EY Tomorrows Investment Rules

Tomorrow’s
Investment
Rules 2.0
Emerging risk and stranded
assets have investors looking
for more from nonfinancial
reporting
Tomorrow’s Investment Rules 2.0 | 1

Contents
Welcome from EY 4
Foreword 6
Executive summary 3
Sections
1. Recognizing a new value paradigm:
a sharpened focus on stranded assets 9
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complete understanding of performance 11
3. Investors seek consistent and comparable

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,&KlYf\Yj\ar]\$k][lgj%kh][aÕ[af^gjeYlagfak
fundamental to investors’ ESG assessments 24
5. The regional view: Europe still leads, but

ESG evaluations increasing globally 29
6. Actions for issuers and investors:

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About this research 42
2 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 3

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Today more than ever, investors tell us that they’re using làkaf^gjeYlagfo`]feYcaf_afn]kle]fl\][akagfk&9fmeZ]j
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their investment decisions. This is understandable, since we their responses.
increasingly see cases where companies’ intangible assets Làkq]YjÌkj]kmdlkk]f\Yhgo]j^mde]kkY_]$oal`ka_faÕ[Yfl
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is data on environmental, social and economic sustainability • Stakeholders are key: Understanding what a
disclosures into their investment decision making. Plus, we see
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a much wider view on which industries and sectors are expected
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investor expectations regarding their reporting in these areas. kljYl]_q^gjfgfÕfYf[aYdj]hgjlaf_&
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Can responsible and resilient companies improve their ;geeall]] AAJ;!k]lkgmlafàk^gj]ogj\$l`]j]]paklkZgl`Y • Materiality matters: Undertaking an assessment to
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companies, in particular, can disclosures be improved in ways driven reporting approaches that capture how and why their to a business’s capacity to create value is important;
that increase market understanding and highlight purpose-led kh][aÕ[Zmkaf]kkeg\]dkoadd[j]Yl]nYdm]gn]jl`]dgf_]jl]je& investors expect a company to disclose these risks
business practices? That’s important given the questions we asked regarding the and to explain how it will manage them.
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For a second year, we commissioned Institutional Investor
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l`Yf*((afklalmlagfYdafn]klgjk$af[dm\af_hgjl^gdageYfY_]jk$ Leading companies globally are embracing purpose-led growth, the business will need to consider large-scale
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directors. We explored their views on the availability and quality sustainable models likely to be increasingly attractive to Zmkaf]kkeg\]dako]dd%hdY[]\lgkm[[]]\afda_`lg^
g^[gjhgjYl]fgfÕfYf[aYdaf^gjeYlagf$Yf\gfo`]l`]jl`]qmk]\ hjgna\]jkg^ÕfYf[aYd[YhalYd& them.
• ;gff][laf_nYdm]2Oal`l`]Y\n]flgêgj]
integrated reporting, companies should articulate
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Juan Costa Climent

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Can responsible and
and Sustainability Services
EY
resilient companies
+34 915 727 756 improve their
disclosures to help
[email protected]
attract capital?

Foreword Executive summary
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International Integrated Reporting Council
Given today’s complex business models and operating L`]kmjn]qYdkgj]n]Ydkl`Ylem[``Yk[`Yf_]\kaf[]l`]Õjkl For the second consecutive year, EY has commissioned a study on >a_mj]=&)&" ?jgoaf_afl]j]klaffgfÔfYf[aYd
]fnajgfe]fl$eYjc]lkf]]\[d]Yj$à_`%imYdalqaf^gjeYlagf klm\qaf*(),&AlakhYjla[mdYjdqhd]Ykaf_^gjl`]AAJ;lgk]]^jge afklalmlagfYdafn]klgjkÌna]okj]_Yj\af_fgfÕfYf[aYdj]hgjlaf_Zq
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;gfk]im]fldq$afn]klgjkf]]\af^gjeYlagfl`Yl_g]kZ]qgf\ afl]_jYl]\j]hgjlaf_$oal`/(&1k]]af_afl]_jYl]\j]hgjlkYk our inaugural thought leadership report, published in early 2014, H]j[]flY_]g^j]khgf\]flko`gÁ
ÕfYf[aYdklYl]e]flklg[geeallgeYcaf_Zgl`k`gjl%l]jeYf\ essential or important. which established that investors were progressively incorporating
long-term investment decisions. environmental, social and governance (ESG) analysis, along with 2015 2014
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afl]_jYl]\j]hgjlaf_&9k[à]^]p][mlan]g^l`]Afl]jfYlagfYd 2015 EY survey clearly suggests that this support exists, which is Based on the 2014 study, EY published Tomorrow’s Investment
Integrated Reporting Council, I am keen to ensure that through why businesses need to be aware that investors will increasingly Rules,oà[`j]hgjl]\ )!l`Ylegklafn]klgjk\g$af\]]\$^Y[lgj 61.5% 33.7%
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and relationships being employed to cr eate value but, ultimately, question whether companies’ disclosures are adequate to Mk]Ykljm[lmj]\$e]l`g\a[Yd]nYdmYlagfg^]fnajgfe]flYdYf\
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to make improved investment assessments. \]l]jeaf]a^=K?akeYl]jaYdlgafn]kle]fl\][akagfk&L`]j]hgjl kg[aYdaehY[laf^gjeYlagf
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There is a recognized need globally to back movements, such so that investors have no excuse not to use this wider knowledge
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will pull all investors in a direction towards ’integrated investment’ ]^^][lan]dq$Yf\$aflmjf$Y[à]n]ka_faÕ[YflÕfYf[aYdkYnaf_k& around the world, asked two questions that weren’t included in
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in traditional annual reports, enabling organizations to present [gehYfqÌkk`Yj]k\m]lgl`]jakcg^kljYf\]\Ykk]lk7
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Zmkaf]kkeg\]dk$kljYl]_a]kYf\h]j^gjeYf[]& value, too. 70.9% 61.0%
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increasingly evident. Participants in our “<IR> Business Network” businesses meet investor needs. It gives them vital insight into The responses about stranded assets (i.e., those that lose
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decision making and enhanced relations with investors. g^Yoa\]j[gf[]hlg^nYdm][j]Ylagf—supporting both better might be more widespread than many expect.
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The responses about

institutional investors around the world. Notably, the survey
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stranded assets reveal

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decisions. This change clearly points to a growing interest in more
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and preparers.
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over this risk might be

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6 | Ernst & Young LLP
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Recognizing a new value paradigm:
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afn]kle]flk&Afn]klgjkYj]^Y[af_Y\]Õ[alg^l`]imYdalqYf\lqh] g^l]f`Yn]afn]kle]fl[geeall]]kl`Ylaf[dm\]]ehdgq]] Yj]kmdl$ngf@mk]fZ]da]n]k$ÉKge]kàhkoaddfgdgf_]jZ]YZd] ]phj]kk[gf[]jfgn]jkljYf\]\Ykk]ljakc&F]Yjdq+.j]hgjll`Yl
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respondents say issuers do not adequately disclose ESG risks. l`]aj^mf\k`Yn]\][j]Yk]\`gd\af_kg^Y[gehYfqÌkk`Yj]kafl`]
9mkljYdaY— a larger portion than in any other region — consider assets.” dYklq]Yj\m]lglàkjakc$oàd]Yfgl`]j*.&/]ph][llgegfalgj
• 9kafl`]*(),klm\q$afn]klgjkY[jgkkk][lgjkkladdÕf\ fgfÕfYf[aYd^Y[lgjklgZ]j]d]nYflafafn]kle]fl\][akagfk làkjakc[dgk]dqafl`]^mlmj] k]]>a_mj])&)!&
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between peers. • Investors in the US and Canada have made the most notable investor decision making in the years ahead. Stranded assets are j]n]Ydaf_l`Yljakckkl]eeaf_^jge]fnajgfe]flYdYf\
hjg_j]kkkaf[]*(),afl`]afl]_jYlagfg^fgfÕfYf[aYd those that prematurely or unexpectedly lose their value due to kg[aYd^Y[lgjkYj]af[j]Ykaf_dqY^^][laf_[gehYfa]kÌZmkaf]kk
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second in usefulness behind only
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energy and extraction industries, such as oil and gas, mining, f]]\lggn]j[ge]^gjea\YZd]`mj\d]klgj]Ydar]l`]^mddnYdm]
j]hgjlaf_3/(&1k]]afl]_jYl]\j]hgjlkYk]kk]flaYdgjaehgjlYfl$ see integrated reporting as essential also rose.
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annual reports. ogjd\afalkfgfÕfYf[aYd$Y[[gj\af_lgafn]klgjk&@go]n]j$l`]j]
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social responsibility (CSR) reports to be essential or important to YoYj]f]kkg^l`]aehgjlYf[]g^fgfÕfYf[aYdaf^gjeYlagfaf >a_mj])&)&F]Yjdqlog%làj\kg^j]khgf\]flkYj][gf[]jf]\YZgmlkljYf\]\Ykk]lk
investment decisions. afn]kle]fl\][akagfk&BYhYf$^gj]pYehd]$j][]fldqYffgmf[]\
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• 9eYbgjalqgâfn]klgjk .)&-![gfka\]jfgfÕfYf[aYd\YlYlgZ] plans to improve the country’s corporate governance.
relevant to all industrial sectors today. • DYlaf9e]ja[Y$o`gk]afn]klgjkYf\[gehYfa]k`Yn]hj]nagmkdq
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this closely in the future
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compare across companies.
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gaining investor attention and, ultimately, winning an advantage Don’t know Fg
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doing so, establish a new investor strategy.

