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Investors relations

CSR Communication

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Agenda
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Corporate Social Responsibility

and extra-financial communication

1. History of CSR and SRI

2. CSR Communication : key issues and current evolutions

3. Case study

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History of CSR and SRI

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Sustainable development
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! Sustainable development emerges as a concept in the 1970s and 1980s

! Principle: to ensure that the conditions of our current economic development

will not affect and endanger the capacity for future generations to satisfy their
own needs

! Consequence : how can we evaluate the impact of our economic decisions

and make them sustainable

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Sustainable development
has led to corporate responsibility
! Corporations have a responsibility
toward their environment and
toward every bodies impacted by
their economic development
\ their shareholders
\ their employees and relatives,
the territories where they live
\ their clients and end-consumers
\ their providers, subcontractors and any
entity involved in the production process
\ their natural environment, considering it
will be passed on to the future
generations
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! Corporations will thus have to define
new criteria :
\ when they have to evaluate their
strategic choices and measure their
efficiency
\ profitability is not enough
\ but it is still required
! The measurement wil define the
performance
! But what shall be measured ?
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Shareholders’ activism
! From the 1920’s some categories of
shareholders have been looking for
investments that meet their moral
principles
\ religious corporations, foundations…
\ exclusion investment process:
no weapons, pornography, tobacco…
! From the 1970’, in the US :
shareholders’ activism
\ Shareholders claim for their rights and
their will to influence strategic decisions
made by the management
\ Shareholders activists may have some
very diverse motivations
\ Some are very famous for they have the
strategic choices of the management
and organised their replacement in order
to increase the value for shareholders
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! 1980’s: financial de-regulation and
strong development of financial
markets
! 1990’s : corporate governance
\ How to actually control the top
management when minority shareholders
have no means ?
\ A set of principles for a good corporate
governance have progressively emerged
! 200’s: shareholders’ democracy
\ How to guarantee that the management
actually behaves and acts in the long
term interest of all shareholders
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Focus : principal-agent problem
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! Shareholders (the principal) hire a top executive manager (the agent)

! They expect him/her to behave and to make decision in order to preserve

and develop their own interest

! But they actually cannot be sure this is actually the case

\ How to control the agent
\ How to pay the agent in a way that he/she has a incentive in behaving the expected way

information
Asymmetric

hires
P A
self-interest self-interest
performs

Skema - Investors relation - CSR Communication 7

 15 April 2010

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Shared board membership in the CAC 40

Article complet
http://www.alternatives-economiques.fr/les-cumulards-du-cac-40_fr_art_633_49410.html
Graphique interactif
http://www.alternatives-economiques.fr/fic_bdd/article_pdf_fichier/1274372604_cac40_3.swf
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And this led to Socially Responsible Investment
! Starting point: Socially responsible
companies should be more
profitable in the long-term
! Consequence: asset managers
have launched investment vehicles
dedicated to this purpose
! Main problem: which selection and
performance criteria are useful to
base investment decisions on ?
! Principles for Responsible Investment
\ Initiative launched in 2005 by the UN
\ End of 2011 :
915 institutions , $30 trillions AUM
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! 6 principles
! We will incorporate ESG issues into
investment analysis and decision-making
processes.
! We will be active owners and incorporate
ESG issues into our ownership policies and
practices.
! We will seek appropriate disclosure on
ESG issues by the entities in which we
invest.
! We will promote acceptance and
implementation of the Principles within the
investment industry.
! We will work together to enhance our
effectiveness in implementing the
Principles.
! We will each report on our activities and
progress towards implementing the
Principles.
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 pour convaincre vos partenaires

! Video Eurosif Mainstreaming Responsible Investment

http://youtu.be/9hWGII8bsq8

! Video Eurosif Engagement in practice

http://youtu.be/mOOeDN5cG6A

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 SRI and mainstream
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! SRI: still a niche market ! Principles for Responsible Investment:

\ estimated 3-5% of total AUM widely disseminated among
\ expected to reach 10% mainstream AM
\ all major AM institutions have signed
! 3 main fund strategies \ and accepted to report on these issues
\ exclusion
\ best-in-class
! Orientation:
no matter how good you are in ESG,
\ thematical
you shall report on it
Growth of SRI European Markets 2001-2009
\ companies which do not provide the
6 000
required information will be excluded from
5 000
the scope of investment
4 500
Billion €

3 000 2 700

1 500 1 033
336
0
2002 (EU 8) 2005 (EU 9) 2009 (EU 14)

