Water Risk Index Launch – smart beta for a water-secure world

Water Risk Index Launch – smart beta for a water-secure world

Water Water Risk Index Launch - smart beta for a water-secure world

Finscoms are delighted to support Thomas Schumann Capital LLC (TSC) and the launch of the Water Risk Index – smart beta for a water-secure world.

Water1080 Water Risk Index Launch - smart beta for a water-secure world
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Water risk is the biggest risk facing people, planet and profit. $145 trillion in assets could be under threat by 2025.

Thomas Schumann Capital LLC (TSC) is a FinServ company providing FIs, investors, asset managers, insurance & risk with a smart beta index solution to mitigate water risk in securities and financial asset portfolios. TSC’s market strategy targets both active and passive investment managers in the global water indexing market (28% CAGR 2025).

Financial water smart beta: Manage Water Risk Exposure in Portfolios

Water Risk Index is a smart beta solution for asset allocation, based on sophisticated and proprietary models. It informs asset owners and investment managers of the water risk to equities in their financial portfolios. Rather than forcing asset managers to make their own interpretations of operational reports and resource management scenarios, our index translates the key metrics of water risk into financial measures that can be accurately and effectively incorporated into financial models.

Asset managers require transparency to make decisions. Typically, water risk transparency is based on share pricing, curated corporate financial accounting and voluntary disclosures of environmental risk attributes. Water Risk Index allows the asset manager to extract a probabilistic financial indicator of corporate and portfolio risk to facilitate allocation decisions.

Data and Smart Beta Facts

Developed using six NAICS sectors (utilities, food & beverage, household products, semiconductors, steel, and precious metals),  our smart water beta algorithm has the following features:

  • Normalized to industry-specific indexes (e.g. utilities, semiconductors, food and beverage).
  • Can be directly integration in portfolio asset allocation strategies; no interpretation required.
  • Time granular value-at-risk (VaR; volatility) metric based on 3-month intervals for 10 years
  • Geographically granular asset risk and productivity/revenue impacts from water exposure
  • Corrected for operational efficiency using asset intensity metric (assets/enterprise value; PPE/EV)
  • Integrates correction factor for water impact on “intangibles” (IP, brand, value chain position)
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Schumann’s business and investment philosophy values “People, Planet and Profit”, in exactly that order.

Water Risk Index licenses for the ‘500’ companies are available August 1, 2018. A global equity index version is available December 1st, 2018.

As population pressures create competition for water, global groundwater supplies are declining and climate variability is increasing — leading to longer droughts and more intense flood events. All these factors pose risks that are hard to ignore. Water risk analysis happens at different stages of investment decision making, from the initial asset allocation strategies, to portfolio level analysis, through to the buy/sell decision. portfolio water foot printing can be helpful in flagging companies and sectors with high water risk exposure relative to a benchmark and highlighting where further analysis is warranted.

At the individual security level are three critical research steps to obtain a comprehensive picture of water risk exposure:

1) Understand Corporate Water Dependency

2) Combine Water Dependency Data with an Assessment of Water Security

3) Get a Sense of Corporate Water Risk Awareness and Response

Water500-300x180 Water Risk Index Launch - smart beta for a water-secure world

Water risk analysis is conducted on a corporation or security by integrating water into the research processes. Our target clients and  fund managers use this information in a variety of ways, from avoiding high water risk industries or companies, to influencing internally created company environment, social, and governance (ESG) scores, to clarifying corporate engagement priorities.

Corporate water risk assessments influence or modify financial projections or their weighted average cost of capital assumptions. Scenario analysis modeling determines how much the market cap of companies would be impacted if they had to absorb more of the costs of treating their wastewater discharges, especially as drought intensifies and communities and regulators become less tolerant of water use and pollution. a deeper understanding of the probability of large financial losses due to strategic risks related to water, such as not being able to grow revenue, access new markets, or develop new facilities.

Begin including water risk analysis into your portfolio management practices.

Ken Carmody

KMCauthor Water Risk Index Launch - smart beta for a water-secure world

For more information about the Water Risk Index Launch and how to invest please contact info@thomasschumann.com

If​ ​you​ ​would​ ​like​ ​to​ ​learn​ ​more​ ​about​ ​how​ ​Finscoms​ ​can​ ​help​ ​with​ ​your​ ​fund​ ​raising please​ ​do​ ​make​ ​contact​ ​with​ ​Edward​ ​at​ emds@finscoms.com

Why digital marketing is essential for the offshore financial sector

For the financial sector, offshoring is no longer an unusual option with a number of different locations around the world offering particular advantages to companies who opt to register there.

Improved tax efficiencies, asset management and lower operating costs are just some of the benefits which can be achieved by offshoring far more effectively than keeping the company in the same location.

Some countries have become known for their expertise in accommodating offshore arrangements, and with the respective governments keen to welcome foreign investment, the climate is well suited to the financial sector. In fact, some of these offshore locations have risen on the global stage as hubs for knowledge, expertise and excellence, challenging the long-held stereotypes.

Offshoring doesn’t mean compromising integrity; when done properly there’s just as much regulation and monitoring in offshore locations as in the EU or US. However, that’s not necessarily the perception that the general public have and many feel that a move towards offshoring is simply a cost-cutting exercise and nothing more.

For this reason, maintaining a very public image and engaging with a possibly hostile market is more important than ever. And that’s where digital marketing has a very important role to play.

Changing face of communication

Marketing and advertising has always played an integral role in the reputation of a company but in the past this would have been achieved from far more traditional methods. This could have included radio adverts, billboards or TV commercials.

While all these approaches are still entirely valid, effective marketing in the modern age is very different with digital means the primary channel. 

Of course, digital marketing is not a single channel, far from it in fact. Digital marketing means encompassing a number of different methods of not just communication but interaction. And this last point is key: modern digital marketing is no longer the company simply advertising what they want to say, it’s a two way process.

Effective digital marketing

Customers now expect to be able to interact with companies and to have a voice and a means to express it. Much of this expectation has arisen from the growth of social media as the ability to reach out to companies directly with the minimum of fuss.

Sites such as Twitter and Facebook in particular have provided a digital channel for customers to interact with companies, and respond directly to marketing campaigns.

Ignoring this method of marketing isn’t an effective ploy; if you’re not on their building brand awareness and engaging with the community, it doesn’t mean your name will be absent.

Social networking provides a unique ability for customers to discuss your brand directly and if you aren’t present, you won’t have the opportunity to respond to any comments or correct any misunderstandings. Failing to use digital marketing for your benefit simply means that your detractors will have the platform all to themselves.

What your customers want

The single most convenient aspect of digital marketing is that it doesn’t matter where in the world you are, if you have access to the internet you can reach your customers effectively and in real time.

Whether it’s keeping them updated with the latest company news, responding to Tweets or simply showing a regular online presence, the modern customer wants a modern approach. The financial sector isn’t renowned for taking radical and innovative steps, but this is one area where that’s easy to rectify.

Don’t remain in the prehistoric age; connecting with your customers and building your brand within the market has never been easier. Offshore companies desperately need some positive PR and by being accessible, approachable and personable, your business could quickly start to reach a whole new audience.

The importance of business marketing for the financial services industry

The financial services industry has had more than its fair share of bad publicity in recent times, with responsible and professional companies often finding themselves unfairly grouped together with those who have acted less scrupulously.

Business marketing has therefore never been more important for the industry but the tight regulation means that it can be difficult to get your message heard.

We take a closer look at the importance of business marketing in the financial services sector and what you can do to get positive publicity. (more…)