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debate in recent years, and activist organizations now seek
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movements) regime change, sanctions and embargos, and international ^Y[lgjk[mjj]fldqnYja]koa\]dq&L`]]nYdmYlagf[YfZ]ZYka[$Ykakl`]af^gjeYdYhhjgY[`
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and electric vehicles)
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^Y[lgjk[Yf[Ymk]Ykk]lklgZ][ge]kljYf\]\&>gddgoaf_Yj]^gmj l`][gehYfqÌk_dgZYdgh]jYlagfk$kYqkl`]hgjl^gdageYfY_]j$Éal
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structured, methodical or information from third parties environmental and social
)& J]_mdYlagf2Gf]]pYehd]g^`goYkk]l\]nYdmYlagfea_`l ,& =fnajgfe]flYd[`Yf_]2 The link between climate change and evaluation of environmental such as the UN Principles for impact statements informally.
aehY[l^gkkad^m]dkakcfgofYkl`]ÉmfZmjfYZd][YjZgfÊ stranded assets extends well beyond the companies that are and social impact statements Responsible Investments or other
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j]_mdYlagfkgf[YjZgf\agpa\]]eakkagfk$l`]^gkkad^m]d :mkaf]kkHjgb][lgmldaf]kl`j]]][gfgea[Yddqka_faÕ[Yfljakck
reserves held by oil and coal companies could exceed the g^[daeYl][`Yf_]afl`]MK2 )!\YeY_]lg[gYklYdhjgh]jlq
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turning their reserves into stranded or partially stranded surge, threatening vast real estate and business operations;
Ykk]lk&9kYj]kmdl$kge]afn]klgjkfgokà^lYoYq^jge (2) climate-driven changes in energy demand and agriculture
investments in companies with carbon-intensive assets. Indeed, hjg\m[lagf$l`j]Yl]faf_l`]^gg\af\mklja]k3Yf\ +!l`]aehY[l
lg`]dhl`]e\gkg$afn]kle]flaf\a[]kl`Ylmf\]jo]a_`l^gkkad g^à_`]jl]eh]jYlmj]kgfdYZgjhjg\m[lanalqYf\hmZda[`]Ydl`& 37.0% 15.6% 26.5% 20.9%
^m]dklg[ck$af[dm\af_l`][dgk]dqoYl[`]\EK;A?dgZYdDgo In short, climate change is likely to have a substantial impact
Carbon Leaders Indexes, have recently been launched. across nearly all industries that could result in stranded assets.
Stranded assets are among the clearest

pieces of evidence revealing that risks 19.6% 12.9% 31.9% 35.6%
stemming from environmental and social

factors can impact investor perceptions of
business performance
2015 2014

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actually look like? Consider a Swiss private bank’s structured trying to integrate it into their work,’” said the analyst. consequences
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system that provides transparency and control, while allowing the increasingly present and integrated role in investors’ decision
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“We have developed our own scoring system so that we don’t have ZqYddafn]kle]flhjg^]kkagfYdk&Afl`]dgf_l]je$fgfÕfYf[aYd
to rely on a black box. Basically, we have an engine that applies Minimize risk
analysis may play a similarly prominent role in the operating and
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fgfÕfYf[aYdaf^gjeYlagfak]phYf\af_&9fYfYdqklYlYMKYkk]l emerge as material to investment decisions, companies will likely
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DYklq]Yj$l`]ÕjeZ]_Yf]pYeafaf_l`]jakcg^lYpYnga\Yf[]Zq
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truly takes place.” The analyst conducted extensive research on af^gjeYlagf7
l`]lgha[afYf]^^gjllg`]dhàkl]Yemf\]jklYf\o`]j]]pY[ldq 22.9% 41.2% 28.8% 7.2%
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oYjjYfl]\l`]_j]Yl]kl[gf[]jf&ÉLàkak\]Õfal]dqY_gn]jfYf[] according to this year’s data. Survey respondents are most likely
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16.9% 61.0% 18.8% 3.2%
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said the analyst. h]j^gjeYf[]— l`gk]l`YlY^^][lgh]jYlaf_h]j^gjeYf[]$jakc Personal values
LàkkYe]MK%ZYk]\YfYdqklYdkgg^^]jkY[Yn]Ylj]_Yj\af_`go and valuation — as essential or important (see Figure 2.2). 16.9% 49.4% 22.7% 11.0%
afn]klgjkk`gmd\afl]_jYl]fgfÕfYf[aYdk[j]]faf_aflgl`]aj Institutional policies and internal mandates are less likely to spur
investment decision making. In short, he advocates making it the Y[ml]afl]j]klaffgfÕfYf[aYdaf^gjeYlagf&?jYfl]\$n]jq^]o Investment codes/advisors — Principals for Responsible Investments (PRI) Pensions & Investment
j]khgfkaZadalqg^]n]jqYfYdqkl$jYl`]jl`YfhdY[af_alafl`]`Yf\k j]khgf\]flk\akeakk^Y[lgjkkm[`Ykl`]ajgofnYdm]k$afn]kle]fl Research Consultants (EIRC)
g^Yk]hYjYl]kh][aYdar]\l]Ye&ÉAk]fk][da]flkYj][gf[]jf]\ codes, external advice or company-level policies as unimportant.
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to emerge as material to investment fgfÕfYf[aYd^Y[lgjkY^^][le]YkmjYZd]Ykh][lkg^[gehYfa]kÌ
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decisions, companies will likely be investments — alakfglkmjhjakaf_l`YlYfmeZ]jgâfn]klgjk
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l`]]phda[almk]g^ZjaZ]jqYf\[gjjmhlagfhgda[a]k3Yfla%[gjjmhlagf
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;=G3k]hYjYlagfg^c]qhYjla]koalàfl`][gehYfq3\an]jkalq3
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‘proper investing.’”
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^mf\k$^gj]pYehd]$oaddfglafn]klaf[gehYfa]kl`Yll`]qk]]Yk g^Yfa[`]hjg\m[l— afn]klgjk[gflafm]lg\]ZYl]o`Yll`]]^^][l
`Yje^mdlgkg[a]lqgjaf\ana\mYdk3gl`]jkkaehdqoaddfglafn]klaf g^=K?oaddZ]gfl`]dgf_%l]jej]lmjfkg^^]j]\Zq[gehYfa]k&Ak
Ékaf&ÊAfgl`]jogj\k$l`]akkm]jkafl`]ajhgjl^gdagkemklhYkk alYfY\\]\[gklgjYkgmj[]g^[gehYfa]kÌaehjgn]\h]j^gjeYf[]
[]jlYaff]_Ylan]k[j]]fk&Gf]_dgZYdÕp]\af[ge]eYfY_]jYlY and, hence, returns?
Investors are increasingly EYdYqkaYfh]fkagf^mf\oal`MK*((Zaddagfaf9MEj]hgjlkl`Yl$

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company says more generally, “I see ESG personally as an added
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is not necessarily your main concern because you have other
h]j^gjeYf[]$jYf_af_ l`Yll`]j]akfgeYl]jaYdY\n]jk]S]fnajgfe]flYdUaehY[llgl`]
society.”
standards and commitments.”
^jge[gehYfa]kl`Yl Certain other institutional investors are interested in including

afl`]ajhgjl^gdagk[gehYfa]kl`Yl`Yn]hYkk]\hgkalan]k[j]]fk
@go]n]j$eYfqafn]klgjkZ]da]n]l`Yl=K?[Yf`Yn]Yf]mljYdgj
]n]fhgkalan]]^^][lgfhgjl^gdagj]lmjfk&ÉAlàfcqgm[YfY[à]n]
are good environmental — l`Ylak$[gehYfa]kl`Yl[j]Yl]nYdm]^gjaf\ana\mYdkgjkg[a]lq&

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citizens to ones that are ]pYehd]kg^l`]ajeYcaf_km[àfn]kle]flkaf[gehYfa]kjYf_af_

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MK+0(Zaddagfaf9ME&ÉAlàfcj]lmjf$Yll`]]f\g^l`]\Yq$ak
j]Yddqo`YleYll]jkegkllgl`]Õ\m[aYjq$ja_`l7Alàfcl`]k]log
charitable donors charitable donors.

objectives, ESG and returns, can be achieved at the same time;
qgmbmkl`Yn]lgZ]n]jql`gm_`l^mdaf`goqgmY[à]n]l`]k]log
goals.”
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afl]j]kl]\afl`]fgfÕfYf[aYdh]j^gjeYf[]g^l`][gehYfa]k
afoà[`l`]q[gfka\]jafn]klaf_&9kl`]h]fkagf^mf\YfYdqkl
^jgeH]jm]fl`mkaYkla[Yddq]phdYafk$ÉO`]l`]jalÌk^gjl`]à_`
j]lmjfkafl`]dgf_l]je$^gjeYjc]laf_hmjhgk]k$gjZ][Ymk]
qgmoYfllg\g_gg\^gjkg[a]lq$fgfÕfYf[aYd[gfka\]jYlagfkdac]
=K?g^^]jal&Ê@go]n]j$^gjafn]klgjklgÕf\[gehYfa]kl`Yl[Yf
`]dhl`]eY[[gehdak`Yfqg^l`]k]_gYdk$akkm]jkf]]\lgj]hgjl
l`]ajfgfÕfYf[aYdaf^gjeYlagfafoYqkl`Yl]YkadqYddgoallgZ]
incorporated into investors’ decision making.
Gf]]pYehd][ge]k^jgeY[gfkme]jk][lgjYfYdqklYlY
H]jmnaYfh]fkagf^mf\oalègj]l`YfMK)(Zaddagfaf9ME&@]
l]ddkg^j][gee]f\af_l`Yll`]^mf\Zmqk`Yj]kg^YMK_jg[]jq
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afn]kle]fl$Z][Ymk]o]Yj]ljqaf_lg`]dhkgdn][]jlYaf]^^][lan]
problems in the world, including obesity. We are trying to improve
l`]`]Ydl`YoYj]f]kkg^h]ghd]afl]jekg^]Ylaf_o]dd&Kg$o]
afn]klafl`Yl[gehYfq&L`YlÌkYfY^ÕjeYlan]oYqg^mkaf_=K?
k[j]]faf_lg[j]Yl]nYdm]^gjkg[a]lq&Ê

