Itau Unibanco Holding S.a. · BMFBOVESPA:ITUB3
Itau Unibanco — ESG Presentation (January 2024)
72 slides from Itau Unibanco's sustainability presentation, Jan 9, 2024
Slide 1: Brazil ESG Strategy
Brazil ESG Strategy Great for Portfolios. Even Better for Humans. Initiating Coverage January 09, 2024 ESG Team Strategy Team Victor Natal, CFA Daniel Gewehr, CNPI Matheus Marques, CNPI Victor Cunha, CNPI +55-11-93714-8162 +55-11-99748-9052 +55-11-3073-3255 +55-11-3073-3359 victor.natal@itaubba.com
Slide 2: Executive Summary - Brazil ESG Strategy
Executive Summary - Brazil ESG Strategy: Great for Portfolios. Even Better for Humans. Key message. In this report, we are initiating coverage on Brazil Environmental, Social and Governance (ESG) Strategy. The sustainability theme has gained traction in Brazil in the last few years: the number of
Slide 3: Contents
Contents ESG Panorama: Connecting the Dots ESG in the Corporate World: Six Ways ESG Adds Value ESG Is Not Philanthropy: Understanding responsible, sustainable, social and impact Six Ways ESG Adds Value for the Corporate World: Understanding how ESG investing (Slide 5) adds value for companie
Slide 4: ESG Panorama: Connecting the dots
ESG Panorama: Connecting the dots 4
Slide 5: ESG Is Not Philanthropy
ESG Is Not Philanthropy Responsible Investment is an umbrella term encompassing the various ways investors can incorporate ESG factors into security selection and portfolio construction. It combines financial and non-financial outcomes, complementing traditional financial analysis and portfolio te
Slide 6: Six of the Ten Top Global Risks Are Environmental Issues
Six of the Ten Top Global Risks Are Environmental Issues In recent years, ESG concerns have centered on environmental issues. Social and Emissions Scenarios and Temperature Control governance factors are undoubtedly important, yet it is climate change, GHG emissions, and temperature control that h
Slide 7: ESG Commitments are Up 90% in Brazil Since 2020
ESG Commitments are Up 90% in Brazil Since 2020 Society’s commitment to ESG has been tied to public adherence to pacts, initiatives and frameworks, which are numerous and non-exclusive. Figures for both market PRI: Cumulative Number of Policy Interventions, 2023 participants and companies show a w
Slide 8: The Most Pressing Challenge in ESG – Reporting and Standardization
The Most Pressing Challenge in ESG – Reporting and Standardization From an investor’s perspective, reporting quality is the most pressing issue in ESG today. The multitude of sustainability frameworks, standards and indices, each with its own definitions, scope and uses, has led to an overly compl
Slide 9: The Most Pressing Challenge in ESG – Reporting and Standardization
The Most Pressing Challenge in ESG – Reporting and Standardization Frameworks, Standards and Ratings – Summary Sustainability Frameworks Sustainability Standards Sustainability Ratings ▪ A broad set of principles-driven guidance ▪ A document issued by a standard-setting ▪ Assessment of a company's m
Slide 10: 94% of Global Investors Notice Greenwashing in Corporate Reports
94% of Global Investors Notice Greenwashing in Corporate Reports The concept of greenwashing has been evolving ever since the term was coined in According to INBS (the Brazilian sustainability institute), there are at least seven 1989. At the beginning, it denoted solely the practice of misleadi
Slide 11: Materiality Mapping – GRI and SASB Dominate the Market
Materiality Mapping – GRI and SASB Dominate the Market Materiality mapping is a strategic analysis tool used to identify and prioritize the sustainability issues that are most significant to a given organization and its stakeholders. It involves a process where the business assesses the relative i
Slide 12: The ESG Investor: Players, Alpha, and Fiduciary Duty
The ESG Investor Players, Alpha, and Fiduciary Duty 12
Slide 13: Best-in-Class Strategies Dominate in Brazil; ESG Integration Is the World's Preference
