Apple to issue long-term bonds totally 6,5 billion dollars

Apple has issued new long-term bonds worth 6,5 billion dollars. According to the company the new series of different maturity bonds have been made to take advantage of a drop in borrowing costs to fund its aggressive share buyback programme. The company has boughts its own shares worth 45 billion dollars back during the past 12 months.

The long-term bechmark bonds have been in all time low during the recent weeks. For example the US-30 year Treasury has been 2,22 per cent, UK benchmark at 2,02 per cent and German Bunds at 0,97 per cent.

 

Finance Tech

Ritakallio: Ilmarinen has integrated ESG issues into decision making process

CEO Timo Ritakallio from Ilmarinen says that the pension fund has integrated ESG issues into its investment processes. He says that Ilmarinen also engage with companies and try to achieve improvments through active dialogue. He was speaking in EarthRate´s ESG Conference in Helsinki last week.

– In addition to the norms based assessment we assess company specific ESG risks that can be strategic, operational, financial or compliance related. For us it is also important to see how companies are turning ESG impacts into business opportunities.

– Ilmarinen also compares companies within industries and markets in terms of ESG risks and prepardeness. This enables us to identify industry leaders and laggards. ESG analysis also targets, how company can cope  big megatrends like climate change, natural resources scarcity, water issue or urbanization, he says.

Ilmarinen is a pension insurance company and its portfolios market value is over 34 billion euros, of which Finnish equities are about 3 billion euros. The biggest holdings are  for example in Nokia, Sampo, Kone, UPM Kymmene and Metso. And in the small cap companies there are Suominen, Technopolis, Basware, Talentum and Tikkurila.

 

Finance

Video Fiona Reynolds: PRI´s Montreal pledge targets 3 trillion dollars by Paris 2015

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Responsible Investment organization ´s (PRI)  managing director Fiona Reynolds says that the low carbon Montreal pledge initiative for investors is targeting 3 trillion dollars by Paris 2015 talks. ComteamPUB+ met her in Helsinki while she was one of the keynote speakers in EarthRate´s ESG conference in January 22nd 2015.

– There is lot of discussions about low carbon and climate change issues among investors. Especially the Paris 2015 negotiations, where we hope to see a global agreement around climate change issues. So the first thing for investor is to understand your fund and its exposure to carbon assets. Then it is easy to make possible judgements in the portfolio. Montreal carbon pledge targets 3 trillion dollars before the Paris 2015 talks and we have now 15 investors that have signed the initiative, says managing director Fiona Reynolds in Helsinki.

Mrs Reynolds also says that this decision may not be easy one and investors normally start with the equities in their portfolios.

– Although there are some investors that have taken the initiative to all their asset classes. This is also a possibility for investors to engage with companies and have a dialoque about how to transit from high carbon to low carbon economy, she reminds.

Montreal carbon pledge was launched in Montreal, Canada September 2014. This is the first step for investors to measure and disclose the carbon footprint of their equities portfolios on an annual basis. At the moment for example these signatories have signed the initiative: AP funds, Nordea, Calvert and Calpers.

Interview: Päivi Härkönen

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Finance

The German Investment Community is well ahead in ESG issues

dvfa_logo_reflex_blue      Ralf-Frank-DVFA

 

The German Financial Analysts Society DVFA is one of the most respected analyst & investment professionals societies in Europe. The managing director Ralf Frank explains here the history of the association and its ESG (environment, social and governance) issues in Germany. The association is located in Frankfurt and this interview was made in the late of January 2015.

Managing director of the DVFA Ralf Frank could you briefly describe your society history and the main focus areas?

DVFA started in 1960 as a professional association of financial analysts i.e. equity sell-side analysts. Throughout the years the association grew into a network of investment professionals meaning that to an increasing extent fund managers and other functions such as Financial Engineering, M&A, Risk Management joined DVFA. Today, the organization hat 1,400 individual members. Employers i.e. banks or asset managers cannot become members of the association. Membership is reserved for individuals who have to commit to a code of conduct and provide evidence of their continuous development and training. DVFA operates its own training school with more than 5,000 alumni in the German market.

