Meetup on ESG:The Importance of S- Wequity- Gabriel LEVIE

1. The 'S' in ESG
The inevitable rise of a complex
web of societal trends
December 2022

2. IKEA — 1

3. IKEA — 1
Did you know about this?

4. Mining company's executives even had to resign over a
major social scandal
Rio Tinto — 2

5. For corporates, ESG scandals imply that...
...regulatory fines are looming
Companies are accountable for human rights and
environmental violations within their value chain (CSDD).
Corporate Scandals — 3

6. Quarrels involving ESG issues have wiped $500B+ off
the value of large US companies over the past 5 years.
...company reputation is at risk
For corporates, ESG scandals imply that...
Corporate Scandals — 3

7. Top Quartile Bottom Quartile
Source: Mc Kinsey Diversity Database, 2021 Diversity Wins data set
Likelihood of financial performance above
national industry median, by diversity quartile (%)
Social matters are also opportunities!
The business case for diversity in
executive teams remains strong
The data suggests diversity correlates
with better financial performance
Ethnic Diversity
Gender Diversity
Both
combined
0 20 40 60
+35%
+15%
+25%
0 2
0
4
0
6
0
2014
2017
2019
0 2
0
4
0
6
0
2014
2017
2019
By Gender Diversity
By Ethnic Diversity
Likelihood of financial outperformance (%)
+15%
+21%
+25%
+35%
+33%
+36%
Social Opportunities — 4

8. Research even suggests that workplace democracy can lead to
positive results in terms of worker productivity
Strict Economic Performance
No agreement on the
existence of a relationship,
though it is positive when
found.
Productivity
Collective Ownership
Board Representation
Workers' Council
Innovation
37 studies from 1979 until 2021
in a wide variety of countries
like USA, Finland, Spain,
Uruguay, and mostly
Germany.
8 studies, ranging from 2001
until 2019 and except for one
on the Netherlands, all
focused on Germany.
Type of studies 27 studies from 1979 until 2021
in a wide variety of countries
like USA, China, France, and
mostly Germany.
Source: ESL Thesis - Levie (2022). Workplace Democracy — 5

9. Source: ISS ESG 2022 report
Though regulations are coming up soon, we
seem to be far from ready
Regulations are coming at a fast pace...
EU Sustainability
Corporate Governance
Directive.
COP26 in November
2021, 30+ countries
signed pledges to
support workers
2020
US restricts imports
based on forced
labour in supply
chain
2021
2022
Many companies are still flagged for
being "at risk" on Social Safeguard topic...
Fail
34.7%
Pass
65.3%
...and it's even worse in their supply chain
A B C D
100
75
50
25
0
Performance of Textile companies regarding enabling and
supporting suppliers to safeguard labor rights (in %)
Grade A (Best) to D (worst)
Workplace Democracy — 6

10. group-wide gender pay gap data (%)
group-wide and partial gender pay gap information (%)
0 20 4
0
6
0
8
0
United Kingdom
Italy
Netherlands
New Zealand
Australia
Finland
Sweden
Canada
Japan
Wome
n
Me
n
0 0.25 0.5 0.75 1
Financials
Real Estate
Communication Services
Consumer Discretionary
Energy
Industrials
Materials
Consumer Staples
Information Technology
Health Care
Utilities
Only 5.9% of companies globally disclose and
20.3% disclose a limited amount of info
Source: ISS ESG
Percentage of companies disclosing gender pay gap data (by country) Average mean Unadjusted Gender Pay Gap by Sector
Half of companies disclose that women are earning between
2,6% and 21,1% less than men
Financials trail behind in narrowing the gap
Workplace Democracy — 7

11. Source: McKinsey DEI Initiative Survey
Collecting today Plan to collect Do not plan to collect
0 2
0
40 6
0
Gender diversity of boards
Ethnival and racial diversity of boards
Gender diversity of C-suite
Ethnical and racial diversity of C-suite
Measuring Social — 8
Measuring social aspects enables us to monitor progress

12. Executive pay ratio ratio has been increasing
Linking ESG objectives to executive remunerations
is also becoming more common
Sources: PwC 2022 Report, Deloitte 2022 Report
2021:
1:81
2019:
1:75
2020:
1:59
Increasing numbers of companies are tying
executive pay to ESG goals
Executive remuneration — 9

13. For asset managers, ESG scandals imply that...
Goldman Sachs paid a $4m penalty to settle charges for
failing to screen investments on ESG criterias (Nov. 2022).
...regulatory fines are looming
Investors — 10

14. For asset managers, ESG scandals imply that...
ESG investments “not being what they claim to be” is
the number one concern identified by 44% of investors.
...client satisfaction is at risk
Investors — 10

15. Investors have become more focused on Social factors
Social activist investor campaigns
have surged...
Sources: Capital IQ, S&P Global Ratings' analysis, Schroders (2021); BNP ESG Global Survey (2021)
JP Morgan (2021).
57%
of investors felt that social
problems had grown more
relevant to them during the
epidemic.
Environmental (%) Social
(%)
201
8
201
9
202
0
15
10
5
0
Investors — 11

16. ...yet investors grapple with the difficulty
of 'measuring' social aspects
Sources: Capital IQ, S&P Global Ratings' analysis, Schroders (2021); BNP ESG Global Survey (2021)
JP Morgan (2021).
51%
of investors find it the most
difficult metrics to analyse &
measure.
• Uses 100k+ data sources to identify social
factors in stocks.
• The development of AI is enabling investors to
interpret all this data quickly and efficiently
Investors — 11
Investors have become more focused on Social factors

17. Natural Language Processing can support the detection and analysis of
alternative data sources in real-time
Technology — 10

18. Complex Problems — 11

19. Solutions — 12

20. Thank you
Gabriel@wequity.app
Co-Founder