Quantum Nifty 50 ETF · NSE:QNIFTY
Quantum Nifty 50 ETF — Quantum India ESG Equity Fund — ESG Presentation (June 2019)
42 slides from Quantum Nifty 50 ETF's sustainability presentation, Jun 21, 2019
Slide 1: Introducing Quantum India ESG Equity Fund
Introducing QUANTUM INDIA ESG EQUITY FUND An open-ended equity scheme investing in companies following Environment, Social and Governance (ESG) theme NFO starts from June 21, 2019 to July 5, 2019 1
Slide 2: Making money. Making a difference.
Making money. Making a difference. You shouldn't have to pick between the two. 2
Slide 3: What is ESG all about?
What is ESG all about? 3
Slide 4: ESG – Buzz words or Better Investments?
ESG – Buzz words or Better Investments? Sustainability Responsible Investing Impact Investing Clean Investing Societal Impact Fiduciary Duties 4
Slide 5: What is ESG Investing?
What is ESG Investing? Replacing the question “how much return?” with “how much sustainable return?” PEOPLE PLANET Social PROFIT Environment Governance Labor practices Gender diversity Minority shareholder treatment Climate change Corporate social responsibility Board Independence GHG emissions Stak
Slide 6: ESG is the fastest growing investment approach globally
ESG is the fastest growing investment approach globally Top-league funds gradually moving their portfolio to only include ESG- compliant businesses: Norges Bank T-Rowe Price Blackrock Investec Natixis The Children's Fund Hermes Investment Management Nordea California Pensions Fund California Teacher
Slide 7: Why ESG?
Why ESG? Sustainable Investing isn’t about changing the world, it’s about understanding how the world is changing. 7
Slide 8: Environmental, geopolitical and technological risks have grown in prominence
Environmental, geopolitical and technological risks have grown in prominence 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Asset price Asset price Asset price Storms and Income Income disparity Income disparity Inerstate conflict Involuntary Extreme weather Extreme weather collapse collapse
Slide 9: Risks facing India
Risks facing India Risk 2018 2017 2016 Kerala Floods; Warmest year since climate data came Public health emergency declared by India scored 5.75 out of 100 in global to be officially compiled; southern states doctors in Delhi as air quality in the Environmental air quality index; faced the worst dro
Slide 10: India faces higher ESG risks compared to other emerging economies
India faces higher ESG risks compared to other emerging economies Data Source: GMO ESG assessment framework: top-down 10
Slide 11: Growing importance of ESG aspects as material risk factors in India
Growing importance of ESG aspects as material risk factors for doing business in India Data Source: Global Risk Report 2018 by World Economic Forum 11
Slide 12: Evidence of stock price reaction to negative news
Evidence of stock price reaction to negative news Share price drop on Stock News Date NSE Investigations against the former chairman following allegations that he offered loans worth crores to people recommended by politicians, placed J&K Bank June -19 ~20% in 1 day his relatives in plum positions,
Slide 13: Evidence of stock price reaction to negative news
Evidence of stock price reaction to negative news Stock News Date Share price drop on NSE Nestle FSSAI accused Nestle of failing to comply with food safety laws Jun-15 ~18% in 1 week SEBI barred it from selling shares for three years. The move came after seven DLF years of investigation into the cha
Slide 14: Evidence of growing shareholder pressure encourages owners to engage
Evidence of growing shareholder pressure encourages owners to engage “Fortis shareholders vote to oust Brian Tempest from the company's board.” Economic Times 23.8.18 “Shareholders reject re-appointment of Apollo Tyres MD. Voting against Neeraj Kanwar may have been on the issue of high compensation.
Slide 15: E for Environment
E for Environment Water Stress Clean, Climate change Pollution 54% of India affordable # 3 globally in 11 of top 12 facing high stress energy carbon emissions polluted cities in Fossil fuels but low on per India constitute 92.5% capita basis of commercial energy consumption and 75% of total energy c
Slide 16: S for Social
S for Social Poverty Food Security Employment India has one of the 2.4% of world’s land; lowest participation 224mn people (18% 17% of world’s rates of working age of pop) population women in the labor force – about 25% Illiteracy Basic hygiene Healthcare system 50% of all villagers There are about
Slide 17: G for Governance
G for Governance Credit Rating “Dependent” In India, 15 of the top Agencies (CRAs) independent 20 business groups Audit crisis of 2018 behind the curve directors are family-owned Auditors of over 204 CRAs have repeatedly Independent India has 108 listed firms resigned* failed to alert directors in m
Slide 18: Examples of irresponsible corporate behavior and their consequences
Examples of irresponsible corporate behavior and their consequences SOCIAL Affected element Irresponsible behavior Consequence Supplier Working with low cost suppliers who Litigation, bad reputation, product boycotts, Protests by community employ labor in poor working members and organizations condi
Slide 19: Examples of irresponsible corporate behavior and their consequences
Examples of irresponsible corporate behavior and their consequences ENVIRONMENTAL Affected element Irresponsible behavior Consequence Water Many industries do not have a proper waste management system Litigation and fines and drain the waste in the fresh water which goes into rivers, Bad reputation
Slide 20: Evolve from a stockholder to a stakeholder
Evolve from a stockholder to a stakeholder Greater emphasis on ESG factors, which play out over a long horizon, may provide a counterweight to the constant pressure on companies to maximize near-term earnings The mandate to maximize short-term shareholder value or Quarterly Capitalism has Quarterl
Slide 21: A positive correlation between sustainability and economic profitability
A positive correlation between sustainability and economic profitability *Percentage of studies showing Data Source: Oxford report ‘From stockholder to stakeholder’ based on more than 200 academic studies (March 2015) Strong ESG profile More competitive Higher Profitability Higher dividends Strong E
Slide 22: As millennials age into investors, ESG compliance is here to stay
As millennials age into investors, ESG compliance is here to stay As per the 2018 U.S. Trust Insights on Wealth and Worth survey by Bank of America, the majority of Millennials (87%) believe that a company’s track record in environmental, social and governance is an important consideration for inv
Slide 23: What is in it for you?
