1. No category

VALUING NON-FINANCIAL PERFORMANCE
-ET PROSJEKT FRA CSR EUROPE
Enterprise 2020: Smart, Sustainable and Inclusive
Social innovation
= new ideas, business models, products & services that resolve existing sustainability challenges
European Alliance Laboratory
Market Valuation of Non-Financial Performance
2006 - 2008
Central Proposition:
1. Companies (CEOs) believe their companies would be more
highly rated if investors understood more about the nonfinancial performance (CSR/Intangibles) of the company;
2. Investors believe they would be better able to assess the
future performance of companies if the companies were
willing to share more information on key drivers, particularly
non-financial drivers
http://www.csreurope.org/pages/en/market_valuation.html
Enterprise Value
Important Findings: The blockages
Companies
• Perceived lack of adequate senior executive expertise in non-financial performance issues
and reticence to include in investor presentations unless material to current business
strategy.
• Concerns over the robustness of non-financial performance management information and
internal methodologies for delivering it.
• Lack of senior executive confidence in the company‘s ability to manage non-financial
performance to the extent of being able to maintain current and forecast future performance.
• Scepticism at investors‘ interest in non-financial performance.
• Concerns about impact on personal credibility of senior executives promoting messages that
are not perceived by investors as core to the financial performance of the business.
Important Findings: The blockages
Investors
• Inadequate evidence of casual link between non-financial and financial performance.
• Lack of robust inter-company or sectoral frameworks for comparison of non-financial
performance.
• The relative importance of non-financial performance differs between risk and regulatory
environments.
• Investor expertise limited to assessment of non-financial performance related directly to the
business strategy or leadership competence.
• Lack of willingness to publicise basis of evaluating non-financial performance to protect
proprietary analytical tools and approaches as a source of market differentiation, creating
lack of transparency in investor methodologies.
Collaborative Project on Valuing Non-Financial Performance
OBJECTIVES
What are we trying to achieve?
(1) Company project
(2) Investor project
The company project helps companies to
increase quality and efficiency of nonfinancial performance management, by:
The investor project aims to:
1.
1. Identify the Environmental, Social and
Governance (ESG) factors that the
largest European investors considers
most likely to add long-term enterprise
value (“super factors”)
2.
3.
4.
5.
Helping companies to better identify,
measure and manage core drivers of
non-financial performance;
Overcoming challenges in engaging
with various parts of businesses;
Creating a more robust business case
for driving CSR within companies;
Improving the quality and focus of
reporting and the link to company
planning processes;
Understanding – with regard to top
management – how to identify and
communicate the data that is most
relevant to investors.
2.
Develop a robust methodology for
Measuring the “super factors”
Objective
1. Overcoming the
blockages
Company
project
Investor
project
2. Super-factors
6-10 (?) factors that,
regardless of sector,
companies and investors agree
add long-term entreprise
value
COMPANY PROJECT
PROJECT OVERVIEW
19 Corporate Participants from CSR Europe/EABIS
network:
2011-2012: three-step improvement process
Workshop #2
Workshop #3
Strategic
Workshop #1
Integration
Maturity
Results linked to core
business strategy and
KEY Performance
Indicators
Delivering performance
improvement through
core management
processes
Coherence in
measurement AND
management of nonfinancial performance
Reporting
Workshop no.1: Management Maturity
“Getting your measurement right & getting it used”
Objective(s):
To increase the level of maturity within companies by improving their capacity to measure and
manage what is material to their business
Process:
Empirical Analysis:
Company self-assessment
Individual
Conversations
Output:
Compare companies to identify
common areas for
improvement
Analyze Best Practices &
“best in class” tools
1.5-day Workshop
Share opportunities
/solutions for improvement
Expected/Desired Outcome(s):
Assist companies to better identify, measure and manage core drivers of non-financial
performance
Workshop no. 2: Management Integration
“the degree to which CSR is linked to the core strategy & management processes of the business”
Objective(s):
To help companies link their CSR management and/or measurement to core strategic
and management processes of the business
Process:
Output:
Empirical Analysis:
Questionnaire
1.5-day Workshop
Identify best practices, challenges and common areas for
improvement.
Share opportunities
/solutions for improvement
Expected/Desired Outcome(s):
1. Overcoming challenges in engaging with various parts of the business;
2. Improving the quality and focus of reporting and the link to company planning
processes.
