Socially Responsible Investment. Page 2 Agenda Adding shareholder value using sustainable development Focusing investments Developing appropriate retail.

Socially Responsible Investment

Page 2

Agenda

Adding shareholder value using sustainable development

Focusing investments

Developing appropriate retail and institutional products

Engagement

Page 3

Sustainable Development

“Development that meets the needs of the present without compromising the ability of future generations to meet their

own needs”

- Bruntland Commission 1987

Page 4

Why Sustainable Development?

World Economic Growth continues, UK GDP/capita doubles (1950 - 2000)

Page 5

Environmental Costs

Pollution

Climate change

Ozone destruction

Acid rain

Toxic pollutants

Fresh water pollution

Radio-active wastes

Resource depletion

Biodiversity

Deforestation, flooding

Fisheries on brink

Freshwater shortages

Topsoil losses

Page 6

Climate Change

Severe weather, and more to come…

Impacts - insurance - ‘exceptional’ losses, - electricity generation - agriculture- energy industries

Solutions: renewable energies, fuel cells, energy efficiency, rail transport...

Searching for sustainable investment solutions

Page 7

Endocrine Disrupters

Exposure to a cocktail of chemicals

Disturbing evidence: early puberty in girls, low sperm counts, gender distortion in wildlife

Industries at risk: chemicals, consumer products, retailers and insurance

Friends of the Earth campaign- Boots a key target

Page 8

Social Costs

Inequality

Regional conflicts increasing

Diseases reappearing (TB, Malaria, Aids)

Diseases of the developed world: Obesity, Heart Disease, Depression

Page 9

Index of Sustainable Economic Welfare

Page 10

Five World Economy

Energy

Materials

Linear Economy

Products and Services

Fossil Fuels,Nuclear

Rich Ore Deposits,Ancient Forests,

Oil Reserves etc..

Heavy metalsCarcinogens,EDCs

CO2, Nox,SOx

DEPLETION POLLUTION

OVER CONSUMPTION

Page 11

One World Economy

Energy

Wastes

Cycling Economy

Quality of Life Enhancers

RenewableSources

SustainablyManaged

Resources Bio-degradable

wastes

Materials

Page 13

Key driver to investment performance

“As investors, we increasingly believe that good environmental and social practice is synonymous with good management of companies and, in turn, good share price performance.”

- Keith Jones, Managing Director of Morley

Society

Economy

Environment

Sustainable Development

Page 16

Appraisal Process

Profile each company to:

identify environmental and social opportunities & risk

judge suitability of a company for the SRI funds

highlight areas suitable for progressive engagement

Judge suitability of a company based on grading system surrounding 2 key elements:

Business sustainability

Management vision and strategy

Page 17

Business Sustainability grading:

A: core business is sustainability solution

……..

E: business is fundamentally in conflict with sustainable development

Management Vision & Strategy Grading:

1: Excellent - clear vision of sustainable development and actively working to

achieve it……..

5: Poor - company is hostile to the concept of corporate social responsibility

How We Rate Companies - Sustainability Matrix

Page 18

Engagement

Good social and environmental practice

Good business practice

Good financial performance

Page 19

Paying the Price of Poor Practice

Compensation claims

Damage to reputation

82% drop in share price

Page 20

Summary

SRI must add shareholder value to succeed

Traditional negative screening simply restricts where you invest

Corporate Governance and engagement are an extension SRI.