Best-in-Class Strategies Dominate in Brazil; ESG Integration Is the World’s Preference Responsible Investment Assets by Strategy The ESG investing strategies preferred in Brazil differ from the prevailing 43% strategies in the rest of the world. Globally, investors’ approach to ESG has been 38% ch
Slide 14: Brazil Ranks Higher Than LatAm; ESG Indexes Tend to Outperform
Brazil Ranks Higher Than LatAm; ESG Indexes Tend to Outperform Non-ESG Peers in the Long Run Factoring In ESG: MSCI LatAm vs. MSCI LatAm ESG (USD) Factoring In ESG: MSCI Brazil vs. MSCI Brazil ESG (BRL) 152.48 150.00 250.0 140.00 212.2 130.00 120.00 149.32 200.0 110.00 100.00 90.00 150.0 80.00 182.1
Slide 15: 59% of Academic Studies Conclude That ESG Generates Similar or Better Returns
59% of Academic Studies Conclude That ESG Generates Similar or Better Portfolio Returns Correlation Between ESG and Financial Performance – Company Perspective Academia’s takes on ESG returns. A plethora of studies on this subject has been produced in the last couple of decades. Depending on the p
Slide 16: ESG in the Corporate World
ESG in the Corporate World Six Ways ESG Adds Value 16
Slide 17: Six Ways ESG Adds Value for the Corporate World
Six Ways ESG Adds Value for the Corporate World Investors’ Willingness to Accept Lower Returns as the Cost of Companies’ How does ESG adds value to companies? Here are some pathways. Sustainability Measures Top-line growth: ESG initiatives help companies tap new markets, expand in existing ones an
Slide 18: ESG Has Reached the Operating Level for Only 65% of Brazilian Companies
ESG Has Reached the Operating Level for Only 65% of Brazilian Companies Although awareness of ESG is increasing, Brazilian companies still have a long way to go. Many are incorporating ESG and recognize its advantages, but ESG is far from Brazilian Companies’ ESG Efforts entrenched at the operatio
Slide 19: Eight out of Ten Brazilian CFOs Believe Taxation Is Key to ESG Development
Eight out of Ten Brazilian CFOs Believe Taxation Is Key to ESG Development Taxation is a key variable for companies when it comes to ESG. It can work both ways, promoting sustainable companies with tax incentives and punishing the less- Perceived Benefits of the Creation of the ISSB committed ones
Slide 20: ESG in Brazil: Fund Classification, IFRS, and the Carbon Market
ESG in Brazil: Fund Classification, IFRS, and the Carbon Market 20
Slide 21: ANBIMA's New Fund Classifications
ANBIMA’s New Fund Classifications In January 2022, ANBIMA (the Brazilian Financial and Capital Markets Association) ANBIMA’s Rules for IS Funds established new rules for identifying sustainable funds (“IS” funds) and funds that integrate ESG into their management criteria. The new rules distinguis
Slide 22: Reporting: IFRS S1 and S2 – Brazil Leads the Pack
Reporting: IFRS S1 and S2 – Brazil Leads the Pack To improve trust and confidence in company disclosures about sustainability and help Integration with financial reporting: Encourages the integration of sustainability- investors make investment decisions based on ESG, the International Sustainab
Slide 23: Brazilian Carbon Markets – a USD 120 Billion Opportunity
Brazilian Carbon Markets – a USD 120 Billion Opportunity Brazil’s potential in the carbon market. Brazil’s biodiversity positions it as a natural Approval of Regulated Carbon Market Bill. After years of public and private discussions, candidate for carbon trading. Studies by ICC Brasil suggest a
Slide 24: Brazilian Regulated Carbon Market: Global Expansion of ETS
Brazilian Regulated Carbon Market Global Expansion of Emission Trading Systems (ETS) +Ontario + China National ETS + China National ETS* Germany + Austria + Montenegro 17% + Nova Scotia Of global GHG + Washington emissions + Oregon + Mexico + UK +Chongqing + Hubei (as new Chinese Pilots) 9,000 +Fuij
Slide 25: Brazilian Regulated Carbon Market
Brazilian Regulated Carbon Market Exclusion of agribusiness from Brazil’s regulated carbon market. The Environment Committee of the Brazilian Senate approved the bill excluding the agricultural sector from the obligations of the Sectorial Coverage of ETSs regulated carbon market. This decision has
