Marcus pratsch

Titel der Präsentation 18.11.2010 Seite 1

Nachhaltigkeitsgütesiegel des DZ BANK Research Honouring the value of ESG Research

for the professional investment community

(TBLI Conference Europe 2010)

Marcus Pratsch, Head of Institutional Sustainable Investment Research, DZ BANK AG


Not too long ago…


… ESG researchers were considered as aliens among

the analysts.

Source: Universal Pictures


The past

Sustainability criteria were largely ignored in equity

analysis.

Investors paid little attention to sustainable share

investment, considering it as a niche sector and an

investment vehicle that would generally be

associated with a reduced return.


BUT: The situation has changed

Sustainability is becoming ever more a strategic

competitive factor for corporations operating on a

global scale.

“Non-financial” capital plays an ever more key role in

the success of a company.

Investors with a long term-perspective will hardly be

able to ignore the issue of sustainability.


The market for sustainable investment products is

significantly growing

Source: Eurosif (2010)

0

1000

2000

3000

4000

5000

6000

2002 (EU-8) 2005 (EU-9) 2007 (EU-13) 2009 (EU-14)

Billio

n €

Core SRI Broad SRI


The performance excuse does not prove true in the long termGlobal Challenges Index vs. MSCI World

40,0

50,0

60,0

70,0

80,0

90,0

100,0

110,0

Sep

07

No

v 0

7

Jan

08

Mrz

08

Mai

08

Ju

l 08

Sep

08

No

v 0

8

Jan

09

Mrz

09

Mai

09

Ju

l 09

Sep

09

No

v 0

9

Jan

10

Mrz

10

Mai

10

Ju

l 10

Sep

10

Ind

exie

rt i

n E

uro

GCI MSCI World


The growing importance of ESG research

The inclusion of sustainability factors in the evaluation

of companies is a qualitative enhancement of the

analysis process.

It helps to provide information to investors in their bid

to allocate capital to companies with good prospects

for the future.

This should also influence their willingness to pay for

such information.


Our thesis

Creation of in-house sustainable investment research

will pay off for brokers as demand from both

institutional and retail investors is growing.


Why investors are paying for ESG research

Regulatory requirements for pension funds throughout Europe in

respect of sustainable criteria are tightening

Sustainable quota

Fund managers must take a “wider” view (more criteria)

Extraction of information must be extended beyond pure

balance sheet analysis

“Quantitative” fundamental analysis must be complemented by

sustainable research aspects > only in this way can a complete

picture of companies be obtained



Helping pension fund managers, fund managers and asset

managers to handle the information overload in terms of

sustainability

Sustainability is no rigid construct – it is a dynamic process

Sustainability criteria have to be reviewed regularly

Sustainability is complex - it has many facets

Sustainability is more than ecology



Pension fund managers, fund managers and asset managers

cannot limit themselves to discussions with companies:

Not realistic in terms of time

Sending out questionnaires often fails due to low return rate

Green washing by companies


ESG research will be also honoured from inside the own

organisation

However, maintaining an independent sustainable research unit can

also strengthen the position of research within the organisation.

Turning a pure cost centre into an internal profit centre

Implementation of investment ideas by means of design and

sale of products with a sustainability view

Possible acquisition of new investor groups (institutional and

private)

Creation of specially tailored products for specific customer

groups (churches , NGOs)

Internal participation in the proceeds (x% of the volume placed)


Internal survey

We have conducted a survey after the publication of our latest

Sustainable Investment Research study revealing how commission

was created and hence showing how institutional clients value ESG

research.


Internal survey – Distribution of ESG research

Inst itut io nal

investo rs

35%

R etail investo rs

50%

Internal clients

15%


Internal survey – Split of institutional investors

N o n-pure ESG

investo rs

95%

P ure ESG

investo rs

5%


Internal survey – Commission by pure ESG investors

D irect

co mmissio n

70%

Indirect

co mmissio n

30%


Internal survey – Commission by non-pure ESG investors

Indirect

co mmissio n

75%

D irect

co mmissio n

25%


The challenge

In Germany for example there are still very few

sustainable research teams.

”Shortfall in ESG research supply” offers numerous

opportunities:

First-mover effects

Build-up of reputation

Inclusion of sustainable research criteria in

“conventional valuation models”


The price for fading out sustainability criteria

Pressure on analysts from investors will grow

Business only if sustainable research criteria have been taken

into account

(Temporary) deletion from the broker list

Major effects on placing orders and hence allocating

commissions

Motto: “Challenge (sustainable research) and promote (orders,

unbundling)”


very much for your attention!


DZ BANK Sustainable Investment Research

Marcus Pratsch

Head of Institutional Sustainable Investment Research

[email protected]

+49-69-7447-1582

If you have any further questions please do not hesitate to contact me!

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Marcus pratsch