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 CSR Communication:
key issues and current evolution

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First regulations
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! In France, Law NRE in 2002 :

requirement to disclose information on social en environmental data in the
Management report

! But the information content is not specified

\ Initially a confused period when companies filled information with little coherence
\ The disclosure requirement induces a risk:
what is the legal liability for the management and for the company?
\ how does the company adapt to new environmental regulations ?
\ Communication induces public exposure: environmental activists compare corporate
communication with the actual behaviour of companies: NGO’s Unions…

! European Regulation :
Prospectus Directive in 2005
\ information on social & environmental impact
\ information on risks, actual or potential litigation, specifically environmental litigation

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Fast growth of SRI funds
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! Fast growth of SRI funds ! Specialised rating agencies

\ € 70 billions end-2010 (€20 billions in 2007) (ex. Vigeo in 2002)
\ Several AM strategies are emerging \ agencies provide raings to their clients
! global SRI funds
investors

! thematic funds: renewable energies, \ ey can also directly rate companies on a

cleantech... voluntary basis
! Integrating ESG principles in their selection \ each rating agency has their own criteria
process and methods
\ Those funds need tools to select and
benchmark their investments ! Global SRI index
\ Dow Jones Sustainability Index World
As a % of otal AuM
30%
\ ASPI Eurozone® (Advanced Sustainability
Index)
20% \ FTSE4Good Index
10%
\ Euronext FAS IAS® : actionnariat salarié

0%
2000 2011 2020
Fonds ISR Intégration ESG

Skema - Investors relation - CSR Communication 14

International initiatives
! Global Compact launched by the
UN
\ companies join the program on a
voluntary basis and comply with 10
fundamental principles
! Global Reporting Initiative :
\ an international working group dedicated
to set up a corpus of standards and
indicators in order to evaluate the ESG
performance
! Interactions with the communication
on internal control procedures and
risk management
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! Some major companies actively
support those initiatives
\ they develop a strategic communication
on CSR
\ they deploy dedicated
Environmental Information systems and
Environmental management systems
\ They disclose a detailed information on
their actions, achievements and possible
improvements
\ They tend to mutualise and standardise
best practises
ex. mass retail and social audits
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A brand new field of communication
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! The need to comply with communication requirements has been the first state
of awareness about sustainable development for many companies

! IR and financial communication teams may be decisive in companies setting

up of a sustainable development policy

! Which perfectly illustrates how financial markets can represent a positive

constraint

Skema - Investors relation - CSR Communication 16

the picture is a varied one
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Element of
Strategic line performance
assessment

Communication Compliant with legal

and image requirements

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Communication requirements
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! Communication material
\ As a minimum : on section in the Management report and the Reference Document
\ As a maximum : dedicated Sustainable Development Report
! may reach one hundred pages
! may come with an abstract
! some reports are certified, totally or partially, by external auditors

! Communication schedule: yearly basis

\ Sustainable development indicators are not disclosed on a quarterly basis
\ In many cases, these is no real analysis of those indicators,
sometimes because companies lack of historical basis for comparison
\ No indication that ESG performance may be used as a measurement for internal
performance and incentive

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Environmental Indicators
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! Consumption of natural resources : water, oil, electricity, % of renewable

energy…

! Emission of contaminating products : greenhouse gases, waste (toxic,

common), paper, plastics…

! Actions for decreasing the environmental footprint : energy savings, waste

reovery, recycling, production of renewable energy, offset mechanism for
CO2…

! Indirect Impacts : impact of the products and services offered…

! Education policies : clients, employees, suppliers, local communities…

! Biodiversity conservation.

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Social indicators
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! Headcount, age structure, hierarchical structure…

! Promotion of diversity : parity in total and at management level, disabled,

minorities…

! Compensation policy: wage scale, promotion, social benefits…

! Employment : recruitment, turnover, training, relationship with local

communities, with education…

! Health & safety : Accidents at work,

risk prevention…

! Welfare : psychosocial risks, social dialogue…

! Ethics : Ethics Charter, Purchasing policy, fight against corruption…

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Certification of ESG reporting
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Environment and social Rating
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The current development of SRI
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! Video Eurosif 2010 European Study

http://www.eurosif.org/media/videos/item/320-2010-european-sri-study-video

! Video Eurosif Study on HNWI & Sustainable Investment

http://youtu.be/KET58-kAyUo

Skema - Investors relation - CSR Communication 23

Case study

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