Slide 26: Itaú BBA's ESG Picks: Matching the Traditional and the Sustainable
Itaú BBA’s ESG Picks: Matching the Traditional and the Sustainable 26
Slide 27: Our Methodology and MSCI ESG
Our Methodology and MSCI ESG Starting with a combined methodology. We focus on a positive screening approach, favoring best-in-class and best-in-progress companies, coupled with ESG engagement. ISE Composition - Sector Since every portfolio manager has a different methodology for accounting for ES
Slide 28: Our Methodology and MSCI ESG
Our Methodology and MSCI ESG MSCI ESG features we use: Rating Distribution Materiality maps. In line with other internationally accepted standards, MSCI’s materiality analysis addresses the most important issues in each of the three ESG pillars. 40% 37% Controversy flags indicate overall company
Slide 29: Our Methodology and Selected Portfolio
Our Methodology and Selected Portfolio Constituents’ Information EPS EPS 2024 EBITDA EBITDA Weight in Weight Allocation Weight Allocation ADTV 3m Diff vs 5y Diff vs 5y Diff vs 5y Diff vs 5y Diff vs 5y Diff vs 5y FCF Yield Dividend MSCI Ticker Sector Beta Upside 6m 12m P/E P/B EV/EBITDA Growth 3M Gro
Slide 30: Our Methodology and Selected Portfolio
Our Methodology and Selected Portfolio Portfolio Weight by Theme Portfolio Allocation by Category and Value 60% 60% Commodities, 10,0% Financials, 20,0% 30% 30% 20% 10% 10% 10% 10% Value, 20,0% 0% 0% Secular Themes USD Linked SOEs Advantage Cos / High Positive Assymetry Deleverage Low Correlation to
Slide 31: Engie: An All-Renewables Genco with Transmission and Midstream Assets
An All-Renewables Genco with Transmission and Midstream Assets (EGIE3 – YE24 Target Price: BRL 46.1) Investment Thesis 2024 Outlook, Valuation & Earnings Comments Key Indicators & Factors We see the name trading at an attractive implied real IRR Engie is trading at an implied EV/EBITDA of 7.9x,
Slide 32: Engie: Materiality Map and MSCI Ratings
An All-Renewables Genco with Transmission and Midstream Assets (EGIE3 – YE24 Target Price: BRL 46.1) Materiality Map and Controversies Rating Evolution Rating Distribution 26% Environm ent Social Governance AAA AA AA 19% AA Human Capital Corporate 16% Biodiversity & Land Use Development Governance A
Slide 33: Engie: ESG Highlights
An All-Renewables Genco with Transmission and Midstream Assets (EGIE3 – YE24 Target Price: BRL 46.1) Highlights Board compensation. The variable remuneration of the Chairman of the BoD is based on the results achieved by the company, considering individual, financial, and Positives: Great perfor
Slide 34: Engie: Social and Environment
An All-Renewables Genco with Transmission and Midstream Assets (EGIE3 – YE24 Target Price: BRL 46.1) Professional development. In 2022, the company invested BRL 5.7 million in training and Water consumption. The company’s goal for 2030 is to reduce the water-consumption skill upgrades for its em
Slide 35: CPFL: A Dividend Play in the Utilities Sector
A Dividend Play in the Utilities Sector (CPFE3 – YE24 Target Price: BRL 39.7) Investment Thesis 2024 Outlook, Valuation & Earnings Comments Key Indicators & Factors CPFL is a bond proxy with double-digit real IRR compared to Because of the recent heat waves in Brazil, we expect to see NTN-B belo
Slide 36: CPFL: Materiality Map and MSCI Ratings
A Dividend Play in the Utilities Sector (CPFE3 – YE24 Target Price: BRL 39.7) Materiality Map and Controversies Rating Evolution Rating Distribution 26% Environm ent Social Governance AAA 19% Human Capital AA 16% Carbon Emissions Corporate Governance Development A A 13% 12% Opportunities in Renew ab
Slide 37: CPFL: ESG Highlights
A Dividend Play in the Utilities Sector (CPFE3 – YE24 Target Price: BRL 39.7) Highlights Positives: Above-average performance in the environmental pillar – producing 96% Corporate governance. In 2019, the Corporate Governance management area was renewable energy, committed to reducing GHG emissi
