1 You Are What You Finance ESG Risk in the Finance Sector New York Paris Toronto London San Francisco Sydney Tokyo Innovest Uncovering Hidden Value for.

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Presentation transcript:

1 You Are What You Finance ESG Risk in the Finance Sector New York Paris Toronto London San Francisco Sydney Tokyo Innovest Uncovering Hidden Value for Strategic Investors

2 Redefining and Recalculating Risk Investors now have to recalibrate and recalculate what risk is: What is the cost of eco-inefficiency when oil is $160/brl? What is the cost of climate change when carbon costs $60/tonne? What is the cost of predatory lending in the wake of the subprime collapse? Who will be hurt? Who will thrive?

3 How Sick is the American Consumer? US Household Net Savings Rate vs Debt Service Ratio US Real Wages Growth in Credit Card Debt vs Growth in Real Wages Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Federal Reserve.

4 How Big and How Soon? Innovest forecasts: -First Quarter 2009 Charge Offs of $18.6 billion -Total 2009 Charge Offs $96 billion -Estimate: Net Charge Off Rate peaks at 10% in Q1 2009

5 Subprime Exposure as % of Credit Card Loans (subprime = FICO score below 660) Who Are the Borrowers? Source: SEC Filings of Master Trust Data, S&P.

6 What happens when emitting carbon isn’t free?

7 You Are What You Finance

8

9 Stock Performance of US Consumer Finance Companies Above-Average vs. Below-Average Innovest Rating Winning and Losing Strategies Source: Innovest, Bloomberg.

10 Three Year Stock Performance

11 Twelve Month Stock Performance