to Move Markets European University at St Petersburg Dr Allen L White 30 September 2013 Peter Bakker President WBCSD former CEO TNT 2 I am a capitalistThe mistake currently lies in only expecting and managing a return on financial capital Capitalism requires ID: 744050
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Slide1
Harnessing Sustainability Ratings
to Move MarketsEuropean University at St. PetersburgDr. Allen L. White 30 September 2013Slide2
Peter
Bakker
President
, WBCSD; former CEO, TNT2“I am a capitalist…The mistake currently lies in only expecting (and managing) a return on financial capital. Capitalism requires a new operating system and needs to be re-booted so that we expect and manage the return on financial, natural and social capital.
Business as usual is not an option for a future-proofed economy in which nine billion people live well with the limits of the planet by mid-century.”Slide3
3Slide4
About GISR
Founders
: The Global Initiative for Sustainability Ratings (GISR)
is a joint project of Ceres and Tellus Institute — partners that founded the Global Reporting Initiative (GRI)Vision: Redefine the definition and measurement of
company value creation that incorporates all forms of capital: human, intellectual, natural, social, along side financial
Mission: Create a world class corporate sustainability ratings standard as an instrument for embedding
sustainability
into company practices and
financial
markets
worldwide
Strategy
:
Steward a m
ulti-stakeholder and global process comprising:
investment managers, pension funds, companies, NGOs, accountancies, academics,
governments and raters
Launch
:
June 2011
Role
: A standard setter. GISR will not rate companies; its standard will be applied by existing and future ratings organizations
4Slide5
20 Years of Sustainability MetricsMore voluminous
GISR data base: 1500+ indicators/500+ issuesSASB: 900+ indicators; 500+ uniqueGRI: G4: 29 issues/149 “disclosures”; sector research: 2800 indicators More applicationsSRI
Self AssessmentStock ExchangesRatings: Sustainability and Credit…………………. More material? More impactful?
5Slide6
Sustainability Ratings:
What’s
the
Problem?Too many indicatorsToo many issuesToo many surveys
Too much volatilityToo little transparency
>>>Curbs utility, uptake, integration, and
impact
Opportunity—grow the supply and credibility of quantity of quality ratings; mainstream sustainability,
enhance company practices, move
financial
markets
…
6Slide7
Value
Proposition for the GISR Standard
Companies
Survey Fatigue TransparencyConvergence InvestorsClarity
RelevanceRaters
Credibility Market Expansion
7Slide8
Sustainability Information Value Chain8Slide9
Standards Ecosystem
9Slide10
Selected GISR Partners
10
Companies
Investors
Metanoia
Fund
NGOs & Foundations
SponsorsSlide11
11
Building the Standard:
Content and Accreditation Levels Slide12
Component 1: Principles
12
Process
Assurability
Continuous Improvement
Impartiality
Inclusiveness
Transparency
Content
Balance
Comparability
Comprehensiveness
Sustainability Context
Long-Term Horizon
Materiality
Value Chain
Exposure Draft>>>Beta>>>Version 1.0: November 2013Slide13
Example 1: A Balancing Act--
Transparency
13
Companies:
Essential for performance improvement
Raters:
IP is part of the business model
Investors:
Essential for informed choice and application
Thus, transparency of what, to whom and in what form?
Slide14
Example 2: A Balancing Act – Comprehensiveness and Sustainability Context
14
X
1
Baseline
year
Peer
comparison
Performance
Today
2
Company
Goal
3
START LINE
SUSTAINABILITY CONTEXT
- FINISH LINE
4Slide15
Credit Ratings:The Next Sustainability Frontier
Sustainability ratings rate companiesCredit ratings rate debt issuesCompanies, public and private, float issues
>>>>>Credit markets=$10’s trillions/year15Slide16
State of Play – Credit Ratings
Number of Outstanding Credit Ratings by Category of Credit Rating
NRSRO
Financial InstitutionsInsurance CompaniesCorporate IssuersAsset-Backed Securities
Government Securities
Total RatingsAM Best
N/R
4,826
1,910
56
N/R
6,792
DBRS
21,695
151
4,037
9,889
15,798
51,570
EJR
101
519621391,136Fitch54,5864,010
14,427
58,315
217,198
348,536
JCR
163
27
478
N/R
54
722
KBRA
16,127
52
1,001
40
58
17,278
Moody’s
56,486
3,953
30,439
93,913
814,087
998,878
Morningstar
N/R
N/R
N/R
16,070
N/R
16,070
S&P
60,700
7,800
45,400
108,400
948,300
1,170,600
Total
209,858
20,870
98,654
286,696
1,995,504
2,611,58216
Source: NRSRO Annual Certifications, 2011Slide17
Sustainability: Embedded in Business Risk Profile
S&P’s Corporate Ratings Methodology: Business and Financial Risk Matrix
Financial Risk Profile
Business Risk ProfileMinimalModestIntermediate
SignificantAggressive
Highly LeveragedExcellent
AAA/AA+
AA
A
A-
BBB
--
Strong
AA
A
A-
BBB
BB
BB-
Satisfactory
A-
BBB+BBBBB+BB-B+Fair--BBB-
BB+
BB
BB-
B
Weak
--
--
BB
BB-
B+
B-
Vulnerable
--
--
--
B+
B
B- or below
17Slide18
Ratings 2020: Companies and Credit
18
Ratings
2013
START LINE
RATINGS 2020 FINISH
LINE
Ratings
2020
Financial
Ratings
Sustain.
Ratings
Integrated
RatingsSlide19
Sustainability Ratings
2020
19
RATINGS TODAY
RATINGS 2020
Voluminous surveys burden companies; underinvestment in sustainability by investors.
Common survey for core information and
accompanying supplements.
R
atings harmonization
without over-prescriptiveness.
Lack of
transparency impairs
application to performance improvement and investor uptake
Users’ Guide to Sustainability Ratings and GISR Principles enhance transparency, utility and value of ratings for financial
markets
Lack of
materiality
leads
to information
overloadGISR standard drives convergence toward
material
issues and indicators
Financial markets minimally integrate sustainability information
GISR builds ratings credibility and spurs market expansion for high quality
ratings
Slide20
An Invitation
20
Support GISR’s Standard Development Activities
Technical Committee, Expert Advisor Committee, feedback on public exposure and beta versions:
www.ratesustainability.org
Join the Supporting Stakeholder
Program
A growing multi-stakeholder network of supporters
http://ratesustainability.org/get-involved/become-a-supporting-stakeholder/
Contact GISR to Explore Opportunities for Collaboration
:
http://ratesustainability.org/contact-gisr/
Slide21
Thank you
For more information:
www.ratesustainability.org
Mark.tulay@ratesustainability.org
21