Slide 38: CPFL: Social and Environment
A Dividend Play in the Utilities Sector (CPFE3 – YE24 Target Price: BRL 39.7) Diversity. The company’s Board of Directors has one woman among its seven members. Carbon emissions. CPFL has committed to being carbon-neutral by 2025, to reducing The Executive Board has one woman out of eight member
Slide 39: Localiza: A High-Quality Play at an Attractive Valuation
A High-Quality Play at an Attractive Valuation (RENT3 – YE24 Target Price: BRL 80.0) Investment Thesis 2024 Outlook, Valuation & Earnings Comments Key Indicators & Factors (Consensus) In our view, investors are overly concerned about depreciation, We see the stock trading at 17x P/E 2024, compar
Slide 40: Localiza: Materiality Map and MSCI Ratings
A High-Quality Play at an Attractive Valuation (RENT3 – YE24 Target Price: BRL 80.0) Materiality Map and Controversies Rating Evolution Rating Distribution 40% 37% Environm ent Social Governance AAA AA AA AA AA Corporate Carbon Emissions Labor Management Governance A A A BBB Health & Safety Corporat
Slide 41: Localiza: ESG Highlights
A High-Quality Play at an Attractive Valuation (RENT3 – YE24 Target Price: BRL 80.0) Highlights Remuneration. For the Executive Board, depending on the employment regime, there are fixed and/or variable compensation plans and long-term incentive plans, which are Positives: 100% of the energy use
Slide 42: Localiza: Environment
A High-Quality Play at an Attractive Valuation (RENT3 – YE24 Target Price: BRL 80.0) Environment Carbon Emissions. In 2022, 100% of the energy used by the company came from clean, renewable sources. That was the year Localiza launched Neutraliza, a program to neutralize emissions related to its di
Slide 43: Banco do Brasil: Extremely Discounted Valuation With Superior Profitability
An Extremely Discounted Valuation With Superior Profitability (BBAS3 – YE24 Target Price: BRL 59.0) Investment Thesis 2024 Outlook, Valuation & Earnings Comments Key Indicators & Factors (Consensus) Earnings growth at discounted valuations. Banco do Brasil Our estimates are above consensus. For
Slide 44: Banco do Brasil: Materiality Map and MSCI Ratings
An Extremely Discounted Valuation With Superior Profitability (BBAS3 – YE24 Target Price: BRL 59.0) Materiality Map and Controversies Rating Evolution Rating Distribution 35% 28% Environm ent Social Governance AAA AA AA AA 21% Financing Environmental Consumer Financial Corporate Impact Protection Go
Slide 45: Banco do Brasil: ESG Highlights
An Extremely Discounted Valuation With Superior Profitability (BBAS3 – YE24 Target Price: BRL 59.0) Highlights Board compensation. A part of the bank’s Variable Compensation Plan is aligned with the fulfillment of its Master Plan, which measures the institution’s overall Positives: As a signator
Slide 46: Banco do Brasil: Diversity and Environment
An Extremely Discounted Valuation With Superior Profitability (BBAS3 – YE24 Target Price: BRL 59.0) Diversity and inclusion. Almost 42% of Banco do Brasil’s total workforce are women, Environment and 24% are people of color. Additionally, 37% of management positions are occupied by women, and 23%
Slide 47: Banco do Brasil: Energy and Climate
An Extremely Discounted Valuation With Superior Profitability (BBAS3 – YE24 Target Price: BRL 59.0) Energy management. BB had committed to achieving a 90% renewable energy supply by 2024, but it actually achieved that goal in 2023, reaching 100% renewable energy use. The bank already sources energ
Slide 48: Rumo: Strong Momentum to Continue in 2024
Strong Momentum to Continue in 2024 (RAIL3 – YE24 Target Price: BRL 30.0) Investment Thesis 2024 Outlook, Valuation & Earnings Comments Key Indicators & Factors (Consensus) Brazil is the world’s leading soybean producer and the third-largest In 2024, the company is likely to benefit from another
Slide 49: Rumo: Materiality Map and MSCI Ratings