DVFA is also one of the forerunners in ESG integration in investment decision processes and asset management. How would you describe the situation in Germany and the stage of ESG analysis?

ESG is a niche topic in the German market. This is due to the fact that institutional investors allocate most of their AuM (assets under management)  into non-equity asset classes. As ESG is predominantly a topic geared to stock-listed companies, demand of ESG in general has been very low. This said the small but brave ESG community looked into modeling ESG into investment decisions very early and has produced some convincing approaches as to how to integrate ESG into investment modeling.

What areas do you find the most interesting ones for ESG in Germany?

In the course of the Japan nuclear power station Fukushima accident German government has prescribed an energy transition (“Energiewende”) to the German economy, aiming at increasing the proportion renewable energy sources and at the same time stimulating the industrial sector of so-called green energy technology. However, some of the most needed enablers of the energy transition are high-scale and big dimension projects such as smart grids, or storage technology. These require large scale financing which institutional investors could potentially embrace as part of their ESG strategy.

You have developed also an ESG education & training/ how do you see the situation in Europe in general?

We have seen over the last 8-10 years that many investment professionals got more and more interested in sustainability, but failed to see as to how to integrate ESG data into their investment calculations and models. Full-fledged ESG integration into, say, DCF models or  WACC calculations are commonly described as the “holy grail” of ESG. The training program which we developed for the European Federation EFFAS takes into account that there is no silver bullet, one way of integration of ESG into conventional investment decision-making but rather a way of building a firm judgment by approaching a potential investment from several avenues.

How integrated reporting and ESG fit together?

Integrated Reporting is an approach that seeks to integrate conventional financial performance data with ESG data. While as an idea it sounds convincing, conceptually, it is quite challenging. Unless companies want to simply staple their financial and CSR packages together (which would not qualify as an integrated report!), they are faced with the difficult task of determining a) which ESG factors to choose (materiality), and b) how to describe how ESG aspects do influence the economic performance of the company (connectivity).

You have also developed ESG KPIs for some industry and service sectors. Could you tell more about this as well?

DVFA developed “KPIs for ESG” in 2008 and subsequently received an endorsement by EFFAS (the European umbrella organization of investment professionals’ associations). KPIs for ESG follow an investment approach as KPIs for 114 subsections are being defined following the Stoxx Industry Classification Benchmark. This allows investment professionals to use the sets of proposed KPIs when selecting stocks for sector-based strategy. By the same token KPIs for ESG provide companies with sets for their specific sector activities including formulas as to how to calculate the KPIs. Stoxx, a leading builder of indices used the DVFA/EFFAS KPIs as a base for their ESG Leaders Family of Indices.

http://www.dvfa.de

See also this ESG education by European Federation of Financial Analysts Society (EFFAS):

http://effas.net/education-and-qualification/effas-certified-diplomas/effas-certified-esg-analysts.html

 

Finance

Changing IPO markets

Reading Alibaba´s IPO makes me think of the changes in the financial markets. This huge 21 billion dollars IPO will be making history in the markets for many ways. It will lead this Chinese e-commerce giant to the history books of NYSE (www.nyse.com) and give for example funds new investment case with 163 billion dollars market value.

Alibaba “BABA” as its ticker will be when the trading starts next week the 19th September, has priced its shares around 68 dollars and they expect the demand to be enough to sell the stocks at the high end of the offering range. The final offers will be placed in the early next week. Alibaba has had its global roadshow in the US last week and next week they will be in London.

The company is a good example of what internet has enabled to Chinese business people and the huge growth potential in the Asian markets. The IPO growth story is good and backed with figures. International media companies have analysed Alibaba many times. One of the topic questions has been, if this Chinese company is to rival Amazon altought the business strategy is different.

The roadshow is also branded by the company founder Jack Ma and his story, as was the story of Facebook in 2012 when the company listed. And lessons learned from that, Alibaba do not want to push the price too high. Facebook´s IPO faced many obstacles in the beginning of the trading: one of them the high pricing. And NYSE is already testing the trading system with brokers.

