TBLI Conference November 11, 20101

©Simone Giostra & Partner

TBLI Conference Europe 2010November 11 and 12London, United Kingdom

JEAN ROGERS, PhD PE

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WHO WE ARE

• A global, integrated, multidisciplinary firm of professionals working together to tackle complex planning and design

issues associated with sustainable development

• Over 9,000 engineers, designers, planners, management consultants and economists

• 86 networked offices in 37 countries

SUSTAINABILITY SERVICES

• Strategic Planning • Sustainability Reporting• Transaction Advice & Portfolio Evaluation• Climate Change & Carbon Management• Sustainable Design• Sustainable Development

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Can ESG affect valuation ?

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Can ESG affect valuation?

If ESG can affect performance, and performance can affect valuation, then it follows that ESG can affect valuation

If x = y, and y = z, then x = z

--Transitive Law of Algebra

--Transitive Law of Sustainability

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RELEVANT EXPERIENCE

NEW YORK POWER AUTHORITY SUSTAINABILITY BASELINE AND PLAN

BASELINEASSESSMENT

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RELEVANT EXPERIENCE

NEW YORK POWER AUTHORITY INTEGRATED SUSTAINABILITY

Ensure a strong credit

rating

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TRENDS IN SUSTAINABILITY REPORTING

SAN FRANCISCO PUBLIC UTILITIES COMMISSION SUSTAINABILITY PLAN AND PROGRAM

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TRENDS IN SUSTAINABILITY REPORTING

LINKS TO FINANCIALS

SAN FRANCISCO PUBLIC UTILITIES COMMISSION, Action Plan linked to Budget, 2009

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TRENDS IN SUSTAINABILITY REPORTING

KEY PERFORMANCE INDICATORS

UNITED UTILITIES, Annual Report and Financial Statements, 2009

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TRENDS IN SUSTAINABILITY REPORTING

KEY PERFORMANCE INDICATORS

NATIONAL GRID, Non-financial KPI’s, 2009

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Relevance and Comparability – Key to Valuing Performance

Relevance Comparabilityvs. Unique “one off “stories Eco-Efficiency Indicators

water waste energy carbon

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Relevance Comparabilityand

Relevance AND Comparability – Both are Keys to Performance

A Sector Based Approach

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FROM TRANSPARENCY TO PERFORMANCEIndustry-Based Sustainability Reporting on Key Issues

Jean Rogers, ArupDavid Wood, Initiative for Responsible Investment, Harvard UniversitySteve Lydenberg, Domini Social Investment LLC

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FROM TRANSPARENCY TO PERFORMANCE: INDUSTRY-BASED SUSTAINABILITY ON REPORTING ON KEY ISSUES

SIX STEP METHOD

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FROM TRANSPARENCY TO PERFORMANCE: INDUSTRY-BASED SUSTAINABILITY ON REPORTING ON KEY ISSUES

SIX STEP METHOD – POOL THE ISSUES

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FROM TRANSPARENCY TO PERFORMANCE: INDUSTRY-BASED SUSTAINABILITY ON REPORTING ON KEY ISSUES

SIX STEP METHOD - MATERIALITY

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FROM TRANSPARENCY TO PERFORMANCE: INDUSTRY-BASED SUSTAINABILITY ON REPORTING ON KEY ISSUES

KEY FINDINGS

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FROM TRANSPARENCY TO PERFORMANCE: INDUSTRY-BASED SUSTAINABILITY ON REPORTING ON KEY ISSUES

A TAILORED SET OF INDICATORS FOR EACH SECTOR

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FROM TRANSPARENCY TO PERFORMANCE: INDUSTRY-BASED SUSTAINABILITY ON REPORTING ON KEY ISSUES

UTILITIES SECTOR EXAMPLE

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FROM TRANSPARENCY TO PERFORMANCE: INDUSTRY-BASED SUSTAINABILITY ON REPORTING ON KEY ISSUES

AIRLINES SECTOR EXAMPLE

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Peer to Peer Comparison

Everyone Wins

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Nirvana

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Fair Market Value

The price at which property would change hands in an open market when neither is under compulsion to buy or sell, and when both have reasonable knowledge of the relevant facts.

-- International Glossary of Business Valuation Terms

“Relevant facts” include ESG performance.

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Clear signals are needed

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Which comes first:

British scientists claim to have finally come up with the definitive answer: The chicken.

---- July 14, 2010, the Daily Mail

Timing is Everything

ESG Reporting or Link to Valuation?

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In conclusion

1. Transitive law of sustainability: performance is the link between ESG reporting and valuation

2. Sector issues are where the rubber meets the road and where ESG performance can be compared

3. Clear market signals are needed- which ESG issues are most material, by sector?

4. ESG Reporting is the chicken and valuation is the egg. The chicken comes first.

If x = y, and y = z, then x = z

2.

3.

4.

1.

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THANK YOU

jean.rogers@arup.com