Sustainable Finance Strategic Insights Media Briefing Research - - PowerPoint PPT Presentation

Sustainable Finance

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

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Slide 2

Research Methodology: key elements

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

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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

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Strategy: Issuers and Investors

Strategy currently in place for reducing environmental impact

% of Total

75,5 52,8 36,0 26,5 48,7 80,5 56,8 56,9 32,1 58,7

10 20 30 40 50 60 70 80 90 Europe Americas Asia Middle East Total Market

Issuers Investors

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Disclosure: Corporate Issuers

54,7 34,2 19,4 15,4 19,4 43,4 37,0 41,4 27,8 15,1 8,2 28,9 21,1 23,8

Europe Americas Asia Middle East Up to US$10Bn Over US$10Bn Total Market

Currently disclose environmental strategy Currently disclose environmental impact

Current and future plans to disclose environmental strategy and impact

% of Regional Total

50,0 32,0 32,0 9,1 13,8 44,6 34,1 37,5 60,0 48,0 81,8 62,1 18,2 52,9 41,50 32,7 17,80 6,70 29,00 21,10 23,70

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 INTERNAL

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Disclosure: Institutional Investors

Barriers to increasing climate related/low carbon investments

% of Total

82,2 63,9 45,0 44,6 16,3 2,0

10 20 30 40 50 60 70 80 90

Lack of credible investment opportunities available Poor research/analysis available Lack of a standardised set of sector definitions Poorer yields relative to the broader market Lack of internal understanding of asset class Other

Sums to over 100 per cent due to multiple responding allowed

• 65.2% of investors plan to increase low carbon investments however three quarters (73.9%)
• f all investors encounter barriers

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Disclosure: Institutional Investors

Inadequate levels of current disclosure by issuers and what investors see driving increased disclosures

% of Regional Total 20 40 60 80 100 20 40 60 80 100

Europe Americas Asia Middle East Regulation Risk of negative publicity Stakeholder pressure Best practice Inadequate levels of disclosure

Sums to over 100 per cent due to multiple responding allowed

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Slide 8

Sustainability Investment Plans and Financing Strategy

• Issuers

20,0 15,3 9,3 6,1 3,1 18,3 13,0 80,0 84,7 90,7 93,9 96,9 81,7 87,0 77,1 70,8 51,2 26,5 67,0 53,9 58,5

10 20 30 40 50 60 70 80 90 100 Europe Americas Asia Middle East Up to US$10Bn Over US$10Bn Total Market

Yes No Current investment plans in place to make own business more sustainable Do you have a green/sustainable financing strategy to raise capital for green initiatives/ investments?

% of Regional Total

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Slide 9

Impacts of the Paris Agreement - Investors

Changes in holdings as a direct results of the Paris Agreement to limit climate change to two degrees

2,44 2,59 2,19 2,92 2,68 2,33 2,02

1 2 3 4 5 Total Over US$10Bn FUM Up to US$10Bn FUM Middle East Asia Americas Europe 5 — — — 4 — — 3 — — 2 — — — 1 (No Change) (Major Change) INTERNAL

Slide 10

Business Impact of 2015 Paris Agreement - Issuers

10 20 30 40 50 60 70 80 90 100 Europe Americas Asia Middle East Up to US$10Bn Over US$10Bn Total Market

No Unsure Yes 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

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Slide 11

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

1,00 2,00 3,00 4,00 5,00 10 20 30 40 50 60 70

Europe Americas Asia Middle East

5 — — — 4 — — 3 — — 2 — — — 1 (Not Important) (Very Important) % of Regional Total re ESG integration Integration of copmanies' ESG performance as an investment factor

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Slide 12

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?

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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

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Slide 14

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

Sustainable Finance

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

INTERNAL