Strong Momentum to Continue in 2024 (RAIL3 – YE24 Target Price: BRL 30.0) Materiality Map and Controversies Rating Evolution Rating Distribution 38% 34% AAA Environm ent Social Governance AA Carbon Emissions Health & Safety Corporate A A A A Governance BBB BBB Labor Management Corporate Behavior BB
Slide 50: Rumo: ESG Highlights
Strong Momentum to Continue in 2024 (RAIL3 – YE24 Target Price: BRL 30.0) Highlights Governance Positives: Company is committed to reducing Scope 1 emissions by 21% by 2030 Board. The Board of Directors is composed of 10 members, elected by the Ordinary (based on 2020 levels); it aims to maintai
Slide 51: Rumo: Social and Environment
Strong Momentum to Continue in 2024 (RAIL3 – YE24 Target Price: BRL 30.0) Career development. To support the career development and engagement of its Carbon emissions. In 2022, Rumo’s direct carbon emissions were 981.114 tCO2. employees, Rumo sponsored more than 514,000 training sessions that we
Slide 52: Totvs: A Compounding Name With Solid Momentum
A Compounding Name With Solid Momentum (TOTS3 – YE24 Target Price: BRL 38.0) Investment Thesis 2024 Outlook, Valuation & Earnings Comments Key Indicators & Factors (Consensus) Totvs is a compounding story with a resilient profile We see the stock trading at 24.6x P/E for 2024, which (recurring r
Slide 53: Totvs: Materiality Map and MSCI Ratings
A Compounding Name With Solid Momentum (TOTS3 – YE24 Target Price: BRL 38.0) Materiality Map and Controversies Rating Evolution Rating Distribution 34% , Environm ent Social Governance AA AA 22% A A Human Capital Corporate 17% Opportunities in Clean Tech BBB BBB BBB BBB Development Governance 11% Pr
Slide 54: Totvs: ESG Highlights
A Compounding Name With Solid Momentum (TOTS3 – YE24 Target Price: BRL 38.0) Highlights Employee performance. In 2022, 89% of all employees Board of Directors. The company’s Board of Directors Positives: Totvs has limited access to end-user comprises a majority of independent members (86% – 6
Slide 55: Totvs: Environment
A Compounding Name With Solid Momentum (TOTS3 – YE24 Target Price: BRL 38.0) Energy consumption. 98% of Totvs’s energy at the headquarters, data center, and Joinville unit (the most populous offices) comes from renewable sources, through a contract with an external company, which corresponds to 83
Slide 56: 3tentos: A Unique Business Model With Plenty of Room to Grow
A Unique Business Model With Plenty of Room to Grow (TTEN3 – YE24 Target Price: BRL 16.0) Investment Thesis 2024 Outlook, Valuation & Earnings Comments Key Indicators & Factors (Consensus) Brazil is the world’s number-one soybean producer and 3tentos has considerable growth potential in Mato Gro
Slide 57: 3tentos: Materiality Map and MSCI Ratings
A Unique Business Model With Plenty of Room to Grow (TTEN3 – YE24 Target Price: BRL 16.0) Materiality Map and Controversies Rating Evolution Rating Distribution 23% 22% Environm ent Social Governance AAA Community Corporate AA Biodiversity & Land Use 13% 13% 12% Relations Governance A A Supply Chain
Slide 58: 3tentos: ESG Highlights
A Unique Business Model With Plenty of Room to Grow (TTEN3 – YE24 Target Price: BRL 16.0) Highlights Work accidents. There were a total of 23 work accidents in Listing. The company is listed on B3’s Novo Mercado with Positives: Zero-water-effluent system in place; renewable 100% of common shares
Slide 59: 3tentos: Environment
A Unique Business Model With Plenty of Room to Grow (TTEN3 – YE24 Target Price: BRL 16.0) Energy consumption. Ten of 3tentos’s units use renewable energy, from hydroelectric power plants (PCH), biomass thermoelectric plants, wind plants, and solar plants. In 2022, there was a 7.2% reduction in the
Slide 60: Renner: A Good Risk-Reward Proposition
A Good Risk-Reward Proposition (LREN3 – YE24 Target Price: BRL 20.0) Investment Thesis 2024 Outlook, Valuation & Earnings Comments Key Indicators & Factors (Consensus) Despite expectations of a weak 3Q23, the company is likely to We see the stock trading at 13.7x P/E 2024, compared with a see an
Slide 61: Renner: Materiality Map and MSCI Ratings