“ Ifrom
would like to get away
How do investors react to different types of Gfl`]gl`]j`Yf\$fgfÕfYf[aYdjakckl`YlYj]d]kke]YkmjYZd]$
not directly linked to a company’s business practices, or less
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=[`gaf_l`]ajna]okYZgmll`]lqh]kg^fgfÕfYf[aYdaf^gjeYlagf
pressing in the near term (e.g., those tied to climate change)
are less likely to spur investors to abandon or reconsider an ESG being
na]o]\YkfgfÕfYf[aYd$
they consider most important, survey respondents in 2015 investment opportunity.
indicate that their investment decisions are most likely to be
Viewed year-on-year, survey data reveals substantial consistency
because I think these

Y^^][l]\ZqfgfÕfYf[aYd\ak[dgkmj]kla]\lgnakaZd]$e]YkmjYZd]
afafn]klgjkÌna]okj]_Yj\af_l`]aehY[lg^nYjagmk\ak[dgkmj]k&
jakcklgY[gehYfqÌkh]j^gjeYf[] k]]>a_mj]*&+!&KlYl]e]flk
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Yj]ÕfYf[aYdakkm]k& “
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]phgk]l`]jakcg^hggj_gn]jfYf[]$gjj]n]Ydjakckl`Yl\aj][ldq
respondents to rule out a prospective investment in both 2015
Y^^][lh]j^gjeYf[] km[`YkjakcklgY[gehYfqÌkkmhhdq[`Yaf$
Yf\*(),$YdZ]all`]qkoYhhdY[]kafl`]logkmjn]qk&9f\oàd]
]fnajgfe]flYdh]j^gjeYf[]gj`meYfja_`lkj][gj\!Yj]egkl
l`]j]Yj]kge]gl`]jkeYddkà^lkafl`]gj\]jg^j]khgfk]k^jge
likely to cause investors to rule out a potential investment or, at
last year to this year, the data remains quite consistent.
least, reconsider it.
L`]9mkljYdaYfYkk]leYfY_]e]flÕjekh][aYdaraf_af_dgZYddakl]\ [gehYfqj]d]Yk]\YlYgfogjc]jkY^]lq$^gj]pYehd]7AlÌkZ][Ymk]
>a_mj]*&+&FgfÔfYf[aYd\ak[dgkmj]kY^^][laf_jakcYf\h]j^gjeYf[]Yj]egkldac]dq af^jYkljm[lmj]Zmad\kkge]g^l`]kh][aÕ[fgfÕfYf[aYdjakckl`Yl the company and its investors, obviously, realize it can impact
to stall an investment investors consider most serious directly into its decision making production, which can impact sales, which impacts the value
e]lja[k&ÉO`]fo]Ìj]hmllaf_lg_]l`]jgmjÕfYf[aYdeg\]dk$Ê g^l`]klg[c&Aogmd\dac]lg_]lYoYq^jge=K?Z]af_na]o]\Yk
@googmd\l`]^gddgoaf_\ak[dgkmj]kYZgmlYhjgkh][lan]afn]kle]flY^^][lqgmjafn]kle]fl\][akagf7 ]phdYafkYk]fagjYfYdqklYf\hgjl^gdageYfY_]jYll`]Õje$Éo] fgfÕfYf[aYd$Z][Ymk]Alàfcl`]k]Yj]ÕfYf[aYdakkm]k&L`]q
ljqlgZjaf_=K?aflggmj[Yk`Ögo^gj][Yklk$o`]j]hgkkaZd]&O] happen to have social or environmental or other important
2015 2014 2015 2014
consider costs to the revenue line that are impacted by social jYeaÕ[Ylagfk$Zmll`]qÌj]Ydkg[d]YjdqÕfYf[aYd&Ê
7.2% 6.2% 17.9% 13.5%
17.9% 13.5% gj]fnajgfe]flYdj]klja[lagfkYf\^]]\làkaf^gjeYlagfaflggmj L`]akkm]Z][ge]k`goafn]klgjk[Yf_]ll`]fgfÕfYf[aYd
42.2%
40.7% Absence of a clear ]ph][l]\j]lmjf^jgeYklg[c&Gfl`]jakcka\]$gmjhgjl^gdag af^gjeYlagfl`Yll`]q[gfka\]jegklmk]^mdlgl`]ajafn]kle]fl
strategy to create value Riskfrom
Risk fromresource
resource Not
Not asked
asked eYfY_]jkYhhdqYjakc^Y[lgjlg_gn]jfYf[]$afhYjla[mdYj$kaf[]alÌk decision making — l`Ylak$af^gjeYlagfla]\lg[gehYfa]kÌnakaZd]$
in the short, medium
51.6%
scarcity— —e.g.,
scarcity e.g., water
water in in 2014
2014 the area that has the most impact on valuation. For governance, e]YkmjYZd]h]j^gjeYf[]&L`]AAJ;akgf]gj_YfarYlagf`]dhaf_
52.2% and long term we typically use metrics that have to do with shareholder investors and issuers achieve this goal. In 2013, it released the
68.6%
68.6%
structure, board compensation, remuneration and the alignment Integrated Reporting Framework, which helps companies produce
between the company and investors.” afl]_jYl]\j]hgjlkl`Yldafcl`]aj=K?Yf\gl`]jfgfÕfYf[aYd
7.2% 26.9% 3.7%
30.2% 20.3%
20.3% 17.9%
17.9% 20.5% 18.6%
20.5% 18.6% L`]lqh]kg^=K?Yf\gl`]jfgfÕfYf[aYd\ak[dgkmj]kl`Ylegkl \ak[dgkmj]klgl`]aj]ph][l]\h]j^gjeYf[]Yf\hdYfk^gjnYdm]
g^l]f[Ymk]afn]klgjklgjmd]gmlYfafn]kle]flYj]l`gk]l`Yl [j]Ylagf&9k[gehYfa]kYf\af\mklja]k[gflafm]lgY\ghll`]
Risk or history of Limited
Limitedverification
verification
mdlaeYl]dq`Yn]YÕfYf[aYdaehY[lgf[gehYfa]k&L`]YfYdqkl _ma\af_hjaf[ahd]kaf[gjhgjYl]\aflglàkj]hgjlaf_^jYe]ogjc$
poor governance 66.0% ofofdata
dataand
andclaims
claims
Yll`]MKYkk]leYfY_]e]flÕjeoal`MK,*-Zaddagfaf9ME al[gmd\Z]Yka_faÕ[Yflkl]hlgoYj\afn]klgjkÌ_]llaf_l`]
65.9%
61.8%
61.8% 60.9%
60.9% kmeeYjar]kalo]dd2É=K?akfglYdoYqkfgfÕfYf[aYd&>gjYf fgfÕfYf[aYdaf^gjeYlagfl`]qoYfl&
=K?^Y[lgjlgZ]afl]j]klaf_lgYdYj_]hgjlagfgâfn]klgjk$alÌk
_gllg`Yn]kge]dafclgÕfYf[aYdaehY[l&O`q\g]kYeafaf_
12.0% 15.4% 15.0% 11.9% 15.5% 12.4%
15.5% 33.5% 12.4%
27.5% 33.5%
27.5%
Risks in supply No
Nolink
linktotofinancial
financial
chain not addressed performance
performance
54.0%
72.6% 73.1% 57.0% 54.0%
57.0%
15.3% 9.1% 13.6% 11.7% 8.7% 8.0%

29.8% 8.7% 39.5% 8.0%
29.8% 39.5%
Risk or history of
Risk from
poor environmental Risk from
climate change
performance 61.5%
climate change 52.5%
75.6% 74.7% 52.5%
61.5%
17.7% 19.1% 24.2% 21.7%
Human rights risk Rule out investment immediately

