Trucost: Driving Sustainable Investment Decision Making

Trucosttaking the environment into accountdriving sustainable investment decision makingtrucost.com2If water were to be priced according to its availability, based on current production locations 27% of profits would be at risk across the world’s largest companies“ “Natural capital liabilities such as carbon, water, resource dependency, pollutants and waste are threatening the ability of our natural ecosystems to deliver economic growth. The impact is already being felt through volatile commodity prices linked to extreme weather events and natural resource constraints. Governments are also beginning to ask companies to internalize environmental costs through regulatory frameworks.We’ll help you navigate the complexities of natural capital investment factors with data, insight and tools that identify liabilities concealed within corporate value chains and help you integrate natural capital considerations in financial products and services.Trucost’s Environmental Register provides the world’s most comprehensive natural capital data representing 93% of global markets by market capitalization. We also provide customized insight based on our environ-mental economics expertise. Key to our approach is that we not only measure natural capital risk in physical quantities, we also apply a financial value to provide an overarching metric for risk and opportunity analysis.Our data is used by the world’s largest pension funds and leading financial institutions to enhance their investment processes – you can trust in our credentials.We help investors understand the economic consequences of natural capital dependency in order to identify risk and opportunity from growing natural resource pressures and increasing environmental regulation3How can Trucost help?We provide industry leading data, tools and insight that identify investment risk and opportunityfrom increasing natural resource constraints and environmental costs.Trucost’s analysis has assisted us a great deal in understanding our portfolio carbon and water risks which will be further used in developing GEPF’s carbon and water risk mitigation and engagement strategies with investee companies“ “4Trucost’s Environmental Register provides the world’s most comprehensive natural capital data covering 93% of global markets by market capitalization to help investors embed natural capital considerations within traditional investment analysis. Trucost Environmental RegisterNatural capital impacts are often concealed within global supply chains. We use advanced environmental modelling to reveal liabilities at each tier of the value chain for holistic risk and opportunity analysis. We then apply standardized company disclosed natural capital data – and engage annually with the world’s largest companies to either confirm or improve our research by incorporating the latest non-disclosed information. You can be confident in our ability to provide complete and comprehensive natural capital metrics.Uses of Trucost’s Environmental RegisterOur data and insight supports fundamental analysis, best in class analysis, investment screening, scenario analysis, risk monitoring, engagement and thematic research. But every investment strategy is different. Our analysts are experts in environmental economics. They will work with you to identify the best ways in which natural capital metrics can be applied to your particular investment strategy in order to:Generate alpha • Reduce risk • Analyze commodity flows • Understand the impact of regulatory frameworks • Create new investment products • Market existing products • Conduct natural capital engagement programmes • Gain deeper insight into key natural capital themes • Meet increasing reporting requirements e.g. UN PRI, NCD, CDP or GHG Protocol • Trucost’s global environmental impact data has enabled us to truly integrate climate change analysis into our investment process. The quantitative data is fed into our mainstream investment decision making process enabling risk management, portfolio footprinting, sector and stock level analysis and the simulation of climate change strategies across asset classes““5Features of Trucost dataNatural capital metrics Standard: carbon and other Greenhouse Gas (GHG) emissions, water use, resource dependency, air/land/water pollutants, wasteFinancial: externality valuation ($), impact ratio (proxy for potential contingent resource liability), profit at riskCustomized: commodity flows, environmental benefits, region specific analysis, legislation impact, forward looking scenario analysisDisclosure metrics We research the environmental reporting of 4,500 companies globally on an annual basis and provide a disclosure metric for each natural capital impact.Advanced environmental profiling toolWhere companies do not disclose natural capital data, we complete the data gaps with advanced econometric modelling which converts business information related to activities and revenues into detailed natural capital metrics.History Time series data available (typically 5-10 years)Number of companies Standard: ~4,500 listed companies (representing 93% of global markets by market capitalization)Customized: Trucost can incorporate additional company analysis based on business activities and revenue for any company, irrespective of size or listing.Indices covered MSCI World, S&P 500, MSCI Emerging Markets, MSCI Europe, STOXX Europe 600, S&P/IFCI LargeMidCap, MSCI Asia Ex-Japan, FTSE All-Share, Nikkei 225, Topix 150, Bovespa, ASX 200, CAC 40, SMI, KOSPI, IBEX, AEX and FTSE MIB.Asset classes covered Equities, fixed income, commodities, private equity, infrastructure and property. GHG Protocol Scopes (1, 2, 3) coveredALL Scopes (covering operation