A Good Risk-Reward Proposition (LREN3 – YE24 Target Price: BRL 20.0) Materiality Map and Controversies Rating Evolution Rating Distribution 38% Environm ent Social Governance AAA 29% Corporate AA AA AA Product Carbon Footprint Labor Management Governance A A A A Privacy & Data 15% Raw Material Sourc
Slide 62: Renner: ESG Highlights
A Good Risk-Reward Proposition (LREN3 – YE24 Target Price: BRL 20.0) Highlights Listing. The company is listed on B3’s Novo Mercado with 100% of common shares. Positives: Seven out of eight members of the Board of Directors are independent; Board of directors. The Board of Directors (BoD) has
Slide 63: Renner: Environment and Social
A Good Risk-Reward Proposition (LREN3 – YE24 Target Price: BRL 20.0) Chemicals. Renner’s chain is trained by SENAI in the storage of chemicals and Water consumption. In 2021, 40% of the jeans delivered to Renner were classified restricted substances, with eight hours of training and testing in t
Slide 64: B3: Good Exposure to a Better Brazil
Good Exposure to a “Better Brazil” (B3SA3 – YE24 Target Price: BRL 17.0) Investment Thesis 2024 Outlook, Valuation & Earnings Comments Key Indicators & Factors (Consensus) Good exposure to a “better Brazil”. As investors start to Our average daily trading volume (ADTV) estimate for B3 consider t
Slide 65: B3: Materiality Map and MSCI Ratings
Good Exposure to a “Better Brazil” (B3SA3 – YE24 Target Price: BRL 17.0) Materiality Map and Controversies Rating Evolution Rating Distribution 32% AAA 24% Environm ent Social Governance AA AA AA Carbon Emissions Human Capital Corporate A A A A 15% Development Governance 13% BBB 11% Corporate Behavi
Slide 66: B3: ESG Highlights
Good Exposure to a “Better Brazil” (B3SA3 – YE24 Target Price: BRL 17.0) Highlights Listing. The company is listed on B3’s Novo Mercado with 100% of common shares. Positives: Every member of the Board of Directors is independent under the terms of Social Novo Mercado regulations, and women make
Slide 67: B3: Diversity and Environment
Good Exposure to a “Better Brazil” (B3SA3 – YE24 Target Price: BRL 17.0) Diversity. On B3’s BoD and Executive Board, four out of 11 members are women. In Water consumption. The company’s water consumption in 2022 (31,356 m³) was 2% 2022, women made up 28% of its employees in non-leadership posit
Slide 68: Cosan: Irreplicable Assets in Brazil's Most Promising Sectors
Irreplicable Assets in Brazil’s Most Promising Sectors (CSAN3 – YE24 Target Price: BRL 23.0) Investment Thesis 2024 Outlook, Valuation & Earnings Comments Key Indicators & Factors (Consensus) Cosan has committed to a strategy of portfolio diversification We estimate EBITDA of BRL 22.8 billion (+
Slide 69: Cosan: Materiality Map and MSCI Ratings
Irreplicable Assets in Brazil’s Most Promising Sectors (CSAN3 – YE24 Target Price: BRL 23.0) Materiality Map and Controversies Rating Evolution Rating Distribution 37% AAA Environm ent Social Governance AA AA Carbon Emissions Labor Management Corporate A A AA AA AA 21% Governance BBB 14% 12% Toxic E
Slide 70: Cosan: ESG Highlights
Irreplicable Assets in Brazil’s Most Promising Sectors (CSAN3 – YE24 Target Price: BRL 23.0) Highlights Best practices. Cosan conducted training throughout the Control. Ometto family has 36% of the voting power. year for employees and executives directly involved in Positives: Environmental pi
Slide 71: Cosan: Diversity and Clean Tech
Irreplicable Assets in Brazil’s Most Promising Sectors (CSAN3 – YE24 Target Price: BRL 23.0) Diversity. At Cosan, 36% of leadership positions are held by women. The company has Opportunities in clean tech. Among Cosan companies, Raízen is the one with the set a goal of having and maintaining at
Slide 72: Disclaimer
Disclaimer Material Information 1. This report was prepared by Itaú Unibanco, a company regulated by the Securities and Exchange Commission (CVM), and distributed by Additional note for reports distributed in the (i) United Kingdom: This material has been prepared by Itau Unibanco S.A. for informati