from operations
Reconsider investment
63.2% 54.0%
No change in investment plan
3
Investors seek consistent and
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In which sectors do investors consider
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Yfgl`]j*-&-g^j]khgf\]flkkYqalakj]d]nYfllgl`]]f]j_q
k][lgjkh][aÕ[Yddq$qa]d\af_0/&(g^j]khgf\]flko`g[gfka\]j
af^gjeYlagf
alaehgjlYfllglàkk][lgj&9kl`]h]fkagf^mf\YfYdqklafH]jm
Afn]klgjk`Yn]ZjgY\]f]\l`]jYf_]g^k][lgjkafoà[`l`]q puts it, “There are some industries that are more prone to ESG Kmjn]qj]khgf\]flkkYql`]qYj]dggcaf_Ylegj]fgfÕfYf[aYd
[gfka\]jfgfÕfYf[aYdaf^gjeYlagflgZ]j]d]nYfl&Egj]l`Yf risk. These are energy, mining and probably the consumer sector af^gjeYlagfafegj]kljm[lmj]\oYqk$ZmlalYhh]Yjkl`Yllàk
>a_mj]+&)&:]lo]]f*()-Yf\*(),$l`]
.(g^j]khgf\]flkaflàkq]YjÌkklm\qk]]km[àf^gjeYlagfYk — l`]dYklZ][Ymk]g^ZjYf\nYdm]afl]jekg^[mklge]jkYf\ Y\\alagfYd]^^gjl`Ykfglqa]d\]\YZjgY\kà^lafafn]kle]fl
hjghgjlagfgâfn]klgjkÔf\af_fgfÔfYf[aYd
j]d]nYflY[jgkkl`]^mddkh][ljmegâf\mklja]k$mh^jge++&/af reputation issues.” \][akagfk&Afl`]*()-klm\q$*+&/g^j]khgf\]flkkYq
af^gjeYlagf^j]im]fldqhanglYdlgl`]aj
2014 (see Figure 2.4). fgfÕfYf[aYdh]j^gjeYf[]^j]im]fldqhdYq]\YhanglYdjgd]afl`]aj
\][akagfk`Ykj]eYaf]\YlYdegklgf]%imYjl]j
<]khal]afn]klgjkÌ]phYf\]\mk]g^fgfÕfYf[aYdaf^gjeYlagfY[jgkk
Oàd]YeYbgjalqgâfn]klgjk[gfka\]jfgfÕfYf[aYd^Y[lgjk all industries, it is clear, as we will see in the next section, that investment decisions over the previous year (see Figure 3.1); this Afl`]dYkl)*egfl`k$`go^j]im]fldq`YkY[gehYfqÌk
j]d]nYfllgYddk][lgjk$fglYdd`gd\làkna]o&9kYj]kmdl$egj] l`]q^Y[]Y\]Õ[alg^à_`%imYdalqfgfÕfYf[aYdj]hgjlaf_&Akkm]jk akZYka[Yddq[gfkakl]floal`l`]*+&+o`gkYa\l`]kYe]af*(),& fgfÕfYf[aYdh]j^gjeYf[]hdYq]\YhanglYdjgd]afqgmj
j]khgf\]flk[gfka\]jfgfÕfYf[aYd\YlYaehgjlYfllgl`]]f]j_q lggg^l]f\gfglhjgna\]]fgm_`fgfÕfYf[aYdaf^gjeYlagfafl`] investment decision making?
L`]egkll]ddaf_YfYdqkakeYqZ]làk29dl`gm_`YeYbgjalqg^
k][lgjl`YflgYfqgl`]jk][lgj&AfY\\alagflgl`].)&-g^ ^gjeafn]klgjkÕf\mk]^mdo`]feYcaf_afn]kle]fl\][akagfk&
j]khgf\]flko`gkYqfgfÕfYf[aYd\YlYakj]d]nYfllgYddk][lgjk$
afn]klgjkhYqkge]\]_j]]g^Yll]flagflg[gehYfa]kÌfgfÕfYf[aYd 2015 Frequently Occasionally Seldom Never
h]j^gjeYf[]$Yj]dYlan]dqkeYddhjghgjlagfÕf\klàk[jal]jagflg
Z]^j]im]fldqhanglYdlgl`]ajafn]kle]fl\][akagfk&Gf]j]Ykgf *+&/ *0&( *)&0 *.&-
>a_mj]*&,&Afn]klgjafl]j]klaffgfÔfYf[aYdaf^gjeYlagfkhYfkYddk][lgjk investors’ decision making does not, at present, rely more heavily
gf[gehYfa]kÌfgfÕfYf[aYdh]j^gjeYf[]akl`Ylafn]klgjkÕf\ 2014
Afoà[`k][lgjkYj]qgmegj]dac]dqlg[gfka\]jfgfÕfYf[aYd\YlYegklj]d]nYfl7 l`]qYj]fgl_]llaf_l`]egklmk]^mdaf^gjeYlagfYZgml[gehYfa]kÌ
fgfÕfYf[aYdh]j^gjeYf[]&Afn]klgjkkYqj]h]Yl]\dql`Yll`]q *+&+ +,&, +)&+ ))&(
25.5% 2015 2014 \gfglj][]an]]fgm_`Y[[mjYl]$klYf\Yj\ar]\fgfÕfYf[aYd
Energy
44.8% af^gjeYlagfj]d]nYfllg[gehYfa]kÌjakcYf\h]j^gjeYf[]
Ykk]kke]fl&Kh][aÕ[Yddq$Ydegkllog%làj\kg^j]khgf\]flkkYq
21.2% [gehYfa]k\gfglY\]imYl]dq\ak[dgk]af^gjeYlagfYZgml=K?
Mining and metals
46.6% jakck$Yf\f]Yjdq,([Ydd^gj[gehYfa]klg\gkgegj]^mddqafl`]
^mlmj] K]]>a_mj]+&*!&
16.8%
Industrial
32.5%
14.4% >a_mj]+&*&Afn]klgjkkYq[gehYfa]k\gfglY\]imYl]dq\ak[dgk]l`]aj=K?jakck
Consumer products
23.9%
<g[gehYfa]kY\]imYl]dq\ak[dgk]l`]aj=K?jakckl`Yl[gmd\Y^^][ll`]aj[mjj]flZmkaf]kkeg\]dk7
13.5%
Manufacturing
28.8%
11.5%
Financial services
14.1%
3.8% +0&0 *,&0
Business services
5.5% *)&0 ),&.
61.5%
All of the above
33.7%
Yes No, No Don’t know

but companies
should disclose
these risks more
fully

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Yf\gl`]jfgfÕfYf[aYdjakckYf\Z]f]ÕlkZqakkm]jk& cost — or perceived cost — \aj][ldqYkYj]Ykgf^gjl`]ajafY\]imYl] >a_mj]+&+&Afn]klgjko`g\gfglmk]fgfÔfYf[aYdaf^gjeYlagf[gfka\]jalaeeYl]jaYdgjdY[caf_
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\ak[dgkmj]g^=K?Yf\gl`]jfgfÕfYf[aYdaf^gjeYlagf&=phdYafk quality
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kar]&DYj_][Yh[gehYfa]kYj]lqha[Yddqegj]^gjl`[geaf_oal`
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l`]]na\]f[]k`gokl`Ylgf[]qgmklYjlhjg\m[af_fgfÕfYf[aYd making?
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qgmkYn]Yka_faÕ[YflYegmflgêgf]qZqZ]ll]jeYfY_af_
companies nowadays have the means, ability and willingness to
Yllalm\]kYf\j]kgmj[]k$ZqY\\j]kkaf_hmZda[kY^]lqakkm]k$Yf\
report on ESG issues, whereas small microcaps likely do not. So,
so on. So, I think it’s more than just cost. Cost is an excuse that’s
when I screen the whole 2,500-plus companies in the world, I’d
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kYqYjgmf\Ylàj\j]hgjlgfl`]k]akkm]k&9egf_l`]dYj_][Yhk$
that investors should take an interest in, and so they aren’t willing ,.&, ),&+
Ydegkl1(g^l`][gehYfa]keYc]=K?\YlYYnYadYZd]&A[Yfk]]Y *0&. FgfÕfYf[aYd
[d]Yj[gjj]dYlagfZ]lo]]fl`]h]j[]flY_]g^[gehYfa]kj]hgjlaf_
to invest in the reporting. There is an initial investment to be made It’s unclear whether
fgfÕfYf[aYd\ak[dgkmj]kYj]
FgfÕfYf[aYdaf^gjeYlagfak measurements are )(&/
afZmad\af_l`]kqkl]eklgj]hgjllàkaf^gjeYlagf&Ê inconsistent, unavailable, or inconsistent, and we are Other
and their market cap. I would suggest the smaller companies don’t eYl]jaYdgj`Yn]YÕfYf[aYd
fgln]jaÕ]\ unable to compare them
have the ability, rather than the willingness, to disclose to a decent impact
to those of other
d]n]dg^k[jmlafq&Ê companies
“ The evidence shows that once

qgmklYjlhjg\m[af_fgfÕfYf[aYd ?anaf_Ykh][aÕ[]pYehd]$`][gflafm]k$ÉO]Ìn]]f_Y_]\afl`] @go]n]j$YfmeZ]jg^gj_YfarYlagfkafngdn]\afk]llaf_klYf\Yj\k
US with a very large electrical equipment company. It’s been ^gj[gehYfqj]hgjlaf_g^^]jj]e]\a]k^gjl`]dY[cg^[gfkakl]f[q
reports, you start managing ^g[mk]\gfSZ][geaf_Uegj]j]kgmj[]]^Õ[a]fl$Yf\o][gY[`]\
them to do a sustainability report.” The question, he explains, is
Yf\[gehYfq%lg%[gehYfq[gehYjYZadalqaffgfÕfYf[aYd
af^gjeYlagf&L`j]]g^l`]egj]afÖm]flaYdg^l`]k]gj_YfarYlagfk
these issues more effectively, why had this company not done a sustainability report sooner.
ÉL`]Yj_me]fll`Yl[Ye]lgl`]kmj^Y[]akl`YlaloYkYZgml[gklÊ
Yj]l`]AAJ;$l`]KmklYafYZadalq9[[gmflaf_KlYf\Yj\k:gYj\
K9K:!Yf\l`]?dgZYdJ]hgjlaf_AfalaYlan] ?JA!& K]]j]dYl]\
Yf\qgmkYn]Yka_faÕ[Yfl \]khal]l`]^Y[lkl`YlÉlàk[gehYfq`YkY_gg\=K?klgjqÊYf\ j]^]j]f[]kgfhY_]*)&!
“
that such reporting can result in savings.
amount of money.
9_Yafkllàk[mjj]flZY[c\jghg^mf]n]ffgfÕfYf[aYdaf^gjeYlagf
L`mk$][`gaf_YfmeZ]jgâfn]klgjkafl]jna]o]\^gjlàkklm\q$ ^jge[gehYfa]k$al[ge]kYkdalld]kmjhjak]l`Ylegj]l`Yfgf]%
làkMCj]k]Yj[``]Y\k]]kfgfÕfYf[aYdj]hgjlaf_YkYhgl]flaYddq imYjl]jg^j]khgf\]flkj]hgjll`Yl[gehYfa]kÌfgfÕfYf[aYd
ka_faÕ[YflZgllgedaf]kljYl]_qZYk]\gfalkmdlaeYl]YZadalqlg h]j^gjeYf[]\a\fglhdYqYhanglYdjgd]afl`]ajafn]kle]fl
save companies money. decisions even once during the previous year (see Figure 3.1).
9fgl`]j]phdYfYlagf^gjakkm]jkÌhggj\ak[dgkmj]kj]_Yj\af_ 9egf_l`]k]afn]klgjk^gjo`gefgfÕfYf[aYdaf^gjeYlagff]n]j
fgfÕfYf[aYd^Y[lgjkea_`lda]afl`]]e]j_af_klYl]g^fgfÕfYf[aYd hdYq]\YhanglYdjgd]$,.&,]phdYafl`Yll`]q\gfgl[gfka\]j
j]hgjlaf_&Oàd]afn]klgjkfgo]fbgql`]j]kmdlkg^`mf\j]\k fgfÕfYf[aYd\ak[dgkmj]kafl`]aj\][akagfeYcaf_Z][Ymk]l`]q
g^q]Yjkg^ÕfYf[aYdj]hgjlaf_$fgfÕfYf[aYdj]hgjlaf_akafalk im]klagfl`]eYl]jaYdalqgjÕfYf[aYdaehY[lgfl`][gehYfa]k
early stages — and is not yet based on standardized reporting that they are evaluating (see Figure 3.3). Others believe that the
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gl`]jfgfÕfYf[aYdaf^gjeYlagf[Yfk]]efglgfdq]ph]fkan]Zml [gehYjaf_gf][gehYfqlgYfgl`]j$gjmfn]jaÕYZd]&
also overly complex to companies.
9lhj]k]fl$f]al`]jafn]klgjkfgjakkm]jkYj]j]khgfkaZd]^gj
kh][a^qaf_`go[gehYfa]kk`gmd\j]hgjlfgfÕfYf[aYdaf^gjeYlagf&