Workshop no. 3: Strategic
“Closer to the holy grail – the link between Financial & Non-Financial Performance”
Objective(s):
To identify the key performance indicators within companies where the link between financial
and non-financial performance can be validated
Process:
Output:
All Company Participants (Wave One &Two)
Collect individual company examples
One-day Workshop
Identify current linkages
between FP & NFP
Expected Outcome(s):
1. Creating a more robust business case for driving CSR within your company;
2. Understanding – with regard to top management – how to identify and communicate
the data that is most relevant to investors.
3. Comparison of “Super factors” with the Delphi Investor Project
„What happens in Brussels, Stays in Brussels“
All information shared during the CP VNFP Workshops
remains confidential and sources will not be included
in written material unless prior consent is obtained
4 CSR Europe National Partners will potentially
replicate the VNFP project:
Nordisk prosjekt H12 – V13
• Replikerer det europeiske prosjektet WS 1 og
2.
• CSR Sweden er prosjektansvarlig, Ola Løhman
er prosjektleder
• Opp til 10 selskap får bli med – fra Sverige,
Norge og Finland
• 4 plasser er tatt, 4 er i beslutningsprosess
• Det vil koste tid, innsats og penger å bli med
Prosess
 Selvevaluering i en strukturert prosess starter så snart som mulig.
Ola vil være selskapenes sparringpartner. Resultat fra
selvevalueringen vil anonymisere hos CSR Europe, og danne
grunnlag for sammenligning av ulike tilnærminger
 Workshop 1: 1,5 dager i slutten av oktober. Få frem nye forslag til
ESG-drivere i selskapene
 Utfylling av spørreskjema utviklet av CSR Europe for å identifisere
Best practice, utfordringer og forbedringsområder
 Workshop 2: 1,5 dager i slutten av november. Dele forslag til
løsninger og forbedringer
 Konferanse i London 2013: Dele alle resultat fra de to europeiske
prosjektene + de regionale prosjektene + Investorprosjektet
Input / Output
Forventet resultat:
 En ny forståelse for ESGfaktorer som verdidrivere –
og derfor interessante
rapporteringsindikatorer
 Økt strategisk relevans for
samfunnsansvarsarbeidet
 En konkret kobling av ESGfaktirer til egen strategi og
kjerneprosesser
 Et solid grunnlag for
integrert rapportering
Nødvendig innsats:
 1 – 2 personer deltar i selve
prosjektet
 Internt bør alle relevante
miljøer engasjeres både i
analysedel, utvikling og
integrering i
kjerneprosesser
 Åpenhet om egen
virksomhet i Workshops
 75.000 SEK dekker prosess,
støtte + 2 WS m /kost og
losji.
INVESTOR PROJECT: PROJECT DELPHI
PROJECT OVERVIEW
45+ Participants
Asset Manager Group
Metrics Group
Asset Owner Group
Consultants Group
State Street Global
Advisors
Axa IM
SG Corp & Investment
Bank
Aberdeen Asset
Management
F&C Management
BofA Merrill Lynch
Schroders
BNP Paribas
SEB Investment
Management
Goldman Sachs (GS
Sustain)
Royal London Asset
Managers
AWJ Capital Partners
DB Climate Change
Advisors
WHEB AM
DVFA / EFFAS
SAM Research AG
KKR
ECPI
Aviva
West LB
Cheuvreux
CIC AM
Zürcher
Kantonalbank
Railpen Investments
Storebrand
APG
KLP, Norway
DNB (Dutch Central
bank)
Nestlé Deutschland
Pension Protection Fund
Varma
ERAFP
PGGM (consultative role)
AP3 (consultative role)
Mercer Consultants
Hymans Robertson
Towers Watson
Cambridge Associates
Academics /
Federations
EABIS
Universität Hamburg
Context of Project Delphi
• ESG has now become mainstream and is growing fast
Strong demand from investors
• Little consensus amongst institutional investors on ESG investment
criteria
• Data sets are short at present, but are getting longer every day.
• Non-Financials (including ESGs) do account for substantial value.
Which ones ? By how much?
• Project intended to bring together the strands of research already
carried out by asset managers and other market participants, agree
basis for measurement and obtain validation from the large institutional
investors.
Deliverables
• Agreed methodology for measurement and reporting
• Short-list of ESG material factors
• Recommended minimum set of KPIs which should be reported by
corporates. Absolute value & intensity.
• Suggestions for complimentary KPIs – sector specific
• Framework as a recommendation for reporting by corporates and
investors
• Set of ESG super-factors, priority ranking and metrics that are validated by
a cross-section of Europe's largest institutional investors.