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Branding Sustainable Development Invesmtent in Emerging Markets: Our Promise, Our Impact, and Our Opportunities

Marc de Sousa-ShieldsEnterprising Solutions

International Conference on Sustainable Finance November 22 to 25th, São Paulo, Brazil

Introduction

ObjectiveExplore product experiences and brand images to understand the potential for existing and future product opportunities for sustainable development

Branding Opportunity

Deconstructing Brands

Brands & Opportunities

Part One

Branding Opportunity

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Branding Our Opportunities

• Products• Sector• National• International

Branding Opportunity

Development TradableInvestments Securities

Branding Opportunity

A brand is the identity of a product or services that differentiates it from those of its competitors. Creates a relationship between customers and the product or service.

Brands & Branding

The unique sets of associations in the minds of customers generating an implicit product PROMISE ....

Brand Image

The set of functional and mental associations a brand aspires to create or maintain�. The STRATEGIC GOAL for a brand in the minds of its creators

Brand Identity

Branding Opportunity

The SRI Brand = Creating Opportunity

US SRI Market

1984 USD 40 billion

1995 USD 639 billion

2003 USD 2.3 trillion

1 in 9 dollars

Emerging SRI Market

2003 USD 3.0 billion

2016 USD 48 billion

2024 USD 172 billion

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Part Two

Deconstructing The SRI Brand

Brand Positioning

Deconstructing Brands

Current Conventional Wisdom

�Market Space� a brand occupies in the mind of clients...

Milton Friedman…“un-American”and “subversive” Bloomberg … carries a lower rate of return,

but provides society with many benefits

Lipper… sector bias underweighted in manufacturing and energy favoring technology and services

US Sector Brand Identity

Deconstructing Brands

Image: Advancing key social & environmental concerns throughcompetitive investments

Promise: You don�t loose while changing the world

1) Past performance

2) Sustainable development indicators more accurately predict corporate performance

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Deconstrucing Brand

Image: Nurturing, educational, modest, trustworthy, financially responsible, open, transparent, honest�

Domini Social Investments

Promise: Social performance and issue leadership...

Three P�s

� Performance� Products� Practice

Deconstructing Brands

The Fourth Imutable Law of Marketing

Marketing is not a battle of products, its a battle of perceptions

Promise meets Reality

Deconstructing Brands

Bad News for SRI Branding

"socially responsible investing" is so broad that it is meaningless

90 percent of Fortune 500 companies

Haliburton, tobacco-maker Altria (formerly Phillip Morris)Weapons maker Raytheon oil ExxonMobil; genetically modified

seeds Monsanto

Paul Hawken, Director Natural Capital Institute

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Deconstructing Brands

Product Level .... plethora of studies on Financial Performance

63 financial studiesPaucity of studies on social and environmental impact

Difficult to understand or apply, anecdotal, static, not representative....

Developing Value: The Business Case for Sustainabilityin Emerging Markets

SustainAbility and International Finance Corporation

Must Read

Mutual Fund Screen Types

245.8

157.9

124

93

31

28.9

28.8

23.8

22

16.6

14.1

11.2

10.3

0 50 100 150 200 250 300

Alcohol, Tobacco, Gambling

All others

Tobacco

Alcohol

Labour Relations

Environment

Gambling

Defense/Weapons

Equal Opp. Employment

Product/Services

Other

Human Rights

Community Impact

Mu

tual

Fun

d S

cree

n b

y T

ype

USD billions

Deconstructing Brands

Tobacco, Alcohol, Gambling 70%

Others 30%

Deconstructing Brands

The sustainable development “Holy Grail”.. would be to find a direct link between a company's financial performance and its competence in sustainability reporting, hopefully with a link back to its governance structure... Frankly, we are still a long way off."

Peter Zollinger, Executive Director of SustainAbility 1

The convergence of financial and non-financial worlds is now under way... bad news is that most companies still fail to identify material, strategic and financial risks, and opportunities associated with the economic, social, and environmental impacts captured bythe 'triple bottom line' agenda."