Gf]hjgZYZd]j]Ykgf^gjafn]klgjkÌ
“aWhen I started in 2000,
Gf]hjgZYZd]j]YkgfZ]àf\afn]klgjkÌ\akkYlak^Y[lagfoal`
=K?Yf\gl`]jfgfÕfYf[aYdaf^gjeYlagfda]kafl`]jYlagfYd]
\akkYlak^Y[lagfoal`fgfÕfYf[aYdaf^gjeYlagf Yf\kljYl]_qZ]àf\[gehYfa]kÌj]hgjlaf_km[àf^gjeYlagf&
9eYbgjalqgâfn]klgjkkYql`Ylakkm]jkhjgna\]fgfÕfYf[aYd very small proportion
lies in the strategy behind companies’ af^gjeYlagfafgj\]jlgZmad\l`]aj[gjhgjYl]j]hmlYlagfk
with customers or to comply with governmental regulatory of the FTSE 100 had
reporting — it is not currently created to j]imaj]e]flk k]]>a_mj]+&,!$Zmlfgllgk]jn]l`]f]]\kg^
investors themselves. environmental policy
k]jn]l`]f]]\kgâfn]klgjk Afl`]Õjkl[Yk]$j]_Yj\af_fgfÕfYf[aYdj]hgjlaf_l`Ylk]jn]k
[mklge]jk$akkm]jklqha[Yddqk]]clghmll`]ajZ]kl^ggl^gjoYj\& statements, and that
“Certainly, the ESG leaders are the ones that want to broadcast
l`]aj\ak[dgkmj]kegkldgm\dq$Êfgl]kl`]k]fagjYfYdqklaf9mkljYdaY was it. Now, 15 years
>a_mj]+&,&;gehYfa]khjgna\]fgfÔfYf[aYdaf^gjeYlagfafYf]^^gjllgk]jn][mklge]jkYf\
j]_mdYlgjk$egj]kgl`Yflgk]jn]afn]klgjk
quoted earlier.
EYfq[gehYfa]k$lgYhh]Ydlg[mklge]jk$g^^]jmk]^mdYf\
later, 80% or 90% have
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YdkgafklYf[]kafoà[`l`]af^gjeYlagfhj]k]fl]\e]j]dqafl]f\k
very comprehensive
to put a positive spin on ESG issues. corporate responsibility
reports. “
Build corporate 63.8% 2015 2014 Afl`]k][gf\[Yk]$j]_Yj\af_fgfÕfYf[aYdj]hgjlaf_Yf\
69.0% j]_mdYlgjq[gehdaYf[]$[]jlYaf[gehYfa]k^g[mkgfe]]laf_
reputation with customers
the minimum regulatory requirement, rather than on telling
investors a more complete story about the value and business
Comply with regulatory 59.2% aehY[lg^l`]aj=K?]^^gjlk&ÉKge][gehYfa]keYqgfdq\gl`] ;gfkakl]floal`làk\YlY$afn]klgjkafl]jna]o]\YkhYjlg^làk
requirements 69.0% ZYj]eafaemeo`]fal[ge]klgj]hgjlaf_$kYqaf_$ËA^l`]j]Ìkfg klm\qfgl]YeYjc]\aehjgn]e]flaf=K?Yf\gl`]jfgfÕfYf[aYd
regulation that requires me to report this, I won’t,’” explains the reporting in recent years, especially among large-cap companies.
42.1% `]Y\g^]imalqhgjl^gdageYfY_]e]flYlYMKYkk]leYfY_]e]fl L`]MC`]Y\g^j]khgfkaZd]afn]klaf_imgl]\]Yjda]j]phdYafk$
Demonstrate risk
Õjeoal`MK+0(Zaddagfaf9ME&ÉAlàfcl`YlÌkhjgZYZdql`]egkl ÉO`]fAklYjl]\af*((($Yn]jqkeYddhjghgjlagfg^l`]>LK=
management 29.0%
[geegfj]YkgfS^gjl`]dY[cg^j]hgjlaf_U&Ê 100 had environmental policy statements, and that was it. Now,
)-q]YjkdYl]j$0(gj1(`Yn]n]jq[gehj]`]fkan][gjhgjYl]
Explain strategy to 40.1% While investors might not be the intended primary audience
j]khgfkaZadalqj]hgjlk&ÊKh]Ycaf_^jge9mkljYdaY$Yhgjl^gdag
maintain and grow long- g^lg\YqÌkfgfÕfYf[aYdj]hgjlk$kmjn]q\YlYkm__]klkl`Yl
term capital value 31.7% akkm]jkeYqY[lmYddqZ]hjgna\af_egj]Yf\Z]ll]jaf^gjeYlagf
manager concurs, “ESG data is improving all the time, especially
with larger-cap companies. They understand that this is a bigger
^gjafn]klgjkÌmk]&Lg\Yq$j]khgf\]flkYj]egj]dac]dqlgkYq
Responding to investor 37.5% akkm]$Yf\l`]qÌj]j]hgjlaf_Ydglg^l`Yl\YlY&L`]qÌj]Ydegkl
[gehYfa]k\ak[dgk]fgfÕfYf[aYdaf^gjeYlagfafj]khgfk]lgl`]
requirements for hmllaf_YÖY_hgklafl`]kYf\So`]j]l`]\YlYUaklg\Yq$Yf\
disclosure 33.8% [gf[]jfkgâfn]klgjkl`Yfl`]q\a\afl`]*(),klm\q&>gjlq%
they’re trying to improve on that year-on-year, which I think is a
logh]j[]flg^j]khgf\]flkaf*()-kYql`Yl\]egfkljYlaf_Y
j]Yddqhgkalan]làf_&9f\oal`l`][gehYfa]kZ]af_YoYj]g^Slàk
[gehYfqÌkjakceYfY_]e]fleglanYl]kalkfgfÕfYf[aYdj]hgjlaf_$
Prove important 19.7% \YlYU$Alàfco`]fl`]ZgYj\Yf\eYfY_]e]fllàfckljYl]_a[Yddq
mh^jge*1&(af*(),&KaeadYjdq$,(&)kYql`Yl]phdYafaf_Y
cost saving 9.0% company’s long-term capital value strategy motivates a company’s
YZgmlo`Yll`]qÌj]_gaf_lg\goal`l`][gehYfq$l`]q^Y[lgjaf
ESG to a larger extent every year.”
fgfÕfYf[aYdj]hgjlaf_$mh^jge+)&/af*(),&
Competitive 18.4% 9ll`]kYe]lae]$l`]hjghgjlagfg^j]khgf\]flko`gZ]da]n]
pressure 25.5% l`Yl[gehYfa]keYc]fgfÕfYf[aYd\ak[dgkmj]klgZmad\l`]aj
j]hmlYlagfkoal`[mklge]jk^]ddlg.+&0af*()-^jge.1&(af
2014. Similarly, the portion stating that companies make these
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af*()-^jge.1&(af*(),&AlYhh]Yjkl`Yl[gehYfa]keYq
Z]klYjlaf_lgegn]^jgefgfÕfYf[aYd\ak[dgkmj]kYkYe]Yfk
g^ZjYf\Zmad\af_Yf\j]_mdYlgjq[gehdaYf[]lgYegj]afn]klgj%
centric strategy.