impacts, fuel use and supply chain impacts)Information sources We research, standardize and validate company disclosed data (via environmental reports, financial reports, websites) and Carbon Disclosure Project (CDP) responses (Trucost is a CDP Gold Partner). We also engage directly with companies to verify our research and collect the latest non-disclosed data.Economic valuations We provide natural capital data in financial terms using environmental cost analysis derived from academic literature enabling you to understand potential financial impacts and integrate natural capital risk into traditional financial metrics.Verification We have developed a robust verification process which includes independent analyst quality checks, identification of data outliers and sector level comparisons. We also engage directly with companies as part of our research process to verify our assessments.Delivery options We offer data subscriptions as well as custom cuts of data. These can be delivered via the Trucost EBoard, customized spreadsheets or FTP transfer. Thematic research and customized analysis is also available in report form.Investment platforms Our data is also available via FactSet and Style Research platforms.6For banks, natural capital risk is mainly focused in lending and financing activities – yet few banks are actively managing this systemic risk.Bank loan booksWe worked with Trucost to carry out an analysis of the generation mix of the energy companies we lend to and their greenhouse gas emissions. We have also implemented a range of policies and procedures to ensure we take account of social and environmental risks when lending to customers““We help banks identify, monitor and report natural capital risk embedded in financing activities as a result of growing natural resource pressures and increasing environmental regulation.Our data and insight provides a fast assessment of natural capital risk by company, region or sector. We can rank and benchmark company performance and disclosure to support annual risk assessments. Or we can develop customized platforms to engage with companies in order to manage risk and promote best practice standards.We also provide a comprehensive range of time series natural capital metrics to support the development of new investment products or client services.Chart 2: Natural capital risk for banks7Portfolio auditsOur portfolio audits provide a comprehensive understanding of natural capital risk and opportunity at portfolio level or across consolidated holdings – including comparison to appropriate benchmarks to explain the effect of stock selection and sector allocation decisions.They support you in evaluating unanticipated bias to natural capital risk, highlight engagement issues – and help you meet increasing environmental reporting requirements, including UN PRI, CDP, GHG Protocol, investment mandates and stakeholder reporting.We assess a range of natural capital metrics including carbon emissions, water use, resource dependency, pollutants and waste across equity, fixed income, private equity, property, real estate, infrastructure, and commodity portfolios.We also provide customized solutions for calculating and reporting on the environmental benefits of clean technology and sustainability funds.Trucost footprints of our active equity funds against their benchmarks give us a fresh perspective on risk, stock selection and sector exposures. The analysis helps us track external fund manager performance against environmental criteria, identify companies for engagement and address financially material risks and opportunities linked to our investments“ “Portfolio audits help you to quickly assess the natural capital implications of investment portfolios though the traditional lens of portfolio attribution analysis.Chart 3: Stock and sector allocation8Our data drives investment products from leading fund managers that deliver financial performance with up to 50% reduced natural capital riskInvestment productsTrucost’s quantitative work highlighted that applying a ‘green’ filter to our current investments could actually add value and generate extra returns“ “We work with index providers, fund managers and pension funds to develop investment products that deliver financial performance alongside reduced risk from growing natural resource pressures and increasing environmental regulation.Our comprehensive range of time series natural capital metrics underpins active and passive investment strategies.Whether you want to generate alpha, reduce risk or track an investment benchmark, our expert analysts will support you every step of the way.Chart 4: S&P IFCI Carbon Effficient Index9EngagementTrucost’s ability to dig out the data about the environmental consequences of production is absolutely second to none anywhere in the globe“ “We provide customized, data driven solutions to ensure your environmental engagement programmes are well informed and focused in the right areas.We provide company briefings summarizing issues for engagement, supported by data on how the company’s performance compares to peers and sector benchmarks, to ensure your engagement programmes are well informed.We can also provide time series data for trend analysis, set targets for companies to improve performance – and report changes in performance following engagement programmes.Our data and insight helps you:Identify companies where engagement on natural capital • issues is most likely to increase shareholder value Assess which companies and sectors will be most affected • by current and future regulatory frameworks Understand the impact of pass through regulatory costs • through environmental economic analysis Analyze the effect of commodity price shocks on • company supply chains Meet