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You Are What You Finance ESG Risk in the Finance Sector

You Are What You Finance ESG Risk in the Finance Sector. Innovest Uncovering Hidden Value for Strategic Investors. New York Paris Toronto London San Francisco Sydney Tokyo. Redefining and Recalculating Risk. Investors now have to recalibrate and recalculate what risk is:

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You Are What You Finance ESG Risk in the Finance Sector

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

  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 Real Wages US Household Net Savings Rate vs Debt Service Ratio 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. Who Are the Borrowers? • Subprime Exposure as % of Credit Card Loans • (subprime = FICO score below 660) 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. You Are What You Finance

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

  10. Three Year Stock Performance

  11. Twelve Month Stock Performance

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