,
KlYf\Yj\ar]\$k][lgj%kh][aÕ[
af^gjeYlagfak^mf\Ye]flYdlg
investors’ ESG assessments Afn]klgjk[gfkakl]fldqY^Õjel`]aj\]kaj]^gj\ak[dgkmj]kl`Yl
Yddgol`]Yhhd]k%lg%Yhhd]k[gehYjakgfg^[gehYfa]k$ZmldYe]fl
9ll]ehlaf_lgkgdn]l`]af[gfkakl]f[qYf\gl`]jhjgZd]ekoal`
oà[`fgfÕfYf[aYdj]hgjlaf_ak^Y[]\Ylalk[mjj]flfYk[]flklY_]
l`]^Y[ll`Yl[gf\m[laf_km[`[gehYjakgfkakg^l]f\a^Õ[mdlYf\ Yj]YfmeZ]jg^klYf\Yj\kgj_YfarYlagfkafl`]Õ]d\g^[gjhgjYl]
lae][gfkmeaf_&L`]MC`]Y\g^j]khgfkaZd]afn]klaf_imgl]\ j]hgjlaf_$af[dm\af_l`]AAJ;$l`]K9K:Yf\l`]?JA&L`]aj
Survey data indicates that investors are especially eager to l`YldafcfgfÕfYf[aYdjakcklg]ph][l]\h]j^gjeYf[]Yk]imYddq
]Yjda]j]phdYafkl`][mjj]fl\a^Õ[mdlqaf\gaf_[jgkk%[gehYfq=K? recommendations, some quite recent, are gaining international
e]Ykmj]Y[gehYfqÌkfgfÕfYf[aYdh]j^gjeYf[]Y_Yafkll`Ylg^ Z]f]Õ[aYd k]]>a_mj],&)!&Làk]fl`mkaYke^gjk][lgj%kh][aÕ[
[gehYjakgfk2É=n]fo`]f[gehYfa]khjgna\]af^gjeYlagfgf Y[[]hlYf[]$Yf\l`][gehYfa]kl`Yl^gddgol`]_ma\]daf]kg^
alkk][lgjh]]jkYf\lgdafcY[gehYfqÌkfgfÕfYf[aYdaf^gjeYlagf \ak[dgkmj]kakj]af^gj[]\Zqj]khgf\]flkÌ[gehYjYlan]dqdgojYfcaf_
g^hj]k[jahlan]Y[[gmflaf_klYf\Yj\koal`Õp]\[jal]jaY$l`Ylogmd\ ESG, the challenge is making it cross-comparable, because the Yfqgf]g^l`]k]gj_YfarYlagfkYj]YlY\aklaf[lY\nYflY_]oal`
lgalk]ph][l]\h]j^gjeYf[]&Kh][aÕ[Yddq$Ydegkll`j]]%imYjl]jk
g^j]khgf\]flk[gfka\]jk][lgj%kh][aÕ[j]hgjlaf_[jal]jaYYf\c]q k]]clgYhhdqYd]n]dg^mfa^gjealqY[jgkkYddk][lgjk& [gehYfa]kgZnagmkdq`Yn]\a^^]j]floYqkg^[gdd][laf_l`]aj\YlY$ investors.
h]j^gjeYf[]af\a[Ylgjk CHAk!lgZ]n]jqgjkge]o`YlZ]f]Õ[aYdlg Yf\l`]af\a[Ylgjkl`Yll`]qmk]Yj]\a^^]j]fl&O`]j]làf_kYj]
l`]ajafn]kle]fl\][akagfeYcaf_$Yf\egj]l`Yf/(k]]e]lja[k more regulated, there is better comparability and more data, but
where there’s less regulation, we have to go out there and seek to
O`gklYf\k^gjl`]klYf\Yj\k7
improve the disclosures by the companies that we own. Our ESG 9fmeZ]jg^klYf\Yj\kZg\a]kYj]lg\YqYll]ehlaf_
>a_mj],&)&Afn]klgjkoYfllge]Ykmj]Y[gehYfqËkfgfÔfYf[aYdh]j^gjeYf[]Y_Yafkll`Ylgâlk
l]Ye^mddq]f_Y_]koal`)*(%hdmk[gehYfa]kh]jq]Yj3YZgml,( lgÕddl`]f]]\^gjklYf\Yj\ar]\$[gehYjYZd]$k][lgj%
k][lgjh]]jkmkaf_[geegfh]j^gjeYf[][jal]jaY kh][aÕ[fgfÕfYf[aYdaf^gjeYlagf&L`]j]kmdlakYfYjjYq
g^l`gk]j]im]klkYj]^gjaehjgn]\\YlY\ak[dgkmj]&Ê
@goZ]f]Õ[aYdogmd\]Y[`g^l`]^gddgoaf_j]hgjlkgj\ak[dgkmj]kZ]lgqgmjafn]kle]fl\][akagfeYcaf_7 g^j][gee]f\]\j]hgjllqh]k&Egkl$`go]n]j$dafc=K?
J]hgjl[gfl]flk Investors consistently af^gjeYlagflgY[gehYfqÌkhj]\a[l]\h]j^gjeYf[]afYf

integrated report — that is, they integrate a company’s
K][lgjgjaf\mkljq%kh][aÕ[j]hgjlaf_[jal]jaYYf\CHAk
1.0%
Y^Õjel`]aj\]kaj] ÕfYf[aYdYf\fgfÕfYf[aYdj]hgjlaf_aflgYkaf_d]YfYdqkak&
These links, along with other characteristics seen in many
32.7% 41.5% 24.4%
0.5% ^gj\ak[dgkmj]kl`Yl g^l`]k]j]hgjleg\]dk km[`Ykk][lgj%kh][aÕ[klYf\Yj\k!$
are among the priorities that investors would like to see in
Statements and metrics on expected future performance and links to
fgfÕfYf[aYdjakck allow the apples-to- fgfÕfYf[aYdj]hgjlaf_$Y[[gj\af_lglàkklm\q&
L`j]]g^l`]egklafÖm]flaYdYegf_l`]k]klYf\Yj\k
32.4% 39.6% 25.6%
2.4%
0.0%
Yhhd]k[gehYjakgfg^ gj_YfarYlagfkYj]l`]^gddgoaf_2
companies, but lament

• The International Integrated Reporting Council (IIRC) has
Company disclosures based on what they feel is most material to issued the Integrated Reporting Framework that allows
their value creation story
l`]^Y[ll`Yl[gf\m[laf_
[gehYfa]klgj]hgjleYl]jaYdaf^gjeYlagfYZgmll`]aj
3.9% kljYl]_q$_gn]jfYf[]$h]j^gjeYf[]Yf\hjgkh][lkafl`]
28.8% 30.7% 36.6%
such comparisons is
[gfl]plg^l`]aj]pl]jfYd]fnajgfe]fl$mkaf_Yfafl]_jYl]\$
0.0%
[gf[ak]^gjeYll`YleYc]k[jgkk%[gehYfq[gehYjakgfk
Hj]k[jahlan]Y[[gmflaf_klYf\Yj\k^gjfgfÕfYf[aYde]lja[koal`
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easy.
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• L`]KmklYafYZadalq9[[gmflaf_KlYf\Yj\k:gYj\ K9K:!
3.0%
13% 44% 39.5%
0.5% consuming akYfaf\]h]f\]fl$MK%ZYk]\$fgl%^gj%hjgÕlgj_YfarYlagf
whose mission is to develop and disseminate industry-
9k]fagjYfYdqklYlYf9mkljYdaYfYkk]leYfY_]jY\\kl`Yl\gaf_ kh][aÕ[kmklYafYZadalqY[[gmflaf_klYf\Yj\kl`Yl`]dh
J]hgjl^gjeYl [jgkk%[gehYfq[gehYjakgfkak[gehda[Yl]\^mjl`]jZ][Ymk]l`] hmZda[[gjhgjYlagfk\ak[dgk]eYl]jaYdaf^gjeYlagfmk]^mdlg
K]hYjYl]kmklYafYZadalqYf\ÕfYf[aYdj]hgjlaf_ hjg[]kkYf\klYf\Yj\kYj]kgk][lgjkh][aÕ[2ÉL`]e]Ykmj]kl`Yl investor decision making within 80 industries.
1.4% we are interested in vary quite a lot across industries. While we • The Global Reporting Initiative (GRI) has pioneered a
24.0% 41.3% 31.7% ea_`lZ]afl]j]kl]\af$kYq$l`]afbmjqjYl]kg^[gehYfa]kl`Yl
1.4% comprehensive Sustainability Reporting Framework that
haul dangerous materials, the impacts we’re interested in are
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annual reports or not). third parties. Companies’ annual reports
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potential value that can be captured by investors.
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generally have employees on their >a_mj]-&,&Afn]klgjkaf9mkljYdaYYj]l`]egkldac]dqlgk]]fgfÔfYf[aYd\YlYYkj]d]nYflY[jgkk
investment committees or boards,” he all industry sectors
explains. “That, I think, has really driven
a sincere interest in ESG topics because Afoà[`k][lgjkYj]qgmegj]dac]dqlg[gfka\]jfgfÕfYf[aYd\YlYegklj]d]nYfl7 H]j[]flY_]g^j]khgf\]flk[`ggkaf_
you’re more likely to see an employee É9ddÊjYl`]jl`Yfaf\ana\mYdaf\mkljqk][lgjk&!
kYqaf_$Ë@]q$l`]k]Yj]làf_kl`YlYj]
important to me and other employees.
Let’s make sure that our investment side is
capturing that.’”
0*&. .-&1 .)&/ -,&- *0&.

Australia Europe Asia United Latin
(excluding Australia) States and America
Canada

“ We think ESG
United States and Canada Làk_jgoaf_]fl`mkaYke^gj\ak[ahdaf]\YfYdqkakg^[gehYfa]kÌ
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j][g_falagfl`YlS=K?Ulgha[kYj]aehY[laf_klg[ckYf\k][mjala]k investment process. I
9ll`]kYe]lae]$l`]hgjlagfg^j]khgf\]flkafl`]MKYf\;YfY\Yo`gÕf\afl]_jYl]\j]hgjlk]kk]flaYdo`]feYcaf_Yfafn]kle]fl
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certainly trying to drive that dialogue here, because we agree. We should say, ‘any good,
làfc=K?afl]_jYlagfakbmklYfYlmjYdhYjlg^YfqY[lan]$dgf_%l]je
investment process. I should say, ‘any good, active, long-term active, long-term
>a_mj]-&-&Afn]klgjkafl`]Mfal]\KlYl]kYf\;YfY\Y`Yn]Z][ge]egj]^g[mk]\gf
investment process.‘ “
investment process.’”
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2015 2014 g^kmklYafYZadalqj]k]Yj[àfl`]MCkYqk$ÉL`]j]Ìk[]jlYafdq
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statements and disclosures decisions in the last year h]j^gjeYf[]gfdYZgjklYf\Yj\kgj]fnajgfe]flYdgjj]_mdYlgjq
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moral basis rather than on recognition that these issues have a
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associated with that history, where people still see this as being
)+&1 the core agenda.”
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“There’s certainly
confusion around
investment gjaehgjlYfl
what ESG means for
a lot of investors.
But in the US, while many companies now acknowledge the
“
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;gfka\]jafl]_jYl]\j]hgjlaf_]kk]flaYdgj ]phdYafk$ÉKge]g^l`]klYhd]kgjZjYf\]\hY[cY_]\_gg\k
aehgjlYflo`]feYcaf_Yfafn]kle]fl\][akagf companies in the US have very intricate sustainability programs,
and they talk about how these programs really add value, help
l`]eeYfY_]oYl]jjakcYf\kggf&ÊÉ@go]n]j$Ê`][gflafm]k$
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companies, ‘You should consider ESG in your investment process
.+&* ,/&/ ^gjqgmj,() c!hdYf$Ìl`]afn]kle]flg^Õ[]jkYqk$ËFg$fg$fg$o]
don’t do that.’”

