

These are the key investors who have been most active in outsourcing and vocal in their pro-ESG investing philosophy. They tend to have longer-term horizons and large asset bases, facilitating the creation of dedicated ESG teams.

Development in sustainable and ESG-themed products will help spur the adoption of ESG investments by insurers as part of risk management.

Although bulk of ESG assets sit in equities, there is growing demand in other asset classes – fixed income (e.g. impact bonds), multi-asset and alternatives.

Most global private banks have expanded their ESG teams to target the growing demand from millennials for ESG considerations to be integrated into their portfolio. It is also emerging as a criterion for picking wealth advisors.


18


According to a study conducted by EY, about 75% of the global workforce will be comprised of millennials by 2025.

UBS reckons that US$7 trillion globally will pass on to millennials between 2017 to 2020.

A survey by BlackRock in 2018 found that 67% of millennials say they want investments to reflect their social and environmental values.

Source: Ernst & Young, UBS, BlackRock19

ESG events making the headlines more frequently

20

Dead Sea shrinkage

Source: NASA, BBC, Wikipedia

20111989

Dead Sea

West Bank

Jordan

Israel

Evaporation basins

1972

ESG events making the headlines more frequentlyDead Sea shrinkage

21

Year Surface (km2)

1930 1,050

1980 680

1992 675

1997 670

2004 662

2010 655

2016 605

Source: Meteorological Service Singapore

2012 2017

Average Mean Temperature

ESG events making the headlines more frequentlyWarmer temperatures in Singapore

22

Source: Guardian

ESG events making the headlines more frequentlyImpact of Climate Change

23

Temperature for cherry trees to bloom

The flowers are forming during

summerResting time during late

autumnAwakening

Flowers start to get ready for

blooming

Flowers bloom during spring

Cherry trees tend to bloom at a warmer temperature. During summer,even though the temperature is warm, the leaves that secretehormones prevent flowering. However, due to the typhoons that causedthe leaves to fall, the trees ended up blooming early.

18 Oct 2018

Source: MSCI

Does ESG outperform?

24

CUMULATIVE INDEX PERFORMANCE – GROSS RETURNS (USD) (SEP 2007 – DEC 2018) ANNUAL PERFORMANCE (%)

Source: UN SDG, GIIN

UOBAM’s Impact Investing Strategy

• Our impact investing strategy revolves around the United Nations Sustainable Development Goals (SDGs)

• The SDGs are part of the UN 2030 Agenda for Sustainable Development, to balance the three dimensions of sustainable development: economic, social and environmental

• Strategy is to identify companies that can contribute to the SDGs; measure their impact; score and rank companies; stock selection done in tandem with fundamental bottom up research

25

THE 17 SDGs

UOBAM’s Impact Investing Strategy

Source: UN SDG26

Conversion of waste energy into other useful forms Alternative resources Innovative

sustainable products

UOBAM’s Impact Investing StrategyInvestment Themes

27

Siam Cement Group TMB Co. Bakeys

Converts wasted heat into electricity during cement production; saves US$49 million annually in energy use

Paper made from limestone to reduce water usage and save trees

Edible cutlery made to reduce plastic usage

UOBAM’s Impact Investing StrategyInvestment Themes

28

Conversion of waste energy into other useful forms Alternative resources Innovative

sustainable products

UOBAM’s ESG Initiatives

UOBAM is the investmentadvisor for Fukoku CapitalManagement, a leadingJapanese insurance investmentmanager.

ESG Integration UOBAM (Thailand) Good Corporate Governance

Strategy

ESG Mandate for Asia ex Japan Equities

29

Asia Equities

Integrated ESG evaluation intoInvestment Process since 2017.

Global Fixed Income

Incorporated ESG screening forAsian and Singapore credits,and also US Investment Gradecorporate credits.

UOBAM (Thailand) launched theCorporate Good GovernanceRetirement Strategy in 2016.

The strategy invests in listedcompanies in Thailand with soundcorporate governance practicesand sustainable earnings as well asgrowth potential.

UOB Group’s ESG Initiatives

30UOB winning the Best Inaugural Sustainability Report (Mainboard) Award at The Singapore

Sustainability Reporting Awards 2017 organised by the Singapore Institute of Directors.

UOB Group’s ESG Initiatives

Dedicated ESG Committee

Asia Impact Investment Fund

UOBVM collaborated withCredit Suisse to launch AsiaImpact Investment Fund (AIIF),aimed to scale companies thatoffer sustainable and profitablesolutions to social andenvironmental challenges.

31

Best Inaugural Sustainability Report

UOB winning the Best InauguralSustainability Report Award at TheSingapore Sustainability ReportingAwards 2017.

spotlight on impact investing...bakeys converts wasted heat into electricity during cement...

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