What is in it for you? 23
Slide 24: Responsibility and profitability are wholly complementary
Responsibility and profitability are not incompatible, but in fact wholly complementary Data Source: MSCI Indexes supplied by MSCI Inc, and MSCI ESG Indexes supplied by MSCI ESG Research Inc, a subsidiary of MSCI Inc. Past Performance may or may not be sustained in future. Not only has the ESG index
Slide 25: 54% of the ESG index's excess return is stock-specific
54% of the ESG index’s excess return over its parent is attributable to stock-specific sources 199 basis points (bps) of the 367 bps annualized outperformance has been contributed by selection of stocks based on ESG measures Source of Active Return Active Risk Return (%) Contribution (%) Style 0.63
Slide 26: Sustainability Initiatives
Sustainability Initiatives Business managed by professional CEO despite promoter holding of ~60% 5 of 9 Board members are independent 37% of the material from renewable sources 93% of packaging material is recyclable Implemented responsible sourcing guidelines in 2017 Data Source: Bloomber
Slide 27: Sustainability Initiatives
Sustainability Initiatives 39% of energy produced from renewable sources (WHRS + solar) 23.5% use of alternative raw material All plants comply with zero liquid discharge norms Use of air cooled condensers to conserve water Contracts with suppliers include clauses on E&S aspects Data Sourc
Slide 28: Sustainability Initiatives
Sustainability Initiatives Provided training to 20,000 unskilled and semi-skilled Imparted training to women in the field of modern-age paint application for homes - increase in monthly income from INR 4- 5K to 14-18 K Business managed by professional CEO despite promoter holding of ~75% Env
Slide 29: Characteristics of company with strong ESG profile
Characteristics of company with strong ESG profile Proactive stakeholder engagement relations and programs to address interests of legitimate stakeholder groups (Shareholders / customers / local community) No evidence of harmful relationships with non-financial stakeholders that could impair lon
Slide 30: ESG Indices versus Equity Indices
ESG Indices versus Equity Indices 251 NIFTY100 ESG Index 225 MSCI India ESG Leaders Index 233 228 Investment in an ESG Index provides: BSE200 Index 204 175 NIFTY Index SENSEX Index 180 • Higher returns over long duration MSCI India Index 125 • Lower downside risk 75 • Less volatile Apr-11 Apr-16 Dec
Slide 31: What is our idea?
What is our idea? Delivering Long term value from ESG 31
Slide 32: Quantum's ESG Approach
Quantum’s ESG Approach Our analysis is guided by the materiality of the issues Governance sits at the heart of our analysis Typically focus on areas such as capital allocation, board composition, quality of disclosures and treatment of minority shareholders Shortcomings go hand in hand with
Slide 33: Approach to ESG evaluation
Approach to ESG evaluation Proprietary research Data Sources Scoring system (Blended Approach) • Sustainability reports (GRI Company disclosures Company disclosures Framework) (30% weight) • Binary scoring systems: +1 for • Business Responsibility disclosure, 0 for non disclosure Reports (BRR) and a
Slide 34: ESG – What you end up owning?
ESG – What you end up owning? ESG determined stock selection is Value Agnostic – Most stock indexes are Value agnostic as well ESG weighing provides exposure to Quality and Low volatility factors ESG generally tends to do well in down markets ESG focus help avoid tail risks ESG endeavors t
Slide 35: Quantum India ESG Equity Fund
Quantum India ESG Equity Fund Investors get exposure to broad basket of ESG compliant companies which in the long run is expected to outperform conventional market indices PORTFOLIO 40-60 stocks Companies which score above the minimum threshold ESG score are included in the portfolio. Allocation is
Slide 36: Portfolio Construction
Portfolio Construction Stock with Volume US$ 1 mn per day? Yes Stock under active coverage Yes ESG Score Not included in the Portfolio ESG Score < internal threshold ESG Score > internal threshold Included in the Portfolio Investment Rules Weight for a stock in the portfolio will depend on the ESG s
Slide 37: Investing with Values!
Investing with Values! Clean and Environmental friendly businesses Businesses contributing towards the society Businesses having a fair and transparent practices Businesses that are responsible Businesses where sustainability drives long term performance Make Quantum India ESG Equity Fund
Slide 38: Fund Features
Fund Features 38
Slide 39: Fund Facts
Fund Facts • To achieve long-term capital appreciation by investing in shares of Investment Objective companies that meet Quantum’s Environment, Social and Governance (ESG) criteria. Benchmark • Nifty 100 ESG Total Return Index Type of Scheme • An open-ended Equity Scheme investing in companies foll
Slide 40: Asset allocation
Asset allocation The Fund would follow the following asset allocation under normal circumstances: Category Allocation Range Risk Profile Investment Rationale Min-Max% Equity & Equity Related 80 - 100 High ESG compliance; Instruments of Companies Growth oriented following ESG Criteria Money Market In
Slide 41: The data in this presentation are meant for general reading purpose only and are
The data in this presentation are meant for general reading purpose only and are not meant to serve as a professional guide/investment advice for the readers. This presentation has been prepared on the basis of publicly available information, internally developed data and other sources believed to b
Slide 42: Introducing Quantum India ESG Equity Fund
Introducing QUANTUM INDIA ESG EQUITY FUND An open-ended equity scheme investing in companies following Environment, Social and Governance (ESG) theme NFO starts from June 21, 2019 to July 5, 2019 42
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