On the other hand, financial markets focus now more on governance issues. Some institutional investors are not easy for example with the board nomination in Alibaba due to the governance structure of the company. And questions have been raised about the payment subsidiary Alipay, which is not included in the IPO.

Investors with long-term focus have to think about the ESG disclosures and reporting nowadays more than ever. And this will have its effects on the company storytelling and branding. Companies with focus on long-term value creating and reporting will be the winners in the financial markets, whether they are huge giants or growth companies.

 

 

Finance

Financial markets and Loch Ness

Once again we can notice that the financial markets have their own paths due to economic situation. Last week was a good example of this. The week ended with a positive sign in Wall Street, but in the euro-zone the continent was in negative mood. And with good reason – the sanctions against Russia due to Ukraine crisis may have larger impact in EU-economies than earlier estimated.

New economic data from Germany and Italy show that the economic activity is not at the level as economists have predicted. For Germany Russia is the fifth largest export partner according to the OECD statistics. In Germany the trade balance showed a declining trend in June and the industry orders as well. The industry orders were down by 3,2 percent, when the markets expected a 0,9 percent increase. And in Italy the economy showed a continuous recession.

Mr. Mario Draghi, the president of the European Central Bank, said that the eurozone and US monetary policy would remain on a divergent path for some time. And so it seems to be. ECB is likely to continue its low-rates policy at least this year while the Federal Reserve has already said that they will end the quantitative easing programme in October.

Fed´s decision is backed by the fact that 75 per cent of the S&P 500 companies which have published their interim reports now have reported profits above the earning estimates. So the US companies are doing well in general.

The uneasy situation in the financial markets in Europe will stay for a while. There is also the currency situation in Scotland. Scotland will decide on September 18 whether or not they will end the union with the UK.

Surveys show that one of the biggest issues for or against the union is the question of currency. Which currency Scotland would use if they decide to be independent?

There is political debate if the rest of the UK would be interested to make a joint currency union if Scotland declares itself independent. Or would Scotland take euro in that case?

Anyway, one of the biggest economic impact would be the North Sea oil and gas revenues in the referendum. According to BBC it is predicted that the North Sea would bring 57 billion pounds tax revenue to Scotland by 2018. On the other hand, the UK goverment announced last week that they will review the tax system in the area in order to better match the current market conditions and to enhance investment activity.

Scotland has thought also further. They have said they would be interested to make a Norwegian-style sovereign wealth fund to manage the oil price fluctuations. This “Oil fund in Norway” is one of the biggest goverment pension funds globally and one of the active responsible investors in the field. The fund has said it will explore new investments in renewables.

If Scotland says yes in the referendum, it will have long-term impacts in the EU economic policy, currency markets, global financial centers rankings and of course Loch Ness. This Nessie would surprise markets – like Scottish Widows did in the pension markets in the early days.

But one thing is sure, the last weeks before the referendum, there will be new different public affairs campaigns and lobbying for no and yes votes.

Finance

Employer branding is about building the total value

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Employer branding is about the building of the total value of corporate assets. These intangible assets are becoming more and more important in M&A deals, getting the best talent and building the company brand and imago in the markets. We know that the younger generation has paid attention to these items for a long time, but I would say that the older generation is also moving towards this direction. Change has become an initial part of the HR and Communications Departments.

One essential part of employer branding is the engagement itself inside and outside the company. For company executives values are the most important guidance of everyday work in order to achieve the targets, whether they are financial or sustainable targets. And this needs engagement in different forms. One on ones, group meetings, intranet, HR magazine, interviews and surveys are the first tools to engage with employees and get the feeling what they are thinking about.

After these steps it is then easier to have different forms and functions to enhance the employer branding, inside and outside. I find different kind of unite initiatives the most rewarding ones for employees. The initiatives varies according to the industry sector and resources available. It is vital for corporations to think twice which NGOs or which public organizations are relevent to the business strategy. Public private co-opeartion has been one of the drivers in this field.

Employer branding is also about transparency, openness and communications. But it is also about how to measure the outcomes and how these actions have improved company´s overall reputation and brand value. And in the future it is more common to see sustainability targets embedded in the corporate targets and actions. And this needs new thinking; rethinking.

Päivi Härkönen

 

Finance