9kaY%HY[aÕ[ Latin America
>a_mj]-&.&KljYf\]\Ykk]ljakcakegj]hj]kkaf_Yegf_DYlaf
Afn]klgjkkYq$gfgf]`Yf\$l`Yl9kaY ]p[dm\af_9mkljYdaY!dY_k ÉAfDYlaf9e]ja[Y$l`]d]n]dg^\ak[dgkmj]ak
American investors
Z]àf\l`]j]klg^l`]ogjd\afalkj]hgjlaf_g^=K?af^gjeYlagf& lower than I have seen on US companies’
ÉL`]j]akYemdlalm\]g^hggjj]hgjl]jkaf9kaY$hYjla[mdYjdqaf )(%Ck$ÊkYqkYfYfYdqklYlYH]jmnaYf Afl`]dYkl)*egfl`k$`Ykqgmj^mf\\][j]Yk]\alk`gd\af_kg^Y[gehYfqÌk
;àfYYf\EYdYqkaY$ÊkYqkl`]`]Y\g^j]khgfkaZd]afn]klaf_Yl h]fkagf^mf\&ÉSAfDYlaf9e]ja[Y$UalÌkfgl k`Yj]k\m]lgl`]jakcg^kljYf\]\Ykk]lk ]&_&$\m]lg[`Yf_]kafj]_mdYlagf$
YMCYkk]leYfY_]j&:ml$gfl`]gl`]j`Yf\$l`]j]k]]eklg regulated. Companies issue things they social expectations, disruptive technology or environmental conditions)?
be ready evidence that advances are underway. “Japan,” he `Yn]afl`]aj^Yngj&H]jlYafaf_lgjakck$l`]q
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which is going to improve corporate governance there.” One US gflg]phdYafl`YlegklDYlaf9e]ja[Yf
Latin America
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governance in Japan could be contagious, says, “Japan, Yfqegj]=K?\ak[dgkmj]l`Yfl`]qg^^]j& 57.1% 23.8% 9.5% 9.5%
ljY\alagfYddqY[gmfljqo`]j]_gn]jfYf[]`Yk^Ydd]fZ]àf\gl`]j ÉAo]flgfYÕ]d\ljahafl`][`]ea[Ydk
developed market standards, is now trying to change that. You sector. The person in the inversor relations
Australia
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that were there, including me, cared
40.9% 22.7% 27.3% 9.1%
L`]kmjn]q\YlYYdkgj]n]Ydkgl`]jka_fkg^_jgoaf_afl]j]klaf
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j]khgf\]flk$,)&(`Yn]Ykljm[lmj]\$e]l`g\a[YdYhhjgY[`lg Ë9Zkgdml]dqfgl&ÌL`Ylakgf]h]jkh][lan]$ Europe
Zmll`]f$^gj]pYehd]$Z][Ymk]o]Yj]Y 37.3% 27.7% 32.5% 2.4%
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policy, we do care, and we push companies
@go]n]j$alk]]ekl`Yllàkafl]j]klaffgfÕfYf[aYdh]j^gjeYf[] to disclose that or improve their
Asia (excluding Australia)
gfl`]hYjlgâfn]klgjkaf9kaY ]p[dm\af_9mkljYdaY!`Ykfgl governance processes.” 29.5% 26.2% 29.5% 14.8%
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That said, there seems to be the growing
lgl`gk]gâfn]klgjkafgl`]jj]_agfk&G^j]khgf\]flkaf9kaY
j]YdarYlagfYegf_DYlaf9e]ja[Yf United States and Canada
]p[dm\af_9mkljYdaY!$,/&-j]hgjll`Yl[gehYfa]kÌfgfÕfYf[aYd
investors that they need to protect their 21.7% 30.4% 39.1% 8.7%
h]j^gjeYf[]f]n]jhdYq]\YhanglYdjgd]afl`]ajafn]kle]fl
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af^gjeYlagfegj]g^l]fhdYqkYhanglYdjgd]afafn]kle]fl\][akagf
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in all other regions (see Figure 5.2).
afDYlaf9e]ja[Y$-/&)$j]hgjlj]\m[af_
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\ak[dgkmj]g^=K?jakck$Y[[gj\af_lgkge]afn]klgjk&L`]`]Y\g^ Ykk]ljakcl`Yf\a\kgaf=mjgh]$9kaYgjl`] are likely to
j]khgfkaZd]afn]klaf_YlYdYj_]MCYkk]leYfY_]e]flÕjehgaflk US and Canada (see Figure 5.6).
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other risks, institutional investors around the world say they afn]klgjkl`]ajfgfÕfYf[aYdaf^gjeYlagfÈo`]l`]jnaYk]hYjYl]
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demonstrating a willingness — indeed, an eagerness — to gauge • Focuses on measurable performance factors, such as
issuers’ potential returns using expanded criteria, beyond the regulation, cost and risk
[mklgeYjq^mf\Ye]flYdYf\l][`fa[Ydafhmlk&;gehYfa]kk]]caf_ J]da]kgfklYf\Yj\$af\mkljq%kh][aÕ[[jal]jaYl`YlYddgo
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expected performance
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attention and, ultimately, may attract and retain investor’s capital. • Has a company’s top-level approval by, for example, its board
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criteria that allow comparisons between
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practical strategies: >mjl`]jegj]$YnYkleYbgjalqg^j]khgf\]flkoYfl_gn]jfYf[]
procedures in place that give a company’s board or audit
• Afn]klaffgfÕfYf[aYdj]hgjlaf_29klàkklm\qk`gok$afn]klgjk When examining risk and timeframe
[geeall]]Y[[gmflYZadalq^gjalkfgfÕfYf[aYdj]hgjlaf_&
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47.4% 41.4% 9.9% 1.3%
— especially among large-cap companies — widespread and [gfka\]jfgfÕfYf[aYdaf^gjeYlagfafl`]]YjdqklY_]kg^l`]aj
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short should keep in mind, as is also revealed in the survey, lglYc]YhgkalagfafY[gehYfq&Egj]l`Yf,-g^j]khgf\]flk 45.7% 37.7% 15.2% 1.3%
that investors are progressively bringing a more integrated kYql`]q^j]im]fldq[gfka\]j=K?af^gjeYlagfo`]f\]l]jeafaf_
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When adjusting valuation to account for risk
[gehYfa]k&L`]j]akem[`lgZ]_Yaf]\^jgeYfakkm]jÌk evaluating industry dynamics, and when examining the regulatory
ljYfkhYj]f[qYf\]f`Yf[]\fgfÕfYf[aYde]kkY_af_& ]fnajgfe]fl k]]>a_mj].&)!&FgfÕfYf[aYdaf^gjeYlagfhdYqk 35.5% 46.1% 16.4% 2.0%
a lesser role, say investors, when reviewing investment results.
• >g[mkfgfÕfYf[aYd\ak[dgkmj]kgfaf^gjeYlagfl`YlakeYl]jaYd
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dgf_%l]jenYdm][j]Ylagf$Yf\$l`]j]^gj]$afl`]fgfÕfYf[aYd 26.5% 41.7% 22.5% 9.3%
issuers hoping to make it onto investors’ short list are well advised
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this study is that investors want to know how a company’s
investors increasingly seek. When reviewing investment results
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• Consider incorporating domestic and international leading
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guidelines — such as the IIRC’s Integrated Reporting Framework,
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K9K:ÌkfgfÕfYf[aYdY[[gmflaf_klYf\Yj\kYf\?JAÌk
Sustainability Reporting Framework — evolving rapidly, the bar
afn]klaf_gn]jY^]oegfl`k$l`]f\gaf_YfYo^mddglgôgjc Frequently Occasionally Seldom Never consider
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g^YZmkaf]kkeYqfglZ]ogjlàl&:mla^qgmYj]gjgm_`llgZ]
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a longer-term investor, then these issues become much more
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those that ignore these leading practices are progressively at
risk.
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want, they may increasingly see it as a negative when making
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Next steps for investors Indeed, some investors even take steps beyond engaging
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afn]klgjkaf[gjhgjYlaf_fgfÕfYf[aYdk[j]]faf_aflgl`]aj\][akagf and consistent approaches. Investors are likely to continue
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we have seen, and is an especially high risk with ESG-sensitive them into their investment decision making because, without meeting to discuss these issues.”
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them, they would miss the increasing risks and opportunities
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Furthermore, certain investors are attempting to improve
resources, other and transparently. and potential holdings.

