PROJECT DELPHI: THE MATERIAL ESG FACTORS AND METRICS THAT DRIVE VALUE - 18th March 2014
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18th March 2014 PROJECT DELPHI: THE MATERIAL ESG FACTORS AND METRICS THAT DRIVE VALUE
Our mission
Enhance ESG Enhance understanding of the impact of the most
important ESG factors on the creation of
understanding enterprise value
Measurement Develop a credible methodology for measurement
of the ESG factors and provide a dynamic platform
methodology for future models
Validated Deliver a framework for the creation of collective
investment vehicles and/or integration into investment
framework decision making, validated by asset owners
Signpost Provide pointers to potential alpha creating and risk
mitigating drivers
outperformance
Investor Create an investor benchmark for corporates to be
able to assess the financial impact of their ESG
benchmark activities
Facilitate Promote a common language for dialogue between
companies and investment professionals, recognising
dialogue that both parties need information from each other
Regulatory Make recommendations to regulators
influenceWhat Delphi brings: the USP
• Investor led
• Represents collective intellectual property of leading industry figures
through iterative dialectic
• Drawing on research and analysis from the world’s most authoritative ESG sources
• Encompasses asset managers AND asset owners AND world’s
leading investment consultancies
• Material: robust materiality definition based on quantitative financial
and qualitative non-financial criteria
• Logic: ESG factors linked to non-financial value drivers linked to financial levers
• Parsimonious : focused on the MOST material ESG factors, by industry,
and representative metrics
• Predictive of future performance not just reporting on past performance
• Dynamic platform for regular updating as conditions change and allowing tailoring for
specific institutional needs and development of future models
• Aligned with corporate priorities
• Cognisant of public policy needsChanging the investment context
enabling ESG dialogue between key industry players
Analysts and researchers
Helping scope the material issues by industry
and the analysis and research needed to
inform asset managers’ new valuation
approaches and investment models
Asset managers
Promoting greater recognition of the
critical ESG issues and the information
and data they need to revise valuation
approaches and develop new
investment models
Asset owners and their advisers
Increasing understanding of the
value implications of ESG investing
and the priorities they should be
setting asset managersESG Factors
Within the scope of Project Delphi, ESG (Environmental, Social and
Governance issues) is defined as relating to:
those factors relevant to the understanding of a company which help to assess the
company's capacity to remain productive over time AND its potential for long-
term maintenance of profitability through:
– the responsible use of natural resources both in their own operations and the
operations of their respective value chains;
– respecting social norms in their markets of operation and those markets
where their products and services are in use;
– being accountable to providers of equity and debt capital.Materiality
Within the scope of Project Delphi, an ESG factor is considered material if it:
• has a high probability of having a financially material impact on the defined value
drivers of investment value of Delphi within a given time horizon, and
• allows prioritization of issues for investment decision-making and/or corporate
engagement, and
• is based on research or sufficient evidence on its impact, and
• is rigorous i.e. replicable, defensible, and credible, and
• practical i.e. simple enough to be widely used and communicated, and
• sophisticated enough for the needs of investment decision-making including
modelling and calculation e.g. of DCF, NPV etc.Delphi logic flow
Value drivers influenced by material ESG Factors representing performance in a range of industry specific metrics
ESG Metric
ESG FACTOR ESG Metric
ESG Metric
ESG Metric
ESG FACTOR ESG Metric
ESG Metric
VALUE DRIVER ESG FACTOR
ESG Metric
ESG Metric
ESG Metric
ESG Metric
ESG FACTOR ESG Metric
ESG Metric
ESG Metric
ESG FACTOR ESG Metric
ESG MetricParsimony
material and industry relevant ESG Factors and metrics
Industry (ICB) ESG Factors Metrics
Oil & Gas 13 61
Basic materials 9 53
Industrials 14 66
Consumer Goods 10 42
Health Care 11 45
Consumer Services 5 23
Telecoms 10 59
Utilities 13 64
Financials 8 37
Technology 15 62Delphi timeline
Framework to outreach
2012 2014
1 Q! 2 Q”2 3 Q3 4 Q4 5 Q1 6 Q2 7 Q3 8 Q4 9 Q1 10 Q2 11 Q3 12 Q4
ESG Factor materiality assessment
Industry metrics analysis
Framework testing
OutreachIP of leading industry figures
Project Delphi: participants at March 2014
State Street Global Advisors Aon Hewitt
DVFA BNP Paribas
EFFAS Schroders
Railpen Investments Aegon
Axa IM Pension Protection Fund
Didas Research Kepler Cheuvreux
Alliance Trust KKR
SG Corp & Investment Bank Mercer Consultants
Aberdeen Asset Management SAM Research AG
F&C Storebrand
APG PGGM (consultative role)
KLP, Norway Cambridge Associates
Nestlé Deutschland SEB
DNB (Dutch Central bank) Goldman Sachs (GS Sustain)
Towers Watson Royal London Asset Managers
Hymans Robertson ERAFP
BofA Merrill Lynch Varma
RobecoSAM ECPI
Sustainalytics Sustainable Insight Capital Management
First State Investments WHEB Asset Management
AWJ Capital PartnersBeyond the framework: a broader agenda
Signpost Investor benchmark Regulatory
Facilitate dialogue
outperformance influence
Quantitative Proprietary Sell-side Corporate Change
Valuation Reporting Public policy
analysis research research engagement ManagementYou can also read
