DVFA Committee on Non-Financials

Non Financials

Key Performance Indicators for

ESG

Society of Investment Professionals in Germany

DVFA Criteria for KPIs for Extra-/Non-Financial
Extra /Non Financial

IMPERATIVE:
• Depict correlation to
z Risk
z Success factors of corporate business
• Significant and relevant for investment decisions
• Firmly anchored in corporate management system
• Quantified
• Comparable
2
z Benchmarkable from peer to peer
z Depict dynamic i.e. from reporting period to reporting period © 2008
DVFA
• Accepted
p by
y mainstream financial analysts
y and investors e.V.

• Manageable amount („Key“) e.g. small set of max. 30 KPIs

• Not yet another reporting scheme: KPIs can be reported within
z traditional reporting statements e.g. quaterly reports, annual reports,
z Sustainability formats e.g. GRI‘s G3
ESG Issues considered important

Customer Satisfaction 4,19

Revenues with New Products Introduced 4,02

R&D Expenses 4

Health and safety

f off products & services ((in G
General)) 3,73

Anti-competitive behavior, anti-trust, monopoly practices 3,67

Energy Efficiency (in General) 3,64

3
Training & qualification 3,64

Litigation payments for non-compliance with laws and regulation incl. © 2008
3,6 DVFA
environmental and social
e.V.
Handling of corruption 3,59

Number of Patents 3,44

Staff turnover 3,38

,

Deployment of Renewable Energies (in General) 3,3

0 1 2 3 4 5
Perception of the 24 KPIs: Summary (2)

Maturity of Workforce 3,25

Environmental Compatibility/Tolerance of Products sold (in General) 3,17

End of life cycle impact / Reclaiming of Resources (in General) 3,14

Restructuring caused relocation of jobs

Restructuring-caused 3 12
3,12

CO2 Emissions (in General) 3,11

Waste 3,07

4
Absenteeism Rate 3,04

© 2008
Screening of SUPPLIER agreements with rgds to human rights 2,99 DVFA
e.V.
Screening of investment agreements with rgds to human rights 2,93

NO, SO and other air emissions by type and weight (in General) 2,64

Contributions to political parties 2,55

Unburned Hydrocarbon (UH) (in General) 2,44

0 1 2 3 4 5
What are the Specifics of the Approach?

• Utilize XBRL as an analytical tool first

• th as an enabler
then bl
• ‚Open source‘ framework
• Validation process – mandate of DVFA and EFFAS
• Clear separation between topical area (ESG) and measurable
item (KPI)
• Provision of KPI line item for Corporate
p and Benchmark
5
represents investment analysis approach
• Detailed taxonomy © 2008
DVFA
e.V.
Definitions

Two levels of Standardisation

• Topical areas are called ESGs

z ESG has several topical areas e.g. CO2 Emissions, Maturity of
W kf
Workforce, H dli off Corruption
Handling C ti = ESG (->
( IAS)
z Example: ESG 15 Waste, ESG 18 Diversity
z Litmus test: ESG are not measurable!
6

• Measurable elements are called KPIs (Key Performance © 2008

Indicators) DVFA
e.V.

z Always linked to an ESG

z Can be modified according to industry-group
 Structure of ESGs

E S G V
Environmental Social Governance Longterm Viability
ESG 8 Contributions to
ESG 1 Energy Efficiency ESG 3 Staff Turnover ESG 11 Customer Satisfaction
Political Parties
ESG 2 Deployment of ESG 9 Anti--competitive ESG 12 Revenues from New
ESG 4 Training & Qualification
General: Renewable Energy Sources Behaviour, Monopoly
Behaviour Products
ESGs which apply ESG 5 Maturity of Workforce ESG 10 Corruption
to all industry-
groups ESG 6 Absenteeism
ESG 7 Restructuring-related
Relocation of Jobs
7
ESG 13 CO2 Emissions ESG 18 Diversity ESG 25 Litigation Payments ESG 27 R&D Expenses
© 2008
ESG 19 % of Credit Loans, ESG 26 Dimension of Pending
ESG 14 NO,SO Emissions ESG 28 Patents DVFA
Undergone ESG Screening Legal Proceedings
e.V.
ESG 20 % of Funds Managed ESG 29 Investments in Research
Industry-Group ESG 15 Waste
in Accordance to ESG Criteria on New Risk
Specific: ESG 16 Environmental
ESG 21 Financial Instruments
held in Accordance to ESG ESG 30 Customer Retention
ESGs which apply Compatibility
Criteria
to select industry- ESG 17 End-of-Lifecycle ESG 22 Investments in
groups Impact Accordance with ESG
ESG 23 Supplier Agreements
in Accordance with ESG
ESG 24 Health & Safety of
Products
ESGs and KPIs

Industry
General -specific
E
Example:
l
Example:
ESG 15 „Waste“ – is
ESG 1 „Energy applicable to certain
Efficiency“ – industries only e.g. Oil
should be & Gas Producers,
reported by all Chemicals, Forestry &
industries Paper, etc.
General ESGs Industry specific
Industry-specific
~ issues or topical areas ESGs
which corporates in all ~ issues or topical areas
industries should report which corporates in
about specific industries should
report about
Topical Areas = ESGs

Measurable items = KPIs

8
List of KPIs for List of KPIs for
Individual ESGs Individual ESGs
adapted to meet adapted to meet © 2008
the needs of the needs of DVFA
specific industries specific industries e.V.
Example: Example:
ESG 1 „Energy ESG 15 „Waste“ has the
Efficiency“ has the following KPIs:
following KPIs:
- Waste by Unit Produced
Electric Energy
% of Waste Recycled
Consuption Total
Corporates from
Electric Energy
industries to which the
consumption per
Industry-Specific
d f ESG
employee
applies should report at
(...) least 1 KPI
All corporates should
report at least 1 KPI for
this General ESG
KPIs for ESG and XBRL

• Taxonomy designed by PwC NY David vun Kannon

• T t d with
Tested ith data
d t from
f Asset4
A t4
• Section within WICI framework
• Next step: pilot with corporates

© 2008
DVFA
e.V.