Risk & Opportunity: Best Practice in Non-Financial ReportingSustainability, United Nations Environment Programme and Standard & Poor’s1

1 Quoted in Social Funds.comNovember 16, 2004

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Deconstructing Brands

Brand Identity

Address some sustainable development concernsbut need to be competitive to grow

PromiseProbably will not save the world but may slow the damage,

but we really don�t really know for sure.... and you wont loose return in the process.

Brand ImageLimited & Incremental change... doing what we can

US Sector BrandImage: Advancing key social & environmental concerns throughcompetitive social investments

Promise: You don�t loose while changing the world

Deconstructing Brands

International Image: Impossible unclearity of risk & return...

Emerging Market SRI

(Broken) Promises...Significant risk, returns, impacts, challenges...

� Decorrelation and diversification....� Ethical Funds Inc. Global Equity Fund (formerly Asia Pacific Fund)� Calvert South Africa Fund� Progressive Assets Fund

Deconstructing Brands

The Emerging, Emerging Market Brand Image

Product-Investment Level

� Charitable activity� Government sponsored� Lower returns than conventional

investments� Marginal� Developed countries led agenda

Sector Level

� Regional NGO organziations� Corporate governance initiatives� Corporate social responsibility initiatives� Sustainability NGOs and agitators� Growing business interest� Shareholder advocates

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Part Three

Creating Opportunity

Creating Opportunity

Over the next five years Branding Process will be one of the most important long term consideration for growth....

To define what we want to achieve and the impact we want have...

Branding in Process

� Brand Image....� Brand Promise....

� Develop and manage your brands

� Sector level� Business level

� Measure on your terms

Creating Opportunity

Invests in small and medium sized businesses in India

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Avisharkaar India Micro Venture Capital Fund

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Creating Opportunity

Invests in 70 Microfinance Institutions (MFIs) worldwide

International MFI portfolio securitization

Four Traunches and OPIC insurance protecting institutional investors

USD 80 million adding 3.0% to SRI mmerging markets Total

Several millions loans to microentreprenuers

Creating Opportunity

Shareholder ActivismNumber of Shareholder Actions Percentage Vote on Resolution

2001 2002 2003 2001 2002 2003Environment Resource Use 24 34 33 7.2 9.3 11.3 CERES 9 8 13 9.2 7.8 0 GMO 19 13 13 7.9 5.7 4.4 Climate Change 6 21 21 9.5 18.8 16.3

Environment Total 58 76 80 8.45 10.4 831.0% 5.3%

Total 236 270 282 7.9 8.3 10.5

% Total 24.6% 28.1% 28.4%

Global Labour 48 48 47 8.5 8.8 10.3

% Total 20.3% 17.8% 16.7% -0.6 -0.5 0.2

Creating Opportunity

USD $200 million cooperatively owned debt & equity fund

2% dividend to owners

2.5% tax credit to investors from Dutch Government

Foreign currency reserve fund

Invests in over 400 Small buisness and MFIs around the world

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Creating Opportunity

USD $5 million securitization of SHARE Microfin portfolio

ICICI credibility and buyer(s)

Grameen Foundation provided $400,000 guarantees

Local currency avoids FX risk and develops local appetite while supporting secondary market creation

Frees equity and maximizes leverage

$18 million in loans to women microentreprenuers

Creating Opportunity

Dedicated to promoting corporate social responsibilityand sustainable investment practice in the Asia Pacificregion.

Ongoing industry information

Research, conferences

Buy, sell, trustees, IFA, Communities, Business

Creating Opportunity

Sector Brand is as important as Business Brand

Define terms of the promise

Sustainable Development or Incremental Social & Environmental Change?

Manage brand poorly at your own peril

Global and Local Considerations

SRI alone.....?

Conclusions