UN PRI commitments quote• Chart 5: Change in commodity costs/EBITDA10InsightThe United Nations backed Principles for Responsible Investment (PRI) and the United Nations Environment Programme Finance Initiative (UNEP FI) commissioned Trucost to calculate the cost of global environmental damage and examine why this is important to the economy, capital markets, companies and institutional investors“ “Our research can be thematic looking at particular sectors and associated resource constraints and environmental costs; regional, such as examining environmental disclosure in emerging markets; or issue specific, such as authoring the UK government’s environmental reporting guidelines for business.We publish regular research studies to support the investment community in understanding natural capital risk and opportunity across investment funds, indices, regions and sectors.Visit www.trucost.com to download our FREE published research. 11EBoardOur partnership with Trucost provides FactSet users with a robust and comprehensive environmental data set to let them manage environmental risk alongside traditional financial metrics“ “EBoard is a robust analytical tool designed by Trucost to help investors identify natural capital risk and opportunity from growing natural resource pressures and increasing environmental regulation. Powered by our comprehensive natural capital data and insight, EBoard provides a comprehensive range of natural capital metrics to support company and portfolio level analysis.Alternative delivery optionsFactSet• FactSet has partnered with Trucost to enable investors to seamlessly embed environmental risk management into their everyday decision making, alongside traditional financial metrics. The partnership creates an integrated approach to analysing the environmental performance and associated financial risk of all companies across the major investment indices, including carbon, water, waste, pollution and natural resource dependency.Style Research• Style Research has formed a partnership with Trucost to incorporate its data and analysis on the environmental impacts of companies into its traditional equity style analysis, allowing asset managers to assess the environmental footprint of their funds, understand the risks and create funds with lower impacts. 12CredentialsNewsweek worked with leading environmental researcher Trucost to rank companies based on their actual environmental performance for its Green Rankings“ “Trucost has analysed the economic consequences of environmental dependencies associated with $2.7 trillion investment funds.• Trucost data drives a range of environmentally optimised indices and investment products for leading index providers and fund managers • including Bank of America Merrill Lynch, GLG Partners, Legal and General Asset Management, NYSE Euronext, Standard and Poor’s, UBS, VicSuper and Virgin Money.Trucost works with the world’s largest pension funds to help them integrate natural capital metrics in investment decision making including, • BT Pension Scheme, CalSTRS and the Norwegian Petroleum Fund.Trucost is a Gold CDP Partner. By partnering with the CDP, Trucost is able to embed CDP data within its data subscription services• Trucost assessed the environmental damage costs of the world’s largest 3,000 companies on behalf of the United Nations Environment • Programme Finance Initiative (UNEP FI) and the United Nations Principles for Responsible Investment (UN PRI).Trucost was commissioned by the UK Government to write its Environmental Reporting Guidelines for Business: Key Performance Indicators.• Trucost has worked with Newsweek since 2009 as the lead research partner for its annual Green Rankings. • Trucost data is used by 15 academic institutions (including Harvard, Yale & Oxford University) and is supported by an Academic • Advisory Panel.Trucost has been researching, standardising and validating the world’s most comprehensive environmental impact data for over 12 years, • including carbon emissions, water usage, waste disposal, pollutants and natural capital dependency.Trucost has been helping investors, companies, governments, academics and thought leaders to understand the economic consequences of natural capital dependency for over 12 years – and has a strong heritage of delivering innovative, data driven solutions to meet complex sustainability challenges. 13Our clientsWhile it’s still early days in the brave new world of carbon-pricing, Trucost’s research suggests that far from being a doom and gloom scenario there may be just as many investment opportunities as there are risks“ “Keep in touchFollow us on twitter…@trucostJoin us on LinkedIn…/trucostKeep up to date with our news, events and blog…trucost.com/news-and-events14Trucost is a Research and Information business focused on natural resource economics, with a growing client base of investors, corporations and consultants in the Americas, Asia, Australia and Europe. The Company pioneered the quantitative analysis of corporate impacts on the environment, in terms of carbon emission, water use, waste and pollution. UK Trucost Plc, 22 Chancery Lane London WC2A 1LS United Kingdom T:+44 (0) 20 7160 9800 E: enquiries@trucost.comNorth America Trucost Plc, 60 State Street Suite 700 Boston, MA. 02109 T: +1 800 402 8774 E: northamerica@trucost.comAsia Trucost Plc, Beijing, China. T: +86 13811433419 E: asia@trucost.comContact usTrucost’s ability to dig out the data about the environmental consequences of production is absolutely second to none anywhere in the globe“ “Dr. Richard MattisonChief Executive OfficerAlastair MacGregorChief Operating OfficerLauren SmartExecutive Directortrucost.comLibby BernickSenior Vice President, North AmericaChaoni HuangHead of Business Development, Asia