disclosure through legislation and collaboration with public action
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priorities or timing Af]phdYafaf_àkÕjeÌkhgklmj]Y[jgkkYddgâlkhgjl^gdagklgoYj\ >mjl`]jegj]$l`]j]Yj]YfmeZ]jg^kl]hkl`Ylafn]klgjk af9ME`YkÉYhjg[]kkafhdY[]o`]j]$l`jgm_`k`Yj]`gd\]j

eakkaf_fgfÕfYf[aYdaf^gjeYlagf$l`]`]Y\g^j]khgfkaZd] themselves can — and do — take to increase the quantity and initiatives or statutory initiatives, we encourage companies to
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may be interpreted afn]klaf_YlYMCYkk]leYfY_]e]flÕjeoal`MK,*-Zaddagf j]hgjl$ÊY[[gj\af_lgalk`]Y\g^]imalqhgjl^gdageYfY_]e]fl&
af9MEj]hgjlk$ÉLqha[Yddq$a^Y[gehYfqakfÌlhjgna\af_\YlY$ hYjla[mdYj$eYfqkmjn]qj]khgf\]flkj]hgjll`Yll`]ajÕjek$Yk 9f\l`]`]Y\g^j]khgfkaZd]afn]klaf_afl`]MCY\\k$ÉO]Ydkg
hYjlg^l`]ajafn]kle]fl\][akagfeYcaf_$kh]f\Yka_faÕ[Yfl collaborate with others through initiatives such as the Carbon
negatively by investors it is potentially not managing or recognizing these risks or
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<ak[dgkmj]Hjgb][lYf\YkmZ%hjgb][lg^l`Yl[Ydd]\l`];YjZgf
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that its management has a strategy to deal with this. That would
gl`]jfgfÕfYf[aYdaf^gjeYlagfakk]]fYkhjg_j]kkan]dqegj] emitting companies to set themselves carbon targets and, going
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important to investment decisions, this investor practice will likely ^gjoYj\$YZkgdml]j]\m[lagflYj_]lk&Ê
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increase.
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a nudge to provide the data.” L`]`]Y\g^j]khgfkaZd]afn]klaf_YlYMCYkk]leYfY_]j]phdYafk à_`]j%imYdalq=K?Yf\gl`]jfgfÕfYf[aYd\ak[dgkmj]kZmlYj]
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Kg$]n]fl`gm_`Y[gehYfqÌkj]la[]f[]affgfÕfYf[aYd the companies in which we invest, asking them to provide us dggcaf_akkm]jk[gmd\]^^][lan]dqk]ar]l`]ghhgjlmfalqlgÕddlàk
j]hgjlaf_eYqfglZ]Yfaf\a[Ylgjg^hggjeYfY_]jaYdYfYdqkak with the data demonstrating that they’re managing these risks. af^gjeYlagf\]Õ[alYf\$afl`]hjg[]kk$[j]Yl]Yegj]]^^][lan]
or stewardship, it may be perceived that way. Failure to make Afl`]=mjgh]YfeYjc]lhdY[]$o]Ìj]imal]YZa_`gd\]jafeYfqg^ afn]klgjkljYl]_q^gjl`]ek]dn]k.
fgfÕfYf[aYd\ak[dgkmj]k]n]f^gjj]Ykgfkg^daeal]\j]kgmj[]k$ l`][gehYfa]kafoà[ò]afn]kl&L`]kar]g^gmjk`Yj]`gd\af_
other priorities or timing may be interpreted negatively means that our ESG team has quite a good ability to get data and
by investors. afÖm]f[]eYfY_]e]fl&ÊFglYddafn]klgjk`Yn]l`]afÖm]f[]gn]j
>mjl`]jegj]$l`][gfk]im]f[]k^gjY[gehYfql`Yl`YkkmZhYj [gehYfa]kl`YllàkMK,*-ZaddagfYkk]leYfY_]e]flÕje`Yk&
ESG-reporting practices relative to its sector peers can be serious
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af9ME]phdYafk$ÉO`]fo]`Yn]fgaf^gjeYlagfgf=K?^jge
Y[gehYfqalk]d^naY:dggeZ]j_$o]Ykka_falYfafl]jfYdjYlaf_
meaning ‘no data available,’ which is neutral; it’s not negative or
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klYf\Yj\lg\]l]jeaf]oà[àkkm]jklgaf[dm\]afalk=K?hgjl^gdag$
“such a company would screen lower than the best and would
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HY[aÕ[ k]]>a_mj]9&*!&Làkq]YjÌkklm\qaf[dm\]kYem[`à_`]j afn]kle]fl\][akagfkaf]n]jqk][lgj&Oàd]egj]l`Yf`Yd^kYq
This 2015 study, commissioned by EY and conducted by the afklalmlagfYdafn]klgjkafl`]9e]ja[Yk$=mjgh]Yf\9kaY%HY[aÕ[&
hjghgjlagfg^j]khgf\]flk^jge9kaY%HY[aÕ[l`Yf\a\l`]*(), l`Yll`]qafn]klY[jgkkYddk][lgjk$l`]f]pldYj_]kl_jgmhkg^
Custom Research Group at Institutional Investor Research In addition, in-depth interviews were conducted with 11 investors
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AAJ!$]pYeaf]kafn]klgjkÌna]okYZgmll`]mk]g^fgfÕfYf[aYd afgj\]jlggZlYaf[gfl]plYf\^mjl`]j\]lYadkj]_Yj\af_l`]
Yf\l`]af\mkljaYdk][lgjk k]]>a_mj]9&+!&
af^gjeYlagfafafn]kle]fl\][akagfeYcaf_&AlakY^gddgo%mhklm\q data collected.
to one on the same topic, also commissioned by EY and conducted Survey respondents represent high-level investment decision
by IIR, that was published in 2014. eYc]jk3af\]]\$Ydegkl`Yd^Yj]hgjl^gdageYfY_]jk&G^Ydd >a_mj]9&*& Kmjn]qj]khgf\]flkYj]dg[Yl]\afl`]9e]ja[Yk$=mjgh]$Yf\9kaY%HY[aÔ[
For use in the 2015 study, IIR, in collaboration with EY, composed j]khgf\]flk$.)&.ogjc^gjlàj\%hYjlqafn]kle]fleYfY_]jk&
a questionnaire on the study topic, which it kept largely consistent FglYZdq$Ydegkll`j]]%imYjl]jkg^j]khgf\]flkogjc^gj Where is your position located?
with the questionnaire used in the 2014 study so that historical afklalmlagfkoal`MK)(Zaddagfgjegj]af9ME k]]>a_mj]9&)!& AlYdq(&1 KhYaf(&1
comparisons could be made. In January and February 2015, IIR ?]jeYfq)&, Ko]\]f(&1
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EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction and advisory services.
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in the capital markets and in economies the world over. We develop
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stakeholders. In so doing, we play a critical role in building a better working
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About EY’s Climate Change and Sustainability Services

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requirements and rising stakeholder concerns. There may be opportunities
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to create long-term shareholder value. The industries and countries
in which businesses choose to operate, along with extended business
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opportunities. Our global, multidisciplinary team combines our experience
in assurance, tax, transactions and advisory services with climate change
and sustainability knowledge in all industries. We provide tailored services
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Wherever a business may be in the world, EY can provide the right
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about our organization, please visit ey.com.
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1506-1545882
ED None
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only and is not intended to be relied upon as accounting, tax, or other
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=Q?dgZYdDaeal]\l`YfckAfklalmlagfYdAfn]klgjDD;^gj[gf\m[laf_làk
research and writing this report.
© 2015 EYGM Limited.

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Climate Change and Sustainability Services

Tomorrow’s Investment Rules 2.0 — geographic contacts
9e]ja[Yk Japan
Jeanna Doherty C]aa[àMkàbaeY

Contact | +1 860 725 3835 Contact | +81 3 3503 3292
Global, Europe, Middle East, India and E: [email protected] E: [email protected]
9^ja[Y =E=A9!
Juan Costa Climent 9kaY%HY[aÕ[ Oceania

Contact | +34 915 727 381
E: [email protected] EYl`]oF]dkgf EYll`]o:]dd
Contact | +61 3 9288 8121 Contact | +61 2 9248 5555
E: [email protected] E: matthew.bell.au.ey.com
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Tomorrow’s

Tomorrow’s Investment Rules 2.0 | 1

3. Investors seek consistent and comparable

5. The regional view: Europe still leads, but

6. Actions for issuers and investors:

About this research 42

2 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 3

Juan Costa Climent

4 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 5

The responses about

stranded assets reveal

that investors’ concern

over this risk might be

many expect ;gfka\]jeYf\YlgjqZgYj\gn]jka_`lg^fgfÕfYf[aYd

8 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 9

Stranded assets are among the clearest

stemming from environmental and social

10 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 11

Investors are increasingly EYdYqkaYfh]fkagf^mf\oal`MK*((Zaddagfaf9MEj]hgjlkl`Yl$

^jge[gehYfa]kl`Yl Certain other institutional investors are interested in including

are good environmental — l`Ylak$[gehYfa]kl`Yl[j]Yl]nYdm]^gjaf\ana\mYdkgjkg[a]lq&

citizens to ones that are ]pYehd]kg^l`]ajeYcaf_km[`afn]kle]flkaf[gehYfa]kjYf_af_

charitable donors charitable donors.

14 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 15

because I think these

15.3% 9.1% 13.6% 11.7% 8.7% 8.0%

17.7% 19.1% 24.2% 21.7%

Human rights risk Rule out investment immediately

Yes No, No Don’t know

18 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 19

“ The evidence shows that once

20 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 21

22 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 23

J]hgjl[gfl]flk Investors consistently af^gjeYlagflgY[gehYfqÌkhj]\a[l]\h]j^gjeYf[]afYf

companies, but lament

Very Somewhat No Impact Somewhat Very

24 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 25

akn]jqZ]f]Õ[aYd integrated reporting

26 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 27

Mandatory board oversight 80.8% 68.9% 91.3%

0*&. .-&1 .)&/ -,&- *0&.

30 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 31

32 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 33

34 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 35

Next steps for issuers

36 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 37

38 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 39

resources, other and transparently. and potential holdings.

priorities or timing Af]phdYafaf_`akÕjeÌkhgklmj]Y[jgkkYddg^alkhgjl^gdagklgoYj\ >mjl`]jegj]$l`]j]Yj]YfmeZ]jg^kl]hkl`Ylafn]klgjk af9ME`YkÉYhjg[]kkafhdY[]o`]j]$l`jgm_`k`Yj]`gd\]j

40 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 41

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42 | Ernst & Young LLP Tomorrow’s Investment Rules 2.0 | 43

About EY’s Climate Change and Sustainability Services

© 2015 EYGM Limited.

Climate Change and Sustainability Services

Jeanna Doherty C]aa[`aMk`abaeY

Juan Costa Climent 9kaY%HY[aÕ[ Oceania

44 | Ernst & Young LLP

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